<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
July 1, 1996
Date of Report (Date of earliest event reported)
Commission File Number: 0-19281
THE AES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
54-1163725
(IRS Employer Identification No.)
1001 North 19th Street
Arlington, Virginia 22209
(Address of principal executive office)
Telephone Number (703) 522-1315
(Registrant's telephone number, including area code)
<PAGE> 2
Item 5. Other Matters
In connection with the registration by The AES Corporation (the "Company") of
up to $250,000,000 of Debt Securities (Registration Statement No. 333-01286 and
Registration Statement No. 333-07041), the Company is hereby filing with the
Commission, the First Supplemental Indenture dated as of July 1, 1996, relating
to the Company's 10-1/4% Senior Subordinated Notes due 2006, entered into with
The First National Bank of Chicago. Reference is made to the First
Supplemental Indenture, a copy of which is filed herewith as exhibit 4.1(c),
for the terms and conditions thereof.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
c(i) Exhibits.
4.1(c) First Supplemental Indenture dated as of July 1, 1996
(Supplemental to Indenture dated as of July 1, 1996) 10 1/4
Senior Subordinated Notes Due 2006, between the Company and
the First National Bank of Chicago as Trustee.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The AES Corporation
(Registrant)
BY: WILLIAM R. LURASCHI
WILLIAM R. LURASCHI
GENERAL COUNSEL AND SECRETARY
Dated: July 1, 1996
<PAGE> 4
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
4.1(c) First Supplemental Indenture dated as of July 1, 1996
(Supplemental to Indenture dated as of July 1, 1996) 10 1/4
Senior Subordinated Notes Due 2006, between the Company and
the First National Bank of Chicago as Trustee.
<PAGE> 1
THE AES CORPORATION
and
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
----------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of July 1, 1996
(Supplemental to Indenture Dated as of July 1, 1996)
10 1/4 % Senior Subordinated Notes Due 2006
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE dated as of July 1, 1996 between
The AES Corporation, a Delaware corporation (hereinafter called the "Company")
and The First National Bank of Chicago, a national banking asociation, as
Trustee (hereinafter called the "Trustee").
WHEREAS, the Company executed and delivered an Indenture dated
as of July 1, 1996 (hereinafter called the "Original Indenture") between the
Company and the Trustee providing for the issue from time to time of its
unsecured debentures, notes or other evidences of indebtedness in one or more
series (hereinafter called the "Securities"); and
WHEREAS, Section 9.1 of the Original Indenture provides that
the Original Indenture may be amended without the consent of the holders of the
Securities in order to establish the form or forms or terms of Securities of
any series or of the coupons appertaining to such Securities pursuant to
Sections 2.1 and 2.3 of the Original Indenture; and
WHEREAS, all conditions and requirements necessary to make
this First Supplemental Indenture a valid and binding instrument in accordance
with its terms and the terms of the Original Indenture have been satisfied.
NOW, THEREFORE, this First Supplemental Indenture
W I T N E S S E T H:
That in consideration of the premises and of the mutual
covenants herein contained, and in order to provide for payment of the
principal of (and premium, if any) and interest on all of the Notes, according
to their tenor, the Company and the Trustee hereby covenant and agree:
SECTION 1. For all purposes of this First Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires, all capitalized terms used and not defined herein that are
defined in the Original Indenture shall have the meanings assigned to them in
the Original Indenture. Unless otherwise expressly specified, all references
to a "Section" herein refer to a section of the First Supplemental Indenture.
SECTION 1.1. The words "herein", "hereof" and "hereunder" and
other words of similar import refer to this First Supplemental Indenture as a
whole and not to any particular Section or other subdivision. The following
terms shall, unless the context otherwise clearly requires,
<PAGE> 3
for all purposes of this First Supplemental Indenture have the respective
meanings specified in this Section:
"Acquisition Debt" means Debt of any Person existing at the
time such Person became a Subsidiary of the Company (or such Person is merged
into the Company or one of its Subsidiaries) or assumed in connection with the
acquisition of assets from any such Person (other than assets acquired in the
ordinary course of business), including Debt Incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary of the Company (but
excluding Debt of such Person which is extinguished, retired or repaid in
connection with such Person becoming a Subsidiary of the Company).
"Adjusted Consolidated Net Income" means, for any period, for
any Person the aggregate Net Income (or loss) of such Person and its
Consolidated Subsidiaries for such period determined in conformity with GAAP
plus the Net Income of any Subsidiary of such Person for prior periods to the
extent such Net Income is actually paid in cash to such Person during such
period plus the Net Income of any Person (other than a Subsidiary) in which
such Person has a joint interest with a third party for prior periods to the
extent such Net Income is actually paid in cash to such Person during such
period; provided that the following items shall be excluded in computing
Adjusted Consolidated Net Income (without duplication): (i) the Net Income (or
loss) of any Person (other than a Subsidiary) in which such Person has a joint
interest with a third party, except to the extent such Net Income is actually
paid in cash to such Person during such period; (ii) solely for the purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (c)(i) or (c)(ii) of Section 3.3 of this First Supplemental Indenture
(and in such case, except to the extent includible pursuant to clause (i)
above), the Net Income (if positive) of such Person accrued prior to the date
it becomes a Subsidiary of any other Person or is merged into or consolidated
with such other Person or any of its Subsidiaries or all or substantially all
of the property and assets of such Person are acquired by such other Person or
any of its Subsidiaries; (iii) the Net Income (or loss) of any Subsidiary of
such Person, except to the extent such Net Income (if positive) is actually
paid in cash to such Person during such period; (iv) any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) the cumulative effect of a
change in accounting principle; and (vi) any amounts paid or accrued as
dividends on Preferred Stock of such Person or Preferred Stock of any
Subsidiary of such Person.
2
<PAGE> 4
"AES Hawaii" means AES Hawaii Management Co., Inc., a Delaware
corporation and a Subsidiary of the Company, and its successors.
"AES Oklahoma" means AES Oklahoma Management Co., Inc., a
Delaware corporation and a Subsidiary of the Company, and its successors.
"Asset Acquisition" means (i) an investment by the Company or
any of its Subsidiaries in any other Person pursuant to which such Person shall
become a Subsidiary of the Company or any of its Subsidiaries or shall be
merged into or consolidated with the Company or any of its Subsidiaries or (ii)
an acquisition by the Company or any of its Subsidiaries of the Property of any
Person other than the Company or any of its Subsidiaries that constitutes
substantially all of an operating unit or business of such Person.
"Asset Disposition" means, with respect to any Person, any
sale, transfer, conveyance, lease or other disposition (including by way of
merger, consolidation or sale-leaseback) by such Person or any of its
Subsidiaries to any Person (other than to such Person or a Consolidated
Subsidiary of such Person and other than in the ordinary course of business) of
(i) any assets (excluding cash and cash equivalents) of such Person or any of
its Subsidiaries or (ii) any shares of Capital Stock of such Person's
Subsidiaries. For purposes of this definition, any disposition in connection
with directors' qualifying shares or investments by foreign nationals mandated
by applicable law shall not constitute an Asset Disposition. In addition, the
term "Asset Disposition" shall not include any sale, transfer, conveyance,
lease or other disposition of assets governed by Section 8.1 of the Original
Indenture. The term Asset Disposition also shall not include (i) any sale of
shares of Capital Stock for the purposes of, and subject to the provisions set
forth in, Section 3.7(d) or (f) hereof, (ii) the grant of a security interest
by any Person in any assets or shares of Capital Stock securing a borrowing by,
or contractual performance obligation of, such Person or any Subsidiary of such
Person, (iii) a sale-leaseback transaction involving substantially all of the
assets of a Power Generation Facility where a Subsidiary of the Company sells
the Power Generation Facility to a Person in exchange for the assumption by
that Person of the Debt financing the Power Generation Facility and the
Subsidiary leases the Power Generation Facility from such Person, (iv)
dispositions of contract rights, development rights and resource data made in
connection with the initial development of a Power Generation Facility, made
prior to
3
<PAGE> 5
the commencement of commercial operation of such Power Facility or (v)
transactions made in order to enhance the repatriation of cash proceeds in
connection with a Foreign Asset Disposition or in order to increase the
after-tax proceeds thereof available for immediate distribution.
"Asset Sale" means the sale or other disposition by the
Company or any of its Subsidiaries (other than to the Company or another
Subsidiary of the Company) of (i) all or substantially all of the Capital Stock
of any Subsidiary of the Company or (ii) all or substantially all of the
Property that constitutes an operating unit or business of the Company or any
of its Subsidiaries.
"Average Life" means, at any date of determination with
respect to any debt security, the quotient obtained by dividing (i) the sum of
the product of (A) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security
multiplied by (B) the amount of such principal payment by (ii) the sum of all
such principal payments.
"Bank Agent" means Morgan Guaranty Trust Company of New York,
as agent for the Banks pursuant to the Bank Credit Agreement, and any successor
or successors thereto in such capacity.
"Bank Credit Agreement" means the Credit Agreement dated as of
May 20, 1996 among the Company, the Banks named on the signature pages thereof
and the Bank Agent, as such Agreement has been and may be amended, restated,
supplemented or otherwise modified from time to time, and includes any
agreement extending the maturity of, or restructuring (including, but not
limited to, the inclusion of additional borrowers thereunder that are
Subsidiaries of the Company and whose obligations are guaranteed by the Company
thereunder) all or any portion of, the Debt under such Agreement or any
successor agreements and includes any agreement with one or more banks or other
lending institutions refinancing all or any portion of the Debt under such
Agreement or any successor agreements.
"Banks" means the lenders who are from time to time parties
to the Bank Credit Agreement.
"Board of Directors" means either the Board of Directors of
the Company or (except for the purposes of clause (iii) of the definition of
"Change of Control") any committee of such Board duly authorized to act
hereunder.
4
<PAGE> 6
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of, or interests in (however designated), the
equity of such Person which is outstanding or issued on or after the date
hereof, including, without limitation, all Common Stock and Preferred Stock and
partnership and joint venture interests of such Person.
"Capitalized Lease" means, as applied to any Person, any lease
of any Property of which the discounted present value of the rental obligations
of such Person as lessee, in conformity with GAAP, is required to be
capitalized on the balance sheet of such Person; and "Capitalized Lease
Obligation" means the rental obligations, as aforesaid, under such lease.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company to any Person or group (as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) of Persons, (ii) a
Person or group (as so defined) of Persons (other than management of the
Company on the date hereof or their Affiliates) shall have become the
beneficial owner of more than 35% of the outstanding Voting Stock of the
Company, or (iii) during any one-year period, individuals who at the beginning
of such period constitute the Board of Directors (together with any new
director whose election or nomination was approved by a majority of the
directors then in office who were either directors at the beginning of such
period or who were previously so approved) cease to constitute a majority of
the Board of Directors.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of common stock of such Person which is
outstanding or issued on or after the date hereof, including, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" of any Person for any period means the
Adjusted Consolidated Net Income of such Person, plus (without duplication) (i)
income taxes (other than income taxes (x) (either positive or negative)
attributable to extraordinary and non-recurring gains or losses or Asset Sales
and (y) actually payable with respect to such period) determined on a
consolidated basis for such Person and its Consolidated Subsidiaries in
accordance with GAAP to the extent payable by such Person, (ii) Consolidated
Fixed
5
<PAGE> 7
Charges, (iii) depreciation and amortization expense for such period and prior
periods, all determined on a consolidated basis for such Person and its
Consolidated Subsidiaries in accordance with GAAP, but only to the extent that
the positive cash flow associated with such depreciation and amortization
expense is actually received in cash by such Person during such period and (iv)
all other non-cash items reducing Net Income for such period and prior periods,
all determined on a consolidated basis for such Person and its Consolidated
Subsidiaries in accordance with GAAP, but only to the extent that the positive
cash flow associated with such non-cash items is actually received in cash by
such Person during such period, and less (without duplication) (i) all non-cash
items increasing Net Income of such Person during such period and prior
periods, but only to the extent that positive cash flow associated with such
non-cash items in not actually received in cash by such Person during such
period, and (ii) the aggregate amount of any capitalized expenses (including
capitalized interest) paid by such Person during such period which have the
effect of increasing Net Income for such period.
"Consolidated Fixed Charges" of any Person means, for any
period, the aggregate of (i) Consolidated Interest Expense, (ii) the interest
component of Capitalized Leases, determined on a consolidated basis for such
Person and its Consolidated Subsidiaries in accordance with GAAP, excluding any
interest component of Capitalized Leases in respect of that portion of a
Capitalized Lease Obligation of a Subsidiary that is Non-Recourse to such
Person and (iii) cash and non-cash dividends due (whether or not declared) on
the Preferred Stock of any Subsidiary and any Redeemable Stock of such Person.
"Consolidated Interest Expense" of any Person means, for any
period, the aggregate interest expense in respect of Debt (including
amortization of original issue discount and non-cash interest payments or
accruals) of such Person and its Consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, including all commissions,
discounts, other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs associated with Interest Rate
Agreements and any amounts paid during such period in respect of such interest
expense, commissions, discounts, other fees and charges that have been
capitalized; provided that Consolidated Interest Expense of the Company shall
not include any interest expense (including all commissions, discounts, other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs associated with Interest Rate Agreements) in respect
6
<PAGE> 8
of that portion of Debt of a Subsidiary of the Company that is Non-Recourse to
the Company; and provided further that Consolidated Interest Expense of the
Company in respect of a Guarantee by the Company of Debt of a Subsidiary shall
be equal to the commissions, discounts, other fees and charges that would be
due with respect to a hypothetical letter of credit issued under the Bank
Credit Agreement that can be drawn by the beneficiary thereof in the amount of
the Debt so guaranteed if (i) the Company is not actually making directly or
indirectly interest payments on such Debt and (ii) GAAP does not require the
Company on an unconsolidated basis to record such Debt as a liability of the
Company.
"Consolidated Subsidiary" means at any date with respect to
any Person, any Subsidiary of such Person or other entity the accounts of which
would be consolidated with those of such Person in its consolidated financial
statements if such statements were prepared as of such date.
"Consolidated Total Assets" means, with respect to any Person
at any time, the total assets of such Person and its Consolidated Subsidiaries
at such time determined in conformity with GAAP.
"Currency Agreement" means, with respect to any Person, any
foreign exchange contract, currency swap agreement or other similar agreement
or arrangement designed to protect such Person or any of its Subsidiaries
against fluctuations in currency values to or under which such Person or any of
its Subsidiaries is a party or a beneficiary on the date hereof or becomes a
party or a beneficiary thereafter.
"Debt" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or bankers' acceptance or other similar
instruments (or reimbursement obligations with respect thereto), (iv) all
obligations of such Person to pay the deferred purchase price of property or
services, except Trade Payables, (v) all obligations of such Person as lessee
under Capitalized Leases, (vi) all Debt of others secured by a Lien on any
asset of such Person, whether or not such Debt is assumed by such Person;
provided that, for purposes of determining the amount of any Debt of the type
described in this clause, if recourse with respect to such Debt is limited to
such asset, the amount of such Debt shall be limited to the lesser of the fair
market value of such asset or the amount of such Debt, (vii) all
7
<PAGE> 9
Debt of others Guaranteed by such Person to the extent such Debt is Guaranteed
by such Person, (viii) all Redeemable Stock valued at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends and (ix) to the extent not otherwise included in this definition, all
obligations of such Person under Currency Agreements and Interest Rate
Agreements.
"Designated Senior Debt" means (i) Debt under the Bank Credit
Agreement and (ii) Debt constituting Senior Debt which, at the time of its
determination, (A) has an aggregate principal amount of at least $30 million
and (B) is specifically designated in the instrument evidencing such Senior
Debt as "Designated Senior Debt" by the Company.
"Excess Cash Flow" of any Person for any period means
Consolidated EBITDA less Consolidated Fixed Charges less any income taxes
actually paid by such Person during such period.
"Fixed Charge Ratio" means the ratio, on a pro forma basis, of
(i) the aggregate amount of Consolidated EBITDA of any Person for the Reference
Period immediately prior to the date of the transaction giving rise to the need
to calculate the Fixed Charge Ratio (the "Transaction Date") to (ii) the
aggregate Consolidated Fixed Charges of such Person during such Reference
Period; provided that for purposes of such computation, in calculating
Consolidated EBITDA and Consolidated Fixed Charges, (1) the Incurrence of the
Debt giving rise to the need to calculate the Fixed Charge Ratio and the
application of the proceeds therefrom shall be assumed to have occurred on the
first day of the Reference Period, (2) Asset Sales and Asset Acquisitions which
occur during the Reference Period or subsequent to the Reference Period and
prior to the Transaction Date (but including any Asset Acquisition to be made
with the Debt Incurred pursuant to clause (1) above) shall be assumed to have
occurred on the first day of the Reference Period, (3) the Incurrence of any
Debt during the Reference Period or subsequent to the Reference Period and
prior to the Transaction Date and the application of the proceeds therefrom
shall be assumed to have occurred on the first day of such Reference Period,
(4) Consolidated Interest Expense attributable to any Debt (whether existing or
being Incurred) computed on a pro forma basis and bearing a floating interest
rate shall be computed as if the rate in effect on the date of computation had
been the applicable rate for the entire period unless such Person or any of its
Subsidiaries is a party to an Interest Rate Agreement (which shall remain in
effect for the twelve month period after the Transaction Date) which has the
effect of fixing the
8
<PAGE> 10
interest rate on the date of computation, in which case such rate (whether
higher or lower) shall be used and (5) there shall be excluded from
Consolidated Fixed Charges any Consolidated Fixed Charges related to any amount
of Debt which was outstanding during and subsequent to the Reference Period but
is not outstanding on the Transaction Date, except for Consolidated Fixed
Charges actually incurred with respect to Debt borrowed (as adjusted pursuant
to clause (4)) (x) under a revolving credit or similar arrangement to the
extent the commitment thereunder remains in effect on the Transaction Date or
(y) pursuant to clause (iv) in Section 3.1(b) hereof. For the purpose of
making this computation, Asset Sales and Asset Acquisitions which have been
made by any Person which has become a Subsidiary of the Company or been merged
with or into the Company or any Subsidiary of the Company during the Reference
Period or subsequent to the Reference Period and prior to the Transaction Date
shall be calculated on a pro forma basis (including all of the calculations
referred to in clauses (1) through (5) above assuming such Asset Sales or Asset
Acquisitions occurred on the first day of the Reference Period).
"Foreign Asset Disposition" means any Asset Disposition in
respect of the Capital Stock and/or Property of any Subsidiary of any Person
where such Subsidiary is organized under the laws of any jurisdiction other
than the U.S. or any state thereof or any Subsidiary of the type described in
Section 936 of the Internal Revenue Code of 1986, as amended, to the extent
that the proceeds of such Asset Disposition are received by a Person subject in
respect of such proceeds to the tax laws of a jurisdiction other than the U.S.
or any state thereof.
"Foreign Subsidiary" means any Subsidiary of any Person where
such Subsidiary is organized under the laws of a jurisdiction other than the
U.S. or any state thereof and more than 80% of the sales, earnings or assets
(determined on a consolidated basis in accordance with GAAP) of which are
located or derived from operations located in territories of the U.S. or
jurisdictions outside the U.S.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keepwell, to
9
<PAGE> 11
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Incur" means, with respect to any Debt, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such Debt;
provided that neither the accrual of interest (whether such interest is payable
in cash or kind) nor the accretion of original issue discount shall be
considered an Incurrence of Debt.
"Independent Financial Advisor" means a nationally recognized
investment banking firm (i) which does not (and whose directors, officers,
employees and Affiliates do not) have a direct or indirect material financial
interest in the Company and (ii) which, in the sole judgment of the Board of
Directors, is otherwise independent and qualified to perform the task for which
such firm is being engaged.
"Interest Rate Agreement" means, with respect to any Person,
any interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement designed to protect such Person or any
of its Subsidiaries against fluctuations in interest rates to or under which
such Person or any of its Subsidiaries is a party or a beneficiary on the date
hereof or becomes a party or a beneficiary thereafter.
"Investment" in a Person means any investment in, loan or
advance to, Guarantee on behalf of, directly or indirectly, or other transfer
of assets to such Person.
"Investment Grade" means, with respect to any security, a
rating of Baa3 or higher of such security by Moody's Investors Service Inc.
together with a rating of BBB- or higher of such security by Standard & Poor's
Corporation.
"Joint Venture" means a joint venture, partnership or other
similar arrangement, whether in corporate,
10
<PAGE> 12
partnership or other legal form; provided that, as to any such arrangement in
corporate form, such corporation shall not, as to any Person of which such
corporation is a Subsidiary, be considered to be a Joint Venture to which such
Person is a party.
"Lien" means, with respect to any Property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect
of such Property. For purposes of this First Supplemental Indenture, the
Company shall be deemed to own subject to a Lien any Property which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such Property.
"Material AES Entity" means (i) any Subsidiary Guarantor, (ii)
any of AES Connecticut Management Co., Inc., AES Thames, Inc., AES Barbers
Point, Inc. and AES Shady Point, Inc. and (iii) any other Person in which the
Company has a direct or indirect equity Investment if such Person's
contribution to Consolidated EBITDA of the Company for the four most recently
completed fiscal quarters of the Company constitutes 15% or more of the
Consolidated EBITDA of the Company for such period.
"Net Cash Proceeds" from an Asset Disposition means cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received (including any cash received upon sale or
disposition of such note or receivable), excluding any other consideration
received in the form of assumption by the acquiring Person of Debt or other
obligations relating to the Property disposed of in such Asset Disposition or
received in any other noncash form) therefrom, in each case, net of all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred (including, without limitation, consent and waiver fees and any
applicable premiums, earn-out or working interest payments or payments in lieu
or in termination thereof), and all federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP (i) as a
consequence of such Asset Disposition, (ii) as a result of the repayment of any
Debt in any jurisdiction other than the jurisdiction where the Property
disposed of was located or (iii) as a result of any repatriation to the U.S. of
any proceeds of such Asset Disposition, and in each case net of a reasonable
reserve for the after tax-cost of any indemnification payments (fixed and
contingent) attributable to seller's indemnities to the purchaser undertaken by
the Company or
11
<PAGE> 13
any of its Subsidiaries in connection with such Asset Disposition (but
excluding any payments, which by the terms of the indemnities will not, under
any circumstances, be made during the term of the Notes (as defined in Section
2 hereof)), and net of all payments made on any Debt which is secured by such
Property, in accordance with the terms of any Lien upon or with respect to such
Property or which must by its terms or by applicable law be repaid out of the
proceeds from such Asset Disposition, and net of all distributions and other
payments made to minority interest holders in Subsidiaries or Joint Ventures as
a result of such Asset Disposition.
"Net Income" of any Person for any period means the net income
(loss) of such Person for such period, determined in accordance with GAAP,
except that extraordinary and non-recurring gains and losses as determined in
accordance with GAAP shall be excluded.
"Net Worth" of any Person means, as of any date, the aggregate
of capital, surplus and retained earnings (including any cumulative translation
adjustment) of such Person and its Consolidated Subsidiaries as would be shown
on a consolidated balance sheet of such Person and its Consolidated
Subsidiaries prepared as of such date in accordance with GAAP.
"Non-Recourse" to a Person as applied to any Debt (or portion
thereof) means that such Person is not directly or indirectly liable to make
any payments with respect to such Debt (or portion thereof), that no Guarantee
of such Debt (or portion thereof) has been made by such Person and that such
Debt (or portion thereof) is not secured by a Lien on any asset of such Person.
"Outstanding", when used with reference to Notes, shall,
subject to the provisions of Section 2.9 of the Original Indenture, mean, as of
any particular time, all Notes authenticated and delivered by the Trustee under
this First Supplemental Indenture, except
(a) Notes theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation or which shall have been paid pursuant to
Section 2.8 of the Original Indenture; and
(b) Notes, or portions thereof, for the payment or redemption
of which moneys or direct obligations of the United States of America backed by
its full faith and credit in the necessary amount shall have been deposited in
trust with the Trustee or with any paying agent (other than the
12
<PAGE> 14
Company) or shall have been set aside, segregated and held in trust by the
Company (if the Company shall act as its own paying agent), provided that if
such Notes are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as herein provided, or provision satisfactory
to the Trustee shall have been made for giving such notice.
"Permitted Investment" means any Investment of the type
specified in clauses (iv) through (v) of the definition of Restricted Payment
which is made directly or indirectly by the Company and its Subsidiaries;
provided that (i) at the time such Investment is made, the Company could Incur
at least $1 of Debt under Section 3.1(a) hereof; (ii) at the time such
Investment is made, no Event of Default or event that, after the giving of
notice or lapse of time or both would become an Event of Default, shall have
occurred and be continuing; (iii) after giving effect to the Investment, the
aggregate Investments made by the Company and its Subsidiaries in the
applicable Person and in any other Persons that have a direct or indirect
interest in the same Power Generation Facility or Unrelated Business does not
exceed 40% of the Net Worth of the Company as of the end of its most recently
ended fiscal quarter; (iv) the Person in which the Investment is made is
engaged only in the businesses described in Section 3.5 hereof; and (v) the
Company directly or through its Subsidiaries either (x) controls, under an
operating and management agreement or otherwise, the day to day management and
operation of any Power Generation Facility or Unrelated Business of the Person
in which the Investment is made or (y) has significant influence over the
management and operation of any such Power Generation Facility or Unrelated
Business in connection with such management or operation. To the extent that
an Investment is not a Permitted Investment only because the aggregate
investment limitation in clause (iii) above is not satisfied, such Investment
shall be treated as a Permitted Investment to the extent of the limitation and
any excess Investment shall be subject to the other restrictions of Section
3.3.
"Permitted Payments" means with respect to the Company or any
of its Subsidiaries (i) any dividend on shares of Capital Stock payable (or to
the extent paid) solely in shares of Capital Stock (other than Redeemable
Stock) or in options, warrants or other rights to purchase Capital Stock (other
than Redeemable Stock) and any distribution of Capital Stock (other than
Redeemable Capital Stock) in respect of the exercise of any right to convert or
exchange any instrument (whether Debt or equity and including Redeemable
Stock); (ii) any dividend or other
13
<PAGE> 15
distribution payable to the Company by any of its Subsidiaries or by a
Subsidiary to another Subsidiary; (iii) the repurchase or other acquisition or
retirement for value of any shares of the Company's Capital Stock, or any
option, warrant or other right to purchase shares of the Company's Capital
Stock with additional shares of, or out of the proceeds of a substantially
contemporaneous issuance of, Capital Stock other than Redeemable Stock (unless
the redemption provisions of such Redeemable Stock prohibit the redemption
thereof prior to the date on which the Capital Stock to be acquired or retired
was by its terms required to be redeemed); (iv) any defeasance, redemption,
repurchase or other acquisition for value of any Debt which by its terms ranks
pari passu with, or subordinate in right of payment to the Notes with the
proceeds from the issuance of (x) Debt which is also pari passu with the Notes
or subordinate to the Notes at least to the extent and in the manner as the
Debt to be defeased, redeemed, repurchased or otherwise acquired is subordinate
in right of payment to, the Notes; provided that such new pari passu or
subordinated Debt provides for no payments of principal by way of sinking fund,
mandatory redemption or otherwise (including defeasance) by the Company
(including, without limitation, at the option of the holder thereof other than
an option given to a holder pursuant to a "change of control" covenant which is
no more favorable to the holders of such Debt than the provisions contained in
the Debt being replaced or, if none, Section 3.11) prior to the maturity of
Debt being replaced and the proceeds of such new pari passu or subordinated
Debt are utilized for such purpose within 45 days of issuance or (y) Capital
Stock (other than Redeemable Stock); (v) in respect of any actual payment on
account of an Investment which is not fixed in amount at the time when made,
the amount determined by the Board of Directors to be a Restricted Payment on
the date such Investment was originally deemed to have been made (the "Original
Restricted Payment Charge") plus an amount equal to the interest on a
hypothetical investment in a principal amount equal to the Original Restricted
Payment Charge assuming interest at the rate of 7% per annum compounded
annually for a period beginning on the date the Investment was originally
deemed to have been made and ending with respect to any portion of the Original
Restricted Payment Charge actually paid on the date of actual payment, less any
actual payments previously made on account of such Investment; provided that
the Permitted Payment under this clause (v) shall in no event exceed the
payment actually made; or (vi) a Permitted Investment.
"Power Generation Facility" means an electric power or thermal
energy generation or cogeneration facility
14
<PAGE> 16
or related facilities, and its or their related electric power transmission,
distribution, fuel supply and fuel transportation facilities, all subject to
related security interests under related project financing arrangements,
together with its or their related power supply, thermal energy and fuel
contracts as well as other contractual arrangements with customers, suppliers
and contractors.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of preferred or preference stock of such Person
which is outstanding or issued on or after the date hereof.
"Property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person under
GAAP.
"Redeemable Stock" means any class or series of Capital Stock
of any Person that by its terms or otherwise is (i) required to be redeemed
prior to the Stated Maturity of the Notes, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Debt having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Redeemable Stock but for provisions thereof
giving holders thereof the right to require the Company to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or a "change of
control" occurring prior to the Stated Maturity of the Notes shall not
constitute Redeemable Stock if the "asset sale" or "change of control"
provision applicable to such Capital Stock is no more favorable to the holders
of such Capital Stock than the provisions contained in Sections 3.9 and 3.11
and such Capital Stock specifically provides that the Company will not
repurchase or redeem any such Capital Stock pursuant to such provisions prior
to the Company's repurchase of Notes required to be repurchased by the Company
under Sections 3.9 and 3.11.
"Reference Period" means the four fiscal quarters for which
financial information is available preceding the date of a transaction giving
rise to the need to make a financial calculation.
"Restricted Payment" means, with respect to any Person, (i)
any dividend or other distribution on any shares of such Person's Capital
Stock; (ii) any payment on account
15
<PAGE> 17
of the purchase, redemption, retirement or acquisition for value of such
Person's Capital Stock; (iii) any defeasance, redemption, repurchase or other
acquisition or retirement for value prior to scheduled maturity of any Debt
ranked pari passu with or subordinated in right of payment to the Notes and
having a maturity date after the maturity of the Notes; (iv) any Investment in
a Subsidiary after the occurrence of an event of default, as defined in any
indenture or instrument evidencing or under which such Subsidiary has at the
date hereof or shall thereafter have outstanding any Debt, shall happen and be
continuing; and (v) any Investment made in an Affiliate (other than a Person
that constitutes an Affiliate solely because of the Company's, or a Subsidiary
of the Company's, control of such Person). Notwithstanding the foregoing,
"Restricted Payment" shall not include any Permitted Payment.
"Significant Subsidiary" of a Person means, as of any date,
any Subsidiary which has two or more of the following attributes: (i) it
contributes 20% or more of such Person's Excess Cash Flow for its most recently
completed fiscal quarter or (ii) it contributes 15% or more of Net Income
before tax of such Person and its Consolidated Subsidiaries for such Person's
most recently completed fiscal quarter or (iii) it constitutes 20% or more of
Consolidated Total Assets of such Person at the end of such Person's most
recently completed fiscal quarter.
"Stated Maturity" means, with respect to any debt security or
any installment of interest thereon, the date specified in such debt security
as the fixed date on which any principal of such debt security or any such
installment of interest is due and payable.
"Subsidiary Guarantors" means (i) prior to the first day, if
any, on which the Company's long-term debt is rated BBB- or higher by Standard
& Poor's Ratings Group and Baa3 or higher by Moody's Investors Service, Inc.,
AES Oklahoma and AES Hawaii, and (ii) on and after such first day, if any, AES
Hawaii.
"Trade Payables" means, with respect to any Person, any
accounts payable or any other indebtedness or monetary obligation to trade
creditors created, assumed or Guaranteed by such Person or any of its
Subsidiaries arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Unrelated Business" means any business not of the type
contemplated by clause (a) of Section 3.5 of this First Supplemental Indenture
hereof.
16
<PAGE> 18
"U.S." means the United States of America.
"Voting Stock" means, with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote for the election
of directors of such Person.
"Wholly Owned Subsidiary" means, with respect to any Person,
any Subsidiary of such Person if all the Capital Stock or other ownership
interests in such Subsidiary having ordinary voting power to elect the entire
board of directors or entire group of other persons performing similar
functions (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned directly or indirectly
by such Person.
SECTION 2. Pursuant to Sections 2.1 and 2.3 of the Original
Indenture, the Company shall issue the following series of Securities, the form
of each Security to be substantially as follows:
A series of notes under the Original Indenture designated as
the 10 1/4% Senior Subordinated Notes due July 15, 2006 (the "Notes"). The
series of Notes will be limited to $250,000,000 aggregate principal amount and
will mature on July 15, 2006. The Notes will be issuable in denominations of
$1,000 or integral multiples thereof. Each Note will bear interest from July
2, 1996 at the rate of 10 1/4% per annum, payable semi-annually (to holders of
record on the first day of the calendar month of such interest payment date,
whether or not such date is a Business Day) immediately preceding the interest
payment date) on January 15 and July 15 of each year beginning January 15,
1997. The Notes may not be redeemed prior to July 15, 2001. On and after that
date, the Notes may be redeemed at any time, in whole or in part, on not less
than 30 nor more than 60 days' notice at the prices set forth below:
The Notes will be issued as one or more Registered Global
Securities for which the Depositary will be the Depository Trust Company.
SECTION 2.1. Interest on the Notes shall be computed on
the basis of a 360-day year of twelve 30-day months.
SECTION 3. In addition to all covenants described in the
Original Indenture, the Company covenants and agrees with the Trustee as
follows:
SECTION 3.1. Limitation on Debt. (a) The Company shall not
Incur any Debt, including Acquisition Debt, unless after giving effect to the
Incurrence of such Debt and the
17
<PAGE> 19
receipt and application of the proceeds therefrom, the Fixed Charge Ratio of
the Company would be greater than (a) 2 to 1 through June 30, 1999 and (b)
2.625 to 1 thereafter. The Company's obligation to comply with this covenant
will terminate if and when the Notes become Investment Grade.
(b) Notwithstanding the foregoing, the Company may Incur each
and all of the following:
(i) Debt under or in respect of the Bank Credit Agreement
in an aggregate principal amount at any one time outstanding not to
exceed $225 million provided that in the event the Notes are rated
both Ba2 or higher by Moody's Investors Service Inc. and BB or higher
by Standard & Poor's Corporation, the $225 million amount in the
foregoing clause shall be increased to $425 million; provided further
that such Debt shall be permitted under this clause (i) only to the
extent such Debt consists of borrowings for working capital purposes
or letters of credit issued for purposes consistent with the practices
of the Company in its use of the Bank Credit Agreement on or prior to
the date hereof;
(ii) Debt issued in exchange for, or the proceeds of which
are used to refinance, outstanding Notes or other Debt of the Company
in an amount (or, if such new Debt provides for an amount less than
the principal amount thereof to be due and payable upon a declaration
of acceleration thereof, with an original issue price) not to exceed
the amount so exchanged or refinanced (plus accrued interest and fees
and expenses related to such exchange or refinancing); provided that
(A) the date of any payment of principal by way of sinking fund,
mandatory redemption or otherwise (including defeasance) on any Debt
so refinanced or exchanged otherwise due after the final scheduled
maturity date of the Notes shall not occur prior to such maturity date
as a result of such exchange or refinancing and (B) new Debt the
proceeds of which are used to exchange or refinance the Notes or other
Debt of the Company that is subordinated in right of payment to the
Notes shall only be permitted under this clause (ii) if (x) in case
the Notes are exchanged or refinanced in part, such new Debt, by its
terms or by the terms of any agreement or instrument pursuant to which
such Debt is issued, is expressly made pari passu with, or subordinate
in right of payment to, the remaining Notes, (y) in case the Debt to
be exchanged or refinanced is subordinated in right of payment to the
18
<PAGE> 20
Notes, such new Debt, by its terms or by the terms of any agreement or
instrument pursuant to which such Debt is issued, is expressly made
subordinate in right of payment to the Notes, at least to the extent
that the Debt to be exchanged or refinanced is subordinated in right
of payment to the Notes and (z) in case the Notes are exchanged or
refinanced in part or the Debt to be exchanged or refinanced is
subordinated in right of payment to the Notes, as of the date the new
Debt is Incurred, the Average Life of the new Debt shall be equal to
or greater than the Average Life of the Notes or Debt to be exchanged
or refinanced;
(iii) Debt of the Company to any of its Consolidated
Subsidiaries, except that any transfer of such Debt by a Consolidated
Subsidiary (other than to another Consolidated Subsidiary) will be
deemed to be an Incurrence of Debt; provided that such Debt is
expressly subordinated in right of payment to the Notes; and
(iv) Debt in an aggregate principal amount not to exceed
$50 million at any one time outstanding.
(c) For purposes of determining any particular amount of
Debt under this Section 3.1, Guarantees of, or obligations with respect to
letters of credit supporting, Debt otherwise included in the determination of
such particular amount shall not be included. For purposes of determining
compliance with this Section 3.1, (A) in the event that an item of Debt meets
the criteria of more than one of the types of Debt described in clauses (i)
through (iv) of Section 3.1(b), the Company, in its sole discretion, shall
classify such item of Debt and only be required to include the amount and type
of such Debt in one of such clauses and (B) the amount of Debt issued at a
price that is less than the principal amount thereof shall be equal to the
amount of the liability in respect thereof determined in conformity with GAAP.
SECTION 3.2. Limitation on Subsidiary Debt. (a) The Company
shall not permit any Subsidiary to Incur, directly or indirectly, any Debt,
including Acquisition Debt. The Company's obligation to comply with this
covenant will terminate if and when the Notes become Investment Grade.
(b) Notwithstanding Section 3.2(a), each and all of the
following Debt may be Incurred by a Subsidiary:
(i) Debt outstanding as of the date hereof;
19
<PAGE> 21
(ii) Debt Incurred for any purpose (including without
limitation the purposes set forth in clause (iii) below) to the extent
of the amount thereof that is also Debt of the Company and is
permitted under Section 3.1;
(iii) Debt Incurred to finance the development, acquisition,
construction, maintenance, working capital requirements in the
ordinary course of business consistent with past practice or operation
of a Power Generation Facility or Unrelated Business in which such
Subsidiary has a direct or indirect interest; provided that (a) such
Debt shall be permitted under this clause (iii) only to the extent of
the amount thereof which (x) is Non-Recourse to the Company and (y) is
Non-Recourse to any other Subsidiary with a direct or indirect
interest in any other Power Generation Facility or Unrelated Business,
provided that, the foregoing clause (y) shall not apply if (A) each of
Moody's Investors Service Inc. and Standard & Poor's Corporation
reaffirms the rating of the Notes at a level at least 1 rating
category above the respective ratings of the Notes on the date of
issuance thereof and (B) such Debt is Non-Recourse to any other
Subsidiary of the Company other than Subsidiaries which represented
less than 30% of the Consolidated EBITDA of the Company for the
Reference Period; and (b) upon the commencement of commercial
operation of such Power Generation Facility or, in the case of an
acquisition of such Power Generation Facility or Unrelated Business,
upon the date of such acquisition, the Company directly or through its
Subsidiaries either (x) controls, under an operating and management
agreement or otherwise, the day to day management and operation of the
Power Generation Facility or Unrelated Business so financed or (y) has
significant influence over the management and operation of such Power
Generation Facility or Unrelated Business;
(iv) Debt issued in exchange for, or the proceeds of which
are used to refinance, outstanding Debt of such Subsidiary otherwise
permitted under this First Supplemental Indenture in an amount (or, if
such new Debt provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, with an original issue price) not to exceed the amount so
exchanged or refinanced (plus accrued interest and fees and expenses
related to such exchange or refinancing plus any principal amounts
previously repaid); provided that (A) the new Debt shall be
Non-Recourse to the Company to the same extent
20
<PAGE> 22
as the Debt to be exchanged or refinanced, (B) if such Subsidiary has
a direct or indirect interest in any Power Generation Facility or
Unrelated Business, the new Debt shall be Non-Recourse to any other
Subsidiary with a direct or indirect interest in any other Power
Generation Facility or Unrelated Business to the same extent as the
Debt to be exchanged or refinanced, (C) the date of any payment of
principal by way of sinking fund, mandatory redemption or otherwise
(including defeasance) on any Debt so refinanced or exchanged
otherwise due after the final scheduled maturity date of the Notes
shall not occur prior to such maturity date as a result of such
exchange or refinancing and (D) if the new Debt refinances principal
amounts previously repaid, (x) such new Debt shall be permitted only
if on the date such new Debt is Incurred, the Company could incur at
least $1 of Debt under Section 3.1(a) and (y) the proceeds from such
new Debt are not used to make any Restricted Payments;
(v) Guarantees of Debt of the Company under the Bank Credit
Agreement;
(vi) Debt Incurred to support the performance obligations of a
Subsidiary engaged in providing construction management or operating
services to a Power Generation Facility; provided that (a) such Debt
shall be permitted under this clause (vi) only to the extent of the
amount thereof which is Non-Recourse to the Company and is
Non-Recourse to any other Subsidiary with a direct or indirect
interest in any other Power Generation Facility or Unrelated Business
and (b) upon the commencement of commercial operation of such Power
Generation Facility or in the case of an acquisition of such Power
Generation Facility, upon the date of such acquisition, the Company
directly or through its Subsidiaries either (x) controls, under an
operating and management agreement or otherwise, the day to day
management and operation of such Power Generation Facility or (y) has
significant influence over the management and operation of such Power
Generation Facility;
(vii) Debt in an aggregate amount for all Subsidiaries at any one
time outstanding of not more than $10 million Incurred to finance the
on-going operation, but not any expansion or improvement, of a Power
Generation Facility or Unrelated Business in which such Subsidiary has
a direct or indirect interest; provided that such Debt shall be
permitted under this clause (vii) only to the extent it is Non-
21
<PAGE> 23
Recourse to the Company and to any other Subsidiary with a direct or
indirect interest in any other Power Generation Facility or Unrelated
Business;
(viii) Debt of any Subsidiary of the Company owed to (A) the
Company or (B) an Intermediate Holding Company (as defined in Section
3.4 hereof);
(ix) Debt in respect of Currency Agreements or Interest Rate
Agreements;
(x) Debt that is Non-Recourse to the Company and Non-Recourse to
any other Subsidiary of the Company with a direct or indirect interest
in any other Power Generation Facility or Unrelated Business only to
the extent that the proceeds of such Debt are received by the Company
or an Intermediate Holding Company as a result of such proceeds being
used to pay dividends or make distributions on the Capital Stock of
such Subsidiary and any other Subsidiary in the chain of ownership
between the Company or such Intermediate Holding Company and such
Subsidiary; and
(xi) Debt of the type described in clause (iii) of the
definition thereof the Incurrence of which causes a corresponding
reduction in any debt service or other similar cash reserve required
to be maintained in connection with any Debt of a Subsidiary permitted
by clause (iii) above and (to the extent that the same constitutes a
refinancing of Debt permitted under such clause (iii)) clause (iv)
above, in each case, only to the extent that the proceeds from such
reserve reduction are received by the Company or an Intermediate
Holding Company as a result of such proceeds being used to pay
dividends or make distributions on the Capital Stock of such
Subsidiary and any other Subsidiary in the chain of ownership between
the Company or such Intermediate Holding Company and such Subsidiary.
(c) For purposes of determining compliance with this
Section 3.2, (A) in the event that an item of Debt meets the criteria of more
than one of the types of Debt described in clauses (i) through (xi) of this
Section 3.2(b), the Company, in its sole discretion, shall classify such item
of Debt and only be required to include the amount and type of such Debt in one
of such clauses and (B) the amount of Debt issued at a price that is less than
the principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in conformity with GAAP.
22
<PAGE> 24
SECTION 3.3. Limitation on Restricted Payments. The Company
shall not, and shall not permit any Subsidiary to, directly or indirectly, make
any Restricted Payment if at the time of such Restricted Payment or after
giving effect thereto:
(a) an Event of Default or an event that, after the
giving of notice or lapse of time or both would become an Event of
Default, shall have occurred and be continuing;
(b) the Company could not Incur at least $1 of Debt under
Section 3.1(a); or
(c) the aggregate amount of all Restricted Payments made
by the Company and its Subsidiaries (the amount of any single or
related series of Restricted Payments so expended or distributed, if
in excess of $15 million and other than in cash, to be determined in
good faith by the Board of Directors, as evidenced by a Board
resolution) after the date hereof shall exceed the sum (without
duplication) of:
(i) 50% of the Net Income of the Company and its
Consolidated Subsidiaries for the period (taken as one
accounting period) beginning on July 1, 1996 and ending on the
last day of the fiscal quarter immediately prior to the date
of such calculation; provided that if Net Income for such
period is less than zero, then minus 100% of the amount of
such net loss; plus
(ii) if the Notes are Investment Grade at the time
of the Restricted Payment, an additional 25% of the Net Income
of the Company and its Consolidated Subsidiaries for a period,
if any, consisting of the one or more consecutive quarters
(taken as one accounting period), if any, contained within,
and ending on the same day as, the period referred to in
clause (i) above in which the Notes were Investment Grade
during the entire period; provided that if Net Income for such
period is less than zero, then no amount shall be added under
this clause (ii); plus
(iii) the aggregate net proceeds (including the
fair market value of proceeds other than cash, determined in
good faith by the Board of Directors, as evidenced by a Board
resolution if the fair market value of such non-cash proceeds
is
23
<PAGE> 25
in excess of $15 million) received by the Company from and after the
date hereof from the issuance and sale (other than to a Subsidiary) of
its Capital Stock (excluding Redeemable Stock, but including Capital
Stock other than Redeemable Stock issued upon conversion of, or in
exchange for, Redeemable Stock or securities other than its Capital
Stock), and warrants, options and rights to purchase its Capital Stock
(other than Redeemable Stock), but excluding the net proceeds from the
issuance, sale, exchange, conversion or other disposition of its
Capital Stock convertible (whether at the option of the Company or the
holder thereof or upon the happening of any event) into (x) any
security other than its Capital Stock or (y) its Redeemable Stock;
plus
(iv) the net reduction in Investments of the type
specified in clause (iv) of the definition of Restricted
Payment resulting from payments of interest on Debt,
dividends, repayments of loans or advances, or other transfers
of assets to the Company or other Person that made the
original Investment from the Person in which such Investment
was made or resulting from the sale or disposition of the
Investment or other return of the amount of the Investment;
provided that such payment, for purposes of the calculation to
be made pursuant to this clause (iv), shall not exceed the
amount of the original Investment; plus
(v) any amount previously included as a Restricted
Payment on account of an obligation by the Company or any
Subsidiary of the Company to make a Restricted Payment which
has not actually been made by the Company or any Subsidiary of
the Company and which is no longer required to be paid by the
Company or any Subsidiary of the Company; plus
(vi) $150,000,000;
provided that this clause (c) shall not prevent the payment of any
dividend within 60 days after the date of its declaration if such
dividend could have been made on the date of its declaration without
violation of the provisions of this Section 3.3. For purposes of
subclause (iii) of this Section 3.3(c), the aggregate net proceeds
received by the Company (x) from the issuance of its Capital Stock
upon the conversion of, or exchange for, securities evidencing Debt of
the
24
<PAGE> 26
Company, shall be calculated on the assumption that the gross proceeds
from such issuance are equal to the aggregate principal amount (or, if
discount Debt, the accreted principal amount) of the Debt evidenced by
such securities converted or exchanged and (y) upon the conversion or
exchange of other securities of the Company shall be equal to the
aggregate net proceeds of the original sale of the securities so
converted or exchanged if such proceeds of such original sale were not
previously included in any calculation for the purposes of subclause
(iii) of this Section 3.3(c) plus any additional sums payable upon
conversion or exchange.
If an Investment which the Company or any Subsidiary of the Company is
obligated to make either in part from time to time or in whole in the future is
fixed in amount by the agreement setting forth such obligation, for purposes of
determining whether such Investment is a Restricted Payment permitted under
this Section 3.3 or is a Permitted Payment, the Investment shall be deemed to
have been made only once, in the amount so fixed, at the time the obligation
first arises (and not when payments in respect thereof are later made). If an
Investment which the Company or any Subsidiary of the Company is obligated to
make either in part from time to time or in whole in the future is not fixed in
amount by the agreement setting forth such obligations, for purposes of
determining whether such Investment is a Restricted Payment permitted under
this Section 3.3 or is a Permitted Payment, the Investment shall be deemed to
have been made at the time the obligation first arises in an amount to be
determined in good faith by the Board of Directors, as evidenced by a Board
resolution, and any actual payments in respect of such Investment shall be
deemed to be Investments made on the date of payment thereof. Subject to the
terms of clause (v) of the definition of Permitted Payments, such later
Investments may be Permitted Payments.
SECTION 3.4. Limitation on Subsidiary Investments and
Mergers. The Company shall not permit any Subsidiary with any direct or
indirect interest in a Power Generation Facility to make any Investment in, or
to consolidate or merge with, any other Person with a direct or indirect
interest in any other Power Generation Facility or any Unrelated Business. In
addition, the Company shall not permit any Subsidiary with any direct or
indirect interest in any Unrelated Business to make any Investment in, or to
consolidate or merge with, any other Person with a direct or indirect interest
in any Power Generation Facility or any other Unrelated Business. The
Company's obligation to comply with this covenant shall terminate if and when
the
25
<PAGE> 27
Notes become Investment Grade. Notwithstanding the foregoing:
(a) subject to any applicable restrictions imposed by
Section 3.3, the Company may permit one or more of its Subsidiaries
(each, an "Intermediate Holding Company") to serve as a holding
company for the Company's direct and indirect interests in Power
Generation Facilities and Unrelated Businesses; provided that (i) each
such Intermediate Holding Company's direct and indirect interest in
any Power Generation Facility or Unrelated Business shall be limited
to the ownership of Capital Stock or Debt obligations of a Person with
a direct or indirect interest in such Power Generation Facility or
Unrelated Business; (ii) no consensual encumbrance or restriction of
any kind shall exist on the ability of any Intermediate Holding
Company to make the payments, distributions, loans, advances or
transfers referred to in clauses (a) through (d) of the first
paragraph of Section 3.6, other than those in existence on the date
hereof or those required by the Bank Credit Agreement or any Guarantee
thereof; (iii) no Intermediate Holding Company shall incur, assume,
create or suffer to exist any Debt (including any Guarantee of Debt)
other than Debt to the Company or Debt permitted under clause (iii) of
Section 3.2(b) hereof; and (iv) no Lien shall exist upon any assets of
such Intermediate Holding Company whether now or hereafter acquired,
except for Liens upon the Capital Stock of a Subsidiary of an
Intermediate Holding Company securing Debt of such Subsidiary; and
(b) subject to any applicable restrictions imposed by
Section 3.3, a Subsidiary with an indirect interest in a Power
Generation Facility in commercial operation as of the date hereof may
acquire the Capital Stock of a Person with a direct or indirect
interest in another Power Generation Facility; provided (i) such
acquisition is in connection with an Asset Disposition described under
Section 3.9(a)(ii); (ii) the Subsidiary's direct and indirect interest
in each Power Generation Facility shall be limited to the ownership of
Capital Stock of a Person with a direct or indirect interest in such
Power Generation Facility; and (iii) no consensual encumbrance or
restriction of any kind shall exist on the ability of the Subsidiary
to make the payments, distributions, loans, advances or transfers
referred to in clauses (a) through (d) of the first paragraph of
Section 3.6, other than those in
26
<PAGE> 28
effect on the date hereof or those required by the Bank Credit
Agreement or any Guarantee thereof.
SECTION 3.5. Limitation on Business. The Company (a) will
continue, and will cause each Material AES Entity to continue, to engage in
business of the same general type as now conducted by the Company and its
Subsidiaries and (b) will continue, and will cause each Material AES Entity to
continue, to operate its and their respective businesses on a basis
substantially consistent with the policies and standards of the Company or such
Material AES Entity as in effect on the date hereof.
SECTION 3.6. Limitations on Dividend and Other Payment
Restrictions Affecting Subsidiaries. The Company shall not, and shall not
permit any Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Subsidiary to (a) pay dividends or make any other distributions
permitted by applicable law on any Capital Stock of such Subsidiary owned by
the Company or any other Subsidiary of the Company, (b) make payments in
respect of any Debt owed to the Company or any other Subsidiary of the Company,
(c) make loans or advances to the Company or any other Subsidiary of the
Company or (d) transfer any of its Property to the Company or any other
Subsidiary of the Company. The Company's obligation to comply with this
covenant will terminate if and when the Notes become Investment Grade.
The foregoing paragraph shall not restrict or prohibit any
encumbrances or restrictions created or existing (i) in connection with the
Incurrence of any Debt permitted under clause (iii), (vi), (vii) or (x) of
Section 3.2(b) or with respect to any portion thereof that is also Debt of the
Company and is permitted under Section 3.1; provided that such encumbrances or
restrictions are required in order to effect such financing and are not
materially more restrictive, taken as a whole, on the ability of the applicable
Subsidiary to make the payments, distributions, loans, advances or transfers
referred to in clauses (a) through (d) above than encumbrances and
restrictions, taken as a whole, customarily accepted (or, in the absence of any
industry custom, reasonably acceptable) in substantially non-recourse project
financing, (ii) in connection with the execution and delivery of an electric
power or thermal energy purchase contract to which such Subsidiary is the
supplying party or other contracts with customers, suppliers and contractors to
which such Subsidiary is a party and where such Subsidiary is engaged in the
development, construction, acquisition or operation of a Power Generation
27
<PAGE> 29
Facility; provided that such encumbrances or restrictions are required in order
to effect such contracts and are not materially more restrictive, taken as a
whole, on the ability of the applicable Subsidiary to make the payments,
distributions, loans, advances or transfers referred to in clauses (a) through
(d) above than encumbrances and restrictions, taken as a whole, customarily
accepted (or, in the absence of any industry custom, reasonably acceptable) in
substantially non-recourse project financing, (iii) in connection with the
Incurrence of any Debt permitted under clause (iv) of Section 3.2(b), provided
that such encumbrances or restrictions taken as a whole are not materially more
restrictive on the ability of the applicable Subsidiary to make the payments,
distributions, loans, advances or transfers referred to in clauses (a) through
(d) above than those that are then in effect, taken as a whole, in connection
with the Debt so exchanged or refinanced, or (iv) in connection with the Bank
Credit Agreement and the project financing, electric power and thermal energy
purchase arrangements and other contracts with customers, suppliers and
contractors in effect on the date hereof, including extensions, refinancings,
renewals or replacements thereof, (v) pursuant to customary non-assignment
provisions in leases, (vi) pursuant to restrictions imposed pursuant to any
stock purchase or asset purchase agreement pending the consummation of the
transactions contemplated thereby, (vii) in connection with any Acquisition
Debt, provided that such encumbrance or restriction was not incurred in
contemplation of the obligor becoming a Subsidiary of the Company, which
encumbrance or restriction is not applicable to any Person, or the Property or
assets of any Person, other than the Person, or the Property or assets,
acquired, (viii) customary restrictions on transfers of Property subject to a
Lien which could not materially adversely affect the Company's ability to
satisfy its obligations under this First Supplemental Indenture, the Original
Indenture and the Notes or (ix) provisions contained in agreements or
instruments relating to Debt which prohibit the transfer of all or
substantially all of the assets of the obligor thereunder unless the transferee
shall assume the obligations of the obligor under such agreement or instrument,
in each case; provided that, in the case of clause (iv) above, such
encumbrances and restrictions, taken as a whole, in any such extensions,
refinancings, renewals or replacements are not materially more restrictive on
the ability of the applicable Subsidiary to make the payments, distributions,
loans, advances or transfers referred to in clauses (a) through (d) above than
those encumbrances or restrictions taken as a whole in effect immediately
before such extension, refinancing, renewal or replacement. Nothing contained
in this covenant shall prevent the Company
28
<PAGE> 30
from granting any Liens not expressly prohibited by this Section 3.6.
SECTION 3.7. Limitation on Issuance of Preferred Stock of
Subsidiaries. The Company shall not permit any Subsidiary to create, assume or
otherwise cause or suffer to exist any Preferred Stock except:
(a) Preferred Stock outstanding on the date hereof;
(b) Preferred Stock issued to and held by the Company or
a Consolidated Subsidiary of the Company (but only so long as held or
owned by the Company or a Consolidated Subsidiary of the Company);
(c) Preferred Stock issued by a Person prior to the time:
(i) such Person became a Subsidiary of the
Company;
(ii) such Person merges with or into a Subsidiary
of the Company; or
(iii) another Subsidiary of the Company merges with
or into such Person (in a transaction in which such Person
becomes a Subsidiary of the Company), which Preferred Stock
was not issued in anticipation of such transaction;
(d) Preferred Stock issued or agreed to be issued by a
Subsidiary of the Company in connection with the financing of the
construction, equipping, development, operation, acquisition,
maintenance or working capital requirements in the ordinary course of
business consistent with past practice of a Power Generation Facility
or any Unrelated Business; provided that as of the date hereof either
the Company does not have any direct or indirect interest or
Investment therein or such Power Generation Facility or Unrelated
Business is not in commercial operation;
(e) Preferred Stock issued by a Subsidiary of the Company in
connection with an Asset Disposition described in clause (ii) of
Section 3.9(a); and
(f) Preferred Stock which is exchanged for, or the
proceeds of which are used to refinance, any Preferred Stock permitted
to be outstanding pursuant to
29
<PAGE> 31
clauses (a) through (e) hereof (or any extension, renewal or
refinancing thereof), having a liquidation preference not to exceed
the liquidation preference of the Preferred Stock so exchanged or
refinanced.
The Company's obligation to comply with this covenant will terminate if and
when the Notes become Investment Grade.
SECTION 3.8. Limitation on Additional Tiers of Subordinated
Debt Senior to the Securities. The Company shall not Incur or suffer to exist
any Debt, other than the Notes, that is subordinate in right of payment to any
Senior Debt unless such Debt, by its terms or the terms of the instrument
creating or evidencing it, is pari passu with, or subordinate in right of
payment to, the Notes; provided that any Debt of the Company or any of its
Subsidiaries which is outstanding on the date hereof shall be excluded from the
operation of this Section 3.8.
SECTION 3.9. Limitation on Asset Dispositions. (a)
Subject to the provisions of Section 5.1 of the Original Indenture (as amended
hereby) and Article Twelve of the Original Indenture, the Company shall not
make, and shall not permit any of its Subsidiaries to make, any Asset
Disposition unless the Company (or the Subsidiary, as the case may be) receives
consideration at the time of each such Asset Disposition at least equal to the
fair market value of the shares or assets sold or otherwise disposed of (such
amounts in excess of $15 million determined in good faith by the Board of
Directors, as evidenced by a Board resolution) and either (i) (A) not less than
75% of the consideration received by the Company (or such Subsidiary, as the
case may be) is in the form of cash, provided that any note or other obligation
received by the Company (or such Subsidiary, as the case may be) that is
immediately converted into cash shall be deemed to be cash for purposes of this
clause (i)(A), and (B) first, the Net Cash Proceeds of such Asset Disposition
are applied within 90 days from the later of the date of such Asset Disposition
or the receipt of Net Cash Proceeds related thereto, to the payment of the
principal of, premium and interest on any Senior Debt of the Company (including
to cash collateralize letters of credit) if required by the lenders, or the
terms, of the Senior Debt and, in connection with any such payment, any related
loan commitment, standby facility or the like shall be permanently reduced in
an amount equal to the principal amount so repaid and second, to the extent
such Net Cash Proceeds are not required by the lenders, or the terms, of the
Senior Debt to be applied in accordance with the foregoing or, if after being
so applied there remain Net Cash Proceeds, then at the Company's election, such
Net Cash
30
<PAGE> 32
Proceeds are either (x) invested in the business or businesses of the Company
or any of its Subsidiaries consistent with Section 3.5; provided that such
investment is made within 365 days from the later of the date of such Asset
Disposition or the receipt of the Net Cash Proceeds related thereto or (y) in
the case of any Asset Disposition by a Subsidiary, applied to the payment of
any Debt of such Subsidiary or any Consolidated Subsidiary (other than Debt
owed to the Company or another Subsidiary), and, in connection with any such
payment, any related loan commitment, standby facility or the like shall be
permanently reduced in an amount equal to the principal amount so repaid;
provided that such Net Cash Proceeds are so applied within three months after
the expiration of the 270 day period referred to in clause (x) above or (z)
applied to make a tender offer (the "Offer") to purchase Notes at a purchase
price of 100% of their principal amount, plus accrued interest (subject to
proration in the event of oversubscription in the manner set forth below); or
(ii) if the Asset Disposition is with respect to the assets or Capital Stock of
a Subsidiary, (A) the Company or a Subsidiary receives as consideration
exclusively Capital Stock, cash, or assets of a Person which will be used by
the Company and its Subsidiaries consistent with Section 3.5, (B) the Company
could Incur at least $1 of Debt under Section 3.1(a) and (C) if the Asset
Disposition is with respect to greater than 25% of the outstanding Capital
Stock or assets of a Significant Subsidiary, the Fixed Charge Ratio of the
Company after giving effect to the Asset Disposition shall be no less than 3 to
1; provided that to the extent the Company or any Subsidiary receives any cash
consideration in connection with any Asset Disposition pursuant to this clause
(a)(ii), the Net Cash Proceeds from such Asset Disposition shall be applied in
accordance with clause (a)(i)(B) of this Section 3.9. Notwithstanding the
foregoing, to the extent that any or all of the Net Cash Proceeds of any
Foreign Asset Disposition are prohibited or delayed by applicable local law
from being repatriated to the U.S., the Company (or such Subsidiary, as the
case may be) shall not be required to apply the portion of such Net Cash
Proceeds so affected in accordance with the preceding sentence (other than to
repay Debt of the Subsidiary making such Asset Disposition or Debt of a
Consolidated Subsidiary of the Company, in each case as contemplated by the
preceding sentence and to the extent the prohibition or delay on repatriation
is not applicable to such repayment and such repayment is not in violation of
the terms of any Senior Debt) (the Company hereby agreeing to cause the
applicable Subsidiary to promptly take all reasonable actions required by the
applicable local law to permit such repatriation); provided that once such
repatriation of any
31
<PAGE> 33
of such affected Net Cash Proceeds is permitted under the applicable local law,
such repatriation will be immediately effected and such repatriated Net Cash
Proceeds will be applied in the manner set forth in this covenant.
Notwithstanding anything to the contrary continued herein, to the extent that
dividends or distributions of any or all of the Net Cash Proceeds of any
Foreign Asset Disposition would result in a tax liability greater than that
which would be incurred if such Net Cash Proceeds were not so dividended or
distributed, the Net Cash Proceeds so affected may be retained by the
applicable Subsidiary for so long as such adverse tax liability would continue
to be incurred. Notwithstanding anything herein to the contrary, the Company
and any Subsidiary may make the following Asset Dispositions: (i) a disposition
resulting from the bona fide exercise by governmental authority of its claimed
or actual power of eminent domain, (ii) a realization upon a security interest,
(iii) any Permitted Payment or Restricted Payment that is permitted hereunder,
or (iv) any sale, transfer, conveyance, lease or other disposition of the
Capital Stock or Property of a Subsidiary pursuant to the terms of any power
sales agreement or steam sales agreement or other agreement or contract related
to the output or product of, or services rendered by, a Power Generation
Facility as to which such Subsidiary is the supplying party; provided that to
the extent the Company or any Subsidiary receives any cash consideration in
connection with such Asset Disposition, the Net Cash Proceeds from such Asset
Disposition shall be applied in accordance with clause (a)(i)(B) of this
Section 3.9.
(b) If the aggregate purchase price of Notes tendered
pursuant to an Offer made pursuant to clause (i)(B)(z) of this Section 3.9(a)
is less than the Net Cash Proceeds allotted to the purchase of the Notes, the
Company may use the remaining Net Cash Proceeds for general corporate purposes.
The Company will not be required to comply with the provisions of clause (i)(B)
of Section 3.9(a) hereof if the Net Cash Proceeds from one or more Asset
Dispositions occurring on or after the date hereof are less than $25 million in
any one fiscal year.
(c) (i) Promptly, and in any event within 30 days from the
later of the date of any Asset Disposition and the receipt of the Net Cash
Proceeds as to which the Company must make an Offer, the Company shall be
obligated to deliver to the Trustee and send, by first-class mail to each
holder of Notes, a written notice stating that:
(A) such holder may elect to have his Notes purchased by the
Company either in whole or in part
32
<PAGE> 34
(subject to prorationing as hereinafter described in the event the
Offer is oversubscribed) in integral multiples of $1,000 principal
amount, at the applicable purchase price;
(B) any Note not tendered or accepted for payment will
continue to accrue interest;
(C) any Note accepted for payment pursuant to the Offer shall
cease to accrue interest after the Purchase Date (as defined below);
and
(D) holders of Notes will be entitled to withdraw their
election in the manner described in clause (iii) of this Section
3.9(c).
The notice shall specify a purchase date not less than 30 days nor more than 60
days after the date of such notice (the "Purchase Date"), shall include all
instructions and materials necessary to enable each holders of Notes to tender
Notes pursuant to the Offer and shall contain information concerning the
business of the Company which the Company in good faith believes will enable
such holder to make an informed decision (which at a minimum will include (1)
the most recently filed Annual Report on Form 10-K (including audited
consolidated financial statements) of the Company, the most recent subsequently
filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the
Company filed subsequent to such Quarterly Report, other than Current Reports
describing other asset dispositions otherwise described in the offering
materials (or corresponding successor reports or reports otherwise required to
be delivered to holder of Notes if the Company is no longer filing reports
pursuant to the Securities Exchange Act of 1934), (2) a description of material
developments in the Company's business subsequent to the date of the latest of
such Reports, and (3) if material, appropriate pro forma financial
information).
(ii) Not later than the date upon which written notice of
an Offer is delivered to the Trustee as provided above, the Company shall
deliver to the Trustee an Officers' Certificate as to (A) the amount of the
Offer (the "Offer Amount"), (B) the allocation of the Net Cash Proceeds
pursuant to which such Offer is being made and (C) the compliance of such
allocation with the provisions of this Section 3.9(a). Not later than one
Business Day prior to the Purchase Date, the Company shall also irrevocably
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) in immediately available
funds an amount
33
<PAGE> 35
equal to the Offer Amount to be held for payment in accordance with the
provisions of this Section 3.9. Upon the expiration of the period for which
the Offer remains open (the "Offer Period"), the Company shall deliver to the
Trustee the Notes or portions thereof which have been properly tendered to and
are to be accepted by the Company. The Trustee or the paying agent (if any),
or the Company if acting as its own paying agent, shall, on the Purchase Date,
mail or deliver payment to each tendering holder in the amount of the purchase
price. In the event that the aggregate purchase price of the Notes delivered
by the Company to the Trustee or the paying agent (if the Company is not acting
as its own paying agent) is less than the Offer Amount, the Trustee or the
paying agent, as the case may be, shall deliver the excess to the Company
immediately after the expiration of the Offer Period.
(iii) holder of Notes electing to have their Notes
purchased will be required to surrender such Notes, with an appropriate form
duly completed, to the Trustee at the address specified in the notice at least
one Business Day prior to the Purchase Date. Holder of Notes will be entitled
to withdraw their election if the Trustee or paying agent (if any) receives not
later than the close of business on the Business Day prior to the Purchase Date
a telegram, telex, facsimile transmission or letter setting forth the name of
the holder and a statement that such holder is withdrawing his election to have
all or a portion of his Notes purchased. If at the expiration of the Offer
Period the aggregate principal amount of Notes surrendered by holders of Notes
exceeds the Offer Amount, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Securities in denominations of $1,000 or integral
multiples thereof, shall be purchased). Holders whose Notes are purchased only
in part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
(iv) At the time the Company delivers Notes to the
Trustee which are to be accepted for purchase, the Company will also deliver an
Officers' Certificate stating that such Notes are to be accepted by the Company
pursuant to and in accordance with the terms of this Section. A Security shall
be deemed to have been accepted for purchase at the time the Trustee, directly
or through an agent, or the Company if acting as its own paying agent, mails or
delivers payment therefor to the surrendering holder.
(d) In the event the Company is unable to purchase Notes
from holders thereof in an Offer because such
34
<PAGE> 36
purchase is prohibited by any provision of applicable law, the Company need not
make an Offer. The Company shall then be obligated to use such Net Cash
Proceeds in accordance with clause (i)(B)(x) or (y) of this Section 3.9(a).
(e) Whenever Net Cash Proceeds are received by the
Company, and prior to the allocation of such Net Cash Proceeds pursuant to this
Section 3.9, such Net Cash Proceeds shall be set aside by the Company in a
separate account pending allocation.
SECTION 3.10. Limitations on Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly enter into any transaction (including, without
limitation, the sale, purchase or lease of any assets or properties or the
rendering of any services) involving aggregate consideration in excess of $5
million with any Affiliate or holder of 5% or more of any class of Capital
Stock of the Company except for transactions (including, subject to Section
3.3, any loans or advances by or to, or Guarantee on behalf of, any Affiliate
or any such holder) made in good faith the terms of which are fair and
reasonable to the Company or such Subsidiary, as the case may be, and are at
least as favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis with Persons who are not such a holder or Affiliate;
provided that any such transaction shall be conclusively deemed to be on terms
which are fair and reasonable to the Company or any of its Subsidiaries and on
terms which are at least as favorable as the terms which could be obtained on
an arm's-length basis with Persons who are not such a holder or Affiliate if
such transaction is approved by a majority of the Company's directors
(including a majority of the Company's independent directors); and provided
further that with respect to the purchase or disposition of assets of the
Company or any of its Subsidiaries having a net book value in excess of $15
million, in addition to approval of its Board of Directors, the Company shall
obtain a written opinion of an Independent Financial Advisor stating that the
terms of such transaction are fair to the Company or its Subsidiary, as the
case may be, from a financial point of view; and provided further that the
fairness, reasonableness and arm's-length nature of the terms of any
transaction which is part of a series of related transactions may be determined
on the basis of the terms of the series of related transactions taken as a
whole. This covenant shall not apply to (a) transactions between the Company
or any of its Subsidiaries and any employee of the Company or any of its
Subsidiaries that are approved by the Board of Directors
35
<PAGE> 37
or any committee of the Board of Directors consisting of the Company's
independent directors, (b) the payment of reasonable and customary regular fees
to directors of the Company or a Subsidiary of the Company, (c) any transaction
between the Company and any of its Consolidated Subsidiaries or between any of
its Consolidated Subsidiaries, (d) any Permitted Payment and any Restricted
Payment not otherwise prohibited by Section 3.3 or (e) the provision of general
corporate administrative, operating and management services, including, without
limitation, procurement, construction, engineering, construction
administration, legal, accounting, financial, money management, risk
management, personnel, administration and business planning services, in each
case, in the ordinary course.
SECTION 3.11. Change of Control. (a) Upon a Change of
Control, each holder of Notes shall have, subject to Article Twelve of the
Original Indenture, the right to require that the Company repurchase such
holder's Notes at a repurchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
repurchase, in accordance with the terms contemplated in Section 3.11(b)
hereof.
(b) Within 30 days following any Change of Control, the
Company shall mail a notice to each holder of Notes with a copy to the Trustee
stating:
(1) that a Change of Control has occurred and that such
holder has the right to require the Company to repurchase such
holder's Notes at a repurchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to
the date of repurchase (the "Change of Control Offer");
(2) the circumstances and relevant facts regarding such
Change of Control (including information with respect to pro forma
historical income, cash flow and capitalization after giving effect to
such Change of Control);
(3) the repurchase date (which shall be not earlier than 30
days or later than 60 days from the date such notice is mailed) (the
"Repurchase Date");
(4) that any Note not tendered will continue to
accrue interest;
(5) that any Note accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Repurchase
Date;
36
<PAGE> 38
(6) that holders of Notes electing to have a Note purchased
pursuant to a Change of Control Offer will be required to surrender
the Note, with the form entitled "Option of Noteholder to Elect
Purchase" on the reverse of the Note completed, to the paying agent at
the address specified in the notice prior to the close of business on
the Repurchase Date;
(7) that holders of Notes will be entitled to withdraw their
election if the paying agent receives, not later than the close of
business on the third Business Day (or such shorter periods as may be
required by applicable law) preceding the Repurchase Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of Notes the holder delivered for
purchase, and a statement that such holder is withdrawing his election
to have such Notes purchased; and
(8) that holders of Notes who elect to have their Notes
purchased only in part will be issued new Notes in a principal amount
equal to the unpurchased portion of the Notes surrendered.
(c) On the Repurchase Date, the Company shall (i) accept for
payment Notes or portions thereof tendered pursuant to the Change of Control
Offer, (ii) deposit with the Trustee money sufficient to pay the purchase price
of all Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee Notes so accepted together with an Officers'
Certificate identifying the Notes or portions thereof tendered to the Company.
The Trustee shall promptly mail to the holders of the Notes so accepted payment
in an amount equal to the purchase price, and promptly authenticate and mail to
such holders a new Note in a principal amount equal to any unpurchased portion
of the Note surrendered. The Company will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Repurchase Date.
SECTION 3.12. Officers' Certificates as to Default and as to
Compliance. The Company will, so long as any of the Notes are outstanding:
(a) deliver to the Trustee, forthwith upon becoming aware of
any default or defaults in the performance of any covenant, agreement
or condition contained in this First Supplemental Indenture (including
notice of any event which with the giving of notice or lapse of time
or both would become an Event
37
<PAGE> 39
of Default under Section 6.1 of the Original Indenture (as modified
pursuant to Section 4 hereof)), an Officers' Certificate specifying
such default or defaults; and
(b) deliver to the Trustee within 120 days after the end of
each fiscal year of the Company beginning with the fiscal year ending
December 31, 1996, an Officers' Certificate to the effect that:
(1) a review of the activities of the Company and
its Subsidiaries during such year and of performance under the
Original Indenture and this First Supplemental Indenture has
been made under such officers' supervision; and
(2) to the best of such officers' knowledge, based
on such review, the Company has complied with all conditions
and covenants and has fulfilled all its other obligations
under the Original Indenture and this First Supplemental
Indenture throughout such year (such compliance to be
determined without regard to any period of grace or
requirement of notice provided under the Original Indenture
and this First Supplemental Indenture), or, if there has been
a default in the fulfillment of any such obligation,
specifying each such default known to them and the nature and
status thereof.
SECTION 4. In addition to the Events of Default described in
Section 6.1 the Original Indenture, an Event of Default shall occur with
respect to the Notes if:
(a) an event of default, as defined in any indenture or
instrument evidencing or under which the Company or any Significant
Subsidiary has as of the date hereof or shall hereafter have
outstanding any Debt, shall happen and be continuing and either (i)
such default results from the failure to pay the principal of such
Debt in excess of $10 million at final maturity of such Debt or (ii)
as a result of such default, the maturity of such Debt shall have been
accelerated so that the same shall be or become due and payable prior
to the date on which the same would otherwise have become due and
payable, and such acceleration shall not be rescinded or annulled
within 30 days and the principal amount of such Debt, together with
the principal amount of any other Debt of the Company or any
Significant Subsidiary in default, or the maturity of which has been
accelerated, aggregates
38
<PAGE> 40
$10 million or more; provided that such default shall not be an Event
of Default if such Debt is Debt of a Significant Subsidiary, is
Non-Recourse to the Company in respect of the amounts not paid or due
upon acceleration and the Company could, at the time of default, incur
at least $1 of Debt under Section 3.1(a); and provided further however
that, subject to the provisions of Sections 7.1 and 7.2 of the
Original Indenture, the Trustee shall not be charged with knowledge of
any such default unless written notice thereof shall have been given
to the Trustee by the Company, by the holder or an agent of the holder
of any such Debt, by the trustee then acting under any indenture or
other instrument under which such default shall have occurred, or by
the holders of not less than 25% in the aggregate principal amount of
the Notes at the time Outstanding;
(b) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company contained in the Notes, the Original Indenture or this First
Supplemental Indenture and such failure continues for a period of 30
days after the date on which written notice specifying such failure,
stating that such notice is a "Notice of Default" hereunder and
demanding that the Company remedy the same, shall have been given by
registered or certified mail, return receipt requested, to the Company
by the Trustee, or to the Company and the Trustee by the holders of at
least 25% in aggregate principal amount of the Notes at the time
Outstanding; or
(c) one or more judgments or orders shall be entered by a
court against the Company or any Significant Subsidiary for the
payment of money in an amount which, individually or in the aggregate
exceeds $10 million (excluding the amount thereof covered by insurance
or by a bond written by third parties but treating any deductibles,
self insurance or retentions as not so covered by insurance) and which
judgments or orders shall not be discharged or waived, and shall
remain outstanding and there shall be any period of 30 consecutive
days following entry of such judgment or order in excess of $10
million or the judgment or order which causes the aggregate amount to
exceed $10 million during which a stay of enforcement of such judgment
or order, by reason of a pending appeal or otherwise, shall not be in
effect; provided, that such a judgment or order shall not be an Event
of Default if such judgment or order is against a Significant
Subsidiary
39
<PAGE> 41
and does not require any payment by the Company and the Company could,
at the expiration of the applicable 30 day period, incur at least $1
of Debt under Section 3.1(a).
SECTION 5. The Company covenants and agrees with the Trustee
that, in addition to the provisions of Section 5.1 of the Original Indenture it
shall not consolidate with, merge with or into, or sell, convey, transfer,
lease or otherwise dispose of all or substantially all of its property and
assets (as an entirety or substantially as an entirety in one transaction or a
series of related transactions) to, any Person (other than a consolidation with
or merger with or into a Subsidiary or a sale, conveyance, transfer, lease or
other disposition to a Subsidiary) or permit any Person to merge with or into
the Company unless:
(i) the Net Worth of the Company or the surviving
entity, as the case may be, on a pro forma basis after giving
effect to such transaction is not less than the Net Worth of
the Company immediately prior to such transaction; and
(ii) immediately after giving effect to such
transaction on a pro forma basis, the Company or the surviving
entity would be able to incur at least $1 of Debt under
Section 3.1(a) hereof.
Notwithstanding the foregoing, clause (ii) of this Section 5.1
shall not prohibit a transaction, the principal purpose of which is (as
determined in good faith by the Board of Directors as evidenced by a Board
resolution) to change the state of incorporation of the Company, and such
transaction does not have as one of its purposes the evasion of the limitations
imposed by this Section 5.1 or Sections 5.1 of the Original Indenture.
SECTION 6. The Company may, at any time after July 15, 2001,
redeem all, or from time to time any part of, the Notes upon payment of the
optional redemption prices set forth in the form of Note related thereto,
together with accrued interest to the date fixed for redemption.
SECTION 7. Nothing in this First Supplemental Indenture,
expressed or implied, is intended or shall be construed to confer upon or give
to any person or corporation, other than the parties hereto and the holders of
the Notes any right, remedy or claim under or by reason of this First
Supplemental Indenture or any covenant, stipulation, promise or agreement
contained herein; all the
40
<PAGE> 42
covenants, stipulations, promises and agreements contained herein being for the
sole and exclusive benefit of the parties hereto and their successors, and the
holders from time to time of the Notes.
SECTION 8. This First Supplemental Indenture shall form a
part of the Original Indenture for all purposes relating to the Notes and every
holder of Notes heretofore or hereafter authenticated and delivered under the
Original Indenture as supplemented hereby shall be bound hereby. The Original
Indenture as supplemented by this First Supplemental Indenture is hereby in all
respects ratified and confirmed.
SECTION 9. The Trustee, for itself and its successor or
successors, accepts the trust of the Original Indenture as amended by this
First Supplemental Indenture, and agrees to perform the same, but only upon the
terms and conditions set forth in the Original Indenture, including the terms
and provisions defining and limiting the liabilities and responsibilities of
the Trustee, which terms and provisions shall in like manner define and limit
its liabilities and responsibilities in the performance of the trust created by
the Original Indenture, and, without limiting the generality of the foregoing,
the recitals contained herein shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this First
Supplemental Indenture other than as to the validity of its execution and
delivery by the Trustee.
SECTION 10. This First Supplemental Indenture may be executed
in any number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
41
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, all as of the day and year first
written above.
(SEAL) THE AES CORPORATION
as the Company
Attest:
By
------------------------
Name:
Title:
- ----------------------
(SEAL)
THE FIRST NATIONAL BANK
OF CHICAGO
as Trustee
Attest:
By
-----------------------
Name:
Title:
- ---------------------
42
<PAGE> 44
STATE OF _________ )
)
COUNTY OF ________ )
BEFORE ME, the undersigned authority, on this __ day of
________, 1996, personally appeared ____________, ____________ of The AES
Corporation, a Delaware corporation, known to me (or proved to me by
introduction upon the oath of a person known to me) to be the person and
officer whose name is subscribed to the foregoing instrument, and acknowledged
to me that he/she executed the same as the act of such corporation for the
purposes and consideration herein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS ____ DAY OF __________,
1996.
(SEAL)
--------------------------------
NOTARY PUBLIC, STATE OF ________
Print Name:_____________________
Commission Expires:_____________
STATE OF )
)
COUNTY OF )
BEFORE ME, the undersigned authority, on this _______ day of
__________, 1996, personally appeared _________________, _______________ of The
First National Bank of Chicago, a ______________, known to me (or proved to me
by introduction upon the oath of a person known to me) to be the person and
officer whose name is subscribed to the foregoing instrument, and acknowledged
to me that he/she executed the same as the act of such trust for the purposes
and consideration herein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS _____ DAY OF __________,
1996.
(SEAL)
--------------------------------
NOTARY PUBLIC, STATE OF ________
Print Name:_____________________
Commission Expires:_____________
