AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1999
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CILCORP INC.
(Exact name of registrant as specified in its charter)
ILLINOIS 37-1169387
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
----------------
300 Liberty Street
Peoria, Illinois 61602
(309) 675-8810
(Address and telephone number of registrant's principal executive offices)
Thomas D. Hutchinson
Chief Financial Officer
300 Liberty Street
Peoria, Illinois 61602
(309) 675-8810
(Name, address and telephone number of agent for service)
Copies to:
Stephen W. Hamilton
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
(202) 371-7000
----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
----------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(1)
<S> <C> <C>
8.700% Senior Notes Due 2009 ......... $225,000,000 $ 62,550
9.375% Senior Bonds Due 2029 ......... $250,000,000 $ 69,500
Total ............................. $132,050
</TABLE>
================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) of the Securities Act of 1933, as amended.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION NOVEMBER 5, 1999
OFFER TO EXCHANGE ALL
8.700% SENIOR NOTES DUE 2009 FOR 8.700% SENIOR NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
9.375% SENIOR BONDS DUE 2029 FOR 9.375% SENIOR BONDS DUE 2029
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OF
[CILCORP INC. LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 PM
NEW YORK CITY TIME, ON [ ], 1999, UNLESS EXTENDED
TERMS OF THE EXCHANGE OFFER:
o We will exchange all outstanding senior notes and senior bonds that are
validly tendered and not validly withdrawn prior to the expiration of the
exchange offer. Our outstanding senior notes and senior bonds were
originally issued by Midwest Energy, Inc. on October 18, 1999 and assumed
by us when we merged with Midwest Energy on that date.
o The new senior notes and senior bonds will be substantially identical to
the old senior notes and senior bonds, except for transfer restrictions
and registration rights relating to the old senior notes and senior bonds.
o You may withdraw tendered outstanding senior notes or senior bonds at any
time prior to the expiration of the exchange offer.
o The exchange of outstanding senior notes and senior bonds will not be a
taxable exchange for U.S. federal income tax purposes.
o We will not receive any proceeds from the exchange offer.
o There is no existing market for the senior notes and senior bonds to be
issued, and we do not intend to apply for their listing on any securities
exchange.
See the section entitled "Description of the Securities" that begins on page 39
for more information about the senior notes and senior bonds to be issued in
this exchange offer.
This investment involves risks. See the section entitled "Risk Factors" that
begins on page 12 for a discussion of the risks that you should consider prior
to tendering your outstanding senior notes or senior bonds for exchange.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus is dated [ ], 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
Summary ............................................... 3
Risk Factors .......................................... 12
Special Note on Forward-Looking Statements ............ 16
Use of Proceeds ....................................... 16
Accounting Treatment .................................. 16
Capitalization ........................................ 17
The Exchange Offer .................................... 18
Where You Can Find Additional Information ............. 27
Incorporation by Reference ............................ 27
Business .............................................. 28
Our Merger with Midwest Energy ........................ 36
Management ............................................ 37
Description of the Securities ......................... 39
United States Federal Income Tax Consequences ......... 64
Plan of Distribution .................................. 66
Legal Matters ......................................... 66
Experts ............................................... 66
Index to Financial Statements ......................... F-1
Index to Unaudited Pro Forma Financial Data ........... P-1
ABOUT THIS PROSPECTUS
As used in this prospectus, the terms "CILCORP", "we", "us" and "our" and
similar expressions mean CILCORP Inc., the term "CILCO" refers to our
subsidiary, the Central Illinois Light Company, the term AES means The AES
Corporation and the term "Midwest Energy" means Midwest Energy, Inc. In
addition, we use the phrase "old securities" to mean the outstanding senior
notes and senior bonds and the phrase "new securities" to mean the new senior
notes and senior bonds to be issued in this exchange offer.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any person to provide you
with different information If anyone provides you with different or inconsistent
information, you should not rely on it. You should assume that the information
appearing in this prospectus is accurate only as of the date on the front cover
of this prospectus. Information incorporated by reference into this prospectus
from our prior filings with the SEC is accurate only as of the date of filing of
the incorporated documents. Our business, financial condition, results of
operations and prospects may have changed since those dates. We are not making
an offer to sell the securities in any jurisdiction except where the offer or
sale is permitted.
2
<PAGE>
SUMMARY
The following summary contains the basic information about this exchange
offer. It does not contain all of the information that may be important to you
in deciding whether to exchange your old securities for new securities. We
encourage you to read the prospectus in its entirety.
SUMMARY OF THE EXCHANGE OFFER
On October 18, 1999, Midwest Energy privately placed $225 million aggregate
principal amount of 8.700% Senior Notes due 2009 and $250 million aggregate
principal amount of 9.375% Senior Bonds due 2029. The senior notes and senior
bonds were issued to finance a portion of the cost of our merger with Midwest
Energy, which occurred simultaneously with the private placement. We survived
the merger as a wholly-owned subsidiary of The AES Corporation and assumed all
of Midwest Energy's liabilities under the senior notes and senior bonds. In the
merger, we also assumed all of Midwest Energy's obligations under a registration
rights agreement it entered into on October 18, 1999 with the initial purchasers
of the outstanding senior notes and senior bonds.
Under that registration rights agreement, we must use our reasonable best
efforts to complete this exchange offer within 30 days after the the effective
date of the registration statement of which this prospectus is a part, which
effective date must occur on or prior to April 15, 2000. If we do not complete
this exchange offer before that date, we must pay liquidated damages until the
exchange offer is completed. In this exchange offer, you may exchange your
outstanding senior notes for our 8.700% Senior Notes due 2009 to be issued in
the exchange offer which have substantially the same terms and you may exchange
your outstanding senior bonds for our 9.375% Senior Bonds due 2029 to be issued
in the exchange offer which have substantially the same terms. You should read
the discussion under the heading "The Exchange Offer" and "Description of the
Securities" for further information regarding the senior notes and senior bonds
to be issued in the exchange offer.
Securities offered...... o $225 million in principal amount of new 8.700%
Senior Notes due 2009, which have been registered
under the Securities Act of 1933.
o $250 million in principal amount of new 9.375%
Senior Bonds due 2029, which have been registered
under the Securities Act of 1933.
The terms of the senior notes and senior bonds
offered in the exchange offer are substantially
identical to those of the outstanding senior
notes and senior bonds, except that certain
transfer restrictions, registration rights and
liquidated damages provisions relating to the
outstanding senior notes and senior bonds do not
apply to the new registered senior notes and
senior bonds.
The exchange offer..... We are offering to issue registered senior notes
for a like amount of our outstanding senior notes
and to issue registered senior bonds for a like
amount of our outstanding senior bonds. We are
offering to issue these registered senior notes and
senior bonds to satisfy our obligations under the
registration rights agreement that Midwest Energy
entered into with the initial purchasers of the
outstanding senior notes and senior bonds. You may
tender your outstanding
3
<PAGE>
senior notes or senior bonds for exchange by
following the procedures described under the
heading "The Exchange Offer."
Tenders; expiration date;
withdrawal.............. The exchange offer will expire at 5:00 p.m., New
York City time, on [ ], 1999 unless we extend it.
If you decide to exchange your old securities for
new securities, you must acknowledge that you are
not engaging in, and do not intend to engage in, a
distribution of the new securities. You may
withdraw your tender of old securities at any time
before [ ], 1999. If we decide for any reason not
to accept your senior notes or senior bonds for
exchange, we will return them to you promptly and
without expense after the exchange offer expires or
terminates.
Conditions to the exchange
offer................... We are not required to accept any old securities in
exchange for new securities. We may terminate or
amend the exchange offer if we determine that the
exchange offer violates applicable law or any
applicable SEC interpretation.
Federal tax considerations.. The exchange of old senior notes for new senior
notes and of old senior bonds for new senior bonds
under the exchange offer will not result in any
gain or loss to you for federal income tax
purposes.
Use of proceeds......... We will not receive any proceeds from the exchange
offer.
Accrued interest......... The new securities will bear interest from October
18, 1999, the date the old securities were
originally issued. No interest will be paid on the
old securities following their acceptance for
exchange. See "Description of the Securities."
Exchange agent.......... The Bank of New York is the exchange agent for the
exchange offer. The address and telephone number of
the exchange agent are set forth under the heading
"The Exchange Offer -- Exchange Agent."
CONSEQUENCES OF NOT EXCHANGING YOUR OUTSTANDING
SENIOR NOTES OR SENIOR BONDS
If you do not exchange your outstanding senior notes or senior bonds in the
exchange offer, they will continue to be subject to the restrictions on transfer
that are described in the legend on the senior notes and senior bonds. In
general, you may offer or sell your outstanding senior notes or senior bonds
only if they are registered under, or offered or sold under an exemption from,
the Securities Act of 1933, or the Securities Act, and applicable state
securities laws.
If outstanding senior notes and senior bonds are tendered and accepted in
the exchange offer, it may become more difficult for you to sell or transfer
your unexchanged senior notes and senior bonds. In addition, if you do not
exchange your outstanding senior notes and senior bonds in the exchange offer,
you will no longer be entitled to have those senior notes and senior bonds
registered under the Securities Act, except in limited circumstances with
respect to specific types of holders of outstanding senior notes or senior
bonds. See "The Exchange Offer -- Consequences of Failure to Exchange
Outstanding Securities."
4
<PAGE>
CONSEQUENCES OF EXCHANGING YOUR OUTSTANDING
SENIOR NOTES OR SENIOR BONDS
Based on interpretations of the staff of the SEC, we believe that you may
offer for resale, resell or otherwise transfer the new securities that we issue
in the exchange offer without complying with the registration and prospectus
delivery requirements of the Securities Act if:
o you acquire the new securities issued in the exchange offer in the
ordinary course of business;
o you are not participating, do not intend to participate, and have no
arrangement or undertaking with anyone to participate, in the
distribution of the new securities issued to you in the exchange offer;
and
o you are not an "affiliate" of CILCORP, as defined in Rule 405 of the
Securities Act.
If any of these conditions are not satisfied and you transfer any new
securities issued to you in the exchange offer without delivering a proper
prospectus or without qualifying for a registration exemption, you may incur
liability under the Securities Act. We will not be responsible for or indemnify
you against any liability you may incur.
Any broker-dealer that acquires new securities in the exchange offer for
its own account in exchange for old securities, which it acquired through
market-making or other trading activities, must acknowledge that it will deliver
a prospectus when it resells or transfers any new securities issued in the
exchange offer. See "Plan of Distribution."
THE COMPANY
We are an energy services holding company headquartered in Peoria,
Illinois. In 1998, we had consolidated assets, revenues and net income from
continuing operations of $1.3 billion, $559 million and $38 million,
respectively. Our principal subsidiary is Central Illinois Light Company, or
CILCO, a public utility providing electricity and natural gas service to
residential, commercial and industrial customers in central Illinois. CILCO had
1998 operating revenues of $532 million, approximately 68% of which were from
the generation and sale of electricity with the remainder from the sale and
transport of natural gas. CILCO has approximately 189,000 electric customers and
197,000 gas customers, many of which receive both electric and natural gas
service. Among its electric sales, residential, commercial and industrial
electricity customers contributed 37%, 31% and 25%, respectively, of 1998
electric revenues. Among its gas sales, residential, commercial and
industrial/transportation customers contributed 58%, 25% and 7%, respectively,
of 1998 gas revenues. CILCO has 1,152 megawatts of generating capacity, of which
96% is coal-fired and the balance consists of gas-fired peaking and
co-generation units.
CILCO has the lowest overall average electric rates of any investor-owned
utility in Illinois, and its rates also compare favorably with those of
utilities in surrounding states. Illinois began a transition process to a fully
competitive market for electricity with the passage of the Electric Service
Customer Choice and Rate Relief Law of 1997, which we refer to in this document
as the "Illinois Customer Choice Law." Large industrial customers and customers
representing one-third of the remaining non-residential kilowatt hour sales were
able to choose their electric supplier beginning October 1, 1999, with all
non-residential customers able to choose after December 31, 2000. Residential
electric customers will be able to choose their electric supplier beginning May
1, 2002. As of September 2, 1999, over 160 commercial or industrial electricity
accounts representing approximately 41% of 1998 commercial/industrial kilowatt
hour sales have entered into multi-year contracts with CILCO to continue to
provide electricity service. The Illinois Customer Choice Law also provides for
electric base rate reductions and ceilings on allowed returns on equity. In
recognition of CILCO's already low rates, its rate reductions were a lesser
percent than, and its return on equity ceiling higher than, other Illinois
utilities.
5
<PAGE>
In 1998, we began a process to refocus our corporate strategy on our core
electric and gas utility business by divesting unrelated and higher risk
businesses. Several of these businesses were eliminated, discontinued or
divested in late 1998 and 1999. While we conduct other limited energy-related
businesses through our subsidiaries CILCORP Investment Management Inc. and
CILCORP Ventures Inc., in 1998 approximately 96% of our revenues came from
CILCO.
RECENT DEVELOPMENTS. During July 1999, CILCO purchased approximately $23
million of additional electricity to meet increased consumer demand due to
abnormally warm weather conditions. CILCO's fuel adjustment clause allows it to
pass on to its customers the cost of these additional power purchases, normally
through a single bill. In this instance, on September 1, 1999, the Illinois
Commerce Commission approved a request by CILCO to charge customers over a
twelve-month period without interest, beginning in September 1999. See "Business
- -- Electric Fuel and Purchased Gas Adjustment Clauses."
SUMMARY OF ANTICIPATED THIRD QUARTER 1999 SALES AND EARNINGS
We anticipate that we will record a loss from continuing operations of
approximately $(2.4) million for the quarter ended September 30, 1999, compared
to net income of $18 million for the quarter ended September 30, 1998. Our net
income was adversely impacted in the third quarter of 1999 in large part by a
$16.6 million after-tax charge related to our voluntary early retirement
program, by approximately $1.1 million of after-tax costs related to our merger
with Midwest Energy and, to a lesser extent, by lower margins on unregulated
electricity sales resulting from higher purchased energy costs during unusually
hot weather occurring in late July 1999. For the quarter ended September 30,
1998, we reported income of $4.7 million related to discontinued operations,
primarily due to our sale of our subsidiary QST Communications Inc.
OUR INDEPENDENCE FROM AES
We preserve our independence from AES in several respects. Among other
obligations, AES must appoint one independent director to serve on our board of
directors with specified voting rights. We and AES also keep in place the
additional measures specified under "Our Merger with Midwest Energy -- Our
Independence."
----------------------
Our principal executive offices are located at 300 Liberty Street, Peoria,
Illinois 61602, and our telephone number is (309) 675-8810.
6
<PAGE>
SUMMARY DESCRIPTION OF THE NEW SECURITIES
The form and terms of the new securities to be issued in the exchange are
the same as the form and terms of the old securities except that the new
securities to be issued in the exchange offer have been registered under the
Securities Act and, therefore, will not bear legends restricting their transfer
and will not contain the registration rights and liquidated damages provisions
contained in the old securities. The new securities will evidence the same debt
as the old securities and both the new securities and the old securities are
governed by the same indenture.
The following is a brief summary of select terms of the new securities.
For a more complete description of the terms of the new securities, see
"Description of the Securities."
Issuer................... CILCORP
Total amount of securities
offered................. o $225,000,000 million aggregate principal amount
of senior notes due 2029 registered under the
Securities Act
o $250,000,000 million aggregate principal amount of
senior bonds due 2029 registered under the
Securities Act
Maturity................. o In the case of the senior notes, the entire
principal amount on October 15, 2009
o In the case of the senior bonds, the entire
principal amount on October 15, 2029
Interest................. Annual rate:
o 8.700%, in the case of the senior notes
o 9.375%, in the case of the senior bonds
Interest payment frequency: every six months on
April 15 and October 15
First interest payment: April 15, 2000
Collateral............... Upon issuance, the new securities will not be
secured by any collateral. On the earlier of January
31, 2002 or the date on which our existing $30.5
million Series A medium-term notes are no longer
outstanding, the new securities will be secured
through our pledge of all of the capital stock of
CILCO, excluding the shares of preferred stock of
CILCO outstanding on October 18, 1999. From and
after our pledge, we may secure other permitted
senior debt equally and ratably with the securities.
We currently have no senior secured debt
outstanding. See "Description of the Securities --
Collateral."
Ranking.................. The securities are our direct senior obligations,
ranking equally with all our other existing and
future senior obligations. The securities are senior
to all of our subordinated debt. We are a holding
company with substantially all of our operations
conducted through CILCO and our other subsidiaries.
We are dependent upon cash flow from those entities
to meet our obligations, including obligations under
the new securities. Accordingly, the new securities
effectively rank junior to all liabilities and
preferred stock of our subsidiaries.
7
<PAGE>
As of June 30, 1999, after giving effect to this
exchange offer, the merger and our offering of old
securities and our use of the net proceeds from that
offering:
o we would have had outstanding approximately $65
million of senior debt ranking equally with the
new securities; and
o our subsidiaries would have had approximately
$282 million of debt and approximately $66
million of preferred stock.
Ratings.................. The new securities have been assigned ratings of
Baa2 by Moody's Investors Service, Inc., BBB by
Duff & Phelps Credit Rating Co. and BB+ by Standard
& Poor's Ratings Group.
Optional redemption..... We may redeem the new securities, in whole or in
part, at any time at a redemption price equal to the
greater of:
o 100% of the principal amount of the securities
being redeemed; or
o the sum of the present values of the remaining
scheduled payments of principal and interest on
the securities being redeemed, discounted to
the date of redemption on a semiannual basis at
the discount rate described in "Description of
the Securities -- Optional Redemption."
Covenants................ The indenture governing the new securities contains
covenants that, among other things, will limit our
ability and, in the case of restrictions on liens
and permitted business activities, our restricted
subsidiaries to:
o incur additional debt that is not a part of our
permitted business activities and that would
cause Standard & Poor's, Moody's or Duff &
Phelps to downgrade the existing ratings
assigned to the new securities;
o pay dividends or other distributions and
payments on our capital stock unless we satisfy
a leverage ratio and an interest coverage ratio
or at the time we have an assigned rating on
our long-term secured debt of at least BB+ from
Standard & Poor's, at least Baa2 from Moody's
and at least BBB from Duff & Phelps;
o create certain liens on our assets or
properties (including the capital stock of
CILCO) unless the new securities are also
secured equally and ratably by those assets or
properties;
o enter into new businesses and activities unless
that new business or activity would not cause
Standard & Poor's, Moody's or Duff & Phelps to
downgrade the existing ratings assigned to the
new securities; and
8
<PAGE>
o consolidate or merge, or convey, transfer or
lease substantially all of our consolidated
properties and assets, unless we are the
surviving entity or, if not, the surviving
entity expressly assumes our obligations under
the new securities and the indenture, and the
transaction would not result in a ratings
downgrade below the initial ratings assigned to
the old securities.
These covenants are subject to important exceptions
and qualifications, which are described in
"Description of the Securities -- Covenants." The
indenture does not in any way restrict or prevent
CILCO or any other subsidiary from incurring
unsecured indebtedness.
Use of proceeds......... We will not receive any proceeds from the issuance
of the new securities in this exchange offer. The
net proceeds from the initial offering of the old
securities were used to provide a portion of the
funds necessary to complete our merger with Midwest
Energy. See "Use of Proceeds."
Risk factors............ See "Risk Factors" and the other information in this
prospectus for a discussion of factors you should
carefully consider before deciding to tender your
old securities in the exchange offer.
9
<PAGE>
SUMMARY SELECTED HISTORICAL AND UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL DATA
Our summary selected historical financial data as of and for the years
ended December 31, 1994, 1995, 1996, 1997 and 1998 set forth below have been
derived from audited financial statements. Our summary selected historical
financial data for the six months ended June 30, 1998 and June 30, 1999 set
forth below have been derived from unaudited financial statements. The results
of operations for the six months ended June 30, 1999 are not necessarily
indicative of the results to be expected for the full year. We believe the
unaudited information for the six months ended June 30, 1998 and 1999 contains
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the operating results for those periods. You should read
the financial data set forth below in conjunction with our historical
consolidated financial statements and the related notes to those financial
statements included in this prospectus.
Our summary unaudited pro forma information is based on our historical
financial data and the historical financial data of Midwest Energy. It gives
effect to the merger, the initial offering of the old senior notes and senior
bonds and an equity contribution from AES to Midwest Energy to complete the
financing for the merger. The information is presented as if all those
transactions had occurred on June 30, 1999 with respect to the balance sheet
data and as of the earliest period presented with respect to the income
statement data and other financial data. The summary unaudited pro forma
financial information does not purport to represent what our results of
operations or financial condition actually would have been had the offering and
the merger in fact occurred on the assumed dates, nor does it purport to project
the results of operations and financial position for any future period. You
should read the summary unaudited pro forma financial information set forth
below in conjunction with our historical consolidated financial statements and
unaudited pro forma condensed consolidated financial data and the related notes
to those financial statements and financial data appearing elsewhere in this
prospectus.
<TABLE><CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
HISTORICAL
------------------------------------------------------------------
1994 1995 1996 1997 1998
------------ ------------ ------------ ------------- -------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues ........................................ $ 472,340 $ 487,210 $ 527,060 $ 557,960 $ 559,024
Operating income ................................ $ 76,631 $ 94,165 $ 91,383 $ 97,779 $ 91,563
Income (loss) from continuing operations
before extraordinary item ...................... $ 30,762 $ 38,469 $ 37,940 $ 43,709 $ 38,218
Income (loss) from discontinued operations ...... $ 1,824 $ 113 $ (9,997) $ (31,414) $ (21,908)
OTHER FINANCIAL DATA:
Depreciation and amortization ................... $ 55,276 $ 57,680 $ 60,574 $ 62,416 $ 66,179
Cash flow from operations ....................... 110,356 90,789 102,376 91,014 68,310
Cash flow from investing activities ............. (97,665) (83,999) (50,993) (59,920) (52,457)
Cash flow from financing activities ............. (12,527) 8,706 (63,542) (25,459) (24,760)
EBITDA (1) ...................................... $ 134,309 $ 154,085 $ 154,099 $ 162,643 $ 162,387
Ratio of EBITDA to fixed charges (2) ............ 3.8x 3.9x 4.0x 4.3x 4.0x
Ratio of EBITDA to interest (3) ................. 4.9x 5.1x 5.0x 5.8x 5.5x
Ratio of earnings to fixed charges (4) .......... 2.3x 2.5x 2.5x 2.7x 2.4x
<CAPTION>
YEARS ENDED
DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------- --------------------------------------
PRO FORMA HISTORICAL PRO FORMA
------------- ------------------------- ------------
1998 1998 1999 1999
------------- ------------- ----------- ------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues ........................................ $ 559,024 $ 276,076 $ 288,505 $288,505
Operating income ................................ $ 76,924 $ 44,450 $ 37,196 $ 29,878
Income (loss) from continuing operations
before extraordinary item ...................... $ (1,283) $ 19,051 $ 13,691 $ (6,059)
Income (loss) from discontinued operations ...... $ (21,908) $ (12,045) $ (407) $ (407)
OTHER FINANCIAL DATA:
Depreciation and amortization ................... $ 80,818 $ 31,966 $ 34,481 $ 41,799
Cash flow from operations ....................... -- 49,810 62,862 --
Cash flow from investing activities ............. -- (36,139) (18,785) --
Cash flow from financing activities ............. -- (18,108) (42,205) --
EBITDA (1) ...................................... $ 162,387 $ 77,711 $ 84,993 $ 84,993
Ratio of EBITDA to fixed charges (2) ............ 2.0x 3.9x 4.3x 2.1x
Ratio of EBITDA to interest (3) ................. 2.3x 5.3x 5.8x 2.4x
Ratio of earnings to fixed charges (4) .......... 1.0x 2.3x 2.0x 0.8x
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------------------------
HISTORICAL
---------------------------------------------------------------------------------
1994 1995 1996 1997 1998
---------------- ---------------- --------------- --------------- ---------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets .............................. $ 1,238,384 $ 1,279,303 $ 1,285,693 $ 1,334,819 $ 1,312,940
Long-term debt ............................ $ 326,695 $ 344,113 $ 320,666 $ 304,785 $ 288,135
Short-term borrowings ..................... $ 50,600 $ 66,152 $ 50,957 $ 84,335 $ 109,227
Preferred stock of subsidiary ............. $ 66,120 $ 66,120 $ 66,120 $ 66,120 $ 66,120
Stockholders' equity ...................... $ 344,715 $ 361,978 $ 368,205 $ 352,593 $ 335,538
Ratio of total debt and preferred stock
of subsidiary to capitalization (5) ...... 56.3% 56.8% 54.3% 56.4% 58.0%
AS OF JUNE 30,
-----------------------------------------------
HISTORICAL PRO FORMA
------------------------------- ---------------
1998 1999 1999
--------------- --------------- ---------------
(IN THOUSANDS, EXCEPT RATIOS)
BALANCE SHEET DATA:
Total assets .............................. $ 1,275,076 $ 1,202,635 $ 1,794,239
Long-term debt ............................ $ 313,340 $ 257,168 $ 731,120
Short-term borrowings ..................... $ 76,013 $ 116,300 $ 89,600
Preferred stock of subsidiary ............. $ 66,120 $ 66,120 $ 66,120
Stockholders' equity ...................... $ 342,858 $ 332,696 $ 463,048
Ratio of total debt and preferred stock
of subsidiary to capitalization (5) ...... 57.1% 56.9% 65.7%
</TABLE>
- -----------
(1) For purposes of this definition, EBITDA includes consolidated income from
continuing operations before income taxes plus consolidated interest
expense, plus interest expense on company owned life insurance, dividends on
preferred stock of subsidiary, merger-related expenses including one-time
expenses relating to restructuring efforts, and depreciation and
amortization. Merger-related expenses consist of professional fees and
expenses of approximately $2.0 million and $11.9 million for the six months
ended December 31, 1998 and June 30, 1999, respectively, incurred in
connection with the pending acquisition of CILCORP by AES, including fees
and expenses resulting from the voluntary early retirement program offered
in April 1999 as a result of the pending acquisition. No merger-related
costs related to AES's acquisition of CILCORP were expensed prior to June
30, 1998. This definition of EBITDA may be different from that used by other
companies and should not be considered a substitute for cash flows from
operating activities as defined by generally accepted accounting principles.
(2) For the purpose of computing the ratio of EBITDA to fixed charges, fixed
charges consist of interest expense on all indebtedness, interest expense on
company owned life insurance, the amount of pre-tax earnings required to pay
dividends on preferred stock of subsidiary, and that portion of rental
expense which CILCORP believes to be representative of an interest factor.
(3) For the purpose of computing the ratio of EBITDA to interest, interest
consists of dividends declared on preferred stock of subsidiary and interest
expense incurred at the stated coupon rate during the specified period on
all short-term borrowings and long-term debt. Interest for each of the years
in the five-year period ended December 31, 1998 was, in thousands, $27,502,
$29,943, $30,856, $28,168 and $29,343, respectively. Interest for the
six-month periods ended June 30, 1998 and 1999 was, in thousands, $14,605
and $14,688, respectively. Interest increased, in thousands, $41,393 and
$20,696 as a result of pro forma adjustments reflecting the issuance of the
senior notes and senior bonds for the year ended December 31, 1998 and the
six-month period ended June 30, 1999, respectively.
(4) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes
plus fixed charges. Fixed charges consist of interest expense on all
indebtedness, interest expense on company owned life insurance, the amount
of pre-tax earnings required to pay dividends on preferred stock of
subsidiary, and that portion of rental expense which CILCORP believes to be
representative of an interest factor. The deficiency in earnings for the pro
forma six-month period ended June 30, 1999 was approximately $8.2 million.
(5) For the purpose of computing the ratio of total debt and preferred stock of
subsidiary to capitalization, total debt consists of all short-term
borrowings and long-term debt. Capitalization consists of short-term
borrowings and long-term debt, preferred stock of subsidiary and
stockholders' equity.
11
<PAGE>
RISK FACTORS
You should carefully consider the risks described below in addition to all
other information provided to you in this prospectus before deciding whether to
tender your old securities in the exchange offer. The risk factors set forth
below, other than those which discuss the consequences of failing to exchange
your old securities in the exchange offer, are generally applicable to both the
old securities and the new securities issued in the exchange offer. There may be
additional risks and uncertainties not presently known to us or that we
currently do not believe are material that may also impair our business
operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
that case, the trading price of the new securities could decline and you may
lose all or part of your investment.
RISKS RELATING TO THE NEW SECURITIES
YOU MAY HAVE DIFFICULTY SELLING THE OLD SECURITIES WHICH YOU DO NOT EXCHANGE.
If you do not exchange your old securities for the new securities offered
in this exchange offer, you will continue to be subject to the restrictions on
the transfer of your old securities. Those transfer restrictions are described
in the indenture and in the legend contained on the old securities, and arose
because the old securities were originally issued under exemptions from, and in
transactions not subject to, the registration requirements of the Securities
Act. Except in limited circumstances with respect to specific types of holders
of old securities, we will have no further obligation to provide for
registration under the Securities Act of the old securities upon completion of
the exchange offer.
In general, you may offer or sell your old securities only if they are
registered under the Securities Act and applicable state securities laws, or if
they are offered and sold under an exemption from those requirements. We do not
intend to register the old securities under the Securities Act.
If a large number of old securities are exchanged for new securities issued
in the exchange offer, it may be more difficult for you to sell your unexchanged
senior notes and senior bonds. See "The Exchange Offer -- Consequences of
Failure to Exchange Outstanding Securities" for a discussion of the possible
consequences of failing to exchange your old securities.
WE ARE A HOLDING COMPANY, WHICH MEANS THAT YOUR RIGHT TO RECEIVE PAYMENT ON THE
NEW SECURITIES IS EFFECTIVELY JUNIOR TO EXISTING DEBT AND POSSIBLY ALL FUTURE
BORROWINGS OF CILCO AND OUR OTHER SUBSIDIARIES.
We are a holding company, with limited direct operations and few assets
other than the stock of CILCO and our other subsidiaries. We are dependent on
the cash flows of our subsidiaries to meet our obligations, including the
payment of principal of and interest on the new securities. If those
subsidiaries are unable to provide cash to us when we need it, we may be unable
to meet these obligations. The new securities will be solely our obligation. AES
and its other subsidiaries are separate legal entities that will have no
obligation to pay any amounts due under the senior notes and senior bonds or to
make any funds available for payment of amounts due under the senior notes and
senior bonds, whether by dividends, loans or other payments. In addition, the
ability of our subsidiaries to make any payments or advances to us is limited by
the laws of the relevant jurisdictions in which those entities are organized or
located. In some cases, prior or subsequent approval of any such payments or
advances may be required from applicable regulatory bodies or other governmental
entities.
Your right to receive payments on the new securities is effectively junior
to existing and future debt, including preferred stock, of our subsidiaries. The
rights of holders of new securities to participate in the assets of our
subsidiaries upon any liquidation or reorganization of any subsidiary will rank
junior to the prior claims of that subsidiary's creditors and preferred
stockholders. The terms of the indenture for the new securities will permit us
and our subsidiaries to incur substantial amounts of debt and preferred stock.
12
<PAGE>
THE COLLATERAL SECURING OUR PAYMENT OBLIGATIONS UNDER THE NEW SECURITIES MAY NOT
BE SUFFICIENT TO SATISFY THOSE OBLIGATIONS.
Upon issuance, the new securities will not be secured by any collateral. On
the earlier of January 31, 2002 or the date on which our existing $30.5 million
Series A medium-term notes are no longer outstanding, the new securities will be
secured through our pledge of all of the capital stock of CILCO, excluding the
shares of preferred stock of CILCO outstanding on October 18, 1999. Upon the
effectiveness of our pledge, we will be permitted to secure our other permitted
senior debt equally and ratably with the indebtedness under the new securities.
See "Description of the Securities--Collateral." If an event of default has
occurred and is continuing under the indenture governing the new securities, we
cannot assure you that the net proceeds of any sale of the pledged capital stock
of CILCO will be sufficient to satisfy in full CILCORP's obligations under the
new securities and under our additional senior secured debt. If there are any
remaining payment obligations due on the new securities, then the holders of the
new securities will rank equally with all of our other senior unsecured debt,
and will rank junior to the holders of any other senior secured debt as to our
specific assets securing that debt. We do not presently have any secured debt
outstanding, but the terms of the indenture for the new securities permits us
to, and our other debt agreements will permit us and our subsidiaries to, incur
secured debt. If the date of the pledge of CILCO stock occurs within 90 days
prior to a filing of bankruptcy by us, the pledge of the CILCO stock may be
voidable by a trustee in bankruptcy as a preferential transfer of property.
Upon the occurrence of an event of default under the indenture, the
foreclosure proceedings, the enforcement of our pledge agreement and the right
to take other actions with respect to the pledged shares of CILCO stock will be
controlled by holders of a majority of the aggregate principal amount of the
then outstanding obligations which are equally and ratably secured by the pledge
of the CILCO stock.
THERE IS NO PUBLIC MARKET FOR THE NEW SECURITIES TO BE ISSUED IN THE EXCHANGE
OFFER.
There is no public market for the new securities to be issued in the
exchange offer. We do not intend to apply for listing or quotation of the new
securities on any exchange. Therefore, we do not know the extent to which
investor interest will lead to the development of a trading market or how liquid
that market might be, nor can we make any assurances regarding the ability of
security holders to sell their senior notes or senior bonds or the price at
which the senior notes or senior bonds might be sold. Although the initial
purchasers of the old securities have informed us that they currently intend to
make a market in the new securities to be issued in the exchange offer, they are
not obligated to do so, and any such market-making may be discontinued at any
time without notice.
In addition, the liquidity and the market price of the new securities to be
offered in the exchange offer may be adversely affected by changes in our
financial performance or prospects, or in the prospects for companies in our
industry. As a result, you cannot be sure that an active trading market will
develop for the new securities.
RISKS RELATING TO AN INVESTMENT IN US AND THE ILLINOIS UTILITY INDUSTRY
WE ARE SUBJECT TO CERTAIN OPERATING UNCERTAINTIES COMMONLY ASSOCIATED WITH
UTILITIES.
The operation of a utility involves many risks, including the breakdown or
failure of power generation equipment, pipelines, transmission lines,
distribution lines or other equipment or processes, fuel interruption, and
performance below expected levels of output or efficiency. Sales and revenues of
a utility may also be adversely affected by general economic and business
conditions and weather conditions in its territory.
WE ARE SUBJECT TO INCREASED COMPETITION AS A RESULT OF THE ONGOING DEREGULATION
OF THE ILLINOIS UTILITY INDUSTRY.
The passage of the Illinois Customer Choice Law in 1997 began a nine-year
transition process to a more competitive market for electricity in Illinois.
Under the Illinois Customer Choice Law, electric utilities are required to
"unbundle" their services by offering as a tariffed service "delivery services,"
13
<PAGE>
those services necessary to allow retail customers located in the utilities'
service territory to receive electric power and energy from suppliers other than
the electric utility, including standard metering and billing services.
Unbundling of electric utility services and access to a utility's customers
enhances competition because a customer can choose a supplier of generation
services on the basis of price, while obtaining delivery services from the
electric utility in whose service territory the customer is located. The
Illinois Customer Choice Law sets up a timetable over the next five years for
the implementation of choice of electric suppliers by customers of electric
utilities.
Thus, the generation segment of the electric utility industry in Illinois
will be significantly affected by competition. The introduction of competition
in the wholesale market for electricity, regulated by the Federal Energy
Regulatory Commission, has resulted in a proliferation of power marketers and a
substantial increase in competitive behavior by participants in that market. As
retail competition increases over time, the same competitive forces are likely
to become active at the retail level and existing margins are likely to come
under pressure.
Restructuring could materially affect our results of operations in a manner
and magnitude which cannot be predicted. The effects of competition are
dependent on the number and cost structure of competitors, the loyalty of
CILCO's existing customer base and the possibility of additional legislation
which may affect the extent and timing of competition. Also, the cost of any
assets whose recovery is impaired by the transition to a competitive marketplace
must be written off. CILCO has not determined its electric generating asset
values to be impaired. Its ability to keep total production costs competitive in
a deregulated market will determine whether and to what extent the value of
these assets may be impaired in the future.
WE ARE SUBJECT TO ENVIRONMENTAL, ENERGY AND OTHER REGULATIONS, WHICH, IF THEY
BECOME MORE STRINGENT, COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF
OPERATIONS.
We are subject to a number of environmental and other laws and regulations
affecting many aspects of our present and future operations, including the
disposal of various forms of waste, the construction or permitting of new
facilities and air and water quality. Those laws and regulations generally
require us to obtain and comply with a wide variety of licenses, permits and
other approvals. We will also be subject to a number of complex and stringent
laws and regulations that both public officials and private individuals may seek
to enforce. Existing regulations may be revised or new regulations may be
adopted or become applicable to us which could have an adverse impact on our
operations, including potential regulatory developments related to emissions of
greenhouse gases, sulfur dioxide and nitrous oxides. The implementation of
regulatory changes imposing more comprehensive or stringent requirements on us,
to the extent such changes would result in increased compliance costs or
additional operating restrictions, could have a material adverse effect on our
results of operations.
OUR SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT, WHICH COULD DISRUPT OUR OPERATIONS
AND ADVERSELY AFFECT OUR BUSINESS.
We have undertaken an extensive ongoing project to address our systems
potentially affected by the year 2000 date change. We currently believe we will
be able to adequately address year 2000 issues through a combination of
modifications of certain existing programs and systems, the replacement of
others with new software that is year 2000 compliant, and the development of
contingency plans. We have completed our compliance testing of all identified
suspect embedded chip devices, except for the testing of approximately 1% of
non-critical embedded chip devices associated with power plant operations. We
have also substantially completed the testing of operating system software and
development and testing of contingency plans. We expect to complete the testing
of all embedded chip devices and the testing of the applications that have
undergone year 2000 upgrades or modifications by the end of November 1999.
Despite the comprehensive nature of our year 2000 project, it is possible
that we may experience random, widespread and simultaneous failures in our
generation, transmission and distribution systems as a result of the year 2000
date change. Although we are developing contingency plans for
14
<PAGE>
anticipated risks of interruption to the generation or distribution of energy,
we may experience outages. Although the impact on our future operations and
revenues is unknown, any failure of our systems to perform because of year 2000
implications could result in operating problems and costs material to us.
Although we believe we will complete our compliance project sufficiently in
advance of January 1, 2000, unforeseen and other factors could cause delays in
the project and require material expenditures by us, which could have a material
adverse effect on our results of operations. In addition, we cannot predict the
nature or impact on our operations of third-party noncompliance with year 2000
requirements beyond the assurances given during critical vendor assessments.
AES IS OUR SOLE AND CONTROLLING SHAREHOLDER, AND AES'S INTERESTS MAY CONFLICT
WITH YOUR INTERESTS.
AES is our sole shareholder. AES has taken steps to preserve our
independence in several respects, including the appointment of one independent
director with specified voting rights, as further described in "Our Merger with
Midwest Energy -- Our Independence." Despite those steps, in the event of a
conflict of interest between AES as sole shareholder and the holders of the new
securities as our creditors, AES may exercise its rights as our sole shareholder
and direct our Board of Directors in a manner that is deemed to be in AES's best
interests, which may be to the detriment of the holders of the new securities.
15
<PAGE>
SPECIAL NOTE ON
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about us and our subsidiaries, including, among
other things:
o changes in company-wide operation and plant availability compared to our
historical performance and changes in our historical operating cost
structure, including changes in various costs and expenses;
o regulation and restrictions;
o legislation intended to promote competition in Illinois;
o tariffs;
o governmental approval processes;
o environmental matters;
o construction, operating and fuel risks;
o unusual weather patterns;
o load growth, dispatch and transmission constraints and demands; and
o impact of the Year 2000 issue.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the new securities in
this exchange offer. All of the old securities that are tendered in the exchange
offer will be retired and cancelled. The net proceeds from the initial issuance
of old securities, approximately $468 million, were used to provide a portion of
the funds necessary to complete our merger with Midwest Energy, with the
remaining portion being provided by an equity contribution to Midwest Energy by
AES. See "Our Merger with Midwest Energy."
ACCOUNTING TREATMENT
The new securities to be issued in the exchange offer will be recorded at
the same carrying value as the old securities as reflected in our accounting
records on the date of the exchange. Accordingly, we will not recognize any gain
or loss for accounting purposes. The expenses of the exchange offer and the
unamortized expenses relating to the issuance of the old securities will be
amortized over the term of the old securities and the new securities to be
issued in the exchange offer.
16
<PAGE>
CAPITALIZATION
The following table sets forth our historical consolidated capitalization
at June 30, 1999, and our unaudited pro forma consolidated capitalization as if
the merger, the initial offering of old securities and the AES equity
contribution to Midwest Energy to finance a portion of the merger costs had all
occurred on June 30, 1999. Consolidated capitalization consists of short-term
borrowings, long-term debt, preferred stock of subsidiary and stockholders'
equity. You should read this table in conjunction with the unaudited pro forma
financial information and the related notes to them appearing elsewhere in this
prospectus. See "Summary -- Summary Selected Historical and Unaudited Pro Forma
Consolidated Financial Data" and "Our Merger with Midwest Energy."
<TABLE>
<CAPTION>
JUNE 30, 1999
--------------------------
(IN THOUSANDS)
ACTUAL PRO FORMA
---------- -------------
<S> <C> <C>
SHORT-TERM BORROWINGS:
Notes payable ............................. $ 73,300 $ 46,600
Current portion of long term debt ......... $ 43,000 $ 43,000
-------- ----------
Total short-term borrowings ............ $116,300 $ 89,600
LONG-TERM DEBT:
Senior notes and senior bonds ............. $ -- $ 473,952
Other senior long-term debt ............... $257,168 $ 257,168
-------- ----------
Total long-term debt ................... $257,168 $ 731,120
PREFERRED STOCK OF SUBSIDIARY ............. $ 66,120 $ 66,120
STOCKHOLDERS' EQUITY ...................... $332,696 $ 463,048
-------- ----------
Total capitalization ................... $772,284 $1,349,888
======== ==========
</TABLE>
17
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
When Midwest Energy sold the outstanding senior notes and senior bonds on
October 18, 1999, it entered into a registration rights agreement with the
initial purchasers of those senior notes and senior bonds. We assumed all of
Midwest Energy's obligations under the registration rights agreement when we
merged with Midwest Energy. Under the registration rights agreement, we have
agreed to file a registration statement regarding the exchange of the
outstanding senior notes and senior bonds for new senior notes and senior bonds
which are registered under the Securites Act. We have also agreed to use our
reasonable best efforts to cause the registration statement to become effective
with the SEC, and to conduct this exchange offer after the registration
statement is declared effective. We will use our reasonable best efforts to keep
this registration statement effective at least until the exchange offer is
completed. The registration rights agreement provides that we will be required
to pay liquidated damages to the holders of the outstanding senior notes and
senior bonds if:
o the registration statement is not filed by January 16, 2000;
o the registration statement is not declared effective by April 15, 2000;
or
o the exchange offer has not been completed within 30 business days after
the registration statement becomes effective.
TERMS OF THE EXCHANGE OFFER
This prospectus and the accompanying letter of transmittal together
constitute the exchange offer. Upon the terms and subject to the conditions set
forth in this prospectus and in the letter of transmittal, we will accept for
exchange outstanding senior notes and senior bonds which are properly tendered
on or before the expiration date and are not withdrawn as permitted below. The
expiration date for this exchange offer is 5:00 p.m., New York City time, on [
], or such later date and time to which we, in our sole discretion, extend the
exchange offer.
The form and terms of the new securities being issued in the exchange offer
are the same as the form and terms of the old securities, except that:
o the new securities being issued in the exchange offer will have been
registered under the Securities Act;
o the new securities being issued in the exchange offer will not bear the
restrictive legends restricting their transfer under the Securities Act;
and
o the new securities being issued in the exchange offer will not contain
the registration rights and liquidated damages provisions contained in
the old securities.
Outstanding senior notes and senior bonds being tendered in the exchange
offer must be in denominations of the principal amount of $1,000 and integral
multiples of that amount.
We expressly reserve the right, in our sole discretion:
o to extend the expiration date;
o to delay accepting any outstanding senior notes or senior bonds;
o if any of the conditions set forth below under "--Conditions to the
Exchange Offer" have not been satisfied, to terminate the exchange offer
and not accept any old securities for exchange; or
o to amend the exchange offer in any manner.
We will give oral or written notice of any extension, delay,
non-acceptence, termination or amendment as promptly as practicable by a public
announcement, and in the case of an extension, not later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
expiration date.
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<PAGE>
During an extension, all outstanding senior notes and senior bonds
previously tendered will remain subject to the exchange offer and may be
accepted for exchange by us. Any outstanding senior notes and senior bonds not
accepted for exchange for any reason will be returned without cost to the holder
that tendered them as promptly as practicable after the expiration or
termination of the exchange offer.
HOW TO TENDER OLD SECURITIES FOR EXCHANGE
When the holder of old securities tenders, and we accept, old securities
for exchange, a binding agreement between us and the tendering holder is
created, subject to the terms and conditions set forth in this prospectus and
the accompanying letter of transmittal. Execpt as set forth below, a holder of
outstanding senior notes or senior bonds who wishes to tender them for exchange
must, on or prior to the expiration date:
o transmit a properly completed and duly executed letter of transmittal,
including all other documents required by that letter of transmittal, to
The Bank of New York, the "exchange agent", at the address set forth
below under the heading "Exchange Agent"; or
o if senior notes or senior bonds are tendered pursuant to the book-entry
procedures set forth below, the tendering holder must transmit an agent's
message to the exchange agent at the address set forth below under the
heading "Exchange Agent."
In addition, either:
o the exchange agent must receive the certificates for the outstanding
senior notes or senior bonds being tendered and the letter of
transmittal;
o the exchange agent must receive, prior to the expiration date, a timely
confirmation of the book-entry transfer of the senior notes or senior
bonds being tendered into the exchange agent's account at DTC or an
agent's message; or
o the holder must comply with the guaranteed delivery procedures described
below.
The term "agent's message" means a message, transmitted to DTC and received
by the exchange agent and forming a part of a book-entry transfer, which states
DTC has received an express acknowledgment that the tendering holder agrees to
be bound by the letter of transmittal and that we may enforce the letter of
transmittal against that holder.
THE METHOD OF DELIVERY OF THE OUTSTANDING SENIOR NOTES AND SENIOR BONDS,
THE LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION
AND RISK OF THE HOLDERS. IF THE DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD
ALLOW SUFFICIENT TIME TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR
SENIOR NOTES OR SENIOR BONDS SHOULD BE SENT DIRECTLY TO US.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the old securities surrendered for
exchange are tendered:
o by a holder of the old securities, who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
letter of transmittal; or
o for the account of an eligible institution.
An "eligible institution" is a firm which is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States.
If signatures on a letter of transmittal or notice of withdrawal are
required to be guaranteed, the guarantor must be an eligible institution. If old
securities are registered in the name of a person other than the signer of the
letter of transmittal, the old securities surrendered for exchange must be
19
<PAGE>
endorsed by, or accompanied by a written instrument or instruments of transfer
or exchange, in satisfactory form as determined by us in our sole discretion,
duly executed by the registered holder with the holder's signature guaranteed by
an eligible institution.
We will determine all questions as to the validity, form, eligibility and
acceptance of old securities tendered for exchange in our sole discretion,
including questions as to time of receipt. Our determination will be final and
binding. We reserve the absolute right to:
o reject any and all tenders of any old security improperly tendered;
o refuse to accept any old security if, in our judgement or the judgment of
our counsel, acceptance of the old security may be deemed unlawful; and
o waive any defects or irregularities or conditions of the exchange offer
as to any particular old security either before or after the expiration
date, including the right to waive the ineligibility of any holder who
seeks to tender old securities in the exchange offer.
Our interpretation of the terms and conditions of the exchange offer as to
any particular old securities either before or after the expiration date,
including the letter of transmittal and the instructions to it, will be final
and binding on all parties. Holders must cure any defects and irregularities in
connection with tenders of old securities for exchange within such reasonable
period of time as we will determine, unless we waive those defects or
irregularities. Neither we, the exchange agent nor any other person shall be
under any duty to give notification of any defect or irregularity with respect
to any tender of old securities for exchange, nor shall any of us incur any
liability for failure to give that notification.
If a person or persons other than the registered holder or holders of the
old securities tendered for exchange signs the letter of transmittal, the
tendered old securities must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders that appear on the old securities being tendered.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any old securities or any power of
attorney, those persons should so indicate when signing, and you must submit
proper evidence satisfactory to us of, such person's authority to so act unless
we waive this requirement.
By tendering, each holder will represent to us that, among other things,
the person acquiring new securities in the exchange offer is obtaining them in
the ordinary course of its business, whether or not such person is the holder,
and that neither the holder nor such other person has any arrangement or
understanding with any person to participate in the distribution of the new
securities issued in the exchange offer. If any holder or any such other person
is an "affiliate," as defined under Rule 405 of the Securities Act, of CILCORP,
or is engaged in or intends to engage in or has an arrangement or understanding
with any person to participate in a distribution of new securities to be
acquired in the exchange offer, that holder or any such other person:
o may not rely on the applicable interpretations of the staff of the SEC;
and
o must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
Each broker-dealer who acquired its old securities as a result of
market-making activities or other trading activities and thereafter receives new
securities issued for its own account in the exchange offer, must acknowledge
that it will deliver a prospectus in connection with any resale of such new
securities issued in the exchange offer. The letter of transmittal states that
by so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. See "Plan of Distribution" for a discussion of the exchange and resale
obligations of broker-dealers in connection with the exchange offer.
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<PAGE>
ACCEPTANCE OF OLD SECURITIES FOR EXCHANGE; DELIVERY OF NEW SECURITIES ISSUED IN
THE EXCHANGE OFFER
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all outstanding old
securities properly tendered and will issue new securities registered under the
Securities Act. For purposes of the exchange offer, we will be deemed to have
accepted properly tendered outstanding old securities for exchange when, as and
if we have given oral or written notice to the exchange agent, with written
confirmation of any oral notice to be given promptly thereafter. See
"--Conditions to the Exchange Offer" for a discussion of the conditions that
must be satisfied before we accept any old securities for exchange.
For each outstanding old security accepted for exchange, the holder will
receive a new security registered under the Securities Act having a principal
amount equal to that of the surrendered old security. Accordingly, registered
holders of new securities issued in the exchange offer on the relevant record
date for the first interest payment date following the completion of the
exchange offer will receive interest accruing from the most recent date to which
interest has been paid or, if no interest has been paid on the outstanding
senior notes and senior bonds, from October 18, 1999. Outstanding old securities
that we accept for exchange will cease to accrue interest from and after the
date of completion of the exchange offer. Under the registration rights
agreement, we may be required to make additional payments in the form of
liquidated damages to the holders of the outstanding senior notes and senior
bonds under circumstances relating to the timing of the exchange offer.
In all cases, we will issue new securities in the exchange offer for
outstanding old securities that are accepted for exchange only after the
exchange agent timely receives:
o certificates for such old securities or a timely book-entry confirmation
of such old securities into the exchange agent's account at DTC;
o a properly completed and duly executed letter of transmittal or an
agent's message; and
o all other required documents.
If for any reason set forth in the terms and conditions of the exchange
offer we do not accept any tendered outstanding old securities, or if a holder
submits outstanding old securities for a greater principal amount than the
holder desires to exchange, we will return such unaccepted or non-exchanged old
securities without cost to the tendering holder. In the case of old securities
tendered by book-entry transfer into the exchange agent's account at DTC, such
non-exchanged old securities will be credited to an account maintained with DTC.
We will return the old securities or have them credited to the DTC account as
promptly as practicable after the expiration or termination of the exchange
offer.
BOOK-ENTRY TRANSFERS
The exchange agent will make a request to establish an account with respect
to the outstanding old securities at DTC for purposes of the exchange offer
within two business days after the date of this prospectus. Any financial
institution that is a participant in DTC's systems must make book-entry delivery
of outstanding old securities by causing DTC to transfer such outstanding old
securities into the exchange agent's account at DTC in accordance with DTC's
procedures for transfer. That participant should transmit its acceptance to DTC
on or prior to the expiration date or comply with the guaranteed delivery
procedures described below. DTC will verify that acceptance, execute a
book-entry transfer of the tendered old securities into the exchange agent's
account at DTC and then send to the exchange agent confirmation of that
book-entry transfer. The confirmation of the book-entry transfer will include an
agent's message confirming that DTC has received an express acknowledgment from
the participant that the participant has received and agrees to be bound by the
letter of transmittal and that we may enforce the letter of transmittal against
that participant. Delivery of new securities issued in the exchange offer may be
effected through book-entry transfer at DTC. However, the letter of transmittal
or a facsimile of it or an agent's message, with any required signature
guarantees and any other required documents, must:
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o be transmitted to and received by the exchange agent at the address set
forth below under "--Exchange Agent" on or prior to the expiration date;
or
o comply with the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If a holder of outstanding old securities desires to tender them but they
are not immediately available, or if the holder cannot deliver the old
securities or other required documents to the exchange agent before the
expiration date, or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if:
o the holder tenders the outstanding old securities through an eligible
institution;
o prior to the expiration date, the exchange agent receives from that
eligible institution a properly completed and duly executed notice of
guaranteed delivery, substantially in the form we have provided, by
telegram, telex, facsimile transmission, mail or hand delivery, setting
forth the name and address of the holder of the old securities being
tendered and the amount of the old securities being tendered. The notice
of guaranteed delivery must state that the tender is being made and
guarantee that within three New York Stock Exchange trading days after
the date of execution of the notice of guaranteed delivery, the
certificates for all physically tendered old securities, in proper form
for transfer, or a book-entry confirmation, as the case may be, together
with a properly completed and duly executed letter of transmittal or
agent's message with any required signature guarantees and any other
documents required by the letter of transmittal will be deposited by the
eligible institution with the Exchange Agent; and
o the exchange agent receives the certificates for all physically tendered
old securities, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly completed and
duly executed letter of transmittal or agent's message with any required
signature guarantees and any other documents required by the letter of
transmittal, within three New York Stock Exchange trading days after the
date of execution of the notice of guaranteed delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of your old securities at any time prior to 5:00
p.m., New York City time, on the expiration date.
For a withdrawal to be effective, you must send a written notice of
withdrawal or a properly transmitted agent's message to the exchange agent at
one of the addresses set forth below under "--Exchange Agent." The notice of
withdrawal must:
o specify the name of the person having tendered the old securities to be
withdrawn;
o identify the old securities to be withdrawn, including the principal
amount of the old securities; and
o where certificates for old securities are transmitted, specify the name
in which the old securities are registered, if different from that of the
withdrawing holder.
If certificates for old securities have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and signed notice of withdrawal with
signatures guaranteed by an eligible institution unless the holder is an
eligible institution. If old securities have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawn old securities and otherwise comply with the procedures of that
facility. We will determine all questions as to the validity, form and
eligibilty of such notices, including questions as to time of receipt, and our
determination will be final and binding on all parties. Any tendered old
securities so
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withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the exchange offer. Any old securities which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
tendering holder without cost to that holder. In the case of old securities
tendered by book-entry transfer into the exchange agent's account at DTC, the
old securities withdrawn will be credited to an account maintained with DTC for
the outstanding old securities. The old securities will be returned or credited
to the DTC account as soon as practicable after withdrawal, rejection of tender
or termination of the exchange offer. Properly withdrawn old securities may be
re-tendered by following the procedures described under "--How to Tender Old
Securities for Exchange" above at any time on or prior to 5:00 p.m., New York
City time, on the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
We are not required to accept for exchange, or to issue new securities in
the exchange offer for, any outstanding old securities. We may terminate or
amend the exchange offer, if at any time before the acceptance of outstanding
old securities for exchange:
o any federal law, statute, rule or regulation is adopted or enacted which,
in our judgment, would reasonably be expected to impair our ability to
proceed with the exchange offer;
o any stop order is threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or the
qualification of the indenture under the Trust Indenture Act of 1939; or
o there occurs a change in the current interpretation by staff of the SEC
which permits the new securities to be issued in the exchange offer to be
offered for resale, resold and otherwise transferred by the holders of
the new securities, other than broker-dealers and any holder which is an
"affiliate" of CILCORP within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the new
securities acquired in the exchange offer are acquired in the ordinary
course of that holder's business and that holder has no arrangement or
understanding with any person to participate in the distribution of the
new securities to be issued in the exchange offer.
The preceding conditions are for our sole benefit and we may assert them
regardless of the circumstances giving rise to any such condition. We may waive
the preceding conditions in whole or in part at any time and from time to time
in our sole discretion. If we do so, the exchange offer will remain open for at
least three business days following any waiver of the preceding conditions. Our
failure at any time to exercise the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which we may assert at any time and from time to time.
THE EXCHANGE AGENT
The Bank of New York has been appointed as our exchange agent for the
exchange offer. All executed letters of transmittal should be directed to our
exchange agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for notices of guaranteed delivery should be
directed to the exchange agent addressed as follows:
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Main Delivery To:
The Bank of New York as Exchange Agent
<TABLE>
<CAPTION>
<S> <C>
By mail, hand or overnight courier to: By Facsimile (for eligible institutions only):
The Bank of New York (212) [ ]
101 Barclay Street 7 East
New York, New York 10286 Confirm by telephone:
Attn: Reorganization Section -- Confidential (212) [ ]
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THE LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF
TRANSMITTAL.
FEES AND EXPENSES
We will not make any payment to brokers, dealers, or others soliciting
acceptance of the exchange offer except for reimbursement of mailing expenses.
The estimated cash expenses to be incurred in connection with the exchange
offer will be paid by us and are estimated in the aggregate to be approximately
$500,000.
TRANSFER TAXES
Holders who tender their outstanding old securities for exchange will not
be obligated to pay any transfer taxes in connection with the exchange. If,
however, new securities issued in the exchange offer are to be delivered to, or
are to be issued in the name of, any person other than the holder of the old
securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of the old securities in connection with the exchange offer, then
the holder must pay any such transfer taxes, whether imposed on the registered
holder or on any other person. If satisfactory evidence of payment of, or
exemption from, those taxes is not submitted with the letter of transmittal, the
amount of those transfer taxes will be billed directly to the tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE OUTSTANDING SECURITIES
Holders who desire to tender their outstanding old securities in exchange
for new securities registered under the Securities Act should allow sufficient
time to ensure timely delivery. Neither the exchange agent nor CILCORP is under
any duty to give notification of defects or irregularities with respect to the
tenders of securities for exchange.
Outstanding old securities that are not tendered or are tendered but not
accepted will, following the completion of the exchange offer, continue to be
subject to the provisions in the indenture regarding the transfer and exchange
of the outstanding old securities and the existing restrictions on transfer set
forth in the legend on the outstanding old securities and in the offering
memorandum dated October 13, 1999, relating to the outstanding old securities.
Except in limited circumstances with respect to specific types of holders of
outstanding old securities, we will have no further obligation to provide for
the registration under the Securities Act of such outstanding old securities. In
general, outstanding old securities, unless registered under the Securities Act,
may not be offered or sold except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws.
We do not currently anticipate that we will take any action to register the
outstanding old securities under the Securities Act or under any state
securities laws. Upon completion of the exchange offer, holders of the
outstanding old securities will not be entitled to any further registration
rights under the registration rights agreement, except under limited
circumstances.
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Holders of the new securities of either series issued in the exchange offer
and any outstanding old securities of that series which remain outstanding after
completion of the exchange offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage of the class
have taken certain actions or exercised certain rights under the indenture.
CONSEQUENCES OF EXCHANGING OUTSTANDING SECURITIES
Based on interpretations of the staff of the SEC, as set forth in no-action
letters to third parties, we believe that the new securities issued in the
exchange offer may be offered for resale, resold or otherwise transferred by
holders of those new securities, other than by any holder which is an
"affiliate" of CILCORP within the meaning of Rule 405 under the Securities Act.
Those new securities may be offered for resale, resold or otherwise transferred
without compliance with the registration and prospectus delivery provisions of
the Securities Act, if:
o those new securities issued in the exchange offer are acquired in the
ordinary course of the holder's business; and
o the holder, other than a broker-dealer, has no arrangement or
understanding with any person to participate in the distribution of the
new securities to be issued in the exchange offer.
However, the SEC has not considered our exchange offer in the context of a
no-action letter and we cannot guarantee that the staff of the SEC would make a
similar determination with respect to our exchange offer as in such other
circumstances.
Each holder, other than a broker-dealer, must furnish a written
representation, at our request, that:
o it is acquiring the new securities issued in the exchange offer in the
ordinary course of its business;
o it is not engaged in, and does not intend to engage in, a distribution of
the new securities issued in the exchange offer and has no arrangement or
understanding to participate in a distribution of new securities issued
in the exchange offer;
o it is not a broker-dealer that acquired old securities directly from
Midwest Energy or CILCORP;
o it is not an affiliate of CILCORP; and
o it is not acting on behalf of any person who could not truthfully make
the foregoing representations.
Each broker-dealer that receives new securities issued in the exchange
offer for its own account in exchange for outstanding old securities must
acknowledge that the old securities were acquired by that broker-dealer as a
result of market-making or other trading activities and that it will deliver a
prospectus in connection with any resale of those new securities issued in the
exchange offer. See "Plan of Distribution" for a discussion of the exchange and
resale obligations of broker-dealers in connection with the exchange offer.
In addition, to comply with the state securities laws of certain
jurisdictions, the new securities issued in the exchange offer may not be
offered or sold in any state unless they have been registered or qualified for
sale in that state or an exemption from registration or qualification is
available and complied with by the holders selling the new securities. We have
agreed in the registration rights agreement that, prior to any public offering
of transfer restricted securities, we will register or qualify the transfer
restricted securities for offer or sale under the securities laws of any
jurisdiction requested by a holder, provided that we are not required to qualify
as a foreign corporation or as a dealer in securities in any jurisdiction where
we would not otherwise be required to qualify, or to take any action that would
subject us to taxation or to general service of process in any jurisdiction
where we are not then so subject to taxation or service of process. Unless a
holder requests, we
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<PAGE>
currently do not intend to register or qualify the sale of the new securities
issued in the exchange offer in any state where an exemption from registration
or qualification is required and not available. "Transfer restricted securities"
means each outstanding old security until:
o the date on which that old security has been exchanged by a person other
than a broker-dealer for a new security in the exchange offer;
o following the exchange by a broker-dealer in the exchange offer of the
outstanding old security for a new security issued in the exchange offer,
the date on which the new security issued in the exchange offer is sold
to a purchaser who receives from that broker-dealer on or prior to the
date of the sale a copy of this prospectus;
o the date on which that old security has been effectively registered under
the Securities Act and disposed of in accordance with a shelf
registration statement that we file in accordance with the registration
rights agreement; or
o the date on which that old security is distributed to the public in a
transaction under Rule 144 of the Securities Act.
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<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act covering the new securities to be issued in the exchange offer.
This prospectus does not contain all of the information included in the
registration statement. If we have filed any contract, agreement or other
document as an exhibit to the registration statement, you should read the
exhibit for a more complete understanding of the document or matter involved.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information we file at the SEC's public reference rooms at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http://www.sec.gov".
INCORPORATION BY REFERENCE
We have "incorporated by reference" certain documents. This means that we
are disclosing important information to you by referring you to those documents.
The information in the documents we are incorporating by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we will make with
the SEC under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act:
o Annual Report on Form 10-K for the year ended December 31, 1998.
o Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and
June 30, 1999.
o Current Report on Form 8-K filed on March 22, 1999.
o Current Report on Form 8-K filed on November 2, 1999
We will provide a copy of the documents we incorporate by reference, at no
cost, to any person who receives this prospectus. To request a copy of any or
all of these documents, you should write or telephone us at the following
address and telephone number:
CILCORP Inc.
300 Liberty Street
Peoria, Illinois 61602
Attention: Corporate Secretary
(309) 675-8810
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BUSINESS
We are an energy services holding company headquartered in Peoria,
Illinois. In 1998, we had consolidated assets, revenues and net income from
continuing operations of $1.3 billion, $559 million and $38 million,
respectively. Our principal business subsidiary and our primary source of
revenue is CILCO, a public utility providing electricity and natural gas service
to industrial, commercial and residential customers in central Illinois.
We were incorporated as a holding company in Illinois in 1985. In 1998, we
began a process to refocus our corporate strategy on our core electric and gas
utility business by divesting unrelated and higher risk businesses. Several of
these businesses were eliminated, discontinued or divested in late 1998 and
1999. While we conduct other limited energy-related businesses through our
subsidiaries CILCORP Investment Management Inc. and CILCORP Ventures Inc., in
1998 approximately 96% of our revenues came from CILCO.
CILCO
CILCO generates, transmits, distributes and sells electric energy to
approximately 189,000 customers in an area of about 3,700 square miles in
central Illinois, and purchases, distributes, transports and sells natural gas
to approximately 197,000 customers in an area of about 4,500 square miles in
central Illinois. Many of our customers receive both electric and natural gas
service. CILCO has an installed generation capacity of 1,152 megawatts, of which
96% is coal-fired and the balance consists of gas-fired peaking and
co-generation units. CILCO has the lowest overall average electric cost rates of
any investor-owned utility in Illinois, and its rates also compare favorably
with those of utilities in surrounding states.
CILCO continues to experience in varying degrees the impact of developments
common to the electric and gas utility industries. These include increased
competition in wholesale markets and the prospect of competition in retail
markets, changes in regulation and legislation affecting utilities,
uncertainties as to the future demand for electricity and natural gas,
structural and competitive changes in the markets for these commodities, the
high cost of compliance with environmental and safety laws and regulations and
uncertainties in regulatory and political processes. At the same time, CILCO has
sought to provide reliable service at reasonable rates for its customers and a
fair return for its investors.
PROPERTIES. CILCO owns and operates two steam-electric generating plants, a
cogeneration plant and two combustion turbine-generators. These facilities had
an available summer capability of 1,152 megawatts in 1998. Each combustion
turbine generator has a summer rating of 15 megawatts and is used during peak
periods. They typically operate less than 100 hours per year. The cogeneration
plant, which became operational during 1995, produces steam for Midwest Grain
Products, Inc. and also generates electricity for distribution to CILCO's
customers. This turbine-generator has an available summer capability of 16
megawatts.
The following table shows the major generating facilities of CILCO. They
represent 96% of CILCO's available generating capability projected for 1999 and
are all fueled with coal:
AVAILABLE CAPABILITY
(MEGAWATTS)
STATION & UNIT INSTALLED ACTUAL 1998
- ---------------------- ----------- ---------------------
Duck Creek
Unit 1 ............. 1976 366
E. D. Edwards
Unit 1 ............. 1960 117
Unit 2 ............. 1968 262
Unit 3 ............. 1972 361
CILCO's transmission system includes approximately 285 circuit miles
operating at 138,000 volts, 48 circuit miles operating at 345,000 volts and 16
principal substations with an installed capacity of 2,150,000 kilovolt-amperes.
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The electric distribution system includes approximately 6,223 miles of
overhead pole and tower lines and 2,096 miles of underground distribution
cables. The distribution system also includes 105 substations with an installed
capacity of 1,665,885 kilovolt-amperes.
The gas system includes approximately 3,581 miles of transmission and
distribution mains.
CILCO has an underground gas storage facility located about ten miles
southwest of Peoria near Glasford, Illinois. The facility has a present
recoverable capacity of approximately 4.5 Bcf. An additional storage facility
near Lincoln, Illinois has a present recoverable capacity of approximately 5.2
Bcf.
ELECTRIC SERVICE. CILCO furnishes electric service to retail customers in
136 Illinois communities, including Peoria, East Peoria, Pekin, Lincoln and
Morton. At December 31, 1998, CILCO had approximately 189,000 retail electric
customers. In 1998, 68% of CILCO's total operating revenue was derived from the
sale of electricity. Approximately 37% of electric revenue resulted from
residential sales, 31% from commercial sales, 25% from industrial sales, 5% from
sales for resale and 2% from other sales. Electric sales, particularly
residential and commercial sales during the summer months, fluctuate based on
weather conditions.
The electric operating revenues of CILCO were derived from the following
sources (in thousands):
1998 1997 1996
----------- ----------- -----------
Residential ..................... $133,687 $125,071 $121,668
Commercial ...................... 111,830 103,747 100,944
Industrial ...................... 87,895 82,318 79,065
Sales for resale ................ 18,866 19,966 15,206
Street lighting ................. 1,385 1,343 1,283
Other revenue ................... 6,346 5,651 4,619
-------- -------- --------
Total electric revenue .......... $360,009 $338,096 $322,785
======== ======== ========
The 1998 system peak demand was 1,195 megawatts on June 26, 1998. To date,
the 1999 system peak demand was 1,235 megawatts on July 21, 1999. This was a new
all-time system peak demand. CILCO's planned reserve margin of 18.7% for 1999
takes into account 185 megawatts of firm purchased power and 55 megawatts of
instantaneous interruptible industrial load.
Studies conducted by CILCO indicate that it has sufficient base load
generating capacity and purchased capacity to provide an adequate and reliable
supply of electricity to satisfy base load demand.
CILCO is interconnected with AmerenCIPS, Commonwealth Edison Company,
Illinois Power Company and the Springfield City Water, Light and Power
Department to provide for the interchange of electric energy on an emergency and
mutual help basis.
GAS SERVICE. CILCO provides gas service to customers in 128 Illinois
communities, including Peoria, East Peoria, Pekin, Lincoln and Springfield. At
December 31, 1998, CILCO had approximately 197,000 gas customers, including
industrial, commercial and residential gas transportation customers that
purchase gas directly from suppliers for transportation through CILCO's system.
In 1998, 32% of CILCO's total operating revenue was derived from the sale
or transportation of natural gas. Approximately 58% of gas revenue resulted from
residential sales, 25% from commercial sales, 4% from industrial sales, 3% from
transportation and 10% from other sales. Gas sales, particularly residential and
commercial sales during the winter months, fluctuate based on weather
conditions.
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The gas operating revenues of CILCO were derived from the following sources
(in thousands):
1998 1997 1996
----------- ----------- -----------
Residential .................... $100,010 $124,440 $125,869
Commercial ..................... 42,713 51,204 44,695
Industrial ..................... 6,627 8,276 5,670
Transportation of gas .......... 5,911 6,484 8,388
Other revenue .................. 17,066 18,354 11,148
-------- -------- --------
Total gas revenue .............. $172,327 $208,758 $195,770
======== ======== ========
CILCO's all-time maximum daily send-out of 443,167 MCF occurred on January
15, 1972. The 1998 peak day send-out of 327,328 MCF occurred on January 13,
1998. CILCO was able to meet all of its existing customer requirements during
the 1998-1999 heating season. CILCO believes that its present and planned
supplies of gas will continue to be sufficient to serve all of its existing
customer requirements during the 1999-2000 heating season.
ILLINOIS CUSTOMER CHOICE LAW. Under the Illinois Customer Choice Law, large
industrial customers and customers representing one-third of remaining
non-residential KWh sales were able to choose their electric supplier beginning
October 1, 1999, with all non-residential customers able to choose after
December 31, 2000. Residential electric customers will be able to choose their
electric supplier beginning May 1, 2002.
If a customer chooses to leave its present electricity supplier, that
utility will collect a fee for delivering power and may assess an additional
transition charge on the customer. This charge must be filed with the Illinois
Commerce Commission and is designed to help utilities recover the cost of past
investments made under a regulated system. The transition charge is calculated
by deducting three costs from the existing tariff for bundled electric service:
(1) the charge for transmission and distribution services; (2) the market price
for electricity (determined by a neutral fact finder); and (3) a mitigation
factor established by the Illinois Customer Choice Law. The transition charge
will reduce a customer's economic incentive to switch suppliers. Transition
charges may be collected through 2006, or 2008 upon specific findings by the
Illinois Commerce Commission, including a finding that the recovery is needed to
maintain the utility's financial integrity.
The Illinois Customer Choice Law also requires electric base rate
reductions that vary by utility. CILCO began its reduction in residential base
rates with an initial 2% decrease beginning August 1998. A further 2% decrease
is required effective October 1, 2000 and a final 1% decrease is required
effective October 1, 2002. Also, CILCO's return on common equity will, in
general, be capped at a specified index plus 1.5%. The index will be a 12-month
average yield for 30-year U.S. Treasury bonds plus 8% for calendar years 1998
and 1999 and a 12-month average yield for 30-year U.S. Treasury bonds plus 9%
for calendar years 2000 through 2004. If CILCO's two-year average return on
common equity exceeds the two-year average of that equity cap, 50% of the
earnings in excess of the average equity cap must be refunded to customers in
the following year.
On June 30, 1999, the Illinois General Assembly amended the Illinois
Customer Choice Law to allow certain utilities, including CILCO, to increase the
equity cap by an additional 2% over the equity cap provided under the original
law, for the period 2000 through 2004. The increase in the equity cap is allowed
in exchange for these utilities offering choice of electricity suppliers to
certain non-residential customers three to six months earlier than previously
allowed under the Illinois Customer Choice Law and for waiving the right to seek
a two-year extension on the collection of transition charges.
As the Illinois Customer Choice Law is implemented, electric generation in
Illinois will become deregulated and competitive. As a result, the accounting
principles applicable to rate-regulated enterprises will no longer apply to the
electric generation portion of CILCO's business. Also, the cost of any assets
whose recovery is impaired by the transition to a competitive marketplace must
be
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written off. CILCO has not determined its electric generating asset values to be
impaired. Its ability to keep total production costs competitive in a
deregulated market will determine whether and to what extent the value of these
assets may be impaired in the future.
As required by the Illinois Customer Choice Law, on March 5, 1999, CILCO
filed proposed tariffs for delivery services to its large industrial customers
and customers representing one-third of nonresidential KWh sales. On August 25,
1999, the Illinois Commerce Commission entered an order which established rates
for delivery services which were approximately 18% lower than CILCO had
requested. This lower requirement was calculated by the Illinois Commerce
Commission to enable CILCO to yield a return on equity for its delivery services
of 10.5%. CILCO currently is unable to estimate the effect of the Illinois
Commerce Commission's order on its revenues.
OTHER REGULATORY MATTERS. CILCO is a public utility under the laws of the
State of Illinois and is subject to the jurisdiction of the Illinois Commerce
Commission. The Illinois Commerce Commission has general power of supervision
and regulation with respect to services and facilities, rates and charges,
classification of accounts, valuations of property, determination of
depreciation rates, construction, contracts with any affiliated interest, the
issuance of stock and evidences of indebtedness and various other matters. The
Illinois Commerce Commission's supervision and regulatory oversight of certain
transactions by electric utilities is reduced or suspended during the mandatory
transition period, which terminates on January 1, 2005. With respect to certain
electric matters, CILCO is subject to regulation by the Federal Energy
Regulatory Commission. CILCO is exempt from the provisions of the Natural Gas
Act, but is affected by orders, rules and regulations issued by the Federal
Energy Regulatory Commission with respect to certain gas matters.
ELECTRIC FUEL AND PURCHASED GAS ADJUSTMENT CLAUSES. CILCO's tariffs provide
for adjustments to its electric rates through the fuel adjustment clause to
recover the cost of energy purchased from other suppliers and to reflect
increases or decreases in the cost of fuel used in its generating stations. The
transportation costs of coal are not currently included in the fuel adjustment
clause, but are collected through base rates. CILCO's current tariffs also
provide for adjustments to its gas rates through the purchased gas adjustment
clause to reflect increases or decreases in the cost of natural gas purchased
for sale to customers.
As a result of abnormally warm weather during July 1999, CILCO incurred $33
million of generation and purchased power costs which are subject to recovery
from customers through the fuel adjustment clause. Of this amount, $10 million
was recovered in July 1999 and the balance remained unrecovered at the end of
that month. CILCO's fuel adjustment clause allows it to pass on to its customers
the cost of unrecovered fuel and purchased power costs, normally through a
single bill. In this instance, on September 1, 1999 the Illinois Commerce
Commission approved a request by CILCO to charge customers over a twelve-month
period without interest, beginning in September 1999. Large industrial
customers, however, who were eligible to choose their electricity supplier on
October 1, 1999, may be charged for their full share of the costs incurred
through a single bill. These customers may elect to pay over a 12-month period
(ending with the August 2000 bill due date) after making appropriate
arrangements with CILCO.
While CILCO has already paid for the additional power by borrowing under
short-term financing resources, it will recover the cost over a twelve-month
period. During this time, CILCO will carry the cost as a current asset on its
balance sheet which will be offset through collections of monthly billings.
The Illinois Commerce Commission will conduct its routine review of the
fuel adjustment clause in early 2000 and will determine the prudency of CILCO's
electricity purchases. Any amount of the additional $23 million of electricity
purchases ultimately determined to be imprudent by the Illinois Commerce
Commission would not be recoverable from CILCO's customers, and therefore would
be expensed by CILCO on its income statement. We currently believe these costs
to be recoverable through the fuel adjustment clause. A significant disallowance
of these costs by the Illinois Commerce Commission would be material to CILCO's
results of operations.
COAL SUPPLY. Substantially all of CILCO's electric generation capacity is
coal-fired. Approximately 2.7 million tons of coal were burned during 1998.
Existing coal contracts with suppliers in Illinois are expected to supply 100%
of the 1999 requirements.
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During the years 1998, 1997 and 1996, the average cost per ton of coal
burned, including transportation, was $33.56, $34.01 and $31.82, respectively.
The cost of coal burned per million BTU's was $1.54, $1.56 and $1.44,
respectively. See "-- Electric Fuel and Purchased Gas Adjustment Clauses"
immediately above.
CILCO has a long-term contract with Freeman United Coal Mining Company for
the purchase of high-sulfur, Illinois coal used predominantly at the Duck Creek
Station. The contract gives CILCO the flexibility to purchase between 500,000
and 1,000,000 tons annually from Freeman. Under the terms of the contract,
CILCO's obligation to purchase coal could be extended through 2010; however,
Freeman has the option of terminating the contract with two years' notice. The
contract requires CILCO to pay all variable coal production costs on tons
purchased and certain fixed costs not affected by the volume purchased. On
August 8, 1997, CILCO filed a demand for arbitration with Freeman alleging that
Freeman has failed to keep and perform its prudent mining obligations, as
required by the parties' contract. The relief sought by CILCO through this
arbitration includes damages and confirmation of CILCO's termination rights
under this contract. CILCO and Freeman have agreed to continue operating under
the present contract until a ruling on CILCO's claims is reached by the
arbitrators, which is expected in late 1999. CILCO cannot at this time predict
the ultimate outcome of this dispute or whether its resolution will have a
material impact on CILCO's operating results.
NATURAL GAS SUPPLY. During 1998, CILCO continued to maintain a widely
diversified and flexible natural gas supply portfolio. This portfolio is
structured around firm and interruptible gas transportation service provided by
five interstate pipeline suppliers and firm and interruptible gas purchase
arrangements of varying terms made directly with approximately 20 gas suppliers.
Reliability is enhanced through natural gas injections and withdrawals at
CILCO's two natural gas storage fields and contracted storage facilities. The
supply and pipeline capacity portfolio continues to provide reliable supplies at
prevailing market prices. CILCO believes that its present and planned supply of
gas will continue to be sufficient to serve all of its present and projected
firm customer requirements.
During 1998, CILCO purchased and delivered approximately 37,828,000 MCF of
natural gas at a cost of approximately $101 million, or an average cost of $2.67
per MCF. The average cost per MCF of natural gas purchased and delivered was
$3.03 in 1997 and $3.05 in 1996. See "-- Electric Fuel and Purchased Gas
Adjustment Clauses" above.
SIGNIFICANT CUSTOMER. Caterpillar Inc. is CILCO's largest industrial
customer. Aggregate gas and electric revenues from sales to Caterpillar were
7.6%, 7.5% and 7.5% of CILCO's total operating revenue for 1998, 1997 and 1996,
respectively.
FRANCHISES. CILCO negotiates franchise agreements which authorize it to
provide utility services to the communities in its service area. The franchises
are for various terms, usually 10 to 25 years. Based on past experience, CILCO
anticipates that, as franchises expire, new franchises will be granted in the
normal course of business.
EMPLOYEES AND UNION CONTRACTS. Excluding employees assigned to us, CILCO
had 1,150 full-time and part-time employees at June 30, 1999. Of those
employees, 392 gas and electric department employees were represented by Local
51 of the International Brotherhood of Electrical Workers, and 158 power plant
employees were represented by Local 8 of the National Conference of Firemen and
Oilers.
On October 10, 1997, the International Brotherhood of Electrical Workers
ratified its current labor contract with CILCO, which expires on July 1, 2000.
On October 23, 1998, the National Conference of Firemen and Oilers ratified its
current labor contract with CILCO, which expires on July 1, 2001.
QST
We formed QST Enterprises, Inc. in December 1995. Its operations were
discontinued in the fourth quarter of 1998, except for the utility
infrastructure operation and maintenance services
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provided by a QST subsidiary, CILCORP Infraservices, and for QST's membership
interests in the three limited liability companies that acquired the assets of
ESE Land from a QST subsidiary in November 1997.
OTHER BUSINESSES
CILCORP INVESTMENT MANAGEMENT. The following table shows the investment
portfolio of CILCORP Investment Management at December 31, 1998 and December 31,
1997 (in thousands):
TYPE OF INVESTMENT 1998 1997
- ---------------------------------------------------- ----------- -----------
Investment in leveraged leases .................. $146,990 $146,458
Cash and temporary cash investments ............. 71 152
Investment in Energy Investors Fund ............. 1,510 1,158
Investment in affordable housing funds .......... 13,808 15,557
Other ........................................... 120 156
-------- --------
Total ........................................ $162,499 $163,481
======== ========
At December 31, 1998, CILCORP Investment Management held equity investments
in eight leveraged leases through its wholly-owned subsidiaries. Under those
lease agreements, CILCORP Investment Management's subsidiaries may, in specified
circumstances, be obligated to incur additional non-recourse debt to finance the
cost of certain alterations, additions, or improvements required by the lessee.
Through a wholly-owned subsidiary, CILCORP Investment Management also has a
net investment of $1,510,000 in the Energy Investors Fund, L.P., representing a
3.1% interest in that fund at December 31, 1998. The fund invests in
non-regulated, non-utility facilities for the production of electricity or
thermal energy. The equity method of accounting is used for this investment.
CILCORP Investment Management is also a limited partner in eight affordable
housing portfolios. The ownership interests in these partnerships range from 3%
to 10% at December 31, 1998. The equity method of accounting is also used for
these investments.
CILCORP VENTURES. CILCORP Ventures invests primarily in ventures relating
to energy-related products and services. It has an 80% ownership interest in the
Agricultural Research and Development Corporation and has one wholly-owned
subsidiary, CILCORP Energy Services, Inc. CILCORP Ventures's net investment in
that subsidiary is approximately $1.1 million. CILCORP Energy Services's primary
business is the sale of gas management services, including commodity purchasing.
In addition, during 1998, costs related to providing additional value-added
services to Caterpillar in connection with CILCO's Power Quest programs were
reflected in the operating results of CILCORP Energy Services.
LEGAL PROCEEDINGS
SPRINGFIELD GAS OPERATIONS. As permitted by CILCO's By-Laws, CILCO has
advanced legal and other expenses actually and reasonably incurred by current
and former employees in connection with the U.S. Justice Department's
investigation of CILCO's Springfield gas operations. In 1992, after a
significant number of leaks were detected in CILCO's Springfield cast iron
distribution system, CILCO began a detailed examination of the system and
related operating practices and procedures. CILCO then began an aggressive
program, which it completed in September 1993, to renew the Springfield cast
iron system. The Illinois Commerce Commission staff began an informal review of
CILCO's Springfield gas operations and record keeping practices in September
1992. Subsequently, the U.S. Department of Transportation and the Justice
Department began conducting investigations of CILCO, which were also focused
principally on CILCO's Springfield gas operations. Those investigations were
subject to a September 1994 settlement agreement under which CILCO entered into
a federal court civil consent decree that concluded both investigations. As part
of the settlement,
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CILCO accepted adjustments recommended by the Illinois Commerce Commission staff
which resulted in disallowance from rate base of $4.5 million of the cost of the
Springfield renewal program and payments of $1 million by CILCO in civil fines
and investigation costs.
AMERENCIPS. In August 1990, CILCO entered into a firm, wholesale power
purchase agreement with Central Illinois Public Service Company, now AmerenCIPS.
This agreement provided for a minimum contract delivery rate from AmerenCIPS of
90 MW until the contract expired in May 1998.
In March 1995, CILCO and AmerenCIPS amended a limited-term power agreement
reached in November 1992. This agreement provided for CILCO to purchase 150 MW
of AmerenCIPS' capacity from June 1998 through May 2002, and 50 MW from June
2002 through May 2009.
In May 1999, a settlement was reached between CILCO and AmerenCIPS
regarding disputed issues pertaining to these capacity and energy agreements.
The settlement amends the previous agreements to provide for 100 MW of capacity
and firm energy for the months of June through September for the year 2000
through 2003 and additionally provide for 100 MW of firm energy for the month of
January in each of those years. There are no commitments to purchase capacity or
energy beyond those dates. The agreements provide specific prices for on-peak
and off-peak energy, which eliminates the ambiguity that arose under the old
agreements due to the use of pricing queues. Under the settlement, CILCO will
have no capacity payment obligations to AmerenCIPS for February through December
1999, resulting in 1999 capacity reservation savings of approximately $6
million. The settlement also obligates both parties to withdraw from regulatory
action pertaining to related contract issues. AmerenCIPS and CILCO are currently
preparing the settlement document filing for approval by the Federal Energy
Regulatory Commission.
FORMER GAS PLANT SITES. CILCO continues to investigate and monitor four
former gas manufacturing plant sites located within its present gas service
territory. The purpose of these studies is to determine if waste materials,
principally coal tar, are present, whether the waste materials constitute an
environmental or health risk and if CILCO is responsible for the remediation of
any remaining waste materials at those sites. Remediation work at one of the
four sites was substantially completed in 1991. Based on the operation of a
groundwater collection system and other controls, CILCO expects to receive a "No
Further Remediation" letter from the Illinois EPA for this site in 1999 subject
to requirements for confirmatory groundwater monitoring. Site remediation was
completed for a second site in 1998. CILCO has received a "No Further
Remediation" letter from the Illinois EPA for the second site subject to
requirements for additional confirmatory groundwater monitoring. Additional
groundwater monitoring costs at these two sites are expected to be minimal.
CILCO has not determined the ultimate extent of its liability for, or the
ultimate cost of any remediation of, the remaining two sites, pending further
studies. Investigation of the third site is underway.
CILCO spent approximately $1.7 million for former gas manufacturing plant
site monitoring, legal fees and feasibility studies in 1998. During the first
six months of 1999, CILCO paid approximately $362,000 to outside parties for
additional monitoring, remediation and legal fees, and expects to spend
approximately $642,000 during the remainder of 1999. A $1.2 million liability is
recorded on the balance sheet, representing CILCO's minimum obligation expected
for coal tar investigation and remediation costs. Coal tar remediation costs
incurred through June 1999 have been deferred as a regulatory asset on the
balance sheet, less amounts recovered from customers.
Through June 30, 1999, CILCO has recovered approximately $6.6 million in
coal tar remediation costs from its customers through a gas rate rider approved
by the Illinois Commerce Commission. Currently, that rider allows recovery of
prudently incurred coal tar remediation costs in the year they are incurred.
Under these circumstances, CILCO's management believes that the cost of coal tar
remediation will not have a material adverse effect on CILCO's financial
position or results of operations.
ASH RE-USE. CILCO is currently in the process of investigating and
implementing potential beneficial re-use for ash, a coal combustion by-product,
generated at both generating stations. Providing alternate uses for the ash will
allow CILCO to avoid potential costs associated with the construction of
additional facilities to store and manage this by-product.
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COAL SUPPLY CONTRACT. In August 1997, CILCO initiated arbitration
proceedings against Freeman United Coal Mining Company because CILCO believes
Freeman has breached its obligations under the long-term coal supply contract
between them. This arbitration is discussed further above under "-- Coal
Supply."
QST ENERGY. In February 1999, QST Energy notified two of its California
commercial customers that they were in default of their contracts with QST
Energy as a result of not paying QST Energy for energy delivered. QST Energy
filed two suits in the U.S. District Court, Central District of Illinois,
seeking payment. In March, the customers filed a suit in California Superior
Court, Alameda County, California, alleging that QST Energy was in breach of the
contract. This suit was subsequently removed to the U.S. District Court,
Northern District of California. QST Energy has moved to dismiss this suit filed
in California as duplicative of the suits pending in Illinois, and the customers
similarly filed motions to dismiss the suits pending in Illinois. QST Energy
cannot predict the ultimate outcome of this matter, but intends to vigorously
pursue its claims to collect all amounts due from the customers. The accounts
receivable reflected in our consolidated balance sheet at June 30, 1999 for
these two customers totaled $17.1 million. Under the terms of the contract, QST
Energy has terminated delivery of electricity to the two customers.
OTHER MATTERS. We and our subsidiaries are subject to certain claims and
lawsuits in connection with work performed in the ordinary course of our
businesses. Except as otherwise referred to above, in the opinion of our
management, all such claims currently pending either will not result in a
material adverse effect on our financial position and results of operations or
are adequately covered by insurance, contractual or statutory indemnification,
or reserves for potential losses.
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OUR MERGER WITH MIDWEST ENERGY
On November 22, 1998, we, AES and AES's wholly-owned subsidiary Midwest
Energy entered into a merger agreement under which, subject to the satisfaction
of specified conditions, Midwest Energy would merge with and into us, and we
would survive the merger as a wholly-owned subsidiary of AES. Midwest Energy was
formed by AES solely for the purpose of completing the merger and had no
independent operations. The merger was completed on October 18, 1999. On that
date, each of our 13,625,680 outstanding shares of common stock was converted
into the right to receive $65 in cash and we became a direct, wholly-owned
subsidiary of AES. All of our direct and indirect subsidiaries existing
immediately prior to completion of the merger, including CILCO, continue as our
direct and indirect subsidiaries following completion of the merger.
FINANCING OF THE MERGER
The approximate $468 million in net proceeds from the initial offering of
the old securities, together with a $463 million equity contribution by AES to
Midwest Energy, were allocated to acquire all of the outstanding shares of our
common stock, to retire approximately $27 million of short-term borrowings of
CILCO, to pay approximately $14 million in merger-related personnel costs (of
which approximately $10 million represents cash payments under our terminated
stock option plan), and to pay approximately $10 million in transaction fees and
expenses.
ACCOUNTING TREATMENT
The merger is being accounted for using the purchase method of accounting.
Under this method of accounting, the purchase price is being allocated to the
fair value of the assets acquired and liabilities assumed. The excess purchase
price over the fair value of the assets acquired and liabilities assumed is
being allocated to goodwill.
OUR INDEPENDENCE
Our by-laws include provisions to preserve our independence from AES in
several respects. Among them:
o AES must appoint one independent director to serve on our board of
directors, and that independent director must approve in advance
specified actions by us relating to creditor rights and the bankruptcy
laws. Mr. Mark A. Ferrucci is currently serving as the initial
independent director of CILCORP. See "Management" for additional
information about Mr. Ferrucci.
o All of our directors, including the independent director, have a
fiduciary duty to us, including our creditors, and must make decisions
with respect to our business and operations independent of AES and its
other affiliates.
o We must ensure that our capitalization is adequate in light of our
business and purpose and must maintain an arm's length relationship with
AES and its other affiliates.
o We must pay our own liabilities out of our own funds and, except in the
case of our own subsidiaries, we cannot become liable for the debts of
AES and its affiliates, or make loans or advances to those entities or
acquire their securities.
o We must conduct our own business in our own name, must maintain our
separate identity and must keep our own funds, accounts, assets, records
and books of accounts.
TAX MATTERS
We anticipate that we, AES and our respective subsidiaries will enter into
customary arrangements regarding the sharing of taxes.
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MANAGEMENT
The table shown below provides certain information as of November 1, 1999
with respect to our current directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---------------------------------- ------- ---------------------------------------
<S> <C> <C>
Thomas A. Tribone ............. 47 Director
Mark A. Ferrucci .............. 48 Director
Paul D. Stinson ............... 42 Director and President
Scott Cisel ................... 46 Vice President
Randy J. DeWulf ............... 44 Vice President
Mark E. Miller ................ 38 Vice President
Robert J. Sprowls ............. 42 Vice President
Thomas D. Hutchinson .......... 44 Chief Financial Officer and Controller
Thomas S. Romanowski .......... 49 Treasurer
Michael D. Austin ............. 41 Assistant Treasurer
John G. Sahn .................. 53 Secretary
</TABLE>
Thomas A. Tribone. Mr. Tribone has served as a director of CILCORP since
October 18, 1999. Mr. Tribone has been an Executive Vice President of AES since
January 1998, and was appointed Senior Vice President of AES in 1990. Mr.
Tribone leads AES Americas, a group responsible for power marketing, project
development, construction and plant operations in northern portions of South
America including much of Brazil. From 1987 to 1990, he served as Vice President
for project development and, from 1985 to 1987, he served as project director of
the AES Shady Point plant.
Mark A. Ferrucci. Mr. Ferrucci has served as a director of CILCORP since
October 18, 1999. Under an existing agreement between us and CT Corporation
System, Mr. Ferrucci or another employee of CT Corporation System will serve as
an independent director of CILCORP. Mr. Ferrucci has been employed by CT
Corporation System for 22 years and, among other capacities, has served as an
Assistant Vice President of CT Corporation System since 1993. Mr. Ferrucci
serves as an independent director of many other companies under comparable
arrangements between CT Corporation System and those companies providing for the
appointment of an independent director. See "Our Merger with Midwest Energy --
Our Independence."
Paul D. Stinson. Mr. Stinson has served as a director and President of
CILCORP since October 18, 1999. Mr. Stinson has been a Vice President of AES
since January 1998 and has been working as a co-manager of the newly formed AES
Great Plains Group responsible for the acquisition of CILCORP businesses in the
central U.S. Prior to that, Mr. Stinson served as President of AES Silk Road
group, responsible for AES businesses and business development projects in the
CIS countries, as Managing Director of Medway Power Ltd in England, and as
Project Engineer at AES Thames in Connecticut.
Scott Cisel. Mr. Cisel has served as a Vice President of CILCORP since
October 18, 1999. He has been employed with CILCO since 1975. Since 1995, Mr.
Cisel has served as Vice President of CILCO. In April 1999, Mr. Cisel became the
leader of CILCO's Sales and Marketing Business Unit. Prior to that, Mr. Cisel
served in various sales and customer service management positions within CILCO.
Mr. Cisel is a Trustee of Eureka College and is a member of the Board of
Directors of the Illinois State Chamber of Commerce.
Randy J. DeWulf. Mr. DeWulf has served as a Vice President of CILCORP since
October 18, 1999. He has been employed with AES since 1992. He is the plant
manager of the Edwards Power Plant within the AES Great Plains Group. Mr. DeWulf
had worked for Detroit Edison Company prior to joining AES. His AES career began
as a team leader at the Shady Point Power Plant in Oklahoma, he then assisted in
the start-up of the AES Elsta Plant in the Netherlands and was president/plant
manager of AES Tiszapalkonya in northeast Hungary.
Mark E. Miller. Mr. Miller has served as a Vice President of CILCORP since
October 18, 1999. He has been employed with AES for ten years. He is the plant
manager of the Duck Creek Station
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within the AES Great Plains Group in the central U.S. Mr. Miller had served as
managing director of AES Indian Queens Power Ltd in England, as plant leader of
AES Lyukobanya mine in northeast Hungary and as superintendent at AES Thames in
Connecticut.
Robert J. Sprowls. Mr. Sprowls has served as a Vice President of CILCORP
since October 18, 1999. He has been employed with CILCO since 1982. Since 1998,
he has served as Vice President of CILCO, and has been the leader of CILCO's
Energy Delivery Business Unit since March 1999. Mr. Sprowls has served in
numerous capacities within CILCORP and its subsidiaries, including, among
others, Treasurer and Chief Financial Officer of both CILCO and CILCORP,
President of CILCORP Ventures Inc., Chairman of CILCORP Energy Services Inc., a
subsidiary of CILCORP Ventures, Vice President-Strategic Services for CILCO and
Assistant to the CEO of CILCORP. Mr. Sprowls is a certified public accountant
and certified management accountant. He is a member of the Board of Directors of
Goodwill Industries of Central Illinois.
Thomas D. Hutchinson. Mr. Hutchinson has served as Chief Financial Officer
of CILCORP since October 18, 1999 and as Controller of CILCORP and CILCO since
1997. During 1996 he was Director of Planning and Administration of QST
Enterprises Inc., a CILCORP subsidiary and in 1995 was Director of Competitive
Strategy for CILCO. Prior to 1995, Mr. Hutchinson has served in a variety of
positions in accounting areas of CILCORP and CILCO, including Controller of both
companies, Tax Manager and Supervisor of Plant and Tax Accounting. He has been
employed by CILCORP or one of its subsidiaries since 1974. Mr. Hutchinson is a
certified public accountant and serves on the Board of Directors and various
committees of the Peoria Production Shop, WD Boyce Council-Boy Scouts of
America, and Easter Seals of Central Illinois.
Thomas S. Romanowski. Mr. Romanowski has served as Treasurer of CILCORP and
CILCO since October 18, 1999. Prior to this, he served as Vice President of
CILCO from 1986 until October 1999. Mr. Romanowski has been employed with CILCO
since 1971 advancing through several positions in the accounting, treasury and
information systems areas. He serves as treasurer and board member of the
Employers' Association and is also a director on the boards of the Illinois
Central College Educational Foundation, the Tri-County (Peoria) Urban League,
Inc., the Heartland Community Development Corporation and the Biotechnology
Research and Development Corporation. Mr. Romanowski graduated from Bradley
University in 1971 with a degree in Business Administration.
Michael D. Austin. Mr. Austin has served as Assistant Treasurer of CILCORP
since 1998. From 1995 to 1998, he served as Treasurer of CILCORP. From 1990 to
1995 he served as Director of Investments of CILCORP. Prior to this, Mr. Austin
served in a variety of positions in finance and administration. He has been
employed by CILCORP or its subsidiaries since 1979. Mr. Austin is a certified
public accountant and serves as Chairman of the Board of Trustees of the Peoria
Association of Retarded Citizens Foundation.
John G. Sahn. Mr. Sahn has served as Secretary of CILCORP since 1994. He
has been employed by CILCORP since 1988 and has served as Vice President,
General Counsel and Treasurer as well as Corporate Secretary. He also serves as
Secretary of CILCO and other CILCORP subsidiaries. Mr. Sahn is active in
numerous civic, professional and charitable organizations.
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DESCRIPTION OF THE SECURITIES
GENERAL
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions" at the end of this section of the
prospectus.
Midwest Energy issued the old securities under an indenture dated October
18, 1999 between itself and The Bank of New York, as trustee, in a private
transaction that was not subject to the registration requirements of the
Securities Act. When we merged with Midwest Energy simultaneously with the
issuance of the old securities, we assumed all of Midwest Energy's obligations
under the old securities, the indenture and the registration rights agreement
between Midwest Energy and the initial purchasers of the old securities. Upon
the issuance of the new securities and the effectiveness of a registration
statement with respect to the securities, the indenture will be subject to and
governed by the Trust Indenture Act of 1939 (the "TIA"). Copies of the indenture
and the registration rights agreement are filed as exhibits to the registration
statement which includes this prospectus and are available to you at no cost
upon request.
The terms of the new securities in the exchange offer are identical in all
material respects to the terms of the old securities, except for transfer
restrictions and registration rights relating to the old securities. Any
outstanding old securities of either series and the new securities related to
that series will be treated as a single class for all purposes under the
indenture, including, without limitation, waivers, amendments and redemptions.
When we refer to the term "securities" in this section of the prospectus, we are
referring to the old securities of either series and the new securities related
to that series issued in the exchange offer, unless the context otherwise
requires.
The following description is a summary of the material provisions of the
indenture and the registration rights agreement. It does not restate those
agreements in their entirety. We urge you to read the indenture and the
registration rights agreement because they, and not this description, define
your rights as holders of the securities.
BRIEF DESCRIPTION OF THE SECURITIES
The securities:
o are senior obligations of CILCORP;
o rank equally with all other existing and future senior obligations of
CILCORP;
o are senior to all existing and future subordinated Indebtedness of
CILCORP; and
o rank junior to all Indebtedness and other liabilities of CILCO and
CILCORP's other subsidiaries.
The indenture contains certain restrictions on the ability of CILCORP to
incur additional indebtedness. The indenture contains no restrictions on the
amount of additional unsecured indebtedness which may be incurred by CILCORP's
subsidiaries. In addition, the indenture would permit each of CILCORP's
subsidiaries to incur significant additional amounts of secured indebtedness.
Because CILCORP is a holding company, its rights and the rights of its
creditors, including holders of the securities, in respect of claims on the
assets of each of CILCORP's subsidiaries upon any liquidation or administration
are structurally subordinated to, and therefore will be subject to the prior
claims of, each such subsidiary's preferred stockholders and creditors
(including trade creditors of and holders of debt issued by such subsidiary). At
June 30, 1999, CILCORP's direct and indirect subsidiaries had total indebtedness
and preferred stock of approximately $375 million, all of which would be
effectively senior to the securities.
The ability of CILCORP to pay interest on the securities is, to a large
extent, dependent upon the receipt by it of dividends and other distributions
from direct and indirect subsidiaries, including CILCO in particular. CILCORP
believes that those payments, which will be funded by cash flows
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generated through the operations of CILCO and its other subsidiaries, will be
sufficient to enable CILCORP to meet all of its obligations as they become due,
including CILCORP's obligations under the securities. The availability of
distributions from CILCORP's subsidiaries is subject to the satisfaction of
various covenants and conditions contained in the applicable subsidiaries'
existing and future financing documents.
PRINCIPAL, MATURITY AND INTEREST
The senior notes were issued initially on October 18, 1999 in the aggregate
principal amount of $225 million and will mature on October 15, 2009. The senior
bonds were issued initially on October 18, 1999 in the aggregate principal
amount of $250 million and will mature on October 15, 2029.
Each senior note bears interest at the rate of 8.700% per year and each
senior bond bears interest at the rate of 9.375% per year, in each case from
October 18, 1999, or from the most recent interest payment date to which
interest has been paid or provided for. CILCORP will make each interest payment
semi-annually on April 15 and October 15 of each year, commencing April 15, 2000
to the holders of record at the close of business on the preceding April 1 and
October 1 respectively, until the relevant principal amount has been paid or
made available for payment. Interest on the securities will be computed on the
basis of a 360-day year of twelve 30-day months.
COLLATERAL
The securities are not presently secured by any collateral. On the Pledge
Effective Date, the securities will be secured through a pledge by CILCORP of
all the outstanding capital stock of CILCO, excluding the shares of preferred
stock of CILCO outstanding on October 18, 1999. Under the indenture, prior to
the Pledge Effective Date, CILCORP may not issue any additional Indebtedness
that requires that such Indebtedness be secured equally and ratably with the
securities, unless such Indebtedness matures on or prior to December 21, 2001,
the latest maturity date of the existing Series A medium-term notes, or unless
the terms of such Indebtedness specify that it will be secured under the same
terms and conditions provided in the indenture for the securities. From and
after the pledge by CILCORP, CILCORP may secure other Indebtedness equally and
ratably with the securities, subject to compliance with the limitations on the
incurrence of Indebtedness described below under the caption "--Limitation on
Indebtedness."
From and after the Pledge Effective Date, CILCORP will be able to vote, as
it sees fit in its sole discretion, the pledged shares of capital stock, unless
an Event of Default has occurred and is continuing.
If CILCORP meets the conditions to its defeasance option or its covenant
defeasance option with respect to either series of the securities, as described
below under the caption "--Defeasance and Covenant Defeasance," or the indenture
is otherwise discharged, the Lien on the pledged shares will terminate with
respect to either or both series of the securities, as the case may be.
From and after the Pledge Effective Date, if an Event of Default occurs and
is continuing under the indenture, the collateral agent, on behalf of the
holders of the securities and the holders of other permitted CILCORP senior
secured Indebtedness, in addition to any rights or remedies available to it
under the pledge agreement, may take such action as it deems advisable to
protect and enforce its right in the collateral, including the institution of
foreclosure proceedings. Such foreclosure proceedings, the enforcement of the
CILCORP pledge agreement and the right to take other actions with respect to the
pledged shares of CILCO stock will be controlled by holders of a majority of the
aggregate principal amount of the then outstanding obligations which are equally
and ratably secured by the pledge of the CILCO stock. The proceeds received by
the collateral agent from any foreclosure will be applied by the collateral
agent, first, to pay the expenses of such foreclosure and fees and other amounts
then payable to the collateral agent under the pledge agreement and, thereafter,
to pay the securities and the other permitted CILCORP senior secured
Indebtedness on a pro rata basis based on the aggregate amount outstanding of
the securities and the other permitted CILCORP senior secured Indebtedness.
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METHODS OF RECEIVING PAYMENTS ON THE SECURITIES
All payments on the securities will be made at the office or agency of the
paying agent and registrar within the City of New York unless CILCORP elects to
make interest payments by check mailed to the holders at their address set forth
in the register of holders. A holder owning at least $50 million of securities
may elect to receive all principal, premium, if any, and interest payments on
the securities by wire transfer in accordance with the written wire transfer
instructions provided by that holder to CILCORP.
PAYING AGENT AND REGISTRAR FOR THE SECURITIES
The trustee will initially act as paying agent and registrar. CILCORP may
change the paying agent or registrar without prior notice to the holders of the
securities, and CILCORP or any of its subsidiaries may act as paying agent or
registrar; provided that CILCORP will at all times maintain one or more paying
agents that has an office in the borough of Manhattan, the City of New York.
TRANSFER AND EXCHANGE
A holder may transfer or exchange securities in accordance with the
indenture. The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and CILCORP
may require a holder to pay any taxes and fees required by law or permitted by
the indenture. CILCORP is not required to transfer or exchange any securities
selected for redemption. Also, CILCORP is not required to transfer or exchange
any securities for a period of 15 days before a selection of securities to be
redeemed is made.
The registered holder of a security will be treated as the owner of it for
all purposes. See "--Book-Entry; Delivery and Form" below.
COVENANTS
Except as otherwise set forth under "--Defeasance and Covenant Defeasance"
below, for so long as any securities remain outstanding or any amount remains
unpaid on any of the securities, CILCORP will comply with the terms of the
covenants set forth below. However, each of the "Limitation on Distributions"
covenant and "Limitation on Indebtedness" covenant will cease to be in effect if
the Rating Agencies confirm in writing that, without these covenants, CILCORP's
senior long term debt would still be rated at least the Initial Ratings. If the
limitations on Distributions and Indebtedness cease to be in effect, as
anticipated, CILCORP will be under no obligation to reinstate such limitations
or otherwise observe its terms in the event that such ratings are thereafter
lowered or withdrawn.
PAYMENT OF PRINCIPAL AND INTEREST
CILCORP will duly and punctually pay the principal of and interest on the
securities in accordance with the terms of the securities and the indenture.
LIMITATIONS ON CONSOLIDATION, MERGER, CONVEYANCE, SALE OR LEASE
Except in connection with the merger, CILCORP may not consolidate with or
merge with or into any other Person, or convey, transfer or lease its
consolidated properties and assets substantially as an entirety (in one
transaction or in a series of related transactions) to any Person, or permit any
Person to merge into or consolidate with CILCORP, unless:
o either (1) CILCORP will be the surviving entity, or (2) the surviving
entity, if other than CILCORP, will be an entity organized under the laws
of the United States of America, one of its States or the District of
Columbia and expressly assumes by supplemental indenture CILCORP's
obligations under the securities and the indenture; and
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o immediately after giving effect to that transaction, (1) no Event of
Default shall have occurred and be continuing and (2) CILCORP obtains
written confirmation from the Rating Agencies that the transaction will
not result in a Ratings Downgrade below the Rating Agency's Initial
Rating.
LIMITATION ON DISTRIBUTIONS AND INTERCOMPANY LOANS
CILCORP may only (1) declare, recommend, make or pay any Distribution to
any of its stockholders and (2) make any intercompany loan to AES or any of its
affiliates (other than CILCORP or any of its direct or indirect subsidiaries) if
there exists no Event of Default and no such Event of Default will result from
the making of such Distribution or intercompany loan and either:
o at the time and as a result of such Distribution or intercompany loan,
CILCORP's Leverage Ratio does not exceed 0.67:1, and CILCORP's Interest
Coverage Ratio is not less than 2.0:1 during fiscal years 1999 and 2000
and not less than 2.2:1 thereafter; or
o if it is not in compliance with the foregoing ratios, at such time its
senior long term debt rating is at least BB+ (or its then equivalent)
with S&P, Baa2 (or its then equivalent) with Moody's and BBB (or its then
equivalent) with Duff & Phelps.
Prior to making any Distribution or intercompany loan described above, an
independent director of the CILCORP Board of Directors must have confirmed that
such Distribution or intercompany loan complies with this "Limitation on
Distributions and Intercompany Loans" covenant, provided that, in the case of a
Distribution or intercompany loan to be made under the circumstances described
in the first bullet point above, such independent director shall first have
obtained (1) a compliance certificate from an officer of CILCORP that, at the
time and after giving effect to such Distribution or intercompany loan, CILCORP
is in compliance with the Leverage Ratio and the Interest Coverage Ratio set
forth above and (2) a written confirmation by a nationally recognized accounting
firm as to their agreement with the calculations specified in the compliance
certificate. The foregoing independent director approval will not be required in
the case of intercompany loans, however, if the aggregate amount of intercompany
loans outstanding at any one time does not exceed $20 million.
This "Limitation on Distributions and Intercompany Loans" covenant will
cease to be in effect if the Rating Agencies confirm in writing that, without
this covenant, CILCORP's senior long term debt would still be rated at least the
Initial Ratings. If the limitation on Distributions and Intercompany Loans
ceases to be in effect, CILCORP will be under no obligation to reinstate such
limitation or otherwise observe its terms in the event that such ratings are
thereafter lowered or withdrawn.
In order to obtain the release of the limitation on Distributions and
intercompany loans, CILCORP must deliver to the trustee written confirmation
from each Rating Agency of the ratings conditions as described in the preceding
paragraph.
LIMITATION ON INDEBTEDNESS
CILCORP may not incur any Indebtedness other than:
o as part of CILCORP's permitted businesses and activities described under
"-- Limitation on Business Activities" below;
o Indebtedness outstanding on the date of original issue of the securities
under CILCORP's agreements then in existence and extensions of such
Indebtedness; and
o other Indebtedness (including Permitted Debt) incurred subsequent to
receipt of written confirmation from the Rating Agencies that such
incurrence would not result in a Ratings Downgrade.
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This "Limitation on Indebtedness" covenant will cease to be in effect if
the Rating Agencies confirm in writing that, without this covenant, CILCORP's
senior long term debt would still be rated at least the Initial Ratings. If the
limitation on Indebtedness ceases to be in effect, CILCORP will be under no
obligation to reinstate such limitation or otherwise observe its terms in the
event that such ratings are thereafter lowered or withdrawn.
In order to obtain the release of the limitation on Indebtedness, CILCORP
must deliver to the trustee written confirmation from each Rating Agency of the
ratings conditions as described in the preceding paragraph.
The indenture does not in any way restrict or prevent CILCO or any other
subsidiary from incurring unsecured indebtedness.
LIMITATION ON LIENS
Liens on the CILCO Stock. CILCORP may not secure any Indebtedness by
CILCORP or any other Person by a Lien upon any capital stock of CILCO without
effectively providing that the outstanding securities (together with, if CILCORP
so determines, any other indebtedness or obligation then existing or thereafter
created ranking equally with the securities) will be secured equally and ratably
with (or prior to) such Indebtedness so long as such Indebtedness is so secured.
The foregoing limitation on Liens will not, however, apply to:
(1) any Lien securing amounts not more than 180 days overdue or
otherwise being contested in good faith;
(2) (a) any Lien incurred or deposits made in the ordinary course of
business, including, but not limited to, (1) any mechanics',
materialmen's, carriers', workmen's, vendors' and other like
Liens and (2) any Liens securing amounts in connection with
workers' compensation, unemployment insurance and other types
of social security;
(b) any Lien incurred or deposits made securing the performance of
tenders, bids, leases, trade contracts (other than for borrowed
money), statutory obligations, surety bonds, appeal bonds,
government contracts, performance bonds, return-of-money bonds,
letters of credit not securing borrowings and other obligations
of like nature incurred in the ordinary course of business; and
(c) any Lien securing reimbursement obligations under letters of
credit, guaranties and other forms of credit enhancement given
in connection with the purchase of goods and equipment in the
ordinary course of business;
(3) (a) Liens required by any contract, statute or regulation in
order to permit CILCORP or a Significant Subsidiary to perform
any contract or subcontract made by it with or at the request of
a governmental entity or any governmental department, agency or
instrumentality, or to secure partial, progress, advance or any
other payments by CILCORP or a Significant Subsidiary to such
governmental unit under the provisions of any contract, statute
or regulation; and
(b) any Lien securing taxes or assessments or other applicable
governmental charges or levies;
(4) any Lien which arises under any order of attachment, restraint or
similar legal process arising in connection with court proceedings
and any Lien which secures the reimbursement obligation for any bond
obtained in connection with an appeal taken in any court proceeding,
so long as the execution or other enforcement of such Lien arising
under such legal process is effectively stayed and the claims
secured by that Lien are being contested in good faith and, if
appropriate, by appropriate legal proceedings, and any Lien in favor
of a plaintiff or defendant in any action before a court or tribunal
as security for costs and/or expenses; and
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(5) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Liens
referred to in the foregoing clauses, for amounts not exceeding the
principal amount of the Indebtedness secured by the Lien so
extended, renewed or replaced, provided that such extension, renewal
or replacement Lien is limited to all or a part of the capital stock
of CILCO that was covered by the Lien extended, renewed or replaced.
Liens on Property or Assets other than the CILCO Stock. Neither CILCORP nor
any Significant Subsidiary may issue, assume or guarantee any Indebtedness
secured by a Lien upon any property or assets (other than any capital stock of
CILCO or cash or cash equivalents) of CILCORP or such Significant Subsidiary, as
applicable, without effectively providing that the outstanding securities
(together with, if CILCORP so determines, any other indebtedness or obligation
then existing or thereafter created ranking equally with the securities) will be
secured equally and ratably with (or prior to) such Indebtedness so long as such
Indebtedness is so secured.
The foregoing limitation on Liens will not, however, apply to:
(1) Liens in existence on the date of original issue of the securities;
(2) any Lien created or arising over any property which is acquired,
constructed or created by CILCORP or any of its Significant
Subsidiaries, but only if:
(a) such Lien secures only principal amounts (not exceeding the cost
of such acquisition, construction or creation) raised for the
purposes of such acquisition, construction or creation, together
with any costs, expenses, interest and fees incurred in relation
to that property or a guarantee given in respect of that
property;
(b) such Lien is created or arises on or before 180 days after the
completion of such acquisition, construction or creation; and
(c) such Lien is confined solely to the property so acquired,
constructed or created;
(3) any Lien securing amounts not more than 180 days overdue or otherwise
being contested in good faith;
(4) (a) rights of financial institutions to offset credit balances in
connection with the operation of cash management programs
established for the benefit of CILCORP and/or a Significant
Subsidiary or in connection with the issuance of letters of
credit for the benefit of CILCORP and/or a Significant
Subsidiary;
(b) any Lien on accounts receivable securing Indebtedness of CILCORP
and/or a Significant Subsidiary incurred in connection with the
financing of such accounts receivable;
(c) any Lien incurred or deposits made in the ordinary course of
business, including, but not limited to, (1) any mechanics',
materialmen's, carriers', workmen's, vendors' and other like
Liens and (2) any Liens securing amounts in connection with
workers' compensation, unemployment insurance and other types of
social security;
(d) any Lien upon specific items of inventory or other goods and
proceeds of CILCORP and/or a Significant Subsidiary securing
obligations of CILCORP and/or a Significant Subsidiary in respect
of bankers' acceptances issued or created for the account of such
person to facilitate the purchase, shipment or storage of such
inventory or other goods;
(e) any Lien incurred or deposits made securing the performance of
tenders, bids, leases, trade contracts (other than for borrowed
money), statutory obligations, surety bonds, appeal bonds,
government contracts, performance bonds, return-of-money bonds,
letters of credit not securing borrowings and other obligations
of like nature incurred in the ordinary course of business;
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(f) any Lien created by CILCORP or a Significant Subsidiary under or
in connection with or arising out of a Currency, Interest Rate or
Commodity Agreement or any transactions or arrangements entered
into in connection with the hedging or management of risks
relating to the electricity or natural gas distribution industry,
including a right of set off or right over a margin call account
or any form of cash or cash collateral or any similar arrangement
for obligations incurred in respect of Currency, Interest Rate or
Commodity Agreements;
(g) any Lien arising out of title retention or like provisions in
connection with the purchase of goods and equipment in the
ordinary course of business; and
(h) any Lien securing reimbursement obligations under letters of
credit, guaranties and other forms of credit enhancement given in
connection with the purchase of goods and equipment in the
ordinary course of business;
(5) Liens in favor of CILCORP or a subsidiary;
(6) (a) Liens on any property or assets acquired from an entity which is
merged with or into CILCORP or a Significant Subsidiary or any
Liens on the property or assets of any entity existing at the
time such entity becomes a subsidiary of CILCORP and, in either
case, is not created in anticipation of the transaction, unless
the Lien was created to secure or provide for the payment of any
part of the purchase price of that entity;
(b) any Lien on any property or assets existing at the time of its
acquisition and which is not created in anticipation of such
acquisition, unless the Lien was created to secure or provide for
the payment of any part of the purchase price of such property or
assets; and
(c) any Lien created or outstanding on or over any asset of any
entity which becomes a Significant Subsidiary on or after the
date of the issuance of the securities, where the Lien is created
prior to the date on which that entity becomes a Significant
Subsidiary;
(7) (a) Liens required by any contract, statute or regulation in order to
permit CILCORP or a Significant Subsidiary to perform any
contract or subcontract made by it with or at the request of a
governmental entity or any governmental department, agency or
instrumentality, or to secure partial, progress, advance or any
other payments by CILCORP or a Significant Subsidiary to such
governmental unit under the provisions of any contract, statute
or regulation;
(b) any Lien securing industrial revenue, development, pollution
control or similar bonds issued by or for the benefit of CILCORP
or a Significant Subsidiary, provided that such industrial
revenue, development, pollution control or similar bonds do not
provide recourse generally to CILCORP and/or such Significant
Subsidiary; and
(c) any Lien securing taxes or assessments or other applicable
governmental charges or levies;
(8) any Lien which arises under any order of attachment, restraint or
similar legal process arising in connection with court proceedings
and any Lien which secures the reimbursement obligation for any bond
obtained in connection with an appeal taken in any court proceeding,
so long as the execution or other enforcement of such Lien arising
under such legal process is effectively stayed and the claims secured
by that Lien are being contested in good faith and, if appropriate,
by appropriate legal proceedings, and any Lien in favor of a
plaintiff or defendant in any action before a court or tribunal as
security for costs and/or expenses;
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(9) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Liens
referred to in the foregoing clauses, for amounts not exceeding the
principal amount of the Indebtedness secured by the Lien so
extended, renewed or replaced, provided that such extension, renewal
or replacement Lien is limited to all or a part of the same property
or assets that were covered by the Lien extended, renewed or
replaced (plus improvements on such property or assets);
(10) any Lien created in connection with Project Finance Debt;
(11) any Lien created by CILCO that is then permitted to be created under
the terms of its then existing mortgages and indentures on the terms
in effect at the time of creation of the Lien;
(12) any Lien created in connection with the securitization of some or
all of the assets of CILCO and the associated issuance of
Indebtedness as authorized by applicable state or federal law in
connection with the restructuring of jurisdictional electric or gas
businesses; and
(13) any Lien on stock created in connection with a mandatorily
convertible or exchangeable stock or debt financing, provided that
any such financing may not be secured by or otherwise involve the
creation of a Lien on any capital stock of CILCO or any successor
entity to CILCO.
Notwithstanding the foregoing restriction on liens on property or assets
other than capital stock of CILCO, CILCORP and its Significant Subsidiaries may
create Liens over any of such of their respective properties or assets so long
as the aggregate amount of Indebtedness secured by all such Liens (excluding
therefrom the amount of Indebtedness secured by Liens set forth in clauses (1)
through (13), inclusive, above) does not exceed 10% of Consolidated Net Tangible
Assets in the aggregate calculated as of the date of creation of such Liens
(based upon the Consolidated Net Tangible Assets appearing on the most recently
available balance sheet for the most recently concluded calendar quarter).
LIMITATION ON BUSINESS ACTIVITIES
CILCORP may, and must cause its Significant Subsidiaries to, engage only
in:
o those types of business and other activities in which CILCORP or any of
its direct or indirect subsidiaries or controlled partnerships or joint
ventures are engaged today (including, without limitation, any geographic
or other expansion of such business or activities); and
o any other business or activity which is deemed necessary, useful or
desirable in connection with such existing businesses and activities or
any such permitted additional geographic or other expansions of such
businesses and activities;
provided that CILCORP may enter into additional business operations from time to
time in the future if, prior to doing so, it obtains written confirmation from
the Rating Agencies that the entering into of such new businesses will not
result in a Ratings Downgrade.
MODIFICATION OF THE INDENTURE
The indenture contains provisions permitting CILCORP and the trustee to
modify the indenture or any supplemental indenture or the rights of the holders
of securities of each series to be affected with the consent of the holders of a
majority in aggregate principal amount of the then outstanding securities of
each series to be affected, subject to the same conditions described below under
"--Modification or Waiver of Certain Covenants."
The indenture also contains provisions permitting CILCORP and the trustee
to amend the indenture by entering into one or more supplemental indentures in
certain circumstances without the consent of the holders of any securities to
cure any ambiguity, to correct or supplement any provision
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in the indenture which may be defective or inconsistent with any other provision
in the indenture, to evidence the merger of CILCORP or the replacement of the
trustee and to make any other changes that do not materially adversely affect
the rights of any holders of securities.
EVENTS OF DEFAULT
An Event of Default with respect to the securities of either series is
defined in the indenture as being:
(1) default for 30 days in the payment of any interest on the securities of
that series;
(2) default in the payment of principal of or any premium on, the
securities of that series at maturity, upon redemption, upon required
purchase, upon acceleration or otherwise;
(3) default in the performance, or breach, of any covenant or obligation of
CILCORP in the indenture and continuance of the default or breach for a
period of 30 days after written notice specifying the default is given
to CILCORP by the trustee or to CILCORP and the trustee by the holders
of at least 25% in aggregate principal amount of the securities of that
series;
(4) default in the payment of the principal of any bond, debenture, note or
other evidence of indebtedness, in each case for money borrowed, issued
by CILCORP, or in the payment of principal under any mortgage,
indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for Borrowed Money,
of CILCORP or any Significant Subsidiary if such Indebtedness for
Borrowed Money is not Project Finance Debt and provides for recourse
generally to CILCORP or any Significant Subsidiary, which default for
payment of principal is in an aggregate principal amount exceeding $25
million when such indebtedness becomes due and payable (whether at
maturity, upon redemption or acceleration or otherwise), if such
default shall continue unremedied or unwaived for more than 30 Business
Days and the time for payment of such amount has not been expressly
extended (until such time as such payment default is remedied, cured or
waived);
(5) a court having jurisdiction enters a decree or order for:
o relief in respect of CILCORP or any of its Significant Subsidiaries
in an involuntary case under any applicable bankruptcy, insolvency,
or other similar law now or hereafter in effect;
o appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official of CILCORP or any of its
Significant Subsidiaries or for all or substantially all of the
property and assets of CILCORP or any of its Significant
Subsidiaries; or
o the winding up or liquidation of the affairs of CILCORP or any of its
Significant Subsidiaries;
o and, in each case, such decree or order shall remain unstayed and in
effect for a period of 180 consecutive days;
(6) CILCORP or any of its Significant Subsidiaries:
o commences a voluntary case under any applicable bankruptcy,
insolvency, or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case
under any such law;
o consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or similar
official of CILCORP or any of its Significant Subsidiaries or for all
or substantially all of the property and assets of CILCORP or any of
its Significant Subsidiaries; or
o effects any general assignment for the benefit of creditors; or
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(7) after the Pledge Effective Date, the trustee fails to have a perfected
security interest in the pledged capital stock of CILCO for a period of
10 days.
If an Event of Default (other than an Event of Default specified in clauses
(5) or (6) with respect to CILCORP) occurs with respect to a series of the
securities and continues, then the trustee or the holders of at least 25% in
principal amount of the securities of that series then outstanding may, by
written notice to CILCORP, and the trustee at the request of at least 25% in
principal amount of the securities of that series then outstanding will, declare
the principal, premium, if any, and accrued interest on the outstanding
securities to be immediately due and payable. Upon a declaration of
acceleration, the principal, premium, if any, and accrued interest shall be
immediately due and payable.
If an Event of Default specified in clauses (5) or (6) above occurs with
respect to CILCORP, the principal, premium, if any, and accrued interest on the
securities shall be immediately due and payable, without any declaration or
other act on the part of the trustee or any holder.
The holders of at least a majority in principal amount of an outstanding
series of securities may, by written notice to CILCORP and to the trustee, waive
all past defaults with respect to that series of securities and rescind and
annul a declaration of acceleration with respect to that series of securities
and its consequences if:
o all existing Events of Default applicable to the securities of that
series other than the nonpayment of the principal, premium, if any, and
interest on the securities of that series that have become due solely by
that declaration of acceleration, have been cured or waived; and
o the rescission would not conflict with any judgment or decree of a court
of competent jurisdiction.
No holder of the securities of a series will have any right to institute
any proceeding, judicial or otherwise, with respect to the indenture, or for the
appointment of a receiver or trustee, or for any other remedy under the
indenture, unless:
o such holder has previously given written notice to the trustee of a
continuing Event of Default with respect to the securities of that
series;
o the holders of not less than 25% in principal amount of the securities of
that series shall have made written request to a responsible officer of
the trustee to institute proceedings in respect of such Event of Default
in its own name as trustee;
o such holder or holders have offered the trustee indemnity satisfactory to
the trustee against the costs, expenses and liabilities to be incurred in
compliance with such request;
o the trustee, for 60 days after its receipt of such notice, request and
offer of indemnity, has failed to institute any such proceeding; and
o no direction inconsistent with such written request has been given to the
trustee during such 60-day period by the holders of a majority in
principal amount of the outstanding securities of that series.
However, these limitations do not apply to the right of any holder of a
security to receive payment of the principal, premium, if any, or interest on,
that security or to bring suit for the enforcement of any payment, on or after
the due date expressed in the securities, which right shall not be impaired or
affected without the consent of the holder.
The indenture requires that certain of CILCORP's officers certify, on or
before a date not more than 120 days after the end of each fiscal year, that to
the best of those officers' knowledge, CILCORP has fulfilled all its obligations
under the indenture. CILCORP is also obligated to notify
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the trustee of any default or defaults in the performance of any covenants or
agreements under the indenture provided, however, that a failure by CILCORP to
deliver such notice of a default shall not constitute a default of the
indenture, if CILCORP has remedied such default within any applicable cure
period.
OPTIONAL REDEMPTION
General
The securities of each series will be redeemable in whole or in part, at
the option of CILCORP at any time, at a redemption price equal to the greater
of:
(1) 100% of the principal amount of the series of securities being
redeemed; or
(2) the sum of the present values of the remaining scheduled payments of
principal of and interest on the series of securities being redeemed
discounted to the date of redemption on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at a discount rate
equal to the Treasury Yield plus 37.5 basis points, in the case of the
senior notes and the Treasury Yield plus 50.0 basis points, in the case
of the senior bonds;
plus, for (1) or (2) above, whichever is applicable, accrued interest on such
securities to the date of redemption.
Notice of redemption must be given not less than 30 days nor more than 60
days prior to the date of redemption. If fewer than all the securities are to be
redeemed, selection of securities of a series for redemption will be made by the
trustee in any manner the trustee deems fair and appropriate.
Unless CILCORP defaults in payment of the redemption price from and after
the redemption date, the securities or portions of them called for redemption
will cease to bear interest, and the holders of the securities will have no
right in respect to such securities except the right to receive the redemption
price for them.
Discussion of Optional Redemption Provisions
Under the procedures set forth above, the redemption price payable upon the
optional redemption at any time of a security is determined by calculating the
present value at that time of each remaining payment of principal of or interest
on the security and then totaling those present values. If the sum of those
present values is equal to or less than 100% of the principal amount of the
security, the redemption price of the security will be 100% of its principal
amount (redemption at par). If the sum of the present values is greater than
100% of the principal amount of the security, the redemption price of the
security will be that greater amount (redemption at a premium). In no event may
a security be redeemed optionally at less than 100% of its principal amount.
The present value at any time of a payment of principal of or interest on a
security is calculated by applying to the payment the discount rate applicable
to the security. The discount rate applicable at any time to payment of
principal of or interest on a security equals the equivalent yield to maturity
at that time of a fixed rate United States treasury security having a maturity
comparable to the maturity of the security plus 37.5 basis points (in the case
of the senior notes) and 50.0 basis points (in the case of the senior bonds),
such yield being calculated on the basis of the interest rate borne by that
United States treasury security and the price at that time of that treasury
security. While the coupon borne by a United States treasury security is fixed,
the price of that treasury security tends to vary with interest rate levels
prevailing from time to time. In general, if at a particular time the prevailing
level of interest rates is higher than the level of interest rates prevailing at
the time the relevant United States treasury security was issued, the price of
that treasury security will be lower than its issue price. Conversely, if at a
particular time the prevailing level of interest rates is lower than the level
of interest rates prevailing at the time the relevant United States treasury
security was issued, the price of that treasury security will be higher than its
issue price.
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As a result, an increase or a decrease in the then prevailing level of
interest rates above or below the level of interest rates prevailing at the time
of issue of a United States treasury security will generally result in an
increase or a decrease, respectively, in the yield to maturity of that security
and, therefore, in the discount rate used to determine the present value of a
payment of principal of or interest on a security. An increase or a decrease in
the discount rate will result in a decrease or an increase, respectively, of the
present value of a payment of principal of or interest on a security. In other
words, the redemption price varies inversely with the prevailing levels of
interest rates. As noted above, however, if the sum of the present values of the
remaining payments of principal of and interest on a security proposed to be
redeemed is less than its principal amount, that security may only be redeemed
at par.
The United States treasury security employed in the calculation of a
discount rate as well as the price and equivalent yield to maturity of that
treasury security will be selected or determined by an independent investment
banking institution of international standing appointed by CILCORP.
DEFEASANCE AND COVENANT DEFEASANCE
CILCORP, at its option, may elect:
o to be discharged from any and all obligations in respect of a series of
securities ("Defeasance") (except in each case for the obligations to,
among other things, register the transfer or exchange of such securities,
replace stolen, lost or mutilated securities, maintain paying agencies,
hold moneys for payment in trust and pay when due all principal and
interest solely out of moneys held in trust); or
o not to comply with certain covenants ("Covenant Defeasance") of the
indenture with respect to a series of securities described above under
"Limitations on Consolidation, Merger, Conveyance, Sale or Lease,"
"Limitation on Distributions," "Limitation on Indebtedness," "Limitation
on Liens" and "Limitations on Business Activities;"
if, in either case, CILCORP irrevocably deposits with the trustee, as trust
funds in a trust specifically pledged as security for, and dedicated solely to,
the benefit of the holder or holders of such securities of such series:
o money; or
o U.S. Government Obligations which through the payment of interest and
principal in respect of those U.S. Government Obligations in accordance
with their terms will provide money not later than one day before the due
date of any payment; or
o a combination of money and U.S. Government Obligations, in each case in
an amount sufficient, in the opinion of a nationally recognized firm of
independent accountants, to pay and discharge the principal of and
premium (if any) and interest on the outstanding securities of such
series on the dates such payments are due in accordance with the terms of
the securities of such series (or if CILCORP has designated a redemption
date pursuant to the second succeeding paragraph, to and including the
redemption date so designated by CILCORP).
Certain other conditions must be satisfied in order for the Defeasance or
Covenant Defeasance to occur, including:
o that the securities will not be delisted by any securities exchange on
which they are then traded as a result of the deposit of trust funds in
trust;
o no Event of Default or event which with notice or lapse of time would
become an Event of Default (including by reason of such deposit) with
respect to the securities of such series shall have occurred and be
continuing on the date of such deposit; and
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o such Defeasance or Covenant Defeasance shall not result in the breach or
violation of, or constitute a default under, any other material agreement
or instrument by which CILCORP is bound. To exercise any such option,
CILCORP is required to deliver to the trustee:
o an opinion of independent counsel of recognized standing to the effect
that the holders will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such deposit, which in the
case of Defeasance must be based on a change in law or a ruling by the
U.S. Internal Revenue Service; and
o an officer's certificate as to compliance with all conditions provided
for in the indenture relating to the satisfaction and discharge of the
securities of such series.
If CILCORP meets the conditions to effect its Defeasance option or its
Covenant Defeasance option with respect to either series of the securities, or
the indenture is otherwise discharged, the Lien on the pledged CILCO shares will
terminate with respect to either or both series of the securities, as the case
may be.
If CILCORP wishes to deposit or cause to be deposited money or U.S.
Government Obligations to pay or discharge the principal of and interest, if
any, on the outstanding securities of a series to and including a redemption
date on which all of the outstanding securities of such series are to be
redeemed, such redemption date shall be irrevocably designated by a board
resolution delivered to the trustee on or prior to the date of deposit of such
money or U.S. Government Obligations, and such board resolution shall be
accompanied by an irrevocable CILCORP request that the trustee give notice of
such redemption in the name and at the expense of CILCORP not less than 30 nor
more than 60 days prior to such redemption date in accordance with the
indenture.
If the trustee or the paying agent is unable to apply any moneys deposited
in trust to effect a Defeasance or Covenant Defeasance by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then any obligations from which CILCORP
had been discharged or released will be revived and reinstated as though no such
deposit of moneys in trust had occurred, until such time as the trustee or
paying agent is permitted so to apply all of such moneys deposited in trust.
MODIFICATION OR WAIVER OF CERTAIN COVENANTS
CILCORP may omit in any particular instance to comply with any term,
provision or condition set forth in the indenture with respect to the securities
of a series if before the time for compliance the holders of at least a majority
in aggregate principal amount of the outstanding securities of that series
shall, by act of such holders, either modify the covenant or waive compliance in
that instance or generally waive compliance with that term, provision or
condition; provided that no modification shall, without the consent of each
holder of securities of that series:
o change the stated maturity upon which the principal of or the interest on
the securities of that series is due and payable;
o reduce the principal amount or redemption price of the securities or the
rate of interest on them;
o change any place of payment or the currency in which the securities of
that series or any premium or the interest on them is payable;
o impair the right to institute suit for the enforcement of any such
payment on or after the stated maturity of the securities (or, in the
case of redemption, on or after the redemption date for those
securities);
o release any collateral from the Lien created by the pledge agreement
except in accordance with the terms thereof, or amend such terms, or
terminate the Lien created by the pledge agreement or deprive the holders
of the security afforded by the Lien created by the pledge agreement; or
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o reduce the percentage in principal amount of the outstanding securities
of such series, the consent of holders of which is required for any
waiver of compliance with certain provisions of the indenture or certain
defaults under the indenture and their consequences provided for in the
indenture. The securities owned by CILCORP or any of its affiliates shall
be deemed not to be outstanding for, among other purposes, consenting to
any such modification.
CONCERNING THE TRUSTEE
The Bank of New York will be the trustee under the indenture and has been
appointed by us as paying agent and registrar with respect to the securities.
GOVERNING LAW
The indenture and the securities will be governed by New York law.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Midwest Energy and the initial purchasers entered into a registration
rights agreement on October 18, 1999. CILCORP assumed all of Midwest Energy's
obligations under that agreement once the merger was completed. Under the
registration rights agreement, CILCORP has agreed to file with the Securities
and Exchange Commission the exchange offer registration statement on the
appropriate form under the Securities Act permitting registration of the new
securities to be issued in the exchange offer for the Transfer Restricted
Securities (as defined below) and to permit resales of exchange securities held
by broker-dealers as contemplated by the registration rights agreement. Upon the
effectiveness of the exchange offer registration statement, CILCORP will offer
to the holders of Transfer Restricted Securities who are able to make certain
representations the opportunity to exchange their Transfer Restricted Securities
for exchange securities pursuant to the exchange offer.
The registration rights agreement provides, unless the exchange offer would
not be permitted by applicable law or Securities and Exchange Commission policy,
that:
o CILCORP will use its best efforts to file (which filing may be a
confidential filing) the exchange offer registration statement with the
Securities and Exchange Commission on or prior to January 16, 2000;
o CILCORP will use its reasonable best efforts to have the exchange offer
registration statement declared effective by the Securities and Exchange
Commission on or prior to April 15, 2000;
o CILCORP will:
o file all pre-effective amendments to the exchange offer registration
statement as may be necessary in order to cause the exchange offer
registration statement to become effective;
o file, if applicable, a post-effective amendment to the exchange offer
registration statement pursuant to Rule 430A under the Securities Act;
and
o cause all necessary filings in connection with the registration and
qualifications of the exchange securities to be made under the blue sky
laws of such jurisdictions as are necessary to permit completion of the
exchange offer; and
o CILCORP will commence the exchange offer and use its reasonable best
efforts to issue on or prior to 30 days after the date on which the exchange
offer registration statement was declared effective by the Securities and
Exchange Commission, exchange securities in exchange for all securities tendered
prior to that in the exchange offer.
For purposes of this section, "Transfer Restricted Securities" means each
senior note and senior bond until:
o the date on which such security has been exchanged by a person other than
a broker-dealer for a new security in the exchange offer;
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o following the exchange by a broker-dealer in the exchange offer of a
security for a new security, the date on which such new security is sold
to a purchaser who receives from such broker-dealer on or prior to the
date of such sale a copy of the prospectus contained in the exchange
offer registration statement;
o the date on which such security has been effectively registered under the
Securities Act and disposed of in accordance with the shelf registration
statement referred to below; or
o the date on which such security is distributed to the public pursuant to
Rule 144 under the Securities Act.
Under existing Securities and Exchange Commission interpretations, exchange
securities would, in general, be freely transferable after the exchange offer
without further registration under the Securities Act, except that
broker-dealers ("Participating Broker Dealers") receiving exchange securities in
the exchange offer will be subject to a prospectus delivery requirement with
respect to resale of those exchange securities. The Securities and Exchange
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to the exchange securities
(other than a resale of any unsold allotment from the original sale of the
securities) by delivery of the prospectus contained in the exchange offer
registration statement. Under the registration rights agreement, CILCORP is
required to allow Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements, to use the prospectus
contained in the exchange offer registration statement in connection with the
resale of such exchange securities. The exchange offer registration statement
will be kept effective for a period of up to 180 days after the exchange offer
has been completed in order to permit resales of exchange securities acquired by
broker-dealers in after-market transactions.
Each holder of the securities (other than certain specified holders) who
wishes to exchange such securities for exchange securities in the exchange offer
will be required to represent that:
o any exchange securities to be received by it will be acquired in the
ordinary course of its business;
o it has no arrangement or understanding with any person to participate in
the distribution (within the meaning of the Securities Act) of the
exchange securities;
o it is not a broker-dealer that acquired securities directly from CILCORP;
o it is not an "affiliate," as defined in Rule 405 of the Securities Act,
of CILCORP, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act
to the extent applicable; and
o it is not acting on behalf of any person who could not truthfully make
the foregoing representations.
If the holder of the securities is not a broker-dealer, it will be required
to represent that it is not engaged in, and does not intend to engage in, the
distribution of the exchange securities. If the holder is a broker-dealer that
will receive exchange securities for its own account in exchange for securities
that were acquired as a result of market-making activities or other trading
activities, it will be required to acknowledge that it will deliver a prospectus
in connection with any resale of such exchange securities.
In connection with the exchange offer, CILCORP will mail to each holder of
securities a copy of the prospectus forming part of the exchange offer
registration statement, together with an appropriate letter of transmittal and
related documents. CILCORP will utilize the services of a depositary for the
exchange offer with an address in the borough of Manhattan, the City of New
York.
CILCORP has agreed to pay all expenses incident to the exchange offer and
will indemnify each initial purchaser against certain liabilities, including
liabilities under the Securities Act.
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If:
(1) CILCORP is not permitted to file the exchange offer registration
statement or to complete the exchange offer because the exchange offer
is not permitted by applicable law or Securities and Exchange
Commission policy;
(2) any holder of Transfer Restricted Securities that is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act)
notifies CILCORP on or before the 20th business day following the
consummation of the exchange offer that:
o it is prohibited by law or Securities and Exchange Commission policy
from participating in the exchange offer;
o it may not resell the exchange securities acquired by it in the
exchange offer to the public without delivering a prospectus and the
prospectus contained in the exchange offer registration statement is
not appropriate or available for such resales; or
o it is a broker-dealer and owns securities acquired directly from
CILCORP or an affiliate of CILCORP;
(3) the exchange offer registration statement is not for any other reason
declared effective within 180 days of the closing of the merger;
(4) any holder (other than a Participating Broker-Dealer) is not eligible
to participate in the exchange offer, or in the case of any holder that
participates in the exchange offer, such holder does not receive
exchange securities on the date of the exchange that may be sold
without restriction under U.S. Federal securities laws (other than due
solely to the status of such holder as an affiliate of CILCORP within
the meaning of the Securities Act of 1933 or due to the requirement
that such holder deliver a prospectus in connection with any resale of
the exchange securities); or
(5) the exchange offer has been completed and in the opinion of counsel for
the initial purchasers a registration statement must be filed and a
prospectus must be delivered by the initial purchasers in connection
with any offering or sale of Transfer Restricted Securities,
then CILCORP will file with the Securities and Exchange Commission a shelf
registration statement to cover resales of the securities by the holders thereof
who satisfy certain conditions relating to the provision of information in
connection with the shelf registration statement.
CILCORP will:
o use its best efforts to file the shelf registration statement (which
filing may be a confidential filing) within 60 days of the earliest to
occur of clauses (1) through (5) in the preceding paragraph; and
o use its reasonable best efforts to cause the shelf registration statement
to be declared effective by the Securities and Exchange Commission on or
prior to the 180th day after such obligation arises.
CILCORP shall use its reasonable best efforts to keep such shelf
registration statement continuously effective, supplemented and amended to
ensure that it is available for resales of securities by the holders of Transfer
Restricted Securities entitled to this benefit and to ensure that such shelf
registration statement conforms and continues to conform with the requirements
of the registration rights agreement, the Securities Act and the policies, rules
and regulations of the Securities and Exchange Commission, as announced from
time to time, until October 18, 2001; provided, however, that during such
two-year period the holders may be prevented or restricted by CILCORP from
effecting sales pursuant to the shelf registration statement as more fully
described in the registration rights agreement.
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A holder of securities that sells its securities pursuant to the shelf
registration statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement that are applicable to such
holder (including certain indemnification and contribution obligations).
If:
(1) CILCORP fails to file any of the registration statements required by
the registration rights agreement on or before the date specified for
such filing;
(2) any of such registration statements required by the registration rights
agreement is not declared effective by the Securities and Exchange
Commission on or prior to the date specified for such effectiveness
(the "effectiveness target date");
(3) CILCORP fails to consummate the exchange offer within 30 business days
of the effectiveness target date with respect to the exchange offer
registration statement; or
(4) the shelf registration statement or the exchange offer registration
statement is declared effective but thereafter ceases to be effective
or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the registration rights agreement
without being succeeded within five business days by a post-effective
amendment to such registration statement that cures such failure and
that is itself immediately declared effective,
then CILCORP will pay liquidated damages to each holder of securities in an
amount equal to 0.50% per annum on the principal amount of securities commencing
on the date of the occurrence of any of the events specified in the preceding
clauses (1) through (4), provided, however, that the aggregate amount of
liquidated damages payable pursuant to these provisions shall in no event exceed
0.50% per annum of the principal amount of the securities. Upon the filing of
the registration statement, the effectiveness of the registration statement, the
consummation of the exchange offer or the filing of a post-effective amendment
that is immediately declared effective, as the case may be, the liquidated
damages payable on the securities will cease to accrue. All accrued liquidated
damages will be paid by CILCORP on each interest payment date to the holders in
the same manner as interest is paid pursuant to the indenture.
Holders of securities will be required to make certain representations to
CILCORP (as described in the registration rights agreement) in order to
participate in the exchange offer and will be required to deliver information to
be used in connection with the shelf registration statement and to provide
comments on the shelf registration statement within the time periods set forth
in the registration rights agreement in order to have their securities included
in the shelf registration statement and benefit from the provisions regarding
liquidated damages set forth above.
BOOK-ENTRY; DELIVERY AND FORM
The securities to be issued in the exchange offer will be issued in the
form of one or more fully registered securities in global form ("global
securities") representing the total amount of securities issued by us in the
exchange offer. The global securities will be deposited with the trustee as
custodian for The Depository Trust Company, or DTC, and registered in the name
of Cede & Co. or another nominee as DTC may designate.
The global securities will be exchangeable for definitive certificates in
registered form with the same terms as the global securities only if:
o DTC is unwilling or unable to continue to act as a depositary or DTC
ceases to be a clearing agency registered under applicable law and, in
each case, CILCORP does not appoint a successor depositary within 90
days;
o there is an event of default under the indenture with respect to the
securities; or
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o we decide, in our sole discretion, to exchange the global securities in
whole but not in part, for definitive certificates.
If definitive certificates are issued in exchange for all or part of the
global securities, then such definitive certificates may be exchanged for an
interest in the global securities representing the principal amount of
securities being transferred, unless the global securities have already been
exchanged for definitive securities. In all cases, definitive securities
delivered in exchange for any global securities, or beneficial interests in the
global securities, will be registered in names, and issued in any approved
denominations, requested by or on behalf of DTC, in accordance with its
customary procedures, and may bear restrictive legends regarding their transfer.
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations (collectively, the "participants" or "DTC's
participants") and to facilitate the clearance and settlement of transactions in
those securities between participants through electronic book-entry changes in
accounts of its participants. DTC's participants include securities brokers and
dealers (including the initial purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly (collectively, the "indirect participants" or
"DTC's indirect participants"). Persons who are not participants may
beneficially own securities held by or on behalf of DTC only through DTC's
participants or DTC's indirect participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the participants and indirect participants.
We expect that pursuant to procedures established by DTC:
o upon deposit of the global securities, DTC will credit, on its internal
system, the respective principal amounts of the new securities to be
issued in the exchange offer represented by the global securities to the
accounts of participants; and
o ownership of these interests in the global securities will be shown on,
and the transfer of ownership of these interests will be effected only
through, records maintained by DTC (with respect to the participants) or
by the participants and indirect participants (with respect to other
owners of beneficial interest in the global securities).
The laws of some jurisdictions require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a global security to such persons
will be limited to that extent.
So long as the holder of a global security is the registered owner of any
securities, the holder of a global security will be considered the sole holder
under the indenture of any securities evidenced by the global securities.
Beneficial owners of securities evidenced by the global securities will not be
considered the owners or holders under the indenture for any purpose, including
with respect to the giving of any directions, instructions or approvals to the
trustee thereunder. Neither we nor the trustee will have any responsibility or
liability for any aspect of the records of DTC or for maintaining, supervising
or reviewing any records of DTC relating to the securities. In addition, we and
the trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the securities
for all purposes.
Payments in respect of the principal of, and interest and premium, if any,
on a global security registered in the name of the holder of a global security
on the applicable record date will be payable by the trustee to or at the
direction of the holder of a global security in its capacity as the registered
holder under the indenture. Under the terms of the indenture, we and the trustee
will treat the persons in whose names the securities, including the global
securities, are registered as the owners of the securities for the purpose of
receiving payments and for all other purposes. Consequently, neither we, the
trustee nor any agent of ours or the trustee has or will have any responsibility
or liability for:
o any aspect of DTC's records or any participant's or indirect
participant's records relating to or payments made on account of
beneficial ownership interest in the global securities or for
maintaining, supervising or reviewing any of DTC's records or any
participant's or indirect participant's records relating to the
beneficial ownership interests in the global securities; or
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o any other matter relating to the actions and practices of DTC or any of
its participants or indirect participants.
DTC has advised us that its current practice, upon receipt of any payment
in respect of securities such as the senior notes and the senior bonds
(including principal and interest), is to credit the accounts of the relevant
participants with the payment on the payment date unless DTC has reason to
believe it will not receive payment on such payment date. Each relevant
participant is credited with an amount proportionate to its beneficial ownership
of an interest in the principal amount of the relevant security as shown on the
records of DTC. Payments by the participants and the indirect participants to
the beneficial owners of the securities will be governed by standing
instructions and customary practices and will be the responsibility of the
participants or the indirect participants and will not be the responsibility of
DTC, the trustee or CILCORP. CILCORP and the trustee will not be liable for any
delay by DTC or any of its participants in identifying the beneficial owners of
the securities, and CILCORP and the trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
DTC's management is aware that some computer applications, systems, and the
like for processing data that are dependent upon calendar dates, including dates
before, on, and after January 1, 2000, may encounter Year 2000 problems. DTC has
informed its participants and other members of the financial community (the
"Industry") that it has developed and is implementing a program so that its
systems, as the same relate to the timely payment of distributions (including
principal and income payments) to security holders, book-entry deliveries, and
settlement of trades within DTC, continue to function appropriately. This
program includes a technical assessment and a remediation plan, each of which is
complete. Additionally, DTC's plan includes a testing phase, which is expected
to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to:
o impress upon them the importance of such services being Year 2000
compliant; and
o determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services.
In addition, DTC is in the process of developing such contingency plans as
it deems appropriate.
According to DTC, the foregoing information with respect to Year 2000
problems has been provided to the Industry for informational purposes only and
is not intended to serve as a representation, warranty, or contract modification
of any kind.
We obtained the information in this section regarding DTC and its
book-entry system from sources that we believe to be accurate, but we assume no
responsibility for the accuracy of this information. In addition, we have no
responsibility for the performance by DTC or its participants of their
obligations as described here or under the rules and procedures governing these
obligations.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. We refer
you to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used in this section of the prospectus for which no
definition is provided.
"Capitalized Lease Obligations" means all lease obligations of CILCORP and
its subsidiaries which, under GAAP, are or will be required to be capitalized,
in each case taken at the amount of the lease obligation accounted for as
indebtedness in conformity with those principles.
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"Comparable Treasury Issue" means, with respect to any securities to be
redeemed, the United States Treasury security selected by an independent
investment banking institution of international standing appointed by CILCORP as
having a maturity comparable to the remaining term of such securities that would
be used, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such securities.
"Comparable Treasury Price" means, with respect to any Comparable Treasury
Issue:
o the average of the bid and asked prices for the Comparable Treasury
Issue, expressed in each case as a percentage of its principal amount, on
the third Business Day preceding the redemption date of the securities to
be redeemed, as set forth in the daily statistical release (or any
successor release) published by the Federal Reserve Bank of New York and
designated "Composite 3:30 p.m. Quotations for U.S. Government
Securities"; or
o if such release (or any successor release) is not published or does not
contain such prices on such Business Day, the average, as determined by
CILCORP, of the bid and asked prices for the Comparable Treasury Issue,
expressed in each case as a percentage of its principal amount and quoted
in writing to CILCORP by a primary U.S. government securities dealer in
New York City appointed by CILCORP at 5:00 p.m. on the third Business Day
preceding such redemption date.
"Consolidated Current Liabilities" means the consolidated current
liabilities of CILCORP and its subsidiaries, but excluding the current portion
of long term Indebtedness which would otherwise be included in it, as determined
on a consolidated basis in accordance with GAAP.
"Consolidated Debt" means, at any time, the sum of the aggregate
outstanding principal amount of all Indebtedness for Borrowed Money (including,
without limitation, the principal component of Capitalized Lease Obligations,
but excluding Permitted Debt, Currency, Interest Rate or Commodity Agreements
and all Consolidated Current Liabilities and Project Finance Debt) of CILCORP
and its subsidiaries, as determined on a consolidated basis in conformity with
GAAP.
"Consolidated EBITDA" means, for any period, the sum of the amounts for
that period of CILCORP's:
(1) Consolidated Net Income;
(2) distributions paid, accrued or scheduled to be paid in respect of any
Preferred Securities or other capital stock to the extent deducted in
calculating Consolidated Net Income;
(3) Consolidated Interest Expense plus:
o interest paid, accrued or scheduled to be paid or to be accrued in
respect of any Permitted Debt, and
o interest expense related to company owned life insurance;
(4) income taxes and deferred taxes (other than income taxes--either
positive or negative-- attributable to extraordinary and non-recurring
gains or losses or sales of assets);
(5) depreciation expense;
(6) amortization expense; and
(7) all other non-cash items reducing Consolidated Net Income, less all
non-cash items increasing Consolidated Net Income, all as determined on
a consolidated basis in conformity with GAAP,
provided that, to the extent that CILCORP has any subsidiary that is not a
wholly-owned subsidiary, Consolidated EBITDA will be reduced by an amount equal
to the Consolidated Net Income of such subsidiary multiplied by the quotient of:
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o the number of shares of outstanding common stock of such subsidiary not
owned on the relevant Measurement Date by CILCORP or any subsidiary of
CILCORP, divided by
o the total number of shares of outstanding common stock of such subsidiary
on the relevant Measurement Date.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness for Borrowed Money (excluding interest
expense related to Permitted Debt and company owned life insurance and including
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; and all commissions, discounts and
other fees and charges owed with respect to bankers' acceptance financing) and
the net costs associated with Interest Rate Agreements and all but the principal
component of rentals in respect of Capitalized Lease Obligations, paid, accrued
or scheduled to be paid or to be accrued by CILCORP and each of its subsidiaries
during such period, excluding, however, any amount of such interest of any
subsidiary of CILCORP if the net income (or loss) of such subsidiary is excluded
from the calculation of Consolidated Net Income for such subsidiary pursuant to
clause (2) of the definition of Consolidated Net Income (but only in the same
proportion as the net income (or loss) of such subsidiary is excluded), less
consolidated interest income, all as determined on a consolidated basis in
conformity with GAAP;
provided that, to the extent that CILCORP has any subsidiary that is not a
wholly-owned subsidiary, Consolidated Interest Expense shall be reduced by an
amount equal to such interest expense of such subsidiary multiplied by the
quotient of:
o the number of shares of outstanding common stock of such subsidiary
not owned on the relevant Measurement Date by CILCORP or any
subsidiary of CILCORP, divided by
o the total number of shares of outstanding common stock of such
subsidiary on the relevant Measurement Date.
"Consolidated Net Income" means, for any period, the aggregate of the net
income (or loss) of CILCORP and its subsidiaries for such period, as determined
on a consolidated basis in conformity with GAAP; provided that the following
items will be excluded from any calculation of Consolidated Net Income (without
duplication):
(1) the net income (or loss) of any person (other than a subsidiary) in
which any other person has a joint interest, except to the extent of
the amount of dividends or other distributions actually paid to CILCORP
or another subsidiary of CILCORP during such period;
(2) the net income (or loss) of any subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation or
license;
(3) all extraordinary gains and extraordinary losses, merger-related
expenses and one-time expenses, cash or noncash, relating to
restructuring efforts; and
(4) all gains and losses from discontinued operations.
"Consolidated Net Tangible Assets" means at any time, the total of all
assets (including revaluations of those assets as a result of commercial
appraisals, price level restatement or otherwise) appearing on the most recently
available consolidated balance sheet of CILCORP and its subsidiaries (provided
that such balance sheet is of a date not more than 60 days prior to the date of
creation of the relevant Lien) prepared in accordance with GAAP, net of
applicable reserves and deductions, but excluding goodwill, trade names,
trademarks, patents, unamortized debt discount and all other like intangible
assets (which term shall not be construed to include such revaluations), less
the aggregate of the Consolidated Current Liabilities of CILCORP appearing on
such balance sheet.
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"Currency, Interest Rate or Commodity Agreements" means an agreement or
transaction involving any currency, interest rate or energy price or volumetric
swap, cap or collar arrangement, forward exchange transaction, option, warrant,
forward rate agreement, futures contract or other derivative instrument of any
kind for the hedging or management of foreign exchange, interest rate or energy
price or volumetric risks, it being understood, for purposes of this definition,
that the term "energy" will include, without limitation, coal, gas, oil and
electricity.
"Distribution" means any dividend, distribution or payment (including by
way of redemption, repurchase, retirement, return or repayment) in respect of
shares of capital stock of CILCORP, excluding any contract adjustment payments
under contracts to purchase common stock of CILCORP, AES or any of its
affiliates (which common stock was not held as an asset of CILCORP) entered into
in connection with the issuance of any Permitted Debt.
"Duff & Phelps" means Duff & Phelps Credit Rating Co., and any of its
subsidiaries or successors.
"Excluded Subsidiary" means any subsidiary of CILCORP:
(1) in respect of which neither CILCORP nor any subsidiary of CILCORP
(other than another Excluded Subsidiary) has undertaken any legal
obligation to give any guarantee for the benefit of the holders of any
Indebtedness for Borrowed Money (other than to another member of the
Group) other than in respect of any statutory obligation and the
subsidiaries of which are all Excluded Subsidiaries; and
(2) which has been designated as such by CILCORP by written notice to the
Trustee; provided that CILCORP may give written notice to the Trustee
at any time that any Excluded Subsidiary is no longer an Excluded
Subsidiary whereupon it shall cease to be an Excluded Subsidiary.
"Existing Rating" means, for any Rating Agency on any date of
determination, the Rating assigned to the securities by such Rating Agency as of
such date.
"GAAP" means generally accepted accounting principles in the United States
as in effect from time to time.
"Group" means CILCORP and its subsidiaries and "member of the Group" shall
be construed accordingly.
"incur" means, with respect to any Indebtedness, to incur, create, issue,
assume or guarantee such Indebtedness.
"Indebtedness" means, with respect to CILCORP or any of its subsidiaries at
any date of determination (without duplication):
(1) all Indebtedness for Borrowed Money (excluding any credit which is
available but undrawn);
(2) all obligations in respect of letters of credit (including
reimbursement obligations with respect to letters of credit);
(3) all obligations to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months
after the date of placing such property in service or taking delivery
and title to the property or the completion of such services, except
trade payables;
(4) all Capitalized Lease Obligations;
(5) all indebtedness of other persons secured by a mortgage, charge, lien,
pledge or other security interest on any asset of CILCORP or any of its
subsidiaries, whether or not such indebtedness is assumed; provided
that the amount of such Indebtedness must be the lesser of: (a) the
fair market value of such asset at such date of determination and (b)
the amount of the secured indebtedness;
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(6) all indebtedness of other persons of the types specified in the
preceding clauses (1) through (5), to the extent such indebtedness is
guaranteed by CILCORP or any of its subsidiaries; and
(7) to the extent not otherwise included in this defiition, net obligations
under Currency, Interest Rate or Commodity Agreements.
The amount of Indebtedness at any date will be the outstanding balance at
such date of all unconditional obligations as described above and, upon the
occurrence of the contingency giving rise to the obligation, the maximum
liability of any contingent obligations of the types specified in the preceding
clauses (1) through (7) at such date; provided that the amount outstanding at
any time of any Indebtedness issued with original issue discount is the face
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP.
"Indebtedness For Borrowed Money" means any indebtedness (whether being
principal, premium, interest or other amounts) for:
o money borrowed;
o payment obligations under or in respect of any trade acceptance or trade
acceptance credit; or
o any notes, bonds, loan stock or other debt securities offered, issued or
distributed whether by way of public offer, private placement,
acquisition consideration or otherwise and whether issued for cash or in
whole or in part for a consideration other than cash (including, without
limitation, Permitted Debt);
provided, however, in each case, that such term will exclude:
o any indebtedness relating to any accounts receivable securitizations;
o any Indebtedness of the type permitted to be secured by Liens pursuant to
clause (13) under the caption "--Limitation on Liens" contained in this
prospectus above;
o any Preferred Securities which are issued and outstanding on the date of
original issue of the securities or any extension, renewal or replacement
(or successive extensions, renewals or replacements), as a whole or in
part, of any such existing Preferred Securities, for amounts not
exceeding the principal amount or liquidation preference of the Preferred
Securities so extended, renewed or replaced; and
o any Preferred Securities issued in replacement or in connection with a
refinancing of any preferred securities or preferred stock which is
issued and outstanding on the date of original issue of the securities,
for amounts not exceeding the liquidation preference of the preferred
securities or preferred stock so replaced or refinanced.
"Initial Ratings" means, collectively, the initial rating received (or its
then equivalent) from S&P, the initial rating received (or its then equivalent)
from Moody's and the initial rating received (or its then equivalent) from Duff
& Phelps.
"Interest Coverage Ratio" means, with respect to CILCORP on any Measurement
Date, the ratio of:
(1) the aggregate amount of Consolidated EBITDA of CILCORP for the four
fiscal quarters for which financial information in respect of
Consolidated EBITDA is available immediately prior to such Measurement
Date to
(2) the aggregate Consolidated Interest Expense during such four fiscal
quarters.
"Investments" in any Person means any loan or advance to, any net payment
on a guarantee of, any acquisition of capital stock, equity interest, obligation
or other security of, or capital contribution or other investment in, such
Person. Investments exclude advances to customers and suppliers in the ordinary
course of business.
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"Leverage Ratio" means the ratio of Consolidated Debt to Total Capital,
calculated on the basis of the most recently available consolidated balance
sheet of CILCORP and its consolidated subsidiaries (provided that such balance
sheet is as of a date not more than 60 days prior to a Measurement Date)
prepared in accordance with GAAP.
"Lien" means any mortgage, lien, pledge, security interest or other
encumbrance; provided, however, that the term "Lien" does not mean any
easements, rights-of-way, restrictions and other similar encumbrances and
encumbrances consisting of zoning restrictions, leases, subleases, restrictions
on the use of property or defects in title.
"Measurement Date" means the record date for any Distribution.
"Moody's" means Moody's Investors Service, Inc., and any of its
subsidiaries or successors.
"Permitted Debt" means Indebtedness for Borrowed Money issued in connection
with a contract or contracts to purchase from CILCORP common stock of CILCORP,
AES or any affiliate of AES (which common stock was not held as an asset of
CILCORP) for an aggregate amount equal to the aggregate principal amount of such
Indebtedness for Borrowed Money.
"Pledge Effective Date" means the earlier to occur of (a) January 31, 2002
and (b) the date on which the existing $30.5 million Series A medium-term notes
are no longer outstanding.
"Preferred Securities" means, without duplication, any trust preferred or
preferred securities or related debt or guaranties of CILCORP or any of its
subsidiaries.
"Project Finance Debt" means:
o any Indebtedness to finance or refinance the ownership, acquisition,
development, design, engineering, procurement, construction, servicing,
management and/or operation of any project or asset which is incurred by
an Excluded Subsidiary; and
o any Indebtedness to finance or refinance the ownership, acquisition,
development, design, engineering, procurement, construction, servicing,
management and/or operation of any project or asset in respect of which
the person or persons to whom any such Indebtedness is or may be owed by
the relevant borrower (whether or not a member of the Group) has or have
no recourse whatsoever to any member of the Group (other than an Excluded
Subsidiary) for the repayment of that Indebtedness other than:
o recourse to such member of the Group for amounts limited to the cash
flow or net cash flow (other than historic cash flow or historic net
cash flow) from, or ownership interests or other investments in, such
project or asset; and/or
o recourse to such member of the Group for the purpose only of enabling
amounts to be claimed in respect of such Indebtedness in an enforcement
of any encumbrance given by such member of the Group over such project
or asset or the income, cash flow or other proceeds deriving from the
project (or given by any shareholder or the like, or other investor in,
the borrower or in the owner of such project or asset over its shares
or the like in the capital of, or other investment in, the borrower or
in the owner of such project or asset) to secure such Indebtedness,
provided that the extent of such recourse to such member of the Group
is limited solely to the amount of any recoveries made on any such
enforcement; and/or
o recourse to such borrower generally, or directly or indirectly to a
member of the Group, under any form of assurance, indemnity,
undertaking or support, which recourse is limited to a claim for
damages (other than liquidated damages and damages required to be
calculated in a specified way) for breach of an obligation (not being a
payment obligation or an obligation to procure payment by another or an
indemnity in respect of a payment obligation, or any obligation to
comply or to procure compliance by another with any financial ratios or
other tests of financial condition) by the person against which such
recourse is available.
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"Rating" means, for each Rating Agency, the credit rating assigned to the
securities by such Rating Agency.
"Rating Agency" means S&P, Moody's and Duff & Phelps, and any of their
respective subsidiaries or successors, or, in any case, if such person ceases to
rate any series of securities for reasons outside the control of CILCORP, any
other "nationally recognized statistical rating organization" (within the
meaning of Rule 15c3-l(c)(2)(vi)(F) under the Securities Exchange Act of 1934,
as amended) selected by CILCORP as a replacement Rating Agency.
"Ratings Downgrade" means a lowering by any Rating Agency of the Existing
Rating assigned to the securities by such Rating Agency.
"S&P" means Standard & Poor's Ratings Group, and any of its subsidiaries or
successors.
"Significant Subsidiary" means, at any particular time, any subsidiary of
CILCORP whose gross assets or gross revenues (having regard to CILCORP's direct
and/or indirect beneficial interest in the shares, or the like, of that
subsidiary) represent at least 25% of the consolidated gross assets or, as the
case may be, consolidated gross revenues of CILCORP.
"Subsidiary" means, with respect to any person, any corporation,
association, partnership, limited liability company or other business entity of
which 50% or more of the total voting power of shares of capital stock or other
interests (including partnership interests) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees is at the time owned, directly or indirectly, by (1) such person, (2)
such person and one or more subsidiaries of such person or (3) one or more
subsidiaries of such person.
"Total Capital" of any Person is defined to mean, as of any date, the sum
(without duplication) of:
(1) Indebtedness for Borrowed Money;
(2) preferred stock and Preferred Securities of such Person and its
consolidated subsidiaries; and
(3) consolidated stockholder's equity of such Person and its consolidated
subsidiaries (excluding any preferred stock in stockholder's equity).
"Treasury Yield" means, with respect to any securities to be redeemed, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue for such securities, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to its Comparable Treasury Price.
"U.S. Government Obligation" means any:
(1) security which is: (a) a direct obligation of the United States for the
payment of which the full faith and credit of the United States is
pledged or (b) an obligation of a person controlled or supervised by
and acting as an agency or instrumentality of the United States the
payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States, which, in the case of clause
(a) or (b), is not callable or redeemable at the option of the issuer
of the obligation, and
(2) depositary receipt issued by a bank (as defined in the Securities Act)
as custodian with respect to any security specified in clause (1) above
and held by such bank for the account of the holder of such depositary
receipt or with respect to any specific payment of principal of or
interest on any such security held by any such bank, provided that
(except as required by law) such custodian is not authorized to make
any deduction from the amount payable to the holder of such depositary
receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or
principal of the U.S. Government Obligation evidenced by such
depositary receipt.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material United States federal
income tax consequences of
o the ownership and disposition by a non-U.S. holder, as defined below, of
the new securities to be issued in the exchange offer, and
o the exchange of old securities for the new securities by a U.S. holder or
a non-U.S. holder, but only to the extent discussed below under the
caption "Exchange Offer."
This discussion is addressed only to holders who acquired old securities in the
initial offering, and does not address all of the tax consequences that may be
relevant to holders subject to special tax treatment, such as, for example,
insurance companies, broker-dealers, or tax-exempt organizations, or to holders
who will hold the new securities as a position in a "straddle," as part of a
"synthetic security" or "hedge," or as part of a "conversion transaction," or as
other than a capital asset (generally, an asset held for investment). In
addition, this discussion does not address any aspects of state, local, foreign
or other tax laws. This discussion is based on the United States federal income
tax law in effect as of the date hereof, which is subject to change, possibly on
a retroactive basis. We have not sought, and will not seek, any ruling from the
IRS with respect to the tax consequences discussed in this prospectus, and we
cannot assure you that the IRS will not take a position contrary to the tax
consequences discussed below or that a court would not sustain any such position
taken by the IRS. You should consult your tax advisor as to the particular tax
consequences of the exchange of old securities for the new securities and of the
ownership and disposition of the new securities, including the application and
effect of United States federal, state, local, foreign and other tax laws.
For purposes of this discussion, the term "non-U.S. holder" means any
person that is not a U.S. holder. A U.S. holder means:
o an individual who is a citizen or resident of the United States;
o a corporation or partnership created or organized in or under the laws of
the United States or any state of the United States or the District of
Columbia;
o an estate the income of which is subject to United States federal income
taxation, regardless of its source; or
o a trust if (a) a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
United States persons have the authority to control all substantial
decisions of the trust or (b) the trust has a valid election in effect
under applicable United States Treasury regulations to be treated as a
United States person.
EXCHANGE OFFER
The exchange of old securities for the new securities issued in the
exchange offer will not be treated as an "exchange" for United States federal
income tax purposes because the new securities issued in the exchange offer will
not differ materially in kind or extent from the old securities. Rather, the new
securities received by you in the exchange offer will be treated as a
continuation of the old securities owned by you. As a result, you will not
recognize gain or loss as a result of the exchange. In addition, you will have
the same adjusted tax basis and holding period in the new securities issued in
the exchange offer as you had in the old securities immediately prior to the
exchange.
NON-U.S. HOLDERS
A non-U.S. holder will generally not be subject to United States federal
income or withholding tax on payments of principal or interest on the new
securities provided that the non-U.S. holder satisfies the requirements of the
"portfolio interest" exemption. These requirements will generally be satisfied
if the non-U.S. holder:
o does not actually or constructively own 10% or more of the total combined
voting power of all classes of the capital stock of AES or CILCORP;
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o is not a controlled foreign corporation that is related to AES or
CILCORP through stock ownership, a foreign tax-exempt organization, or
a foreign private foundation for U.S. federal income tax purposes; and
o either (A) the beneficial owner of the securities certifies to CILCORP
or its paying agent, if any, under the penalty of perjury that it is a
non-U.S. holder and provides its name and address or (B) a securities
clearing organization, bank, or other financial institution that holds
customers' securities in the ordinary course of its trade or business
(a "financial institution") and holds the securities in that capacity,
certifies to CILCORP or its paying agent, if any, under the penalty of
perjury, that such statement has been received from the beneficial
owner by it or by a financial institution between it and the
beneficial owner and furnishes CILCORP or its paying agent, if any,
with a copy of that statement.
If a non-U.S. holder cannot satisfy the requirements of the "portfolio
interest" exemption, payments of interest made to the non-U.S. holder will
generally be subject to a 30% withholding tax. A non-U.S. holder may reduce or
eliminate this 30% withholding tax if the holder provides CILCORP or its paying
agent, as the case may be, with a properly executed:
o IRS Form 1001 (or successor form) properly claiming an exemption from,
or a reduction of, such withholding tax under an applicable tax
treaty; or
o IRS Form 4224 (or successor form) stating that payment with respect to
the securities is not subject to withholding tax because it is
effectively connected with the beneficial owner's conduct of a trade
or business in the United States.
Under regulations generally applicable to payments made after December 31,
2000, non-U.S. holders will generally be required to provide an IRS Form W-8BEN
in lieu of IRS Form 1001 or IRS Form 4224, although alternative documentation
may be applicable in certain situations.
Generally, a non-U.S. holder will not be subject to United States federal
income or withholding tax on any amount which constitutes gain upon sale,
exchange, retirement or other disposition of a new security, provided:
o the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. holder; and
o in the case of a non-U.S. holder who is a nonresident alien
individual, either (a) that non-U.S. holder was not present in the
United States for 183 days or more in the taxable year of the
disposition or (b) certain other conditions necessary for the
imposition of tax were not present.
Any interest or gain from the new securities that is effectively connected
with the conduct of a United States trade or business by a non-U.S. holder will
be subject to United States federal income tax on a net income basis in the same
manner as if that non-U.S. holder were a United States person and, if the
non-U.S. holder is a corporation, that non-U.S. holder will be subject to a
United States branch profits tax equal to 30 percent of its "effectively
connected earnings and profits" as adjusted for the taxable year, unless the
holder qualifies for an exemption from that tax or for a lower tax rate under an
applicable treaty.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new securities for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of those securities. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new securities received in the exchange offer where the old
securities were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of 180 days after the
completion of the exchange offer, we will make this prospectus, as amended and
supplemented, available to any broker-dealer for use in connection with any such
resale.
We will not receive any proceeds from any sale of new securities issued in
the exchange offer by broker-dealers. New securities issued in the exchange
offer received by broker-dealers for their own account under the exchange offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the new securities or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such new securities. Any broker-dealer
that resells new securities that were received by it for its own account in the
exchange offer and any broker or dealer that participates in a distribution of
such new securities may be deemed to be an "underwriter" within the meaning of
the Securities Act, and profit on any such resale of new securities issued in
the exchange and any commission or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities Act. The letter
of transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the completion of the exchange offer, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all fees and expenses
incident to the exchange offer, other than the commissions or concessions of any
broker-dealers, and will indemnify the holders of the old securities, including
any broker-dealers, against certain liabilities, including liabilities under the
Securities Act. We note, however, that, in the opinion of the SEC,
indemnification against liabilities arising under federal securities laws is
against public policy and may be unenforceable.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
new securities to be issued in the exchange offer will be passed upon for
CILCORP by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The consolidated financial statements of CILCORP at December 31, 1998 and
1997, and for each of the three years in the period ended December 31, 1998,
appearing in this prospectus have been audited by Arthur Andersen LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
in this prospectus.
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CILCORP INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NO.
-----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Public Accountants ........................................... F-2
Consolidated Statements of Income for the Three Years Ended December 31, 1998 ...... F-3
Consolidated Balance Sheets as of December 31, 1998 and 1997 ....................... F-4
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1998 ................................................................. F-5
Consolidated Statements of Segments of Business for the Three Years Ended
December 31, 1998 ................................................................. F-6
Consolidated Statements of Retained Earnings for the Three Years Ended
December 31, 1998 ................................................................. F-9
Notes to Financial Statements ...................................................... F-10
INTERIM CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Statements of Income For the Six Months Ended June 30, 1999
and 1998 .......................................................................... F-26
Consolidated Balance Sheets as of June 30, 1999 and 1998 ........................... F-27
Consolidated Statement of Cash Flows for the Six Months Ended June 30, 1999
and 1998 .......................................................................... F-29
Consolidated Statements of Segments of Business for the Six Months Ended June 30,
1999 and 1998 ..................................................................... F-30
Notes to Consolidated Financial Statements ......................................... F-31
</TABLE>
F-1
<PAGE>
Report of Independent Public Accountants
To the Stockholders of CILCORP Inc.:
We have audited the accompanying consolidated balance sheets of CILCORP
Inc. (an Illinois corporation) and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income, cash flows,
stockholders' equity and segments of business for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CILCORP Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 27, 1999
F-2
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
CILCORP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1998 1997 1996
------------ ------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenue:
Electric .............................................. $ 360,009 $ 338,096 $ 322,785
Gas ................................................... 172,327 208,758 195,770
Other Businesses ...................................... 26,688 11,106 8,505
--------- --------- ---------
Total ............................................... 559,024 557,960 527,060
--------- --------- ---------
Operating Expenses:
Fuel for Generation and Purchased Power ............... 124,058 115,081 101,622
Gas Purchased for Resale .............................. 93,586 123,532 108,286
Other Operations and Maintenance ...................... 145,673 124,852 131,675
Depreciation and Amortization ......................... 66,179 62,416 60,574
State and Local Revenue Taxes ......................... 26,502 22,467 22,004
Other Taxes ........................................... 11,463 11,833 11,516
--------- --------- ---------
Total ............................................... 467,461 460,181 435,677
--------- --------- ---------
Fixed Charges and Other:
Interest Expense ...................................... 29,473 27,462 28,964
Preferred Stock Dividends of Subsidiary ............... 3,194 3,216 3,188
Allowance for Funds Used During Construction. (34) (134) (90)
Other ................................................. 1,013 1,177 679
--------- --------- ---------
Total ............................................... 33,646 31,721 32,741
--------- --------- ---------
Income from Continuing Operations Before
Income Taxes .......................................... 57,917 66,058 58,642
Income Taxes ........................................... 19,699 22,349 20,702
--------- --------- ---------
Net Income from Continuing Operations Before
Extraordinary Item .................................... 38,218 43,709 37,940
Loss from Operations of Discontinued Businesses,
Net of Tax of $(16,278), $(7,298) and $(6,197)......... (25,025) (34,126) (9,997)
Gain on Sale/Disposal of Assets of Discontinued
Businesses, Net of Tax of $2,014 and $1,889............ 3,117 2,712 --
Extraordinary Item (see Note 1) ........................ -- 4,100 --
--------- --------- ---------
Net Income ............................................. $ 16,310 $ 16,395 $ 27,943
Other Comprehensive Income ............................. (169) (317) (5)
--------- --------- ---------
Comprehensive Income ................................... $ 16,141 $ 16,078 $ 27,938
========= ========= =========
Average Common Shares Outstanding -- Basic ............. 13,611 13,611 13,480
Earnings Per Common Share -- Basic
Continuing Operations ................................. $ 2.81 $ 3.21 $ 2.81
Discontinued Operations ............................... (1.61) (2.31) (.74)
Extraordinary Item .................................... -- .30 --
--------- --------- ---------
Net Income Per Common Share -- Basic ................... $ 1.20 $ 1.20 $ 2.07
========= ========= =========
Average Common Shares Outstanding -- Diluted. 13,707 13,627 13,480
Earnings Per Common Share -- Diluted
Continuing Operations ................................. $ 2.79 $ 3.21 $ 2.81
Discontinued Operations ............................... (1.60) (2.31) (.74)
Extraordinary Item .................................... -- .30 --
--------- --------- ---------
Net Income Per Common Share -- Diluted ................ $ 1.19 $ 1.20 $ 2.07
========= ========= =========
Dividends per Common Share ............................ $ 2.46 $ 2.46 $ 2.46
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these statements.
F-3
<PAGE>
CONSOLIDATED BALANCE SHEETS
CILCORP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------
1998 1997
-------------- -------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Temporary Cash Investments ...................... $ 1,669 $ 10,576
Receivables, Less Reserves of $3,411 and $2,518........... 134,666 141,234
Accrued Unbilled Revenue ................................. 39,220 38,775
Fuel, at Average Cost .................................... 13,431 7,816
Materials and Supplies, at Average Cost .................. 15,062 13,685
Gas in Underground Storage, at Average Cost .............. 20,767 22,666
Prepayments and Other .................................... 7,706 10,971
---------- ----------
Total Current Assets ................................... 232,521 245,723
---------- ----------
Investments and Other Property:
Investment in Leveraged Leases ............................ 146,990 146,458
Other Investments ......................................... 19,500 21,074
---------- ----------
Total Investments and Other Property ................... 166,490 167,532
---------- ----------
Property, Plant and Equipment:
Utility Plant, at Original Cost
Electric ................................................. 1,237,885 1,213,585
Gas ...................................................... 417,585 401,870
---------- ----------
1,655,470 1,615,455
Less -- Accumulated Provision for Depreciation ............ 812,630 769,792
---------- ----------
842,840 845,663
Construction Work in Progress ............................. 30,075 21,550
Other, Net of Depreciation ................................ 7,796 22,188
---------- ----------
Total Property, Plant and Equipment .................... 880,711 889,401
---------- ----------
Other Assets .............................................. 33,218 32,163
---------- ----------
Total Assets ........................................... $1,312,940 $1,334,819
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long-Term Debt ........................ $ 13,027 $ 22,185
Notes Payable ............................................ 96,200 62,150
Accounts Payable ......................................... 136,840 132,286
Accrued Taxes ............................................ 8,185 2,810
Accrued Interest ......................................... 10,102 9,473
FCA/PGA Over-Recoveries .................................. 304 1,666
Other .................................................... 8,881 19,798
---------- ----------
Total Current Liabilities .............................. 273,539 250,368
---------- ----------
Long-Term Debt ............................................ 285,552 298,528
---------- ----------
Deferred Credits and Other Liabilities:
Deferred Income Taxes ..................................... 239,306 241,013
Regulatory Liability of Regulated Subsidiary .............. 46,346 56,807
Deferred Investment Tax Credit ............................ 19,450 21,117
Other ..................................................... 47,089 48,273
---------- ----------
Total Deferred Credits ................................. 352,191 367,210
---------- ----------
Preferred Stock of Subsidiary ............................. 66,120 66,120
---------- ----------
Stockholders' Equity:
Common Stock, no par value; Authorized 50,000,000 shares --
Outstanding 13,610,680 and 13,610,680 shares ............. 192,853 192,567
Retained Earnings ......................................... 143,530 160,702
Accumulated Other Comprehensive Income .................... (845) (676)
---------- ----------
Total Stockholders' Equity ............................. 335,538 352,593
---------- ----------
Total Liabilities and Stockholders' Equity ............. $1,312,940 $1,334,819
========== ==========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these balance sheets.
F-4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
CILCORP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income from Continuing Operations Before Preferred Dividends. $ 41,412 $ 46,925 $ 41,128
--------- --------- ---------
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Non-Cash Income ....................................................... (6,150) (4,102) (4,297)
Cash Receipts in Excess of Debt Service on Leases ..................... 7,618 -- --
Depreciation and Amortization ......................................... 66,179 62,416 60,574
Deferred Income Taxes, Investment Tax Credit and Regulatory
Liability of Subsidiary, Net ........................................ (5,865) (3,342) (1,707)
Changes in Operating Assets and Liabilities:
Decrease (Increase) in Accounts Receivable and Accrued Unbilled
Revenue ............................................................. 5,430 (74) (3,474)
(Increase) Decrease in Inventories .................................... (5,093) 3,294 (5,310)
Increase (Decrease) in Accounts Payable ............................... 14,188 (1,961) 6,809
Increase (Decrease) in Accrued Taxes .................................. 10 3,893 (5,843)
(Increase) Decrease in Other Assets ................................... 209 (17,027) 2,197
Increase (Decrease) in Other Liabilities .............................. (6,426) (9,039) 11,036
--------- --------- ---------
Total Adjustments ...................................................... 70,100 34,058 59,985
--------- --------- ---------
Net Cash Provided by Operating Activities .............................. 111,512 80,983 101,113
Net Cash Provided by (Used in) Operating Activities of Discontinued
Operations ............................................................ (43,202) 10,031 1,263
--------- --------- ---------
Cash Flow from Operations .............................................. 68,310 91,014 102,376
--------- --------- ---------
Cash Flows from Investing Activities:
Additions to Plant ..................................................... (67,112) (55,055) (43,680)
Purchase of Long-Term Investments ...................................... -- (6,933) (4,713)
Other .................................................................. (4,514) (1,242) 482
--------- --------- ---------
Net Cash Used in Investing Activities .................................. (71,626) (63,230) (47,911)
Net Cash Provided by (Used in) Investing Activities of Discontinued
Operations ............................................................ 19,169 3,310 (3,082)
--------- --------- ---------
Cash Flow from Investing Activities .................................... (52,457) (59,920) (50,993)
--------- --------- ---------
Cash Flows from Financing Activities:
Net Increase (Decrease) in Short-Term Debt ............................. 34,050 34,250 (19,200)
Repayment of Long-Term Debt ............................................ (22,102) (22,954) (19,393)
Common Dividends Paid .................................................. (33,482) (33,482) (33,142)
Preferred Dividends Paid ............................................... (3,194) (3,216) (3,188)
Common Stock Issued .................................................... -- -- 11,430
--------- --------- ---------
Net Cash Provided by (Used in) Financing Activities of Continuing
Operations ............................................................ (24,728) (25,402) (63,493)
Net Cash Provided by (Used in) Financing Activities of Discontinued
Operations ............................................................ (32) (57) (49)
--------- --------- ---------
Net Cash Used in Financing Activities .................................. (24,760) (25,459) (63,542)
--------- --------- ---------
Net Increase (Decrease) in Cash and Temporary Cash Investments ......... (8,907) 5,635 (12,159)
Cash and Temporary Cash Investments at Beginning of Year ............... 10,576 4,941 17,100
--------- --------- ---------
Cash and Temporary Cash Investments at End of Year ..................... $ 1,669 $ 10,576 $ 4,941
========= ========= =========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these statements.
F-5
<PAGE>
STATEMENTS OF SEGMENTS OF BUSINESS
CILCORP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
1998
----------------------------------------------------------------------------------
CILCO CILCO CILCO OTHER DISCONT.
ELECTRIC GAS OTHER BUSINESSES OPERATIONS TOTALS
------------ ----------- ------------ ------------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues ............................. $360,009 $172,327 $ 1,743 $ 24,717 $ -- $ 558,796
Interest income ...................... 228 228
-------- -------- -------- ---------- -------- ----------
Total ............................. 360,009 172,327 1,971 24,717 559,024
-------- -------- -------- ---------- -------- ----------
Operating expenses ................... 235,801 138,459 3,600 23,422 401,282
Depreciation and amortization ........ 46,017 19,256 713 193 66,179
-------- -------- -------- ---------- -------- ----------
Total ............................. 281,818 157,715 4,313 23,615 467,461
-------- -------- -------- ---------- -------- ----------
Interest expense ..................... 16,261 6,514 6,698 29,473
Preferred stock dividends ............ 3,194 3,194
Fixed charges and other expenses (34) 1,013 979
-------- -------- -------- ---------- -------- ----------
Total ............................. 16,227 6,514 4,207 6,698 33,646
-------- -------- -------- ---------- -------- ----------
Income from continuing oper.
before income taxes ................. 61,964 8,098 (6,549) (5,596) 57,917
Income taxes ......................... 21,645 3,443 (2,616) (2,773) 19,699
-------- -------- -------- ---------- -------- ----------
Net income from continuing
operations .......................... 40,319 4,655 (3,933) (2,823) 38,218
Effect of discontinued operations..... (21,908) (21,908)
-------- -------- -------- ---------- -------- ----------
Segment net income ................... $ 40,319 $ 4,655 $ (3,933) $ (2,823) $(21,908) $ 16,310
======== ======== ======== ========== ======== ==========
Capital expenditures ................. $ 44,213 $ 22,889 $ -- $ 10 $ 8,916 $ 76,028
Revenue from major customer
Caterpillar Inc. .................... $ 39,354 $ 948 $ -- $ 7,669 $ 1,130 $ 49,101
Segment assets ....................... $730,354 $286,737 $ 5,072 $ 594,734 $121,647 $1,738,544
Consolidation adjustments ............ (1,304) (507) -- (423,789) (4) (425,604)
-------- -------- -------- ---------- ----------- ----------
Total assets ...................... $729,050 $286,230 $ 5,072 $ 170,945 $121,643 $1,312,940
======== ======== ======== ========== ========== ==========
</TABLE>
F-6
<PAGE>
STATEMENTS OF SEGMENTS OF BUSINESS
CILCORP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
1997
-----------------------------------------------------------------------------
CILCO CILCO CILCO OTHER DISCONT.
ELECTRIC GAS OTHER BUSINESSES OPERATIONS TOTALS
------------ ----------- ----------- ------------ ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues ................................. $338,096 $208,758 $ -- $ 10,867 $ -- $ 557,721
Interest income .......................... 239 239
-------- -------- -------- ---------- --------- ----------
Total ................................. 338,096 208,758 239 10,867 557,960
-------- -------- -------- ---------- --------- ----------
Operating expenses ....................... 217,700 165,020 2,831 12,214 397,765
Depreciation and amortization ............ 43,858 17,647 713 198 62,416
-------- -------- -------- ---------- --------- ----------
Total ................................. 261,558 182,667 3,544 12,412 460,181
-------- -------- -------- ---------- --------- ----------
Interest expense ......................... 16,192 6,454 4,816 27,462
Preferred stock dividends ................ 3,216 3,216
Fixed charges and other expenses ......... (134) 1,177 1,043
-------- -------- -------- ---------- --------- ----------
Total ................................. 16,058 6,454 4,393 4,816 31,721
-------- -------- -------- ---------- --------- ----------
Income from continuing oper.
before income taxes ..................... 60,480 19,637 (7,698) (6,361) 66,058
Income taxes ............................. 21,901 7,416 (3,049) (3,919) 22,349
-------- -------- -------- ---------- --------- ----------
Net income from cont. oper.
before extraord. item ................... 38,579 12,221 (4,649) (2,442) 43,709
Effect of discontinued operations
and extraordinary item .................. 4,100 (31,414) (27,314)
-------- -------- -------- ---------- --------- ----------
Segment net income ....................... $ 42,679 $ 12,221 $ (4,649) $ (2,442) $ (31,414) $ 16,395
======== ======== ======== ========== ========= ==========
Capital expenditures ..................... $ 35,196 $ 19,830 $ -- $ 29 $ 6,188 $ 61,243
Revenue from major customer
Caterpillar Inc. ........................ $ 40,106 $ 934 $ -- $ 1,208 $ 1,870 $ 44,118
Segment assets ........................... $724,869 $290,958 $ 5,639 $ 606,786 $ 144,412 $1,772,664
Consolidation adjustments ................ (1,070) (416) -- (436,345) (14) (437,845)
-------- -------- -------- ---------- --------- ----------
Total assets .......................... $723,799 $290,542 $ 5,639 $ 170,441 $ 144,398 $1,334,819
======== ======== ======== ========== ========= ==========
</TABLE>
F-7
<PAGE>
STATEMENTS OF SEGMENTS OF BUSINESS
CILCORP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
1996
------------------------------------------------------------------------------
CILCO CILCO CILCO OTHER DISCONT.
ELECTRIC GAS OTHER BUSINESSES OPERATIONS TOTALS
------------ ----------- ----------- ------------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues ............................. $322,785 $195,770 $ -- $ 7,825 $ -- $ 526,380
Interest income ...................... 680 680
-------- -------- -------- ---------- -------- ----------
Total ............................. 322,785 195,770 680 7,825 527,060
-------- -------- -------- ---------- -------- ----------
Operating expenses ................... 208,566 154,099 2,234 10,204 375,103
Depreciation and amortization ........ 42,530 17,134 713 197 60,574
-------- -------- -------- ---------- -------- ----------
Total ............................. 251,096 171,233 2,947 10,401 435,677
-------- -------- -------- ---------- -------- ----------
Interest expense ..................... 17,445 6,716 4,803 28,964
Preferred stock dividends ............ 3,188 3,188
Fixed charges and other expenses...... (90) 679 589
-------- -------- -------- ---------- -------- ----------
Total ............................. 17,355 6,716 3,867 4,803 32,741
-------- -------- -------- ---------- -------- ----------
Income from continuing oper.
before income taxes ................. 54,334 17,821 (6,134) (7,379) 58,642
Income taxes ......................... 19,576 6,972 (2,466) (3,380) 20,702
-------- -------- -------- ---------- -------- ----------
Net income from continuing
operations .......................... 34,758 10,849 (3,668) (3,999) 37,940
Effect of discontinued operations..... (9,997) (9,997)
-------- -------- -------- ---------- -------- ----------
Segment net income ................... $ 34,758 $ 10,849 $ (3,668) $ (3,999) $ (9,997) $ 27,943
======== ======== ======== ========== ======== ==========
Capital expenditures ................. $ 28,032 $ 15,529 $ -- $ 119 $ 3,061 $ 46,741
Revenue from major customer
Caterpillar Inc. .................... $ 37,724 $ 1,053 $ -- $ 68 $ 119 $ 38,964
Segment assets ....................... $732,219 $296,343 $ 6,424 $ 585,732 $ 94,492 $1,715,210
Consolidation adjustments ............ (352) (137) -- (428,815) (213) (429,517)
-------- -------- -------- ---------- -------- ----------
Total assets ...................... $731,867 $296,206 $ 6,424 $ 156,917 $ 94,279 $1,285,693
======== ======== ======== ========== ======== ==========
</TABLE>
F-8
<PAGE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
CILCORP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COMMON STOCK OTHER
-------------------------- RETAINED COMPREHENSIVE
SHARES AMOUNT EARNINGS INCOME TOTAL
------------ ----------- ------------ -------------- --------------
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 ............. 13,335,606 $179,330 $183,002 $ (354) $361,978
Common Stock Issued ...................... 275,074 11,430 11,430
Cash Dividend Declared on Common
Stock ($2.46 per share).................. (33,141) (33,141)
Additional Minimum Liability of
Non-Qualified Pension Plan at
December 31, 1996, net of $(3) taxes..... (5) (5)
Net Income ............................... 27,943 27,943
---------- -------- --------- --------- ----------
Balance at December 31, 1996 ............. 13,610,680 $190,760 $177,804 $ (359) $368,205
CILCORP Shareholder Return
Incentive Compensation .................. 1,807 1,807
Cash Dividend Declared on Common
Stock ($2.46 per share).................. (33,482) (33,482)
Additional Minimum Liability of
Non-Qualified Pension Plan at
December 31, 1997, net of $(208)
taxes ................................... (317) (317)
Other .................................... (15) (15)
Net Income ............................... 16,395 16,395
---------- -------- --------- -------- ----------
Balance at December 31, 1997 ............. 13,610,680 $192,567 $160,702 $ (676) $352,593
Cash Dividend Declared on Common
Stock ($2.46 per share).................. (33,482) (33,482)
Additional Minimum Liability of
Non-Qualified Pension Plan at
December 31, 1998, net of $(111)
taxes ................................... (169) (169)
Other .................................... 286 286
Net Income ............................... 16,310 16,310
---------- -------- --------- -------- ----------
Balance at December 31, 1998 ............. 13,610,680 $192,853 $143,530 $ (845) $335,538
========== ======== ========= ======== ==========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these statements.
F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CILCORP Inc.
(CILCORP or the Holding Company), Central Illinois Light Company (CILCO), QST
Enterprises Inc. (QST) and its subsidiaries (QST Environmental Inc., formerly
known as Environmental Science & Engineering, Inc. (ESE) and QST Energy Inc.
(QST Energy)) and CILCORP's other subsidiaries (collectively, the Company) after
elimination of significant intercompany transactions. In 1998, the operations of
QST and its subsidiaries were discontinued (see Note 10). Prior year amounts
have been reclassified on a basis consistent with the 1998 presentation.
CILCORP is an investor-owned public utility holding company. CILCO, the
Company's principal business subsidiary, is engaged in the generation,
transmission, distribution and sale of electric energy in an area of
approximately 3,700 square miles in central and east-central Illinois, and the
purchase, distribution, transportation and sale of natural gas in an area of
approximately 4,500 square miles in central and east-central Illinois. Other
CILCORP first-tier subsidiaries are CILCORP Investment Management Inc. (CIM),
which manages the Company's investment portfolio and CILCORP Ventures Inc.
(CVI), which pursues investment opportunities in energy-related products and
services.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations--New Accounting Pronouncements for a discussion of accounting
pronouncements issued by the Financial Accounting Standards Board which are
effective in 1998 or thereafter.
REGULATION
CILCO is a public utility subject to regulation by the Illinois Commerce
Commission (ICC) and the Federal Energy Regulatory Commission (FERC) with
respect to accounting matters, and maintains its accounts in accordance with the
Uniform System of Accounts prescribed by these agencies.
CILCO is subject to the provisions of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of Regulation"
(SFAS 71) for its regulated public utility operations. Under SFAS 71, assets and
liabilities are recorded to represent probable future increases and decreases,
respectively, of revenues to CILCO resulting from the ratemaking action of
regulatory agencies.
The Electric Service Customer Choice and Rate Relief Law of 1997 (Customer
Choice Law) became effective in Illinois in December 1997. Among other
provisions, this law begins a nine-year transition process to a fully
competitive market for electricity in Illinois. Electric transmission and
distribution activities are expected to continue to be regulated, but a customer
may choose to purchase electricity from another supplier (see Management's
Discussion--Competition).
F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Due to the transition cost recovery limitations and base rate reductions of
the Customer Choice Law, CILCO's electric generation activities will no longer
be subject to the provisions of SFAS 71. Accordingly, regulatory assets of $1.5
million and liabilities of $5.6 million associated with electric generating
plant were written-off or credited, respectively, to income in 1997 as a net
$4.1 million after-tax extraordinary item. Regulatory assets included on the
Consolidated Balance Sheets at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Included in prepayments and other:
Fuel and gas cost adjustments .............................. $ 4,740 $ 2,954
Coal tar remediation cost -- estimated current ............. 609 844
Gas transition costs ....................................... -- 159
------- -------
Current costs included in prepayments and other ......... 5,349 3,957
------- -------
Included in other assets:
Coal tar remediation cost, net of recoveries ............... 1,281 2,745
Regulatory tax asset ....................................... 5,723 7,578
Deferred gas costs ......................................... 4,039 4,145
Unamortized loss on reacquired debt ........................ 3,261 3,581
------- -------
Future costs included in other assets ...................... 14,304 18,049
------- -------
Total regulatory assets ................................. $19,653 $22,006
======= =======
</TABLE>
Regulatory assets at December 31, 1998 are related to CILCO's regulated
electric and gas distribution activities. CILCO does not currently believe the
costs recorded for its generating plants and related assets at December 31, 1998
to be impaired as a result of the Customer Choice Law. Regulatory liabilities,
consisting of deferred tax items primarily related to CILCO's electric and gas
transmission and distribution operations, are approximately $46.3 million and
$56.8 million at December 31, 1998 and 1997, respectively.
CILCO's electric generation-related identifiable assets included in the
balance sheet at December 31, 1998 and 1997 were:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Property, Plant and Equipment ......................... $ 537,358 $ 535,065
Less: Accumulated Depreciation ........................ (266,461) (259,988)
---------- ----------
270,897 275,077
Construction Work in Progress ......................... 3,268 1,979
---------- ----------
Net Property, Plant and Equipment .................... 274,165 277,056
Fuel, at Average Cost ................................. 8,704 8,520
Materials and Supplies, at Average Cost ............... 8,452 8,202
---------- ----------
Total Identifiable Electric Generation Assets ......... $ 291,321 $ 293,778
========== ==========
</TABLE>
Accumulated deferred income taxes associated with electric generation
property at December 31, 1998 and 1997 were approximately $72 million and $79
million, respectively.
F-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
OPERATING REVENUES, FUEL COSTS AND COST OF GAS
Electric, gas, and non-regulated energy and energy services revenues
include service provided but unbilled at year end. Substantially all electric
rates and gas system sales rates of CILCO include a fuel adjustment clause and a
purchased gas adjustment clause, respectively. These clauses provide for the
recovery of changes in electric fuel costs, excluding coal transportation, and
changes in the cost of gas on a current basis in billings to customers. CILCO
adjusts the cost of fuel and cost of gas to recognize over or under recoveries
of allowable costs. The cumulative effects are deferred on the Balance Sheets as
a current asset or current liability (see Regulation, above) and adjusted by
refunds or collections through future billings to customers.
CONCENTRATION OF CREDIT RISK
CILCO, as a public utility, must provide service to customers within its
defined service territory and may not discontinue service to residential
customers when certain weather conditions exist. CILCO continually reviews
customers' creditworthiness and requests deposits or refunds deposits based on
that review. At December 31, 1998, CILCO had net receivables of $35.8 million,
of which approximately $4.7 million was due from its major customers.
See Note 6 for a discussion of receivables related to CILCORP Investment
Management Inc.'s leveraged lease portfolio.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of Cash and Temporary Cash Investments, Other
Investments, and Notes Payable approximates fair value. The estimated fair value
of the Company's Preferred Stock with Mandatory Redemption was $23 million at
December 31, 1998 and 1997, based on current market interest rates for other
companies with comparable credit ratings, capital structure, and size. The
estimated fair value of the Company's Long-Term Debt, including current
maturities, was $339 million at December 31, 1998, and $352 million at December
31, 1997. The fair market value of these instruments was based on current market
interest rates for other companies with comparable credit ratings, capital
structures, and size.
DEPRECIATION AND MAINTENANCE
Provisions for depreciation of utility property for financial reporting
purposes are based on straight-line composite rates. The annual provisions for
utility plant depreciation, expressed as a percentage of average depreciable
utility property, were 3.8% and 4.6% for electric and gas, respectively, for
each of the last three years. Utility maintenance and repair costs are charged
directly to expense. Renewals of units of property are charged to the utility
plant account, and the original cost of depreciable property replaced or
retired, together with the removal cost less salvage, is charged to the
accumulated provision for depreciation.
Non-utility property is depreciated over estimated lives ranging from 3 to
40 years.
GOODWILL
As a result of significant downsizing of QST Environmental Inc. (QST
Environmental) during 1996 and 1997 and continuing overcapacity and competition
in the environmental segment in the fourth quarter of 1997, the Company
determined that an impairment to goodwill associated with QST Environmental
existed. As a result, the Company wrote off the $22.6 million unamortized
goodwill balance. In late 1998, the Company decided to sell its 100% ownership
interest in QST Environmental and has classified its results as discontinued
(see Note 10).
F-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
INCOME TAXES
The Company follows a policy of comprehensive interperiod income tax
allocation. Investment tax credits related to utility property have been
deferred and are being amortized over the estimated useful lives of the related
property. CILCORP and its subsidiaries file a consolidated federal income tax
return. Income taxes are allocated to the individual companies based on their
respective taxable income or loss.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Company considers all highly liquid debt instruments purchased with a
remaining maturity of three months or less to be cash equivalents for purposes
of the Consolidated Statements of Cash Flows.
Cash paid for interest and income taxes was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest ............. $26,067 $28,710 $28,988
Income taxes ......... $19,611 $28,537 $13,572
------- ------- -------
</TABLE>
COMPANY-OWNED LIFE INSURANCE POLICIES
The following amounts related to Company-owned life insurance contracts,
issued by one major insurance company, are included in Other Investments:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1997
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash surrender value of contracts ......... $ 50,786 $ 45,297
Borrowings against contracts .............. (48,132) (42,898)
--------- ---------
Net investment ......................... $ 2,654 $ 2,399
========= =========
</TABLE>
Interest expense related to borrowings against Company-owned life
insurance, included in "Other" on the Consolidated Statements of Income, was
$3.6 million, $3.5 million and $2.7 million for 1998, 1997 and 1996,
respectively.
F-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. INCOME TAXES
The Company uses the liability method to account for income taxes. Under
the liability method, deferred income taxes are recognized at currently enacted
income tax rates to reflect the tax effect of temporary differences between the
financial reporting basis and the tax basis of assets and liabilities. Temporary
differences occur because the income tax law either requires or permits certain
items to be reported on the Company's income tax return in a different year than
they are reported in the financial statements. CILCO has recorded a regulatory
asset and liability to account for the effect of expected future regulatory
actions related to unamortized investment tax credits, income tax liabilities
initially recorded at tax rates in excess of current rates, the equity component
of Allowance for Funds Used during Construction and other items for which
deferred taxes had not previously been provided. The temporary differences
related to the consolidated deferred income tax asset and liability at December
31, 1998, 1997, and 1996 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Deferred tax asset ............................. $ 20,742 $ 18,347 $ 16,452
Adjustment to reflect regulatory asset ......... (5,723) (7,578) (4,777)
-------- -------- --------
Net deferred tax asset ......................... $ 15,019 $ 10,769 $ 11,675
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax liabilities:
Deferred tax liability-property ...................................... $ 196,301 $ 207,460 $ 214,356
Adjustment to reflect regulatory liability ........................... (46,346) (56,807) (68,565)
--------- --------- ---------
Net deferred tax liability-property .................................. 149,955 150,653 145,791
Deferred tax liability-leases ........................................ 103,566 101,005 97,964
Deferred tax liability-other ......................................... 804 124 3,159
--------- --------- ---------
Accumulated deferred income tax liability ............................ $ 254,325 $ 251,782 $ 246,914
========= ========= =========
Accumulated deferred income tax liability, net of deferred tax assets $ 239,306 $ 241,013 $ 235,239
========= ========= =========
</TABLE>
The following table reconciles the change in the accumulated deferred
income tax liability to the deferred income tax expense included in the income
statement:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Net change in deferred income tax liability per above table ............ $ (1,707) $ 5,774
Change in tax effects of income tax related regulatory assets and
liabilities ........................................................... (8,606) (14,559)
Deferred taxes related to extraordinary item ........................... -- 5,634
Other .................................................................. (106) 125
--------- ---------
Deferred income tax benefit for the period ............................. (10,419) (3,026)
Less: Deferred income tax benefit for the period from discontinued
operations ............................................................ (6,115) (1,245)
--------- ---------
Deferred income tax benefit for the period from continuing operations... $ (4,304) $ (1,781)
========= =========
</TABLE>
F-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. INCOME TAXES -- (CONTINUED)
Income tax expenses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1998 1997 1996
----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current income taxes
Federal ....................................................... $ 13,731 $ 17,814 $ 15,129
State ......................................................... 3,791 3,836 2,169
--------- -------- --------
Total current taxes ........................................... 17,522 21,650 17,298
--------- -------- --------
Deferred income taxes, net ....................................
Property-related deferred income taxes ........................ (11,262) (841) (2,346)
Leveraged leases .............................................. 2,602 3,040 4,398
Unbilled revenue .............................................. (287) (885) 425
Gas take-or-pay settlements ................................... 522 (339) (706)
Environmental remediation costs ............................... (58) 46 (642)
Pension expenses .............................................. 869 (1,798) (1,726)
Other post-employment benefits expenses ....................... (847) (617) 187
Customer advances ............................................. 478 (438) (40)
Gas in underground storage .................................... (1,681) (191) 405
Amortization of debt discounts, premiums and expenses ......... (790) (179) (179)
CILCO Executive Deferred Compensation Plan .................... (671) (191) (525)
CILCORP Shareholder Return Incentive Comp. Plan ............... (717) -- --
QST Gas Derivatives Mark to Market ............................ 948 -- --
Other ......................................................... 475 (633) (360)
--------- -------- --------
Total deferred income taxes, net .............................. (10,419) (3,026) (1,109)
--------- -------- --------
Investment tax credit amortization ............................ (1,668) (1,684) (1,684)
--------- -------- --------
Total income tax provisions before extraordinary item ......... 5,435 16,940 14,505
Deferred taxes related to extraordinary item .................. -- (5,634) --
--------- -------- --------
Total income tax provisions ................................... $ 5,435 $ 11,306 $ 14,505
========= ======== ========
</TABLE>
Total income tax provisions are presented within the Income Statement as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1998 1997 1996
----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes from continuing operations .............. $ 19,699 $ 22,349 $ 20,702
Tax on income (loss) from operations of discontinued
businesses .......................................... (16,278) (7,298) (6,197)
Tax on gain (loss) on sale/disposal of discontinued
businesses .......................................... 2,014 1,889 --
Deferred taxes related to extraordinary item ......... -- (5,634) --
--------- -------- --------
Total income tax provisions .......................... $ 5,435 $ 11,306 $ 14,505
--------- -------- --------
</TABLE>
The 1997 income tax provision has been reduced to reflect the crediting to
income as an extraordinary item the regulatory liability related to electric
generation property deferred taxes which were recorded at tax rates in excess of
the current rate.
Total deferred income taxes, net, includes deferred state income taxes of
$(1,635,000), $(229,000) and $(538,000) for 1998, 1997 and 1996, respectively.
F-15
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. INCOME TAXES -- (CONTINUED)
The following table represents a reconciliation of the effective tax rate
with the statutory federal income tax rate.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Statutory federal income tax ................................. 35.0% 35.0% 35.0%
---- ----- ----
Amortization of property related deferred taxes provided at
tax rates in excess of current rate ......................... (8.3) (3.9) (3.4)
Amortization of investment tax credit ........................ (7.6) (6.1) (4.0)
State income taxes ........................................... 5.5 9.0 4.8
Goodwill write-off and amortization .......................... -- 29.2 .6
Preferred dividends of subsidiary and other permanent
differences ................................................. 6.6 5.2 3.6
Tax provision adjustment ..................................... -- (1.6) (.4)
Affordable housing tax credits ............................... (6.1) (3.4) (.1)
Corporate-owned life insurance ............................... (4.2) (2.9) (1.7)
AES transaction costs ........................................ 3.3 -- --
Other differences ............................................ 1.1 .7 (.2)
---- ----- ----
Total ........................................................ (9.7) 26.2 (.8)
---- ----- ----
Effective income tax rate before effect of extraordinary item. 25.3 61.2 34.2
Tax effect of extraordinary item ............................. -- (20.4) --
---- ----- ----
Effective income tax rate .................................... 25.3% 40.8% 34.2%
==== ===== ====
</TABLE>
F-16
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE
CILCO has recorded a liability of approximately $1.5 million at December
31, 1998 and 1997, for benefits other than pensions or health care provided to
former or inactive employees. The liability for these benefits (primarily
long-term and short-term disability payments under plans self-insured by CILCO)
is actuarially determined.
PENSION BENEFITS
Substantially all of CILCO's full-time employees, including those assigned
to the Holding Company, are covered by trusteed, non-contributory defined
benefit pension plans. Benefits under these qualified plans reflect the
employee's years of service, age at retirement and maximum total compensation
for any consecutive sixty-month period prior to retirement. CILCO also has an
unfunded nonqualified plan for certain employees.
Pension costs for the past three years were charged as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating expenses .............. $ (893) $ 493 $ 9,700
Utility plant and other ......... 6 125 922
------- ----- -------
Net pension costs ............... $ (887) $ 618 $10,622
======= ===== =======
</TABLE>
Provisions for pension expense reflect the use of the projected unit credit
actuarial cost method. At December 31, 1998 and 1997, CILCO recognized an
additional minimum liability on the Balance Sheets for the plan in which the
accumulated benefit obligation exceeds the fair value of plan assets.
POSTRETIREMENT HEALTH CARE BENEFITS
Provisions for postretirement benefits expenses are determined under the
accrual method of accounting.
Substantially all of CILCO's full-time employees, including those assigned
to the Holding Company, are currently covered by a trusteed, non-contributory
defined benefit postretirement health care plan. The plan pays stated
percentages of most necessary medical expenses incurred by retirees, after
subtracting payments by Medicare or other providers and after a stated
deductible has been met. Participants become eligible for the benefits if they
retire from CILCO after reaching age 55 with 10 or more years of service.
Neither QST Enterprises nor its subsidiaries provide health care benefits to
retired employees.
Postretirement health care benefit costs were charged as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating expenses ................................... $3,904 $3,989 $5,096
Utility plant and other .............................. 1,260 1,825 1,883
------ ------ ------
Net postretirement health care benefit costs ......... $5,164 $5,814 $6,979
====== ====== ======
</TABLE>
F-17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS-- (CONTINUED)
The components of net periodic benefit costs follow:
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
--------------------------- -----------------------
1998 1997 1998 1997
------------ ------------ ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service cost ......................................... $ 5,410 $ 4,384 $ 1,417 $ 1,298
Interest cost ........................................ 19,024 17,561 5,371 5,047
Expected return on plan assets ....................... (25,304) (21,005) (4,388) (3,249)
Amortization of transition liability (asset) ......... (888) (888) 2,858 2,858
Amortization of past service cost .................... 1,068 1,068 -- --
Recognized actuarial loss ............................ (197) (502) (94) (140)
--------- --------- -------- --------
Net benefit cost ..................................... $ (887) $ 618 $ 5,164 $ 5,814
========= ========= ======== ========
Pension Plans with Accumulated Benefit
Obligations in Excess of Assets
Total projected benefit obligation ................... $ (4,191) $ (3,692)
Total accumulated benefit obligation ................. $ (3,582) $ (2,902)
Total fair value of assets ........................... $ -- $ --
</TABLE>
Information on the plans, funded status follows:
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
------------------------------- -----------------------------
1998 1997 1998 1997
-------------- -------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Change in Benefit Obligations
Benefit obligation at January 1, ...................... $ (254,929) $ (235,441) $ (72,542) $ (67,367)
Service cost .......................................... (5,410) (4,384) (1,417) (1,298)
Interest cost ......................................... (19,024) (17,561) (5,371) (5,047)
Actuarial (gain) loss ................................. (22,521) (13,928) (7,500) (2,891)
Benefits paid ......................................... 16,238 16,385 4,514 4,061
---------- ---------- --------- ---------
Benefit obligation at December 31, .................... $ (285,646) $ (254,929) $ (82,316) $ (72,542)
========== ========== ========= =========
Change in Plan Assets
Fair value of assets at January 1, .................... $ 289,091 $ 254,824 $ 52,263 $ 39,601
Actual return on assets ............................... 36,467 50,489 5,781 9,907
Company contributions ................................. 163 163 863 6,816
Participant contributions ............................. -- -- -- --
Benefits paid ......................................... (16,238) (16,385) (4,514) (4,061)
---------- ---------- --------- ---------
Fair value of assets at December 31, .................. $ 309,483 $ 289,091 $ 54,393 $ 52,263
========== ========== ========= =========
Funded Status at December 31,
Benefit obligation less (greater) than plan
assets ............................................... $ 23,837 $ 34,162 $ (27,923) $ (20,279)
Unrecognized net transition liability (asset) ......... (4,011) (4,899) 30,297 33,155
Unrecognized actuarial (gain) loss .................... (35,875) (47,431) (6,777) (12,977)
Unrecognized prior service cost ....................... 6,365 7,433 -- --
Intangible asset ...................................... (415) (455) -- --
Accumulated other comprehensive income ................ (1,401) (1,120) -- --
---------- ---------- --------- ---------
Prepaid (accrued) benefit cost ........................ $ (11,500) $ (12,310) $ (4,403) $ (101)
========== ========== ========= =========
Assumptions as of December 31,
Discount rate ......................................... 6.75% 7.25% 6.75% 7.25%
Long-term return on assets ............................ 9.00% 8.50% 8.50% 8.50%
Long-term compensation increase ....................... 3.50% 4.50% N/A N/A
</TABLE>
F-18
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS-- (CONTINUED)
For measurement purposes, a 7.2 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1998. The rate was
assumed to decrease gradually to 5.7 percent for 2025 and remain level
thereafter.
Increasing the assumed health care cost trend rate by 1% in each year would
increase the accumulated postretirement benefit obligation at December 31, 1998,
by $2.9 million and the aggregate of the service and interest cost components of
net postretirement health care cost for 1998 by $252,000. Decreasing the assumed
health care cost trend rate by 1% in each year would decrease the accumulated
postretirement benefit obligation at December 31, 1998, by $3.3 million and the
aggregate of the service and interest cost components of net postretirement
health care cost for 1998 by $295,000.
NOTE 4. CILCORP SHAREHOLDER RETURN INCENTIVE COMPENSATION PLAN
Under the Company's Shareholder Return Incentive Compensation Plan (the
Plan), eligible key employees of the Company and its subsidiaries are entitled
to receive shares of the Company's common stock based on a performance
methodology established and periodically amended by the Compensation Committee
of the Company's Board of Directors. During 1997, 350,000 fully-vested
performance shares were distributed. Such shares are convertible into common
stock with the number of shares received based upon the number of performance
shares exercised multiplied by the difference between the average market price
of the Company's common stock for the fifteen days prior to exercise and $36,
divided by the market price of common stock at the exercise date.
The compensation expense recognized under this Plan, based on the
provisions of Statement of Financial Accounting Standards No. 123, (SFAS 123)
was $1.8 million in 1997 when the performance shares were distributed. These
shares were convertible into common stock at any time until December 31, 1998
(the Performance Period). The fair value of each performance share granted under
the Plan was $5.98 -- estimated using the Black-Scholes option-pricing model
assuming a risk-free interest rate of 5.7%, dividend yield of 5.9%, expected
life of one year and volatility of 16.1%.
In 1998, the Performance Period for the originally granted performance
shares was extended to December 31, 1999. No additional expense was recorded
following this extension, as a revaluation of the fair value of the performance
shares per the provisions of SFAS 123 yielded no material valuation difference
due to the one-year extension.
To the extent that the market price exceeds $56, the Plan participants are
entitled to receive cash in lieu of common stock. Consequently, the Company
recognized expense of $1.75 million in the fourth quarter 1998 to reflect a
share price approximating $61.
NOTE 5. SHORT-TERM DEBT
Short-term debt at December 31, 1998, consisted of $55.6 million of Holding
Company bank borrowings and $40.6 million of CILCO commercial paper. Short-term
debt at December 31, 1997, included $40.9 million of Holding Company bank
borrowings and $21.3 million of CILCO commercial paper.
The Holding Company had arrangements for bank lines of credit totaling $60
million at December 31, 1998, of which $55.6 million was used. These lines were
maintained by commitment fees of 1/8 of 1% per annum in lieu of balances.
CILCO had arrangements for bank lines of credit totaling $45 million at
December 31, 1998, all of which were unused. These lines of credit were
maintained by commitment fees of 1/20 of 1% per annum in lieu of balances. These
bank lines of credit support CILCO's issuance of commercial paper.
F-19
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. LEVERAGED LEASE INVESTMENTS
The Company, through subsidiaries of CILCORP Investment Management Inc.
(CIM), is a lessor in eight leveraged lease arrangements under which mining
equipment, electric production facilities, warehouses, office buildings,
passenger railway equipment and an aircraft are leased to third parties. The
economic lives and lease terms vary with the leases. CIM's share of total
equipment and facilities cost was approximately $350 million at December 31,
1998, and 1997.
The cost of the equipment and facilities owned by CIM is partially financed
by non-recourse debt provided by lenders, who have been granted, as their sole
remedy in the event of a lessee default, an assignment of rents due under the
leases and a security interest in the leased property. Such debt amounted to
$232 million at December 31, 1998, and $237 million at December 31, 1997.
Leveraged lease residual value assumptions, which are conservative in
relation to independently appraised residual values of the lease portfolio, are
tested on a periodic basis. In 1998, CIM decreased the estimated residual value
of one of its leases by approximately $6.8 million to reflect current conditions
in the secondary market for the asset.
CIM's net investment in leveraged leases at December 31, 1998 and 1997 is
shown below:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Minimum lease payments receivable ..................... $142,095 $136,916
Estimated residual value .............................. 87,569 94,368
Less: Unearned income ................................. 82,674 84,826
-------- --------
Investment in lease financing receivables ............. 146,990 146,458
Less: Deferred taxes arising from leveraged leases..... 103,566 101,005
-------- --------
Net investment in leveraged leases .................... $ 43,424 $ 45,453
======== ========
</TABLE>
NOTE 7. PREFERRED STOCK
PREFERRED STOCK OF SUBSIDIARY
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Preferred stock, cumulative $100 par value,
authorized 1,500,000 shares Without mandatory
redemption 4.50% series -- 111,264 shares ........... $11,126 $11,126
4.64% series -- 79,940 shares ....................... 7,994 7,994
Class A, no par value, authorized 3,500,000 shares
Flexible auction rate -- 250,000 shares (*) ......... 25,000 25,000
With mandatory redemption 5.85% series --
220,000 shares .................................... 22,000 22,000
------- -------
Total preferred stock ............................. $66,120 $66,120
======= =======
</TABLE>
- ----------
(*) Dividend rates at December 31, 1998 and 1997, were 4.04% and 4.18%,
respectively.
All classes of preferred stock are entitled to receive cumulative dividends
and rank equally as to dividends and assets, according to their respective
terms.
The total annual dividend requirement for preferred stock outstanding at
December 31, 1998, is $3.2 million, assuming a continuation of the auction
dividend rate at December 31, 1998, for the flexible auction rate series.
F-20
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. PREFERRED STOCK -- (CONTINUED)
PREFERRED STOCK WITHOUT MANDATORY REDEMPTION
The call provisions of preferred stock redeemable at CILCO's option
outstanding at December 31, 1998, are as follows:
Series Callable Price Per Share (plus accrued dividends)
<TABLE>
<S> <C>
4.50% $110
4.64% $102
Flexible Auction Rate $100
</TABLE>
PREFERRED STOCK WITH MANDATORY REDEMPTION
CILCO's 5.85% Class A preferred stock may be redeemed in 2003 at $100 per
share. A mandatory redemption fund must be established on July 1, 2003. The fund
will provide for the redemption of 11,000 shares for $1.1 million on July 1 of
each year through July 1, 2007. On July 1, 2008, the remaining 165,000 shares
will be retired for $16.5 million.
PREFERENCE STOCK OF SUBSIDIARY, CUMULATIVE
No Par Value, Authorized 2,000,000 shares, of which none have been issued.
PREFERRED STOCK OF HOLDING COMPANY
No Par Value, Authorized 4,000,000 shares, of which none were outstanding
at December 31, 1998 and 1997.
COMMON STOCK RIGHTS
On October 29, 1996, the Board of Directors of CILCORP authorized and
declared a dividend distribution of one right for each share of common stock of
the Company to stockholders of record at November 12, 1996, and for each share
of common stock issued thereafter. Each right gives the stockholder the right to
purchase one one-hundredth of a share of preferred stock of the Company for
$100, subject to the conditions set forth in the agreement governing the rights
plan.
NOTE 8. LONG-TERM DEBT
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
CILCO first mortgage bonds
7 1/2% series due 2007 ......... $ 50,000 $ 50,000
8 1/5% series due 2022 ......... 65,000 65,000
Medium-term notes
6.4% series due 2000 ........... 30,000 30,000
6.82% series due 2003 .......... 25,350 25,350
6.13% series due 2005 .......... 16,000 16,000
7.8% series due 2023 ........... 10,000 10,000
7.73% series due 2025 .......... 20,000 20,000
Pollution control refunding bonds
6.5% series F due 2010 ......... 5,000 5,000
6.2% series G due 2012 ......... 1,000 1,000
6.5% series E due 2018 ......... 14,200 14,200
5.9% series H due 2023 ......... 32,000 32,000
-------- --------
268,550 268,550
-------- --------
</TABLE>
F-21
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8. LONG-TERM DEBT -- (CONTINUED)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------
1998 1997
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
CILCO first mortgage bonds
Unamortized premium and discount on long-term
debt, net ................................. (666) (714)
-------- --------
Total CILCO .............................. $267,884 $267,836
-------- --------
CILCORP Inc. Unsecured medium-term notes;
various maturities in 2001; interest rates
ranging from 8.52% to 9.10% .............. 17,500 30,500
Other ..................................... 168 192
-------- --------
Total long-term debt ..................... $285,552 $298,528
======== ========
</TABLE>
CILCO's first mortgage bonds are secured by a lien on substantially all of
its property and franchises. Unamortized borrowing expense, premium and discount
on outstanding long-term debt are being amortized over the lives of the
respective issues.
Total consolidated maturities of long-term debt for 2000-2003 are as
follows: $30 million in 2000, $18 million in 2001, no debt due in 2002, and $25
million in 2003. The remaining maturities of long-term debt of $214 million,
occur in 2004 and beyond.
The 1999 and 1998 maturities of long-term borrowings have been classified
as current liabilities.
NOTE 9. COMMITMENTS & CONTINGENCIES
CILCO's 1999 capital expenditures are estimated to be $56.6 million in
connection with which CILCO has normal and customary purchase commitments at
December 31, 1998.
CILCO acts as a self-insurer for certain insurable risks resulting from
employee health and life insurance programs.
The International Brotherhood of Electrical Workers Local 51 (IBEW)
ratified its current agreement on October 10, 1997. The contract expires on July
1, 2000. The IBEW represents approximately 389 CILCO gas and electric department
employees. The National Conference of Firemen and Oilers Local 8 (NCF&O)
ratified its current contract with the Company on October 23, 1998. CILCO's
previous contract with the NCF&O expired on July 1, 1998, and the NCF&O
membership had been working without a contract since that time. The new contract
expires on July 1, 2001. The NCF&O represents approximately 200 CILCO power
plant employees.
In August 1990, CILCO entered into a firm, wholesale power purchase
agreement with Central Illinois Public Service Company, now AmerenCIPS (CIPS).
This agreement provided for a minimum contract delivery rate from CIPS of 90 MW
until the contract expired in May 1998.
In March 1995, CILCO and CIPS amended a limited-term power agreement
reached in November 1992. This agreement, which now expires in May 2009,
provides for CILCO to purchase up to 150 MW of CIPS' capacity from June 1998
through May 2002, and 50 MW from June 2002 through May 2009.
In January 1997, CILCO intervened in a proceeding before the Federal Energy
Regulatory Commission (FERC) to raise contract issues relating to CIPS' proposal
to engage with a second utility in joint dispatch of their respective generating
units. CILCO also challenged the validity of the power agreements with CIPS
because of CIPS' failure to obtain FERC approval of the agreements. In the
alternative, CILCO requested that FERC provide an "open season" during which
CILCO may cancel the power agreements in whole or in part. In an October 1997
order, FERC rejected CILCO's
F-22
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
challenges to joint dispatch and denied CILCO's request for an open season.
However, CIPS was ordered to file the agreements with FERC and, on its own
motion, FERC initiated a separate proceeding to investigate the
NOTE 9. COMMITMENTS & CONTINGENCIES -- (CONTINUED)
terms of the agreements. Hearings in that proceeding have concluded, and the
Administrative Law Judge has entered an order finding the agreements are, with
minor exceptions, just and reasonable. CILCO is appealing that order to FERC and
is requesting FERC to assess penalties against CIPS for CIPS' failure to file
the 1990 agreement before providing service to CILCO under that agreement.
FERC's October 1997 order failed to address certain contract issues raised by
CILCO. FERC denied rehearing of that order in February 1998, and CILCO has
appealed to the United States Court of Appeals for the District of Columbia
Circuit for a review of FERC's orders concerning the CIPS agreements. CILCO also
filed a separate complaint at FERC in December 1998, challenging the manner in
which CIPS is performing, or failing to perform, under the agreements and has
notified CIPS that CILCO considers CIPS to be in default under the agreements.
On the ground that CIPS is in default regarding performance under the 1992
agreement, CILCO suspended capacity reservation payments to CIPS under the
agreements as of January 21, 1999. CILCO cannot predict how FERC or the Court
will ultimately rule on the issues pending before them. If CILCO's position is
not upheld on certain issues, CILCO could be required to pay the suspended
capacity reservation charges which are currently $865,000 per month, plus
interest, to CIPS. While the capacity payments are suspended, CILCO is
purchasing power and energy from other sources.
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Environmental Matters (regarding former
gas manufacturing sites) for a discussion of that item.
NOTE 10. QST ENTERPRISES DISCONTINUED OPERATIONS
Due to uncertainties related to energy deregulation across the country, the
illiquidity of certain energy markets and its pending acquisition by AES, the
Company will focus in the future on the opportunities in the Illinois energy
market resulting from the deregulation of electricity under the Electric Service
Customer Choice and Rate Relief Law of 1997 (see Management's Discussion and
Analysis -- Competition). As a result, the Company decided in the fourth quarter
of 1998 to sell its 100% ownership interest in QST Environmental Inc., a
first-tier subsidiary of QST providing environmental consulting and engineering
services. In August 1998, QST sold its wholly-owned fiber optic-based
telecommunications subsidiary, QST Communications, for $20 million cash and
stock options valued at $5.5 million. Since incurring material losses in the
wholesale electricity market in June 1998 and subsequent losses in its energy
operations outside of Illinois, QST Energy has transferred its Pennsylvania
retail customers to other marketers, ceased its Houston-based energy trading
operations, and has begun an effort to negotiate an end to its obligation to
provide electricity to its non-Illinois customers. Accordingly, the operations
of QST Enterprises and its subsidiaries are shown as discontinued operations in
the statements of income. The Company's investment in QST Enterprises, as of
December 31, 1998, on the accompanying consolidated balance sheet, consists
primarily of $17.4 million in working capital, $6.9 million in fixed assets and
$6.3 million of investments and other assets. Prior year financial statements,
which also include the discontinued operations of ESE Land Corporation (sold by
QST Environmental in November 1997, for $9.5 million and residual interests in
three limited liability corporations), have been reclassified to conform to the
current year presentation.
NOTE 11. LEASES
The Company and its subsidiaries lease certain equipment, buildings and
other facilities under capital and operating leases. Several of the operating
leases provide that the Company pay taxes, maintenance and other occupancy costs
applicable to these premises.
F-23
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Minimum future rental payments under non-cancellable capital and operating
leases having remaining terms in excess of one year as of December 31, 1998, are
$19.9 million in total. Payments due during the years ending December 31, 1999,
through December 31, 2003, are $8.1 million, $5.6 million, $3.4 million, $1.9
million and $.5 million, respectively.
NOTE 12. FINANCIAL INSTRUMENTS AND PRICE RISK MANAGEMENT
CILCORP utilizes commodity futures contracts, options and swaps in the
normal course of its natural gas business activities. However, it does not
currently utilize these instruments to hedge its electric purchase and sale
transactions or to participate in energy trading activities. Gains and losses
arising from derivative financial instrument transactions which hedge the impact
of fluctuations in energy prices are recognized in income concurrent with the
related purchases and sales of the commodity. If a derivative financial
instrument contract is terminated because it is probable that a transaction or
forecasted transaction will not occur, any gain or loss as of such date is
immediately recognized. If a derivative financial instrument contract is
terminated early for other economic reasons, any gain or loss as of the
termination date is deferred and recorded concurrently with the related purchase
and sale of natural gas. CILCORP is subject to commodity price risk for
deregulated sales to the extent that energy is sold under firm price
commitments. Due to market conditions, at times CILCORP may have unmatched
commitments to purchase and sell energy on a price and quantity basis. Physical
and derivative financial instruments give rise to market risk, which represents
the potential loss that can be caused by a change in the market value of a
particular commitment. Market risks are actively monitored to ensure compliance
with the Company's risk management policies, including limits to the Company's
total net exposure at any time.
The net loss reflected in operating results from derivative financial
instruments was $2.2 million for the year 1998. As of December 31, 1998, CILCORP
had fixed-price derivative financial instruments representing hedges of natural
gas purchases of 5.6 Bcf and natural gas sales of 7.2 Bcf for commitments
through September 1999. The net deferred loss and carrying amount on these
fixed-price derivatives at December 31, 1998 was $.9 million. At December 31,
1998, CILCORP had open positions in derivative financial instruments used to
hedge basis of 1.0 Bcf for commitments through October 1999. The net deferred
loss on these basis derivatives at December 31, 1998, was $.1 million.
NOTE 13. EARNINGS PER SHARE
The following data show the amounts used in computing earnings per share
and the effect on income and the weighted average number of shares of dilutive
potential common stock. The shares calculated for dilutive potential result from
the CILCORP Shareholder Return Incentive Compensation Plan.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Income available to common shareholders .................. $16,310 $16,395
Weighted average number of common shares used in Basic
Earnings Per Share ...................................... 13,611 13,611
Weighted number of dilutive potential common stock used in
Diluted Earnings Per Share .............................. 96 16
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 128,
Earnings Per Share, beginning with the year ended December 31, 1997. Restatement
of 1996 is not applicable as no potential common stock dilution occurred until
1997.
F-24
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following quarterly operating results are unaudited, but, in the
opinion of management, include all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the Company's operating results
for the periods indicated. The results of operations for each of the fiscal
quarters are not necessarily comparable to, or indicative of, the results of an
entire year due to the seasonal nature of the Company's business and other
factors.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
-------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
------------ ------------ -------------- --------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1998
Revenue .................................................... $154,274 $121,435 $141,143 $ 142,172
Income from continuing operations before income
taxes .................................................... 17,566 10,254 29,020 1,077
Income taxes ............................................... 6,250 2,519 10,983 (53)
Net income from continuing operations ...................... 11,316 7,735 18,037 1,130
Loss from operations of discontinued business, net
of tax of $(2,355), $(5,512), $(2,354) and
$(6,057).................................................. (3,622) (8,423) (3,620) (9,360)
Gain (loss) on sale/disposal of assets of
discontinued business, net of tax of $5,425 and
$(3,411).................................................. -- -- 8,252 (5,135)
Net income (loss) .......................................... $ 7,694 $ (688) $ 22,669 $ (13,365)
Earnings per average common share--basic ...................
Continuing operations ...................................... $ 0.83 $ 0.57 $ 1.33 $ 0.08
Discontinued operations .................................... (0.27) (0.62) 0.34 (1.06)
Net income (loss) .......................................... $ 0.56 $ (0.05) $ 1.67 $ (0.98)
Earnings per average common share--diluted .................
Continuing operations ...................................... $ 0.83 $ 0.56 $ 1.32 $ 0.08
Discontinued operations .................................... (0.27) (0.61) 0.34 (1.06)
Net income (loss) .......................................... $ 0.56 $ (0.05) $ 1.66 $ (0.98)
1997
Revenue .................................................... $168,595 $113,610 $125,050 $ 150,705
Income from continuing operations before income
taxes .................................................... 16,793 10,889 23,966 14,410
Income taxes ............................................... 5,254 3,559 8,858 4,678
Net income from continuing operations before
extraordinary item ....................................... 11,539 7,330 15,108 9,732
Loss from operations of discontinued business, net
of tax of $(1,060), $(842), $(1,195) and $(4,201)......... (1,820) (1,513) (2,034) (28,759)
Gain on sale of assets of discontinued business, net
of tax of $1,889.......................................... -- -- -- 2,712
Extraordinary item ......................................... -- -- -- 4,100
Net income (loss) .......................................... $ 9,719 $ 5,817 $ 13,074 $ (12,215)
Earnings per average common share--basic ...................
Continuing operations ...................................... $ 0.85 $ 0.54 $ 1.11 $ 0.71
Discontinued operations .................................... (0.14) (0.11) (0.15) (1.91)
Extraordinary item ......................................... -- -- -- 0.30
Net income (loss) .......................................... $ 0.71 $ 0.43 $ 0.96 $ (0.90)
Earnings per average common share--diluted .................
Continuing operations ...................................... $ 0.85 $ 0.54 $ 1.11 $ 0.71
Discontinued operations .................................... (0.14) (0.11) (0.15) (1.91)
Extraordinary item ......................................... -- -- -- .30
Net income (loss) .......................................... $ 0.71 $ 0.43 $ 0.96 $ (0.90)
</TABLE>
F-25
<PAGE>
CILCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)*
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1999 1998
------------ --------------
<S> <C> <C>
Revenue:
Electric utility ................................................. $169,006 $167,482
Gas utility ...................................................... 102,366 98,212
Other businesses ................................................. 17,133 10,382
-------- ---------
Total ........................................................... 288,505 276,076
-------- ---------
Operating expenses:
Fuel for generation and purchased power .......................... 57,183 58,329
Gas purchased for resale ......................................... 65,005 60,025
Other operations and maintenance ................................. 73,724 62,001
Depreciation and amortization .................................... 34,481 31,966
Taxes, other than income taxes ................................... 20,916 19,305
-------- ---------
Total ........................................................... 251,309 231,626
-------- ---------
Fixed charges and other:
Interest expense ................................................. 14,340 14,625
Preferred stock dividends of subsidiary .......................... 1,570 1,599
Allowance for funds used during construction ..................... (26) (6)
Other ............................................................ 506 412
-------- ----------
Total ........................................................... 16,390 16,630
-------- ----------
Income from continuing operations before income taxes ............ 20,806 27,820
Income taxes ..................................................... 7,115 8,769
-------- ----------
Net income from continuing operations ............................ 13,691 19,051
Loss from operations of discontinued business, net of tax of
$(266), $(5,512), $(221) and $(7,867)............................ (407) (12,045)
-------- ----------
Net income (loss) ................................................ $ 13,284 $ 7,006
======== ==========
Average common shares outstanding - basic ........................ 13,611 13,611
Earnings per common share--basic Continuing operations ........... $ 1.01 $ 1.40
Discontinued operations .......................................... (.03) (.89)
-------- ----------
Net income per common share--basic ............................... $ .98 $ .51
======== ==========
Average common shares outstanding - diluted ...................... 13,752 13,690
Earnings per common share--diluted Continuing operations ......... $ 1.00 $ 1.39
Discontinued operations .......................................... (.03) (.88)
-------- ----------
Net income per common share--diluted ............................. $ .97 $ .51
======== ==========
Dividends per common share ....................................... $ 1.23 $ 1.23
======== ==========
</TABLE>
- ----------
* Except per share amounts
The accompanying notes to the Consolidated Financial Statements are an integral
part of these statements.
F-26
<PAGE>
CILCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------ -------------
1999 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments .................... $ 3,541 $ 1,669
Receivables, less reserves of $1,657 and $3,411.......... 68,405 134,548
Accrued unbilled revenue ................................ 27,800 39,339
Fuel, at average cost ................................... 9,049 13,431
Materials and supplies, at average cost ................. 16,444 15,435
Gas in underground storage, at average cost ............. 12,478 20,494
Prepayments and other ................................... 8,639 7,646
---------- ----------
Total current assets ................................... 146,356 232,562
---------- ----------
Investments and other property:
Investment in leveraged leases .......................... 143,297 146,977
Cash surrender value of company-owned life insurance, net
of related policy loans of $51,871 and $48,132.......... 2,362 2,655
Other investments ....................................... 21,698 16,882
---------- ----------
Total investments and other property ................... 167,357 166,514
---------- ----------
Property, plant and equipment:
Utility plant, at original cost
Electric ................................................ 1,245,551 1,237,885
Gas ..................................................... 420,812 417,585
---------- ----------
1,666,363 1,655,470
Less -- accumulated provision for depreciation .......... 846,954 812,630
---------- ----------
819,409 842,840
Construction work in progress ........................... 45,576 30,075
Other, net of depreciation .............................. 610 7,755
---------- ----------
Total property, plant and equipment .................... 865,595 880,670
---------- ----------
Other assets ............................................ 23,327 33,194
---------- ----------
Total assets ........................................... $1,202,635 $1,312,940
========== ==========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these Balance Sheets.
F-27
<PAGE>
CILCORP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------- -------------
1999 1998
-------------- -------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ........................ $ 43,000 $ 13,027
Notes payable ............................................ 73,300 96,200
Accounts payable ......................................... 52,276 128,845
Accrued taxes ............................................ 5,031 8,262
Accrued interest ......................................... 9,386 9,994
FAC/PGA over-recoveries .................................. 367 304
Other .................................................... 4,519 14,316
---------- ----------
Total current liabilities ............................... 187,879 270,948
---------- ----------
Long-term debt ........................................... 257,168 288,135
---------- ----------
Deferred credits and other liabilities:
Accumulated deferred income taxes ........................ 240,446 239,305
Regulatory liability of regulated subsidiary ............. 41,302 46,346
Deferred investment tax credits .......................... 18,654 19,450
Other .................................................... 58,370 47,098
---------- ----------
Total deferred credits and other liabilities ............ 358,772 352,199
---------- ----------
Preferred stock of subsidiary ............................ 66,120 66,120
---------- ----------
Stockholders' equity:
Common stock, no par value; authorized 50,000,000 shares--
outstanding 13,610,680 shares ........................... 192,853 192,853
Retained earnings ........................................ 140,688 143,530
Accumulated other comprehensive income ................... (845) (845)
---------- ----------
Total stockholders' equity .............................. 332,696 335,538
---------- ----------
Total liabilities and stockholders' equity .............. $1,202,635 $1,312,940
========== ==========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these Balance Sheets.
F-28
<PAGE>
CILCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income before preferred dividends ............................................ $ 15,261 $ 20,650
--------- ---------
Adjustments to reconcile net income to net cash provided by operating
activities:
Non-cash lease income and investment income ..................................... (3,299) (3,415)
Cash receipts in excess of debt service on leases ............................... 7,326 5,650
Depreciation and amortization ................................................... 34,481 31,966
Deferred income taxes, investment tax credit and regulatory liability of
subsidiary, net ............................................................... (8,748) (4,094)
Changes in operating assets and liabilities:
Decrease in accounts receivable and accrued unbilled revenue .................... 7,719 21,343
Decrease in inventories ......................................................... 11,374 8,501
Decrease in accounts payable .................................................... (20,337) (22,702)
Increase in accrued taxes ....................................................... 934 2,630
Decrease (increase) in other assets ............................................. 1,700 (512)
Increase (decrease) in other liabilities ........................................ 8,339 (1,469)
--------- ---------
Total adjustments ............................................................... 39,489 37,898
--------- ---------
Net cash provided by operating activities from continuing operations ............ 54,750 58,548
--------- ---------
Net cash provided (used) by operating activities of discontinued operations ..... 8,112 (8,738)
--------- ---------
Cash flow from operations ....................................................... 62,862 49,810
--------- ---------
Cash flows from investing activities:
Additions to plant .............................................................. (27,311) (29,871)
Proceeds from sale of discontinued operations ................................... 17,376 --
Other ........................................................................... (4,012) (909)
--------- ---------
Net cash used by investing activities from continuing operations ................ (13,947) (30,780)
--------- ---------
Net cash used by investing activities from discontinued operations .............. (4,838) (5,359)
--------- ---------
Cash flow from investing activities ............................................. (18,785) (36,139)
--------- ---------
Cash flow from financing activities:
Net (decrease) increase in short-term debt ....................................... (22,900) 2,350
Net decrease in long-term debt ................................................... (994) (2,117)
Common dividends paid ............................................................ (16,741) (16,742)
Preferred dividends paid ......................................................... (1,570) (1,599)
--------- ---------
Cash flow from financing activities ............................................. (42,205) (18,108)
--------- ---------
Net increase (decrease) in cash and temporary cash investments ................... 1,872 (4,437)
Cash and temporary cash investments at beginning of year ......................... 1,669 10,576
--------- ---------
Cash and temporary cash investments at June 30 ................................... $ 3,541 $ 6,139
========= =========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest ......................................................................... $ 13,832 $ 13,613
Income taxes ..................................................................... $ 10,872 $ 7,068
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these statements.
F-29
<PAGE>
CILCORP INC. AND SUBSIDIARIES
STATEMENTS OF SEGMENTS OF BUSINESS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
------------------------------------------------------------------------------------
CILCO CILCO CILCO OTHER DISCONT.
ELECTRIC GAS OTHER BUSINESSES OPERATNS. TOTALS
------------ ----------- ------------ ------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues .............................. $169,006 $102,366 $ 1,729 $ 15,235 $ -- $288,336
Interest income ....................... -- -- 113 56 -- 169
-------- -------- -------- -------- ------- --------
Total ............................. 169,006 102,366 1,842 15,291 -- 288,505
-------- -------- -------- -------- ------- --------
Operating expenses .................... 120,487 79,013 3,161 14,167 -- 216,828
Depreciation and amortization ......... 23,786 10,175 432 88 -- 34,481
-------- -------- -------- -------- ------- --------
Total ............................. 144,273 89,188 3,593 14,255 -- 251,309
-------- -------- -------- -------- ------- --------
Interest expense ...................... 8,233 3,265 -- 2,842 -- 14,340
Preferred stock dividends ............. -- -- 1,570 -- -- 1,570
Fixed charges and other expenses....... (26) -- 506 -- -- 480
-------- -------- -------- -------- ------- --------
Total ............................. 8,207 3,265 2,076 2,842 -- 16,390
-------- -------- -------- -------- ------- --------
Income from continuing oper.
before income taxes .................. 16,526 9,913 (3,827) (1,806) -- 20,806
Income taxes .......................... 5,315 4,044 (1,367) (877) -- 7,115
-------- -------- -------- -------- ------- --------
Net income from continuing
operations ........................... 11,211 5,869 (2,460) (929) -- 13,691
-------- -------- -------- -------- ------- --------
Effect of discontinued operations ..... -- -- -- -- (407) (407)
-------- -------- -------- -------- ------- --------
Segment net income .................... $ 11,211 $ 5,869 $ (2,460) $ (929) $ (407) $ 13,284
======== ======== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998
-----------------------------------------------------------------------------
CILCO CILCO CILCO OTHER DISCONT.
ELECTRIC GAS OTHER BUSINESSES OPERATNS. TOTALS
-------------- ----------- ----------- ------------ ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues .............................. $167,482 $ 98,212 $ 355 $ 9,780 $ -- $ 275,829
Interest income ....................... -- -- 191 56 -- 247
-------- -------- -------- -------- --------- ---------
Total ............................. 167,482 98,212 546 9,836 -- 276,076
-------- -------- -------- -------- --------- ---------
Operating expenses .................... 112,626 76,816 1,553 8,665 -- 199,660
Depreciation and amortization ......... 22,436 9,073 356 101 -- 31,966
-------- -------- -------- -------- --------- ---------
Total ............................. 135,062 85,889 1,909 8,766 -- 231,626
-------- -------- -------- -------- --------- ---------
Interest expense ...................... 8,038 3,204 -- 3,383 -- 14,625
Preferred stock dividends ............. -- -- 1,599 -- -- 1,599
Fixed charges and other expenses....... (6) -- 412 -- -- 406
---------- -------- -------- -------- --------- ---------
Total ............................. 8,032 3,204 2,011 3,383 -- 16,630
--------- -------- -------- -------- --------- ---------
Income from continuing oper.
before income taxes .................. 24,388 9,119 (3,374) (2,313) -- 27,820
Income taxes .......................... 8,181 3,645 (1,339) (1,718) -- 8,769
--------- -------- -------- -------- --------- ---------
Net income from continuing
operations ........................... 16,207 5,474 (2,035) (595) -- 19,051
--------- -------- -------- -------- --------- ---------
Effect of discontinued operations ..... -- -- -- -- (12,045) (12,045)
--------- -------- -------- -------- --------- ---------
Segment net income .................... $ 16,207 $ 5,474 $ (2,035) $ (595) $ (12,045) $ 7,006
========= ======== ======== ======== ========= =========
</TABLE>
F-30
<PAGE>
CILCORP INC. AND CENTRAL ILLINOIS LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. INTRODUCTION
The consolidated financial statements include the accounts of CILCORP Inc.
(CILCORP or the Holding Company), Central Illinois Light Company (CILCO), QST
Enterprises Inc. (QST) and its subsidiaries (QST Environmental Inc., QST Energy
Inc. (QST Energy) and CILCORP Infraservices Inc.) and CILCORP's other
subsidiaries (collectively, the Company) after elimination of significant
intercompany transactions. The consolidated financial statements of CILCO
include the accounts of CILCO and its subsidiaries, CILCO Exploration and
Development Company and CILCO Energy Corporation. CILCORP owns directly or
indirectly 100% of the common stock of its first-tier subsidiaries. In the
fourth quarter of 1998, the operations of QST and its subsidiaries (excluding
ESE Land Corporation and CILCORP Infraservices Inc.-- see Management's
Discussion and Analysis) were discontinued (see Note 4.) and, therefore, are
being reported as discontinued operations in the financial statements. QST
completed the sale of subsidiary QST Environmental Inc. in the second quarter of
1999 (see Results of Operations-- QST Enterprises Discontinued Operations).
Prior year amounts have been reclassified on a basis consistent with the 1999
presentation.
The accompanying unaudited consolidated financial statements have been
prepared according to the rules and regulations of the Securities and Exchange
Commission (SEC). Although CILCORP believes the disclosures are adequate to make
the information presented not misleading, these consolidated financial
statements should be read along with the Company's 1998 Annual Report on Form
10-K.
In the Company's opinion, the consolidated financial statements furnished
reflect all normal and recurring adjustments necessary for a fair presentation
of the results of operations for the periods presented. Operating results for
interim periods are not necessarily indicative of operating results to be
expected for the year or of the Company's future financial condition.
NOTE 2. CONTINGENCIES
GAS MANUFACTURING PLANT SITES
CILCO continues to investigate and/or monitor four former gas manufacturing
plant sites located within CILCO's present gas service territory. The purpose of
the investigations is to determine if waste materials, principally coal tar, are
present, whether such waste materials constitute an environmental or health risk
and if CILCO is responsible for the remediation of any remaining waste materials
at those sites.
During the six months ended June 30, 1999, CILCO paid approximately
$362,000 to outside parties for former gas manufacturing plant site monitoring,
remediation and legal fees, and expects to spend approximately $250,000 during
the remainder of 1999. A $1.5 million liability is recorded on the Balance
Sheets, representing CILCO's minimum obligation expected for coal tar
investigation and remediation costs. Coal tar remediation costs incurred through
June 1999 have been deferred as a regulatory asset on the Balance Sheets, less
amounts recovered from customers.
Through June 30, 1999, CILCO has recovered approximately $6.6 million in
coal tar remediation costs from its customers through a gas rate rider approved
by the Illinois Commerce Commission (ICC). Currently, that rider allows recovery
of prudently incurred coal tar remediation costs in the year that the
expenditures occur. Under these circumstances, management believes that the cost
of coal tar remediation will not have a material adverse effect on CILCO's
financial position or results of operations.
CILCO'S UNION CONTRACTS
The International Brotherhood of Electrical Workers Local 51 (IBEW)
ratified its current agreement on October 10, 1997. The current contract expires
on July 1, 2000. The IBEW represents approximately 389 CILCO gas and electric
department employees. The National Conference of Firemen and Oilers Local 8
(NCF&O), ratified its current agreement on October 23, 1998. The current
contract expires on July 1, 2001. The NCF&O represents approximately 159 CILCO
power plant employees.
F-31
<PAGE>
NOTE 3. COMMITMENTS
In August 1990, CILCO entered into a firm, wholesale power purchase
agreement with Central Illinois Public Service Company, now AmerenCIPS (CIPS).
This agreement provided for a minimum contract delivery rate from CIPS of 90 MW
until the contract expired in May 1998.
In March 1995, CILCO and CIPS amended a limited-term power agreement
reached in November 1992. This agreement provided for CILCO to purchase 150 MW
of CIPS' capacity from June 1998 through May 2002, and 50 MW from June 2002
through May 2009.
In May 1999, a settlement was reached between CILCO and CIPS regarding
disputed issues pertaining to these capacity and energy agreements. The
settlement amends the previous agreements to provide for 100 MW of capacity and
firm energy for the months of June through September for the years 2000 through
2003 and additionally provide for 100 MW of firm energy for the month of January
in each of those years. There are no commitments to purchase capacity or energy
beyond those dates. The agreements provide specific prices for on-peak and
off-peak energy, which eliminates the ambiguity that arose under the old
agreements due to the use of pricing queues. Under the settlement, CILCO will
have no capacity payment obligations to CIPS for February through December 1999,
resulting in 1999 capacity reservation savings of approximately $6 million. The
settlement also obligates both parties to withdraw from regulatory action
pertaining to related contract issues. CIPS and CILCO are currently preparing
the settlement document filing for approval by the FERC.
NOTE 4. QST ENTERPRISES DISCONTINUED OPERATIONS
Due to uncertainties related to energy deregulation across the country, the
illiquidity of certain energy markets and the Company's pending acquisition by
AES, the Company intends to focus on the opportunities in the Illinois energy
market resulting from the deregulation of electricity under the Electric Service
Customer Choice and Rate Relief Law of 1997 (see Management's Discussion and
Analysis-- Illinois Electric Deregulation). As a result, the Company decided in
the fourth quarter of 1998 to sell its 100% ownership interest in QST
Environmental Inc. (QST Environmental), a first-tier subsidiary of QST
Enterprises Inc. providing environmental consulting and engineering services. On
May 7, 1999, QST Enterprises Inc. signed a definitive agreement for the sale of
QST Environmental to MACTEC, Inc., a privately-held company which provides
environmental management services, for approximately $18 million in cash, which
was received by QST Enterprises Inc. on June 24, 1999, the effective date of the
sale. In August 1998, QST Enterprises Inc. sold its wholly-owned fiber
optic-based telecommunications subsidiary, QST Communications, for $20 million
cash and stock options then valued at $5.5 million. After incurring material
losses in the wholesale electricity market in June 1998 and subsequent losses in
its energy operations outside of Illinois, QST Energy transferred its
Pennsylvania retail customers to other marketers, ceased its Houston-based
energy trading operations, and has terminated its obligations to provide
electricity to its non-Illinois customers. Accordingly, the operations of QST
Enterprises Inc. and its subsidiaries are shown as discontinued operations in
the statements of income. The Company's investment in QST Enterprises Inc.
(excluding CILCORP Infraservices Inc.), as of June 30, 1999, on the accompanying
consolidated balance sheet, consists primarily of $1.7 million in working
capital, $.2 million in fixed assets and $11.2 million of investments and other
assets. Working capital consists mainly of $1.7 million in receivables (see QST
Enterprises Discontinued Operations) offset by $16.6 million in outstanding debt
to the Holding Company. Investments and other assets consists primarily of a
$5.5 million investment in ESE Land Corporation (ESE Land) and $5.5 million of
stock options obtained in the sale of QST Communications. The investment in ESE
Land consists of residual interests in three limited liability corporations
obtained as part of the sale of ESE Land assets in fourth quarter 1997. QST
Environmental's residual investment in ESE Land was transferred to QST
Enterprises Inc. prior to the sale of QST Environmental. Prior year financial
statements have been reclassified to conform to the current year presentation.
NOTE 5. FINANCIAL INSTRUMENTS AND PRICE RISK MANAGEMENT
CILCORP utilizes commodity futures contracts, options and swaps in the
normal course of its natural gas and electric business activities. Gains and
losses arising from derivative financial instrument transactions which hedge the
impact of fluctuations in energy prices are recognized in income concurrent
F-32
<PAGE>
NOTE 5. FINANCIAL INSTRUMENTS AND PRICE RISK MANAGEMENT-- (CONTINUED)
with the related purchases and sales of the commodity. If a derivative financial
instrument contract is terminated because it is probable that a transaction or
forecasted transaction will not occur, any gain or loss as of such date is
immediately recognized. If a derivative financial instrument contract is
terminated early for other economic reasons, any gain or loss as of the
termination date is deferred and recorded concurrently with the related purchase
and sale of natural gas. CILCORP is subject to commodity price risk for
deregulated sales to the extent that energy is sold under firm price
commitments. Due to market conditions, at times CILCORP may have unmatched
commitments to purchase and sell energy on a price and quantity basis. Physical
and derivative financial instruments give rise to market risk, which represents
the potential loss that can be caused by a change in the market value of a
particular commitment. Market risks are actively monitored to ensure compliance
with the Company's risk management policies, including limits to the Company's
total net exposure at any time.
The net gain reflected in operating results from derivative financial
instruments was approximately $415,000 for the second quarter 1999. As of June
30, 1999, CILCORP had fixed-price derivative financial instruments representing
hedges of natural gas purchases of .5 Bcf and natural gas sales of 1.6 Bcf for
commitments through September 2000. The net deferred gain and carrying amount on
these fixed-price derivatives at June 30, 1999, was approximately $571,600. At
June 30, 1999, CILCORP had open positions in derivative financial instruments
used to hedge basis of 1.4 Bcf for commitments through March 2000. The net
deferred gain on these basis derivatives at June 30, 1999, was approximately
$30,500. As of June 30, 1999, CILCORP had fixed-price derivative financial
instruments representing hedges of electricity purchases of 49,312 MWh and
electricity sales of 3,680 MWh for commitments through June 2000. The net
deferred loss and carrying amount on these fixed-price derivatives at June 30,
1999, was approximately $132,400.
NOTE 6. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133). The statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. As issued, SFAS
133 is effective for all fiscal quarters of fiscal years beginning after June
15, 1999.
In June 1999, the FASB issued Statement of Financial Accounting Standards
No. 137, "Accounting for Derivative Instruments and Hedging Activities--
Deferral of the Effective Date of FASB Statement No. 133" (SFAS 137). SFAS 137
amends SFAS 133 to require implementation of SFAS 133 for all fiscal quarters of
fiscal years beginning after June 15, 2000.
The Company has not yet adopted SFAS 133 and has not yet determined its
effect on the Company's financial position, results of operations or cash flows.
NOTE 7. EARNINGS PER SHARE
The following data show the amounts used in computing earnings per share
and the effect on income and the weighted average number of shares of dilutive
potential common stock. The shares calculated for dilutive potential result from
Award Agreements entered into pursuant to the CILCORP Shareholder Return
Incentive Compensation Plan.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Income available to common shareholders ................... $13,284 $ 7,006
Weighted average number of common shares
used in Basic Earnings Per Share ......................... 13,611 13,611
Weighted number of dilutive potential common shares used in
Diluted Earnings Per Share ............................... 141 79
</TABLE>
The Company adopted Statement of Financial Accounting Standards No. 128,
Earnings Per Share, for the year ended December 31, 1997.
F-33
<PAGE>
INDEX TO UNAUDITED PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
PAGE
NO.
-----
<S> <C>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA:
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1999 .. P-3
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Six
Months Ended June 30, 1999 ................................................... P-4
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1998 ...................................................... P-5
Notes to Unaudited Pro Forma Condensed Consolidated Financial Data ............ P-6
</TABLE>
P-1
<PAGE>
The following unaudited pro forma condensed consolidated financial data are
based on the historical financial statements of Midwest Energy, Inc. and the
consolidated historical financial statements of CILCORP Inc. and its
subsidiaries after giving effect on a pro forma basis to the merger of Midwest
Energy and CILCORP, the contribution of equity and the initial offering of
senior notes and senior bonds as described in the notes to the unaudited pro
forma condensed consolidated financial data appearing below. This data should be
read in conjunction with the historical consolidated financial statements and
notes to those financial statements of CILCORP which are included in this
offering memorandum. Throughout this discussion of unaudited pro forma condensed
consolidated financial data, we use the term "CILCORP" to mean CILCORP and its
subsidiaries.
The unaudited pro forma condensed consolidated statements of operations for
the year ended December 31, 1998 and the six months ended June 30, 1999 present
the results of Midwest Energy and CILCORP as if the merger and related
contribution of equity and offering of senior notes and senior bonds had
occurred at the beginning of the earliest period presented. The accompanying
unaudited pro forma condensed consolidated balance sheet as of June 30, 1999
presents the financial position of Midwest Energy and CILCORP as if the merger
and related contribution of equity and offering of senior notes and senior bonds
had occurred on that date.
The pro forma adjustments are based on preliminary estimates, information
currently available and certain assumptions that management believes are
reasonable under the circumstances. The actual consolidated financial statements
will reflect the effects of the merger on and after the effective date of the
merger rather than the dates indicated above. The unaudited pro forma condensed
consolidated financial data neither purport to represent what the consolidated
results of operations or financial condition actually would have been had the
merger and related transactions in fact occurred on the assumed dates, nor to
project the consolidated results of operations and financial position for any
future period.
The merger will be accounted for by the purchase method and, therefore, the
assets and liabilities of CILCORP will be recorded at their fair values. The
excess of the purchase price over the fair value of net assets acquired at the
effective date of the merger will be recorded as goodwill. Allocations included
in the pro forma financial data are based on an analysis which is not yet
completed. Accordingly, the final value of the purchase price and its allocation
may differ, perhaps significantly, from the amounts included in this pro forma
financial data.
P-2
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 1999
(IN THOUSANDS)
----------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS
PRO FORMA FOR THE
MIDWEST AFTER MERGER
ENERGY, OFFERING CILCORP (NOTES 2, 3 PRO FORMA AS
INC. (NOTES 1 AND 4) INC. AND 4) ADJUSTED
--------- ----------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and Temporary Cash
Investments ............................ $-- $ 931,000 $ 3,541 $ (917,000) $ 17,541
Receivables, Less Reserves of
$1,657.................................. -- -- 68,405 -- 68,405
Accrued Unbilled Revenue ................ -- -- 27,800 -- 27,800
Inventories ............................. -- -- 37,971 -- 37,971
Prepayments and Other ................... -- -- 8,639 -- 8,639
--- --------- ---------- ---------- ----------
Total Current Assets ................. -- 931,000 146,356 (917,000) 160,356
--- --------- ---------- ---------- ----------
Investments and Other
Property ............................... -- -- 167,357 -- 167,357
Property, Plant and
Equipment .............................. -- -- 1,666,363 (846,954) 819,409
Accumulated Depreciation ................ -- -- (846,954) 846,954 --
Construction Work in Progress and
Other .................................. -- -- 46,186 -- 46,186
--- --------- ---------- ---------- ----------
Total Property, Plant and Equipment ..... -- -- 865,595 -- 865,595
--- --------- ---------- ---------- ----------
Goodwill ................................ -- -- -- 571,604 571,604
Other Assets ............................ -- 6,000 23,327 -- 29,327
--- --------- ---------- ---------- ----------
Total Assets ......................... $-- $ 937,000 $1,202,635 $ (345,396) $1,794,239
=== ========= ========== ========== ==========
LIABILITIES:
Current Liabilities:
Current Portion of Long-Term Debt ....... $-- $ -- $ 43,000 $ -- $ 43,000
Notes Payable ........................... -- -- 73,300 (26,700) 46,600
Accounts Payable ........................ -- -- 52,276 -- 52,276
Accrued Interest and Other .............. -- -- 19,303 14,000 33,303
--- --------- ---------- ---------- ----------
Total Current Liabilities ............ -- -- 187,879 (12,700) 175,179
--- --------- ---------- ---------- ----------
Long-Term Debt .......................... -- 473,952 257,168 -- 731,120
Deferred Credits and Other
Liabilities ............................ -- -- 358,772 -- 358,772
Preferred Stock of Subsidiary ........... -- -- 66,120 -- 66,120
Shareholders' Equity:
Common Stock ........................... -- 463,048 192,853 (192,853) 463,048
Retained Earnings ....................... -- -- 140,688 (140,688) --
Accumulated Other
Comprehensive Income ................... -- -- (845) 845 --
--- --------- ---------- ---------- ----------
Total Stockholders' Equity ........... -- 463,048 332,696 (332,696) 463,048
--- --------- ---------- ---------- ----------
Total Liabilities and
Stockholders' Equity ................ $-- $ 937,000 $1,202,635 $ (345,396) $1,794,239
=== ========= ========== ========== ==========
</TABLE>
The accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Data are an integral part of these statements.
P-3
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
---------------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS
PRO FORMA FOR THE
MIDWEST AFTER MERGER
ENERGY, OFFERINGS CILCORP (NOTES 2, 3 PRO FORMA AS
INC. (NOTES 1 AND 4) INC. AND 4) ADJUSTED
--------- ----------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUE:
Electric .............................. $-- $ -- $169,006 $ -- $169,006
Gas ................................... -- -- 102,366 -- 102,366
Other ................................. -- -- 17,133 -- 17,133
--- --------- -------- -------- --------
Total Revenues ..................... -- -- 288,505 -- 288,505
--- --------- -------- -------- --------
OPERATING
EXPENSES:
Fuel for Generation and
Purchased Power ...................... -- -- 57,183 -- 57,183
Gas Purchased for Resale .............. -- -- 65,005 -- 65,005
Other Operations and Maintenance -- -- 73,724 -- 73,724
Depreciation and Amortization ......... -- 173 34,481 7,145 41,799
State and Local Revenue Taxes ......... -- -- 14,199 -- 14,199
Other Taxes ........................... -- -- 6,717 -- 6,717
--- --------- -------- -------- --------
Total .............................. 173 251,309 7,145 258,627
--------- -------- -------- --------
FIXED CHARGES AND
OTHER:
Interest Expense ...................... -- 21,506 14,340 (810) 35,036
Other ................................. -- -- 2,050 -- 2,050
--- --------- -------- -------- --------
Total .............................. -- 21,506 16,390 (810) 37,086
--- --------- -------- -------- --------
(LOSS) INCOME
FROM
CONTINUING
OPERATIONS
BEFORE INCOME
TAXES ................................ -- (21,679) 20,806 (6,335) (7,208)
(Benefit) Provision
for Income Taxes ..................... -- (8,563) 7,115 299 (1,149)
--- --------- -------- -------- --------
NET (LOSS)
INCOME FROM
CONTINUING
OPERATIONS ........................... $-- $ (13,116) $ 13,691 $ (6,634) $ (6,059)
=== ========= ======== ======== ========
</TABLE>
The accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Data are an integral part of these statements.
P-4
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
---------------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS
PRO FORMA FOR THE
MIDWEST AFTER MERGER
ENERGY, OFFERINGS CILCORP (NOTES 2, 3 PRO FORMA AS
INC. (NOTES 1 AND 4) INC. AND 4) ADJUSTED
--------- ----------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUE:
Electric ................................. $-- $ -- $360,009 $ -- $360,009
Gas ...................................... -- -- 172,327 -- 172,327
Other .................................... -- 26,688 -- 26,688
--------- -------- --------- --------
Total Revenues ........................ -- -- 559,024 -- 559,024
--- --------- -------- --------- --------
OPERATING
EXPENSES:
Fuel for Generation
and Purchased Power ..................... -- -- 124,058 -- 124,058
Gas Purchased for Resale ................. -- -- 93,586 -- 93,586
Other Operations and Maintenance ......... -- -- 145,673 -- 145,673
Depreciation and Amortization ............ -- 349 66,179 14,290 80,818
State and Local Revenue Taxes ............ -- -- 26,502 -- 26,502
Other Taxes .............................. -- -- 11,463 -- 11,463
--- --------- -------- --------- --------
Total ................................ -- 349 467,461 14,290 482,100
--- --------- -------- --------- --------
FIXED CHARGES
AND OTHER:
Interest Expense ......................... -- 43,013 29,473 (1,620) 70,866
Other .................................... -- -- 4,173 -- 4,173
--- --------- -------- --------- --------
Total ................................ -- 43,013 33,646 (1,620) 75,039
--- --------- -------- --------- --------
(LOSS) INCOME
FROM
CONTINUING
OPERATIONS
BEFORE INCOME
TAXES ................................... -- (43,362) 57,917 (12,670) 1,885
(Benefit) Provision
for Income Taxes ........................ -- (17,128) 19,699 597 3,168
--- --------- -------- --------- --------
NET (LOSS)
INCOME FROM
CONTINUING
OPERATIONS .............................. $-- $ (26,234) $ 38,218 $ (13,267) $ (1,283)
=== ========= ======== ========= ========
</TABLE>
The accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Data are an integral part of these statements.
P-5
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The Unaudited Pro Forma Condensed Consolidated Financial Data are based on the
following assumptions:
(1) Offering -- The adjustments for the initial offering of senior notes and
senior bonds assume the following:
(a) Receipt of $463 million equity contribution from AES.
(b) Issuance of $225 million of 8.700% 10 year senior notes, at 99.732%,
due 10/15/09.
(c) Issuance of $250 million of 9.375% 30 year senior bonds, at 99.822%,
due 10/15/29.
Issuance costs are assumed to be $6 million.
(2) Use of proceeds -- The proceeds from the receipt of the equity contribution
from AES and the offering of senior notes and senior bonds will be used to
purchase all of the outstanding common shares of CILCORP for approximately
$886 million, to pay fees and expenses of approximately $10 million, and to
retire approximately $27 million of indebtedness of CILCO, which has an
approximate weighted average interest rate of 6%.
(3) Merger -- The merger with CILCORP will be accounted for as a purchase. The
purchase price allocation has been prepared on a preliminary basis pending
completion of engineering, environmental, legal and valuation analyses, all
of which are ongoing. The preliminary adjustments which have been made to
the assets and liabilities of CILCORP to reflect the effect of the
acquisition are as follows (in thousands):
<TABLE>
<S> <C>
Goodwill ............................... $571,604
Merger-related personnel costs ......... 14,000
</TABLE>
(4) A. Income statement adjustments include the amortization of the excess of
the purchase price over the fair value of the net assets acquired using the
straight line method over 40 years.
B. Income statement adjustments include amortization of the issuance costs
over the terms of the senior notes and bonds.
C. Income statement adjustments include income tax benefit for the effects
of the pro forma adjustments which affect taxable income at an effective
rate of 39.5%.
D. Balance sheet adjustments include maintaining the CILCORP fixed rate
debt at its historical cost. Upon consummation of the merger the fixed rate
debt will be recorded at its fair value, considering the rates the combined
companies would expect to receive in similar borrowing arrangements. As of
December 31, 1998, the CILCORP fixed rate debt had a carrying amount of
approximately $299 million and a fair value amount of approximately $339
million.
P-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Section 2.10 and 8.65 of the Illinois Business
Corporation Act (the "IBCA"), which enables a corporation in its original
articles of incorporation or an amendment to those articles to eliminate or
limit the personal liability of a director for violations of the director's
fiduciary duty, except:
o for any breach of the director's duty of loyalty to the corporation or
its stockholders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o under Section 8.65 of the IBCA, providing for liability of directors
for:
(1) voting for or assenting to certain distributions that are
prohibited;
(2) failing to take reasonable steps to cause notice to be given to
creditors in the case of dissolution; or
(3) carrying on business after the filing by the Secretary of State
of articles of dissolution; or
o for any transaction from which a director derived an improper personal
benefit.
Section 8.75 of the IBCA empowers CILCORP Inc. ("CILCORP") to indemnify,
subject to the standards set forth therein, certain persons in connection with
any action, suit or proceeding brought before or threatened by reason of the
fact that the person is or was a director, officer, employee or agent of such
company, or is or was serving as such with respect to another entity at the
request of such company against certain expenses, if such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of CILCORP, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The IBCA also provides that CILCORP may purchase insurance on behalf of any
such person against any liability asserted against and incurred by such person
in any such capacity, whether or not CILCORP would have the power to indemnify
such person against such liability.
The By-laws of CILCORP provide for the indemnification of any person who is
or was a director or officer of CILCORP, or at the discretion of the Board of
Directors, of any person who is or was an employee or agent of CILCORP or is or
was serving at the request of CILCORP, another corporation, partnership, joint
venture, trust or other enterprise in any capacity, where that person:
o was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding whether
civil, criminal, administrative or investigative, including all
appeals (other than an action, suit or proceeding by or in the right
of CILCORP), against expenses (including attorneys' fees), judgments,
decrees, fines, penalties and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, if such person acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best
interests of CILCORP and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful; and
o was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit, including all
appeals, by or in the right of CILCORP to procure a judgment in its
favor, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or
settlement of such action or suit, if such person acted in good faith
and in a manner he or she reasonably believed to be in or not opposed
to the best interests of CILCORP, except that no indemnification shall
be made
II-1
<PAGE>
in respect of any claim, issue or matter as to which such person shall
have been finally adjudged to be liable for negligence or misconduct
in the performance of his or her duty to CILCORP unless and only to
the extent that the court in which such action or suit was brought, or
any other court of competent jurisdiction, shall determine upon
application that, despite the adjudication of liability, but in view
of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court shall deem
proper.
CILCORP has an insurance policy covering its liabilities and expenses which
might arise in connection with its lawful indemnification of its directors and
officers for certain of their liabilities and expenses. Officers and directors
of CILCORP are covered under this policy for certain other liabilities and
expenses.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (see index to exhibits at E-1)
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement; provided, however, that clauses (1)(i)
and (1)(ii) do not apply if the information required to be
included in a post-effective amendment by those clauses is
contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE>
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information confirmed in the documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Peoria, State of Illinois
on November 5, 1999.
CILCORP INC.
By: /s/ Paul D. Stinson
------------------------------------
Paul D. Stinson
President
Known to all person by these presents, that each person whose signature
appears below constitutes and appoints Paul D. Stinson, Robert J. Sprowls and
John G. Sahn his attorney-in-fact, with the power of substitution, for him in
any and all capacities, to sign any amendments to this registration statement
(including post-effective amendments), therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ------------------------- ------------------
<S> <C> <C>
/s/ Paul D. Stinson Director and President November 5, 1999
- -----------------------------
Paul D. Stinson
/s/ Thomas A. Tribone Director November 5, 1999
- -----------------------------
Thomas A. Tribone
/s/ Mark A. Ferrucci Director November 5, 1999
- -----------------------------
Mark A. Ferrucci
/s/ Thomas D. Hutchinson Chief Financial Officer November 5, 1999
- ----------------------------- and Controller
Thomas D. Hutchinson
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. DESCRIPTION NUMBERED PAGE
- ----------- --------------------------------------------------------------------------------------- --------------
<S> <C> <C> <C>
1.1 -- Purchase Agreement dated October 13, 1999 between Midwest Energy, Inc. and
Lehman Brothers Inc., as representative of J.P. Morgan & Co. and Morgan Stanley
Dean Witter
2.1 -- Agreement and Plan of Merger among CILCORP Inc., The AES Corporation, and
Midwest Energy Inc. Filed in the Form 8-K filed on December 3, 1998 and
incorporated herein by reference.
2.2 -- First Amendment to the Agreement and Plan of Merger, dated as of October 14,
1999, among The AES Corporation, CILCORP Inc. and Midwest Energy, Inc.
Filed as exhibit 2.2 to the Form 8-K filed on October 29, 1999 and incorporated
herein by reference.
3.1 -- CILCORP Inc. Articles of Incorporation, as amended
3.2 -- CILCORP Inc. By-laws
4.1 -- Indenture dated October 18, 1999 between Midwest Energy, Inc. and The Bank of
New York, as trustee
4.2 -- Supplemental Indenture dated October 18, 1999 between CILCORP Inc. and the
Bank of New York, as trustee
4.3 -- Registration Rights Agreement dated October 18, 1999 between Midwest Energy,
Inc. and Lehman Brothers Inc., J.P. Morgan & Co. and Morgan Stanley Dean
Witter
4.4 -- Pledge Agreement dated October 18, 1999 by CILCORP Inc. in favor of the Bank
of New York, as collateral agent. Filed as exhibit 10.1 to the Form 8-K filed on
October 29, 1999 and incorporated herein by reference.
4.5 -- Form of Certificate of 8.700% Senior Note (included as Exhibit A to the Indenture
filed as Exhibit 4.1)
4.6 -- Form of Certificate of 9.375% Senior Bond (included as Exhibit B to the Indenture
filed as Exhibit 4.1)
5.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1 -- CILCO Executive Deferral Plan. As amended effective August 17, 1998. Filed as
exhibit 10 to the Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference.
10.2 -- CILCO Executive Deferral Plan II. As amended effective August 17, 1998. Filed as
exhibit 10(a) to the Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference.
10.3 -- Employment Agreement between CILCORP and Robert O. Viets, President and
Chief Executive Officer (effective September 23, 1997; extended for a period of
three years effective April 28, 1998). Filed as exhibit 10(c) to the Form 10-K for the
year ended December 31, 1997 and incorporated herein by reference.*
10.4 -- CILCO Benefit Replacement Plan (as amended effective November 12, 1998).
Filed as exhibit 10(d) to the Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference.
10.5 -- Agreement and Plan of Merger among CILCORP Inc., The AES Corporation and
Midwest Energy, Inc. Filed in the Form 8-K filed December 3, 1998 and
incorporated herein by reference.
10.6 -- Management Continuity Agreement between CILCORP and various subsidiary
officers (approved January 27, 1998). Filed as exhibit 10(h) to the Form 10-K for
the year ended December 31, 1998 and incorporated herein by reference.
10.7 -- CILCO Compensation Protection Plan (approved November 20, 1998). Filed as
exhibit 10(i) to the Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference.
12.1 -- Computation of Ratio of Earnings to Fixed Charges
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. DESCRIPTION NUMBERED PAGE
- ----------- ----------------------------------------------------------------------------- --------------
<S> <C> <C> <C>
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)
24.1 -- Powers of Attorney (included on signature page)
25.1 -- Statement of Eligibility under Trust Indenture Act of 1939, as amended, on
Form T-1 of the Bank of New York, as trustee
99.1 -- Form of Letter of Transmittal
99.2 -- Form of Notice of Guaranteed Delivery
99.3 -- Form of Letter to Clients
99.4 -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees
99.5 -- Form of Exchange Agent Agreement
99.6 -- Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9
- ----------
* A comparable Employment Agreement, effective April 28, 1998 exists between
the Company and John G. Sahn. The only material difference in these
Agreements pertains to the duration of the Agreements and the annual base
salary in effect on the date of each Agreement. The duration of the
Agreement with Mr. Sahn is two years and his annual base salary specified
in the Agreement is $151,000.
</TABLE>
E-2
$475,000,000
MIDWEST ENERGY, INC.
$225,000,000 8.700% Senior Notes due 2009
$250,000,000 9.375% Senior Bonds due 2029
PURCHASE AGREEMENT
October 13, 1999
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY DEAN WITTER
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
Midwest Energy, Inc., a Delaware corporation (the "Company"), confirms
its agreement with Lehman Brothers Inc. and each of the Initial Purchasers named
in Schedule I hereto (collectively, the "Initial Purchasers"), for whom Lehman
Brothers Inc. is acting as representative (in such capacity, the
"Representative"), with respect to the issue and sale by the Company and
purchase by the Initial Purchasers, acting severally and not jointly, of
$225,000,000 in aggregate principal amount of its 8.700% Senior Notes due 2009
(the "Notes") and $250,000,000 in aggregate principal amount of its 9.375%
Senior Bonds due 2029 (the "Bonds" and together with the Notes, the "Offered
Securities"). The Offered Securities are to be issued under an indenture to be
entered into and to be dated as of or around October 18, 1999 (collectively, the
"Indenture"), between the Company and The Bank of New York, as Trustee (the
"Trustee").
The Company, The AES Corporation, a Delaware corporation and the sole
stockholder of the Company ("AES"), and CILCORP Inc., an Illinois corporation
("CILCORP") have entered into a merger agreement dated as of November 22, 1998
(the "Merger Agreement"), pursuant to which the Company will merge into CILCORP
(the "Merger") simultaneously with the issuance of the Offered Securities, with
CILCORP being the surviving corporation and assuming all obligations under the
Offered Securities and the Indenture by execution and delivery of a supplement
to the Indenture (the "Supplemental Indenture").
The Offered Securities will be offered and sold to the Initial
Purchasers without being registered under the United States Securities Act of
1933, as amended (the "Securities Act"), in reliance upon an exemption
therefrom. The Company has prepared a preliminary offering memorandum dated
September 30, 1999 (the "Preliminary Offering Memorandum") and will prepare an
offering memorandum dated the date hereof (the "Offering Memorandum") setting
forth
<PAGE>
2
information concerning the Company, CILCORP, and the Offered Securities. Copies
of the Preliminary Offering Memorandum have been, and copies of the Offering
Memorandum will be, delivered by the Company to the Initial Purchasers pursuant
to the terms of this Agreement. Any reference herein to the Preliminary Offering
Memorandum and the Offering Memorandum shall be deemed to include all amendments
and supplements thereto, unless otherwise noted. The Company hereby confirms
that it has authorized the use of the Preliminary Offering Memorandum and the
Offering Memorandum in connection with the offering and resale of the Offered
Securities by the Initial Purchasers in accordance with Section 3.
Holders of the Offered Securities (including the Initial Purchasers and
their direct and indirect transferees) will be entitled to the benefits of a
Registration Rights Agreement, substantially in the form attached hereto as
Annex A (the "Registration Rights Agreement"), pursuant to which the Company
will agree to file with the U.S. Securities and Exchange Commission (the
"Commission") (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering senior notes and senior
bonds of the Company (collectively, the "Exchange Securities") which are
identical in all material respects to the Offered Securities (except that the
Exchange Securities will not contain terms with respect to transfer
restrictions) and (ii) under certain circumstances, a shelf registration
statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration Statement, the
"Registration Statements"), and in each case to use their reasonable best
efforts to cause such Registration Statements to be declared effective.
In connection with the offering and sale of the Offered Securities,
CILCORP will enter into a pledge agreement (the "Pledge Agreement") providing
for the pledge by CILCORP to the Collateral Agent of all of the capital stock of
Central Illinois Light Company ("CILCO") upon the earlier of (i) January 31,
2002 and (ii) the date on which the existing Medium-Term Notes, Series A of
CILCORP are no longer outstanding (such date, the "Pledge Effective Date"),
which shares shall be pledged for the benefit of the Holders of the Offered
Securities as provided in the Pledge Agreement.
This is to confirm the agreement regarding the purchase of the Offered
Securities by the Initial Purchasers.
This Agreement, the Indenture, the Registration Rights Agreement, the
Pledge Agreement, the Merger Agreement and the Offered Securities are referred
to herein collectively as the "Operative Documents."
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum did not as of its respective date contain any untrue
statement of a
<PAGE>
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided that the Company makes no representation or warranty as to
information contained in or omitted from the Preliminary Offering
Memorandum or the Offering Memorandum in reliance upon and in
conformity with written information furnished to the Company by or on
the behalf of the Initial Purchasers specifically for inclusion
therein.
(b) (i) The documents incorporated by reference in the Preliminary
Offering Memorandum and the Offering Memorandum, when they became
effective or were filed with the Commission, as the case may be, did
not contain an 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 not misleading; (ii) the documents incorporated by
reference in the Preliminary Offering Memorandum and the Offering
Memorandum, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"); (iii) any further documents so filed and
incorporated by reference in the Offering Memorandum or any further
amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Exchange Act; and (iv)
any further documents so filed and incorporated by reference in the
Offering Memorandum or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission,
as the case may be, will not contain an 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 not misleading, except that
the representations and warranties set forth in this paragraph (b) do
not apply to statements or omissions in the Preliminary Offering
Memorandum or Offering Memorandum based upon information relating to
any Initial Purchaser furnished through you expressly for use therein.
(c) Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in Section 4 and their compliance with
the agreements set forth therein, it is not necessary, in connection
with the issuance and sale of the Offered Securities to the Initial
Purchasers and the offer, resale and delivery of the Offered Securities
by the Initial Purchasers in the manner contemplated by this Agreement
and the Offering Memorandum, to register the Offered Securities under
the Securities Act or to qualify the Indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
(d) Each of the Company, CILCORP and each of CILCORP's subsidiaries
which meets the criteria in the definition of "significant subsidiary"
pursuant to Rule
<PAGE>
3
1-02(w) of Regulation S-X under the Securities Act (each, a "Principal
Subsidiary") has been duly organized, is validly existing as a
corporation or other entity in good standing under the laws of its
jurisdiction of incorporation or organization and has the corporate
power and authority required to carry on its business as it is
currently being conducted and to own, lease and operate its properties,
and each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would
not have a material adverse effect on the business, financial condition
or results of operations of the Company, CILCORP and the Principal
Subsidiaries, taken as a whole. The Company has no subsidiaries.
(e) The Offered Securities have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to the Initial Purchasers against payment
therefor as provided by this Agreement, will be entitled to the
benefits of the Indenture, and will be valid and binding obligations of
the Company, enforceable in accordance with their terms except as the
enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights and remedies generally
and by equitable principles of general applicability.
(f) The Exchange Securities have been duly authorized and, when
issued pursuant to the Registration Rights Agreement and in accordance
with the provisions of the Indenture, will be valid and binding
obligations of the Company, enforceable in accordance with their terms
except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights and
remedies generally and by equitable principles of general
applicability.
(g) The Indenture has been duly authorized, and when duly executed
and delivered by the Company shall constitute a valid and binding
agreement of the Company, enforceable in accordance with its terms
except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights and
remedies generally and by equitable principles of general applicability
(regardless of whether enforcement is sought in a proceeding at law or
in equity). Immediately following the effective time of the Merger, the
Supplemental Indenture will be duly authorized, executed and delivered
by CILCORP and will be a valid and binding agreement of CILCORP,
enforceable in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting the
enforcement
<PAGE>
5
of creditors' rights and remedies generally and by equitable principles
of general applicability (regardless of whether enforcement is sought
in a proceeding at law or equity). Company.
(h) Immediately following the effective time of the Merger, the
Pledge Agreement will be duly authorized, executed and delivered by
CILCORP and will constitute a valid and binding agreement of CILCORP,
enforceable in accordance with its terms except as the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights and remedies generally and by
equitable principles of general applicability.
(i) Upon delivery pursuant to the Pledge Agreement to the
Collateral Agent on the Pledge Effective Date of the certificates
representing the shares of common stock of CILCO listed on Schedule II
to the Pledge Agreement (the "Pledged Shares"), along with stock powers
duly endorsed in blank, and assuming (i) the Collateral Agent takes
possession, and continuously maintains possession, of the certificates
representing the Pledged Shares in the State of New York and (ii) the
Collateral Agent takes such Pledged Shares without notice of any
adverse claim, the security interest created in favor of the Collateral
Agent under the Pledge Agreement in the Pledged Shares will constitute
a valid and perfected first priority (subject to any Liens which may be
existing after the date hereof which are permitted under the Indenture)
security interest as security for the Obligations (as defined in the
Pledge Agreement), and, except as specifically provided in the Pledge
Agreement, subject to no equal or prior claim in favor of any person.
No filings or recordings will be required in order to perfect the
security interest created under the Pledge Agreement in such Pledged
Shares.
(j) The Registration Rights Agreement has been duly authorized, and
when duly executed and delivered by the Company shall constitute a
valid and binding agreement of the Company, enforceable in accordance
with its terms except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights and remedies generally and by equitable principles of general
applicability (except as rights to indemnity and contribution hereunder
may be limited by applicable law).
(k) The Merger Agreement has been duly authorized, executed and
delivered by each of the Company, AES and CILCORP and is a valid and
binding agreement of each of the Company, AES and CILCORP, enforceable
in accordance with its terms except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws
<PAGE>
6
affecting the enforcement of creditors' rights and remedies generally
and by equitable principles of general applicability.
(l) This Agreement has been duly authorized, executed and delivered
by the Company.
(m) The Offered Securities conform in all material respects to the
descriptions thereof contained in the Offering Memorandum.
(n) Immediately following the effective time of the Merger, CILCORP
will have an authorized and issued share capital as set forth in the
Offering Memorandum, and all of the issued share capital of CILCORP
will have been duly and validly authorized and issued, and be fully
paid and non-assessable and will not have been issued in violation of,
and will not then be subject to, any preemptive rights and will be
owned of record by AES; except as otherwise described in the Offering
Memorandum there will be no outstanding securities convertible into or
exchangeable for, or warrants, rights or options to purchase from
CILCORP or any of its subsidiaries, or obligations of CILCORP or any of
its subsidiaries to issue, any class of share capital of CILCORP or any
of its subsidiaries; and, except as otherwise described in the Offering
Memorandum, all of the issued share capital of CILCO has been duly and
validly authorized and issued and is fully paid and non-assessable and,
except as otherwise described in the Offering Memorandum, is owned
directly by CILCORP (subject to the pledge of such shares for the
benefit of the holders of the Offered Securities).
(o) The Company is not in violation of its Articles of
Incorporation or its By-laws and none of CILCORP or the Principal
Subsidiaries is in violation of its respective charter, or except for
any such violations which would not have a material adverse effect on
the Company, CILCORP and the Principal Subsidiaries taken as a whole,
in violation of its by-laws, nor is the Company, CILCORP or any of the
Principal Subsidiaries, except as set forth in the Offering Memorandum,
in default in the performance of any material term contained in any
bond, debenture, note or any other evidence of indebtedness or in any
other agreement, indenture or instrument to which the Company, CILCORP
or any of the Principal Subsidiaries is a party or by which the
Company, CILCORP or any of the Principal Subsidiaries or their
respective property is bound except for any such defaults which,
individually or in the aggregate, would not have a material adverse
effect on the business, financial condition or results of operations of
the Company, CILCORP and the Principal Subsidiaries, taken as a whole.
(p) The execution, delivery and performance of the Operative
Documents and compliance by each of the Company and CILCORP with all
the provisions
<PAGE>
7
hereof and thereof and the consummation of the transactions
contemplated hereby and thereby (i) will not require any consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body, including, without
limitation, the Illinois Commerce Commission or the Federal Energy
Regulatory Commission, except (A) as have already been obtained, (B)
with respect to the transactions contemplated by the Registration
Rights Agreement, as may be required under the Securities Act, the
Exchange Act, the Trust Indenture Act and the rules and regulations of
the Commission thereunder, and (C) as required by state or foreign
securities laws; and (ii) will not conflict with or constitute a breach
of any of the terms or provisions of, or a default under, the charter
or by-laws of the Company, CILCORP or any of the Principal Subsidiaries
or any agreement, indenture or other instrument to which the Company,
CILCORP or any of the Principal Subsidiaries is a party or by which the
Company, CILCORP or any of the Principal Subsidiaries or their
respective property is bound, or violate or conflict with any laws,
administrative regulations or rulings or court decrees applicable to
the Company, CILCORP, any of the Principal Subsidiaries or their
respective property (except state securities or Blue Sky laws) except
for any such conflicts, breaches, defaults or violations with respect
to this clause (ii) which, individually or in the aggregate, would not
have a material adverse effect on the business, financial condition or
results of operations of the Company, CILCORP and the Principal
Subsidiaries, taken as a whole.
(q) Except as set forth in the Offering Memorandum, and with
respect to CILCORP and the Principal Subsidiaries, as set forth in
CILCORP's public filings with the Commission, there are no material
legal or governmental proceedings pending to which the Company, CILCORP
or any of the Principal Subsidiaries is a party or to which any of
their respective property is the subject, and, to the best of the
Company's knowledge, no such proceedings are threatened or
contemplated.
(r) Except as set forth in the Offering Memorandum, each of the
Company, CILCORP and each of the Principal Subsidiaries has good and
marketable title, free and clear of all liens, claims, encumbrances and
restrictions 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 operations of
CILCORP or any Principal Subsidiary and (B) liens for taxes not yet due
and payable, to all property and assets described in the Offering
Memorandum as being owned by it. All material leases to which the
Company, CILCORP or any of the Principal Subsidiaries is a tenant are
valid and binding and no default by the Company, CILCORP or any such
Principal Subsidiary has occurred and is continuing thereunder, which
could result in any material adverse change in the business, financial
condition or results of operations of the Company, CILCORP and the
Principal Subsidiaries taken as a whole, and the Company, CILCORP and
the
<PAGE>
8
Principal Subsidiaries enjoy peaceful and undisturbed possession under
all such material leases to which any of them is a tenant with such
exceptions as do not materially interfere with the use made by the
Company, CILCORP or such Principal Subsidiary.
(s) Each of Arthur Andersen LLP and Deloitte & Touche LLP are
independent public accountants with respect to the Company and CILCORP
as required by the Securities Act.
(t) The financial statements, together with related schedules and
notes forming part of the Offering Memorandum (and any supplement
thereto), complied in all material respects with all applicable
requirements of the appropriate statutes and the rules and regulations
thereunder at the respective dates and for the respective periods to
which they apply; such statements and related schedules and notes have
been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except
as disclosed therein.
(u) The pro forma financial information included in the Offering
Memorandum (i) presents fairly in all material respects the information
shown therein and (ii) has been prepared in accordance with applicable
requirements of Regulation S-X promulgated under the Exchange Act. In
the opinion of the Company, the assumptions used in the preparation of
the pro forma financial statements included in the Offering Memorandum
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
(v) Each of the Company, CILCORP and the Principal Subsidiaries has
such permits, licenses, franchises and governmental authorizations
("permits") which are necessary to conduct its business as presently
conducted which are material to the operation of its respective
business described in the Offering Memorandum, except for any such
permits, the failure of which to have, individually or in the
aggregate, would not have a material adverse effect on the business,
financial condition or results of operations of the Company, CILCORP
and the Principal Subsidiaries, taken as a whole, and subject to such
qualifications as may be set forth in the Offering Memorandum.
(w) 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). With
the exception of CILCO, no CILCORP Principal Subsidiary is a "holding
company" or "public-utility company" within the meaning of Sections
2(a)(7) and 2(a)(5) of PUHCA, respectively, nor, except with
<PAGE>
9
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.
(x) 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, 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.
(y) Neither the Company nor CILCORP is an "investment company" or,
to the best knowledge of the Company after due inquiry, a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940 as amended.
(z) Except as set forth in the Offering Memorandum, upon due
inquiry, each of CILCORP and each Principal Subsidiary is in compliance
with all applicable foreign, federal, state and local environmental
(including, without limitation, the Comprehensive Environmental
Response, Compensation & Liability Act of 1980, as amended), safety or
similar law, rule and regulation, and there are no costs or liabilities
associated with any such law, rule or regulation, except for any such
noncompliances, costs or liabilities which, individually or in the
aggregate, would not have a material adverse effect on the business,
financial condition or results of operations of the Company, CILCORP
and the Principal Subsidiaries, taken as a whole.
(aa) Each of CILCORP and CILCO carry, or are covered by, insurance
in such amounts and covering such risks as is customary for companies
conducting the business as conducted by CILCORP and CILCO.
(bb) The Company, CILCORP and each of the Principal Subsidiaries
have duly filed with the appropriate taxing authorities all material
tax returns, reports and other information required to be filed through
the date hereof and have paid all taxes shown to be due thereon except
for such failures to file or pay that would not, individually or in the
aggregate, be reasonably likely to have a material adverse effect on
the financial condition, business or results of operations of the
Company, CILCORP and the Principal Subsidiaries, taken as a whole; and
to the best of the Company's knowledge, each such tax return, report or
other information was, when filed, accurate and complete in all
material respects; and no tax ruling has been received by the Company,
CILCORP or any of the Principal Subsidiaries which has
<PAGE>
10
had or is reasonably likely to have, a Material Adverse Effect (other
than deficiencies that are being contested in good faith).
(cc) Each of CILCORP and the Principal Subsidiaries has undertaken
a review of all its computer hardware and software which is used in the
conduct of its business ("Computer Equipment") and determined that such
Computer Equipment is not in need of replacement or reprogramming in
order to function correctly on or after January 1, 2000 in
substantially the same manner as on or before December 31, 1999, except
where such need for replacement and reprogramming would not have a
material adverse effect on the business, financial condition or results
of operations of the Company, CILCORP and the Principal Subsidiaries,
taken as a whole.
(dd) Neither the issuance or sale of the Offered Securities, nor
the application of the proceeds thereof by the Company will violate
Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224)
of the Board of Governors of the Federal Reserve System.
(ee) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Securities are listed on
any national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation
system.
(ff) Neither the Company nor any person acting on its behalf, to
the best of the Company's knowledge, (assuming the accuracy of the
representations of the Initial Purchasers set forth herein) has offered
or, to the best of the Company's knowledge, will offer or sell the
Offered Securities in the United States (A) by means of any form of
general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act or (B) with respect to any such
securities sold in reliance on Rule 903 of Regulation S under the
Securities Act, by means of any directed selling effort within the
meaning of Rule 902(b) of Regulation S.
2. Officers' Certificates. Any certificate signed by any officer of the
Company and delivered to the Representative or to counsel for the Initial
Purchasers in connection with the offering of the Offered Securities shall be
deemed a representation and warranty by the Company to each of the Initial
Purchasers as to the matters covered thereby on the date of such certificate.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell to the Initial
Purchasers, and the Initial Purchasers agree, severally and not jointly, to
purchase from the Company, at a purchase price of 99.732% of the principal
amount thereof plus accrued interest, if any, from October 18, 1999 the
principal amounts
<PAGE>
11
at maturity of the Notes set forth opposite the names of the Initial Purchasers
in Schedule I hereto and, at a purchase price of 99.822% of the principal amount
thereof plus accrued interest, if any, from October 18, 1999 the principal
amount at maturity of the Bonds set forth opposite the names of the Initial
Purchasers in Schedule I hereto.
The Company will deliver against payment of the purchase price the
Offered Securities in the form of one or more permanent global certificates (the
"Global Notes"), deposited with The Depository Trust Company ("DTC") or its
nominee. Payment for the Offered Securities shall be made by or on behalf of the
Initial Purchasers in same day funds by wire transfer to an account as
previously designated to Lehman Brothers Inc. by the Company at a bank
reasonably acceptable to Lehman Brothers Inc. at 9:00 a.m. (New York time), on
October 18, 1999, or at such other time or place thereafter as Lehman Brothers
Inc. and the Company determine, such time being herein referred to as the
"Closing Date", against delivery at the of rice of the Trustee at 101 Barclay
Street, Floor 21W, New York, New York 10286, Attn: Corporate Trust
Administration, to the Trustee of the Global Notes representing all of the
Offered Securities.
4. Representations, Warranties and Agreements of the Initial
Purchasers. Each Initial Purchaser severally represents, warrants and agrees
with the Company that:
(a) Such Initial Purchaser is an "accredited investor" within the
meaning of Regulation D under the Securities Act.
(b) Such Initial Purchaser acknowledges that the Offered Securities
have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S or
pursuant to an exemption from the registration requirements of the
Securities Act. Such Initial Purchaser represents, warrants and agrees
that it has offered and sold the Offered Securities and will offer and
sell the Offered Securities (i) as part of their distribution at any
time and (ii) otherwise until 40 days after the later of the date of
the commencement of the offering and the Closing Date, only in
accordance with Rule 903 or Rule 144A under the Securities Act ("Rule
144A"). Terms used in this subsection (b) have the meanings given to
them by Regulation S. Neither such Initial Purchaser nor its affiliates
nor any person acting on its or their behalf, has engaged or will
engage in any directed selling efforts in the United States within the
meaning of Regulation S with respect to the Offered Securities, and
such Initial Purchaser, its affiliates and all persons acting on its or
their behalf have complied and will comply with the offering
restrictions requirements of Regulation S.
(c) Such Initial Purchaser represents, warrants and agrees that it
and each of its affiliates has not offered or sold and will not offer
or sell the Offered Securities in the United States by means of any
form of general solicitation or general
<PAGE>
12
advertising within the meaning of Rule 502(c) under the Securities Act,
including, but not limited to, (i) any advertising, article, notice or
other communication published in any newspapers, magazine or similar
media or broadcast over television or radio or (ii) any seminar or
meeting whose attendees have been invited by any general solicitation
or general advertising. Each Initial Purchaser represents, warrants and
agrees, with respect to initial resales made in reliance on Rule 144A
of any of the Offered Securities, to deliver either with the
confirmation of such initial resale or otherwise prior to settlement of
such initial resale a notice (which may be included in the Offering
Memorandum) to the effect that the initial resale of such Offered
Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(d) Such Initial Purchaser agrees that it and each of its
affiliates have not entered and will not enter into any contractual
arrangement with respect to the distribution of the Securities except
for any such arrangements with the other Initial Purchasers or
affiliates of the other Initial Purchasers or with the prior written
consent of the Company.
(e) Such Initial Purchaser represents, warrants and agrees that (i)
it has not solicited, and will not solicit, offers to purchase any of
the Offered Securities from, (ii) it has not sold, and will not sell,
any of the Offered Securities to, and (iii) it has not distributed, and
will not distribute, the Offering Memorandum to, any person or entity
in any jurisdiction outside of the United States except, in each case
to the best of each Initial Purchaser's knowledge and belief, in
compliance in all material respects with all applicable laws. For the
purpose of this Agreement, "United States" and "U.S." means the United
States of America, its territories, its possessions and other areas
subject to its jurisdiction.
5. Further Agreements of the Company. The Company agrees:
(a) To advise you promptly of the happening of any event during the
period prior to the completion of the resale of the Offered Securities
by the Initial Purchasers which makes any statement of a material fact
made in the Offering Memorandum untrue or which requires the making of
any additions to or changes in the Offering Memorandum in order to make
the statements therein not misleading.
(b) The Company will furnish to the Initial Purchasers copies of
the Preliminary Offering Memorandum and the Offering Memorandum (and
all amendments and supplements thereto) in each case as soon as
available and in such quantities as the Initial Purchasers reasonably
request for internal use and for distribution to prospective
purchasers. For so long as any of the Offered Securities are
outstanding, if the Company is not subject to Section 13 or 15(d) of
the Exchange
<PAGE>
13
Act and is not exempt from reporting pursuant to Rule 12g3-2(b) under
the Exchange Act, the Company will promptly furnish or cause to be
furnished upon request to the Initial Purchasers and, upon request of
holders and prospective purchasers of the Offered Securities, to such
holders and purchasers, a reasonable number of copies of the
information required to be delivered to holders and prospective
purchasers of the Offered Securities pursuant to Rule 144A(d)(4) under
the Securities Act (or any successor provision thereto) in order to
permit compliance with Rule 144A in connection with resales by such
holders of the Offered Securities. Subject to Section 6 hereof, the
Company will pay the expenses of printing and distributing to the
Initial Purchasers all such documents.
(c) To cooperate with the Initial Purchasers and counsel for the
Initial Purchasers in connection with the registration or qualification
of the Offered Securities for offer and sale by the several Initial
Purchasers and by dealers under the state securities or Blue Sky laws
of such jurisdictions as the Initial Purchasers may request, to
continue such qualification in effect so long as required for
distribution of the Offered Securities; provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction or to take any other action that would subject the Company
to service of process in any suits other than those arising out of the
offering of the Offered Securities or to taxation in respect of doing
business in any jurisdiction in which it is not otherwise subject.
(d) Until the earlier of (i) the completion of the Exchange Offer
(as defined in the Offering Memorandum) and (ii) the second anniversary
of the Closing Date, the Company will, upon request, furnish to the
Initial Purchasers and any holder of Offered Securities, a copy of the
restrictions on transfer set forth under "Notice to Investors" in the
Offering Memorandum; provided, however, that nothing contained herein
shall obligate the Company to track or trace particular Offered
Securities held by anyone other than the Company or any of their
affiliates (as defined in Rule 144 under the Securities Act).
(e) In connection with the offering, until the earlier of (i) 180
days following the Closing Date or (ii) the date the Initial Purchasers
shall have notified the Company of the completion of the resale of the
Offered Securities, neither the Company nor any of its affiliates has
or will, either alone or with one or more other persons, bid for or
purchase for any account in which it or any of its affiliates has a
beneficial interest any Offered Securities or attempt to induce any
person to purchase any Offered Securities; and neither it nor any of
its affiliates will make bids or purchases for the purpose of creating
actual, or apparent, active trading in, or of raising the price of, the
Offered Securities.
<PAGE>
14
(f) Neither the Company nor any of its direct or indirect
subsidiaries will at any time offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any securities under
circumstances where such offer, sale, pledge, contract or disposition
would cause the exemption afforded by Section 4(2) of the Securities
Act, Rule 144A under the Securities Act or the safe harbor of
Regulation S thereunder to cease to be applicable to the offer and sale
of the Offered Securities.
(g) The Company will apply the net proceeds from the sale of the
Offered Securities being sold by the Company as set forth in the
Offering Memorandum.
(h) Between the date hereof and the Closing Date (both dates
inclusive), the Company will notify and consult with the Initial
Purchasers, and to cause their subsidiaries and all other parties
acting on its or their behalf to notify and consult with the Initial
Purchasers, prior to issuing any announcement which could be material
in the context of the distribution of the Offered Securities.
(i) The Company will promptly inform the Initial Purchasers or
their legal counsel of any communications received by it from any
governmental or regulatory agency or authority, including, without
limitation, the ICC, FERC or the Commission, relating to the offering
of the Offered Securities and to furnish the Initial Purchasers or
their legal counsel with copies thereof.
(j) During the period of two years after the Closing Date, the
Company will take such steps as shall be necessary to ensure that it
shall not become an "investment company" within the meaning of such
term under the Investment Company Act and the rules and regulations of
the Commission thereunder.
(k) The Company will cause Arthur Andersen LLP to deliver an
initial comfort letter, dated the date of the Offering Memorandum, to
the Initial Purchasers in form and substance reasonably satisfactory to
the Initial Purchasers at or prior to the time copies of the Offering
Memorandum are furnished to the Initial Purchasers.
(l) The Company will cause Deloitte & Touche LLP to deliver an
initial comfort letter, dated the date of the Offering Memorandum, to
the Initial Purchasers in form and substance reasonably satisfactory to
the Initial Purchasers at or prior to the time copies of the Offering
Memorandum are furnished to the Initial Purchasers.
(m) If, at any time prior to completion of the resale of the
Offered Securities by the Initial Purchasers, any event shall occur as
a result of which, in the opinion of counsel for the Initial
Purchasers, it becomes necessary to amend or supplement the Offering
Memorandum in order to make the statements therein, in the light of the
circumstances when the Offering Memorandum is delivered to a
<PAGE>
15
purchaser, not misleading, or if it is necessary to amend or supplement
the Offering Memorandum to comply with any law, forthwith to prepare an
appropriate amendment or supplement to the Offering Memorandum so that
the statements in the Offering Memorandum, as so amended or
supplemented, will not in the light of the circumstances when it is so
delivered, be misleading, or so that the Offering Memorandum will
comply with law, and to furnish to each Initial Purchaser as you shall
specify, such number of copies thereof as such Initial Purchaser may
reasonably request.
(n) To use its best efforts to do and perform all its
responsibilities and obligations under this Agreement by the Company
prior to the Closing Date and to satisfy all conditions precedent to
the delivery of the Offered Securities.
6. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Offered Securities and any
taxes payable in that connection; (b) the costs of producing and distributing
this Agreement; (c) the costs incident to the preparation, printing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
any amendments or supplements thereto, (d) any fees charged by investment rating
agencies for the rating of the Offered Securities; (e) the fees and expenses of
qualifying the Offered Securities under the securities laws of the several
jurisdictions as provided in Section 5(c) and of preparing, printing and
distributing a Blue Sky Memorandum (including reasonable related fees and
expenses of counsel to the Initial Purchasers); (f) (i) all costs and expenses
incident to the preparation of the "road show" presentation materials and (ii)
all costs and expenses incident to the road show traveling expenses of the
Company and CILCORP; (g) the costs of preparing certificates evidencing the
Offered Securities; (h) all expenses and fees in connection with the application
for inclusion of the Offered Securities in the PORTAL Market; (i) the fees and
expenses of the Trustee; (j) the cost and charges of any transfer agent or
registrar; (k) all New York stamp or other issuance or governmental duties, if
any, payable by the Initial Purchasers in connection with the offer and sale of
the Offered Securities to the Initial Purchasers and by the Initial Purchasers
to the initial purchasers therefrom; (1) the fees and expenses of Simpson
Thacher & Bartlett, counsel to the Initial Purchasers, and (m) all other costs
and expenses incident to the performance of the obligations of the Company under
this Agreement not otherwise specifically provided for in this Section,
including, without limitation, the fees and expenses of each of Arthur Andersen
LLP and Deloitte & Touche LLP, the Company's independent accountants, and the
fees and expenses of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the
Company.
7. Conditions of the Initial Purchasers' Obligations. The obligations
of the several Initial Purchasers hereunder are subject (i) to the accuracy,
when made and on the Closing Date, of the representations and warranties of the
Company contained herein, or in certificates of any officer of the Company
delivered pursuant to the provisions hereof, (ii) to the performance by the
Company of its covenants and other obligations hereunder and (iii) to each of
the following additional terms and conditions:
<PAGE>
16
(a) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Indenture,
the Registration Rights Agreement, the Pledge Agreement, the Merger
Agreement and the Offering Memorandum or any amendment or supplement
thereto, and all other legal matters relating to this Agreement, the
Indenture, the Registration Rights Agreement and the Pledge Agreement
and the transactions contemplated hereby and thereby shall be
reasonably satisfactory in all material respects to counsel to the
Initial Purchasers, and the Company shall have furnished to such
counsel such documents as they may reasonably request to enable them to
pass upon such matters.
(b) The Company shall have delivered to the Initial Purchasers a
certified copy of the resolutions of its Board of Directors approving
the creation and issue of the Offered Securities by the Company on the
terms and conditions provided in the Indenture and this Agreement and
approving the terms hereof and authorizing the execution and delivery
of this Agreement, the Registration Rights Agreement, the Indenture,
the global certificates and any definitive certificates in registered
form in respect of the Offered Securities, the Merger Agreement and all
other agreements and documents relevant to the issue of the Offered
Securities by the Company.
(c) CILCORP shall have delivered to the Initial Purchasers a
certified copy of the resolutions of the Board of Directors of CILCORP
approving the terms of the Pledge Agreement and authorizing the
execution and delivery of the Pledge Agreement.
(d) The Initial Purchasers shall have received on the Closing Date
the opinions of Skadden, Arps, Slate, Meagher & Flom LLP, outside
counsel for the Company, dated the Closing Date, in the form attached
hereto as Exhibit A-l [corporate matters], Exhibit A-2 [non-substantive
consolidation], and Exhibit A-3 [tax opinion].
(e) The Initial Purchasers shall have received on the Closing Date
an opinion of William Luraschi, Esq., General Counsel of AES, dated the
Closing Date, to the effect set forth in Exhibit B.
(f) The Initial Purchasers shall have received on the Closing Date
an opinion of John Sahn, Esq., Vice President, Secretary and Treasurer
of CILCORP, dated the Closing Date, to the effect set forth in Exhibit
C.
(g) The Initial Purchasers shall have received on the Closing Date
an opinion of Sidley & Austin, outside counsel for the Company, dated
the Closing Date, to the effect set forth in Exhibit D.
<PAGE>
17
(h) The Trustee shall have furnished to the Initial Purchasers an
officer's certificate, dated the Closing Date, in form and substance
satisfactory to the Initial Purchasers, to the effect that (i) the
Indenture has been duly authorized, executed and delivered by the
Trustee and (ii) each person who, on behalf of the Trustee, executed
and delivered the Indenture was at the date thereof and is now duly
elected, appointed or authorized, qualified and acting as an officer or
authorized signatory of the Trustee and duly authorized to perform such
acts at the respective times of such acts and the signatures of such
persons appearing on such document are their genuine signatures.
Attached to the officer's certificate shall be an extract of the Bylaws
of the Trustee, duly adopted by its Board of Directors, respecting the
signing authority of the persons mentioned in clause (ii) above and a
letter from an officer of the Trustee authorizing, pursuant to such
Bylaws, such signing authority, which Bylaws and letter at the Closing
Date are in full force and effect.
(i) With respect to the letter of Deloitte & Touche LLP, delivered
to the Initial Purchasers concurrently with the execution of this
Agreement referred to in Section 5(1), the Company shall have furnished
to the Initial Purchasers a letter (as used in this paragraph, the
"bring-down letter") of each such accountant, addressed to the Initial
Purchasers and dated the Closing Date (i) confirming that they are
independent public accountants within the meaning of the Securities Act
and are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date of the bring-down letter (or,
with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given
in the Offering Memorandum, as of a date not more than five days prior
to the date of the bring-down letter), the conclusions and findings of
such firm with respect to the financial information and other matters
covered by the initial letter and (iii) confirming in all material
respects the conclusions and findings set forth in the initial letter.
(j) The Company shall have furnished to the Initial Purchasers an
officer's certificate, dated the Closing Date, in which such officer,
to the best of his knowledge after reasonable investigation, shall
state that:
(i) The representations and warranties of the Company in
Section 1 are true and correct in all material respects as of the
Closing Date; and the Company has complied with all its agreements
contained herein and has satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date;
and
(ii) Subsequent to the dates of the most recent financial
statements included in the Offering Memorandum, there has been no
material adverse
<PAGE>
18
change, nor any development or event involving a prospective
material adverse change, in the financial condition, business or
results of operations of Company, CILCORP and the Principal
Subsidiaries taken as a whole except as set forth in or
contemplated by the Offering Memorandum or as described in such
certificate.
(k) Since the date of the latest audited financial statements
included in the Offering Memorandum (i) except as disclosed in the
Offering Memorandum, there shall have been no material adverse change,
or a development which is reasonably likely to lead to a material
adverse change, in the financial condition, business or results of
operations of the Company, CILCORP and Principal Subsidiaries, taken as
a whole (otherwise than as contemplated in the Offering Memorandum),
and (ii) except as disclosed in the Offering Memorandum, there shall
not have been any transactions entered into by CILCORP or the Principal
Subsidiaries, other than those in the ordinary course of business,
which are material and adverse to CILCORP and the Principal
Subsidiaries, taken as a whole, and which, in the judgment of the
Initial Purchasers, make it impracticable or inadvisable to proceed
with the offering or the delivery of the Offered Securities on the
terms and in the manner contemplated in the Offering Memorandum.
(l) Subsequent to the execution and delivery of this Agreement, (i)
no downgrading shall have occurred in the rating given to CILCORP's
debt securities by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes
of Rule 436(g)(2) under the Act and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of CILCORP's debt
securities.
(m) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, Inc. or the Nasdaq
National Market System, or trading in any securities of the Company or
CILCORP on any exchange, shall have been suspended or minimum prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium
shall have been declared by U.S. federal or state authorities in the
United States, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities
involving the United States or there shall have been a declaration of a
national emergency or war by the United States or (iv) there shall have
occurred such a material adverse change in general or United States
economic, political or financial conditions or in currency exchange
rates, taxation, exchange controls or foreign investment regulations
(or the effect of domestic or international conditions on the
international financial markets or the financial markets in the United
States shall be
<PAGE>
19
such) as to make it, in the reasonable judgment of a majority in
interest of the Initial Purchasers, impracticable or inadvisable to
proceed with the offering or delivery of the Offered Securities being
delivered on the Closing Date on the terms and in the manner
contemplated in the Offering Memorandum.
(n) The Indenture shall have been duly executed and delivered by
the Company and the Trustee and the Offered Securities shall have been
duly executed and delivered by the Company and duly authenticated by
the Trustee.
(o) The Company and the Initial Purchasers shall have executed and
delivered the Registration Rights Agreement (in form and substance
satisfactory to the Initial Purchasers) and the Registration Rights
Agreement shall be in full force and effect.
(p) Immediately following the effective time of the Merger, CILCORP
shall have executed and delivered the Pledge Agreement (in form and
substance satisfactory to the Initial Purchasers) to the Collateral
Agent and the Pledge Agreement shall be in full force and effect.
(q) The NASD shall have accepted the Offered Securities for trading
in the PORTAL market.
(r) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date,
prevent the issuance or sale of the Offered Securities; and no
injunction, restraining order or order of any other nature by any
federal or state court of competent jurisdiction shall have been issued
as of the Closing Date which would prevent the issuance or sale of the
Offered Securities.
(s) AES shall have made an equity contribution to the Company in an
amount which, together with the proceeds from the sale of the Offered
Securities to the Initial Purchasers, shall equal the amount the
Company is required to pay in order to purchase all of the outstanding
shares of common stock of CILCORP, pursuant to the terms of the Merger
Agreement.
(t) The Company and CILCORP shall contemporaneously consummate the
Merger on the terms described in the Offering Memorandum, and there
shall have been no material amendments or waivers to the Merger
Agreement.
(u) The Initial Purchasers shall have received on the Closing Date
an opinion of Simpson Thacher & Bartlett, counsel to the Initial
Purchasers, in form and substance satisfactory to the Initial
Purchasers.
<PAGE>
20
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance satisfactory to counsel
to the Initial Purchasers.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Initial
Purchaser, its officers and employees and each person, if any, who controls any
Initial Purchaser within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of the Offered Securities), to which that
Initial Purchaser, officer, employee or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Offering Memorandum or the Offering Memorandum, or in any amendment or
supplement thereto, or (ii) the omission or alleged omission to state in any
Preliminary Offering Memorandum or the Offering Memorandum, or in any amendment
or supplement thereto, any material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
each Initial Purchaser and each such officer, employee and controlling person
promptly upon demand for any legal or other expenses reasonably incurred by that
Initial Purchaser, officer, employee or controlling person in connection with
investigating or defending against any such loss, claim, damage, liability or
action as such expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Offering Memorandum or the Offering Memorandum, or in any such amendment or
supplement, or in any Blue Sky Application in reliance upon and in conformity
with the written information furnished to the Company by any Initial Purchaser
specifically for inclusion therein; provided, further, that as to any
Preliminary Offering Memorandum this indemnity agreement shall not inure to the
benefit of any Initial Purchaser, its officers or employees or any person
controlling that Initial Purchaser on account of any loss, claim, damage,
liability or action arising from the sale of Offered Securities to any person by
that Initial Purchaser if that Initial Purchaser failed to send or give a copy
of the Offering Memorandum, as the same may be amended or supplemented, to that
person within the time required by the Securities Act, and the untrue statement
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact in such Preliminary Offering Memorandum was corrected
in the Offering Memorandum unless such failure resulted from non-compliance by
the Company with Section S(b). The foregoing indemnity agreement is in addition
to any liability which the Company may otherwise have to any Initial Purchaser
or to any officer, employee or controlling person of that Initial Purchaser.
(b) Each Initial Purchaser, severally and not jointly, shall indemnify
and hold harmless the Company, its officers and employees, each of its directors
and each person, if any, who controls the Company within the meaning of the
Securities Act from and against any loss, claim,
<PAGE>
21
damage or liability, joint or several, or any action in respect thereof, to
which the Company or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Memorandum or the Offering Memorandum or in any amendment
or supplement thereto, or (ii) the omission or alleged omission to state therein
any material fact required to be stated in any Preliminary Offering Memorandum
or the Offering Memorandum or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with the written information furnished to the Company
through the Initial Purchasers by or on behalf of that Initial Purchaser
specifically for inclusion therein, and shall reimburse the Company and any such
director, officer or controlling person for any legal or other expenses
reasonably incurred by the Company or any such director, officer or controlling
person in connection with investigating or defending against any such loss,
claim, damage, liability or action as such expenses are incurred; provided
however, that in no case shall the Initial Purchaser be liable or responsible
for any amount in excess of the aggregate principal amount of the Offered
Securities purchased by such Initial Purchaser. The foregoing indemnity
agreement is in addition to any liability which any Initial Purchaser may
otherwise have to the Company or any such director, officer or controlling
person.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent it has been materially
prejudiced by such failure and, provided, further, that the failure to notify
the indemnifying party shall not relieve it from any liability which it may have
to an indemnified party otherwise than under this Section 8. If any such claim
or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party). After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under this Section 8 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that any indemnified party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment thereof has been specifically authorized by the
indemnifying party in writing, (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the
<PAGE>
22
reasonable judgment of such counsel it is advisable for such indemnified party
to employ separate counsel or (iii) the indemnifying party has failed to assume
the defense of such action and employ counsel reasonably satisfactory to the
indemnified party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all such indemnified
parties, which firm shall be designated in writing by the Initial Purchasers, if
the indemnified parties under this Section 8 consist of any Initial Purchasers
or any of their respective officers, employees or controlling persons, or by the
Company, if the indemnified parties under this Section consist of the Company or
any of its directors, officers, employees or controlling persons. Each
indemnified party, as a condition of the indemnity agreements contained in
Sections 8(a) and 8(b), shall use its best efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall (i) without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld) settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding,
or (ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the Company
on the one hand and the Initial Purchasers on the other from the offering of the
Offered Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Initial Purchasers on the other
with respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Initial Purchasers on the other with respect to such offering
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the Offered Securities purchased under this Agreement
<PAGE>
23
(before deducting expenses but after deducting discounts and commissions)
received by the Company on the one hand, and the total discounts and commissions
received by the Initial Purchasers with respect to the Offered Securities
purchased under this Agreement, on the other hand, bear to the total gross
proceeds from the offering of the Offered Securities under this Agreement, in
each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Initial Purchasers, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Initial Purchasers agree that it
would not be just and equitable if contributions pursuant to this Section 8(d)
were to be determined by pro rata allocation (even if the Initial Purchasers
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 8(d) shall be deemed to include, for purposes
of this Section 8(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 8(d), no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Offered Securities purchased by it were
resold exceeds the amount of any damages which such Initial Purchaser has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
as provided in this Section 8(d) are several in proportion to their respective
purchase obligations and not joint.
9. Termination. The obligations of the Initial Purchasers hereunder may
be terminated by the Initial Purchasers by notice given to and received by the
Company prior to delivery of and payment for the Offered Securities if, prior to
that time, any of the events described in Sections 7(k), (1) (m) or (r) shall
have occurred or if the Initial Purchasers shall decline to purchase the Offered
Securities for any reason permitted under this Agreement.
10. Reimbursement of Initial Purchasers' Expenses. If this Agreement
shall be terminated, then the Company shall reimburse the Initial Purchasers for
fees and expenses of their counsel and for such other out-of-pocket expenses as
shall have been incurred by them in connection with this Agreement and the
proposed purchase of the Offered Securities, and upon demand the Company shall
pay the full amount thereof to the Initial Purchasers and the Company shall have
no further liability to the Initial Purchasers except as provided in Sections 6
and 8.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
<PAGE>
24
(a) if to the Initial Purchasers, shall be delivered or sent by
mail, telex or facsimile transmission to Lehman Brothers Inc., Three
World Financial Center, New York, New York 10285, Attention: Syndicate
Department (Facsimile No.: 212-528-8822);
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to The AES Corporation, 1001 North 19th Street,
20th floor, Arlington, Virginia 22209, Attention: William Luraschi,
Esq. (Facsimile No.: 703-528-4510);
(c) if to CILCORP, shall be delivered or sent by mail, telex or
facsimile transmission to: CILCORP Inc., 300 Hamilton Boulevard, Suite
300, Peoria, Illinois 61602, Attention: President (Facsimile No.:
309-677-5016);
provided, however, that any notice to an Initial Purchaser pursuant to Section
8(c) shall be delivered or sent by mail, telex or facsimile transmission to such
Initial Purchaser at its address set forth in its acceptance telex to the
Representative, which address will be supplied to any other party hereto by the
Representative upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Initial Purchasers by the Representative.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Company
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the officers and
employees of each Initial Purchaser and the person or persons, if any, who
control each Initial Purchaser within the meaning of Section 15 of the
Securities Act and (B) the representations, warranties, indemnities and
agreements of the Initial Purchasers contained in this Agreement shall be deemed
to be for the benefit of directors, officers and employees of the Company and
any person controlling the Company within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section 12, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
13. Survival. The respective indemnities, representations, warranties
and agreements of the Company and the Initial Purchasers contained in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Offered Securities
and shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
of them or any person controlling any of them. If this Agreement is terminated
pursuant to Section 9 (or if for any reason the purchase of the Offered
Securities by the Initial Purchasers is not
<PAGE>
25
consummated), the respective obligations of the Company and the Initial
Purchasers pursuant to Section 8 shall remain in effect.
14. Definition of the Terms "Business Day" and "Subsidiary." For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the rules and regulations under the Securities
Act.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
If the foregoing correctly sets forth the agreement between the Company
and the Initial Purchasers, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
MIDWEST ENERGY, INC.
By: /s/ Paul Stinson
-------------------------------------
Name: Paul Stinson
Title: Vice President
Accepted:
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY DEAN WITTER
BY: LEHMAN BROTHERS INC.
By: /s/ David Schwarzbach
---------------------------------
Authorized Representative
For themselves and as Representative of the several Initial Purchasers named in
Schedule I hereto.
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Principal
Amount of Amount of
Initial Purchasers Notes Bonds
- ------------------
<S> <C> <C>
Lehman Brothers Inc................................................... $135,000,000 $150,000,000
J.P. Morgan Securities Inc............................................ 45,000,000 50,000,000
Morgan Stanley Dean Witter............................................ 45,000,000 50,000,000
Total................................................................. $225,000,000 $250,000,000
============ ============
</TABLE>
JIM EDGAR
SECRETARY OF STATE
STATE OF ILLINOIS
<TABLE>
<CAPTION>
<S> <C> <C>
Submit in Duplicate File #
- -------------------------------------- --------------------------------
Payment must be made by Certified ARTICLES OF INCORPORATION This Space For Use By
Check, Cashiers Check or a Money Secretary of State
Order, payable to "Secretary of
State." Date
License Fee $
Franchise Tax $
Filing Fee $
Clerk
DO NOT SEND CASH
- -------------------------------------- --------------------------------
Pursuant to the provisions of "The Business Corporation Act of 1983", the
undersigned incorporator(s) hereby adopt the following Articles of
Incorporation.
ARTICLE ONE The name of the corporation is CILCORP Inc.
-------------------------------------------------------------
(shall contain the word "corporation," "company," Incorporated,"
- -----------------------------------------------------------------------------------------------------------
"limited," or an abbreviation thereof)
ARTICLE TWO The name and address of the initial registered agent and its registered office are:
Registered Agent M. J. Murray
-----------------------------------------------------------------------
First Name Middle Name Last Name
Registered Office 300 Liberty Street
-----------------------------------------------------------------------
Number Street Suite # (A.P.O. Box alone is not acceptable)
Peoria 61602 Peoria
-----------------------------------------------------------------------
City Zip Code County
ARTICLE THREE The purpose for which the corporation is organized are:
If not sufficient space to cover this point add one or more sheets of this size
any lawful purpose or purposes under the Business Corporation Act of 1983.
ARTICLE FOUR Paragraph 1: The authorized shares shall be:
Class *Par Value per share Number of shares authorized
-------------------------------------------------------------------------------------------
Common Without par value 20,000,000
-------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Paragraph 2: The preferences, qualifications, limitations, restrictions and the special or
relative rights in respect of the shares of each class are:
If not sufficient space to cover this point, add one or more sheets of this size.
None
ARTICLE FIVE The number of shares to be issued initially, and the consideration to be received by the
corporation therefor, are:
*Par Value Number of shares Consideration to be
Class Per share proposed to be issued received therefor
-------------------------------------------------------------------------------------------
Common Without par value 100 $1,000
-------------------------------------------------------------------------------------------
$
-------------------------------------------------------------------------------------------
$
-------------------------------------------------------------------------------------------
$
-------------------------------------------------------------------------------------------
TOTAL $1,000
-------------------
* A declaration as to a "par value" is optional. This space may be marked "n/a" when no reference to a par
value is desired.
ARTICLE SIX OPTIONAL
The number of directors constituting the initial board of directors of the corporation is
nine (9).
ARTICLE SEVEN OPTIONAL
(a) It is estimated that the value of all property to be owned by the
corporation for the following year wherever located will be: $ --
---------
(b) It is estimated that the value of the property to be located within
the State of Illinois during the following year will be: $ --
---------
(c) It is estimated that the gross amount of business which will be
transacted by the corporation during the following year will be: $ --
---------
(d) It is estimated that the gross amount of business which will be
transacted from places of business in the State of Illinois during
the following year will be: $ --
---------
ARTICLE EIGHT OTHER PROVISIONS See Exhibit A attached hereto and made a part hereof.
Attach a separate sheet of this size for any other provision to be included in the Articles
of Incorporation, e.g., authorizing pre-emptive rights; denying cumulative voting;
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
regulating internal affairs; voting majority requirements; fixing a duration other than
perpetual; etc.
</TABLE>
NAMES & ADDRESSES OF INCORPORATORS
The undersigned incorporator(s) hereby declare(s), under penalties of
perjury, that the statements made in the foregoing Articles of Incorporation are
true.
Dated: January 10, 1985
----------------
Signatures and Names Post Office Address
1. /s/ Robert O. Viets 1. 300 Liberty Street
---------------------------- ---------------------------------
Signature Street
Robert O. Viets Peoria IL 61602
---------------------------- ---------------------------------
Name (please print) City/Town State Zip
2. 2.
---------------------------- ---------------------------------
Signature Street
---------------------------- ---------------------------------
Name (please print) City/Town State Zip
3. 3.
---------------------------- ---------------------------------
Signature Street
---------------------------- ---------------------------------
Name (please print) City/Town State Zip
(Signatures must be in ink on original document. Carbon copy, xerox or rubber
stamp signatures may only be used on conformed copies)
NOTE: If a corporation acts as incorporator, the name of the corporation and the
state of incorporation shall be shown and the execution shall be by its
President or Vice-President and verified by him, and attested by its Secretary
or an Assistant Secretary.
3
<PAGE>
EXHIBIT A
TO
THE ARTICLES OF INCORPORATION
OF CILCORP Inc.
ARTICLE EIGHT
The holders of capital stock of the corporation now or hereafter
outstanding shall not have the right to cumulate their respective votes in any
election for directors of the corporation.
ARTICLE NINE
Paragraph 1: A Business Combination (as hereinafter defined) shall require the
affirmative vote of the holders of that percentage of the Voting Shares (as
hereinafter defined) which is the greater of:
A. 75%, or
B. the percentage calculated by dividing (x) the sum of (i) the aggregate
number of Voting Shares which are beneficially owned by each and every Related
Person (as hereinafter defined) and (ii) one-half of all Voting Shares which are
not beneficially owned by any such Related Person by (y) the total number of
Voting Shares (the "Required Percentage"); provided, however, that for the
purpose of determining the Required Percentage of affirmative votes required for
any Business Combination between the corporation or any Subsidiary (as
hereinafter defined) and any Related Person, only the Related Person which is a
party to such transaction shall be deemed a "Related Person" under this
Paragraph 1.
Such affirmative vote shall be required notwithstanding the fact that no vote
may be required, or that some lesser percentage may be specified, by law or
otherwise.
Paragraph 2: The provisions of Paragraph 1 shall not apply to a Business
Combination, and such Business Combination shall require the affirmative vote of
the holders of a majority of the Voting Shares, if all of the following
conditions shall have been satisfied:
1
<PAGE>
A. If, with respect to such Business Combination (i) at least two-thirds of
the Continuing Directors (as hereinafter defined) shall have approved expressly
a memorandum of understanding with the Related Person which is a party to such
transaction, consistent in material terms with the Business Combination for
which a shareholder vote is sought, before such Related Person became a Related
Person; or (ii) at least two-thirds of the Continuing Directors shall have
approved expressly in advance the acquisition of the Voting Shares that caused
such Related Person to become a Related Person; or (iii) such Business
Combination is approved expressly by the affirmative vote of at least two-thirds
of the Continuing Directors before the consummation of such transaction.
B. The aggregate amount of cash or fair market value of Other Consideration
(as hereinafter defined) to be received per share by holders of Voting Shares in
such Business Combination is not less than the Highest Per Share Price (as
hereinafter defined) paid by the Related Person in acquiring within the two-year
period immediately preceding the Business Combination any shares of capital
stock of the corporation which if continued to be held at the Record Date (as
hereinafter defined) would be (or are) Voting Shares.
C. The consideration to be received by Public Holders (as hereinafter
defined) in such Business Combination shall be in the same form and of the same
kind as the consideration paid by the Related Person in acquiring within the
two-year period immediately preceding the Business Combination any shares of
capital stock of the corporation which if continued to be held at the Record
Date would be (or are) Voting Shares.
D. After such Related Person became a Related Person and before the
Business Combination the Related Person shall have taken steps to ensure that
the corporation's Board of Directors included at all times representation by
Continuing Directors proportionate to the ratio that the Voting Shares which
from time to time are owned by Public Holders bear to all Voting Shares
outstanding at such respective times (with a Continuing Director to occupy any
resulting fractional board position);
E. Before the Business Combination, such Related Person shall not have (i)
received the benefit, directly or indirectly, (except proportionately as a
shareholder) of any loans, advances, guarantees, pledges, financial assistance
or tax credits provided by the corporation, or (ii) made any major change in the
corporation's business or equity capital structure without the approval of at
least two-thirds of the Continuing Directors.
2
<PAGE>
F. A proxy statement responsive to the requirements of the Securities Act
of 1933, as amended, shall have been mailed to all holders of Voting Shares for
the purpose of soliciting shareholder approval of such Business Combination. The
proxy statement shall contain on the front page thereof, in a prominent place,
any recommendations as to the advisability (or inadvisability) of the Business
Combination which the Continuing Directors, or any of them, may have furnished
in writing and, if deemed advisable by a majority of the Continuing Directors,
an opinion of a reputable investment banking firm as to the fairness (or lack of
fairness) of the terms of such Business Combination from the point of view of
the Public Holders (such investment banking firm to be selected by a majority of
the Continuing Directors, to be furnished with all information it reasonably
requests and to be paid a reasonable fee for its services upon receipt by the
corporation of such opinion).
Paragraph 3: The following definitions shall apply to the provisions of Article
Nine and Paragraph 1 of Article Ten of these Articles of Incorporation.
A. "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (any such Rule hereinafter shall be
referred to as "Rule").
B. A Person shall be the "Beneficial Owner" of Voting Shares:
(i) which are beneficially owned, directly or indirectly, by it or any
of its Affiliates and Associates;
(ii) which such Person or any of its Affiliates or Associates has (a)
the right to acquire at any time (notwithstanding that Rule 13d-3 deems
shares to be beneficially owned only if such right may be exercised within
60 days) pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants, options, or
otherwise, or (b) the right to vote pursuant to any agreement, arrangement
or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any other
Person with which such first mentioned Person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any Voting Shares.
3
<PAGE>
C. "Business Combination" shall mean:
(i) any merger or consolidation of the corporation or any Subsidiary
with or into (a) any Related Person or (b) any other Person (whether or not
itself a Related Person) which, after such merger or consolidation, would
be an Affiliate of a Related Person;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition, either in a single transaction or a series of related
transactions, to or with any Related Person of (x) a Substantial Part of
the assets of the corporation (including without limitation any voting
securities of a Subsidiary) or (y) any Subsidiary having total assets with
an aggregate fair market value of $5,000,000 or more;
(iii) the issuance or transfer by the corporation or any Subsidiary,
either in a single transaction or a series of related transactions, of any
securities of the corporation or of any Subsidiary to any Related Person in
exchange for cash, securities or other property (or a combination thereof)
having an aggregate fair market value of $5,000,000 or more;
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation;
(v) any reclassification of securities, including without limitation,
any reverse stock split, recapitalization, reorganization, merger or
consolidation, of the corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise involving a
Related Person) which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class of capital
stock of the corporation or any Subsidiary which is directly or indirectly
owned by any Related Person; or
(vi) any agreement, contract or other arrangement providing for any of
the transactions described in (i) through (v) of this subparagraph C.
D. "Continuing Director" shall mean a person who was a member of the
Board of Directors of the corporation elected by the Public Holders immediately
before the date as of which any Related Person became a Related Person, or
4
<PAGE>
a person designated (before his initial election as a director) as a Continuing
Director by a majority of the then Continuing Directors.
E. "Highest Per Share Price" shall mean the highest price that can be
determined to have been paid at any time within the two-year period immediately
preceding the Business Combination by the Related Person for any share or shares
of capital stock of the corporation which if continued to be held at the Record
Date would be (or are) Voting Shares. In determining the Highest Per Share
Price, all purchases by the Related Person shall be taken into account
regardless of whether the shares were purchased before or after the Related
Person became a Related Person. Also, the Highest Per Share Price shall include
any brokerage commissions, transfer taxes and soliciting dealers' fees paid by
the Related Person with respect to the shares acquired by that Related Person.
Determination of the Highest Per Share Price as required from time to time by
this Article Nine shall be made by at least two-thirds of the Continuing
Directors then in office.
F. "Other Consideration" shall include, without limitation, property,
the capital stock of the corporation retained by its Public Holders in the event
of a Business Combination in which the corporation is the surviving corporation,
or other securities.
G. "Person" shall mean any individual, firm, corporation, partnership
or other entity.
H. A "Public Holder" shall mean a Beneficial Owner of Voting Shares who
is not a Related Person.
I. "Record Date" shall mean the date set by the corporation for the
determination of shareholders entitled to notice of and to vote on the proposed
Business Combination.
J. "Related Person" shall mean, with respect to any Business
Combination, any Person (other than the corporation, any Subsidiary or any
Person who owns all of the Voting Shares) who, together with its Affiliates and
Associates, as of the Record Date or immediately prior to the consummation of
any such transaction, is the Beneficial Owner of not less than 10% of the Voting
Shares.
K. "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1) is owned, directly or
indirectly, by the corporation; provided, however, that for the purposes of the
definition
5
<PAGE>
of Related Person set forth in subparagraph J of this Paragraph 3, the term
"Subsidiary" shall mean only a corporation of which a majority of each class of
capital stock is owned, directly or indirectly, by the corporation.
L. "Substantial Part" shall mean more than 20% of the fair market value
as determined by at least two-thirds of the Continuing Directors of the total
consolidated assets of the corporation and its Subsidiaries taken as a whole as
of the end of its most recent fiscal year ended prior to the time the
determination is being made.
M. "Voting Shares" shall mean all of the shares of capital stock of the
corporation which are issued and outstanding as of the Record Date. The Voting
Shares shall include shares deemed owned through application of subparagraph B
of this Paragraph 3 but shall not include any other Voting Shares which may be
issuable pursuant to any agreement, or upon exercise of conversion rights,
warrants, options or otherwise.
Paragraph 4: For the purposes of this Article Nine, at least two-thirds of the
Continuing Directors shall determine (A) the number of Voting Shares
beneficially owned by any Person, (B) whether a Person is an Affiliate or
Associate of another, (C) whether a Person is the Beneficial Owner of any Voting
Shares, and (D) whether the assets subject to any Business Combination have an
aggregate fair market value of $5,000,000 or more.
Paragraph 5: Nothing contained in this Article Nine shall be construed to
relieve any Related Person from any fiduciary obligation imposed by law.
ARTICLE TEN
Paragraph 1: Any amendment, alteration, change or repeal of Article Nine or this
Paragraph 1 of Article Ten of these Articles of Incorporation shall require the
affirmative vote of the holders of at least 75% of the Voting Shares and if
there is a Related Person, such action must also be approved by the affirmative
vote of a majority in interest of the Public Holders; provided that this
Paragraph 1 of Article Ten shall not apply to, and the majority vote prescribed
by Paragraph 2 of this Article Ten shall be required for, any amendment,
alteration, change or repeal recommended to the shareholders by two-thirds or
more of the Continuing Directors.
6
<PAGE>
Paragraph 2: Any provision of these Articles of Incorporation other than Article
Nine and Paragraph 1 of Article Ten may be amended, altered, changed or repealed
by the affirmative vote of the holders of a majority of the outstanding common
stock of the corporation.
7
<PAGE>
JIM EDGAR
SECRETARY OF STATE
STATE OF ILLINOIS
<TABLE>
<S> <C> <C>
Submit in Duplicate File #5370-721-1
- ----------------------------------- -----------------------------------
Payment must be made by Certified ARTICLES OF AMENDMENT This Space For Use By
Check, Cashiers Check or a Money Secretary of State
Order, payable to "Secretary of
State." Date
License Fee $
Franchise Tax $
Filing Fee $
DO NOT SEND CASH Clerk
- ----------------------------------- -----------------------------------
Pursuant to the provisions of "The Business Corporation Act of 1983", the
undersigned corporation hereby adopts these Articles of Amendment to its
Articles of Incorporation.
ARTICLE ONE The name of the corporation is CILCORP Inc.
------------------------------
-------------------------------------------------- (Note 1)
ARTICLE TWO The following amendment of the Articles of Incorporation was adopted on
April 28 , 19 87 in the manner indicated below. ("X" one box only.)
- -------------------------------------------------- -----
</TABLE>
/ / By a majority of the incorporators, provided no directors were
named in the articles of incorporation and no directors have
been elected; or by a majority of the board of directors, in
accordance with Section 10.10, the corporation having issued
no shares as of the time of adoption of this amendment;
(Note 2)
/ / By a majority of the board of directors, in accordance with
Section 10.15, shares having been issued but shareholder
action not being required for the adoption of the amendment;
(Note 3)
/X/ By the shareholders, in accordance with Section 10.20, a
resolution of the board of directors having been duly adopted
and submitted to the shareholders. At a meeting of
shareholders, not less than the minimum number of votes
required by statute and by the articles of incorporation were
voted in favor of the amendment;
(Note 4)
<PAGE>
/ / By the shareholders, in accordance with Sections 10.20 and
7.10, a resolution of the board of directors having been duly
adopted and submitted to the shareholders. A consent in
writing has been signed by shareholders having not less than
the minimum number of votes required by statute and by the
articles of incorporation. Shareholders who have not consented
in writing have been given notice in accordance with Section
7.10;
(Note 4)
/ / By the shareholders, in accordance with Section 10.20 and
7.10, a resolution of the board of directors have been duly
adopted and submitted to the shareholders. A consent in
writing has been signed by all the shareholders entitled to
vote on this amendment.
(Note 4)
(INSERT AMENDMENT)
(Any article being amended is required to be set forth in its entirety.)
(Suggested language for an amendment to change the corporate name is: RESOLVED,
that the Articles of Incorporation be amended to read as follows:)
- --------------------------------------------------------------------------------
(NEW NAME)
All changes other than name, include on page 2
(over)
<PAGE>
Page 2
Resolution
<PAGE>
Page 3
ARTICLE THREE The manner in which any exchange, reclassification or
cancellation of issued shares, or a reduction of the number of
authorized shares of any class below the number of issued
shares of that class, provided for or effected by this
amendment, is as follows: (If not applicable, insert "No
change")
No change
ARTICLE FOUR (a) The manner in which said amendment effects a change in the
amount of paid-in capital (Paid-in capital replaces the terms
Stated Capital and Paid in Surplus and is equal to the total
of these accounts) is as follows: (If not applicable, insert
"No change")
No change
(b) The amount of paid-in capital (Paid in Capital replaces
the terms Stated Capital and Paid in Surplus and is equal to
the total of these accounts) as changed by this amendment is
as follows: (If not applicable, insert "No change")
No change
Before Amendment After Amendment
Paid-in Capital $ $
---------------- ---------------
(Complete either item 1 or 2 below)
(1) The undersigned corporation has caused these articles to be signed by its
duly authorized officers, each of whom affirm, under penalties of perjury, that
the facts stated herein are true.
Dated May 6 , 19 87 CILCORP Inc.
----------- ------ --------------------------------------------
(Exact Name of Corporation)
<PAGE>
attested by /s/ M. J. Murray by /s/ W. R. Vogelsang
-------------------------- ----------------------------
(Signature of Secretary (Signature of President of
or Assistant Secretary) Vice President)
M. J. Murray, Secretary W. R. Vogelsang, President
--------------------------- ----------------------------
(Type or Print Name & Title) (Type or Print Name and Title)
(2) If amendment is authorized by the incorporators, the incorporators must sign
below.
OR
If amendment is authorized by the directors and there are no officers, then a
majority of the directors or such directors as may be designated by the board,
must sign below.
The undersigned affirms, under penalties of perjury, that the facts stated
herein are true.
Dated , 19
------------------ --------
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
<PAGE>
Extract from Minutes of Annual Meeting of Shareholders of
CILCORP. INC.
held April 28, 1987
I, M.J. Murray, Secretary of CILCORP Inc., hereby certify that at the
Annual Meeting of Shareholders of the Company held April 28, 1987, at which a
quorum was in attendance and voting throughout, the following resolutions were
duly adopted and are now in full force and effect:
RESOLVED: That Article Four of the Article of the Incorporation of the
Company, be amended to read in its entirety as follows:
Paragraph 1: The authorized shares shall be:
Class Par Value Per Share Number of Shares Authorized
- ----- ------------------- ---------------------------
Common Without par value 50,000,000
Preferred Without par value 4,000,000
Paragraph 2: The designations, preferences, qualifications,
limitations, restrictions and the special or relative rights in respect of the
shares of each class are:
Common Stock. Holders of the common stock shall be entitled to one vote per
share on all matters submitted to a vote of the shareholders of the Company,
except matters required to be voted on exclusively by holders of preferred stock
or of any series of preferred stock. Subject only to the prior rights and
preferences of the preferred stock, the holders of the common stock shall be
entitled to dividends thereon, when, as and if declared by the Board of
Directors out of funds of the Company legally available therefor. In the event
of any dissolution or liquidation of the Company, the holders of the common
stock shall be entitled to receive, pro rata, after the prior rights of the
holders of the preferred stock have been satisfied, all of the assets of the
Company remaining available for distribution, if any.
Preferred Stock. The preferred stock may be issued from time to time in one or
more series and shall have preference over the common stock as to the payment of
dividends and to the assets of the Company upon the voluntary or involuntary
liquidation of the Company. Dividends on the preferred stock shall be cumulative
and shares of preferred stock shall have such rights of conversion into shares
of any other class, or into shares of any series of the same or any other class,
as shall be provided with respect to such shares. The Board of Directors by
resolution shall establish each series of preferred stock and fix and determine
the number of shares and the relative rights and preferences of each such
series, provided that
<PAGE>
all shares of the preferred stock shall be identical except as to the following
relative rights and preferences, as to which there may be variations fixed and
determined by the Board of Directors between different series:
(1) The rate of dividend.
(2) The price at and the terms and conditions on which shares....
(3) The amount payable upon shares in event of involuntary
liquidation.
(4) The amount payable upon shares in event of voluntary
liquidation.
(5) Sinking fund provisions for the redemption or purchase of
shares.
(6) The terms and conditions on which shares may be converted, if
the shares of any series are issued with the privilege of
conversion.
(7) The limitation or denial of voting rights, or the grant of
special voting rights.
(8) Any other rights or preferences now or hereafter permitted by
the laws of the State of Illinois as variations between
different series of preferred stock.
RESOLVED FURTHER: That Article Ten of the Article of Incorporation of
this Company, be amended to read in its entirety as follows:
Paragraph 1: Any amendment, alteration, change or repeal of Article
Nine or this Paragraph 1 of Article Ten of these Articles of Incorporation shall
require the affirmative vote of the holders of at least 75% of the Voting Shares
and if there is a Related Person, such action must also be approved by the
affirmative vote of a majority in interest of the Public Holders; provided that
this Paragraph 1 of Article Ten shall not apply to, and the majority vote
prescribed by Paragraph 2 of this Article Ten shall be required for, any
amendment, alteration, change or repeal recommended to the shareholders by
two-thirds or more of the Continuing Directors.
Paragraph 2: Any provision of these Articles of Incorporation other
than Article Nine and Paragraph 1 of Article Ten may be amended, altered,
changed or repealed by the affirmative vote of the holders of a majority of the
outstanding capital stock of the corporation having the right to vote on the
issue and, if a class vote thereon is required pursuant to applicable law, by
the affirmative vote of the holders of a majority of the outstanding shares of
each such class, and
RESOLVED FURTHER: That the officers of this Company are hereby
authorized and directed to do all things necessary or desirable to carry out the
foregoing resolutions and make them effective.
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company this 6th day of May, 1987.
/s/ M. J. Murray
- --------------------------------------------------------------------------------
Secretary
<PAGE>
JIM EDGAR
SECRETARY OF STATE
STATE OF ILLINOIS
<TABLE>
<S> <C> <C>
Submit in Duplicate File #5370-721-1
- ----------------------------------- -----------------------------------
Payment must be made by Certified ARTICLES OF AMENDMENT This Space For Use By
Check, Cashiers Check or a Money Secretary of State
Order, payable to "Secretary of
State." Date
License Fee $
Franchise Tax $
Filing Fee $
DO NOT SEND CASH Clerk
- ----------------------------------- -----------------------------------
Pursuant to the provisions of "The Business Corporation Act of 1983", the
undersigned corporation hereby adopts these Articles of Amendment to its
Articles of Incorporation.
ARTICLE ONE The name of the corporation is CILCORP Inc.
-------------------------------
---------------------------------------------------- (Note 1)
ARTICLE TWO The following amendment of the Articles of Incorporation was adopted on
April 23 , 19 91 in the manner indicated below. ("X" one box only.)
-------------------------- ------
</TABLE>
/ / By a majority of the incorporators, provided no directors were
named in the articles of incorporation and no directors have
been elected; or by a majority of the board of directors, in
accordance with Section 10.10, the corporation having issued
no shares as of the time of adoption of this amendment;
(Note 2)
/ / By a majority of the board of directors, in accordance with
Section 10.15, shares having been issued but shareholder
action not being required for the adoption of the amendment;
(Note 3)
/X/ By the shareholders, in accordance with Section 10.20, a
resolution of the board of directors having been duly adopted
and submitted to the shareholders. At a meeting of
shareholders, not less than the minimum number of votes
required by statute and by the articles of incorporation were
voted in favor of the amendment;
(Note 4)
<PAGE>
/ / By the shareholders, in accordance with Sections 10.20 and
7.10, a resolution of the board of directors having been duly
adopted and submitted to the shareholders. A consent in
writing has been signed by shareholders having not less than
the minimum number of votes required by statute and by the
articles of incorporation. Shareholders who have not consented
in writing have been given notice in accordance with Section
7.10;
(Note 4)
/ / By the shareholders, in accordance with Section 10.20 and
7.10, a resolution of the board of directors have been duly
adopted and submitted to the shareholders. A consent in
writing has been signed by all the shareholders entitled to
vote on this amendment.
(Note 4)
(INSERT AMENDMENT)
(Any article being amended is required to be set forth in its entirety.)
(Suggested language for an amendment to change the corporate name is: RESOLVED,
that the Articles of Incorporation be amended to read as follows:)
- --------------------------------------------------------------------------------
(NEW NAME)
All changes other than name, include on page 2
(over)
<PAGE>
Page 2
Resolution
See attached Exhibit
<PAGE>
Page 3
ARTICLE THREE The manner in which any exchange, reclassification or
cancellation of issued shares, or a reduction of the number of
authorized shares of any class below the number of issued
shares of that class, provided for or effected by this
amendment, is as follows: (If not applicable, insert "No
change")
No change
ARTICLE FOUR (a) The manner in which said amendment effects a change in the
amount of paid-in capital (Paid-in capital replaces the terms
Stated Capital and Paid in Surplus and is equal to the total
of these accounts) is as follows: (If not applicable, insert
"No change")
No change
(b) The amount of paid-in capital (Paid in Capital replaces
the terms Stated Capital and Paid in Surplus and is equal to
the total of these accounts) as changed by this amendment is
as follows: (If not applicable, insert "No change")
No change
Before Amendment After Amendment
Paid-in Capital $ $
---------------- ---------------
(Complete either item 1 or 2 below)
(1) The undersigned corporation has caused these articles to be signed by its
duly authorized officers, each of whom affirm, under penalties of perjury, that
the facts stated herein are true.
Dated May 2 , 19 91 CILCORP Inc.
-------------- ------- --------------------------------
(Exact Name of Corporation)
<PAGE>
attested by /s/ M. J. Murray by /s/ Robert O. Viets
-------------------------- -----------------------------
(Signature of Secretary (Signature of President of
or Assistant Secretary) Vice President)
M. J. Murray, Secretary Robert O. Viets, President
-------------------------- -----------------------------
(Type or Print Name & Title) (Type or Print Name and Title)
(2) If amendment is authorized by the incorporators, the incorporators must sign
below.
OR
If amendment is authorized by the directors and there are no officers, then a
majority of the directors or such directors as may be designated by the board,
must sign below.
The undersigned affirms, under penalties of perjury, that the facts stated
herein are true.
Dated , 19
---------------- --------
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
<PAGE>
CILCORP. INC.
EXHIBIT
RESOLVED: That Article Six of the Articles of Incorporation of the
Company be amended to read in its entirety as follows:
ARTICLE SIX
The number of directors of the corporation shall be such number as may
from time to time be fixed by or pursuant to the By-laws. The directors
shall be elected and divided into three classes, Class I, Class II and
Class III, each class to be as nearly equal in number as possible. The
directors shall initially be allocated to the same classes as those to
which they were designated under the By-laws in effect immediately
prior to the annual meeting in 1991. At each annual meeting the number
of directors of the class whose terms expire at the time of such
meeting (unless the number of directors in such class is increased or
decreased as a result of a change in the total number of directors, in
which case the number of directors in such class as so increased or
deceased) shall be elected to hold office until the third succeeding
annual meeting. Directors may be removed only for cause.
RESOLVED: That Article Seven of the Articles of Incorporation of the
Company be amended to read in its entirety as follows:
ARTICLE SEVEN
In furtherance of, and not in limitation of, the powers conferred by
statute, the Board of Directors of the corporation is expressly
authorized and empowered to adopt, amend or repeal the By-laws (or any
portion thereof) of the corporation. The shareholders of the
corporation are authorized and empowered to adopt, amend or repeal the
By-laws only by an affirmative vote of 75% of the voting power of the
shares outstanding and entitled to vote thereon.
RESOLVED: That Article Eight of the Articles of Incorporation of the
Company be amended to read in its entirety as follows:
<PAGE>
ARTICLE EIGHT
Paragraph 1: The holders of capital stock of the corporation now or
hereafter outstanding shall not have the right to cumulate their respective
votes in any election for directors of the corporation.
Paragraph 2: Any action required or permitted to be taken by the
shareholders of the corporation shall be taken only at a duly called annual or
special meeting. Such action may not be taken by written consent of the
shareholders.
AMENDED AND RESTATED
BY-LAWS
OF
CILCORP INC.
ARTICLE I.
OFFICES
Section 1. The registered office of the Corporation required by the
Illinois Business Corporation Act of 1983, as amended (the "Act"), to be
maintained in the State of Illinois shall be in the City of Chicago, County of
Cook, State of Illinois. The Corporation may also have offices at such other
places both within and without the State of Illinois as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II.
SHAREHOLDERS
Section 1. Time and Place of Meetings. All meetings of the shareholders for
the election of directors or for any other purpose shall be held at such time
and place, within or without the State of Illinois, as shall be designated by
the Board of Directors. In the absence of a designation of a place for any such
meeting by the Board of Directors, each such meeting shall be held at the
principal office of the Corporation.
Section 2. Annual Meetings. An annual meeting of shareholders shall be held
for the purpose of electing directors and transacting such other business as may
properly be brought before the meeting. The date of the annual meeting shall be
determined by the Board of Directors.
Section 3. Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by law, may be called by the
Chief Executive Officer, by the President, by the Chairman of the Board, by a
majority of the Board of Directors, or by the holders of not less than twenty
percent of the outstanding shares entitled to vote on the matter for which the
meeting is called by written request executed by such holders and delivered to
the President or the Secretary of the Corporation.
Section 4. Notice of Meetings. Written notice of each meeting of the
shareholders stating the place, date and time of the meeting and, in the case of
a special meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than ten nor more than sixty days before the date of
the meeting, or in the case of a merger, consolidation, share exchange,
dissolution or sale, lease or exchange of assets, not less than twenty nor more
than sixty days before the date of the meeting, either personally or by mail, by
the President, or by the Secretary at the direction of the President or the
person or persons calling the meeting, to each shareholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the shareholder at his
address as it appears on the records of the Corporation, with postage thereon
prepaid.
Any shareholder entitled to receive notice may waive notice of any meeting
by a writing executed and delivered to the Corporation either before or after
the meeting. Attendance of a shareholder at any meeting shall constitute a
waiver of notice of such meeting, unless the shareholder attends such meeting
for the express purpose of objecting to the holding of such meeting because
proper notice was not given and at the beginning of such meeting records such
objection with the person acting as secretary of the meeting and does not
thereafter vote on any action taken at the meeting.
<PAGE>
Section 5. Quorum. The holders of record of a majority of the shares issued
and outstanding and entitled to vote thereat, represented in person or by proxy,
shall constitute a quorum at all meetings of the shareholders for the
transaction of business, except as otherwise provided by the Act or by the
Articles of Incorporation. If a quorum is not represented, the holders of record
of the shares represented in person or by proxy at the meeting and entitled to
vote thereat shall have power, by the affirmative vote of the holders of a
majority of such shares, to adjourn the meeting to another time and/or place,
without notice other than announcement at the meeting, except as hereinafter
provided, until a quorum shall be present or represented. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the original meeting. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting. Withdrawal of shareholders from any meeting shall not cause the failure
of a duly constituted quorum at such meeting.
Section 6. Voting. At all meetings of the shareholders, each shareholder
shall be entitled to vote, in person or by proxy, each share owned by such
shareholder of record on the record date for the meeting. Each outstanding share
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders, unless otherwise provided in the Act or in the Articles of
Incorporation. When a quorum is present at any meeting, the affirmative vote of
the holders of record of a majority of the shares having voting power
represented in person or by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of the Act
or of the Articles of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question. A
shareholder who is in attendance at a meeting of shareholders in person or by
proxy, but who abstains from the vote on any matter, shall not be deemed to be
represented at such meeting for purposes of the preceding sentence with respect
to such vote, but shall be deemed to be represented at such meeting for all
other purposes.
Section 7. Informal Action by Shareholders. Unless otherwise provided by
the Act or by the Articles of Incorporation, any action required to be taken at
a meeting of the shareholders, or any other action which may be taken at a
meeting of the shareholders, may be taken without a meeting and without a vote,
if a consent in writing, setting forth the action so taken, shall be signed by
(a) the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voting, provided,
that (i) at least five days prior to the execution of the consent a notice in
writing is delivered to all of the shareholders entitled to vote with respect to
the subject matter thereof, and (ii) those shareholders who have not consented
in writing are notified in writing of the taking of the corporate action
promptly after the effective date of such action; or (b) all of the shareholders
entitled to vote with respect to the subject matter thereof.
Section 8. Proxies. At all meetings of shareholders, a shareholder may vote
in person or vote by proxy which is executed by the shareholder or his duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary or
other person authorized to tabulate votes at any time prior to the commencement
of the meeting. No proxy shall be valid after eleven months from the date of its
execution unless otherwise provided in the proxy.
ARTICLE III.
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed and controlled by or under the direction of its Board of
Directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the Articles of Incorporation or
by these By-laws directed or required to be exercised or done by the
shareholders.
3
<PAGE>
Section 2. Number, Qualification and Tenure. The Board of Directors of the
Corporation shall consist of not less than three (3) members and not more than
twelve (12) members, as may be determined by the Board of Directors from time to
time. Within the limits above specified, the number of directors shall be
determined from time to time by resolution of the Board of Directors. The
directors shall be elected at the annual meeting of the shareholders, except as
provided in the Articles of Incorporation or Section 3 of this Article, and each
director elected shall hold office until his successor is elected and qualified
or until his earlier death, termination, resignation or removal from office. Any
decrease in the number of directors shall not have the effect of shortening the
term of any incumbent director.
Section 3. Vacancies and Newly Created Directorships. Vacancies and newly
created directorships resulting from any increase in the number of directors may
be filled by the appointment of a majority of the directors then in office
though less than a quorum, and each director so appointed shall hold office
until the next annual meeting of shareholders and until his successor is elected
and qualified or until the earlier death, termination, resignation or removal
from office of such director.
Section 4. Independent Director.
(a) The Corporation shall have at all times one individual who
is an Independent Director (as defined below). If the Independent Director
resigns, dies or becomes incapacitated, or such position is otherwise vacant, no
action requiring the unanimous affirmative vote of the directors shall be taken
until a successor Independent Director is appointed and qualified and approves
such action.
(b) Notwithstanding any other provision of these By-laws and
any provision of law that otherwise so empowers the Corporation, the Corporation
shall not, without the prior unanimous consent of the Board of Directors,
including the Independent Director, do any of the following: (i) make a general
assignment for the benefit of creditors; (ii) file a voluntary petition in
bankruptcy; (iii) file a petition or answer seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation; (iv) file an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against it in
any proceeding seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or regulation,
or the entry of any order appointing a trustee, liquidator or receiver of it or
of its assets or any substantial portion thereof; or (v) seek, consent to or
acquiesce in the appointment of a trustee, receiver or liquidator of it or of
all or any substantial part of its assets. With regard to any action
contemplated by the preceding sentence, or with regard to any action taken or
determination made at any time when the Corporation is insolvent, each director
will owe its primary fiduciary duty to the Corporation (including the creditors
of the Corporation).
(c) For purposes of these By-laws of the Corporation,
"Independent Director" shall mean, with respect to the Corporation, a director
who is not, and within the last five years was not (except solely by virtue of
such person's serving as, or affiliation with any other person serving as, an
independent director of The AES Corporation ("Parent") or any of its affiliates,
(i) a stockholder, member, partner, director, officer, employee, affiliate,
customer, supplier, creditor or independent contractor of, or any person that
has received any benefit in any form whatever from, or any person that has
provided any service in any form whatever to, or any major creditor (or any
affiliate of any major creditor) of, the Parent or any of its affiliates, or
(ii) any person owning beneficially, directly or indirectly, any outstanding
shares of common stock, any limited liability corporation interests or any
partnership interests, as applicable, of the Parent or any of its affiliates, or
of any major creditor (or any affiliate of any major creditor) of any of the
foregoing, or a stockholder, member, partner, director, officer, employee,
affiliate, customer, supplier, creditor or independent contractor of, or any
person that has received any benefit in any form whatever from, or any person
that has provided any service in any form whatever to, such benefi cial owner or
any of such beneficial owner's affiliates, or (iii) a member of the immediate
family of any person described above; provided that the indirect or beneficial
ownership of stock through a mutual fund or similar diversified investment
vehicle with respect to which the owner does not have discretion or control over
the investments held by such diversified investment vehicle shall not preclude
such owner from being an Independent Director. For purposes of this definition,
"major creditor" shall mean a natural person or
4
<PAGE>
business entity to which the Parent or any of its affiliates has outstanding
indebtedness for borrowed money or credit on open account in a sum sufficiently
large as would reasonably be expected to influence the judgment of the proposed
Independent Director adversely to the interests of the Corporation when the
interests of that person or entity are adverse to those of the Corporation.
Section 5. Directors' Duties. The directors, including the Independent
Director, will act in good faith in accordance with the terms of the
organizational documents and applicable law, and make decisions with respect to
the business and operations of the Corporation independent of, and not dictated
by, the Parent, or any other affiliate thereof, and any director shall bear a
fiduciary duty to the Corporation (including its creditors).
Section 6. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Illinois.
Section 7. Meetings. The Board of Directors shall hold a regular meeting,
to be known as the annual meeting, immediately following each annual meeting of
the shareholders without any notice being given. Other regular meetings of the
Board of Directors shall be held at such time and place as the Board of
Directors may designate from time to time. No notice of regular meetings need be
given, other than by announcement at the immediately preceding regular meeting.
Special meetings of the Board of Directors may be called by or at the request of
the Chairman of the Board or a majority of the Board of Directors. Notice of any
special meeting of the Board shall be given at least two days prior thereto,
either in writing, or telephonically if confirmed promptly in writing, to each
director at the address shown for such director on the records of the
Corporation.
Section 8. Waiver of Notice; Business and Purpose. Notice of any meeting of
the Board of Directors may be waived in writing signed by the person or persons
entitled to such notice either before or after the time of the meeting. The
attendance of a director at any meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened and at the beginning of such meeting records such
objection with the person acting as secretary of the meeting and does not
thereafter vote on any action taken at the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
need be specified in the notice or waiver of notice of such meeting, unless
specifically required by the Act.
Section 9. Quorum and Voting. At all meetings of the Board of Directors a
majority of the total number of directors then in office shall constitute a
quorum for the transaction of business. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting without notice other than announcement at the meeting, to any other
date, time and place until a quorum shall be present. The act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, unless the act of a greater number is required by the
Act or by the Articles of Incorporation. Withdrawal of directors from any
meeting shall not cause the failure of a duly constituted quorum at such
meeting. A director who is in attendance at a meeting of the Board of Directors
but who abstains from the vote on any matter by announcing his abstention to the
person acting as secretary of the meeting and not voting on such matter shall
not be deemed to be present at such meeting for purposes of the preceding
sentence or Section 15 of this Article with respect to such vote, but shall be
deemed to be present at such meeting for all other purposes.
Section 10. Organization. The Chairman of the Board, if elected, shall act
as chairman at all meetings of the Board of Directors. If the Chairman of the
Board is not elected or if elected, is not present, the Vice Chairman, if any,
or, if no such Vice Chairman is present, a director chosen by a majority of the
directors present, shall act as chairman at such meeting of the Board of
Directors.
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Section 11. Committees. The Board of Directors, by resolution adopted by a
majority of the whole Board, may designate two or more directors to constitute
an Executive Committee. The Board of Directors, by resolution adopted by a
majority of the whole Board, may create one or more other committees and appoint
two or more directors to serve on such committee or committees. Each director
appointed to serve on any such committee shall serve, unless the resolution
designating the respective committee is sooner amended or rescinded by the Board
of Directors, until the next annual meeting of the Board or until his respective
successor is designated. The Board of Directors, by resolution adopted by a
majority of the whole Board, may also designate additional directors as
alternate members of any committee to serve as members of such committee in the
place and stead of any regular member or members thereof who may be unable to
attend a meeting or otherwise unavailable to act as a member of such committee.
In the absence or disqualification of a member and all alternate members
designated to serve in the place and stead of such member, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another
director to act at the meeting in the place and stead of such absent or
disqualified member.
The Executive Committee may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation between the meetings of the Board of Directors, and any other
committee may exercise the power and authority of the Board of Directors to the
extent specified by the resolution designating such committee, or the Articles
of Incorporation or these By-laws; provided, however, that no committee may take
any action that is expressly required by the Act or the Articles of
Incorporation or these By-laws to be taken by the Board of Directors and not by
a committee thereof. Each committee shall keep a record of its acts and
proceedings, which shall form a part of the records of the Corporation in the
custody of the Secretary, and all actions of each committee shall be reported to
the Board of Directors at the next meeting of the Board.
Meetings of committees may be called at any time by the Chairman of the
Board, if any, or the chairman of the respective committee. A majority of the
members of the committee shall constitute a quorum for the transaction of
business and, except as expressly limited by this section, the act of a majority
of the members present at any meeting at which there is a quorum shall be the
act of such committee. Except as expressly provided in this section or in the
resolution designating the committee, a majority of the members of any such
committee may select its chairman, fix its rules of procedure, fix the time and
place of its meetings and specify what notice of meetings, if any, shall be
given.
Section 12. Action without Meeting. Unless otherwise specifically
prohibited by the Articles of Incorporation or these By-laws, any action
required or permitted to be taken at any meeting of the Board of Directors or
any committee thereof may be taken without a meeting, if all members of the
Board of Directors or such committee, as the case may be, execute a consent
thereto in writing setting forth the action so taken, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
such committee.
Section 13. Attendance by Telephone. Members of the Board of Directors or
any committee thereof may participate in and act at any meeting of the Board of
Directors or such committee, as the case may be, through the use of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in such meeting
shall constitute attendance and presence in person at the meeting of the person
or persons so participating.
Section 14. Compensation. By resolution of the Board of Directors,
irrespective of any personal interest of any of the members thereof, the
directors may be paid their reasonable expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
meetings or a stated salary as directors, payable in cash or securities. These
payments shall not preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
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Section 15. Presumption of Assent. A director who is present at a meeting
of the Board of Directors or any committee thereof when corporate action is
taken shall be deemed to have assented to the action taken unless: (1) he
objects at the beginning of the meeting to holding such meeting or transacting
business at such meeting; (2) his dissent from the action taken is entered in
the minutes of such meeting; or (3) he delivers written notice of his dissent to
the person acting as the secretary of the meeting before the adjournment thereof
or forwards such dissent by registered or certified mail to the Secretary
immediately after the adjournment of such meeting. The right of dissent is not
available to a director who votes in favor of the action taken.
ARTICLE IV.
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be chosen by
the Board of Directors and shall include a President and a Secretary. The Board
of Directors may also elect a Chairman of the Board, a Vice Chairman, one or
more Vice Presidents, a Treasurer, one or more Assistant Secretaries and
Assistant Treasurers and such other officers and agents as it may deem
appropriate. Any number of offices may be held by the same person.
Section 2. Term of Office. The officers of the Corporation shall be elected
at the annual meeting of the Board of Directors and shall hold office until
their successors are elected and qualified or until their earlier death,
termination, resignation or removal from office. Any officer or agent of the
Corporation may be removed, with or without cause, by the Board of Directors
whenever in its judgment the best interests of the Corporation will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an officer or agent
shall not of itself create contract rights. Any vacancy in any office because of
death, resignation, termination, removal, disqualification or otherwise, may be
filled by the Board of Directors for the unexpired portion of the term.
Section 3. Chief Executive Officer. The Chief Executive Officer of the
Corporation, if elected, shall have general supervision, direction and control
of the business and affairs of the Corporation, subject to the control of the
Board of Directors, and shall have such other functions, authority and duties as
customarily appertain to the office of the chief executive officer of a business
corporation or as may be prescribed by the Board of Directors.
Section 4. President. During any period when there shall be an office of
Chief Executive Officer, the President shall be the chief operating officer of
the Corporation and shall have such functions, authority and duties as may be
prescribed by the Board of Directors or the Chief Executive Officer. During any
period when there shall not be an office of Chief Executive Officer, the
President shall be the chief executive officer of the Corporation, and, as such,
shall have the functions, authority and duties provided for the Chief Executive
Officer.
Section 5. Vice President. The Vice President or, if there shall be more
than one, each Vice President, in the absence of the President or in the event
of the President's inability or refusal to act (and if there be no Chief
Executive Officer), shall have the authority to perform the duties of the
President, subject to such limitations thereon as may be imposed by the Board of
Directors, and such other duties as may from time to time be prescribed by the
Board of Directors, the Chief Executive Officer or the President.
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Section 6. Secretary. The Secretary shall: (a) keep a record of all
proceedings of the shareholders, the Board of Directors and any committees
thereof in one of more books provided for that purpose; (b) give, or cause to be
given, all notices that are required by law or these Bylaws to be given by the
Secretary; (c) be custodian of the corporate records and, if the Corporation has
a corporate seal, of the seal of the Corporation; (d) have authority to affix
the seal of the Corporation to all instruments the execution of which requires
such seal and to attest such affixing of the seal; (e) keep a register of the
post office address of each shareholder which shall be furnished to the
Secretary by such shareholder; (f) sign, with the Chief Executive Officer, if
any, or President or any Vice President, or any other officer thereunto
authorized by the Board of Directors, any certificates for shares of the
Corporation, or any deeds, mortgages, bonds, contracts or other instruments
which the Board of Directors has authorized to be executed by the signature of
more than one officer; (g) have general charge of the share transfer books of
the Corporation; (h) have authority to certify as true and correct copies of the
By-laws, or resolutions of the shareholders, the Board of Directors and
committees thereof, and of other documents of the Corporation; and (i) in
general, perform the duties incident to the office of secretary and such other
duties as from time to time may be prescribed by the Board of Directors, the
Chief Executive Officer or the President. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest such affixing of the seal.
Section 7. Assistant Secretary. The Assistant Secretary, or if there shall
be more than one, each Assistant Secretary in the absence of the Secretary or in
the event of the Secretary's inability or refusal to act, shall have the
authority to perform the duties of the Secretary, subject to such limitations
thereon as may be imposed by the Board of Directors, and such other duties as
may from time to time be prescribed by the Board of Directors, the Chief
Executive Officer, the President or the Secretary.
Section 8. Treasurer. The Treasurer shall be the principal accounting and
financial officer of the Corporation. The Treasurer shall: (a) have charge of
and be responsible for the maintenance of adequate books of account for the
Corporation; (b) have charge and custody of all funds and securities of the
Corporation, and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform the duties incident to the office of treasurer and such
other duties as may from time to time be prescribed by the Board of Directors,
the Chief Executive Officer or the President. The Treasurer may sign with the
Chief Executive Officer, if any, or the President, or any Vice President, or any
other officer thereunto authorized by the Board of Directors, certificates for
shares of the Corporation. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors may determine.
Section 9. Assistant Treasurer. The Assistant Treasurer, or if there shall
be more than one, each Assistant Treasurer, in the absence of the Treasurer or
in the event of the Treasurer's inability or refusal to act, shall have the
authority to perform the duties of the Treasurer, subject to such limitations
thereon as may be imposed by the Board of Directors, and such other duties as
may from time to time be prescribed by the Board of Directors, the Chief
Executive Officer, the President or the Treasurer.
Section 10. Other Officers and Agents. Any officer or agent who is elected
or appointed from time to time by the Board of Directors and whose duties are
not specified in these By-laws shall perform such duties and have such powers as
may from time to time be prescribed by the Board of Directors, the Chief
Executive Officer or the President.
ARTICLE V.
CERTIFICATES FOR SHARES
Section 1. Form. The shares of the Corporation shall be represented by
certificates; provided, however, the Board of Directors may provide by
resolution or resolutions that some or all of any or all classes or series of
the Corporation's shares shall be uncertificated shares. Each certificate for
shares shall be consecutively numbered or otherwise identified. Certificates
representing shares in the
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Corporation shall be signed by or in the name of the Corporation by the Chief
Executive Officer or the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation. Where a certificate is countersigned by a transfer agent, other
than the Corporation or an employee of the Corporation, or by a registrar, the
signatures of one or more officers of the Corporation may be facsimiles. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, the
certificate may be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were such officer, transfer agent or
registrar at the date of its issue.
Section 2. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate or
uncertificated shares in place of any certificate therefor issued by the
Corporation to the person entitled thereto, cancel the old certificate and
record the transaction in its share book.
Section 3. Replacement. In case of the loss, destruction, mutilation or
theft of a certificate representing shares of the Corporation, a new certificate
may be issued upon the surrender of the mutilated certificate or, in the case of
loss, destruction or theft of a certificate, upon satisfactory proof of such
loss, destruction or theft and upon such terms as the Board of Directors may
prescribe. The Board of Directors may in its discretion require the owner of the
lost, destroyed or stolen certificate, or his legal representative, to give the
Corporation a bond, in such sum and in such form and with such surety or
sureties as it may direct, to indemnify the Corporation against any claim that
may be made against it with respect to the certificate alleged to have been
lost, destroyed or stolen.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
Section 1. Third Party Actions. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including all appeals (other than an action,
suit or proceeding by or in the right of the Corporation) by reason of the fact
that he is or was a director or officer of the Corporation (and the Corporation,
in the discretion of the Board of Directors, may so indemnify a person by reason
of the fact that he is or was an employee or agent of the Corporation or is or
was serving at the request of the Corporation, another corporation, partnership,
joint venture, trust or other enterprise in any capacity), against expenses
(including attorneys' fees), judgments, decrees, fines, penalties and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith or in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe his conduct was unlawful.
Section 2. Actions By or in the Right of the Corporation. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit, including all
appeals, by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he is or was a director or officer of the
Corporation (and the Corporation, in the discretion of the Board of Directors,
may so indemnify a person by reason of the fact that he is or was an employee or
agent of the Corporation or is or was serving at the request of the Corporation
in any other capacity for or on behalf of the Corporation), against expenses
(including attorneys' fees) actually and
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reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been finally adjudged to be liable for negligence
or misconduct in the performance of his duty to the Corporation unless and only
to the extent that the court in which such action or suit was brought, or any
other court of competent jurisdiction, shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper. Notwithstanding the foregoing, the
Corporation shall be required to indemnify an officer or director in connection
with an action, suit or proceeding initiated by such person only if such action,
suit or proceeding was authorized by the Board of Directors.
Section 3. Indemnity if Successful. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section 1
or 2 of this Article, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 4. Standard of Conduct. Except in a situation governed by Section 3
of this Article, any indemnification under Section 1 or 2 of this Article
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director
or officer, employee or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in Section 1 or 2, as applicable,
of this Article. Such determination shall be made (i) by a majority vote of
directors acting at a meeting at which a quorum consisting of directors who were
not parties to such action, suit or proceeding is present, or (ii) if such a
quorum is not obtainable, or even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the shareholders.
Section 5. Expenses. Expenses of each officer and director hereunder
indemnified actually and reasonably incurred in defending a civil or criminal
action, suit or proceeding or threat thereof shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of any undertaking by or on behalf of such person to repay such amount unless it
shall ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article. Such expenses incurred by employees
and agents may be so paid upon receipt of the aforesaid undertaking and such
other terms and conditions, if any, as the Board of Directors deems appropriate.
Section 6. Nonexclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to other Sections of this Article, shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may now or hereafter be entitled under any law, by-law,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
Section 7. Insurance. The Corporation may purchase and maintain insurance,
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of the Act.
Section 8. Definitions. For purposes of this Article, references to "the
Corporation" shall include, in addition to the surviving corporation, any
merging corporation (including any corporation having merged with a merging
corporation) absorbed in a merger which, if its separate existence had
continued, would have had the power and authority to indemnify any or all of its
directors, officers, employees and agents, so that any person who was a
director, officer, employee or agent of such merging corporation, or was
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serving at the request of such merging corporation in any other capacity, shall
stand in the same position under the provisions of this Article with respect to
the surviving corporation as such person would have had with respect to such
merging corporation if its separate existence had continued as such corporation
was constituted immediately prior to such merger.
For purposes of this Article, references to "other capacities" shall
include serving as a trustee or agent for any employee benefit plan; references
to "fines" shall include any excise taxes assessed on a person with respect to
an employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries. A person who acted in good faith and in a
manner he reasonably believed to be in the best interests of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article.
Section 9. Reports to Shareholders. If required by the Act, the Corporation
shall report any indemnity payment or advancement of expenses by the Corporation
to any director, officer, employee or agent provided for in this Article to the
shareholders in writing either with or before the distribution of the notice of
the next shareholders' meeting.
Section 10. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction, and the remaining provisions hereof
shall be liberally construed to effectuate the provisions hereof, and the
invalidity of any provision hereof in any jurisdiction shall not affect the
validity or enforceability of such provision in any other jurisdiction.
Section 11. Amendment. The right to indemnification conferred by this
Article shall be deemed to be a contract between the Corporation and each person
referred to herein until amended or repealed, but no amendment to or repeal of
these provisions shall apply to or have any effect on the right to
indemnification of any person with respect to any liability or alleged liability
of such person for or with respect to any act or omission of such person
occurring prior to such amendment or repeal.
ARTICLE VII.
SEPARATENESS
Section 1. Funds, Assets and Accounts. The funds and other assets of the
Corporation shall not be commingled with those of any other entity, and the
Corporation shall maintain its accounts separate from any other person or
entity.
Section 2. Liability for Debts and Name. The Corporation shall not hold
itself out as being liable for the debts of any other entity, and shall conduct
its own business in its own name.
Section 3. Action through Agents and Identity. The Corporation shall act
solely in its own name and through its duly authorized directors, officers or
agents in the conduct of its business, and shall conduct its business so as not
to mislead others as to the identity of the entity or assets with which they are
concerned.
Section 4. Separate Records. The Corporation shall maintain separate
records, books of account and financial statements, and shall not commingle its
records and books of account with the records and books of account of any other
entity.
Section 5. Formalities. The Corporation shall observe in all material
respects all formalities required by
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its organizational documents and applicable law.
Section 6. Capitalization. The Corporation shall at all times ensure that
its capitalization is adequate in light of its business and purpose.
Section 7. Debts of Affiliates. Subject to the last sentence of this
Section 7, (i) neither the Parent nor any affiliate of the Parent (other than
the Corporation) shall guaranty, become liable on or hold itself out as being
liable for the debts of the Corporation; (ii) the Corporation shall not
guarantee or become obligated for the debts of the Parent or any affiliate
thereof (other than the Corporation), or otherwise hold out its credit as being
available to satisfy the obligations of the Parent or any affiliate thereof
(other than the Corporation); (iii) the Corporation shall not pledge its assets
for the benefit of Parent or any of its affiliates; (iv) the Corporation shall
not make loans or advances to Parent or any of its affiliates, and shall not
acquire obligations or securities of the Parent or any affiliate thereof (other
than the Corporation), other than the settlement of purchase contracts with
respect to any Premium Income Equity Securities or similar securities issued by
the Corporation. Notwithstanding the foregoing, the Corporation may take any
action otherwise prohibited under this Section 7 if such action is taken with
respect to its own subsidiaries, and its own subsidiaries may take any action
otherwise prohibited under this Section 7 if such action is taken with respect
to the Corporation.
Section 8. Payment of Liabilities. The Corporation shall pay its own
liabilities out of its own funds.
Section 9. Arm's Length Relationship with Affiliates. The Corporation shall
maintain an arm's-length relationship with its affiliates.
Section 10. Overhead and Office Space. The Corporation shall allocate
fairly and reasonably any overhead for office space shared with the Parent or
any affiliate thereof.
Section 11. Separate Business Forms. The Corporation shall use its own
separate stationery, invoices, checks and other business forms.
Section 12. Correction of Misunderstandings. The Corporation shall correct
any known misunderstanding regarding its separate identity.
ARTICLE VIII.
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be fixed
from time to time by resolution of the Board of Directors.
Section 2. Corporation Seal. The corporate seal, if any, of the Corporation
shall be in such form as may be approved from time to time by the Board of
Directors. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
Section 3. Notices and Mailing. Except as otherwise provided in the Act,
the Articles of Incorporation or these By-laws, all notices required to be given
by any provision of these By-laws shall be deemed to have been given (i) when
received, if given in person, (ii) on the date of acknowledgment of receipt, if
sent by telex, facsimile or other wire transmission, (iii) one day after
delivery, properly addressed, to a reputable courier for same day or overnight
delivery, or (iv) three days after being deposited, properly addressed, in the
U.S. mail, certified or registered mail, postage prepaid.
Section 4. Waiver of Notice. Whenever any notice is required to be given
under the Act or the provisions of the Articles of Incorporation or these
By-laws, a waiver thereof in writing, signed by the
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person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
Section 5. Interpretation. In these By-laws, unless a clear contrary
intention appears, the singular number includes the plural number and vice
versa, and reference to either gender includes the other gender.
ARTICLE IX.
AMENDMENTS
Unless the power to make, alter, amend or repeal these By-laws is reserved
to the shareholders by the Articles of Incorporation, these By-laws, including
any By-law adopted by the shareholders, may be made, altered, amended or
repealed by the shareholders or the Board of Directors, provided, that (i) the
unanimous consent of the Board of Directors, including the Independent Director,
shall be required to alter, amend or repeal (a) Section 4 and Section 5 of
Article III hereof; (b) Article VII hereof; and (c) this Article IX; and (ii)
subject to paragraph (i) above, the fact that the power to make, alter, amend or
repeal these By-laws has been conferred upon the Board of Directors shall not
divest the shareholders of the same powers.
(248391)
13
================================================================================
MIDWEST ENERGY, INC.
and
THE BANK OF NEW YORK,
as Trustee
INDENTURE
Dated as of October 18, 1999
$225,000,000 8.700% Senior Notes due 2009
$250,000,000 9.375% Senior Bonds due 2029
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
<S> <C> <C>
SECTION 1.01. Definitions.....................................................................................1
SECTION 1.02. Certificates and Opinions......................................................................17
SECTION 1.03. Form of Documents Delivered to Trustee.........................................................18
SECTION 1.04. Acts of Holders; Record Dates..................................................................18
SECTION 1.05. Notices, Etc., to Trustee and Company..........................................................21
SECTION 1.06. Notice to Holders; Waiver......................................................................21
SECTION 1.07. Effect of Headings and Table of Contents.......................................................22
SECTION 1.08. Successors and Assigns.........................................................................22
SECTION 1.09. Separability Clause............................................................................22
SECTION 1.10. Benefits of Indenture..........................................................................22
SECTION 1.11. Governing Law..................................................................................22
SECTION 1.12. Legal Holidays.................................................................................22
SECTION 1.13. Incorporation by Reference of Trust Indenture Act..............................................22
ARTICLE II
SECURITY FORMS
SECTION 2.01. Forms Generally................................................................................23
ARTICLE III
SECURITIES
SECTION 3.01. Terms and Issuance of the Securities...........................................................25
SECTION 3.02. Execution, Authentication, Delivery and Dating.................................................31
SECTION 3.03. Temporary Securities...........................................................................32
SECTION 3.04. Registrar and Paying Agent; Registration, Registration of Transfer and
Exchange.......................................................................................32
SECTION 3.05. Restricted Securities..........................................................................34
SECTION 3.06. Global Securities..............................................................................35
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen Securities...............................................40
SECTION 3.08. Payment of Interest; Interest Rights Reserved..................................................41
SECTION 3.09. Persons Deemed Owners..........................................................................42
SECTION 3.10. Cancellation...................................................................................43
SECTION 3.11. Computation of Interest........................................................................43
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SECTION 3.12. Certification Form.............................................................................43
SECTION 3.13. CUSIP and ISIN Numbers.........................................................................50
ARTICLE IV
SATISFACTION, DISCHARGE AND DEFEASANCE
SECTION 4.01. Satisfaction and Discharge of Indenture........................................................50
SECTION 4.02. Defeasance, Discharge and Covenant Defeasance..................................................51
SECTION 4.03. Application of Trust Money.....................................................................54
SECTION 4.04. Reinstatement..................................................................................54
ARTICLE V
REMEDIES
SECTION 5.01. Events of Default..............................................................................55
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment.............................................56
SECTION 5.03. Other Remedies.................................................................................57
SECTION 5.04. Waiver of Past Defaults........................................................................57
SECTION 5.05. Control by Majority............................................................................57
SECTION 5.06. Limitation on Suits............................................................................58
SECTION 5.07. Rights of Holders to Receive Payments..........................................................58
SECTION 5.08. Collection Suit by Trustee.....................................................................58
SECTION 5.09. Trustee May File Proofs of Claim...............................................................59
SECTION 5.10. Application of Proceeds........................................................................59
SECTION 5.11. Restoration of Rights and Remedies.............................................................60
SECTION 5.12. Undertaking for Costs..........................................................................60
SECTION 5.13. Rights and Remedies Cumulative.................................................................60
SECTION 5.14. Delay or Omission Not Waiver...................................................................61
ARTICLE VI
THE TRUSTEE
SECTION 6.01. Certain Duties and Responsibilities............................................................61
SECTION 6.02. Notice of Defaults.............................................................................62
SECTION 6.03. Certain Rights of Trustee......................................................................62
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities.........................................64
SECTION 6.05. May Hold Securities............................................................................64
SECTION 6.06. Money Held in Trust............................................................................64
SECTION 6.07. Compensation and Reimbursement.................................................................64
SECTION 6.08. Disqualification; Conflicting Interests........................................................65
SECTION 6.09. Corporate Trustee Required; Eligibility........................................................65
SECTION 6.10. Resignation and Removal; Appointment of Successor Trustee......................................65
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SECTION 6.11. Acceptance of Appointment by Successor.........................................................67
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business....................................68
SECTION 6.13. Preferential Collecting of Claims Against Company..............................................68
SECTION 6.14. Authenticating Agents..........................................................................68
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01. Company to Furnish Trustee Names and Addresses of Holders......................................70
SECTION 7.02. Preservation of Information; Communications to Holders.........................................70
SECTION 7.03. Reports by Trustee.............................................................................71
SECTION 7.04. Reports by Company.............................................................................71
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, SALE OR LEASE
SECTION 8.01. Company May Consolidate, Etc., Only on Certain Terms...........................................71
SECTION 8.02. Successor Corporation to be Substituted........................................................72
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indenture without Consent of Holders..............................................72
SECTION 9.02. Supplemental Indentures with Consent of Holders................................................74
SECTION 9.03. Execution of Supplemental Indentures...........................................................75
SECTION 9.04. Effect of Supplemental Indentures..............................................................75
SECTION 9.05. Conformity with Trust Indenture Act............................................................75
SECTION 9.06. Reference in Securities to Supplemental Indentures.............................................75
SECTION 9.07. Amendments to the Pledge Agreement.............................................................75
ARTICLE X
COVENANTS
SECTION 10.01. Payment of Principal, Premium, if any, and Interest............................................76
SECTION 10.02. Maintenance of Office or Agency................................................................76
SECTION 10.03. Money for Securities Payments to Be Held in Trust..............................................77
SECTION 10.04. Limitation on Liens............................................................................78
SECTION 10.05. Limitation on Distributions and Intercompany Loans.............................................82
SECTION 10.06. Limitation on Indebtedness of the Company......................................................83
SECTION 10.07. Limitation on Business Activities..............................................................84
SECTION 10.08. Statement by Officers as to Default............................................................84
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SECTION 10.09. Modification or Waiver of Certain Covenants....................................................84
SECTION 10.10. Further Assurances.............................................................................85
SECTION 10.11. Copies Available to Holders....................................................................85
SECTION 10.12. Reports by Company.............................................................................85
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.01. Optional Redemption............................................................................86
SECTION 11.02. Election to Redeem; Notice to Trustee..........................................................86
SECTION 11.03. Selection by Trustee of Securities to Be Redeemed..............................................86
SECTION 11.04. Notice of Redemption...........................................................................87
SECTION 11.05. Deposit of Redemption Price....................................................................88
SECTION 11.06. Securities Payable on Redemption Date..........................................................88
SECTION 11.07. Securities Redeemed in Part....................................................................88
ARTICLE XII
MEETINGS OF HOLDERS OF SECURITIES
SECTION 12.01. Purposes of Meeting............................................................................89
SECTION 12.02. Place of Meetings..............................................................................89
SECTION 12.03. Voting at Meetings.............................................................................90
SECTION 12.04. Voting Rights, Conducts and Adjournment........................................................90
SECTION 12.05. Revocation of Consent by Holders...............................................................91
ARTICLE XIII
SECURITY AND COLLATERAL
SECTION 13.01. Pledge Agreement...............................................................................91
SECTION 13.02. Recording and Opinions.........................................................................92
SECTION 13.03. Release of Collateral..........................................................................92
SECTION 13.04. Certificates of the Company....................................................................93
SECTION 13.05. Certificates of the Trustee....................................................................93
SECTION 13.06. Authorization of Actions to be Taken by the Collateral Agent Under the
Pledge Agreement...............................................................................93
SECTION 13.07. Authorization of Receipt of Refunds by the Trustee Under the Pledge
Agreement......................................................................................94
SECTION 13.08. Termination of Security Interest...............................................................94
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ARTICLE XIV
MISCELLANEOUS
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SECTION 14.01. Consent to Jurisdiction; Appointment of Agent to Accept Service of
Process........................................................................................94
SECTION 14.02. Counterparts...................................................................................96
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EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Bond
Exhibit C First Supplemental Indenture, dated as of October 18, 1999,
between CILCORP Inc., an Illinois Corporation and The Bank of
New York, a New York banking corporation, as trustee
vi
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CROSS-REFERENCE TABLE
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Trust Indenture Indenture
Act Section Section
<S> <C> <C>
Section 310 (a)(1).........................................................................6.09
(a)(2).........................................................................6.09
(a)(3)...............................................................Not Applicable
(a)(4)...............................................................Not Applicable
(b)......................................................................6.08, 6.10
Section 311 (a)............................................................................6.13
(b)............................................................................6.13
(c)..................................................................Not Applicable
Section 312 (a)......................................................................7.01, 7.02
(b)............................................................................7.02
(c)............................................................................7.02
Section 313 (a)............................................................................7.03
(b)............................................................................7.03
(c)............................................................................7.03
(d)............................................................................7.03
Section 314 (a)............................................................................7.04
(a)(4)...................................................................1.01, 7.04
(b)..................................................................Not Applicable
(c)(1).........................................................................1.02
(c)(2).........................................................................1.02
(c)(3)...............................................................Not Applicable
(d)..................................................................Not Applicable
(e)............................................................................1.02
(f)..................................................................Not Applicable
Section 315 (a)............................................................................6.01
(b)............................................................................6.02
(c)............................................................................6.01
(d)............................................................................6.01
(e)............................................................................5.12
Section 316 (a)............................................................1.01 ("Outstanding")
(a)(1)(A)................................................................5.02, 5.05
(a)(1)(B)......................................................................5.04
(a)(2)...............................................................Not Applicable
(b)............................................................................5.07
(c)............................................................................1.04
Section 317 (a)(1).........................................................................5.08
(a)(2).........................................................................5.09
(b)...........................................................................10.03
Section 318 (a)............................................................................1.13
(b)..................................................................Not Applicable
(c)............................................................................1.13
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Note: This Cross-Reference Table shall not, for any purpose, be deemed
to be a part of the Indenture.
-i-
<PAGE>
INDENTURE, dated as of October 18, 1999, between MIDWEST ENERGY, INC., an
Illinois corporation (herein called the "Company"), having its principal office
at 1001 North 19th Street, 20th Floor, Arlington, Virginia 22209, and THE BANK
OF NEW YORK, a New York banking corporation as trustee (herein called the
"Trustee").
W I T N E S S E T H:
WHEREAS, the Company desires to create two series of notes, one series
in an aggregate principal amount of Two hundred and twenty-five million dollars
($225,000,000) to be designated the "8.700% Senior Notes due 2009" (the
"Notes"), and one series in an aggregate principal amount of Two hundred and
fifty million dollars ($250,000,000) to be designated the "9.375% Senior Bonds
due 2029" (the "Bonds" and, together with the Notes, the "Securities"), and all
action on the part of the Company necessary to authorize the issuance of the
Securities under this Indenture has been duly taken; and
WHEREAS, all acts and things necessary to make the Securities, when
executed by the Company and authenticated and delivered by the Trustee as
provided in this Indenture, the valid and binding obligations of the Company,
have been done and performed;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in consideration of the premises and of the acceptance and
purchase of the Securities by the holders thereof and of the acceptance of this
trust by the Trustee, the Company covenants and agrees with the Trustee, for the
equal benefit of holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01 Definitions
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the respective meanings assigned
to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein to the extent applicable;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting
principles in the United States and, except as otherwise herein expressly
provided, the term "generally accepted
<PAGE>
2
accounting principles," with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted in the United States at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article VI, are defined in that
Article.
"Act", when used with respect to any Holder, has the meaning specified
in Section 1.04.
"AES" means The AES Corporation, a Delaware corporation and the sole
stockholder of the Company.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling", and "controlled" have meanings correlative to the
foregoing.
"Applicable Procedures" means the rules and procedures of DTC and, as
applicable, Euroclear and Cedel, in each case pertaining to beneficial interests
in a Global Security.
"Auditors" means the auditors for the time being of the Company or, in
the event of their being replaced by the Company or being unable or unwilling to
carry out any action requested of them pursuant to the terms of the Indenture,
such other firm of internationally recognized accountants as the Company may
select for the purpose.
"Authenticating Agent" means any Person authorized to authenticate and
deliver Securities on behalf of the Trustee pursuant to Section 6.14.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution of the Company
certified by the Secretary or any Assistant Secretary or by any other authorized
designee of the Board of Directors to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification.
"Bonds" has the meaning specified in the first recital of this
Indenture.
<PAGE>
3
"Business Day", when used with respect to the Place of Payment of the
Securities of any series, means each day which is not a Saturday, a Sunday or a
day on which banking institutions in any Place of Payment for the Securities of
that series are authorized or obligated by law to remain closed.
"Capitalized Lease Obligations" means all lease obligations of the
Company and its Subsidiaries which, under GAAP, are or will be required to be
capitalized, in each case taken at the amount of the lease obligation accounted
for as indebtedness in conformity with those principles.
"Cedel" means Cedelbank, societe anonyme, or its successors.
"CILCORP" means CILCORP Inc., an Illinois corporation.
"CILCO" means Central Illinois Light Company, an Illinois corporation
and wholly-owned subsidiary of CILCORP.
"Collateral" has the meaning specified in the Pledge Agreement.
"Collateral Agent" has the meaning specified in the Pledge Agreement.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by the Chairman of the Board of Directors, the
President or a Vice President of the Company and by the Treasurer, an Assistant
Treasurer, Secretary or an Assistant Secretary of the Company, and delivered to
the Trustee.
"Consolidated Current Liabilities" means the consolidated current
liabilities of the Company and its Subsidiaries but excluding the current
portion of long term Indebtedness which would otherwise be included in it, as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Debt" means, at any time, the sum of the aggregate
outstanding principal amount of all Indebtedness for Borrowed Money (including,
without limitation, the principal component of Capitalized Lease Obligations,
but excluding Permitted Debt, Currency, Interest Rate or Commodity Agreements
and all Consolidated Current Liabilities and Project
<PAGE>
4
Finance Debt) of the Company and its Subsidiaries, as determined on a
consolidated basis in conformity with GAAP.
"Consolidated EBITDA" means, for any period, the sum of the amounts for
such period of the Company's (i) Consolidated Net Income, (ii) distributions
paid, accrued or scheduled to be paid in respect of any Preferred Securities or
other capital stock to the extent deducted in calculating Consolidated Net
Income, (iii) Consolidated Interest Expense plus (x) interest paid, accrued or
scheduled to be paid or to be accrued in respect of any Permitted Debt, and (y)
interest expense related to company owned life insurance, (iv) income taxes and
deferred taxes (other than income taxes (either positive or negative)
attributable to extraordinary and non-recurring gains or losses or sales of
assets), (v) depreciation expense, (vi) amortization expense, and (vii) all
other non-cash items reducing Consolidated Net Income, less all non-cash items
increasing Consolidated Net Income, all as determined on a consolidated basis in
conformity with GAAP; provided that, to the extent that the Company has any
Subsidiary that is not a wholly owned Subsidiary, Consolidated EBITDA shall be
reduced by an amount equal to the Consolidated Net Income of such Subsidiary
multiplied by the quotient of (A) the number of shares of outstanding common
stock of such Subsidiary not owned on the relevent Measurement Date by the
Company or any Subsidiary of the Company, divided by (B) the total number of
shares of outstanding common stock of such Subsidiary on the relevent
Measurement Date.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness for Borrowed Money (excluding
interest expense related to Permitted Debt and company owned life insurance and
including amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; and all commissions, discounts
and other fees and charges owed with respect to bankers' acceptance financing)
and the net costs associated with Interest Rate Agreements and all but the
principal component of rentals in respect of Capitalized Lease Obligations,
paid, accrued or scheduled to be paid or to be accrued by the Company and each
of its Subsidiaries during such period, excluding, however, any amount of such
interest of any Subsidiary of the Company if the net income (or loss) of such
Subsidiary is excluded from the calculation of Consolidated Net Income for such
Subsidiary pursuant to clause (ii) of the definition thereof (but only in the
same proportion as the net operating income (or loss) of such Subsidiary is
excluded), less consolidated interest income, all as determined on a
consolidated basis in conformity with GAAP; provided that, to the extent that
the Company has any Subsidiary that is not a wholly owned Subsidiary,
Consolidated Interest Expense shall be reduced by an amount equal to such
interest expense of such Subsidiary multiplied by the quotient of (A) the number
of shares of outstanding common stock of such Subsidiary not owned on the
relevent Measurement Date by the Company or any Subsidiary of the Company
divided by (B) the total number of shares of outstanding common stock of such
Subsidiary on the relevent Measurement Date.
"Consolidated Net Income" means, for any period, the aggregate of the
net income (or loss) of the Company and its Subsidiaries for such period, as
determined on a consolidated basis in conformity with GAAP; provided that the
following items shall be excluded from any calculation of Consolidated Net
Income (without duplication): (i) the net
<PAGE>
5
income (or loss) of any Person (other than a Subsidiary) in which any other
person has a joint interest, except to the extent of the amount of dividends or
other distributions actually paid to the Company or another Subsidiary of the
Company during such period; (ii) the net income (or loss) of any Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such Subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation or license; (iii) all
extraordinary gains and extraordinary losses, merger related expenses and
one-time expenses, cash or noncash, relating to restructuring efforts; and (iv)
all gains and losses from discontinued operations.
"Consolidated Net Tangible Assets" means at any time, the total of all
assets (including revaluations thereof as a result of commercial appraisals,
price level restatement or otherwise) appearing on the most recently available
consolidated balance sheet of the Company and its Subsidiaries (provided that
such balance sheet is of a date not more than 60 days prior to the date of
creation of the relevent Lien) prepared in accordance with GAAP, net of
applicable reserves and deductions, but excluding goodwill, trade names,
trademarks, patents, unamortized debt discount and all other like intangible
assets (which term shall not be construed to include such revaluations), less
the aggregate of the Consolidated Current Liabilities of the Company appearing
on such balance sheet.
"Corporate Trust Office" means the principal office of the Trustee in
The City of New York, at which at any particular time its corporate trust
business shall be administered, which at the date hereof is located at 101
Barclay Street, Floor 21W, New York, NY 10286, Attention: Corporate Trust
Administration, or at any other time at such other address as the Trustee may
designate from time to time.
"corporation" includes corporations, associations, companies and
business trusts.
"Covenant Defeasance" has the meaning specified in Section 4.02(b).
"Currency, Interest Rate or Commodity Agreements" means an agreement or
transaction involving any currency, interest rate or energy price or volumetric
swap, cap or collar arrangement, forward exchange transaction, option, warrant,
forward rate agreement, futures contract or other derivative instrument of any
kind for the hedging or management of foreign exchange, interest rate or energy
price or volumetric risks; it being understood, for purposes of this definition,
that the term "energy" shall include, without limitation, coal, gas, oil and
electricity.
"default" means, for purposes of Section 5.01 hereof, an "Event of
Default" as specified in Section 5.01 hereof. For purposes of Section 310(b) of
the Trust Indenture Act (if applicable to the Securities of any series),
"default" shall mean an "Event of Default" as specified in Section 5.01 hereof,
but exclusive of any period of grace or requirement of notice.
"Defaulted Interest" has the meaning specified in Section 3.08.
<PAGE>
6
"Defeasance" has the meaning specified in Section 4.02(a).
"Definitive Security" means a physical security in fully registered
form.
"Depositary" means, with respect to the Securities issued in whole or
in part in the form of one or more Global Securities, DTC.
"Discharged" means, with respect to the Securities of any series, the
discharge of the entire indebtedness represented by, and obligations of the
Company under, the Securities of such series and the satisfaction of all the
obligations of the Company under this Indenture relating to the Securities of
such series, except (A) the rights of Holders of the Securities of such series
to receive, from the trust fund described in Section 4.03 hereof, payment of the
principal of and interest and premium, if any, on the Securities of such series
when such payments are due, (B) the Company's obligations with respect to the
Securities of such series with respect to registration, transfer, exchange and
maintenance of a Place of Payment and (C) the rights, powers, trusts, duties,
protections and immunities of the Trustee under this Indenture.
"Distribution" means any dividend, distribution or payment (including
by way of redemption, repurchase, retirement, return or repayment) in respect of
shares of capital stock of the Company, excluding any contract adjustment
payments under contracts to purchase common stock of CILCORP, AES or any of its
affiliates (which common stock was not held as an asset of CILCORP) entered into
in connection with the issuance of any Permitted Debt.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debt.
"DTC" means The Depository Trust Company or its successors, or any
successor clearing agency which is registered as such under the Exchange Act and
approved by the Company.
"Duff & Phelps" means Duff & Phelps Credit Rating Co., and any
Subsidiary or successor thereof.
"Effective Date" means the effective date of the Merger, as provided
for in the certificate of merger filed and accepted by the appropriate state
authorities.
"Euroclear" means the Euroclear System or its successors.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Definitive Security" has the meaning specified in Section
2.01.
"Exchange Global Security" has the meaning specified in Section 2.01.
<PAGE>
7
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.
"Exchange Security" means a security which has been registered under
the Securities Act in global form as an Exchange Global Security or definitive
form as an Exchange Definitive Security.
"Existing Rating" means, for any Rating Agency on any date of
determination, the Rating assigned to the securities by such Rating Agency as of
such date.
"Excluded Subsidiary" means any Subsidiary of the Company
(i) in respect of which neither the Company nor any Subsidiary of
the Company (other than another Excluded Subsidiary) has
undertaken any legal obligation to give any guarantee for the
benefit of the holders of any Indebtedness for Borrowed Money
(other than to another member of the Group) other than in
respect of any statutory obligation and the Subsidiaries of
which are all Excluded Subsidiaries; and
(ii) which has been designated as such by the Company by written
notice to the Trustee; provided that the Company may give
written notice to a Responsible Officer of the Trustee at any
time that any Excluded Subsidiary is no longer an Excluded
Subsidiary whereupon it shall cease to be an Excluded
Subsidiary.
"Existing Rating" means, for any Rating Agency on any date of
determination, the Rating assigned to the Securities of any series by such
Rating Agency as of such date.
"Expiration Date" has the meaning specified in Section 1.04.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Global Security" means a Rule 144A Global Security, a Regulations S
Global Security or an Exchange Global Security, in global form substantially in
the form set forth in Exhibit A, with respect to the Notes, or Exhibit B, with
respect to the Bonds, in each case, to this Indenture.
"Group" means the Company and its Subsidiaries and "member of the
Group" shall be construed accordingly.
"Holder", "holder of Securities", "Securityholder" and other similar
terms mean the Person in whose name a Security is registered in the Security
Register.
"Holding Period" has the meaning specified in Section 2.01.
<PAGE>
8
"incur" means, with respect to any Indebtedness, to incur, create,
issue, assume or guarantee such Indebtedness.
"Indebtedness" means, with respect to the Company or any of its
Subsidiaries at any date of determination (without duplication): (i) all
Indebtedness for Borrowed Money (excluding any credit which is available but
undrawn), (ii) all obligations in respect of letters of credit (including
reimbursement obligations with respect thereto), (iii) all obligations to pay
the deferred and unpaid purchase price of property or services, which purchase
price is due more than six months after the date of placing such property in
service or taking delivery and title thereto or the completion of such services,
except trade payables, (iv) all Capitalized Lease Obligations, (v) all
indebtedness of other persons secured by a mortgage, charge, lien, pledge or
other security interest on any asset of the Company or any of its Subsidiaries,
whether or not such indebtedness is assumed; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of the secured indebtedness, (vi)
all indebtedness of other persons of the types specified in the preceding
clauses (i) through (v), to the extent such indebtedness is guaranteed by the
Company or any of its Subsidiaries, and (vii) to the extent not otherwise
included in this definition, net obligations under Currency, Interest Rate or
Commodity Agreements. The amount of Indebtedness at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, upon the occurrence of the contingency giving rise to the obligation,
the maximum liability of any contingent obligations of the types specified in
the preceding clauses (i) through (vii) at such date; provided that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with GAAP.
"Indebtedness For Borrowed Money" means any indebtedness (whether being
principal, premium, interest or other amounts) for (i) money borrowed, (ii)
payment obligations under or in respect of any trade acceptance or trade
acceptance credit, or (iii) any notes, bonds, loan stock or other debt
securities offered, issued or distributed whether by way of public offer,
private placement, acquisition consideration or otherwise and whether issued for
cash or in whole or in part for a consideration other than cash (including,
without limitation, Permitted Debt); provided, however, in each case, that such
term shall exclude (a) any indebtedness relating to any accounts receivable
securitizations, (b) any Indebtedness of the type permitted to be secured by
Liens pursuant to Section 10.04(m) herein, (c) any Preferred Securities which
are issued and outstanding on the date of original issue of the Securities or
any extension, renewal, or replacement (or successive extensions, renewals or
replacements), as a whole or in part, of any such existing Preferred Securities,
for amounts not exceeding the principal amount or liquidation preference of the
Preferred Securities so extended, renewed or replaced, and (d) any Preferred
Securities issued in replacement or in connection with a refinancing of any
preferred securities or preferred stock which is issued and outstanding on the
date or original issue of the Securities, for amounts not exceeding the
liquidation preference of the preferred securities or preferred stock so
replaced or refinanced.
<PAGE>
9
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Indirect Participant" means a Person that holds a beneficial interest
in a Global Security through a person that has an account with DTC.
"Initial Purchaser" means Lehman Brothers Inc., J.P. Morgan & Co. and
Morgan Stanley Dean Witter.
"Initial Ratings" has the meaning specified in Section 10.05.
"Initial Securities" means Securities of any series issued under this
Indenture which are offered and sold pursuant to an exemption from registration
under the Securities Act.
"Interest Coverage Ratio" means, with respect to the Company on any
Measurement Date, the ratio of (i) the aggregate amount of Consolidated EBITDA
of the Company for the four fiscal quarters for which financial information in
respect thereof is available immediately prior to such Measurement Date to (ii)
the aggregate Consolidated Interest Expense during such four fiscal quarters.
"Interest Payment Date", when used with respect to any installment or
interest in respect of a Security, means the Stated Maturity of such installment
of interest.
"Investments" in any Person means any loan or advance to, any net
payment on a guarantee of, any acquisition of capital stock, equity interest,
obligation or other security of, or capital contribution or other investment in,
such Person. Investments exclude advances to customers and suppliers and similar
payments in the ordinary course of business.
"Leverage Ratio" means the ratio of Consolidated Debt to Total Capital,
calculated on the basis of the most recently available consolidated balance
sheet of the Company and its consolidated Subsidiaries (provided that such
balance sheet is as of a date not more than 60 days prior to a Measurement Date)
prepared in accordance with GAAP.
"Lien" means any mortgage, lien, pledge, security interest or other
encumbrance; provided, however, that the term "Lien" shall not mean any
easements, rights-of-way, restrictions and other similar encumbrances and
encumbrances consisting of zoning restrictions, leases, subleases, restrictions
on the use of property or defects in the title thereto.
"Maturity", when used with respect to any Security or any installment
of principal thereof, means the date on which the principal of such Security or
installment of principal, as applicable, becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Measurement Date" means the record date for any Distribution.
<PAGE>
10
"Merger" means the consummation of the merger of the Company with and
into CILCORP and the other transactions contemplated by the Merger Agreement, as
a result of which CILCORP becomes a direct wholly-owned Subsidiary of AES.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
November 22, 1998 among AES, CILCORP and the Company, as the same may be amended
from time to time.
"Moody's" means Moody's Investors Service, Inc., and any Subsidiary or
successor thereof.
"Notes" has the meaning stated in the first recital of this Indenture.
"Notice of Default" means a written notice of the kind specified in
Section 5.01(3).
"Obligations" has the meaning specified in Section 13.01.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board of Directors, the President or any Vice President of the Company and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, and delivered to the Trustee. One of the Officers signing an
Officers' Certificate delivered pursuant to Section 10.08 shall be the principal
executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who, unless
otherwise specified herein or required by the Trust Indenture Act, may be an
employee of or regular counsel for the Company, or may be other counsel to the
Company.
"Outstanding", when used with respect to the Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money or U.S. Governmental Obligations in the
necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust
or set aside and segregated in trust by the Company (if the
Company shall act as its own Paying Agent) for the Holders of
such Securities; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory
to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 3.09 or in
exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other
than any such Securities in respect of which there shall have
<PAGE>
11
been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose
hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Subsidiary of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Securities so owned as
described in the proviso to the preceding sentence which have been pledged in
good faith may be regarded as Outstanding if the pledgee certifies to the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Subsidiary of the Company or of such other obligor.
"Participant" means a Person that has an account with DTC.
"Paying Agent" means The Bank of New York until a successor Paying
Agent shall have become such pursuant to the applicable provisions of this
Indenture and, thereafter, "Paying Agent" shall mean such successor Paying
Agent.
"Permanent Global Security" means a Global Security that is, at the
time of the initial issuance of the related series of Securities, issued in
permanent form.
"Permitted Debt" means Indebtedness for Borrowed Money issued in
connection with a contract or contracts to purchase from CILCORP common stock of
CILCORP, AES or any affiliate of AES (which common stock was not held as an
asset of CILCORP) for an aggregate amount equal to the aggregate principal
amount of such Indebtedness for Borrowed Money.
"Permitted Liens" means liens permitted by clauses (a) through (e)
under Section 10.04(i).
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of (and premium, if any)
and interest, if any, on the Securities of that series are payable as specified
in or as contemplated by Section 3.01.
"Pledge Agreement" means the Pledge Agreement dated as of the date
hereof, made by CILCORP in favor of The Bank of New York, as collateral agent.
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12
"Pledge Effective Date" means the earlier to occur of (i) January 31,
2002 and (ii) the date on which the existing $30.5 million Series A medium-term
notes of CILCORP are no longer outstanding.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purpose of this definition, any Security
authenticated and delivered under Section 3.07 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen security.
"Preferred Securities" means, without duplication, any trust preferred
or preferred securities or related debt or guaranties of CILCORP or any of its
subsidiaries.
"Principal Amount" has the meaning specified in Section 3.01.
"Project Finance Debt" means:
(i) any Indebtedness to finance or refinance the ownership,
acquisition, development, design, engineering, procurement,
construction, servicing, management and/or operation of any project or
asset which is incurred by an Excluded Subsidiary; and
(ii) any Indebtedness to finance or refinance the ownership,
acquisition, development, design, engineering, procurement,
construction, servicing, management and/or operation of any project or
asset in respect of which the person or persons to whom any such
Indebtedness is or may be owed by the relevant borrower (whether or not
a member of the Group) has or have no recourse whatsoever to any member
of the Group (other than an Excluded Subsidiary) for the repayment
thereof other than:
(a) recourse to such member of the Group for amounts
limited to the cash flow or net cash flow (other than historic
cash flow or historic net cash flow) from, or ownership
interests or other investments in, such project or asset;
and/or
(b) recourse to such member of the Group for the
purpose only of enabling amounts to be claimed in respect of
such Indebtedness in an enforcement of any encumbrance given
by such member of the Group over such project or asset or the
income, cash flow or other proceeds deriving therefrom (or
given by any shareholder or the like, or other investor in the
borrower or in the owner of such project or asset over its
shares or the like in the capital of, or other investment in,
the borrower or in the owner of such project or asset) to
secure such Indebtedness, provided that the extent of such
recourse to such member of the Group is limited solely to the
amount of any recoveries made on any such enforcement; and/or
(c) recourse to such borrower generally, or directly
or indirectly to a member of the Group, under any form of
assurance, indemnity, undertaking or
<PAGE>
13
support, which recourse is limited to a claim for damages
(other than liquidated damages and damages required to be
calculated in a specified way) for breach of an obligation
(not being a payment obligation or an obligation to procure
payment by another or an indemnity in respect thereof or any
obligation to comply or to procure compliance by another with
any financial ratios or other tests of financial condition) by
the person against which such recourse is available.
"QIB" means a Qualified Institutional Buyer, as defined in Rule 144A.
"Rating" means, for each Rating Agency, the credit rating assigned to
the Securities of any series by such Rating Agency.
"Rating Agency" means (i) S&P, (ii) Moody's, and (iii) Duff & Phelps,
any of their respective Subsidiaries or successors, or, in any case, if such
person ceases to rate any series of Securities for reasons outside the control
of the Company, any other "nationally recognized statistical rating
organization" (within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange
Act) selected by the Company as a replacement Rating Agency.
"Ratings Downgrade" means a lowering by any of the Rating Agencies of
the Existing Rating assigned to the Securities by such Rating Agency.
"Redemption Date" means any date on which the Company redeems all or
any portion of any Security in accordance with the terms of this Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture, exclusive of accrued and unpaid interest.
"Registered Exchange Offer" means the offer by the Company, pursuant to
the Registration Rights Agreement, to Holders of the Initial Securities, to
issue and deliver to such Holders, in exchange for such Initial Securities, a
like aggregate principal amount of Exchange Securities which have been
registered under the Securities Act.
"Registered Security" means any Security that is payable to a
registered owner or registered assigns thereof as registered in the Security
Register.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of October 18, 1999 between the Company and the Initial Purchasers.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 3.01.
"Regulation S" means Regulation S promulgated under the Securities Act,
or any successor provision thereto and as may be amended from time to time.
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14
"Regulation S Global Security" has the meaning specified in Section
2.01.
"Regulation S Security" means Securities of any series offered and sold
in their initial distribution to non-US Persons in offshore transactions in
reliance on Regulation S, until such time as the Restricted Period shall have
terminated.
"Relevant Date" means, for any payment made with respect to the
Securities of any series, the later of (i) the date on which such payment first
becomes due and (ii) if the full amount payable has not been received in The
City of New York by the Depositary or by the Trustee on or prior to such due
date, the date on which, the full amount having been so received, notice to that
effect shall have been given to the Holders in accordance with this Indenture.
"Responsible Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Office, including any vice president,
assistant vice president, assistant secretary (if any), treasurer, assistant
treasurer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers; and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Restricted Definitive Securities" means Definitive Securities that are
Restricted Securities.
"Restricted Period" has the meaning specified in Section 2.01.
"Restricted Securities" means Securities required to bear a legend
containing Securities Act transfer restrictions, in substantially the form
specified on Exhibits A and B hereto.
"Rule 144" means Rule 144 promulgated under the Securities Act, or any
successor provision thereto and as may be amended from time to time.
"Rule 144A" means Rule 144A promulgated under the Securities Act, or
any successor provision thereto and as may be amended from time to time.
"Rule 144A Global Security" has the meaning specified in Section 2.01.
"Rule 144A Security" means Securities of any series offered and sold in
their initial resale distribution to QIBs in reliance on Rule 144A, until such
time as the Holding Period shall have terminated.
"S&P" means Standard & Poor's Rating Group, and any, Subsidiary or
successor thereof.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
<PAGE>
15
"Securities Act" means the U.S. Securities Act of 1933, as amended.
"Security Register" and "Security Exchange Agent/Registrar" have the
respective meanings specified in Section 3.04.
"Shelf Registration Statement" means any registration statement filed
with the Commission by the Company, in connection with the offer and sale of any
series of Initial Securities pursuant to the Registration Rights Agreement.
"Significant Subsidiary" means, at any particular time, any Subsidiary
of the Company whose gross assets or gross revenues (having regard to the
Company's direct and/or indirect beneficial interest in the shares, or the like,
of that Subsidiary) represent at least 25% of the consolidated gross assets or,
as the case may be, consolidated gross revenues of the Company.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.08.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which 50% or more of the
total voting power of shares of capital stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned, directly or indirectly, by (i) such person, (ii) such
person and one or more Subsidiaries of such person or (iii) one or more
Subsidiaries of such person.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States or any agency thereof or
obligations guaranteed by the United States or any agency thereof, in each case,
maturing within 360 days of the date of acquisition thereof, (ii) investment in
time deposit accounts, certificates of deposit and money market deposits
maturing within 180 days of the date of acquisition thereof issued by a bank or
trust company (including the Trustee) which is organized under the laws of the
United States, any state thereof or any foreign country recognized by the United
States having capital, surplus and undivided profits aggregating in excess of
$250,000,000 and whose debt is rated "A" (or such similar equivalent rating) or
higher by at least one Rating Agency or any money-market fund sponsored by any
registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a nationally
recognized broker-dealer, (iv) investments in commercial paper, maturing not
more than 90 days after the date of acquisition, issued by a corporation (other
than an affiliate of the Company) organized and in existence under the laws of
the United States or any foreign country recognized by the United States with a
rating at the time as of which any
<PAGE>
16
investment therein is made of "P-2" (or higher) according to Moody's or "A-2"
(or higher) according to S&P and (v) securities with maturities of six months or
less from the date of acquisition backed by standby or direct pay letters of
credit issued by any bank satisfying the requirements of clause (ii) above.
"Total Capital" of any Person means, as of any date, the sum (without
duplication) of (a) Indebtedness for Borrowed Money, (b) preferred stock and
Preferred Securities of such Person and its consolidated Subsidiaries and (c)
consolidated stockholder's equity of such Person and its consolidated
Subsidiaries (excluding any preferred stock in stockholder's equity).
"Transactions" means the transactions contemplated by the Merger
Agreement, Pledge Agreement, Registration Rights Agreement and this Indenture.
"Transfer Agent" means any Person authorized by the Company to
effectuate the exchange or transfer of any Security on behalf of the Company
hereunder.
"Trust Indenture Act" means the U.S. Trust Indenture Act of 1939, as
amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"United States" and "U.S." means the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction.
"U.S. Government Obligation" means any (a) security which is (i) a
direct obligation of the United States for the payment of which the full faith
and credit of the United States is pledged or (ii) an obligation of a person
controlled or supervised by and acting as an agency of instrumentality of the
United States the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States, which, in the case of clause (i) or
(ii), is not callable or redeemable at the option of the issuer thereof, and (b)
depositary receipt issued by a bank (as defined in the Securities Act) as
custodian with respect to any security specified in clause (a) above and held by
such bank for the account of the holder of such depositary receipt or with
respect to any specific payment of principal of or interest on any such security
held by any such bank, provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of interest on or
principal of the U.S. Government Obligation evidenced by such depository
receipt.
"Unrestricted Security" has the meaning specified in Section 2.01.
<PAGE>
17
SECTION 1.02. Certificates and Opinions
Except as otherwise expressly provided by this Indenture, upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee (i) an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and (ii) an Opinion of Counsel stating that in the opinion of such counsel all
such conditions precedent, if any, have been complied with.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than the Officers'
Certificate required by Section 10.08) shall include:
(1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether, in the opinion of each such individual, such
condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered to Trustee
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents. Any
certificate or instrument required to be given or executed by a Person which is
not a natural person may be given or executed on behalf of such Person by any
duly authorized designee of such Person.
Any certificate or opinion of an Officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such Officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any certificate or opinion of counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or representations
by, an Officer or Officers of the Company stating that the information with
respect to such factual matters is in the possession
<PAGE>
18
of the Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04. Acts of Holders; Record Dates
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by the
Holders of any series of Securities may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed by each such Holder in
Person or by an agent duly appointed in writing, and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are received by the Trustee and by the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section 1.04.
Without limiting the generality of the foregoing, unless otherwise
established in or pursuant to a Board Resolution or set forth or determined in
an Officers' Certificate, (i) a Holder of any Security may make, give or take,
by a proxy or proxies duly appointed in writing, any request, demand,
authorization, direction, notice, consent, waiver or other action provided in
this Indenture to be made, given or taken by the Holder of any such Security,
(ii) a Holder of any such Security, including a Depositary that is a Holder of a
Global Security, entitled hereunder to take any action hereunder with regard to
such Security may do so with regard to all or any part of the principal amount
of such Security or by one or more duly appointed agents each of which may do so
pursuant to such appointment with regard to all or any part of the principal
amount of such Security; and (iii) a Depositary that is a Holder of a Global
Security may provide its proxy or proxies to the beneficial owners of interest
in such Global Security through the Depositary's standing instructions and
customary practices.
(b) The fact and date of the execution by any Person of any such
instrument, writing or proxy may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument, writing or proxy acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument, writing or proxy, or the authority of the Person executing the
same, may also be proved in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security
Register.
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19
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
(e) The Company may, in its discretion, by Board Resolution, set any
day as a record date for the purpose of determining the Holders of Outstanding
Securities of any series entitled to give, make or take any request, demand,
authorization, direction, consent, waiver or Act provided or permitted by this
Indenture to be given, made or taken by Holders of Securities of such series;
provided that the Company shall have no obligation to set a record date; and
provided further that the Company may not set a record date for, and the
provisions of this paragraph shall not apply with respect to, the giving or
making of any notice, declaration, request or direction referred to in the next
paragraph. If any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities of the relevant series on such record date, and no other
Holders, shall be entitled to take the relevant action, whether or not such
Holders remain Holders after such record date; provided that no such action
shall be effective hereunder unless taken on or prior to any applicable
Expiration Date (as defined below) by Holders of the requisite principal amount
of Outstanding Securities of such series on such record date. Nothing in this
paragraph shall be construed to prevent the Company from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be cancelled and of no effect); provided, however,
that no new record date may be established with the purpose or effect of
rendering, and no other provision of this paragraph shall be construed to
render, ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities of the relevant series on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Company at its own expense, shall cause notice of such record date, the proposed
action by Holders and the applicable Expiration Date to be given to the Trustee
in writing and to each Holder of Securities of the relevant series in the manner
set forth in Section 1.06.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 5.02, (iii) any request to institute proceedings referred
to in Section 5.06 or (iv) any direction referred to in Section 5.05; provided
that if the Trustee does not set any record date within ten days after first
receiving any such notice, declaration, rescission and annulment, request or
direction, as the case may be, then the record date shall be the close of
business on the date on which the Trustee first receives any such notice,
declaration, rescission and annulment, request or direction, as the case may be.
If any record date is set by the Trustee pursuant to this paragraph, the Holders
of Outstanding Securities of such series on such record date, and no other
Holders, shall be entitled to join in such notice, declaration, request or
direction, whether or not such Holders remain Holders after such record date;
provided that no such action shall be effective hereunder unless taken on or
prior to any applicable Expiration Date by Holders of the requisite principal
amount of
<PAGE>
20
Outstanding Securities of such series on such record date. Nothing in this
paragraph shall be construed to prevent the Trustee from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be cancelled and of no effect); provided, however,
that no new record date may be established with the purpose or effect of
rendering, and no other provision of this paragraph shall be construed to
render, ineffective any action taken by Holders of the requisite principal
amount of Outstanding Securities of the relevant series on the date such action
is taken based on such record date previously set. Promptly after any record
date is set pursuant to this paragraph, the Trustee, at the Company's expense,
shall cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Company in writing and to each
Holder of Securities of the relevant series in the manner set forth in Section
1.06.
With respect to any record date set pursuant to this Section 1.04(e),
the party hereto which sets such record date may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other parties hereto
in writing, and to each Holder of Securities of the relevant series in the
manner set forth in Section 1.06, on or prior to the earlier of (i) the existing
Expiration Date and (ii) the proposed new Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 90th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
SECTION 1.05. Notices, Etc., to Trustee and Company
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient for
every purpose hereunder if in writing and mailed, first-class, postage
prepaid, to the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to CILCORP at 300 Hamilton
Blvd., Suite 300, Peoria, Illinois 61602 Attention: Corporate Secretary or
at any other address previously furnished in writing to the Trustee by the
Company.
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21
SECTION 1.06. Notice to Holders; Waiver
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event at the Holder's address as it appears in the Security Register,
not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders.
If, by reason of the suspension of regular mail service or by reason of
any other cause, it shall be impracticable to give such notice by mail, then
such notification as shall be made at the direction of the Company in a manner
reasonably calculated, to the extent practicable under the circumstances, to
provide prompt notice shall constitute a sufficient notification for every
purpose hereunder.
Any notice required or permitted hereunder may be waived in writing by
the Person entitled to receive such notice, either before or after the event,
and such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
SECTION 1.07. Effect of Headings and Table of Contents
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 1.08. Successors and Assigns
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 1.09. Separability Clause
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.10. Benefits of Indenture
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
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22
SECTION 1.11. Governing Law
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 1.12. Legal Holidays
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest, if any, or principal (and premium, if any) need
not be made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, and no interest shall accrue for the period from and after such
Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
SECTION 1.13. Incorporation by Reference of Trust Indenture Act
Whenever this Indenture refers to a provision of the Trust Indenture
Act, the provision is incorporated by reference in and made part of this
Indenture. The following Trust Indenture Act terms used in this Indenture have
the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture, as then supplemented.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" in the indenture securities means the Company and any other
obligor in the indenture securities.
All other terms used in this Indenture that are defined by the Trust
Indenture Act, defined by Trust Indenture Act reference to another statute or
defined by Commission rule have the meanings assigned to them by such
definitions.
<PAGE>
23
ARTICLE II
SECURITY FORMS
SECTION 2.01. Forms Generally
The Securities of each series shall be in substantially the form set
forth in Exhibits A and B hereto, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon (i) as may be
required by law or to comply with the rules of (a) any securities exchange, (b)
DTC or any other clearing agency registered as such under the Exchange Act or
(c) Euroclear or Cedel; or (ii) as may, consistently herewith, be determined by
the Officers executing such Securities, as evidenced by their execution thereof.
The Trustee's certificate of authentication shall be in substantially the form
set forth in Exhibits A and B hereto.
The Definitive Securities shall be printed, typewritten, lithographed
or engraved on steel engraved borders or may be produced in any other manner,
all as determined by the Officers executing such Securities, as evidenced by
their execution thereof.
Initial Securities of any series offered and sold in their initial
resale distribution to QIBs in reliance on Rule 144A shall initially be issued
in the form of one or more global Securities of such series in definitive, fully
registered form, substantially in the form set forth in Exhibits A and B, with
respect to Notes and Bonds, respectively, with such applicable legends as are
provided for in Section 3.01(h). Such global Securities shall be duly executed
by the Company and authenticated by the Trustee as provided, and deposited with
the Trustee, which will hold such global Securities for the benefit of DTC.
Until such time as the Holding Period (as defined below) shall have terminated,
each such Security shall be referred to as a "Rule 144A Global Security." The
aggregate principal amount of any Rule 144A Global Security may be adjusted by
endorsements to Schedule A on the reverse thereof in any situation where
adjustment is permitted or required by this Indenture. Unless the Company
determines otherwise in accordance with applicable law, the legend setting forth
transfer restrictions shall be removed from a Rule 144A Security in accordance
with the procedures set forth in Section 3.05(b) after such time as the
applicable Holding Period shall have terminated, and each such Security shall
thereafter be held as an "Unrestricted Security." As used herein, the term
"Holding Period," with respect to Rule 144A Securities of any series, means the
period referred to in Rule 144(k) or any successor provision thereto and as may
be amended or revised from time to time, beginning from the later of (i) the
original issue date of such Securities or (ii) the last date on which the
Company or any affiliate of the Company was the beneficial owner of such
Securities (or any predecessor thereof).
Initial Securities of any series offered and sold in their initial
distribution to non-U.S. Persons in offshore transactions in reliance on
Regulation S shall initially be issued in the form of one or more global
Securities of such series in definitive, fully registered form, substantially in
the form set forth in Exhibits A and B, with respect to Notes and Bonds,
<PAGE>
24
respectively, with such applicable legends as are provided for in Section
3.01(h). Such global Securities shall be duly executed by the Company and
authenticated by the Trustee as provided, and deposited with the Trustee, which
will hold such global Securities for the benefit of DTC, for credit initially
only to such accounts at Euroclear or Cedel as DTC's Participants may direct.
Until such time as the Restricted Period (as defined below) shall have
terminated, each such global Security shall be referred to as a "Regulation S
Global Security." The aggregate principal amount of any Regulation S Global
Security may be adjusted by endorsements to Schedule A on the reverse thereof in
any situation where adjustment is permitted or required by this Indenture.
Unless the Company determines otherwise in accordance with applicable law, the
legend setting forth transfer restrictions shall be removed from a Regulation S
Security in accordance with the procedures set forth in Section 3.05(b) after
such time as the applicable Restricted Period shall have terminated, and each
such Security shall thereafter be held as an "Unrestricted Security." As used
herein, the term "Restricted Period," with respect to Regulation S Securities of
any series, means the period of 40 consecutive days beginning on and including
the later of (i) the date on which such Securities are first offered to Persons
other than distributors (as defined in Regulation S) in reliance on Regulation S
and (ii) the original issue date of such Securities. No Regulation S Global
Security shall be issued except as provided in this paragraph to evidence
Securities offered and sold in their initial distribution in reliance on
Regulation S.
Exchange Securities of any series exchanged for interests in a Rule
144A Global Security or a Regulation S Global Security will be issued in the
form of one or more permanent global Securities of such series substantially in
the form set forth in Exhibits A and B with respect to Notes and Bonds,
respectively, including the appropriate legend set forth in Section 3.01(h),
(the "Exchange Global Securities") which shall be duly executed by the Company
and authenticated by the Trustee as provided, and deposited with the Trustee.
The Exchange Global Securities may be represented by more than one certificate,
if so required by DTC's rules regarding the maximum principal amount to be
represented by a single certificate. Exchange Securities exchanged for interests
in a Rule 144A Definitive Security or a Regulation S Definitive Security will be
issued in the form of a Definitive Security substantially in the form set forth
in Exhibits A and B with respect to Notes and Bonds, respectively, including the
appropriate legend set forth in Section 3.01(h) (the "Exchange Definitive
Securities").
ARTICLE III
SECURITIES
SECTION 3.01. Terms and Issuance of the Securities
(a) Issue of Securities.
Two series of Securities, which shall be designated the "8.700% Senior
Notes due 2009", and the "9.375% Senior Bonds due 2029", respectively, shall be
executed, authenticated and delivered in accordance with the provisions of, and
shall in all respects be subject to, the terms, conditions and covenants of this
Indenture (including the forms of Securities set forth in Exhibits A and B, as
applicable). The aggregate principal amount of the Notes, and the
<PAGE>
25
aggregate principal amount of the Bonds which may be authenticated and delivered
under this Indenture shall not exceed $225 million and $250 million,
respectively.
(b) Optional Redemption.
The Securities may be redeemed, in whole or in part, at the option of
the Company pursuant to the terms set forth in paragraph 2 of the series of
Securities to be redeemed. The provisions of Article XI of this Indenture shall
also apply to any optional redemption of Securities by the Company.
(c) Place of Payment.
The Place of Payment in respect of the Securities will be in The City
of New York, initially at the Corporate Trust Office of The Bank of New York
(which as of the date hereof is located at 101 Barclay Street, Floor 21W, New
York, New York 10286, Attention: Corporate Trust Administration).
(d) Form of Securities; Incorporation of Terms.
The form of the Securities shall be substantially in the forms of
Exhibits A and B attached hereto, as applicable, the respective terms of which
are herein incorporated by reference and which are part of this Indenture. The
Securities shall be issued as one or more Global Securities in fully registered
form and one or more Definitive Securities in fully registered form, as
determined in accordance with Section 2.01 hereof. The Global Securities shall
be deposited with the Trustee, as custodian for DTC, to be held by the Trustee
in accordance with this Indenture.
(e) Exchange of the Global Securities.
Each of the Global Securities shall be exchangeable for Definitive
Securities only as provided in Section 3.06(b)(ii) hereof.
(f) Regular Record Date for the Securities.
The Regular Record Date for the Securities shall be immediately prior
to the April 1 or October 1 immediately prior to the respective Interest Payment
Date.
(g) Authorized Denominations.
Beneficial interests in Global Securities, as well as Definitive
Securities, may be held only in denominations of $1,000 and integral multiples
of $1,000 in excess thereof.
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26
(h) Restrictive Legends.
Except as otherwise provided in clause (A) or (B) below, unless and
until (i) an Initial Security is sold under an effective registration statement
or (ii) an Initial Security is exchanged for an Exchange Security in connection
with an effective registration statement, in each case pursuant to the
Registration Rights Agreement or a similar agreement,
(A) the Rule 144A Global Securities shall bear the following legend on
the face thereof:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE
"DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE
FOR SECURITIES HELD BY A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO
TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY
THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR
TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY (OR ITS PREDECESSOR) HAS BEEN INITIALLY RESOLD IN RELIANCE ON
RULE 144A UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE
WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS
PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND, ACCORDINGLY, THIS SECURITY MAY
NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION
<PAGE>
27
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND REGULATION S
THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH HOLDER OF THIS SECURITY AND ANY OWNERS OF
INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS
A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE
ORIGINAL ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY
(OR ANY PREDECESSOR HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE
144(K) UNDER THE SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN
THE UNITED STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904
UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR
(E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT
WILL, AND EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND ON THESE RESALE RESTRICTIONS.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW,
THIS LEGEND WILL BE REMOVED BY THE COMPANY UPON REQUEST OF THE HOLDER,
AFTER THE EXPIRATION OF THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER
THE SECURITIES ACT BEGINNING FROM THE LATER OF (A) THE ORIGINAL ISSUE DATE
OF THIS SECURITY AND (B) THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY
PREDECESSOR HEREOF)."; and
(B) the Regulation S Global Securities shall bear the following legend
on the face thereof:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS HELD BY THE
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28
DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY.
THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN
THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER
OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE
EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR
TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY (OR ITS PREDECESSOR) HAS BEEN ISSUED IN RELIANCE ON
REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") AND SHALL BEAR THE FOLLOWING LEGEND UNTIL REMOVABLE IN ACCORDANCE
WITH ITS TERMS AND THE TERMS OF THE INDENTURE. THIS SECURITY (OR ITS
PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT, AND, ACCORDINGLY, THIS SECURITY MAY
NOT BE OFFERED OR SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING
ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A AND REGULATION S THEREUNDER.
BY ITS ACQUISITION HEREOF, EACH HOLDER OF THIS SECURITY AND ANY OWNERS OF
INTERESTS HEREIN, FOR THE BENEFIT OF THE COMPANY, (1) REPRESENTS THAT IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT BEGINNING FROM THE LATER OF (X) THE ORIGINAL
ISSUE DATE OF THIS SECURITY OR (Y) THE LAST DATE ON WHICH THE COMPANY OR
ANY AFFILIATE THEREOF WAS THE BENEFICIAL OWNER OF THIS SECURITY (OR ANY
PREDECESSOR
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29
HEREOF) THROUGH THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE
SECURITIES ACT, IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE COMPANY OR ANY AFFILIATE THEREOF, (B) IN THE UNITED
STATES TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (E)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH OF CASES (A) TO (E) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES AND (3) AGREES THAT IT WILL, AND
EACH SUBSEQUENT HOLDER WILL BE REQUIRED TO, DELIVER TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND ON THESE RESALE RESTRICTIONS.
THE RIGHTS ATTACHED TO THIS REGULATION S GLOBAL SECURITY, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE SECURITIES,
ARE AS SPECIFIED IN THE INDENTURE.
PRIOR TO THE COMMENCEMENT OF THE REGISTERED EXCHANGE OFFER OR THE
EFFECTIVENESS OF THE SHELF REGISTRATION STATEMENT, TRANSFERS OF INTERESTS
IN THIS REGULATION S GLOBAL SECURITY TO U.S. PERSONS SHALL BE LIMITED TO
TRANSFERS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT.
UNLESS THE COMPANY DETERMINES OTHERWISE IN ACCORDANCE WITH APPLICABLE LAW,
THIS LEGEND WILL BE REMOVED BY THE COMPANY FOLLOWING THE EXPIRATION OF 40
CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY ON
WHICH INTERESTS IN THIS SECURITY ARE OFFERED TO PERSONS OTHER THAN
DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE ORIGINAL ISSUE DATE
OF THIS SECURITY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT."; and
(C) the Exchange Global Securities shall bear the following legend on
the face thereof:
"THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY (THE
"DEPOSITARY") OR A NOMINEE OF
<PAGE>
30
THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A
PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY DEFINITIVE SECURITY IS ISSUED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO., OR
TO SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
31
SECTION 3.02. Execution, Authentication, Delivery and Dating
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents. The
signature of any such Person on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signature of any individual
who was at any time the proper Officer of the Company shall bind the Company,
notwithstanding that such individual has ceased to hold such office prior to the
authentication and delivery of such Securities or did not hold such office at
the date of authentication of such Securities.
The Company may deliver the Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver the Securities. In
authenticating the Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee will be
entitled to receive, and (subject to Section 6.01 and 6.03) shall be fully
protected in relying upon, an Opinion of Counsel stating,
(a) that the terms of the Securities have been established in
conformity with the provisions of this Indenture; and
(b) that the Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, constitute valid and
legally binding obligations of the Company, enforceable in accordance
with their terms, subject to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting the
enforcement of creditors' rights and to general principles of equity
and such other matters as counsel may specify therein.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee or an Authenticating Agent by manual signature, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 3.10 together
with a written statement (which need not be accompanied by an Opinion of
Counsel) stating that such Security has never been issued and sold by the
Company, for all purposes of this Indenture such Security shall be deemed never
to have been authenticated and delivered hereunder and shall never be entitled
to the benefits of this Indenture.
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SECTION 3.03. Temporary Securities
Pending the preparation of the definitive Securities, the Company may
execute, and upon compliance by the Company with Section 3.02, the Trustee or
the Authenticating Agent shall authenticate and deliver, temporary Securities
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued, in registered form or,
if authorized, in bearer form, and with such appropriate insertions, omissions,
substitutions and other variations as the Officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities of such series, the temporary Securities of such series
shall be exchangeable for definitive Securities of such series upon surrender of
the temporary securities of such series at the office or agency of the Company
in a Place of Payment for that series, without charge to the Holder except as
provided in Section 3.04 (if in connection with a transfer). Upon surrender for
cancellation of any one or more temporary Securities the Company shall execute
and the Trustee or the Authenticating Agent shall authenticate and deliver in
exchange therefor one or more definitive Securities of any authorized
denominations and of a like aggregate principal amount and tenor. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities of such series and
tenor.
Upon any exchange of a portion of a temporary Global Security for a
definitive Global Security for the individual Securities represented thereby
pursuant to this Section 3.03 or Section 3.04, the temporary Global Security
shall be endorsed by the Trustee to reflect the reduction of the principal
amount of such temporary Global Security, and such principal amount shall be
reduced for all purposes by the amount so exchanged and endorsed.
SECTION 3.04. Registrar and Paying Agent; Registration, Registration of
Transfer and Exchange
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration, transfers and exchanges of the Securities. The Company shall
maintain an office or agency of the Paying Agent in any Place of Payment where
the Securities may be presented for payment. The Company may have one or more
co-registrars and one or more additional paying agents, and the terms "Security
Exchange Agent/Registrar" and "Paying Agent" shall include any additional
co-registrars and paying agents, respectively.
The Company shall enter into an appropriate agency agreement with any
Securities Exchange Agent/Registrar, Paying Agent or additional co-registrars or
paying agents not a party to this Indenture, which shall incorporate the terms
of the Trust Indenture Act and the
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33
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee in writing of the name and address of any such agent. If the Company
fails to maintain a Security Exchange Agent/Registrar or Paying Agent, the
Trustee shall act as such and shall be entitled to appropriate compensation
therefor pursuant to Section 6.07. The Company may act as Security Exchange
Agent/Registrar or Paying Agent.
The Company hereby initially appoints the Trustee as Registrar for the
purpose of registering Securities and transfers of Securities, and for the
purpose of exchanging Securities, and as Paying Agent, all as herein provided.
The Company may change the Paying Agent or Registrar.
Upon surrender for registration of transfer of any Security of any
series at the office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee or the Authenticating Agent shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, any Security or Securities may be
exchanged for other Securities of the same series, of any authorized
denominations and of a like aggregate principal amount and tenor, upon surrender
of the Securities to be exchanged at such office or agency. Whenever any
Securities are so surrendered for exchange, the Company shall execute, and upon
receipt of a Company Order the Trustee or the Authenticating Agent shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities as provided in this Indenture shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Exchange Agent/Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to the Holder for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Sections 3.03, 9.06 or 11.07 not involving any
transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption
under Section 11.04 and ending at the close of business on the day of such
mailing, or (ii) to register the transfer of or exchange any Security so
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34
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part, provided that such Security shall be
immediately surrendered for redemption with written instructions for payment
consistent with the provisions of this Indenture.
The provisions of this Section 3.04 are, with respect to any Global
Security, subject to Section 3.06 hereof.
SECTION 3.05. Restricted Securities
(a) Transfer and Exchange.
Every Restricted Security shall be subject to the restrictions on
transfer provided in the applicable legend(s) required to be set forth on the
face of each Restricted Security pursuant to Section 2.01, unless such
restrictions on transfer shall be waived or modified, in accordance with
applicable laws, by the written consent of the Company. Each of the Holder of
each Restricted Security, by its acceptance thereof, agrees to be bound by such
restrictions on transfer.
(b) Removal of Transfer Restrictions.
Unless with respect to the whole or any portion of any Restricted
Security the Company determines otherwise in accordance with applicable law,
transfer restrictions and any restrictive legend(s) with respect to Restricted
Securities of any series shall be removed by the Company (i) in the case of Rule
144A Securities upon presentation of such Security by the Holder at any time on
or after the expiration of the Holding Period, or (ii) in the case of Regulation
S Securities, upon presentation of such Security by the Holder at any time on or
after the expiration of the Restricted Period. Thereafter, upon registration of
transfer of or exchange of such Securities, the Company shall execute, and the
Trustee shall authenticate and deliver, an Unrestricted Security.
The Company shall deliver to the Trustee an Officer's Certificate
setting forth the expiration date of the Holding Period and the Restricted
Period.
Except as otherwise provided in the preceding paragraph, if the
Securities are issued upon the registration of transfer, exchange or replacement
of Securities bearing a legend or legends setting forth restrictions on
transfer, or if a request is made to remove such legend(s) from a Security, the
Securities so issued shall bear such legend(s), or such legend(s) shall not be
removed, as the case may be, unless there is delivered to the Company such
satisfactory evidence (which may include an opinion, reasonably satisfactory to
the Company, of independent counsel experienced in matters of United States
securities law) as may be reasonably required by the Company that neither such
legend(s) nor the restrictions on transfer set forth therein are required to
ensure that transfers thereof comply with the provisions of Rule 144A or Rule
144 or Regulation S under the Securities Act or that such Securities are not
"restricted securities" within the meaning of Rule 144 under the Securities Act.
Upon provision of such satisfactory evidence to the Company, the Trustee, at the
written direction of the Company, shall authenticate and
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35
deliver a Security that does not bear such legend(s). In the absence of bad
faith on its part, the Trustee may conclusively rely upon such direction of the
Company in authenticating and delivering a Security that does not bear such
legend(s).
As used in this Section 3.05, the term "transfer" encompasses any sale,
pledge or other transfer of any Securities referred to herein.
Notwithstanding anything else in this Indenture to the contrary, after
a transfer of any Initial Securities during the period of the effectiveness of a
Shelf Registration Statement with respect to such Initial Securities, all
requirements pertaining to legends on such Initial Security will cease to apply,
the requirements requiring that any such Initial Security issued to certain
Holders be issued in global form will cease to apply, and a certificated Initial
Security without legends will be available to the transferee of the Holder of
such Initial Securities or upon receipt of directions to transfer such Holder's
interest in the Global Security, as applicable.
Notwithstanding anything else in this Indenture to the contrary, upon
the consummation of the Registered Exchange Offer with respect to the Initial
Securities pursuant to which Holders of such Initial Securities are offered
Exchange Securities in exchange for their Initial Securities, all requirements
pertaining to such Initial Securities that Initial Securities issued to certain
Holders be issued in global form will cease to apply and certificated Initial
Securities with the restricted securities legend set forth in Section 3.01(h)
will be available to Holders of such Initial Securities, that do not exchange
their Initial Securities and Exchange Securities in certificated form will be
available to Holders that exchange such Initial Securities in the Registered
Exchange Offer.
SECTION 3.06. Global Securities
(a) Form and Legend.
The Company shall execute and the Trustee shall, in accordance with
Section 3.02, authenticate and deliver, a Global Security or Securities which
(i) shall represent, and shall be denominated in an aggregate amount equal to
the aggregate principal amount of, all of the Securities of such series to be so
represented, (ii) shall be registered in the name of the Depositary or its
nominee, (iii) shall be delivered by the Trustee to the Depositary for such
series or pursuant to the Depositary's instruction and (iv) shall bear a legend
substantially to the effect of the first two paragraphs of the legend set forth
in Section 3.01(h)(A).
(b) Transfer and Exchange.
(i) Transfers of Global Notes as such. Except as otherwise
expressly provided in this Indenture or any supplement thereto, a
Global Security representing all or a portion of the Securities may not
be transferred in global form, except as a whole (i) by the Depositary
for such series to a nominee of such Depositary; (ii) by a nominee of
such Depositary to such Depositary or another
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36
nominee of such Depositary; or (iii) by such Depositary or any such
nominee to a successor Depositary for such series or a nominee of such
successor Depositary.
(ii) Exchanges of Global Securities for Definitive Securities.
A Global Security shall be exchangeable, in whole but not in part, for
definitive Securities of such series if:
(a) DTC notifies the Company and the Depositary that it is unwilling or
unable to continue to hold book-entry interests in such Global Security
or DTC at any time ceases to be a "clearing agency" registered as such
under the Exchange Act, and, in either case, a successor is not
appointed by the Company within 90 days;
(b) while a Global Security is a Restricted Security the book-entry
interests in such Global Security cease to be eligible for DTC services
because the Securities of such series are neither (i) rated in one of
the top four categories by a nationally recognized statistical rating
organization nor (ii) included within a Self-Regulatory Organization
system approved by the Commission for the reporting of quotation and
trade information of securities eligible for transfer pursuant to Rule
144A, such as the PORTAL system;
(c) the Depositary for Securities of such series notifies the Company
that it is unwilling or unable to continue as Depositary with respect
to such Global Security and no successor is appointed within 90 days;
(d) the Company in its sole discretion executes and delivers to the
Trustee an Officers' Certificate providing that such Global Security
shall be so exchangeable. Securities so issued in exchange for any such
Global Security shall be of the same series, having the same interest
rate, if any, and maturity and having the same terms as such Global
Security, in authorized denominations and in the aggregate having the
same principal amount as such Global Security and registered in such
names as the Depositary for such Global Security shall direct based on
the instructions of DTC; or
(e) if there shall have occurred and be continuing an Event of Default
with respect to the Securities of such series and the Registrar has
received a request from the Depositary that the Global Security of such
series be exchanged for one or more Definitive Securities.
Upon such exchange, the surrendered Global Security shall be canceled
by the Trustee. Upon any such surrender, (i) the Company shall execute and the
Trustee shall authenticate and deliver without charge to each Person specified
by DTC, in exchange for such Person's beneficial interest in the Global
Security, a new Security or Securities of the same series in definitive
registered form having the same interest rate, if any, and maturity and having
the same terms as such Global
<PAGE>
37
Security, in any authorized denomination requested by such Person and of an
aggregate principal amount equal to such Person's beneficial interest in the
Global Security and bearing the applicable legend regarding transfer
restrictions applicable to such Security set forth in Section 3.01(h); and (ii)
if the Global Security is being exchanged (x) as a whole, then the surrendered
Global Security shall be canceled by the Trustee, or (y) in part, then the
principal amount of the surrendered Global Security shall be reduced by an
endorsement on Schedule A thereto in the appropriate amount.
Definitive Securities issued in exchange for a Global Security pursuant
to this Section 3.06(b)(ii) shall be issued only in registered form and shall be
registered in such names and in such authorized denominations as the Depositary
for such Global Security, pursuant to instructions from DTC and its Participants
or Indirect Participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Securities to the Persons in whose names such Securities are
so registered.
(c) Beneficial Interests.
Subject to Section 3.05 and Section 3.06, beneficial interests in a
Global Security may be transferred in any manner consistent with the Applicable
Procedures.
(d) Special Provisions Regarding Transfer of Beneficial Interests in a
Regulation S Global Security.
The transfer of beneficial interests in a Regulation S Global Security
shall be effected in a manner not inconsistent with the following provisions:
(i) Transfer Through a Rule 144A Global Security. If the
holder of a beneficial interest in a Regulation S Global Security
wishes at any time to transfer such interest to a Person who wishes to
take delivery thereof in the form of a beneficial interest in a Rule
144A Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with this Section 3.06(d)(i).
Upon receipt by the Security Exchange Agent/Registrar at the Corporate
Trust Office of (1) written instructions given in accordance with the
Applicable Procedures from a Participant directing the Depositary to
cause to be credited to a specified Participant's account a beneficial
interest in the Rule 144A Global Security equal to that of the
beneficial interest in the Regulation S Global Security to be so
transferred, (2) a written order given in accordance with the
Applicable Procedures containing information regarding the account of
the Participant to be credited with, and the account of the Participant
held for Euroclear or Cedel (as the case may be) to be debited for,
such beneficial interest, and (3) a certificate substantially in the
form set forth in or contemplated by Section 3.12(a) given by the
transferor of such beneficial interest, the Security Exchange
Agent/Registrar shall (A) reduce the principal amount of the Regulation
S Global Security, and increase the principal amount of the Rule 144A
Global Security, in each case by an amount equal to the principal
amount of the beneficial interest in the Regulation S Global Security
to be so transferred, as evidenced by appropriate endorsements on
Schedule A of the respective Global Securities and
<PAGE>
38
(B) instruct DTC (x) to make corresponding reductions and increases in
the amounts represented by the respective Global Securities and (y) to
cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Rule 144A Global Security
having a principal amount equal to the amount by which the principal
amount of the Regulation S Global Security was reduced upon such
transfer.
Delivery of a beneficial interest in the Regulation S Global Security
of any series may not be taken in the form of a beneficial interest in the Rule
144A Global Security if immediately prior to the contemplated transfer no Rule
144A Global Security of the same series is then Outstanding.
(ii) Interests in Regulation S Global Security Initially to be
Held Through Euroclear or Cedel. Until the termination of the
Restricted Period with respect to Securities of a series, beneficial
interests in a Regulation S Global Security of such series may be held
only through Participants acting for and on behalf of Euroclear and
Cedel; provided that this Section 3.06(d)(ii) shall not prohibit any
transfer otherwise permissible under Section 3.06(d)(i).
(e) Special Provisions Regarding Transfer of Beneficial Interests in a
Rule 144A Global Security.
The transfer of beneficial interests in a Rule 144A Global Security
shall be effected in a manner not inconsistent with the following provisions:
(i) Transfer Through a Regulation S Global Security. If the
holder of a beneficial interest in a Rule 144A Global Security wishes
at any time to transfer such interest to a Person who wishes to take
delivery thereof in the form of a beneficial interest in a Regulation S
Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with this Section 3.06(e)(i).
Upon receipt by the Security Exchange Agent/Registrar at the Corporate
Trust Office of (1) written instructions given in accordance with the
Applicable Procedures from a Participant directing the Depositary to
cause to be credited to a specified Participant's account a beneficial
interest in the Regulation S Global Security equal to that of the
beneficial interest in the Rule 144A Global Security to be so
transferred, (2) a written order given in accordance with the
Applicable Procedures containing information regarding the account of
the Participant held for Euroclear or Cedel (as the case may be) to be
credited with, and the account of the Participant to be debited for,
such beneficial interest, and (3) a certificate substantially in the
form set forth in or contemplated by Section 3.12(b) given by the
transferor of such beneficial interest, the Security Exchange
Agent/Registrar shall (A) reduce the principal amount of the Rule 144A
Global Security, and increase the principal amount of the Regulation S
Global Security, in each case by an amount equal to the principal
amount of the beneficial interest in the Rule 144A Global Security to
be so transferred, as evidenced by appropriate
<PAGE>
39
endorsements on Schedule A of the respective Global Securities and (B)
instruct DTC (x) to make corresponding reductions and increases to the
amounts represented by the respective Global Securities and (y) to
cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Regulation S Global Security
having a principal amount equal to the amount by which the principal
amount of the Rule 144A Global Security was reduced upon such transfer.
Delivery of a beneficial interest in the Rule 144A Global Security of
any series may not be taken in the form of a beneficial interest in the
Regulation S Global Security if immediately prior to the contemplated transfer
no Regulation S Global Security of the same series is then Outstanding.
(ii) Transfer Through an Unrestricted Global Security. If the
holder of a beneficial interest in a Rule 144A Global Security wishes
at any time to transfer such interest to a Person who wishes to take
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Security, such transfer may be effected, subject to
the Applicable Procedures, only in accordance with this Section
3.06(e)(ii). Upon receipt by the Security Exchange Agent/Registrar at
the Corporate Trust Office of (1) written instructions given in
accordance with the Applicable Procedures from a Participant directing
the Depositary to cause to be credited to a specified Participant's
account a beneficial interest in the Unrestricted Global Security equal
to that of the beneficial interest in the Rule 144A Global Security to
be so transferred, (2) a written order given in accordance with the
Applicable Procedures containing information regarding the account of
the Participant (and, in the case of any such transfer pursuant to
Regulation S, the Euroclear or Cedel account for which such
Participant's account is held) to be credited with, and the account of
the Participant to be debited for, such beneficial interest, (3) a
certificate substantially in the form set forth in or contemplated by
Section 3.12(c) given by the transferor of such beneficial interest,
and (4) if requested by the Company or the Trustee, an opinion of
counsel satisfactory to each of them, the Security Exchange
Agent/Registrar shall (A) reduce the principal amount of the Rule 144A
Global Security, and increase the principal amount of the Unrestricted
Global Security, in each case by an amount equal to the principal
amount of the beneficial interest in the Rule 144A Global Security to
be so transferred, as evidenced by appropriate endorsements on Schedule
A of the respective Global Securities and (B) instruct DTC (x) to make
corresponding reductions and increases to the transferor's beneficial
interests in the respective Global Securities and (y) to cause to be
credited to the account of the Person specified in such instructions a
beneficial interest in the Unrestricted Global Security having a
principal amount equal to the amount by which the principal amount of
the Rule 144A Global Security was reduced upon such transfer.
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SECTION 3.07. Mutilated, Destroyed, Lost and Stolen Securities
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such Security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its written request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security, in each such case without
premium or penalty.
Upon the issuance of any new Security under this Section 3.07, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section 3.07
in exchange for any mutilated Security or in lieu of any destroyed, lost or
stolen Security shall constitute an original additional contractual obligation
of the Company, whether or not the mutilated, destroyed, lost or stolen Security
shall be at any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Securities of that series duly issued hereunder.
The provisions of this Section 3.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.08. Payment of Interest; Interest Rights Reserved
Interest on any Security which is payable and is punctually paid or
duly provided for on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Payment of interest, if any, in respect of the Securities will be made
at the office or agency of the Paying Agent and Registrar within the City of New
York unless the Company
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41
elects to make interest payments by check mailed to the address of the Person
entitled thereto at such person's address appearing in the Security Register.
Payment of interest, if any, in respect of the Securities may also be made, in
the case of a Holder of at least U.S. $50,000,000 aggregate principal amount of
Securities, and payment of interest, if any, in respect of a Permanent Global
Security shall be made, by wire transfer to a U.S. Dollar account maintained by
the Holder with a bank in the United States; provided that such Holder elects
payment by wire transfer by giving written notice to the Trustee or a Paying
Agent to such effect designating such account no later than 15 days immediately
preceding the relevant due date for payment.
Any interest on any Security of any series which is payable but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
thereof on the relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the Company, at its election
in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security of such series and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. Unless the Trustee is
acting as the Security Exchange Agent/Registrar, promptly after such
Special Record Date, the Company shall furnish the Trustee with a list, or
shall make arrangements satisfactory to the Trustee with respect thereto,
of the names and addresses of, and respective principal amounts of such
Securities held by, the Holders appearing on the Security Register at the
close of business on such Special Record Date. The Trustee shall promptly
notify the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder of Securities of such series at
the Holder's address as it appears in the Security Register, not less than
10 days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been
so mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the following clause (2).
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(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any Securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange.
Subject to the foregoing provisions of this Section 3.08, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security, shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.09. Persons Deemed Owners
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 3.08) interest, if any, on such Security and for
all other purposes whatsoever, whether or not such Security be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary. All such payments so made to any
such person, or upon such person's order, shall be valid, and, to the extent of
the sums so paid, effectual to satisfy and discharge the liability for monies
payable upon any such Security.
Holders of beneficial interests in a Global Security of any series will
not be entitled to receive certificates therefor, except in the limited
circumstances set forth in Section 3.06(b)(ii). No holder of any beneficial
interest in a Global Security shall have any rights under this Indenture with
respect to such Global Security.
The Trustee shall not deem requests or directions from, or votes by,
the Depositary for a Global Security of any series to be inconsistent if made on
behalf of different holders of beneficial interests.
SECTION 3.10. Cancellation
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any Person for delivery to the
Trustee) for cancellation any Securities previously authenticated hereunder
which the Company has not issued and sold, and all Securities so delivered shall
be promptly cancelled by the Trustee. No Securities shall be authenticated in
lieu of or in exchange for any Securities cancelled as provided in this Section
3.10, except as expressly permitted by this Indenture. All cancelled Securities
held by the Trustee shall be returned to the Company upon written request.
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SECTION 3.11. Computation of Interest
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 3.12. Certification Form
(a) Whenever any certification is to be given by an owner of a
beneficial interest in a Regulation S Global Security pursuant to Section
3.06(d)(i) of this Indenture, in connection with the transfer of a beneficial
interest therein to a Person who wishes to take delivery thereof in the form of
a beneficial interest in a Rule 144A Global Security, such certification shall
be provided substantially in the form of the following certificate (which may be
attached to or set forth on the Security), including or omitting bracketed
language as appropriate, but otherwise with only such changes as may be approved
in writing by the Company:
<PAGE>
44
FORM OF TRANSFER CERTIFICATE
FOR TRANSFER OR EXCHANGE FROM REGULATION S
GLOBAL SECURITY TO RULE 144A GLOBAL SECURITY
(TRANSFERS PURSUANT TO SECTION 3.06(d)(i) OF THE INDENTURE)
The Bank of New York,
as Trustee
101 Barclay Street
New York, NY 10286
Attn: Corporate Trust Administration
Re : CILCORP INC.'s [Title of Securities]
Reference is hereby made to the Indenture, dated as of October 18, 1999
(the "Indenture"), between CILCORP INC. and THE BANK OF NEW YORK, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to U.S. $___________ principal amount of Securities
which are evidenced by one or more Regulation S Global Securities in fully
registered form (ISIN No. _____) and held with the Depositary by means of a
book-entry interest through [Euroclear] [Cedel] in the name of [insert name of
transferor] (the "Transferor"). The Transferor has requested a transfer of such
beneficial interest in the Regulation S Global Security to a Person that will
take delivery thereof (the "Transferee") in the form of any equal principal
amount of Securities evidenced by one or more Rule 144A Global Securities (CUSIP
No. ______).
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that the interests in the Regulation S Global
Security are being transferred pursuant to and in accordance with Rule 144A
under the Securities Act of 1933, and, accordingly, the Transferor does hereby
further certify that the interests in the Regulation S Global Security are being
transferred to a Person that the Transferor reasonably believes is purchasing
the Securities for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A, in each case in a transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of the United
States.
<PAGE>
45
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the underwriters or initial
purchasers, if any, of the initial offering of such Securities being
transferred.
[Insert Name of Transferor]
By:
--------------------------------
Name:
Title:
Dated:
----------------------
cc: CILCORP INC.
Signature Guarantee:
---------------------
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Security Exchange Agent/Registrar, which
requirements include membership or participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other "signature guarantee program" as may
be determined by the Security Exchange Agent/Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
(b) For Securities of any series, whenever any certification is to be
given by an owner of a beneficial interest in a Rule 144A Global Security
pursuant to Section 3.06(e)(i) of this Indenture in connection with the transfer
of a beneficial interest therein to a Person who wishes to take delivery thereof
in the form of a beneficial interest in a Regulation S Global Security, such
certification shall be provided substantially in the form of the following
certificate (which may be attached to or set forth on the Security), with only
such changes as shall be approved in writing by the Company:
<PAGE>
46
FORM OF TRANSFER CERTIFICATE
FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL
SECURITY TO REGULATION S GLOBAL SECURITY
(TRANSFERS PURSUANT TO SECTION 3.06(e)(i) OF THE INDENTURE)
The Bank of New York,
as Trustee
101 Barclay Street
New York, NY 10286
Attn: Corporate Trust Administration
Re: CILCORP INC.'s [Title of Securities]
Reference is hereby made to the Indenture, dated as of October 18, 1999
(the "Indenture"), between CILCORP INC. and THE BANK OF NEW YORK, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to US$___________ principal amount of Securities
which are evidenced by one or more Rule 144A Global Securities (CUSIP
No._______) and held through DTC in the name of [insert name of transferor] (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Securities to a non-U.S. Person who will take delivery thereof
in the form of an equal principal amount of Securities evidenced by one or more
Regulation S Global Securities (CUSIP No. ________), which amount, immediately
after such transfer, is to be held with DTC through Euroclear or Cedel or both
(Common Code _________).
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been effected pursuant to
and in accordance with Rule 903 or Rule 904 under the United States Securities
Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor
does hereby further certify that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either:
(A) at the time the buy order was originated, the transferee
was outside the United States or the Transferor and any Person acting
on its behalf reasonably believed that the transferee was outside the
United States, or
(B) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither the
Transferor nor any Person acting on its behalf knows that the
transaction was pre-arranged with a buyer in the United States;
<PAGE>
47
(3) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial interest being
transferred as described above is to be held with DTC through Euroclear or Cedel
or both (Common Code ____________).
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the underwriters or initial
purchasers, if any, of the initial offering of such Securities being
transferred. Terms used in this certificate and not otherwise defined in the
Indenture have the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
---------------------------------
Name:
Title:
Dated:
------------------
cc: CILCORP INC.
Signature Guarantee:
----------------------
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Security Exchange Agent/Registrar, which
requirements include membership or participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other "signature guarantee program" as may
be determined by the Security Exchange Agent/Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
<PAGE>
48
(c) Whenever any certification is to be given by an owner of a
beneficial interest in a Rule 144A Global Security pursuant to Section
3.06(e)(ii) of this Indenture in connection with the transfer of a beneficial
interest in the Rule 144A Global Security to a Person who wishes to take
delivery thereof in the form of a beneficial interest in an Unrestricted Global
Security, such certification shall be provided substantially in the form of the
following certificate, with only such changes as shall be approved in writing by
the Company:
FORM OF TRANSFER CERTIFICATE
FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL
SECURITY TO UNRESTRICTED GLOBAL SECURITY
(TRANSFERS PURSUANT TO SECTION 3.06(e)(ii)
OF THE INDENTURE)
The Bank of New York,
as Trustee
101 Barclay Street
New York, NY 10286
Attn: Corporate Trust Administration
Re: CILCORP INC.'s [Title of Securities]
Reference is hereby made to the Indenture, dated as of October __, 1999
(the "Indenture"), between CILCORP INC. and THE BANK OF NEW YORK, as Trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
This letter relates to US$_______ principal amount of Securities which
are evidenced by one or more Rule 144A Global Securities (CUSIP No.______) and
held through DTC in the name of [insert name of transferor] (the "Transferor").
The Transferor has requested a transfer of such beneficial interest in the
Securities to a Person who will take delivery thereof in the form of an equal
principal amount of Securities evidenced by one or more Unrestricted Global
Securities (CUSIP No.______).
In connection with such request and in respect of such Securities, the
Transferor does hereby certify that such transfer has been effected pursuant to
and in accordance with either Rule 903, Rule 904 or Rule 144 under the United
States Securities Act of 1933, as amended (the "Securities Act"), and
accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 903 or Rule
904:
(A) the offer of the Securities was not made to a Person in
the United States;
<PAGE>
49
(B) either:
(i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any Person acting on its behalf reasonably believed that the
transferee was outside the United States, or
(ii) the transaction was executed in, on or through
the facilities of a designated offshore securities market and
neither the Transferor nor any Person acting on its behalf
knows that the transaction was pre-arranged with a buyer in
the United States;
(C) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(D) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; or
(2) if the transfer has been effected pursuant to Rule 144, the
Securities have been transferred in a transaction permitted by Rule 144.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the underwriters and initial
purchasers, if any, of the initial offering of Securities being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By:
----------------------------------
Name:
Title:
Dated:
------------------
cc: CILCORP INC.
Signature Guarantee:
---------------------
Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Security Exchange Agent/Registrar, which
requirements include membership or participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other "signature guarantee program" as may
be determined by the Security Exchange Agent/Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
<PAGE>
50
SECTION 3.13. CUSIP and ISIN Numbers
The Company in issuing the Securities may use "CUSIP" numbers or "ISIN"
numbers (in either case, if then generally in use), and, if so, the Trustee
shall use "CUSIP" or "ISIN" numbers, as applicable, in notices of redemption as
a convenience to Holders; provided that the Trustee shall assume no
responsibility for the accuracy of such numbers and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE IV
SATISFACTION, DISCHARGE AND DEFEASANCE
SECTION 4.01. Satisfaction and Discharge of Indenture
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
the Securities herein expressly provided for and any rights to receive payments
of any principal, premium or interest in respect thereof as provided in Section
10.01), and the Trustee shall execute instruments in form and substance
satisfactory to itself and to the Company acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all the Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 3.07 and
(ii) Securities for whose payment money has theretofore been deposited
in trust with the Trustee or any Paying Agent or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 10.03) have been delivered to
the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Company, or
(iv) are deemed paid and discharged pursuant to
Section 4.02, and the Company, in the case of (i), (ii) or
(iii) above, has irrevocably deposited or caused to be
deposited with the Trustee as trust funds in trust for the
purpose an amount
<PAGE>
51
of (a) money or (b) U.S. Government Obligations which through
the payment of interest and principal in respect thereof in
accordance with their terms will provide not later than one
day before the Stated Maturity or Redemption Date, as the case
may be, money, or (c) a combination of money and such U.S.
Government Obligations, in each case, sufficient to pay and
discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for
principal, premium, if any, and interest, if any, to the date
of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption Date,
as the case may be;
(2) the Company has paid, caused to be paid or made provision
satisfactory to the Trustee for payment of all other sums payable hereunder
by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
following rights and obligations shall survive: (i) the obligations of the
Company to the Trustee under Section 6.07 and 6.14,(ii) if money or U.S.
Government Obligations shall have been deposited with or received by the Trustee
pursuant to Section 4.01(1)(B) or Section 4.02, the obligations of the Trustee
under Section 4.03 and the last paragraph of Section 10.03 and (iii) any rights
of registration of transfer, exchange or replacement of Securities provided in
Article III and Sections 9.06, 10.02 and 11.07.
SECTION 4.02. Defeasance, Discharge and Covenant Defeasance
(a) Defeasance and Discharge of a Series of Securities. The Company
shall be deemed to have been discharged from its obligations with respect to
Outstanding Securities of any series, as provided in this Section 4.02(a) on and
after the date the applicable conditions set forth in subsection (c) hereof are
satisfied (hereinafter called "Defeasance") with respect to such Securities. For
this purpose, such Defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness representing the Outstanding
Securities of such series and to have satisfied all of its other respective
obligations under the Securities of such series and this Indenture insofar as
the Securities of such series are concerned (and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging the same), subject
to the following which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of Securities of such series to receive,
solely from the trust fund described in Section 4.03 and as more fully set forth
in such Section, payments in respect of the principal of and any premium and
interest on such Securities of such series when payments are due, (ii) the
Company's obligations with respect to the Securities of such series under
Article III and Sections 10.02 and 10.03, (iii) the rights (including without
limitation, the rights set forth in Section 6.07), powers, trusts, duties and
immunities of the Trustee hereunder and (iv) this Article. Subject to compliance
with this Article, the Company may defease any Securities
<PAGE>
52
pursuant to this Section notwithstanding the prior Covenant Defeasance of such
Series pursuant to subsection (b) hereof.
(b) Covenant Defeasance. On and after the date the applicable
conditions set forth in subsection (c) hereof are satisfied (hereinafter called
"Covenant Defeasance") with respect to the Outstanding Securities of any series,
(i) the Company shall be released from its obligations under Sections 8.01,
10.04, 10.05, 10.06, 10.07, 10.08 and Article XIII (other than Section 13.08),
and any covenants adopted by indenture supplemental hereto under Section 9.01(2)
for the benefit of the Holders of such Securities and (ii) the occurrence of any
event specified in Sections 5.01(3), 5.01(4), 5.01(5), 5.01(6) or 5.01(7) with
respect to any obligations referred to in clause (i) shall be deemed not to be
or result in an Event of Default, in each case with respect to the Outstanding
Securities of such series as provided in this Section. For this purpose, such
Covenant Defeasance means that the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such specified Section, whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or Article or by reason of any
reference in any such Section or Article to any other provision herein or in any
other document, but the remainder of this Indenture and the Securities of such
series shall be unaffected thereby.
(c) Conditions to Defeasance or Covenant Defeasance. The following
shall be the conditions to the Defeasance or the Covenant Defeasance pursuant to
this Section 4.02 of the Outstanding Securities of any series:
(1) The Company shall elect by Board Resolution to effect a Defeasance or a
Covenant Defeasance pursuant to this Section 4.02 with respect to the
Outstanding Securities of any series specified in such Board Resolution;
(2) The Company shall irrevocably have deposited or caused to be deposited
(except as provided in Section 6.07, Section 4.03(c) and the last paragraph
of Section 10.03) with the Trustee (specifying that each such deposit is
pursuant to this Section 4.02) as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of the Outstanding Securities of such series, (a) money, or (b)
U.S. Government Obligations which through the payment of principal and
interest in respect thereof in accordance with their terms will provide
money, not later than one day before the due date of any payment, or (c) a
combination thereof, in each case in an amount sufficient, in the opinion
of a nationally recognized firm of independent accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee to pay and discharge
the principal of and any premium and interest on the Securities of such
series on the respective Stated Maturities (or if the Company has
designated a Redemption Date pursuant to the next sentence of this clause
(2), to and including the Redemption Date so designated by the Company), in
accordance with the terms of this Indenture and the Securities of such
series. If the Company shall wish to deposit or cause to be deposited money
or U.S. Government Obligations to pay or discharge the principal of (and
premium, if any) and interest, if any, on the outstanding Securities of
such series to and including a Redemption Date on which
<PAGE>
53
all of the outstanding Securities of such series are to be redeemed, such
Redemption Date shall be irrevocably designated by a Board Resolution
delivered to the Trustee on or prior to the date of deposit of such money
or U.S. Government Obligations, and such Board Resolution shall be
accompanied by an irrevocable Company Request that the Trustee give notice
of such redemption in the name and at the expense of the Company not less
than 30 nor more than 60 days prior to such Redemption Date in accordance
with this Indenture;
(3) In the event of a Defeasance pursuant to Section 4.02(a), the Company
shall have delivered to the Trustee an opinion of independent counsel of
recognized standing stating that (x) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (y)
since the date of this instrument, there has been a change in the
applicable U.S. federal income tax law, in either case (x) or (y) to the
effect that, and based thereon such opinion shall confirm that, the Holders
of such series will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of the deposit;
(4) In the event of a Covenant Defeasance pursuant to Section 4.02(b), the
Company shall have delivered to the Trustee an opinion of independent
counsel of recognized standing to the effect that the Holders and any
owners of beneficial interests in Outstanding Securities of such series
will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of the deposit;
(5) The Securities, if then listed on any securities exchange, will not be
delisted as a result of such deposit;
(6) No event which is, or after notice or lapse of time or both would
become, an Event of Default (including by reason of such deposit) with
respect to the Outstanding Securities of such series shall have occurred
and be continuing at the time of such deposit;
(7) Such Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under, any other material agreement
or instrument to which the Company is a party or by which it is bound; and
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and Opinion of Counsel, stating that all conditions precedent
with respect to such Defeasance or Covenant Defeasance have been complied
with.
SECTION 4.03. Application of Trust Money
(a) Subject to the provisions of the last paragraph of Section 10.03,
all money or U.S. Government Obligations deposited with the Trustee pursuant to
Sections 4.01 or 4.02 and all money received by the Trustee in respect of U.S.
Government Obligations deposited with the Trustee pursuant to Sections 4.01 or
4.02, shall be held in trust and applied by it, in accordance
<PAGE>
54
with the provisions of the Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the persons entitled thereto, of
the principal of (and premium, if any) and interest, if any, on the Securities
for whose payment such money has been deposited with or received by the Trustee.
(b) The Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the Trustee or the trust
created hereby with respect to U.S. Government Obligations deposited pursuant to
Sections 4.01 or 4.02 or the interest and principal received in respect thereof
other than any such tax, fee or other charge which by law is payable by or on
behalf of Holders.
(c) The Trustee shall deliver or pay to the Company from time to time
upon Company Request any monies or U.S. Government Obligations held by it as
provided in Sections 4.01 or 4.02 which, in the opinion of a nationally
recognized firm of independent certified public accountants expressed in a
written certification thereof delivered to the Trustee, are in excess of the
amount thereof which, at the time of such certification, would have been
required to be deposited to effect the discharge of the Indenture or of any
series of Securities, or the Defeasance or Covenant Defeasance of the Securities
of any series, as the case may be. This paragraph (c) shall not authorize the
sale by the Trustee of any U.S. Government Obligations held under this
Indenture.
SECTION 4.04. Reinstatement
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to the Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 4.01 or 4.02 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 4.03 with respect to such Securities
in accordance with this Article; provided, however, that if the Company makes
any payment of principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in Trust.
ARTICLE V
REMEDIES
SECTION 5.01. Events of Default
An "Event of Default" shall occur with respect to the Securities of any
series if:
<PAGE>
55
(1) default for a period of 30 days in the payment of any interest upon any
Security of that series when it becomes due and payable and continuance of
such default; or
(2) default in the payment of the principal of (or any premium on) any
Security of that series at its Maturity upon redemption, upon required
purchase, upon acceleration or otherwise; or
(3) default in the performance, or breach, of any other covenant or
obligation of the Company in this Indenture for a period of 30 days after
there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least
25% aggregate principal amount of the Outstanding Securities of that series
a written notice specifying such default and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder; or
(4) default in the payment of the principal of any bond, debenture, note or
other evidence of indebtedness, in each case for money borrowed by the
Company, or in the payment of principal under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for Borrowed Money of the Company or any
Significant Subsidiary, if such Indebtedness for Borrowed Money is not
Project Finance Debt and provides for recourse generally to the Company
which default for payment of principal is in an aggregate principal amount
exceeding $25 million (or its equivalent in any other currency or
currencies) when such indebtedness becomes due and payable (whether at
maturity, upon redemption or acceleration or otherwise), if such default
shall continue unremedied or unwaived for more than 30 Business Days and
the time for payment of such amount has not been expressly extended by the
holders of such indebtedness, provided that at the time such payment
default is remedied, cured or waived the Event of Default hereunder by
reason thereof shall be deemed likewise to have been remedied, cured or
waived without further action upon the part of the Trustee or any of the
Holders; or
(5) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of the Company or any of its Significant Subsidiaries or
for all or substantially all of the property and assets of the Company or
any of its Significant Subsidiaries or ordering the winding up or
liquidation of the affairs of the Company or any of its Significant
Subsidiaries, and in each case such decree or order shall remain unstayed
and in effect for a period of 180 consecutive days; or
(6) the Company or any of its Significant Subsidiaries (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
of its
<PAGE>
56
Significant Subsidiaries or for all or substantially all of the property
and assets of the Company or any of its Significant Subsidiaries or (C)
effects any general assignment for the benefit of creditors; or
(7) from and after the Pledge Effective Date, the Trustee fails to have
perfected a security interest in the pledged capital stock of CILCO for a
period of 10 days in accordance with the terms of the Pledge Agreement.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment
(a) If an Event of Default other than as described in clauses (5) or
(6) of Section 5.01 with respect to the Securities of any series then
outstanding occurs and is continuing, then, and in each and every such case,
except for any series of Securities the principal of which shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Securities of any such affected series then
outstanding hereunder (each such series treated as a separate class) by notice
in writing to the Company (and to the Trustee if given by Securityholders), may
declare the entire principal of all Securities of such affected series, and the
interest accrued thereon, if any, to be due and payable immediately, and upon
any such declaration the same shall become immediately due and payable.
(b) If an Event of Default described in clause (5) or (6) of Section
5.01 occurs and is continuing, then the principal amount of all the Securities
then outstanding, premium, if any, and interest accrued thereon, shall be and
become immediately due and payable, without any notice or other action by any
Holder or the Trustee, to the full extent permitted by applicable law.
The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Securities of any series shall have
been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, if any and all Events of Default under the Indenture, other than the
non-payment of the principal of Securities which shall have become due by
acceleration, shall have been cured, waived or otherwise remedied as provided
herein, then and in every such case the Holders of a majority in aggregate
principal amount of all the then outstanding Securities of all such series that
have been accelerated (voting as a single class), by written notice to the
Company and to the Trustee, may waive all defaults with respect to all such
series and rescind and annul such declaration and its consequences, but no such
waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon.
SECTION 5.03. Other Remedies
If an Event of Default with respect to the Securities of any series
occurs and is continuing, the Trustee may pursue, in its own name or as trustee
of an express trust, any available remedy by proceeding at law or in equity to
collect the payment of principal of and
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interest on the Securities of such series or to enforce the performance of any
provision of the Securities of such series or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding.
SECTION 5.04. Waiver of Past Defaults
Subject to Sections 5.02, 5.07 and 9.02, the Holders of at least a
majority in the aggregate principal amount of the Outstanding Securities of each
series affected, by notice to the Trustee, may waive an existing default or
Event of Default with respect to the Securities of such series and its
consequences, except a default in the payment of principal of or interest on any
Security as specified in clauses (1) or (2) of Section 5.01 or in respect of a
covenant or provision of this Indenture which cannot be modified or amended
without the consent of the Holder of each outstanding Security affected. Upon
any such waiver, such default shall cease to exist, and any Event of Default
with respect to the Securities of such series arising therefrom shall be deemed
to have been cured, for every purpose of this Indenture; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereto.
SECTION 5.05. Control by Majority
Subject to Sections 6.01 and 6.03, the Holders of at least a majority
in aggregate principal amount of the Outstanding Securities of all series
affected may direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee with respect to the Securities of such series by this Indenture;
provided, that the Trustee may refuse to follow any direction that conflicts
with law or this Indenture, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders not joining in the giving of such
direction; and provided further, that the Trustee may take any other action it
deems proper that is not inconsistent with any directions received from Holders
of Securities pursuant to this Section 5.05.
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SECTION 5.06. Limitation on Suits
No Holder of any Security of any series may institute any proceeding,
judicial or otherwise, with respect to this Indenture or the Securities of such
series, or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(1) such Holder has previously given to a Responsible Officer of the
Trustee written notice of a continuing Event of Default with respect to the
Securities of such series;
(2) the Holders of at least 25% in aggregate principal amount of
outstanding Securities of all such series affected shall have made written
request to a Responsible Officer of the Trustee to institute proceedings in
respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee security or
indemnity reasonably satisfactory to the Trustee against any costs,
liabilities or expenses to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
(5) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Securities of all such affected series
have not given the Trustee a direction that is inconsistent with such
written request.
Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 5.07. Rights of Holders to Receive Payments
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of or interest, if any, on
such Holder's Security on or after the respective due dates expressed on such
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 5.08. Collection Suit by Trustee
If an Event of Default with respect to the Securities of any series in
payment of principal or interest specified in clause (1) or (2) of Section 5.01
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, and accrued interest remaining unpaid on, together with interest
on overdue principal of, and, to the extent that payment of such interest is
lawful, interest on overdue installments of interest on, the Securities of such
series, in each case
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at the rate specified in such Securities, and such further amount as shall be
sufficient to cover all amounts owing the Trustee under Section 6.07.
SECTION 5.09. Trustee May File Proofs of Claim
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for amounts due the Trustee under Section 6.07) and the
Holders allowed in any judicial proceedings relative to the Company (or any
other obligor on the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any moneys, securities or other
property payable or deliverable upon conversion or exchange of the Securities or
upon any such claims and to distribute the same, and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it under Section 6.07. Nothing herein contained shall be deemed to
empower the Trustee to authorize or consent to, or accept or adopt on behalf of
any Holder, any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 5.10. Application of Proceeds
Any moneys collected by the Trustee pursuant to this Article in respect
of the Securities of any series shall be applied in the following order at the
date or dates fixed by the Trustee and, in case of the distribution of such
moneys on account of principal (or premium, if any) or interest, upon
presentation of the several Securities and noting thereon the payment, if only
partially paid, or upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 6.07
applicable to the Securities of such series in respect of which moneys have
been collected;
SECOND: In case the principal and premium, if any, of the Securities of
such series in respect of which moneys have been collected shall not have
become and be then due and payable, to the payment of interest on the
Securities of such series in default in the order of the maturity of the
installments of such interest, with interest (to the extent permitted by
law) upon the overdue installments of interest at the same rate as the rate
of interest specified in such Securities, such payments to be made ratably
to the persons entitled thereto, without discrimination or preference;
THIRD: In case the principal and premium, if any, of the Securities of
such series in respect of which moneys have been collected shall have
become and shall be then due and payable, to the payment of the whole
amount then owing and unpaid upon all the Securities of such series for
principal and premium, if any, and interest, if any, with interest upon the
overdue
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principal, and (to the extent permitted by law) upon overdue installments
of interest at the same rate as the rate of interest specified in the
Securities of such series; and in case such moneys shall be insufficient to
pay in full the whole amount so due and unpaid upon the Securities of such
series, then to the payment of such principal and interest, without
preference or priority of principal over interest, or of interest over
principal or premium, if any, or of any installment of interest over any
other installment of interest, or of any Security of such series over any
other Security of such series, ratably to the aggregate of such principal
and accrued and unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the Company.
SECTION 5.11. Restoration of Rights and Remedies
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then, and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Company, Trustee and the Holders shall
continue as though no such proceeding had been instituted.
SECTION 5.12. Undertaking for Costs
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, in either case in respect to the Securities of any series, a
court may require any party litigant in such suit (other than the Trustee) to
file an undertaking to pay the costs of such suit, and the court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant (other than the Trustee) in the suit having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 5.12 does not apply to a suit by a Holder pursuant to
Section 5.07 or a suit by Holders of more than 10% in principal amount of the
outstanding Securities of such series.
SECTION 5.13. Rights and Remedies Cumulative
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or wrongfully taken Securities in Section 3.07, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
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SECTION 5.14. Delay or Omission Not Waiver
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article V or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
ARTICLE VI
THE TRUSTEE
SECTION 6.01. Certain Duties and Responsibilities
(a) Except during the continuance of a default with respect to the
Securities of any series,
(1) the Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall
examine the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case a default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it shall be conclusively determined
by a court of competent jurisdiction that the Trustee was negligent in
ascertaining the pertinent facts;
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(3) no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if repayment of such funds or adequate indemnity
against such risk or liability satisfactory to the Trustee has not been
assured to it; and
(4) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of
the Holders of not less than a majority in principal amount of the
Outstanding Securities of any series, determined as provided in Section
5.05, relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture with respect to the
Securities of such series.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct of, or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.01.
SECTION 6.02. Notice of Defaults
Within 90 days after the occurrence of any default hereunder with
respect to the Securities of any series, the Trustee shall transmit by mail to
all Holders of Securities of such series notice of such default hereunder
actually known to a Responsible Officer of the Trustee, unless such default
shall have been cured or waived; provided, however, that, except in the case of
a default in the payment of the principal of (or premium, if any) or interest,
if any, on any Security of such series, the Trustee shall be fully protected in
withholding such notice if and so long as a trust committee or a Responsible
Officer of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders of Securities of such series; and
provided, further, that in the case of any default of the character specified in
Section 5.01(3) with respect to Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section 6.02, the term "default" means any event which is,
or after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
SECTION 6.03. Certain Rights of Trustee
Subject to the provisions of Section 6.01:
(a) the Trustee may rely conclusively and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
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(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
or as otherwise expressly provided herein and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, conclusively rely upon an
Officers' Certificate;
(d) the Trustee may consult with counsel of its selection, and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to expend or risk
its own funds or to exercise, at the request or direction of any of the
Holders, any of the rights or powers vested in it by this Indenture
pursuant to this Indenture, unless such Holders shall have offered to
the Trustee security or indemnity satisfactory to the Trustee against
the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled upon reasonable
prior request and during normal business hours to examine the books,
records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents, attorneys, custodians or nominees and shall not be
liable for the actions or omissions of such agents, attorneys,
custodians or nominees appointed by it with due care; and
(h) The Trustee shall not be charged with knowledge of any
default or Event of Default, as the case may be, with respect to the
Securities of any series unless either (1) a Responsible Officer of the
Trustee shall have actual knowledge of the default or an Event of
Default, as the case may be, or (2) written notice of such default or
Event of Default, as the case may be, shall have been given to the
Trustee by the Company pursuant to Section 10.08 hereof, by any other
obligor on such Securities or by any Holder of such Securities.
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities
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The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent nor any party
hereto (other than the Company) assumes any responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities. Neither the Trustee nor any
Authenticating Agent nor any party hereto (other than the Company) shall be
accountable for the use or application by the Company of Securities or the
proceeds thereof.
SECTION 6.05. May Hold Securities
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Exchange Agent/Registrar or any other agent of the Company, in its individual or
any other capacity, may become the owner or pledgee of Securities and, subject
to Sections 6.08 and 6.13, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Exchange Agent/Registrar or such other agent.
SECTION 6.06. Money Held in Trust
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 6.07. Compensation and Reimbursement
The Company agrees
(1) to pay to the Trustee from time to time such compensation as is agreed
upon in writing, which compensation shall not be limited by any provision
of law regarding compensation of the trustee of an express trust;
(2) except as otherwise expressly provided herein, to reimburse the Trustee
upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel, which compensation, expenses and
disbursements shall be set forth in sufficient written detail to the
satisfaction of the Company), except any such expense, disbursement or
advance as may be attributable to its or their negligence or willful
misconduct; and
(3) to indemnify each of the Trustee, its officers, directors, agents and
employees for, and to hold it harmless against, any loss, liability or
expense incurred without negligence, bad faith, or willful misconduct on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
Obligations under this
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Section 6.07(3) will survive the satisfaction and discharge of this
Indenture pursuant to Section 4.01 hereof or the earlier resignation or
removal of the Trustee.
SECTION 6.08. Disqualification; Conflicting Interests
If the Trust Indenture Act shall be applicable to a series of
Securities issued hereunder and if the Trustee has or shall acquire a
conflicting interest within the meaning of the Trust Indenture Act, then the
Trustee shall either eliminate such interest or resign, to the extent and in the
manner provided by, and subject to the provisions of, the Trust Indenture Act
and this Indenture.
SECTION 6.09. Corporate Trustee Required; Eligibility
There shall at all times be a Trustee hereunder which shall be eligible
to act as trustee under the Trust Indenture Act and which shall have a combined
capital and surplus of at least $50,000,000. If the Trustee does not have an
office in The City of New York, the Trustee may appoint an agent in The City of
New York reasonably acceptable to the Company to conduct any activities which
the Trustee may be required under this Indenture to conduct in The City of New
York. If the Trustee does not have an office in The City of New York or has not
appointed an agent in The City of New York, the Trustee shall be a Participant
in DTC and in the FAST distribution systems. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of a United States federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section 6.09,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Trustee shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 6.10. Resignation and Removal; Appointment of Successor Trustee
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 6.11 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction at the expense of the Company for the appointment of a successor
Trustee with respect to the Securities of such series, subject to Section 6.09.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company. If the instrument of acceptance by a
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successor Trustee required by Section 6.11 shall not have been delivered to the
Trustee within 30 days of such removal, the Trustee subject to such removal may
petition any court of competent jurisdiction at the expense of the Company for
the appointment of a successor Trustee with respect to the Securities of such
series, subject to Section 6.09.
(d) If at any time:
(1) the Trustee shall fail to comply with section 310(b) of the Trust
Indenture Act pursuant to Section 6.08, with respect to any series of
Securities to which the Trust Indenture Act may be applicable, after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.09 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all the Securities, or (ii) subject to Section 5.12, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of either series) and shall comply with the applicable
requirements of Section 6.11. If no successor Trustee with respect to the
Securities of any series shall have been so appointed by the Company and
accepted appointment in the manner required by Section 6.11, any Holder who has
been a bona fide Holder of a Security of such series for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by giving
notice in the manner provided in Section 1.06. Each notice shall include the
name of the successor Trustee with respect to the Securities of such series and
the address of its Corporate Trust Office.
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SECTION 6.11. Acceptance of Appointment by Successor
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
series to which the appointment of such successor Trustee relates, (2) if the
retiring Trustee is not retiring with respect to all Securities, shall contain
such provisions as shall be deemed necessary or desirable to confirm that all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Securities of that or those series as to which the retiring Trustee is not
retiring shall continue to be vested in the retiring Trustee, and (3) shall add
to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-trustees of the same
trust and that each such Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder administered by any other
such Trustee; and upon the execution and delivery of such supplemental indenture
the resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that series
to which the appointment of such successor Trustee relates; but on request of
the Company or any successor trustee, such retiring Trustee shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder with respect to the Securities of that series to
which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section 6.11, as the case may be.
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(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
Business
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. Preferential Collecting of Claims Against Company
The Trustee shall comply with Trust Indenture Act Section 311(a),
excluding any creditor relationship listed in Trust Indenture Act Section
311(b). A Trustee who has resigned or been removed shall be subject to Trust
Indenture Act Section 311(a) to the extent indicated.
SECTION 6.14. Authenticating Agents
From time to time the Trustee, with the prior written approval of the
Company, may appoint one or more Authenticating Agents with respect to one or
more series of Securities with power to act on the Trustee's behalf and subject
to its direction in the authentication and delivery of Securities of such series
issued upon original issuance and upon exchange, registration of transfer or
partial redemption thereof or in connection with transfers and exchanges under
Sections 3.03, 3.04, 3.05, 3.06, 3.07 and 11.07 as fully to all intents and
purposes as though the Authenticating Agent had been expressly authorized by
those Sections of this Indenture to authenticate and deliver Securities of such
series. For all purposes of this Indenture, the authentication and delivery of
Securities by an Authenticating Agent pursuant to this Section 6.14 shall be
deemed to be authentication and delivery of such Securities "by the Trustee".
Each such Authenticating Agent shall be acceptable to the Company and shall at
all times be a corporation organized and doing business under the laws of the
United States, any State thereof or the District of Columbia, authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination by
Federal, State or District of Columbia authority. If such corporation publishes
reports of condition at least annually pursuant to law or the requirements of
such authority, then for the purposes of this Section 6.14 the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of
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condition so published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section 6.14, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section 6.14.
Any corporation into which any Authenticating Agent may be merged or
with which it may be consolidated, or any corporation resulting from, any merger
or consolidation or to which any Authenticating Agent shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of any Authenticating Agent, shall be the successor of the
Authenticating Agent hereunder, if such successor corporation is otherwise
eligible under this Section 6.14, without the execution or filing of any paper
or any further act on the part of the parties hereto or the Authenticating Agent
or such successor corporation.
An Authenticating Agent may resign at any time by giving written notice
of resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section 6.14, the
Trustee may appoint a successor Authenticating Agent with the prior written
approval of the Company and shall mail notice of such appointment to all Holders
of Securities of the series with respect to which such Authenticating Agent will
serve, as the names and addresses of such Holders appear on the Security
Register. Any successor Authenticating Agent, upon acceptance of its appointment
hereunder, shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section 6.14.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 6.14 as may be
agreed in a separate writing among the Company, the Trustee and such
Authenticating Agent.
If an appointment with respect to one or more series of Securities is
made pursuant to this Section 6.14, the Securities of such series may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication in the following form:
This is one of the Securities of the series designated herein referred
to in the within mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
as Authenticating Agent
Dated: By:
------------ --------------------------------
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Authorized Signatory
ARTICLE VII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01. Company to Furnish Trustee Names and Addresses of Holders
The Company will furnish or cause to be furnished to the Trustee with
respect to the Registered Securities of each series
(a) semi-annually, not later than 15 days after each Regular Record
Date, or, in the case of any series of Registered Securities on which
semi-annual interest is not payable, not more than 15 days after such
semi-annual dates as may be specified by the Trustee, a list, in such form as
the Trustee may reasonably require, of the names and addresses of the Holders as
of such Regular Record Date or semi-annual date, as the case may be, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
provided, however, that if and so long as the Trustee is Security Exchange
Agent/Registrar for any series of Registered Securities, no such list shall be
required to be furnished with respect to any such series.
SECTION 7.02. Preservation of Information; Communications to Holders
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Exchange Agent/Registrar. The Trustee may destroy any list furnished to it as
provided in Section 7.01 upon receipt of a new list so furnished.
SECTION 7.03. Reports by Trustee
(a) As promptly as practicable after each May 15 beginning with the May
15 following the date of this Indenture, and in any event prior to July 15 in
each year, the Trustee shall mail to each Holder a brief report dated as of such
May 15 that complies with Trust Indenture Act Section 313(a). The Trustee also
shall comply with Trust Indenture Act Section 313(b). The Trustee shall also
transmit by mail all reports required by Trust Indenture Act Section 313(c).
(b) A copy of each report at the time of its mailing to Holders shall
be filed with the Commission and each U.S. stock exchange (if any) on which the
Securities are listed.
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The Company agrees to notify promptly the Trustee whenever the Securities become
listed on any U.S. stock exchange and of any delisting thereof.
SECTION 7.04. Reports by Company
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, SALE OR LEASE
SECTION 8.01. Company May Consolidate, Etc., Only on Certain Terms
The Company shall not consolidate with or merge with or into any Person
(other than CILCORP in the Merger), or convey, transfer or lease its
consolidated properties and assets substantially as an entirety (in one
transaction or in a series of related transactions) to any Person, or permit any
Person to merge into or consolidate with the Company, unless (i)(x) the Company
will be the surviving or continuing Person or (y) if other than the Company, the
surviving or continuing Person or purchaser or lessee will be an entity
organized under the laws of the United States, one of the States thereof or the
District of Columbia and expressly assumes by supplemental indenture,
substantially in the form of Annex I hereto, the Company's obligations under
each series of the Securities under the Indenture, (ii) immediately after giving
effect to such transaction, (x) no Event of Default shall have occurred and be
continuing, and (y) the Company obtains written confirmation from the Rating
Agencies that such transaction will not result in a Ratings Downgrade below such
Rating Agency's Initial Rating, and (iii) the Company shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel stating that such
consolidation, merger, transfer or lease and such supplemental indenture (if
any) complies with this Indenture.
SECTION 8.02. Successor Corporation to be Substituted
Upon any consolidation by the Company with or merger by the Company
into any other corporation or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety in accordance
with Section 8.01, and upon the effectiveness of the Merger, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, transfer or lease is made (which, in the case of the
Merger, shall be CILCORP) shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter the predecessor entity shall be relieved of all obligations and
covenants under this Indenture and the Securities. In the case of the Merger,
CILCORP shall immediately following the effective time of the Merger, by
supplemental indenture expressly assume the Company's obligations under each
series of the Securities under
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the Indenture. Such supplemental indenture shall be entered into by CILCORP and
the Trustee without the consent of any Holder of either series of Securities or
any other action on the part of any Person.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indenture without Consent of Holders
Without the consent of any Holders, the Company and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another entity to the Company and the
assumption by any such successor of the covenants of the Company herein and
in the Securities;
(2) to add to the covenants of the Company for the benefit of the Holders
of all or any series of Securities (and if such covenants are to be for the
benefit of less than all series of Securities, stating that such covenants
are expressly being included solely for the benefit of such series) or to
surrender any right or power herein conferred upon the Company;
(3) to add any additional Events of Default (and if such Events of Default
are to be for the benefit of less than all series of Securities, stating
that such Events of Default are expressly being included solely for the
benefit of such series);
(4) to add to or change any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to facilitate the issuance of
Securities in uncertificated form, or to permit or facilitate the issuance
of extendible Securities;
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only as
to the Securities of any series created by such supplemental indenture and
Securities of any series subsequently created to which such change or
elimination is made applicable by the subsequent supplemental indenture
creating such series;
(6) to secure the Securities pursuant to the requirements of Section 10.04
or otherwise;
(7) to evidence and provide for the acceptance of appointment hereunder by
a successor Trustee with respect to the Securities of one or more series
and to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or
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73
facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 6.11(b);
(8) to provide for any rights of the Holders of Securities of any series to
require the repurchase of Securities of such series by the Company;
(9) to modify the restrictive legends set forth on the face of the form of
Security, or modify the form of certificate set forth in Section 3.12;
provided, however, that any such modification shall not materially and
adversely affect the interest of the Holders of the Securities;
(10) to amend this Indenture to conform to the provisions of the Trust
Indenture Act as in effect at the time of the execution of such
supplemental indenture;
(11) to cure any ambiguity, omission or defect, to correct or supplement
any provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided such action shall not
materially and adversely affect the interests of the Holders of Securities
of any series; or
(12) to modify, alter, amend or supplement this Indenture in any other
respect which is not materially adverse to Holders, which does not involve
a change described in clauses (1), (2),(3) or (4) of Section 9.02 hereof
and which, in the judgment of the Trustee, is not to the prejudice of the
Trustee, or in order to provide for the duties, responsibilities and
compensation of the Trustee as a transfer agent in the event one registered
Security of any series is issued in the aggregate principal amount of all
outstanding Securities of such series in which Holders will hold an
interest.
SECTION 9.02. Supplemental Indentures with Consent of Holders
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities of each series affected
by such supplemental indenture, by Act of said Holders delivered to the Company
and the Trustee, the Company, when authorized by or pursuant to a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities of such series
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Security affected
thereby:
(1) change the Stated Maturity of the principal of, or any installment of
principal of or interest, if any, on, any Security, or reduce the principal
amount thereof or the rate of interest thereon, or reduce any premium
payable upon the redemption thereof, or change any Place of Payment where,
or the coin or currency in which, any Security or any premium or the
interest thereon is payable, or impair the right to institute suit for the
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74
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding Securities
of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture,
or
(3) modify any of the provisions of this Section 9.02, Section 5.04 or
Section 10.09, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, provided, however, that this clause shall not be deemed to require
the consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section 9.02, or the deletion of
this proviso, in accordance with the requirements of Sections 6.11(b) and
9.01(7), or
(4) except in accordance with the terms thereof, (i) release any collateral
from the Lien created by the Pledge Agreement, (ii) amend such terms, (iii)
terminate the Lien created by the Pledge Agreement or (iv) deprive the
holders of the security afforded by the Lien created by the Pledge
Agreement.
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section
9.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.03. Execution of Supplemental Indentures
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, other than the supplemental indenture
referenced in the last sentence of Section 8.02, the Trustee shall be entitled
to receive, and (subject to Section 6.01) shall be fully protected in relying
upon, an Officer's Certificate and an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
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SECTION 9.04. Effect of Supplemental Indentures
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 9.05. Conformity with Trust Indenture Act
Every supplemental indenture executed pursuant to this Article shall,
if so required by the Trust Indenture Act, conform to the requirements of the
Trust Indenture Act as then in effect.
SECTION 9.06. Reference in Securities to Supplemental Indentures
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
SECTION 9.07. Amendments to the Pledge Agreement
The Company shall not amend, modify or supplement, or permit or consent
to any amendment, modification or supplement of, the Pledge Agreement in any way
that would be adverse to the Holders of the Securities.
ARTICLE X
COVENANTS
SECTION 10.01. Payment of Principal, Premium, if any, and Interest
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and interest on
the Securities of that series in accordance with the terms of the Securities and
this Indenture. An installment of principal of or interest on the Securities of
a series shall be considered paid on the date it is due if the Trustee or Paying
Agent holds at 11:00 a.m. New York City Time on that date money deposited by the
Company in immediately available funds and designated for, and sufficient to
pay, the installment in full.
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Neither the Company nor any agent of the Company (including but not
limited to the Paying Agent) will have any responsibility or liability for any
aspect relating to payments made or to be made by the Depositary to DTC in
respect of the Global Securities of a series or the beneficial interests
therein, subject only to limited indemnification rights of the Depository. None
of the Company, the Trustee, the Paying Agent, the Depositary or any agent of
any of the foregoing will have any responsibility or liability for any aspect
relating to payments made or to be made by DTC on account of a Participant's or
Indirect Participant's ownership of a beneficial interest in a Global Security
or for maintaining, supervising or reviewing any records relating to a
Participant's interests in such Global Security.
SECTION 10.02. Maintenance of Office or Agency
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities of any series may be presented or
surrendered for payment, and where notices and demands to or upon the Company in
respect of the Securities of such series and this Indenture may be served and an
office or agency of a Security Exchange Agent/Registrar in such Place of Payment
where Securities may be surrendered for registration of transfer or exchange.
The Company will give prompt written notice to the Trustee of the location, and
any change in the location, of any such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, all such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee and the Company hereby appoints the Paying Agent as its
agent to receive all such presentations, surrenders, notices and demands. In the
event any such notice or demands are so made or served on the Paying Agent, the
Paying Agent shall promptly forward copies thereof to the Company and the
Trustee.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of such Place of Payment) where the
Securities of one or more series and any appurtenant coupon may be presented or
surrendered for any or all of such purposes, and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for any series of Securities for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation and any change in the location of any such other office or agency.
SECTION 10.03. Money for Securities Payments to Be Held in Trust
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest, if any, on any of the Securities
of that series, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and premium, if any) or
interest, if any, so becoming due until such sums shall be paid to such Persons
or otherwise disposed of as herein provided and will promptly notify the Trustee
in writing of its action or failure so to act.
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Whenever the Company shall have one or more Paying Agents for any
series of the Securities, it will, no later than 10:00 a.m. New York City Time,
on each due date of the principal of (and premium, if any) or interest, if any,
on any Securities of that series, deposit with a Paying Agent a sum in
immediately available funds sufficient to pay the principal (and premium, if
any) or interest so becoming due, such sum to be held in trust for the benefit
of the Persons entitled thereto.
The Company will cause each Paying Agent for any series of the
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section 10.03, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest, if any, on Securities of that series in trust
for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities of that series) in the making of any payment of
principal (and premium, if any) or interest, if any, on the Securities of
that series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by the Company or by any Paying Agent
to the Trustee, the Company or such Paying Agent, as the case may be, shall be
released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest, if any, on any Security of any series and remaining unclaimed
for two years after such principal (and premium, if any) or interest has become
due and payable shall be paid to the Company on Company Request, or (if then
held by the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease.
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SECTION 10.04. Limitation on Liens
(i) Immediately upon the effectiveness of the Merger, CILCORP will not
secure any Indebtedness by CILCORP or any other Person by a Lien upon any
capital stock of CILCO without effectively providing that the outstanding
Securities (together with, if CILCORP so determines, any other indebtedness or
obligation then existing or thereafter created ranking equally with the
Securities) will be secured equally and ratably with (or prior to) such
Indebtedness so long as such Indebtedness is so secured. The limitation on Liens
pursuant to this Section 10.04(i) will not, however, apply to:
(a) any Lien securing amounts not more than 180 days overdue or
otherwise being contested in good faith;
(b) (1) any Lien incurred or deposits made in the
ordinary course of business, including, but not
limited to, (x) any mechanics', materialmen's,
carriers', workmen's, vendors' and other like Liens
and (y) any Liens securing amounts in connection with
workers' compensation, unemployment insurance and
other types of social security; and
(2) any Lien incurred or deposits made securing the
performance of tenders, bids, leases, trade contracts
(other than for borrowed money), statutory
obligations, surety bonds, appeal bonds, government
contracts, performance bonds, return-of-money bonds,
letters of credit not securing borrowings and other
obligations of like nature incurred in the ordinary
course of business;
(3) any Lien securing reimbursement obligations under
letters of credit, guaranties and other forms of
credit enhancement given in connection with the
purchase of goods and equipment in the ordinary
course of business;
(c) (1) Liens required by any contract, statute or
regulation in order to permit CILCORP or a
Significant Subsidiary to perform any contract or
subcontract made by it with or at the request of a
governmental entity or any governmental department,
agency or instrumentality, or to secure partial,
progress, advance or any other payments by CILCORP or
a Significant Subsidiary to such governmental unit
under the provisions of any contract, statute or
regulation; and
(2) any Lien securing taxes or assessments or other
applicable governmental charges or levies;
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(d) any Lien which arises under any order of attachment, restraint
or similar legal process arising in connection with court
proceedings and any Lien which secures the reimbursement
obligation for any bond obtained in connection with an appeal
taken in any court proceeding, so long as the execution or
other enforcement of such Lien arising under such legal
process is effectively stayed and the claims secured by that
Lien are being contested in good faith and, if appropriate, by
appropriate legal proceedings, and any Lien in favor of a
plaintiff or defendant in any action before a court or
tribunal as security for costs and/or expenses; and
(e) any extension, renewal or replacement (or successive
extensions, renewals or replacements), as a whole or in part,
of any Liens referred to in the foregoing clauses, for amounts
not exceeding the principal amount of the Indebtedness secured
by the Lien so extended, renewed or replaced, provided that
such extension, renewal or replacement Lien is limited to all
or a part of the capital stock of CILCO that was covered by
the Lien extended, renewed or replaced.
(ii) Each of the Company and any Significant Subsidiary will not issue,
assume or guarantee any Indebtedness secured by a Lien upon any property or
assets (other than any capital stock of CILCO or cash or cash equivalents) of
the Company or such Significant Subsidiary, as applicable, without effectively
providing that the Outstanding Securities (together with, if the Company so
determines, any other indebtedness or obligation then existing or thereafter
created ranking equally with such Securities) shall be secured equally and
ratably with (or prior to) such Indebtedness so long as such Indebtedness shall
be so secured. The foregoing limitation on Liens will not, however, apply to:
(a) Liens in existence on the date of original issue of the Securities;
(b) any Lien created or arising over any property which is acquired,
constructed or created by the Company or any of its Significant
Subsidiaries, but only if (i) such Lien secures only principal amounts (not
exceeding the cost of such acquisition, construction or creation) raised
for the purposes of such acquisition, construction or creation, together
with any costs, expenses, interest and fees incurred in relation thereto or
a guarantee given in respect thereof, (ii) such Lien is created or arises
on or before 180 days after the completion of such acquisition,
construction or creation and (iii) such Lien is confined solely to the
property so acquired, constructed or created;
(c) any Lien securing amounts not more than 180 days overdue or
otherwise being contested in good faith;
(d) (i) rights of financial institutions to offset credit balances in
connection with the operation of cash management programs established for
the benefit of the Company and/or a Significant Subsidiary or in connection
with the issuance of letters of credit for the benefit of the Company
and/or a Significant Subsidiary; (ii) any Lien on
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accounts receivable securing indebtedness of the Company and/or a
Significant Subsidiary incurred in connection with the financing of such
accounts receivable; (iii) any Lien incurred or deposits made in the
ordinary course of business, including, but not limited to, (A) any
mechanics', materialmen's, carriers', workmen's, vendors' or other like
Liens and (B) any Liens securing amounts in connection with workers'
compensation, unemployment insurance and other types of social security;
(iv) any Lien upon specific items of inventory or other goods and proceeds
of the Company and/or a Significant Subsidiary securing obligations of the
Company and/or a Significant Subsidiary in respect of bankers' acceptances
issued or created for the account of such person to facilitate the
purchase, shipment or storage of such inventory or other goods; (v) any
Lien incurred or deposits made securing the performance of tenders, bids,
leases, trade contracts (other than for borrowed money), statutory
obligations, surety bonds, appeal bonds, government contracts, performance
bonds, return-of-money bonds, letters of credit not securing borrowings and
other obligations of like nature incurred in the ordinary course of
business; (vi) any Lien created by the Company or a Significant Subsidiary
under or in connection with or arising out of a Currency, Interest Rate or
Commodity Agreement or any transactions or arrangements entered into in
connection with the hedging or management of risks relating to the
electricity or natural gas distribution industry, including by a right of
set off or right over a margin call account or any form of cash or cash
collateral or any similar arrangement for obligations incurred in respect
of Currency, Interest Rate or Commodity Agreements; (vii) any Lien arising
out of title retention or like provisions in connection with the purchase
of goods and equipment in the ordinary course of business; and (viii) any
Lien securing reimbursement obligations under letters of credit, guaranties
and other forms of credit enhancement given in connection with the purchase
of goods and equipment in the ordinary course of business;
(e) Liens in favor of the Company or a Subsidiary;
(f) (i) Liens on any property or assets acquired from an entity which
is merged with or into the Company or a Significant Subsidiary or any Liens
on the property or assets of any entity existing at the time such entity
becomes a Subsidiary of the Company and, in either case, is not created in
anticipation of the transaction (unless such Lien is created to secure or
provide for the payment of any part of the purchase price of such entity);
(ii) any Lien on any property or assets existing at the time of acquisition
thereof and which is not created in anticipation of such acquisition
(unless such Lien was created to secure or provide for the payment of any
part of the purchase price of such property or assets) and (iii) any Lien
created or outstanding on or over any asset of any entity which becomes a
Significant Subsidiary on or after the date of the issuance of the
Securities, where such Lien is created prior to the date on which such
entity becomes a Significant Subsidiary;
(g) (i) Liens required by any contract, statute or regulation in order
to permit the Company or a Significant Subsidiary to perform any contract
or subcontract made by it with or at the request of a governmental entity
or any department, agency or
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instrumentality thereof, or to secure partial, progress, advance or any
other payments by the Company or a Significant Subsidiary to such
governmental unit pursuant to the provisions of any contract, statute or
regulation; (ii) any Lien securing industrial revenue, development,
pollution control or similar bonds issued by or for the benefit of the
Company or a Significant Subsidiary, provided that such industrial revenue,
development, pollution control or similar bonds do not provide recourse
generally to the Company and/or such Significant Subsidiary; and (iii) any
Lien securing taxes or assessments or other applicable governmental charges
or levies;
(h) any Lien which arises pursuant to any order of attachment,
restraint or similar legal process arising in connection with court
proceedings and any Lien which secures the reimbursement obligation for any
bond obtained in connection with an appeal taken in any court proceeding,
so long as the execution or other enforcement of such Lien arising pursuant
to such legal process is effectively stayed and the claims secured thereby
are being contested in good faith and, if appropriate, by appropriate legal
proceedings, and any Lien in favor of a plaintiff or defendant in any
action before a court or tribunal as security for costs and/or expenses;
(i) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Liens referred to
in the foregoing clauses, for amounts not exceeding the principal amount of
the Indebtedness secured by the Lien so extended, renewed or replaced,
provided that such extension, renewal or replacement Lien is limited to all
or a part of the same property or assets that were covered by the Lien
extended, renewed or replaced (plus improvements on such property or
assets);
(j) any Lien created in connection with Project Finance Debt;
(k) any Lien created by CILCO that is then permitted to be created
under the term of its then existing mortgages and indentures on the terms
in effect at the time of creation of the Lien;
(l) any Lien created in connection with the securitization of some or
all of the assets of CILCO and the associated issuance of Indebtedness as
authorized by applicable state or federal law in connection with the
restructuring of jurisdictional electric or gas businesses; and
(m) any Lien on stock created in connection with a mandatorily
convertible or exchangeable stock or debt financing, provided that any such
financing may not be secured by or otherwise involve the creation of a Lien
on any capital stock of CILCO or any successor thereto.
Notwithstanding the foregoing, the Company and its Significant
Subsidiaries may create Liens over any of their respective property or assets,
so long as the aggregate amount of Indebtedness secured by all such Liens
(excluding therefrom the amount of Indebtedness secured by Liens set forth in
clauses (a) through (m), inclusive, above) does not exceed 10% of
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Consolidated Net Tangible Assets in the aggregate calculated as of the date of
creation of such Liens (based upon the Consolidated Net Tangible Assets
appearing on the most recently available balance sheet for the most recently
concluded calendar quarter).
SECTION 10.05. Limitation on Distributions and Intercompany Loans
The Company shall not (1) declare, recommend, make or pay any
Distribution to any of its shareholders or (2) make any intercompany loan to AES
or any of its affiliates (other than CILCORP or any of its direct or indirect
subsidiaries) unless there exists no Event of Default and no such Event of
Default will result from the making of such Distribution or intercompany loan
and either:
(a) at the time and as a result of such Distribution or intercompany
loan, the Company's Leverage Ratio does not exceed 0.67:1, and the
Company's Interest Coverage Ratio is not less than 2.0:1 during fiscal
years 1999 and 2000 and not less than 2.2:1 thereafter; or
(b) if the Company is not in compliance with the foregoing ratios at
such time its senior long-term debt rating from the Rating Agencies is at
least BB+ (or its then equivalent) with S&P, Baa2 (or its then equivalent)
with Moody's and BBB (or its then equivalent) with Duff & Phelps.
Prior to making any Distribution or intercompany loan described in this
Section 10.05, an independent director of the CILCORP Board of Directors shall
confirm that such Distribution or intercompany loan complies with the terms of
this Section 10.05, provided that, in the case of a Distribution or intercompany
loan to be made under the circumstances described Section 10.05(a), such
independent director shall have first obtained (1) a compliance certificate from
an officer of CILCORP that, at the time and after giving effect to such
Distribution or intercompany loan, CILCORP is in compliance with the Leverage
Ratio and the Interest Coverage Ratio set forth in Section 10.05(a) and (2) a
written confirmation by a nationally recognized accounting firm as to their
agreement with the calculations specified in the compliance certificate;
provided further that the foregoing independent director approval will not be
required in the case of intercompany loans if the aggregate amount of
intercompany loans outstanding at any one time does not exceed $20 million.
The foregoing limitation on Distributions and intercompany loans shall
cease to be in effect if the Rating Agencies confirm that without the
limitations contained in this Section 10.05 the Company's senior long term debt
would still be rated at least the initial ratings (or its then equivalent)
received from S&P, the initial ratings (or its then equivalent) received from
Moody's, and the initial ratings (or its then equivalent) received from Duff &
Phelps (collectively, the "Initial Ratings"). If the limitation on Distributions
and intercompany loans set forth in this Section 10.05 ceases to be in effect,
the Company will be under no obligation to reinstate such limitation or
otherwise observe its terms in the event such ratings are thereafter lowered or
withdrawn.
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In order to obtain the release of the limitation on Distributions and
intercompany loans, the Company shall deliver to a Responsible Officer of the
Trustee written confirmation from each Rating Agency of the ratings conditions
as described in the preceding paragraph. Securities of any series which are
entitled to the benefit of this Section 10.05 and are authenticated and
delivered after the release of the limitation on Distributions and intercompany
loans may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to the current inapplicability of such limitation.
SECTION 10.06. Limitation on Indebtedness of the Company
The Company shall not incur any Indebtedness other than (i) as part of
the Company's permitted businesses and activities that are described in Section
10.07 hereof, (ii) Indebtedness outstanding on the date of original issue of the
Securities under CILCORP's agreements then in existence and extensions of such
Indebtedness, or (iii) other Indebtedness (including Permitted Debt) incurred
subsequent to receipt of written confirmation from the Rating Agencies that such
incurrence would not result in a Ratings Downgrade.
The foregoing limitation on Indebtedness shall cease to be in effect if
the Rating Agencies confirm that without the limitations contained in this
Section 10.06 the Company's senior long term debt would still be rated at least
the Initial Ratings. If the limitation on Indebtedness set forth in this Section
10.06 ceases to be in effect, the Company will be under no obligation to
reinstate such limitation or otherwise observe its terms in the event such
ratings are thereafter lowered or withdrawn.
In order to obtain the release of the limitation on Indebtedness, the
Company shall deliver to a Responsible Officer of the Trustee written
confirmation from each Rating Agency of the ratings conditions as described in
the preceding paragraph. Securities of any series which are entitled to the
benefit of this Section 10.06 and are authenticated and delivered after the
release of the limitation on Distributions may, and shall if required by the
Trustee, bear a notation in form approved by the Trustee as to the current
inapplicability of such limitation.
SECTION 10.07. Limitation on Business Activities
(a) The Company shall, and shall cause its Significant Subsidiaries to,
engage only in (x) those types of businesses and other activities in which
CILCORP or any of its direct or indirect subsidiaries or controlled partnerships
or joint ventures are engaged on the date hereof (including, without limitation,
any geographic or other expansion of such businesses or activities) and (y) any
other business or activity which is deemed necessary, useful or desirable in
connection with such existing businesses and activities or any such permitted
additional geographic or other expansions of such businesses and activities
provided, that CILCORP may enter into additional business operations from time
to time in the future if, prior to doing so, it shall have obtained written
confirmation from the Rating Agencies that the entering into of such new
businesses will not result in a Ratings Downgrade.
SECTION 10.08. Statement by Officers as to Default
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The Company will give a Responsible Officer of the Trustee notice, in
the form of an Officers' Certificate, of any Event of Default relating to the
Company or of any condition or event which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default relating to the
Company within five (5) days after the occurrence of such Event of Default
becomes known to the Company, and of the measures it is taking to remedy such
Event of Default.
The Company will deliver to the Trustee within 120 days after the end
of each fiscal year of the Company an Officers' Certificate, stating that in the
course of the performance by the signers thereof of their duties as Officers of
the Company they would normally have knowledge of any default by the Company in
the performance and observance of any of the covenants contained in the
Indenture, and stating whether or not the signers have knowledge of any such
default without regard to any period of grace or requirement of notice and, if
so, specifying each such default of which such signer has knowledge and the
nature thereof; provided, however, that a failure by the Company to deliver such
notice of a default shall not constitute a default of the Indenture if the
Company has remedied such default within any applicable cure period.
SECTION 10.09. Modification or Waiver of Certain Covenants
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in this Indenture with respect to the
Securities of any series if before the time for such compliance the Holders of
at least a majority in aggregate principal amount of the Outstanding Securities
of such series shall, by Act of such Holders, either modify the covenant or
waive such compliance in such instance or generally waive compliance with such
term, provision or condition, provided that no such modification shall without
the consent of each Holder of Securities of such series (a) change the stated
maturity upon which the principal of or the interest on the Securities of such
series is due and payable, (b) reduce the principal amount or redemption price
thereof or the rate of interest thereon, (c) change any place of payment or the
currency in which the Securities of such series or any premium or the interest
thereon is payable, (d) impair the right to institute suit for the enforcement
of any such payment on or after the stated maturity thereof (or, in the case of
redemption, on or after Redemption Date), (e) except in accordance with the
terms thereof, (i) release any collateral from the Lien created by the Pledge
Agreement, (ii) or amend such terms, (iii) or terminate the Lien created by the
Pledge Agreement or (iv) deprive the Holders of the Security afforded by the
Lien created by the Pledge Agreement, or (f) reduce the percentage in principal
amount of the outstanding Securities of such series, the consent of whose
Holders is required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided for in
this Indenture. The Securities owned by the Company or any of its affiliates
shall be deemed not to be Outstanding for, among other purposes, consenting to
any such modification.
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SECTION 10.10. Further Assurances
The Company and the Trustee shall execute and deliver all such other
documents, instruments and agreements and do all such other acts and things as
may be reasonably required to enable the Trustee to exercise and enforce its
rights under this Indenture and under the documents, instruments and agreements
required under this Indenture and to carry out the intent of this Indenture.
SECTION 10.11. Copies Available to Holders
Copies of this Indenture shall be furnished only to Holders upon the
written request of such holder, without change, provided that such written
request is made to the Company in accordance with Section 1.05.
SECTION 10.12. Reports by Company
Notwithstanding that the Company may not be required to be subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, from and
after the date of effectiveness of any registration statement required to be
filed by the Company pursuant to the Registration Rights Agreement or otherwise
relating to a particular series of Securities, the Company shall file with the
Commission or cause to be filed with the Commission and provide copies to the
Trustee (and, if the Company is subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, to the Holders of the Securities) with the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) that the
Company is (or would be if it were still so subject) required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act.
Prior to the date on which the Company becomes subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, the Company
will provide, without charge, upon the written request of (x) a Holder of any
Securities or (y) a prospective Holder of any of the Securities who is a QIB and
is designated by an existing Holder of any of the Securities (in each case, with
a copy to the Trustee), with the information with respect to the Company
required to be delivered under Rule 144A(d)(4) under the Securities Act to
enable resales of the Securities to be made pursuant to Rule 144A. The Company
shall also comply with the other provisions of Section 314(a) of the Trust
Indenture Act. Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.01. Optional Redemption
The Securities may be redeemed, in whole or in part, at the option of
the Company pursuant to the terms set forth in paragraph 2 of the series of
Securities to be redeemed, in accordance with the provisions of this Article XI.
SECTION 11.02. Election to Redeem; Notice to Trustee
The election of the Company to redeem any Securities shall be
authorized by a Board Resolution and evidenced by an Officers' Certificate. In
case of any redemption at the election of the Company of less than all the
Securities of any series, the Company shall, not less than 30 days nor more than
60 days prior to the Redemption Date fixed by the Company (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date, the terms and of the principal amount of Securities of such
series to be redeemed. In the case of any redemption of Securities prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, or pursuant to an election by the
Company which is subject to a condition specified in the terms of such
Securities or elsewhere in this Indenture, the Company shall furnish the Trustee
with an Officers' Certificate evidencing compliance with such restriction or
condition.
SECTION 11.03. Selection by Trustee of Securities to Be Redeemed
If less than all the Securities of any series are to be redeemed, the
particular securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate (and which method the Company and the Trustee
agree shall be selection by lot, on a pro rata basis, or such other method as
agreed to) and which may provide for the selection for redemption of portions
equal to the minimum authorized denomination for Securities of that series (or
any integral multiple thereof) of the principal amount of Securities of such
series of a denomination larger than the minimum authorized denomination for
Securities of that series.
Securities shall be excluded from eligibility for selection for
redemption if they are identified by certificate number in a written statement
signed by an authorized officer of the Company and delivered to the Security
Exchange Agent/Registrar at least 45 days prior to the Redemption Date as being
owned of record and beneficially by, and not pledged or hypothecated by either
(a) the Company or (b) an entity specifically identified in such written
statement which is an Affiliate of the Company.
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The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 11.04. Notice of Redemption
Notice of redemption shall be given not less than 30 days nor more than
60 days prior to the Redemption Date to each Holder of Securities to be redeemed
in accordance with Section 1.06.
All notices of redemption shall include the description of the issue
and the CUSIP number and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due and
payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date, and
(5) the place or places where such Securities are to be surrendered for
payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.05. Deposit of Redemption Price
By 11:00 a.m. New York time on any Redemption Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust as provided in Section 10.03)
an amount of money in same day funds sufficient to pay the Redemption Price of,
and (except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities which are to be redeemed on that
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date (to the extent that such amounts are not already on deposit at such time in
accordance with the provisions of Sections 4.01, 4.02 or 10.09).
SECTION 11.06. Securities Payable on Redemption Date
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued and
unpaid interest) such Securities shall cease to bear interest. Upon surrender of
any such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued and
unpaid interest to the Redemption Date; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, and in the case of Registered Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 3.05.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption due to the failure of the Company to pay the
Redemption Price, the principal (and premium, if any) shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the
Security.
SECTION 11.07. Securities Redeemed in Part
Any Security (including any Global Security) which is to be redeemed
only in part shall be surrendered at a Place of Payment therefor (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee upon written direction shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities of the same series, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the security so surrendered;
provided, that if a Global Security is surrendered for partial redemption, no
new Global Security shall be issued but instead the principal amount of the
surrendered Global Security shall be reduced by an endorsement to Schedule A to
such Global Security by the Security Exchange Agent/Registrar equal to the
redeemed portion of the principal of the Global Security so surrendered,
whereupon such Global Security shall be delivered to the Depositary; and
provided further that following any such partial redemption the Securities
selected for redemption and any beneficial interests therein shall not have had
their principal amount reduced below the minimum authorized denomination for
Securities of such series and for any beneficial interests therein. In the case
of a partial redemption of the Global Securities, DTC (and, in turn, its
Participants) shall have the responsibility to select the interests in such
Global Securities to be redeemed in accordance with Applicable Procedures.
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ARTICLE XII
MEETINGS OF HOLDERS OF SECURITIES
SECTION 12.01. Purposes of Meeting
A meeting of the Holders may be called at any time from time to time
pursuant to this Article XII for any of the following purposes:
(1) to give any notice to the Company and to the Trustee, or to consent to
the waiving of any default hereunder and its consequences, or to take any
other action authorized to be taken by Holders pursuant to Article IX
hereof;
(2) to remove the Trustee and appoint a successor trustee pursuant to
Article VI hereof;
(3) to consent to the execution of an indenture supplemental hereto
pursuant to Section 9.02 hereof.
SECTION 12.02. Place of Meetings
(a) The Trustee may at any time (upon not less than 21 days' notice)
call a meeting of Holders to be held at such time and at such place in the
location determined by the Trustee pursuant to this Section 12.02. Notice of
every meeting of Holders, setting forth the time and the place of such meeting
and in general terms the action proposed to be taken at such meeting, shall be
mailed to each Holder and published in the manner contemplated by Section 1.06
hereof.
(b) In case at any time the Company or the Holders of at least an
aggregate principal amount of the Securities sufficient to take action requested
in such notice, shall have requested the Trustee to call a meeting of the
Holders, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have made the
first giving of the notice of such meeting within 20 days after receipt of such
request, then the Company or the Holders in the amount above specified may
determine the time (not less than 21 days after notice is given) and the place
in the location determined by the Company or the Holders pursuant to this
Section 12.02 for such meeting and may call such meeting to take any action
authorized in Section 12.01 hereof by giving notice thereof as provided in
Section 12.02(a) hereof.
SECTION 12.03. Voting at Meetings
To be entitled to vote at any meeting of Holders, a Person shall be (i)
a Holder or (ii) a Person appointed by an instrument in writing as proxy for a
Holder or Holders by such Holder or Holders. The only Persons who shall be
entitled to be present or to speak at any meeting of Holders shall be the
Persons so entitled to vote at such meeting and their counsel, any
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representatives of the Trustee and its counsel, and any representatives of the
Company and its counsel.
SECTION 12.04. Voting Rights, Conducts and Adjournment
(a) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders in regard to proof of the holding of Securities of a series and of the
appointment of proxies and in regard to the appointment and duties of inspectors
of votes, the submission and examination of proxies, certificates and other
evidence of the right to vote, and such other matters concerning the conduct of
the meeting as it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Securities of a series shall be
proved in the manner specified in Article II hereof and the appointment of any
proxy shall be proved in such manner as is deemed appropriate by the Trustee or
by having the signature of the person executing the proxy witnessed or
guaranteed by any bank, banker or trust company customarily authorized to
certify to the holding of a security such as a Global Note.
(b) At any meeting of Holders, the representative of Persons holding or
representing Securities of a series in an aggregate principal amount sufficient
under the appropriate provision of this Indenture to take action upon the
business for the transaction of which such meeting was called shall constitute a
quorum. Any meetings of Holders duly called pursuant to Section 12.03 hereof may
be adjourned from time to time by vote of the Holders (or proxies for the
Holders) of a majority of the Securities of a series represented at the meeting
and entitled to vote, whether or not a quorum shall be present; and the meeting
may be held as so adjourned without further notice. No action at a meeting of
Holders shall be effective unless approved by Persons holding or representing
Securities of a series in the aggregate principal amount required by the
provision of this Indenture pursuant to which such action is being taken.
(c) At any meeting of Holders, each Holder or proxy shall be entitled
to one vote for each $1,000 principal amount of outstanding Securities of a
series held or represented.
SECTION 12.05. Revocation of Consent by Holders
At any time prior to (but not after) the evidencing to the Trustee of
the taking of any action at a meeting of Holders by the Holders of the
percentage in aggregate principal amount of the Securities specified in this
Indenture in connection with such action, any Holder of a Security the serial
number of which is included in the Securities the Holders of which have
consented to such action may, by filing written notice with the Trustee at its
principal corporate trust office and upon proof of holding as provided herein,
revoke such consent so far as concerns such Securities. Except as aforesaid any
such consent given by the Holder of any Securities shall be conclusive and
binding upon such Holder and upon all future Holders and owners of such
Securities and of any Securities issued in exchange therefore, in lieu thereof
or upon transfer thereof, irrespective of whether or not any notation in regard
thereto is made upon such Securities. Any action taken by the Holders of the
percentage in aggregate principal amount of
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the Holders specified in this Indenture in connection with such action shall be
conclusively binding upon the Company, the Trustee and the Holders of all the
Securities.
ARTICLE XIII
SECURITY AND COLLATERAL
SECTION 13.01. Pledge Agreement
The full and punctual payment when due and the full and punctual
performance of all of the obligations of the Company under the Securities and
this Indenture to the Holders and the Trustee, according to the provisions of
this Indenture or the Securities (the "Obligations"), shall be secured as of the
Pledge Effective Date, as provided in the Pledge Agreement. Each Holder of the
Securities, by its acceptance thereof, consents and agrees to the terms of the
Pledge Agreement (including, without limitation, the provisions providing for
foreclosure and release of Collateral) as the same may be in effect or may be
amended from time to time in accordance with its terms and authorizes and
directs the Collateral Agent to enter into the Pledge Agreement and to perform
its obligations and exercise its rights thereunder in accordance therewith. The
Company shall cause CILCORP to deliver to the Trustee copies of all documents
delivered to the Collateral Agent pursuant to the Pledge Agreement, and shall
cause to be done all such acts and things as may be necessary or proper, or as
may be required by the provisions of the Pledge Agreement, to assure and confirm
to the Trustee and the Collateral Agent that the security interest in the
Collateral contemplated hereby, by the Pledge Agreement or any parts thereof, as
from time to time constituted, so as to render the same available for the
security and benefit of this Indenture and the Securities, secured hereby,
according to the intent and purposes herein expressed. The Company shall cause
to be taken any and all actions reasonably required to cause the Pledge
Agreement to create and maintain, as security for the Obligations of the
Company, hereunder, a valid and enforceable perfected first priority Lien in and
on all the Collateral, in favor of the Collateral Agent for the benefit of the
Trustee and Holders and other Secured Parties (as defined in the Pledge
Agreement), if any, superior to and prior to the rights of all third Persons and
subject to no other Liens than Permitted Liens.
SECTION 13.02. Recording and Opinions
(a) The Company shall furnish to the Collateral Agent and the Trustee
upon the Pledge Effective Date an Opinion of Counsel either (i) stating that in
the opinion of such counsel all action has been taken with respect to the
recording, registering and filing of this Indenture, financing statements or
other instruments necessary to make effective the Lien intended to be created by
the Pledge Agreement, and reciting with respect to the security interests in the
Collateral, the details of such action, or (ii) stating that, in the opinion of
such counsel, no such action is necessary to make such Lien effective.
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(b) The Company shall furnish to the Collateral Agent and the Trustee
within 3 months after each anniversary of the Pledge Effective Date, an Opinion
of Counsel, dated as of such date, either (i) (A) stating that, in the opinion
of such counsel, action has been taken with respect to the recording,
registering, filing, re-recording, re-registering and refiling of all
supplemental indentures, financing statements, continuation statements or other
instruments of further assurance as is necessary to maintain the Lien of the
Pledge Agreement and reciting with respect to the security interests in the
Collateral the details of such action or referring to prior Opinions of Counsel
in which such details are given, (B) stating that, based on relevant laws as in
effect on the date of such Opinion of Counsel, all financing statements and
continuation statements have been executed and filed that are necessary as of
such date and during the succeeding 12 months fully to preserve and protect, to
the extent such protection and preservation are possible by filing, the rights
of the Holders and the Collateral Agent and the Trustee hereunder and under the
Pledge Agreement with respect to the security interests in the Collateral, or
(ii) stating that, in the opinion of such counsel, no such action is necessary
to maintain such Lien and assignment.
(c) The Company shall otherwise comply with the provisions of TIA
Section 314(b).
SECTION 13.03. Release of Collateral
(a) Subject to subsections (b), (c) and (d) of this Section 13.03 and
the terms of the Pledge Agreement, Collateral may be released from the Lien and
security interest created by the Pledge Agreement at any time or from time to
time in accordance with the provisions of the Pledge Agreement. In addition,
subject to the terms of the Pledge Agreement, upon the request of the Company
pursuant to an Officers' Certificate certifying that all conditions precedent
hereunder have been met and (at the sole cost and expense of the Company) the
Collateral Agent shall release the Collateral that is sold, conveyed or disposed
of in compliance with the provisions of the Pledge Agreement and this Indenture.
Upon receipt of such Officers' Certificate, the Collateral Agent shall execute,
deliver or acknowledge any necessary or proper instruments of termination,
satisfaction or release to evidence the release of any Collateral permitted to
be released pursuant to this Indenture or the Pledge Agreement, as prepared by
the Company.
(b) No Collateral shall be released from the Lien and security interest
created by the Pledge Agreement pursuant to the provisions of the Pledge
Agreement unless there shall have been delivered to the Collateral Agent the
certificate required by this Section 13.03.
(c) At any time when a Default or Event of Default shall have occurred
and be continuing and the maturity of the Securities shall have been accelerated
(whether by declaration or otherwise) and the Trustee shall have delivered a
notice of acceleration to the Collateral Agent, no release of Collateral
pursuant to the provisions of the Pledge Agreement shall be effective as against
the Holders of Securities.
<PAGE>
93
(d) The release of any Collateral from the terms of this Indenture and
the Pledge Agreement shall not be deemed to impair the security under this
Indenture in contravention of the provisions hereof if and to the extent the
Collateral is released pursuant to the terms of this Indenture or the terms of
the Pledge Agreement. To the extent applicable, the Company shall cause TIA
Section 313(b), relating to reports, and TIA Section 314(d), relating to the
release of property or securities from the Lien and security interest of the
Pledge Agreement and relating to the substitution therefor of any property or
securities to be subjected to the Lien and security interest of the Pledge
Agreement, to be complied with. Any certificate or opinion required by TIA
Section 314(d) may be made by an Officer of the Company except in cases where
TIA Section 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected by the Company in a manner consistent with the
requirements of the TIA.
SECTION 13.04. Certificates of the Company
The Company shall furnish to the Trustee and the Collateral Agent,
prior to each proposed release of Collateral pursuant to the Pledge Agreement,
(i) all documents required by TIA Section 314(d) and (ii) an Opinion of Counsel,
which may be rendered by internal counsel to the Company to the effect that such
accompanying documents constitute all documents required by TIA Section 314(d).
SECTION 13.05. Certificates of the Trustee
In the event that the Company wishes to release Collateral in
accordance with the Pledge Agreement and has delivered the certificates and
documents required by the Pledge Agreement and Sections 13.03 and 13.04 hereof
and the Trustee has received, all documentation required by TIA Section 314(d)
in connection with such release, and (ii) the Opinion of Counsel delivered
pursuant to Section 13.04(b), the Trustee shall deliver a certificate to the
Collateral Agent setting forth that it has received all such documentation.
SECTION 13.06. Authorization of Actions to be Taken by the Collateral
Agent Under the Pledge Agreement
Subject to the provisions of Sections 6.01 and 6.03 hereof and the
Pledge Agreement, the Trustee may, with the consent of the Holders of a majority
in principal amount of the Securities, direct the Collateral Agent to take all
actions it deems necessary or appropriate in order to (a) enforce any of the
terms of the Pledge Agreement and (b) collect and receive any and all amounts
payable in respect of the Obligations of the Company hereunder.
SECTION 13.07. Authorization of Receipt of Refunds by the Trustee Under
the Pledge Agreement
The Trustee is authorized to receive any funds for the benefit of the
Holders distributed under the Pledge Agreement, and to make further
distributions of such funds to the Holders of Securities according to the
provisions of this Indenture.
<PAGE>
94
SECTION 13.08. Termination of Security Interest
Upon the payment in full of all Obligations of the Company, under this
Indenture and the Securities, or upon Defeasance or Covenant Defeasance, the
Trustee shall, upon receipt of an Officer's Certificate, deliver a certificate
to the Collateral Agent stating that such Obligations have been paid in full,
and, subject to the terms of the Pledge Agreement, instruct the Collateral Agent
to release the Liens pursuant to this Indenture and the Pledge Agreement.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Consent to Jurisdiction; Appointment of Agent to Accept
Service of Process
(a) The Company irrevocably consents and agrees, for the benefit of the
Holders from time to time of the Securities and the Trustee, that any legal
action, suit or proceeding against it with respect to its obligations,
liabilities or any other matter arising out of or in connection with this
Indenture or the Securities may be brought in the United States District Court
for the Southern District of New York or in the Supreme Court of New York in New
York County, and, until amounts due and to become due in respect of the
Securities have been paid, hereby irrevocably consents and submits to the
nonexclusive jurisdiction of each such court and any appellate court of either
of them in personam, generally and unconditionally with respect to any action,
suit or proceeding for itself and in respect of its properties, assets and
revenues.
(b) The Company hereby designates, appoints, and empowers CT
Corporation System, acting through its office at 111 8th Avenue, 13th Floor, New
York, New York 10011, as the Company's designee, appointee and agent (the
"Authorized Agent") to receive, accept and acknowledge for and on its behalf,
and its properties, assets and revenues, service of any and all legal process,
summons, notices and documents which may be served in any action, suit or
proceeding brought against the Company pursuant to paragraph (a) of this
Section. Such appointment shall be irrevocable until all amounts in respect of
the principal of and any premium and interest due and to become due on or in
respect of all the Securities issued under this Indenture have been paid by the
Company to the Trustee pursuant to the terms hereof and of the Securities.
Notwithstanding the foregoing, the Company reserves the right to appoint another
Person and located or with an office in the Borough of Manhattan, The City of
New York, as a successor Authorized Agent, and upon acceptance of such
appointment by such a successor the appointment of the prior Authorized Agent
shall terminate. The Company shall give notice to the Trustee and all Holders of
the appointment by it of a successor Authorized Agent. If for any reason CT
Corporation System ceases to be able to act as the Authorized Agent or to have
an address in the Borough of Manhattan, The City of New York, the Company will
appoint a successor Authorized Agent in accordance with the two preceding
sentences. The Company further agrees to take any and all action, including the
filing of any and all documents and instruments as may be necessary to continue
such designation and appointment of such agent in
<PAGE>
95
full force and effect until this Indenture has been satisfied and discharged in
accordance with Article IV hereof. The Company further hereby irrevocably
consents and agrees to the service of any and all legal process, summons,
notices and documents in any action, suit or proceeding against the Company by
serving a copy thereof upon the relevant agent for service of process referred
to in this Section 14.01 (whether or not the appointment of such agent shall for
any reason prove to be ineffective or such agent shall accept or acknowledge
such service) or by mailing copies thereof by registered or certified air mail,
postage prepaid, to the Company at its address specified in or designated
pursuant to this Indenture. The Company agrees that the failure of any such
designee, appointee and agent to give any notice of such service to it shall not
impair or affect in any way the validity of such service or any judgment
rendered in any action or proceeding based thereon. Nothing herein shall in any
way be deemed to limit the ability of the holders of the Securities and the
Trustee, to serve any such legal process, summons, notices and documents in any
other manner permitted by applicable law or to obtain jurisdiction over the
Company or bring actions, suits or proceedings against the Company in such other
jurisdictions, and in such manner, as may be permitted by applicable law. The
Company irrevocably and unconditionally waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions, suits or proceedings arising out of or in
connection with this Indenture brought in the United States District Court for
the Southern District of New York or in the Supreme Court of New York in New
York County, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
<PAGE>
96
SECTION 14.02. Counterparts
This instrument may be executed in any number of Counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
97
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers or directors duly authorized thereto,
all as of the day and year first above written.
MIDWEST ENERGY, INC.
By: /s/ Paul D. Stinson
---------------------------------
Name: Paul D. Stinson
Title: Vice President
THE BANK OF NEW YORK, as Trustee
By: /s/ MaryBeth Lewicki
---------------------------------
Name: MaryBeth Lewicki
Title: Vice President
================================================================================
CILCORP INC.,
and
THE BANK OF NEW YORK,
as Trustee
-------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of October 18, 1999
$225,000,000 8.700% Senior Notes due 2009
$250,000,000 9.375% Senior Bonds due 2029
================================================================================
<PAGE>
1
FIRST SUPPLEMENTAL INDENTURE, dated as of October 18, 1999, between
CILCORP Inc., an Illinois corporation ("CILCORP"), and The Bank of New York, a
New York banking corporation, as trustee (the "Trustee"). Terms not defined
herein shall have the meanings assigned to them in the Indenture (as defined
below).
W I T N E S S E T H:
WHEREAS, Midwest Energy, Inc., an Illinois corporation (the "Company")
and the Trustee are parties to an Indenture, dated as of October 18, 1999 (the
"Indenture"), relating to the Company's 8.700% Senior Notes due 2009 (the
"Notes") and the Company's 9.375% Senior Bonds due 2029 (the "Bonds", and
together with the Notes, the "Securities");
WHEREAS, on October 18, 1999, the Company was merged with and into
CILCORP (the "Merger"), with CILCORP being the surviving corporation in the
Merger;
WHEREAS, CILCORP, as the successor corporation to the Company pursuant
to the Merger is liable for and shall assume all of the Obligations of the
Company under the Indenture and each series of the Securities;
WHEREAS, Section 8.02 of the Indenture requires that CILCORP and the
Trustee enter into a supplemental indenture, without the consent of any Holder
of either series of Securities, immediately following the effective time of the
Merger in order for CILCORP to expressly assume the obligations of the Company
in the Indenture and each series of Securities; and
NOW, THEREFORE, for and in consideration of the premises, it is
mutually covenanted and agreed, for the equal and ratable benefit of the
Holders, as follows:
ARTICLE 1
ASSUMPTION OF OBLIGATIONS
SECTION 1.1. Assumption. CILCORP hereby unconditionally assumes
liability, on and after the effective time of the Merger, for all of the
Obligations of the Company under the Indenture and each series of the
Securities, including the punctual payment when due, whether at stated maturity,
by acceleration or otherwise, of the principal of, premium, if any, and interest
on the Securities according to the terms of the Securities and as more fully
described in the Indenture.
ARTICLE 2
GENERAL PROVISIONS
SECTION 2.1. Incorporation of Indenture. All the provisions of this
First Supplemental Indenture shall be deemed to be incorporated in, and made a
part of, the Indenture; and the Indenture, as supplemented and amended by this
First Supplemental Indenture, shall be read, taken and construed as one and the
same instrument.
<PAGE>
2
SECTION 2.2. Headings. The headings of the Articles and Sections of
this First Supplemental Indenture are inserted for convenience of reference and
shall not be deemed to be a part thereof.
SECTION 2.3. Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
SECTION 2.4. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof which is required
to be included in this First Supplemental Indenture by any of the provisions of
the Trust Indenture Act, such required provision shall control.
SECTION 2.5. Successors. All covenants and agreements in this First
Supplemental Indenture by CILCORP shall be binding upon and accrue to the
benefit of its respective successors. All covenants and agreements in this First
Supplemental Indenture by the Trustee shall be binding upon and accrue to the
benefit of its successors.
SECTION 2.6. Separability Clause. In case any provision in this First
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 2.7. Benefits of First Supplemental Indenture. Nothing in this
First Supplemental Indenture, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder and the Holders,
any benefit or any legal or equitable right, remedy or claim under this First
Supplemental Indenture.
SECTION 2.8. Governing Law. This First Supplemental Indenture shall be
governed by, and in accordance with, the laws of the State of New York.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this First Supplemental Indenture, as
of the date first above written.
CILCORP INC.
/s/ Paul D. Stinson
-------------------------------------
By: Paul D. Stinson
Title: President
THE BANK OF NEW YORK,
as Trustee
/s/ MaryBeth Lewicki
-------------------------------------
By: MaryBeth Lewicki
Title: Vice President
- --------------------------------------------------------------------------------
$225,000,000 8.700% Senior Notes due 2009
$250,000,000 9.375% Senior Bonds due 2029
REGISTRATION RIGHTS AGREEMENT
Dated as of October 18, 1999
Among
MIDWEST ENERGY, INC.
AND
LEHMAN BROTHERS INC.
AND
J.P. MORGAN SECURITIES INC.
AND
MORGAN STANLEY DEAN WITTER
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions..............................................................................................1
2. Exchange Offer...........................................................................................4
3. Shelf Registration Statement.............................................................................7
(a) Shelf Registration Statement....................................................................7
(b) Withdrawal of Stop Orders.......................................................................8
(c) Supplements and Amendments......................................................................8
4. Liquidated Damages.......................................................................................8
5. Registration Procedures.................................................................................10
6. Registration Expenses...................................................................................17
7. Indemnification and Contribution........................................................................18
8. Underwritten Registrations..............................................................................22
9. Miscellaneous...........................................................................................22
(a) No Inconsistent Agreements.....................................................................22
(b) Amendments and Waivers.........................................................................22
(c) Notices........................................................................................23
(d) Successors and Assigns.........................................................................24
(e) Counterparts...................................................................................24
(f) Headings.......................................................................................24
(g) Governing Law..................................................................................24
(h) Severability...................................................................................25
(i) Securities Held by the Company, or Its Affiliates..............................................25
(j) Entire Agreement...............................................................................25
</TABLE>
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
October 18, 1999, by and among Midwest Energy, Inc., a Delaware Corporation (the
"Company"), and Lehman Brothers Inc., J.P. Morgan Securities Inc. and Morgan
Stanley Dean Witter (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of October 13, 1999, by and among the Company and the
Initial Purchasers (the "Purchase Agreement") which provides for the sale by the
Company to the Initial Purchasers of its $225,000,000 8.700% Senior Notes due
2009 (the "Notes") and its $250,000,000 9.375% Senior Bonds due 2029 (the
"Bonds" and together with the Notes, the "Securities"). The Securities are to be
issued under an indenture, dated as of October 18, 1999 (the "Indenture"), by
and between the Company and The Bank of New York, as Trustee. In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement for the
benefit of the Initial Purchasers and their direct and indirect transferees and
assigns.
The parties hereby agree as follows:
1. Definitions
Unless otherwise defined herein, terms defined in the Indenture shall
be used herein as defined therein. As used in this Agreement, the following
terms shall have the following meanings:
Advice: See Section 5 hereof.
Agreement: See the first introductory paragraph hereto.
Applicable Period: See Section 2(b) hereof.
Authenticating Agent: The Authenticating Agent as defined in the
Indenture.
Company: See the first introductory paragraph hereto.
Effectiveness Period: See Section 3(a) hereof.
Effectiveness Target Date: In the case of the Exchange Offer
Registration Statement, the 180th day after the effective date of the Merger. In
the case of the Shelf Registration Statement, the 180th day after the obligation
to file the Shelf Registration Statement first arises in accordance with clause
(i), (ii), (iii), (iv) or (v) of Section 2(c).
Event Date: See Section 4(b) hereof.
<PAGE>
2
Exchange Act: The U.S. Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a) hereof.
Exchange Offer Registration Statement: See Section 2(a) hereof.
Filing Date: In the case of the Exchange Offer Registration Statement,
the 90th day after the effective date of the Merger. In the case of the Shelf
Registration Statement, the 60th day after the obligation to file the Shelf
Registration Statement first arises in accordance with clause (i), (ii), (iii),
(iv) or (v) of Section 2(c).
Holder: Any holder of Transfer Restricted Securities.
Indenture: See the second introductory paragraph hereto.
Initial Purchasers: See the first introductory paragraph hereto.
Inspectors: See Section 5(m) hereof.
Issuance Date: The date of the issuance of the Securities under the
Indenture.
Liquidated Damages: See Section 4(a) hereof.
Merger: The merger of the Company with and into CILCORP Inc., pursuant
to the Merger Agreement dated as of November 22, 1998.
NASD: See Section 5(p) hereof.
Exchange Securities: See Section 2(a) hereof.
Securities: See the second introductory paragraph hereto.
Participant: See Section 7(a) hereof.
Participating Broker-Dealer: See Section 2(b) hereof.
Person: An individual, trustee, corporation, partnership, limited
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or
<PAGE>
3
supplemented by any prospectus supplement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
Purchase Agreement: See the second introductory paragraph hereto.
Records: See Section 5(m) hereof.
Registration Statement: Any registration statement of the Company,
including, but not limited to, the Exchange Offer Registration Statement or the
Shelf Registration Statement, filed with the SEC pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The U.S. Securities and Exchange Commission.
Securities Act: The U.S. Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration Statement: See Section 3(a) hereof.
Transfer Restricted Securities: Each Security until the earliest to
occur of (i) the date on which such Security has been exchanged by a Person
(other than a Participating Broker-Dealer) for one or more Exchange Securities
in the Exchange Offer, (ii) following the exchange by a Participating
Broker-Dealer in the Exchange Offer of such Security for one or more Exchange
Securities, the date on which such Exchange Securities are sold to a purchaser
who receives from such Participating Broker-Dealer on or prior to the date of
such sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such
<PAGE>
4
Security has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iv) the date on which
such Security is distributed to the public pursuant to Rule 144 under the
Securities Act.
Trust Indenture Act: The U.S. Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent, the trustee
under any indenture governing the Exchange Securities.
underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
(a) The Company agrees to use its best efforts to file at its sole cost
and expense with the SEC no later than the Filing Date, unless prohibited by
applicable law or SEC policy, an offer to exchange (the "Exchange Offer") any
and all of the Transfer Restricted Securities for a like aggregate principal
amount of senior notes or senior bonds, as appropriate, of the Company, which
are substantially identical in all material respects to the Notes and Bonds,
respectively (collectively, the "Exchange Securities") (and which are entitled
to the benefits of the Indenture or a trust indenture which is substantially
identical in all material respects to the Indenture (other than such changes to
the Indenture or any such identical trust indenture as are necessary to comply
with any requirements of the SEC to effect or maintain the qualification thereof
under the Trust Indenture Act) and which, in either case, has been qualified
under the Trust Indenture Act), except that the Exchange Securities shall have
been registered pursuant to an effective Registration Statement under the
Securities Act and shall contain no restrictive legend thereon. The Exchange
Offer shall be registered under the Securities Act on the appropriate form (the
"Exchange Offer Registration Statement") and shall comply with all applicable
tender offer rules and regulations under the Exchange Act. The Company agrees to
(i) use its reasonable best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act on or before the
Effectiveness Target Date; (ii) keep the Exchange Offer open for at least 20
business days (or longer if required by applicable law) after the date that
notice of the Exchange Offer is mailed to Holders; (iii) (A) file all
pre-effective amendments to such Registration Statement as may be necessary in
order to cause such Registration Statement to become effective, (B) file, if
applicable, a post-effective amendment to such Registration Statement pursuant
to Rule 430A under the Securities Act and (C) cause all necessary filings in
connection with the registration and qualifications of the Exchange Securities
to be made under the blue sky laws of such jurisdictions as are necessary to
permit consummation of the Exchange Offer; and (iv) use its reasonable best
efforts to consummate the Exchange Offer on or prior to 30 days after the date
on which the Exchange Offer Registration Statement is declared effective by the
SEC; provided, however, that the Company shall not be required to (1) qualify as
a foreign corporation or as a dealer in securities in any jurisdiction where
they would not otherwise be required to qualify, (2) file any general consent to
service of process or (3) subject themselves to taxation in any such
jurisdiction if they are not so subject. Upon the Exchange Offer Registration
Statement being declared effective, the Company will
<PAGE>
5
offer the Exchange Securities in exchange for surrender of the Securities. If
after such Exchange Offer Registration Statement is declared effective by the
SEC, the Exchange Offer or the issuance of the Exchange Securities thereunder is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Exchange Offer
Registration Statement shall be deemed not to have become effective for purposes
of this Agreement. Each Holder who participates in the Exchange Offer will be
required to represent that (i) any Exchange Securities received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement or
understanding with any Person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Securities, (iii) it is not a
broker-dealer that acquired Securities directly from the Company, (iv) it is not
an "affiliate" (as defined in Rule 405 under the Securities Act) of the Company
or, if it is such an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable
and (v) it is not acting on behalf of any Person who could not truthfully make
the foregoing representations. If such Holder is not a broker-dealer, such
Holder will be required to represent that it is not engaged in, and does not
intend to engage in, the distribution of the Exchange Securities. If such Holder
is a broker-dealer that will receive Exchange Securities for its own account in
exchange for Securities that were acquired as a result of market-making
activities or other trading activities, it will be required to acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Securities. Upon consummation of the Exchange Offer in accordance with this
Section 2, the Company shall not have any further obligation to register
Transfer Restricted Securities pursuant to Section 2 hereof. No securities other
than the Exchange Securities shall be included in the Exchange Offer
Registration Statement.
(b) The Company shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution",
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Securities received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
publicly disseminated by the Staff of the SEC or such positions or policies, in
the judgment of the Initial Purchasers, represent the prevailing views of the
Staff of the SEC. Such "Plan of Distribution" section shall also expressly
permit the use of the Prospectus by all Persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers (unless such Participating Broker-Dealer will be reselling an
unsold allotment from the original sale of the Securities), and include a
statement describing the means by which Participating Broker-Dealers may resell
the Exchange Securities.
Upon written request after the consummation of the Exchange Offer, the
Company shall use its reasonable best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by any Participating Broker-Dealer subject to the prospectus delivery
requirements of the Securities Act and other Persons, if any, with similar
prospectus delivery requirements for such period of time as is necessary to
comply with applicable law in
<PAGE>
6
connection with any resale of the Exchange Securities; provided, however, that
such period shall not exceed 180 days after the consummation of the Exchange
Offer (or such longer period if extended pursuant to the last paragraph of
Section 5 hereof) (the "Applicable Period").
Interest on the Exchange Securities will accrue from the last interest
payment date on which interest was paid on the Securities surrendered in
exchange therefor or, if no interest has been paid on the Securities, from the
Issuance Date.
In connection with the Exchange Offer, the Company shall:
(1) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(3) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all applicable
laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer the
Company shall:
(1) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Exchange Offer;
(2) deliver to the Trustee or Authenticating Agent for cancellation
all Securities so accepted for exchange; and
(3) cause the Trustee promptly to authenticate and deliver to each
Holder of the canceled Securities or Exchange Securities, in global
form in aggregate principal amount equal to the respective Securities
so accepted for exchange, as further set forth in the Indenture.
The Exchange Securities may be issued under (i) the Indenture or (ii)
an indenture substantially identical in all material respects to the Indenture,
which in either event shall provide that the Exchange Securities shall not be
subject to the transfer restrictions set forth in the Indenture.
(c) If (i) the Company is not permitted to file the Exchange Offer
Registration Statement or to consummate the Exchange Offer because the Exchange
Offer is not permitted by
<PAGE>
7
applicable law or SEC policy, (ii) any Holder of Transfer Restricted Securities
that is a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) notifies the Company on or before the 20th business day
following the consummation of the Exchange Offer that (a) applicable law or SEC
policy prohibits the Holder from participating in the Exchange Offer, (b) such
Holder may not resell the Exchange Securities acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus contained
in the Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder or (c) such Holder is a broker-dealer and holds
Securities acquired directly from the Company or an affiliate of the Company,
(iii) the Exchange Offer Registration Statement is not for any other reason
declared effective within 180 days after the effective date of the Merger, (iv)
any Holder (other than a Participating Broker-Dealer) is not eligible to
participate in the Exchange Offer, or in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange
Securities on the date of the exchange that may be sold without restriction
under U.S. Federal securities laws (other than due solely to the status of such
Holder as an affiliate of the Company within the meaning of the Securities Act
or due to the requirement that such Holder deliver a Prospectus in connection
with any resale of the Exchange Securities) or (v) the Exchange Offer has been
completed and in the opinion of counsel for the Initial Purchasers a
Registration Statement must be filed and a prospectus must be delivered by the
Initial Purchasers in connection with any offering or sale of Transfer
Restricted Securities, then the Company shall promptly deliver written notice
thereof (the "Shelf Notice") to the Trustee and in the case of clauses (i) and
(iii), all Holders and in the case of clauses (ii), (iv) and (v), the affected
Holders, and shall at its own cost file a Shelf Registration Statement pursuant
to Section 3 hereof. Following the delivery of a Shelf Notice in accordance with
this Section 2(c) and compliance with Section 3(a), the Company shall not have
any further obligations under this Section 2.
3. Shelf Registration Statement
If a Shelf Notice is delivered as contemplated by Section 2(c) hereof,
then:
(a) Shelf Registration Statement. The Company will: (A) use its best
efforts to file with the SEC a Registration Statement (which filing may be a
confidential filing) for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Transfer Restricted Securities (the "Shelf
Registration Statement"), within 60 days of the earliest to occur of clauses (i)
through (v) in Section 2(c) above and (B) use its reasonable best efforts to
cause the Shelf Registration Statement to be declared effective by the SEC on or
prior to the 180th day after such obligation arises. No Holder shall be entitled
to the benefits of Section 4 of this Agreement unless and until such Holder
shall have provided all information reasonably requested by the Company (after
conferring with counsel), and such Holder shall not be entitled to such benefits
with respect to any period during which such information was not provided. Each
Holder to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading; provided, further, that if the Company files a Shelf
Registration Statement pursuant to this Section 3(a), it need not abandon the
attempt to cause the SEC to declare the Exchange Offer Registration Statement
effective, and it may satisfy its obligations to register the Securities
pursuant to this
<PAGE>
8
Agreement either by complying with Section 2 and/or Section 3. The Shelf
Registration Statement shall be on Form S-3 or another appropriate form
permitting registration of such Transfer Restricted Securities for resale by
Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings), or may be an amendment to the
Exchange Offer Registration Statement. The Company shall not permit any
securities other than the Transfer Restricted Securities to be included in the
Shelf Registration Statement.
The Company shall use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended to
ensure that it is available for resales of Securities by the holders of Transfer
Restricted Securities entitled to this benefit and to ensure that such Shelf
Registration Statement conforms and continues to conform with the requirements
of this Agreement, the Securities Act and the policies, rules and regulations of
the SEC, as announced from time to time, until the second anniversary of the
Issuance Date, subject to extension pursuant to the last paragraph of Section 5
hereof (the "Effectiveness Period"), or such shorter period ending when all
Transfer Restricted Securities covered by the Shelf Registration Statement have
been sold in the manner set forth and as contemplated in the Shelf Registration
Statement or when the Transfer Restricted Securities become eligible for resale
pursuant to Rule 144 under the Securities Act without volume restrictions, if
any.
(b) Withdrawal of Stop Orders. If the Shelf Registration Statement
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), the Company shall use its reasonable best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof.
(c) Supplements and Amendments. The Company shall promptly supplement
and amend the Shelf Registration Statement if required by the rules, regulations
or instructions applicable to the registration form used for such Shelf
Registration Statement, if required by the Securities Act, or during the
shortest of such periods set forth in the second paragraph of Section 3(a)
hereof if reasonably requested by the Holders of a majority in aggregate
principal amount of Transfer Restricted Securities covered by such Registration
Statement or by any underwriter of such Transfer Restricted Securities based on
a reasonable belief that such supplement or amendment is required by law.
4. Liquidated Damages
(a) The Company and the Initial Purchasers agree that the Holders of
Securities will suffer damages if the Company fails to fulfill its obligations
under Section 2 or Section 3 hereof and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, the Company
agrees to pay, as liquidated damages, additional interest on the Securities
("Liquidated Damages") under the circumstances and to the extent set forth below
(each of which shall be given independent effect and shall not be duplicative):
(i) if neither the Exchange Offer Registration Statement nor the
Shelf Registration Statement has been filed on or prior to the
applicable Filing Date, then,
<PAGE>
9
commencing on the 1st day after the applicable Filing Date, Liquidated
Damages shall accrue on the Securities over and above the stated
interest at a rate of 0.50% per annum;
(ii) if neither the Exchange Offer Registration Statement nor the
Shelf Registration Statement is declared effective by the SEC on or
prior to the applicable Effectiveness Target Date, then, commencing on
the 1st day after the applicable Effectiveness Target Date, Liquidated
Damages shall accrue on the Securities included or which should have
been included in such Registration Statement over and above the stated
interest at a rate of 0.50% per annum;
(iii) if the Exchange Offer has not been consummated within 30 days
after the Effectiveness Target Date with respect to the Exchange Offer
Registration Statement, then, commencing on the 31st day after such
Effectiveness Target Date, Liquidated Damages shall accrue on the
Securities over and above the stated interest at a rate of 0.50% per
annum; or
(iv) (A) the Exchange Offer Registration Statement is filed and
declared effective but thereafter ceases to be effective or fails to be
usable for its intended purpose at any time during the Applicable
Period and is not declared effective again within five business days
thereafter or (B) the Shelf Registration Statement is filed and
declared effective but thereafter ceases to be effective or fails to be
usable for its intended purpose at any time during the Effectiveness
Period and is not declared effective again within five business days
thereafter, Liquidated Damages shall accrue on the Securities over and
above the stated interest rate at a rate of 0.50% per annum (it being
understood and agreed that, notwithstanding any provision to the
contrary, so long as any Security which is the subject of a Shelf
Notice is then covered by an effective Shelf Registration Statement, no
Liquidated Damages shall accrue on such Security);
provided, however, that in no event shall the Liquidated Damages exceed 0.50%
per annum; and provided further that (1) upon the filing of the Exchange Offer
Registration Statement or a Shelf Registration Statement as required hereunder
(in the case of clause (i) of this Section 4(a)), (2) upon the effectiveness of
the Exchange Offer Registration Statement or the Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4(a)), (3) upon
the consummation of the Exchange Offer (in the case of clause (iii) of this
Section 4(a)), and (4) upon the effectiveness or usability of the Exchange Offer
Registration Statement which had ceased to remain effective or be usable (in the
case of clause (iv)(A) of this Section 4(a)), or upon the effectiveness or
usability of the Shelf Registration Statement which had ceased to remain
effective or be usable (in the case of clause (iv)(B) of this Section 4(a)),
Liquidated Damages on the affected Securities as a result of such clause (or the
relevant subclause thereof), as the case may be, shall cease to accrue.
(b) The Company shall notify the Trustee within five business days
after each and every date on which an event first occurs in respect of which
Liquidated Damages is required to be paid (an "Event Date"). Any amounts of
Liquidated Damages due pursuant to (a)(i), (a)(ii), (a)(iii) or (a)(iv) of this
Section 4 will be payable to DTC or its nominee in its capacity as the
<PAGE>
10
registered holder of affected Securities in cash semi-annually on each April 15
and October 15 (to the holders of record on the April 1 and October 1
immediately preceding such dates), commencing with the first such date occurring
after any such Liquidated Damages commences to accrue. The amount of Liquidated
Damages will be determined by multiplying the Liquidated Damages rate by the
principal amount of the affected Securities of such Holders, multiplied by a
fraction, the numerator of which is the number of days such Liquidated Damages
rate was applicable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360. The Company
shall notify the Trustee within five business days of the cessation of any
requirement to pay Liquidated Damages hereunder.
(c) Notwithstanding the foregoing, the Company shall not be required to
pay the additional interest described in clause (a) of this Section 4 to a
Holder with respect to the Securities held by such Holder if the applicable
event pursuant to clause (a) of this Section 4 arises by reason of the failure
of such Holder to provide such information (i) the Company may reasonably
request, with reasonable prior written notice, for use in the Shelf Registration
Statement or any Prospectus included therein to the extent the Company
reasonably determines that such information is required to be included therein
by applicable law, (ii) the NASD or the Commission may request in connection
with such Shelf Registration Statement, or (iii) that is required to comply with
the agreements of such Holder contained in clause (a) of Section 3 to the extent
compliance thereof is necessary for the Shelf Registration Statement to be
declared effective.
5. Registration Procedures
In connection with the filing of any Registration Statement pursuant to
Sections 2 or 3 hereof, the Company shall use its reasonable best efforts to
effect such registration(s) to permit the sale of the securities covered thereby
in accordance with the intended method or methods of disposition thereof, and
pursuant thereto and in connection with any Registration Statement filed by the
Company hereunder, the Company shall:
(a) Prepare and file with the SEC prior to the applicable Filing Date,
a Registration Statement or Registration Statements as prescribed by Sections 2
or 3 hereof, and use its reasonable best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
however, that (i) the Company shall afford any Holder of Transfer Restricted
Securities covered by such Registration Statement or any Participating
Broker-Dealer who seeks to sell Exchange Securities during the Applicable
Period, or their counsel, upon such Holder's written request to the Company, an
opportunity to review copies of all such documents proposed to be filed, and
(ii) if such filing is pursuant to Section 3, before filing any Registration
Statement or Prospectus or any amendments or supplements thereto (including
documents that would be incorporated therein by reference after the initial
filing of the Registration Statement), the Company shall afford the counsel for
the Holders of the Transfer Restricted Securities covered by such Registration
Statement or any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period an opportunity to review copies of all
such documents proposed to be filed.
<PAGE>
11
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented by
any Prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to them with respect to the
disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus. Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good faith that it is in the best
interests of the Company not to disclose the existence of or facts surrounding
any proposed or pending material event or transaction involving the Company, the
Company may (i) in the event a Shelf Registration Statement has been filed,
allow the Shelf Registration Statement to fail to be effective or usable as a
result of such nondisclosure for up to 60 days during the Effectiveness Period,
but in no event for any period in excess of 30 consecutive days, and (ii) in the
event the Exchange Offer is consummated, allow the Exchange Offer Registration
Statement to fail to be effective or usable as a result of such non-disclosure
for up to 15 days during the Applicable Period.
(c) If (1) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, notify the Holders of Transfer
Restricted Securities, or each such Participating Broker-Dealer, as the case may
be, (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any Holder
may, upon request, obtain, at the sole expense of the Company, one conformed
copy of such Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of any
stop order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection with
sales of the Transfer Restricted Securities or resales of Exchange Securities by
Participating Broker-Dealers the representations and warranties of the Company
contained in any agreement (including any underwriting agreement), contemplated
by Section 5(l) hereof, cease to be true and correct, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of a Registration Statement or any of the
Transfer Restricted Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, (v) of the
happening of any event, the existence of any fact known to the Company that
makes any statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or
<PAGE>
12
that requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any 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, and (vi) of the determination by the Company that a
post-effective amendment to a Registration Statement would be appropriate.
(d) Use its reasonable efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Transfer Restricted Securities
or the Exchange Securities for sale in any jurisdiction, and, if any such order
is issued, to use its reasonable efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) If (l) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, furnish to each selling Holder of
Transfer Restricted Securities and to each such Participating Broker-Dealer who
so requests and to counsel and each managing underwriter, if any, at the sole
expense of the Company, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(f) If (l) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, deliver to each Holder of Transfer
Restricted Securities, or each such Participating Broker-Dealer, as the case may
be, at the sole expense of the Company, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each amendment
or supplement thereto as such Persons may reasonably request; and, subject to
the last paragraph of this Section 5, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the Holders
of Transfer Restricted Securities or each such Participating Broker-Dealer, as
the case may be, and the underwriters or agents, if any, and dealers (if any),
in connection with the offering and sale of the Transfer Restricted Securities
covered by, or the sale by Participating Broker-Dealers of the Exchange
Securities pursuant to, such Prospectus and any amendment or supplement thereto.
(g) Prior to any public offering of Transfer Restricted Securities or
Exchange Securities or any delivery of a Prospectus contained in the Exchange
Offer Registration Statement by any Participating Broker-Dealer who seeks to
sell Exchange Securities during the
<PAGE>
13
Applicable Period, use its reasonable best efforts to register or qualify (and
to cooperate with selling Holders of Transfer Restricted Securities or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Transfer Restricted Securities) for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the United States
as any selling Holder, Participating Broker-Dealer, or the managing underwriter
or underwriters reasonably request in writing; provided, however, that where
Exchange Securities held by Participating Broker-Dealers or Transfer Restricted
Securities are offered other than through an underwritten offering, the Company
agrees to cause its counsel to perform necessary Blue Sky investigations and
file registrations and qualifications required to be filed pursuant to this
Section 5(g); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Exchange Securities held by Participating Broker-Dealers or the Transfer
Restricted Securities covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it is not then so qualified,
(B) take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or (C) subject itself to
taxation in any such jurisdiction where it is not then so subject.
(h) If a Shelf Registration Statement is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Transfer Restricted Securities to
facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit with DTC, and
enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders may reasonably request at least three
business days prior to any such sale.
(i) If (l) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, upon the occurrence of any event
contemplated by Section 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable
prepare and (subject to Section 5(b) hereof) file with the SEC a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Transfer Restricted Securities being sold
thereunder or to the purchasers of the Exchange Securities to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an 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. If the Company so notifies the Holders to suspend the use of the
Prospectus after the occurrence of such an event, the Holders shall suspend use
of the Prospectus, and not communicate such material non-public information to
any third party, and
<PAGE>
14
not sell or purchase, or offer to sell or purchase, any securities of the
Company, until the Company has amended or supplemented the Prospectus to correct
such misstatement or omission.
(j) Use its reasonable best efforts to cause the offered securities
covered by the Registration Statement to continue to be rated by the rating
agencies that initially rated the Securities during the period that the
Registration Statement is required hereunder to remain effective (it being
acknowledged, however, that the foregoing shall not be deemed to require the
Company to maintain the rating of such offered securities at the rating given
the Securities).
(k) Prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Securities, provide a CUSIP number, and ISIN
Code for Transfer Restricted Securities or Exchange Securities, as the case may
be.
(l) In connection with any underwritten offering of Transfer Restricted
Securities pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings of debt
securities similar to the Securities and take all such other actions as are
reasonably requested by the managing underwriter or underwriters in order to
facilitate the registration or the disposition of such Transfer Restricted
Securities and, in such connection, (i) make such representations and warranties
to, and covenants with, the underwriters with respect to the business of the
Company, CILCORP and CILCORP's subsidiaries (including any acquired business,
properties or entity, if applicable) and the Registration Statement, Prospectus
and documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, as are customarily made by issuers to underwriters in
underwritten offerings of debt securities similar to the Securities, and confirm
the same in writing if and when requested; (ii) obtain the written opinion of
counsel to the Company and written updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters, addressed
to the underwriters covering the matters customarily covered in opinions
requested in underwritten offerings of debt similar to the Securities; (iii)
obtain "cold comfort" letters and updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data are, or are required to be, included or incorporated by reference
in the Registration Statement), addressed to each of the underwriters, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings of
debt similar to the Securities; and (iv) if an underwriting agreement is entered
into, it shall provide that Holders of Transfer Restricted Securities that are
sold pursuant to such underwriting agreement shall pay all underwriting
discounts, if any, and commissions and transfer taxes, if any, relating to the
sale or dispositions of such Securities, and the same shall contain
indemnification provisions and procedures no less favorable than those set forth
in Section 7 hereof (or such other provisions and procedures acceptable to
Holders of a majority in aggregate principal amount of Transfer Restricted
Securities covered by such Registration Statement and the managing underwriter
or underwriters or agents) with respect to all parties to be indemnified
pursuant to said provisions and procedures, including, without limitation, the
<PAGE>
15
Holders of Transfer Restricted Securities and the underwriters. The above shall
be done at each closing under such underwriting agreement, or as and to the
extent required thereunder.
(m) If (1) a Shelf Registration Statement is filed pursuant to Section
3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, make available for inspection by a
representative of the selling Holders of a majority in aggregate principal
amount of such Transfer Restricted Securities being sold, or each such
Participating Broker-Dealer, as the case may be, and any underwriter
participating in any such disposition of Transfer Restricted Securities, if any
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries (collectively, the
"Records") and cause the officers, directors and employees of the Company and
its subsidiaries to supply all information as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities. As a
condition to supplying such information, the Company shall receive an agreement
in writing from the Inspectors agreeing that records which the Company
determines, in good faith, to be confidential and notifies Inspectors of such
confidentiality shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is in the reasonable opinion of counsel to the
Company necessary to avoid or correct a misstatement or omission in such
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction, (iii)
disclosure of such information is, in the reasonable opinion of counsel for any
Inspector, necessary or advisable in connection with any action, claim, suit or
proceeding, directly or indirectly, involving or potentially involving such
Inspector and arising out of, based upon, relating to, or involving this
Agreement, or any transactions contemplated hereby or arising hereunder, or (iv)
the information in such Records has been made generally available to the public
other than as a result of a disclosure by any Inspector in violation of this
Section 5(m). Each selling Holder of such Transfer Restricted Securities and
each such Participating Broker-Dealer will be required to agree that information
obtained by it as a result of such inspections shall be deemed confidential and
shall not be used by it as the basis for any market transactions in the
securities of the Company unless and until such information is generally
available to the public other than as a result of a disclosure by any Inspector
in violation of this Section 5(m). Each selling Holder of such Transfer
Restricted Securities and each such Participating Broker-Dealer or underwriter,
as the case may be, will be required further to agree that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company at its sole
expense to undertake appropriate action to prevent disclosure of the Records
deemed confidential.
(n) Provide an indenture trustee for the Transfer Restricted Securities
or the Exchange Securities, as the case may be, and use its best efforts to
cause the Indenture or the trust indenture provided for in Section 2(a) hereof,
as the case may be, to be qualified under the Trust Indenture Act not later than
the effective date of the first Registration Statement relating to the Transfer
Restricted Securities; and in connection therewith, cooperate with the trustee
under any such indenture and the Holders of the Transfer Restricted Securities,
to effect such changes
<PAGE>
16
to such indenture as may be required for such indenture to be so qualified in
accordance with the terms of the Trust Indenture Act; and execute, and use its
reasonable best efforts to cause such trustee to execute all documents as may be
required to effect such changes, and all other forms and documents required to
be filed with the SEC to enable such indenture to be so qualified in a timely
manner.
(o) Use its reasonable best efforts to comply with all applicable rules
and regulations of the SEC.
(p) Cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
The Company may require each seller of Transfer Restricted Securities
as to which any Shelf Registration Statement is being effected to (i) furnish to
the Company in writing such information specified in Item 507 and Item 508, as
applicable, of Regulation S-K under the Securities Act or any other information
required by the Securities Act or applicable United States state securities laws
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein and (ii) make such representations, in
each case as the Company may, from time to time, reasonably request. The Company
may exclude from such registration the Transfer Restricted Securities of any
seller who unreasonably fails to furnish such information or make such
representations within a reasonable time after receiving such request. Each
seller as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such seller
not materially misleading.
Each Holder of Transfer Restricted Securities and each Participating
Broker-Dealer agrees by acquisition of such Transfer Restricted Securities or
Exchange Securities to be sold by such Participating Broker-Dealer, as the case
may be, that, upon receipt of any notice from the Company of the happening of
any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or
5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such
Transfer Restricted Securities covered by such Registration Statement or
Prospectus or Exchange Securities to be sold by such Holder or Participating
Broker-Dealer, as the case may be, until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto and, if so directed by
the Company, such holder will deliver to the Company (at its expense) all copies
in its possession, other than permanent file copies then in such holder's
possession, of the prospectus covering such Securities current at the time of
receipt of such notice, or certify in writing as to the destruction thereof. In
the event the Company shall give any such notice, each of the Effectiveness
Period and the Applicable Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to and
including the date when each seller of Transfer Restricted Securities covered by
such Registration Statement or Exchange Securities to be sold by such
Participating Broker-Dealer, as the case may be, shall
<PAGE>
17
have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(i) hereof or (y) the Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange Offer Registration Statement or a Shelf Registration Statement is
filed or becomes effective, including, without limitation, (i) all registration
and filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Transfer Restricted Securities or
Exchange Securities and determination of the eligibility of the Transfer
Restricted Securities or Exchange Securities for investment under the laws of
such jurisdictions (x) where the holders of Transfer Restricted Securities are
located, in the case of the Exchange Securities, or (y) as provided in Section
5(g) hereof, in the case of Transfer Restricted Securities or Exchange
Securities to be sold by a Participating Broker-Dealer during the Applicable
Period)); (ii) printing expenses, including, without limitation, the printing of
prospectuses if the printing of prospectuses is requested by the managing
underwriter or underwriters, if any, by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities included in any
Registration Statement or by any Participating Broker-Dealer, as the case may
be, (iii) reasonable fees and disbursements of counsel for the Company and
reasonable fees and disbursements of special counsel for the sellers of Transfer
Restricted Securities (subject to the provisions of Section 6(b) hereof),
however, such fees of counsel for the sellers shall be limited to not more than
one counsel for sellers; (iv) reasonable fees and disbursements of all
independent certified public accountants referred to in Section 5(l)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort" letters required by or incident to such performance), (v) rating agency
fees, if any, and any fees associated with making the Exchange Securities
eligible for trading through DTC, (vi) Securities Act liability insurance, if
the Company desires such insurance, (vii) reasonable fees and expenses of all
other Persons retained by the Company, (viii) internal expenses of the Company
(including, without limitation, all salaries and expenses of officers and
employees of the Company performing legal or accounting duties), (ix) the
expense of any annual audit, (x) the reasonable fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, and (xi) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, securities
sales agreements, indentures and any other documents necessary in order to
comply with this Agreement.
(b) The Company shall reimburse the Holders of the Transfer Restricted
Securities being registered in a Shelf Registration Statement for the reasonable
fees and disbursements of not more than one counsel chosen by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities to
be included in such Registration Statement (which counsel shall be Simpson
Thacher & Bartlett unless otherwise affirmatively stated by the Holders)
provided, further, however, that if the Company permits an Underwritten
<PAGE>
18
Offering, the Company shall not be responsible for any fees and expenses of any
underwriter including any underwriting discounts and commissions or any legal
fees and expenses of counsel to the underwriters (except for the reasonable fees
and disbursements of counsel in connection with state securities or Blue Sky
qualification of any of the Registrable Securities or the Exchange Securities).
(c) The Company shall not be responsible for any fees and expenses of
the Initial Purchaser, except for such fees related to state securities or Blue
Sky qualification described in Section 6(a) above.
7. Indemnification and Contribution
(a) The Company shall indemnify and hold harmless each Holder of
Transfer Restricted Securities offered pursuant to a Shelf Registration
Statement, each Participating Broker-Dealer selling Exchange Securities during
the Applicable Period and the Initial Purchasers and the officers and employees,
each agent of each such person and each Person, if any, who controls any such
Person within the meaning of the Securities Act (each a "Participant") from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to the exchange of or sales of the Transfer
Restricted Securities), to which that Participant may become subject, under the
Securities Act, Exchange Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus, (ii) the omission or alleged omission to state therein
any material fact required to be stated therein or necessary to make the
statements therein not misleading or (iii) any act or failure to act, or any
alleged act or failure to act, by any Participant in connection with, or
relating in any manner to, the Transfer Restricted Securities or the
registration contemplated hereby, and which is included as part of or referred
to in any loss, claim, damage, liability or action arising out of or based upon
matters covered by clause (i) or (ii) above (provided that the Company not shall
be liable in the case of any matter covered by this clause (iii) to the extent
that it is determined in a final judgment by a court of competent jurisdiction
that such loss, claim, damage, liability or action resulted directly from any
such act or failure to act undertaken or omitted to be taken by such Participant
through its negligence or wilful misconduct), and shall reimburse each
Participant promptly upon demand for any legal or other expenses reasonably
incurred by that Participant in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred in each and every case; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement or Prospectus, or in any such amendment or
supplement, or in any Blue Sky Application in reliance upon and in conformity
with the written information furnished to the Company by or on behalf of any
Participant specifically for inclusion therein; provided, further, that with
respect to any such untrue statement in or omission from any preliminary
prospectus, the indemnity agreement contained in this Section 7(a) shall not
inure to the benefit of any such Participant to the extent that the sale to the
Person asserting any such loss, claim, damage, liability or action was an
initial
<PAGE>
19
resale by such Participant and any such loss, claim, damage, liability or action
of or with respect to such Participant results from the fact that both (A) to
the extent required by applicable law, a copy of the Prospectus was not sent or
given to such Person at or prior to the written confirmation of the sale of such
securities to such Person and (B) the untrue statement in or omission from such
preliminary prospectus was corrected in the Prospectus unless, in either case,
such failure to deliver the Prospectus was a result of non-compliance by the
Company with Section 5(f) of this Agreement. The foregoing indemnity agreement
is in addition to any liability which the Company may otherwise have to any
Participant.
(b) Each Holder of Transfer Restricted Securities offered pursuant to a
Shelf Registration Statement, each Participating Broker-Dealer selling Exchange
Securities during the Applicable Period and the Initial Purchasers (each a
"Participant Indemnifying Party"), severally and not jointly, shall indemnify
and hold harmless the Company, its officers and employees, each of its directors
or agent of each such person and each Person, if any, who controls the Company
within the meaning of the Securities Act from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which the Company or any such director, officer, employee, agent or controlling
Person may become subject, under the Securities Act, Exchange Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any preliminary prospectus or the Registration Statement
or Prospectus, or in any amendment or supplement thereto, or (B) in any Blue Sky
Application or (ii) the omission or alleged omission to state therein any
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with the written information furnished to the
Company by that Participant Indemnifying Party, and shall reimburse the Company
and any such director, officer, employee, agent or controlling Person for any
legal or other expenses reasonably incurred by the Company or any such director,
officer, employee, agent or controlling Person in connection with investigating
or defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred in each and every case. The
foregoing indemnity agreement is in addition to any liability which any
Participant Indemnifying Party may otherwise have to the Company or any such
director, officer or controlling Person.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 7, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent it did not otherwise learn of
such action and such omission results in the forfeiture by the indemnifying
party or material impairment of substantial rights and defenses and, provided,
further, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have to an indemnified party otherwise than
under this Section 7. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly
<PAGE>
20
notified indemnifying party, to assume the defense thereof with counsel
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 7 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that any indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the employment
thereof has been specifically authorized by the indemnifying party in writing,
(ii) such indemnified party shall have been advised by such counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party and in the reasonable
judgement of such counsel it is advisable for such indemnified party to employ
separate counsel or (iii) the indemnifying party has failed to assume the
defense of such action and employ counsel reasonably satisfactory to the
indemnified party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all such indemnified
parties, which firm shall be designated in writing by the Participants, if the
indemnified parties under this Section 7 consist of any Participants, or by the
Company, if the indemnified parties under this Section 7 consist of the Company
or any of its respective directors, officers, employees, agents of such persons
or controlling Persons. Each indemnified party, as a condition of the indemnity
agreements contained in Sections 7(a) and 7(b), shall use its reasonable efforts
to cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld) settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent (a) includes an unconditional
release of each indemnified party from all liability arising out of such claim,
action, suit or proceeding and (b) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 7(a) or 7(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, contribute to the aggregate loss, claim, damage or liability, or
<PAGE>
21
action in respect thereof, in such proportion as shall be appropriate to reflect
the relative benefits received by the Company on the one hand and the
Participants on the other from the offering of the Securities and the relative
fault of the Company on the one hand and the Participants on the other with
respect to the statements or omissions which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Participants on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Securities (before deducting
expenses underwriting discounts and commissions) received by the Company on the
one hand, and the total underwriting discounts and commissions received by the
Participants with respect to the Securities purchased under the Purchase
Agreement, on the other hand, bear to the total gross proceeds from the offering
of the Securities under the Purchase Agreement. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company on the one hand, or the Participants on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Participants agree that it would not be just and equitable
if contributions pursuant to this Section 7(d) were to be determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. Notwithstanding the provisions
of this Section 7(d), no Participant shall be required to contribute any amount
in excess of the amount by which the total price at which the Securities
purchased by it were resold exceeds the amount of any damages which such has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The Participant's obligations to contribute as
provided in this Section 7(d) are several in proportion to their respective
purchase obligations and not joint.
8. Underwritten Registrations
No Holder of Transfer Restricted Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Transfer Restricted Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
9. Miscellaneous
(a) No Inconsistent Agreements. The Company has not, as of the date
hereof, nor will it, after the date of this Agreement, enter into any agreement
with respect to any of its securities that is inconsistent with the rights
granted to the Holders of Transfer Restricted Securities in this Agreement or
otherwise conflicts with the provisions hereof.
<PAGE>
22
(b) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of (A) the Company and the Initial Purchasers and, in circumstances that
would adversely affect the Holders of then outstanding Transfer Restricted
Securities, the Holders of not less than a majority in aggregate principal
amount of any series of the then outstanding Transfer Restricted Securities with
respect to such series of Transfer Restricted Securities and (B) in
circumstances that would adversely affect the Participating Broker-Dealers, the
Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Securities held by all Participating
Broker-Dealers with respect to Exchange Securities; provided, however, that
Section 7 and this Section 9(b) may not be amended, modified or supplemented
without the prior written consent of each Holder and each Participating
Broker-Dealer (including any Person who was a Holder or Participating
Broker-Dealer of Transfer Restricted Securities or Exchange Securities, as the
case may be, disposed of pursuant to any Registration Statement).
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders of Transfer Restricted Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Transfer
Restricted Securities may be given by Holders of at least a majority in
aggregate principal amount of the Transfer Restricted Securities being sold by
such Holders pursuant to such Registration Statement; provided, however, that
the provisions of this sentence may not be amended, modified or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(c) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(1) if to a Holder of the Transfer Restricted Securities or any
Participating Broker-Dealer, at the most current address of such Holder
or Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar under the Indenture, with a copy in like
manner to the Initial Purchasers as follows:
Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Facsimile No: 212-528-8822
Attention: Syndicate Department
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Facsimile No: 212-455-2502
Attention: Andrew Keller, Esq.
<PAGE>
23
(2) if to the Initial Purchasers, at the addresses specified in
Section 9(c)(1);
(3) if to the Company, as follows:
Midwest Energy, Inc.
1001 North 19th Street
20th Floor
Arlington, Virginia 22209
Facsimile No: 703-528-4510
Attention: President
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, NW
Washington, D.C. 20005
Facsimile No: 202-393-5760
Attention: Stephen W. Hamilton, Esq.
Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof. The Company shall be entitled to act and rely
upon any request, consent, notice or agreement given or made on behalf of the
Initial Purchasers.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties hereto
and the Holders; provided, however, that this Agreement shall not inure to the
benefit of or be binding upon a successor or assign of a Holder unless and to
the extent such successor or assign holds Transfer Restricted Securities.
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE>
24
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Each of the parties hereto hereby submits to the non-exclusive
jurisdiction of the Federal and State Courts of the Borough of Manhattan in the
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
The Company hereby irrevocably waives, to the extent permitted by law,
any immunity to jurisdiction to which it may otherwise be entitled (including,
without limitation, immunity to pre-judgment attachment, post-judgment
attachment and execution) in any legal suit, action or proceeding against it
arising out of or based on this Agreement or the transactions contemplated
hereby.
The provisions of this Section 9(g) are intended to be effective upon
the execution of this Agreement without any further action by the Company or the
Initial Purchasers and the introduction of a true copy of this Agreement into
evidence shall be conclusive and final evidence as to such matters.
(h) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(i) Securities Held by the Company, or Its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Transfer Restricted
Securities is required hereunder, Transfer Restricted Securities held by the
Company or its "affiliates" (as such term is defined in Rule 405 under the
Securities Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(j) Entire Agreement. This Agreement, together with the Purchase
Agreement, the Indenture and the Pledge Agreement, is intended by the parties as
a final and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein and
any and all prior oral or written agreements, representations, or warranties,
contracts, understandings, correspondence, conversations and memoranda between
the Initial Purchasers on the one hand and the Company on the other, or between
or among any agents, representatives, parents, subsidiaries, affiliates,
predecessors in interest or successors in interest with respect to the subject
matter hereof and thereof are merged herein and replaced hereby.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
MIDWEST ENERGY, INC.
By: /s/ Paul D. Stinson
--------------------------------
Name: Paul D. Stinson
Title: Vice President
LEHMAN BROTHERS INC.,
for itself and on behalf of the
several Initial Purchasers
By: /s/ David Schwarzbach
--------------------------------
Authorized Representative
Exhibit 5.1
[SASM&F Letterhead]
November 5, 1999
CILCORP Inc.
300 Liberty Street
Peoria, Illinois 61602
Re: CILCORP Inc.
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel to CILCORP Inc., an Illinois
corporation (the "Company"), in connection with the public offering of up to
$225,000,000 aggregate principal amount of the Company's 8.700% Senior Notes due
2009 (the "Exchange Notes") and up to $250,000,000 aggregate principal amount of
the Company's 9.375% Senior Bonds due 2029 (the "Exchange Bonds" and, together
with the Exchange Notes, the "Exchange Securities"). The Exchange Securities are
to be issued pursuant to an exchange offer (the "Exchange Offer") in which an
aggregate principal amount of up to (i) $225,000,000 of the Exchange Notes will
be exchanged for a like principal amount of the Company's issued and outstanding
8.700% Senior Notes due 2009 (the "Old Notes") and (ii) $250,000,000 of the
Exchange Bonds will be exchanged for a like principal amount of the Company's
issued and outstanding 9.375% Senior Bonds due 2029 (the "Old Bonds" and,
together with the Old Notes, the "Old Securities"), in each case under the
Indenture, dated as of October 18, 1999, between Midwest Energy, Inc. and the
Bank of New York, as Trustee (the "Trustee"), as supplemented by the First
Supplemental Indenture, dated as of October 18, 1999, between the Company and
the Trustee (as so supplemented, the "Indenture"), as contemplated by the
Registration Rights Agreement, dated as of October 18, 1999 (the "Registration
Rights Agreement"), by and among Midwest Energy, Inc., Lehman Brothers Inc.,
J.P. Morgan & Co. and Morgan Stanley Dean Witter.
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Securities Act").
In connection with rendering this opinion, we have examined originals
or copies, certified or otherwise identified to our satisfaction, of (i) the
Registration Statement on Form S-4 relating to the Exchange Offer to be filed
with the Securities and Exchange Commission (the "Commission") on the date
hereof under the Securities Act (the "Registration Statement"); (ii) an executed
copy of the Registration Rights Agreement; (iii) an executed copy of the
Indenture; (iv) the Certificate of Incorporation of the Company, as amended to
date; (v) the Amended and Restated By-Laws of the Company, as amended to
<PAGE>
CILCORP Inc.
November 5, 1999
Page 2
date; (vi) certain resolutions adopted by the Board of Directors of the Company
relating to the Old Securities and the Exchange Offer, the issuance of the
Exchange Securities and related matters; (vii) the Form T-1 of the Trustee filed
as an exhibit to the Registration Statement; and (viii) the form of the Exchange
Securities filed as an exhibit to the Registration Statement and incorporated
by reference therein. We have also examined originals or copies, certified or
otherwise identified to our satisfaction, of such records of the Company and
such agreements, certificates of public officials, certificates of officers or
other representatives of the Company and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of executed documents or documents to be executed by parties other
than the Company, we have assumed that such parties had or will have the power,
corporate or other, to enter into and perform all obligations thereunder and
have also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity and binding effect of such documents. As to any facts material to the
opinions expressed herein which we have not independently established or
verified, we have relied upon statements and representations of officers and
other representatives of the Company and others.
Our opinions set forth herein are limited to the Business Corporation
Act of the State of Illinois and those laws of the State of New York which are
normally applicable to the transactions of the type contemplated by the Exchange
Offer and to the extent that judicial or regulatory orders or decrees or
consents, approvals, licenses, authorizations, validations, filings, recordings
or registrations with governmental authorities are relevant, to those required
under such laws (all of the foregoing being referred to as "Opined on Law"). We
do not express any opinion with respect to the law of any jurisdiction other
than Opined on Law or as to the effect of any such non-opined law on the
opinions herein stated. We have relied, with your consent, as to matters of
Illinois law on the opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois).
Based upon and subject to the foregoing and the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that when (i) the Registration Statement becomes effective and the
Indenture has been qualified under the Trust Indenture Act of 1939, as amended,
and (ii) the Exchange Securities (in the form examined by us) have been duly
executed by the Company, authenticated by the Trustee in accordance with the
provisions of the Indenture and delivered upon consummation of the
2
<PAGE>
CILCORP Inc.
November 5, 1999
Page 3
Exchange Offer against receipt of Old Securities surrendered in exchange
therefor in accordance with the terms of the Exchange Offer, the Registration
Rights Agreement and the Indenture, the Exchange Securities will constitute
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except to the extent that enforcement thereof may
be limited by (1) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (2) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
In rendering the opinion set forth above, we have assumed that the
execution and delivery by the Company of the Indenture and the Exchange
Securities and the performance of the Company of its obligations thereunder do
not and will not violate, conflict with or constitute a default under any
agreement or instrument to which the Company or its properties is subject,
except for those agreements and instruments which have been identified to us by
the Company as being material to it and which are listed as material contracts
in part II of the Registration Statement.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
3
Exhibit 12.1
CILCORP INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Years Ended December 31, Six Months Ended June 30,
------------------------------------------------------------------- --------------------------------
Historical Pro Forma Historical Pro Forma
------------------------------------------------------------------- --------------------------------
1994 1995 1996 1997 1998 1998 1998 1999 1999
-------- -------- ---------- -------- -------- ---------- ------ ------ ---------
(In thousands, except ratios) (in thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings as defined:
Net Income (loss) from
continuing operations 30,762 38,469 37,940 43,709 38,218 (1,283) 19,051 13,691 (6,059)
Provision (benefit) for
income taxes 16,922 22,427 20,702 22,349 19,699 3,168 8,769 7,115 (1,149)
Interest expense 23,341 29,681 28,964 27,462 29,473 70,866 14,625 14,340 35,036
Interest expense on COLI 2,028 2,349 2,731 3,491 3,624 3,624 1,701 1,920 1,920
Interest portion of rentals 1,979 2,020 1,726 1,877 1,903 1,903 951 962 962
Preferred dividends of
subsidiary 2,980 3,299 3,188 3,216 3,194 3,194 1,599 1,570 1,570
------ ------ ------- ------- ------ ------ ------ ------ ------
Total earnings, as
defined 81,012 98,425 95,251 102,104 96,111 81,472 46,696 39,598 32,280
====== ====== ======= ======= ====== ====== ====== ====== ======
Fixed charges, as defined:
Interest expense 26,341 29,861 28,964 27,462 29,473 70,866 14,625 14,340 35,036
Interest expense on COLI 2,028 2,349 2,731 3,491 3,624 3,624 1,701 1,920 1,920
Interest portion on rentals 1,979 2,020 1,726 1,877 1,903 1,903 951 962 962
Tax effected preferred
dividends of subsidiary 4,939 5,468 5,284 5,331 5,294 5,294 2,650 2,602 2,602
------ ------ ------- ------- ------ ------ ------ ------ ------
Total fixed charges, as
defined 35,287 39,698 38,705 38,161 40,294 81,687 19,927 19,824 40,520
====== ====== ======= ======= ====== ====== ====== ====== ======
Ratio of earnings to fixed
charges 2.3 2.5 2.5 2.7 2.4 1.0 2.3 2.0 0.8
====== ====== ======= ======= ====== ====== ====== ====== ======
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report included in this Form S-4 Registration Statement covering $225,000,000
Senior Notes and $250,000,000 Senior Bonds and to the incorporation by reference
in this Registration Statement of our reports dated January 27, 1999, included
or incorporated by reference in CILCORP Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1998 and to all references to our Firm included in
this Registration Statement.
/s/ Arthur Andersen LLP
Chicago, Illinois,
November 5, 1999
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
</TABLE>
CILCORP Inc.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Illinois 37-1169387
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
300 Liberty Street
Peoria, Illinois 61602
(Address of principal executive offices) (Zip code)
</TABLE>
-------------
8.70% Senior Notes due 2009
9.375% Senior Bonds due 2029
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 28th day of October, 1999.
THE BANK OF NEW YORK
By: /s/ MARYBETH LEWICKI
---------------------------------
Name: MARYBETH LEWICKI
Title: VICE PRESIDENT
-4-
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the
Federal Reserve System, at the close of business June 30, 1999, published in
accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS In Thousands
- ------ ------------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin......... $5,597,807
Interest-bearing balances.................................. 4,075,775
Securities:
Held-to-maturity securities................................ 785,167
Available-for-sale securities.............................. 4,159,891
Federal funds sold and Securities purchased under
agreements to resell....................................... 2,476,963
Loans and lease financing receivables:
Loans and leases, net of unearned
income................................................... 38,028,772
LESS: Allowance for loan and
lease losses............................................. 568,617
LESS: Allocated transfer risk
reserve.................................................. 16,352
Loans and leases, net of unearned income, allowance,
and reserve.............................................. 37,443,803
Trading Assets................................................ 1,563,671
Premises and fixed assets (including capitalized leases)...... 683,587
Other real estate owned....................................... 10,995
Investments in unconsolidated subsidiaries and associated
companies.................................................. 184,661
Customers' liability to this bank on acceptances
outstanding................................................ 812,015
Intangible assets............................................. 1,135,572
Other assets.................................................. 5,607,019
Total assets.................................................. $64,536,926
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices........................................ $26,488,980
Noninterest-bearing........................................ 10,626,811
Interest-bearing........................................... 15,862,169
In foreign offices, Edge and Agreement subsidiaries,
and IBFs................................................. 20,655,414
Noninterest-bearing........................................ 156,471
Interest-bearing........................................... 20,498,943
Federal funds purchased and Securities sold under
agreements to repurchase................................... 3,729,439
Demand notes issued to the U.S.Treasury....................... 257,860
Trading liabilities........................................... 1,987,450
Other borrowed money:
With remaining maturity of one year or less................ 496,235
With remaining maturity of more than one year
through three years...................................... 465
With remaining maturity of more than three years........... 31,080
Bank's liability on acceptances executed and outstanding...... 822,455
Subordinated notes and debentures............................. 1,308,000
Other liabilities............................................. 2,846,649
Total liabilities............................................. 58,624,027
EQUITY CAPITAL
Common stock.................................................. 1,135,284
Surplus....................................................... 815,314
Undivided profits and capital reserves........................ 4,001,767
Net unrealized holding gains (losses) on available-for-sale
securities................................................. (7,956)
Cumulative foreign currency translation adjustments........... (31,510)
Total equity capital.......................................... 5,912,899
Total liabilities and equity capital........................ $64,536,926
</TABLE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni Directors
Alan R. Griffith
Gerald L. Hassell
EXHIBIT 99.1
LETTER OF TRANSMITTAL
CILCORP INC.
OFFER TO EXCHANGE ALL
8.700% SENIOR NOTES DUE 2009 FOR 8.700% SENIOR NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
9.375% SENIOR BONDS DUE 2029 FOR 9.375% SENIOR BONDS DUE 2029 WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
PURSUANT TO THE PROSPECTUS, DATED [ ], 1999
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON [ ], 1999,
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN BEFORE 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
DELIVERY TO: THE BANK OF NEW YORK, EXCHANGE AGENT
BY REGISTERED OR CERTIFIED MAIL OR OVERNIGHT COURIER: BY FACSIMILE TRANSMISSION: BY HAND:
The Bank of New York (FOR ELIGIBLE INSTITUTIONS ONLY) The Bank of New York
101 Barclay Street (212) [ ] 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level Attention: Reorganization Section
New York, New York 10286 CONFIRM BY TELEPHONE:
Attention: Reorganization Section (212) [ ]
FOR INFORMATION CALL:
(212) [ ]
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus, dated [ ], 1999
(the "Prospectus"), of CILCORP Inc., an Illinois corporation (the "Company" or
"CILCORP"), and this Letter of Transmittal (this "Letter"), which together
constitute the Company's offer (the "Exchange Offer") to exchange an aggregate
principal amount of up to $225,000,000 of the Company's 8.700% Senior Notes due
2009 (the "New Notes") which have been registered under the Securities Act of
1933, as amended (the "Securities Act") for a like principal amount of the
Company's issued and outstanding 8.700% Senior Notes due 2009 (the "Old Notes")
and to exchange an aggregate principal amount of up to $250,000,000 of the
Company's 9.375% Senior Bonds due 2029 (the "New Bonds" and together with the
New Notes the "New Securities") which have been registered under the Securities
Act for a like principal amount of the Company's issued and outstanding 9.375%
Senior Bonds due 2029 (the "Old Bonds" and together with the Old Notes the "Old
Securities"), in each case from the registered holders thereof (the "Holders").
For each Old Security accepted for exchange, the Holder of such Old
Security will receive a New Security having a principal amount equal to that of
the surrendered Old Security. The New Securities will bear interest from the
most recent date to which interest has been paid on the Old Securities or, if no
interest has been paid on the Old Securities, from October 18, 1999.
Accordingly, registered Holders of New Securities on the relevant record date
for the first interest payment date following the consummation of the Exchange
Offer will receive interest accruing from the most recent date to which interest
has been paid or, if no interest has been paid, from October 18, 1999. Old
Securities accepted for exchange will cease to accrue interest from and after
the date of consummation of the Exchange Offer. Holders of Old Securities whose
Old Securities are accepted for exchange will not receive any payment in respect
of accrued interest on such Old Securities otherwise payable on any interest
payment date the record date for which occurs on or after consummation of the
Exchange Offer.
This Letter is to be completed by a holder of Old Securities if
certificates are to be forwarded herewith. If tenders of Old Securities held in
book-entry form are to be made by book-entry transfer to the account maintained
by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures for tender by book-entry transfer set
forth in "The Exchange Offer -- Book-Entry Transfers" section of the Prospectus
and in accordance with the Automated Tender Offer Program ("ATOP") established
by DTC, a tendering holder will become bound by the terms and conditions hereof
in accordance with the procedures established by ATOP. Holders of Old Securities
whose certificates are not immediately available, or who are unable to deliver
their certificates or confirmation of the book-entry tender of their Old
Securities into the Exchange Agent's account at the Book-Entry Transfer Facility
(a "Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or before the Expiration Date, must tender their Old
Securities according to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent. The term "Agent's Message" means
a message, transmitted by the Book-Entry Transfer Facility to , and received by,
the Exchange Agent and forming a part of the Book-Entry Confirmation, which
states that the Book-Entry Transfer Facility has received an express
acknowledgement from the tendering Holder that such Holder agrees to be bound by
the Letter and that the Company may enforce the Letter against that Holder.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
<PAGE>
List below the Old Securities to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Securities should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DESCRIPTION OF OLD SECURITIES
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (1) (2) (3) (4)
(PLEASE FILL IN, IF BLANK) CERTIFICATE NUMBER(S)* AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL AMOUNT
AMOUNT AT PRINCIPAL AMOUNT AT MATURITY
MATURITY OF AT MATURITY TENDERED**
OLD NOTE(S) OF OLD BOND(S)
Total
</TABLE>
* Need not be completed if Old Securities are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have
tendered ALL of the Old Securities represented by the Old Securities
indicated in column 2 and 3. See Instruction 2. Old Securities tendered
hereby must be in denominations of principal amount at maturity of $1,000
and any integral multiple thereof. See Instruction 1.
[ ] CHECK HERE IF TENDERED OLD SECURITIES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
--------------------------------------------------
Account Number Transaction Code Number
-----------------------------------------
[ ] CHECK HERE IF TENDERED OLD SECURITIES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
------------------------------------------------
Window Ticket Number (if any)
--------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------------------------
Name of Institution which guaranteed delivery
----------------------------------
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number Transaction Code Number
---------------------- --------------------
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: Address:
------------------------ ------------------------
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for Old Securities that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Securities; however, by
so acknowledging and by delivering such a prospectus, the undersigned will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. If the undersigned is a broker-dealer that will receive New
Securities, it represents that the Old Securities to be exchanged for the New
Securities were acquired as a result of market-making activities or other
trading activities.
2
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Securities indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Securities tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Securities as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the undersigned's true and lawful agent and attorney-in-fact with
respect to such tendered Old Securities, with full power of substitution, among
other things, to cause the Old Securities to be assigned, transferred and
exchanged. The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, sell, assign and transfer the Old
Securities, and to acquire New Securities issuable upon the exchange of such
tendered Old Securities, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim when the same are accepted by the Company. The undersigned hereby further
represents that any New Securities acquired in exchange for Old Securities
tendered hereby will have been acquired in the ordinary course of business of
the person receiving such New Securities, whether or not such person is the
undersigned, that neither the Holder of such Old Securities, other than a
broker-dealer, nor any such other person is participating in, intends to
participate in or has an arrangement or understanding with any person to
participate in the distribution of such New Securities, and that neither the
holder of such Old Securities nor any such other person is an "affiliate", as
defined in Rule 405 under the Securities Act, of the Company. The undersigned
hereby further represents that it is not a broker-dealer that acquired Old
Securities directly from Midwest Energy, Inc. or the Company and that it is not
acting on behalf of any person who could not truthfully make all of the
representations of the undersigned set forth in this paragraph.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "Commission"), that the New Securities issued pursuant to the
Exchange Offer in exchange for the Old Securities may be offered for resale,
resold and otherwise transferred by Holders thereof (other than a broker-dealer
who acquires such New Securities directly from the Company for resale pursuant
to Rule 144A under the Securities Act or any other available exemption under the
Securities Act or any such holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Securities are acquired in the ordinary course of such Holders'
business and such Holders have no arrangement with any person to participate in
the distribution of such New Securities. However, the SEC has not considered the
Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the SEC would make a similar determination with
respect to the Exchange Offer as in other circumstances. If the undersigned is
not a broker-dealer, the undersigned represents that it is not engaged in, and
does not intend to engage in, a distribution of New Securities and has no
arrangement or understanding to participate in a distribution of New Securities.
If any Holder is an affiliate of the Company, is engaged in or intends to engage
in or has any arrangement or understanding with respect to the distribution of
the New Securities to be acquired pursuant to the Exchange Offer, such Holder
(i) could not rely on the applicable interpretations of the staff of the SEC and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. If the undersigned
is a broker-dealer that will receive New Securities for its own account in
exchange for Old Securities, it represents that the Old Securities to be
exchanged for the New Securities were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Securities; however, by so acknowledging
and by delivering a prospectus meeting the requirements of the Securities Act,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Securities tendered hereby. All
authority conferred or agreed to be conferred in this Letter and every
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators, trustees in bankruptcy and legal
representatives of the undersigned and shall not be affected by, and shall
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal Rights" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Securities (and, if applicable,
substitute certificates representing Old Securities for any Old Securities not
exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Old Securities, please credit the account indicated above maintained
at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under
the box entitled "Special Delivery Instructions" below, please send the New
Securities (and, if applicable, substitute certificates representing Old
Securities for any Old Securities not exchanged) to the undersigned at the
address shown above in the box entitled "Description of Old Securities".
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
SECURITIES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
OLD SECURITIES AS SET FORTH IN SUCH BOX ABOVE.
3
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Securities not exchanged
and/or New Securities are to be issued in the name of and sent to someone other
than the person(s) whose signature(s) appear(s) on this Letter above, or if Old
Securities delivered by book-entry transfer which are not accepted for exchange
are to be returned by credit to an account maintained at the Book-Entry Transfer
Facility other than in the account indicated above.
Issue New Securities and/or Old Securities not tendered to:
Name(s)
------------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------------
(Please Type or Print)
Address:
-----------------------------------------------------------------------
(Include Zip Code)
(Complete accompanying Substitute Form W-9)
Credit unexchanged Old Securities delivered by book-entry
transfer to the Book-Entry Transfer Facility
account set forth below.
- --------------------------------------------------------------------------------
(Book-Entry Transfer Facility Account Number, if applicable)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Securities not exchanged
and/or New Securities are to be sent to someone other than the person(s) whose
signature(s) appear(s) on this Letter above or to such person(s) at an address
other than shown in the box entitled "Description of Old Securities" on this
Letter above.
Mail New Securities and/or Old Securities not tendered
Name(s)
------------------------------------------------------------------------
(Please Type or Print)
- --------------------------------------------------------------------------------
(Please Type or Print)
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR
OLD SECURITIES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR
THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING
ANY BOX ABOVE.
4
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
Dated: , 1999
-------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Signature(s) of Owner(s) (Date)
Area Code and Telephone Number:
------------------------------------------------
If a holder is tendering any Old Securities, this Letter must be signed by
the registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Old Securities or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s):
-----------------------------------------------------------------------
(Please Print)
Capacity:
-----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by an Eligible Institution:
----------------------------
(Authorized Signature)
Title:
--------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
Dated:
--------------------------------------------------------------------,
1999
5
<PAGE>
INSTRUCTIONS
CILCORP INC.
Forming Part of the Terms and Conditions of the Offer to Exchange 8.700%
Senior Notes Due 2009 for 8.700% Senior Notes Due 2009 which have
been registered under the Securities Act of 1933, as amended, and 9.375%
Senior Bonds Due 2029 for 9.375% Senior Bonds Due 2029 which have
been registered under the Securities Act of 1933, as amended.
1. Delivery of This Letter and Old Securities; Guaranteed Delivery
Procedures.
This Letter of Transmittal is to be completed by a holder of Old Securities
if certificates are to be forwarded herewith. If tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer -- Book-Entry Transfers" section of the Prospectus and in accordance with
ATOP established by DTC, a tendering holder will become bound by the terms and
conditions hereof in accordance with the procedures established under ATOP.
Certificates for all physically tendered Old Securities, or Book-Entry
Confirmation, as the case may be, as well as a properly completed and duly
executed Letter (or manually signed facsimile hereof) or an Agent's Message and
any other documents required by this Letter must be received by the Exchange
Agent at the address set forth herein on or before the Expiration Date, or the
tendering holder must comply with the guaranteed delivery procedures set forth
below. Old Securities tendered hereby must be in denominations of principal
amount of $1,000 and any integral multiple thereof.
Holders whose certificates for Old Securities are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or before the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old
Securities pursuant to the guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus.
Pursuant to such procedures, (i) such tender must be made through an Eligible
Institution, (ii) before 5:00 p.m., New York City time, on the Expiration Date,
the Exchange Agent must receive from such Eligible Institution (as defined
below) a properly completed and duly executed Letter (or a facsimile thereof)
and Notice of Guaranteed Delivery, substantially in the form provided by the
Company (by facsimile transmission, mail or hand delivery), setting forth the
name and address of the holder of Old Securities and the amount of Old
Securities tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Securities, in proper form for
transfer, or a Book-Entry Confirmation and Agent's Message, as the case may be,
and any other documents required by this Letter will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Old Securities, in proper form for transfer, or a Book-Entry
Confirmation and Agent's Message, as the case may be, and all other documents
required by this Letter, must be received by the Exchange Agent within three
NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
The method of delivery of this Letter, the Old Securities and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Old Securities are sent by mail, it is suggested that the
mailing be registered mail, properly insured, with return receipt requested,
made sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent before 5:00 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. Partial Tenders (Not Applicable to Securityholders Who Tender by
Book-Entry Transfer).
If less than all of the Old Securities evidenced by a submitted certificate
are to be tendered, the tendering holder(s) should fill in the aggregate
principal amount of Old Securities to be tendered in the box above entitled
"Description of Old Securities -- Principal Amount Tendered." A reissued
certificate (or separate certificates in the event the holder tenders both
senior notes and senior bonds) representing the balance of nontendered Old
Securities will be sent to such tendering holder, unless otherwise provided in
the appropriate box on this Letter, promptly after the Expiration Date. ALL OF
THE OLD SECURITIES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN
TENDERED UNLESS OTHERWISE INDICATED.
3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of
Signatures.
If this Letter is signed by the registered holder of the Old Securities
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Securities are owned of record by two or more joint
owners, all of such owners must sign this Letter.
If any tendered Old Securities are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Securities specified herein and tendered hereby, no endorsements of certificates
or separate bond powers are required. If, however, the New Securities are to be
issued, or any untendered Old Securities are to be reissued, to a person other
than the registered holder, then endorsements of any certificates transmitted
hereby or separate bond powers are required. Signatures on such certificate(s)
must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
6
<PAGE>
Endorsements on certificates for Old Securities or signatures on bond
powers required by this Instruction 3 must be guaranteed by a firm that is a
financial institution (including most banks, savings and loan associations and
brokerage houses) that is a participant in the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchanges Medallion Program (each an "Eligible Institution").
Signatures on this letter need not be guaranteed by an Eligible
Institution, provided the Old Securities are tendered: (i) by a registered
holder of Old Securities (which term, for purposes of the Exchange Offer,
includes any participant in the Book-Entry Transfer Facility System whose name
appears on a security position listing as the holder of such Old Securities) who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on this letter, or (ii) for the account of an Eligible
Institution.
4. Special Issuance and Delivery Instructions.
Tendering holders of Old Securities should indicate in the applicable box
the name and address to which New Securities issued pursuant to the Exchange
Offer and/or substitute certificates evidencing Old Securities not exchanged are
to be issued or sent, if different from the name or address of the person
signing this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Securityholders tendering Old Securities by book-entry transfer may
request that Old Securities not exchanged be credited to such account maintained
at the Book-Entry Transfer Facility as such securityholder may designate hereon.
If no such instructions are given such Old Securities not exchanged will be
returned to the name and address of the person signing this Letter.
5. Taxpayer Identification Number.
Federal income tax law generally requires that a tendering holder whose Old
Securities are accepted for exchange must provide the Company (as payor) with
such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9 below, which in the case of a tendering holder who is an individual, is his
or her social security number. If the Company is not provided with the current
TIN or an adequate basis for an exemption from back-up withholding, such
tendering holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, the Exchange Agent may be required to withhold 31% of the
amount of any reportable payments made after the exchange to such tendering
holder of New Securities. If withholding results in an overpayment of taxes, a
refund may be obtained.
Exempt holders of Old Securities (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Securities must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying, under penalties of perjury, that the TIN provided is correct (or
that such holder is awaiting a TIN) and that (i) the holder is exempt from
backup withholding, or (ii) the holder has not been notified by the Internal
Revenue Service that such holder is subject to back-up withholding as a result
of a failure to report all interest or dividends or (iii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the tendering holder of Old Securities is a nonresident alien or
foreign entity not subject to backup withholding, such holder must give the
Exchange Agent a completed Form W-8, Certificate of Foreign Status. These forms
may be obtained from the Exchange Agent. If the Old Securities are in more than
one name or are not in the name of the actual owner, such holder should consult
the W-9 Guidelines for information on which TIN to report. If such holder does
not have a TIN, such holder should consult the W-9 Guidelines for instructions
on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and
write "applied for" in lieu of its TIN. Note: Checking this box and writing
"applied for" on the form means that such holder has already applied for a TIN
or that such holder intends to apply for one in the near future. If the box in
Part 2 of the Substitute Form W-9 is checked, the Exchange Agent will retain 31%
of reportable payments made to a holder during the sixty (60) day period
following the date of the Substitute Form W-9. If the holder furnishes the
Exchange Agent with his or her TIN within sixty (60) days of the Substitute Form
W-9, the Exchange Agent will remit such amounts retained during such sixty (60)
day period to such holder and no further amounts will be retained or withheld
from payments made to the holder thereafter. If, however, such holder does not
provide its TIN to the Exchange Agent within such sixty (60) day period, the
Exchange Agent will remit such previously withheld amounts to the Internal
Revenue Service as backup withholding and will withhold 31% of all reportable
payments to the holder thereafter until such holder furnishes its TIN to the
Exchange Agent.
6. Transfer Taxes.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Securities to it or its order pursuant to the Exchange Offer. If,
however, New Securities and/or substitute Old Securities not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Old Securities tendered hereby, or if tendered
Old Securities are registered in the name of any person other than the person
signing this Letter, or if a transfer tax is imposed for any reason other than
the transfer of Old Securities to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Securities specified in this
letter.
7. Waiver of Conditions.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Securities, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Old
Securities for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Securities nor shall any of them incur any liability for failure to give any
such notice.
7
<PAGE>
9. Mutilated, Lost, Stolen or Destroyed Old Securities.
Any holder whose Old Securities have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. Withdrawal Rights.
Tenders of Old Securities may be withdrawn at any time before 5:00 p.m.,
New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Securities to be effective, a written
notice of withdrawal must be received by the Exchange Agent at the address set
forth above before 5:00 p.m., New York City time, on the Expiration Date. Any
such notice of withdrawal must (i) specify the name of the person having
tendered the Old Securities to be withdrawn (the "Depositor"), (ii) identify the
Old Securities to be withdrawn (including certificate number or numbers and the
principal amount of such Old Securities), (iii) contain a statement that such
holder is withdrawing his election to have such Old Securities exchanged, (iv)
be signed by the holder in the same manner as the original signature on the
Letter by which such Old Securities were tendered (including any required
signature guarantees) or be accompanied by documents of transfer to have the
Trustee with respect to the Old Securities register the transfer of such Old
Securities in the name of the person withdrawing the tender and (v) specify the
name in which such Old Securities are registered, if different from that of the
Depositor. If Old Securities have been tendered pursuant to the procedure for
book-entry transfer set forth in "The Exchange Offer -- Book-Entry Transfers"
section of the Prospectus, any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Old Securities and otherwise comply with the procedures of such
facility. All questions as to the validity, form and eligibility (including time
of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Securities so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer and no New Securities will be issued with respect
thereto unless the Old Securities so withdrawn are validly retendered. Any Old
Securities that have been tendered for exchange but which are not exchanged for
any reason will be returned to the Holder thereof without cost to such Holder
(or, in the case of Old Securities tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures set forth in "The Exchange Offer -- Book-Entry
Transfers" section of the Prospectus, such Old Securities will be credited to an
account maintained with the Book-Entry Transfer Facility for the Old Securities)
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Old Securities may be retendered by
following the procedures described above at any time on or before 5:00 p.m., New
York City time, on the Expiration Date.
11. Request for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, and requests for Notices of
Guaranteed Delivery and other related documents may be directed to the Exchange
Agent, at the address and telephone number indicated above.
8
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: CILCORP INC.
- --------------------------------------------------------------------------------
SUBSTITUTE FORM W-9
Department of the Treasury
Internal Revenue Service
PAYOR'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER ("TIN")
AND CERTIFICATION
- --------------------------------------------------------------------------------
PART 1 -- Please provide your TIN
in the box at right and certify by
Number signing and dating below.
- --------------------------------------------------------------------------------
PART 2 -- TIN Applied For
- --------------------------------------------------------------------------------
- -----------------------------
Social Security Number
OR
- -----------------------------
Employer Identification
Number
- --------------------------------------------------------------------------------
Certification: Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me)
(2) I am not subject to backup withholding either because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding, and
(3) any other information provided on this form is true and correct.
You must cross out item (2) of the above certification if you have been notified
by the IRS that you are subject to backup withholding because of underreporting
of interest or dividends on your tax return and you have not been notified by
the IRS that you are no longer subject to backup withholding.
- --------------------------------------------------------------------------------
SIGNATURE DATE
------------------------------- --------------------------------
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide a number.
SIGNATURE DATE
------------------------------- ---------------------------------
- --------------------------------------------------------------------------------
EXHIBIT 99.2
FORM OF NOTICE OF GUARANTEED DELIVERY
NOTICE OF GUARANTEED DELIVERY
FOR
CILCORP INC.
THIS FORM OR ONE SUBSTANTIALLY EQUIVALENT HERETO MUST BE USED TO ACCEPT THE
EXCHANGE OFFER OF CILCORP INC. (THE "COMPANY") MADE PURSUANT TO THE PROSPECTUS,
DATED [ ], 1999 (THE "PROSPECTUS"), IF CERTIFICATES FOR THE OUTSTANDING 8.700%
SENIOR NOTES DUE 2009 OF THE COMPANY (THE "OLD NOTES") OR 9.375% SENIOR BONDS
DUE 2029 OF THE COMPANY (THE "OLD BONDS" AND, TOGETHER WITH THE OLD NOTES, THE
"OLD SECURITIES") ARE NOT IMMEDIATELY AVAILABLE OR IF THE PROCEDURE FOR
BOOK-ENTRY TRANSFER CANNOT BE COMPLETED ON A TIMELY BASIS OR TIME WILL NOT
PERMIT ALL REQUIRED DOCUMENTS TO REACH THE BANK OF NEW YORK, AS EXCHANGE AGENT
(THE "EXCHANGE AGENT") BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE OF THE EXCHANGE OFFER. SUCH FORM MAY BE DELIVERED OR TRANSMITTED BY
FACSIMILE TRANSMISSION, MAIL OR HAND DELIVERY TO THE EXCHANGE AGENT AS SET FORTH
BELOW. IN ADDITION, IN ORDER TO UTILIZE THE GUARANTEED DELIVERY PROCEDURE TO
TENDER OLD SECURITIES PURSUANT TO THE EXCHANGE OFFER, A COMPLETED, SIGNED AND
DATED LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) OR AN AGENT'S MESSAGE MUST
ALSO BE RECEIVED BY THE EXCHANGE AGENT BEFORE 5:00 P.M., NEW YORK CITY TIME, ON
THE EXPIRATION DATE. CAPITALIZED TERMS NOT DEFINED HEREIN ARE DEFINED IN THE
LETTER OF TRANSMITTAL.
DELIVERY TO: THE BANK OF NEW YORK, EXCHANGE AGENT
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL: BY HAND OR OVERNIGHT DELIVERY:
<S> <C>
The Bank of New York The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, New York 10286 Corporate Trust Services Window
Attention: Reorganization Section Ground Level
New York, New York 10286
Attention: Reorganization Section
</TABLE>
FOR INFORMATION CALL:
(212) [ ]
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
(212) [ ]
CONFIRM BY TELEPHONE:
(212) [ ]
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Securities set forth below pursuant to the
guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus.
<PAGE>
Principal Amount of Old Notes Tendered:* $
--------------------------------------
Certificate Nos. (if available):
-----------------------------------------------
Total Principal Amount Represented by Old Notes Certificate(s): $
---------------
Principal Amount of Old Bonds Tendered:* $
--------------------------------------
Certificate Nos. (if available):
------------------------------------------------
Total Principal Amount Represented by Old Bonds Certificate(s): $
---------------
If Old Securities will be delivered by book-entry transfer to The Depository
Trust Company, provide account number.
Account Number
- -------------------------------------
ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE
DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED
HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS
AND ASSIGNS OF THE UNDERSIGNED.
PLEASE SIGN HERE
<TABLE>
<S> <C>
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
SIGNATURE(S) OF OWNER(S) OR DATE
AUTHORIZED SIGNATORY
Area Code and Telephone Number:
- ------------------------------------
</TABLE>
Must be signed by the holder(s) of Old Securities as their name(s) appear(s) on
certificates for Old Securities or on a security position listing, or by
person(s) authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
2
<PAGE>
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
- ------------------------------------
- ------------------------------------
Capacity:
- ------------------------------------
Address(es):
- ------------------------------------
- ------------------------------------
- ------------------------------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a financial institution (including most banks, savings and loan
associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the certificates representing the principal amount of Old Securities
tendered hereby in proper form for transfer, or timely confirmation of the
book-entry transfer of such Old Securities into the Exchange Agent's account at
The Depository Trust Company pursuant to the procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus,
together with a properly completed and duly executed Letter(s) of Transmittal
(or manually signed facsimile(s) thereof), with any required signature
guarantee, or an Agent's Message and any other required documents, will be
received by the Exchange Agent at the address set forth above, no later than
three New York Stock Exchange trading days after the date hereof.
--------------------------------- ----------------------------------
Name of Firm Authorized Signature
--------------------------------- Title:
Address -----------------------------
--------------------------------- Name:
Zip Code ----------------------------
(Please type or print)
--------------------------------- Dated:
Area Code and Tel. No. ---------------------------
NOTE: DO NOT SEND CERTIFICATES FOR OLD SECURITIES WITH THIS FORM.
CERTIFICATES FOR OLD SECURITIES SHOULD BE SENT ONLY WITH A COPY OF
YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
- --------------------------------------------------------------------------------
3
EXHIBIT 99.3
FORM OF CLIENT LETTER
CILCORP INC.
OFFER TO EXCHANGE ALL
8.700% SENIOR NOTES DUE 2009 FOR 8.700% SENIOR NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
9.375% SENIOR BONDS DUE 2029 FOR 9.375% SENIOR BONDS DUE 2029 WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
PURSUANT TO THE PROSPECTUS, DATED [ ], 1999
TO OUR CLIENTS:
Enclosed for your consideration is a Prospectus, dated [ ], 1999 (the
"Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of CILCORP Inc. (the
"Company") to exchange its outstanding 8.700% Senior Notes due 2009 (the "Old
Notes") for 8.700% Senior Notes due 2009 which have been registered under the
Securities Act of 1933, as amended (the "New Notes"), and to exchange its
outstanding 9.375% Senior Bonds due 2029 (the "Old Bonds" and together with the
Old Notes the "Old Securities") for 9.375% Senior Bonds due 2029 which have been
registered under the Securities Act of 1933, as amended (the "New Bonds" and
together with the New Notes the "New Securities"), upon the terms and subject to
the conditions described in the Prospectus and the Letter of Transmittal. The
Exchange Offer is being made in order to satisfy certain obligations of the
Company contained in the Registration Rights Agreement dated as of October 18,
1999, by and among Midwest Energy, Inc. and the initial purchasers referred to
therein, which agreement the Company has assumed as the surviving entity in its
merger with Midwest Energy.
This material is being forwarded to you as the beneficial owner of the Old
Securities held by us for your account but not registered in your name. A TENDER
OF SUCH OLD SECURITIES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Securities held by us for your account, pursuant to the
terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Securities on your behalf in accordance
with the provisions of the Exchange Offer. The Exchange Offer will expire at
5:00 p.m., New York City time, on [ ], 1999, unless extended by the Company. Any
Old Securities tendered pursuant to the Exchange Offer may be withdrawn at any
time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Securities.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section captioned "The Exchange Offer --
Conditions to the Exchange Offer."
3. Any transfer taxes incident to the transfer of Old Securities
from the holder to the Company will be paid by the Company,
except as otherwise provided in the Instructions in the Letter of
Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on
[ ], 1999, unless extended by the Company.
<PAGE>
If you wish to have us tender your Old Securities, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD SECURITIES.
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by CILCORP Inc.
with respect to its Old Securities.
This will instruct you to tender the Old Securities held by you for the
account of the undersigned, upon and subject to the terms and conditions set
forth in the Prospectus and the related Letter of Transmittal.
Please tender the Old Securities held by you for my account as indicated
below:
<TABLE>
<CAPTION>
(AGGREGATE PRINCIPAL AMOUNT OF OLD SECURITIES)
<S> <C>
8.700% Senior Notes due 2009 $
9.375% Senior Bonds due 2029 $
[ ] Please do not tender any Old Securities
held by you for my account.
Dated:
</TABLE>
Signature(s):
- ---------------------------------------------------------------
Print Name(s) here:
- ---------------------------------------------------------------
(Print Address(es)):
- ---------------------------------------------------------------
(Area Code and Telephone Number(s)):
- --------------------------------------------
(Tax Identification or Social Security Number(s)):
- --------------------------------------------
None of the Old Securities held by us for your account will be tendered
unless we receive written instructions from you to do so. Unless a specific
contrary instruction is given in the space provided, your signature(s) hereon
shall constitute an instruction to us to tender all the Old Securities held by
us for your account.
2
EXHIBIT 99.4
FORM OF BROKER, DEALER, ETC. LETTER
CILCORP INC.
OFFER TO EXCHANGE ALL
8.700% SENIOR NOTES DUE 2009 FOR 8.700% SENIOR NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
9.375% SENIOR BONDS DUE 2029 FOR 9.375% SENIOR BONDS DUE 2029
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
PURSUANT TO THE PROSPECTUS, DATED [ ], 1999
TO: BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
CILCORP Inc. (the "Company") is offering, upon and subject to the terms and
conditions set forth in the Prospectus, dated [ ], 1999 (the "Prospectus"), and
the enclosed Letter of Transmittal (the "Letter of Transmittal"), to exchange
(the "Exchange Offer") its outstanding 8.700% Senior Notes due 2009 (the "Old
Notes") for 8.700% Senior Notes due 2009 which have been registered under the
Securities Act of 1933, as amended (the "New Notes"), and to exchange its
outstanding 9.375% Senior Bonds due 2029 (the "Old Bonds" and together with the
Old Notes the "Old Securities") for 9.375% Senior Bonds due 2029 which have been
registered under the Securities Act of 1933, as amended (the "New Bonds" and
together with the New Notes the "New Securities"). The Exchange Offer is being
made in order to satisfy certain obligations of the Company contained in the
Registration Rights Agreement dated October 18, 1999, by and among Midwest
Energy, Inc. and the initial purchasers referred to therein, which agreement the
Company has assumed as the surviving entity in its merger with Midwest Energy.
We are requesting that you contact your clients for whom you hold Old
Securities regarding the Exchange Offer. For your information and for forwarding
to your clients for whom you hold Old Securities registered in your name or in
the name of your nominee, or who hold Old Securities registered in their own
names, we are enclosing the following documents:
1. Prospectus dated [ ], 1999;
2. The Letter of Transmittal for your use and for the information of your
clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Securities are not immediately available
or time will not permit all required documents to reach the Exchange
Agent prior to the Expiration Date (as defined below) or if the
procedure for book-entry transfer cannot be completed on a timely
basis;
4. A form of letter which may be sent to your clients for whose account
you hold Old Securities registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions
with regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to The Bank of New York, the Exchange Agent
for the Exchange Offer.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON [ ], 1999, UNLESS EXTENDED BY THE COMPANY (THE
"EXPIRATION DATE"). OLD SECURITIES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY
BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE.
<PAGE>
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message (as defined in the Letter of
Transmittal) and any other required documents should be sent to the Exchange
Agent. Certificates representing the Old Securities should be delivered to the
Exchange Agent, all in accordance with the instructions set forth in the Letter
of Transmittal and the Prospectus.
If a registered holder of Old Securities desires to tender, but such Old
Securities are not immediately available, or time will not permit such holder's
Old Securities or other required documents to reach the Exchange Agent before
the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected by following the
guaranteed delivery procedures described in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Securities held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Securities pursuant to the Exchange Offer,
except as set forth in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to The Bank
of New York, the Exchange Agent for the Exchange Offer, at its address and
telephone number set forth on the front of the Letter of Transmittal.
Very truly yours,
CILCORP INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
2
EXCHANGE AGENT AGREEMENT
[ ], 1999
The Bank of New York
Corporate Trust Administration
101 Barclay Street - 21st Floor
New York, New York 10286
Ladies and Gentlemen:
CILCORP Inc. (the "Company") proposes to make an offer (the "Exchange
Offer") to exchange its 8.700% Senior Notes due 2009 (the "Old Notes") for its
8.700% Senior Notes due 2009 which have been registered under the Securities Act
of 1933, as amended (the "New Notes") and 9.375% Senior Bonds due 2029 (the "Old
Bonds" and together with the Old Notes, the "Old Securities") for its 9.375%
Senior Bonds due 2029 which have been registered under the Securities Act of
1933, as amended (the "New Bonds" and together with the New Notes, the "New
Securi ties"). The terms and conditions of the Exchange Offer as currently
contemplated are set forth in a prospectus, dated [ ], 1999 (the "Prospectus")
to be distributed to all record holders of the Old Securities. The Old
Securities and the New Securities are collectively referred to herein as the
"Securities".
The Company hereby appoints The Bank of New York to act as exchange
agent (the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the Company on or
about [ ], 1999. The Letter of Transmittal accompanying the Prospectus (or in
the case of book-entry securities, the Automated Tender Offer Program (ATOP) of
the Book-Entry Transfer Facility referred to in paragraph 2 below) is to be used
by the holders of the Old Securities to accept the Exchange Offer, and contains
instructions with respect to the (i) delivery of certificates for Old Securities
tendered in connection therewith and (ii) the book-entry transfer of Securities
to the Exchange Agent's account.
The Exchange Offer shall expire at 5:00 p.m., New York City time, on
[ ], 1999, or on such later date or time to which the Company may extend the
Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set
forth in the Prospectus, the Company expressly reserves the right to extend the
Exchange Offer from time to time and may extend the Exchange Offer by giving
oral (confirmed in writing) or written notice to you before 9:00 a.m., New York
City time, on the business day following the previously scheduled Expiration
Date.
The Company reserves the right to amend or terminate the Exchange Offer
and not to accept for exchange any Old Securities not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified in the Prospectus under the caption "The Exchange Offer - Conditions
to the Exchange Offer." The Company will give oral (confirmed in writing) or
written notice of any amendment or termination of the Exchange
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<PAGE>
Offer or nonacceptance of Old Securities to you promptly after any amendment,
termination or nonacceptance.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth herein; provided, however, that in no way will your
general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Old Securities at
The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes
of the Exchange Offer within two business days after the date of the Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Old Securities by causing
the Book-Entry Transfer Facility to transfer such Old Securities into the
account in accordance with the Book-Entry Transfer Facility's procedure for such
transfer. You will maintain, during the Exchange Offer, an address in the
Borough of Manhattan, The City of New York, in which tenders of the Old
Securities may be made.
3. You are to examine each of the Letters of Transmittal and
certificates for Old Securities (or confirmation of book-entry transfer into
your account at the Book-Entry Transfer Facility) and any other documents
delivered or mailed to you by or for holders of the Old Securities to ascertain
whether: (i) the Letters of Trans mittal and any such other documents are
executed and properly completed in accordance with the instructions set forth
therein and (ii) the Old Securities have otherwise been properly tendered,
provided, however, that you shall be entitled to rely conclusively in good faith
on the DTC electronic messages sent regarding ATOP delivery of the Old
Securities to the Exchange Agent's account at DTC from the DTC participants
listed on the DTC position listing provided to the Exchange Agent. In each case
where the Letter of Transmittal or any other document has been improperly
completed or executed or any of the certificates for Old Securities are not in
proper form for transfer or some other irregularity in connection with the
acceptance of the Exchange Offer exists, you will endeavor to inform the
presenters of the need for fulfillment of all requirements and to take any other
action as may be reasonably necessary or advisable to cause such irregularity to
be corrected.
4. With the approval of the President, Chief Financial Officer, Chief
Legal Officer, Treasurer, Controller or any Vice President each a "Designated
Officer") of the Company, or of counsel to the Company, (such approval, if given
orally, to be confirmed in writing) or any other party designated by any
Designated Officer in writing, you are authorized to waive any irregularities in
connection with any tender of Old Securities pursuant to the Exchange Offer.
5. Tenders of Old Securities may be made only as set forth in the
Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer -- How to Tender Old Securities for Exchange," and Old Securities
shall be considered properly tendered to you only when tendered in accordance
with the procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Old Securities
which a Designated Officer, or of counsel to the Company, shall approve as
having been properly tendered
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<PAGE>
shall be considered to be properly tendered (such approval, if given orally,
shall be confirmed in writing).
6. You shall advise the Company with respect to any Old Securities
received subsequent to the Expiration Date and accept its written instructions
with respect to disposition of such Old Securities.
7. Subject to paragraphs 4 and 5, you shall accept tenders:
(a) in cases where the Old Securities are registered in two or
more names, only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letter
of Transmittal) is acting in a fiduciary or a representative capacity, only when
proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Old
Securities provided that customary transfer requirements, including any
applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Old Securities where so
indicated and as permitted in the Letter of Transmittal and deliver certificates
for Old Securi ties to the transfer agent for split-up and return any untendered
Old Securities to the holder (or such other person as may be designated in the
Letter of Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will notify you (such notice if given orally, to be confirmed
in writing) of its acceptance, promptly after the Expiration Date, of all Old
Securities properly tendered and you, on behalf of the Company, will exchange
such Old Securities for New Securities and cause such Old Securities to be
cancelled. Deliv ery of New Securities will be made on behalf of the Company by
you at the rate of $1,000 principal amount at maturity of New Notes for each
$1,000 principal amount of Old Notes, and at the rate of $1,000 principal amount
at maturity of New Bonds for each $1,000 principal amount of Old Bonds, in each
case tendered promptly after notice (such notice if given orally, to be
confirmed in writing) of acceptance of said Old Securities by the Company;
provided, however, that in all cases, Old Securities tendered pursuant to the
Exchange Offer will be exchanged only after timely receipt by you of
certificates for such Old Securities (or confirmation of book-entry transfer
into the account at the Book-Entry Transfer Facility), a properly completed and
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other required documents. You shall issue New
Securities only in denominations of $1,000 or any integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and the
Letter of Transmittal, Old Securities tendered pursuant to the Exchange Offer
may be withdrawn at any time prior to the Expiration Date.
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<PAGE>
10. The Company shall not be required to exchange any Old Securities
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Old Securities
tendered shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Old Securities tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus under
the caption "The Exchange Offer -- Conditions to the Exchange Offer" or
otherwise, you shall as soon as practicable after the expiration or termination
of the Exchange Offer return those certificates for unaccepted Old Securities
(or effect appropriate book-entry transfer), together with any related required
documents and the Letters of Transmittal relating thereto that are in your
possession, to the persons who deposited them.
12. All certificates for reissued Old Securities, unaccepted Old
Securities or for New Securities shall be forwarded by first-class mail or
appropriate book-entry transfer.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall not be liable for any action or omission to act unless
the same constitutes your own gross negligence, willful misconduct or bad faith,
and in no event shall you be liable to a security holder, the Company or any
third party for special, indirect or consequential damages, or lost profits,
arising in connection with this Agreement.
(b) shall have no duties or obligations other than those
specifically set forth herein or as may be subsequently agreed to in writing by
you and the Company;
(c) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of any of
the certificates for the Old Securities represented thereby deposited with you
pursuant to the Exchange Offer, and will not be required to and will make no
representation as to the validity, sufficiency, value or genuineness of the
Exchange Offer; provided, however, that in no way will your general duty to act
in good faith be discharged by the foregoing;
(d) shall not be obligated to take any legal action hereunder
which might in your judgment involve any expense or liability, unless you shall
have been furnished with indemnity satisfactory to you;
(e) may conclusively rely on and shall be fully protected in
acting in reliance upon any instruction, certificate, instrument, opinion,
notice, letter, telegram or other document whether in its original or facsimile
form or security delivered to you and believed by you to be genuine and to have
been signed by the proper party or parties;
(f) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due
execution and validity and
4
<PAGE>
effectiveness of its provisions, but also as to the truth and accuracy of any
information contained therein, which you shall in good faith believe to be
genuine or to have been signed or represented by a proper person or persons;
(g) may conclusively rely on and shall be fully protected in
acting upon written or oral instructions from any Designated Officer of the
Company;
(h) may consult with counsel with respect to any questions
relating to your duties and responsibilities and the advice or opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by you hereunder in good faith
and in accordance with the advice or opinion of such counsel; and
(i) shall not advise any person tendering Old Securities pursuant
to the Exchange Offer as to the wisdom of making such tender or as to the market
value or decline or appreciation in market value of any Old Securities.
15. You shall take such action as may from time to time be requested by
the Company or its counsel or any Designated Officer in writing (and such other
action as you may reasonably deem appropriate) to furnish copies of the
Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery
accompanying the Prospectus or such other forms as may be approved from time to
time by the Com pany, to all persons requesting such documents and to accept and
comply with reasonable telephone requests for information relating to the
Exchange Offer, provided that such information shall relate only to the
procedures for accepting (or withdrawing from) the Exchange Offer. The Company
will furnish you with copies of such documents at your request. All other
requests for information relating to the Exchange Offer shall be directed to the
Company, Attention: Thomas Hutchinson, Chief Financial Officer.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to Thomas Hutchinson, Chief Financial
Officer of the Company, and such other person or persons as it may request in
writing, daily (and more frequently during the week immediately preceding the
Expiration Date and if otherwise requested in writing) up to and including the
Expiration Date, as to the number of Old Securities which have been tendered
pursuant to the Exchange Offer and the items received by you pursuant to this
Agreement, separately reporting and giving cumulative totals as to items
properly received and items improperly received. In addition, you will also
inform, and cooperate in making available to, the Company or any such other
person or persons upon written request made from time to time prior to the
Expiration Date of such other information as it or he or she reasonably
requests. Such cooperation shall include, without limitation, the granting by
you to the Company and such person as the Company may request of access to those
persons on your staff who are responsible for receiving tenders, in order to
ensure that immediately prior to the Expiration Date, the Company shall have
received information in sufficient detail to enable it to decide whether to
extend the Exchange Offer. You shall prepare a final list of all persons whose
tenders were accepted, the aggregate principal amount of Old Securities
tendered, the aggregate principal amount of Old Securities accepted and deliver
said list to the Company.
5
<PAGE>
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be
stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
18. For services rendered as Exchange Agent hereunder, you shall be
entitled to compensation as set forth on Schedule I attached hereto. The
provisions of this section shall survive the termination of this agreement or
the earlier resigna tion or removal of the Exchange Agent.
19. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
20. The Company covenants and agrees to fully indemnify and hold you
and your officers, directors, employees and agents harmless in your capacity as
Exchange Agent, hereunder against any and all loss, liability, cost or expense,
including reasonable attorneys' fees and expenses, arising out of or in
connection with any act, omission, delay or refusal made by you in reliance upon
any signature, endorsement, assignment, certificate, order, request, notice,
instruction or other instrument or document (whether in its original or
facsimile form) reasonably believed by you to be valid, genuine and sufficient
and in accepting any tender or effecting any transfer of Old Securities
reasonably believed by you in good faith to be authorized, and in delaying or
refusing in good faith to accept any tenders or effect any transfer of Old
Securities. In each case, the Company shall be notified by you, by letter or by
facsimile confirmed by letter, of the written assertion of a claim or notice of
commencement of an action against you, promptly after you shall have received
any such written assertion or notice of commencement of an action. The Company
shall be entitled to participate at its own expense in the defense of any such
claim or other action, and, if the Company so elects, the Company shall assume
the defense of any suit brought to enforce any such claim. In the event that the
Company shall assume the defense of any such suit or threatened action in
respect of which indemnification may be sought hereunder, the Company shall not
be liable for the fees and expenses of any additional counsel retained by you so
long as the Company shall retain counsel reasonably satisfactory to you to
defend such suit, and so long as you have not determined, in your reasonable
judgment, that a conflict of interest exists between you and the Company.
21. You shall arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the Internal
Revenue Service in accordance with applicable regulations.
22. At the Company's written direction, you shall deliver or cause to
be delivered, in a timely manner to each governmental authority to which any
transfer taxes are payable, if
6
<PAGE>
any, in respect of the exchange of Old Securities, your check in the amount of
all transfer taxes so payable, and the Company shall reimburse you for the
amount of any and all transfer taxes payable in respect of the exchange of Old
Securities; provided, however, that you shall reimburse the Company for amounts
refunded to you in respect of your payment of any such transfer taxes, at such
time as such refund is received by you.
23. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state, and without regard to conflicts of law principles, and shall inure to the
benefit of, and the obligations created hereby shall be binding upon, the
successors and assigns of each of the parties hereto.
24. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
25. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
26. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by duly authorized representatives of the parties.
This Agreement may not be modified orally.
27. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:
If to the Company:
CILCORP Inc.
300 Liberty Street
Peoria, Illinois 61602
Facsimile: (309) 677-5590
Attention: Thomas D. Hutchinson
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Facsimile: (202) 393-5760
Attention: Stephen W. Hamilton, Esq.
If to the Exchange Agent:
The Bank of New York
7
<PAGE>
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Administration
28. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 19 and 21 shall survive the termination of this Agreement
or the earlier resignation or removal of the Exchange Agent. Upon any
termination of this Agreement, you shall promptly deliver to the Company any
certificates for Securi ties, funds or property then held by you as Exchange
Agent under this Agreement.
29. This Agreement shall be binding and effective as of the date
hereof.
8
<PAGE>
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
CILCORP INC.
By:
------------------------------
Name: Thomas D. Hutchinson
Title: Chief Financial Officer
Accepted as of the date first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:
-------------------------------
Name: MaryBeth A. Lewicki
Title: Vice President
9
<PAGE>
SCHEDULE I
FEES
Exchange Agent Fee: $5,000.00
Out of Pocket Expenses: Fees quoted do not include any out-of-pocket expenses
including but not limited to facsimile, stationery, postage, telephone,
overnight courier and messenger costs. These expenses will be billed at cost
when incurred.
Outside Counsel Fees and Expenses: Fees quoted do not include the fees and
expenses for services rendered by outside counsel.
10
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PAYER'S NAME: [PAYING AGENT]
- ----------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT
AND CERTIFY BY SIGNING AND DATING BELOW.
---------------------------
FORM W-9 Social Security Number
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE OR
---------------------------
Employer Identification
Number
(If awaiting TIN write
"Applied For")
----------------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER PART II-- For Payees Exempt from Backup Withholding, see the enclosed
IDENTIFICATION NUMBER (TIN) Guidelines and complete as instructed therein.
AND CERTIFICATION FOR PAYEE
EXEMPT FROM BACKUP CERTIFICATION -- Under penalties of perjury, I certify that:
WITHHOLDING (1) The number shown on this form is my correct Taxpayer Identification
Number (or a Taxpayer Identification Number has not been issued to me and
either (a) I have mailed or delivered an application to receive a
Taxpayer Identification Number to the appropriate Internal Revenue Service
("IRS") or Social Security Administration office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do
not provide a Taxpayer Identification Number within sixty (60) days, 31%
of all reportable payments made to me thereafter will be withheld until
I provide a number), and
(2) I am not subject to backup withholding because (a) I am exempt from backup
withholding, (b) I have not been notified by the IRS that I am subject to
backup withholding as a result of failure to report all interest or
dividends or (c) the IRS has notified me that I am no longer subject to
backup withholding.
----------------------------------------------------------------------------------
Certificate Instructions -- You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines.)
----------------------------------------------------------------------------------
Signature: Date:
--------------------------------------- -------------------,------
Name:
-----------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE
TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
</TABLE>
6
