PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into as
of October 18, 1999 by CILCORP Inc., an Illinois corporation (the "Pledgor") in
favor of The Bank of New York, a New York banking corporation, as collateral
agent (the "Collateral Agent") for the benefit of the Secured Parties (as
defined below).
W I T N E S S E T H:
WHEREAS, on November 22, 1998, The AES Corporation, a Delaware
corporation ("AES"), Midwest Energy, Inc., a Delaware corporation and a wholly
owned subsidiary of AES ("Midwest") and the Pledgor entered into a Merger
Agreement, pursuant to which Midwest and the Pledgor will merge (the "Merger"),
with the Pledgor being the surviving corporation;
WHEREAS, Central Illinois Light Company, an Illinois corporation
("CILCO") is a direct, wholly owned subsidiary of the Pledgor and will continue
to be a direct, wholly owned subsidiary of the Pledgor upon consummation of the
Merger;
WHEREAS, Midwest and The Bank of New York, as trustee (the "Trustee"),
have entered into that certain indenture dated as of October 18, 1999 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Indenture"), pursuant to which Midwest has issued $475 million in
aggregate principal amount of 8.700% Senior Notes (the "Senior Notes") due 2009
and 9.375% Senior Bonds due 2029 (the "Senior Bonds" and collectively, the
"Securities");
WHEREAS, the Securities are being issued to finance a portion of the
cost of the Merger and will be assumed by the Pledgor immediately upon
consummation of the Merger;
WHEREAS, the terms of the Indenture require that the Pledgor (a)
pledge, such pledge to attach and become effective on the Pledge Effective Date
(as defined herein), to the Collateral Agent for the equal and ratable benefit
of the holders of the outstanding Securities (the "Securities Holders") and
grant to the Collateral Agent for the equal and ratable benefit of the
Securities Holders a security interest in, the Collateral (as defined herein)
and (b) execute and deliver this Agreement in order to secure the payment and
performance by the Pledgor of all of the Securities Obligations (as defined
herein) of the Pledgor under the Indenture and the Securities;
WHEREAS, the Pledgor may incur additional secured indebtedness from
time to time, to the extent permitted pursuant to the Indenture, that is by its
terms to be equally and ratably secured hereunder with the Securities
Obligations ("Additional Secured Debt"), as hereinafter provided (with any
holders of Additional Secured Debt from time to time being herein collectively
called "Additional Debtholders"), and with all documentation evidencing, or
entered into in connection with, any Additional Secured Debt, including without
limitation any mortgage, indenture or other instrument, being herein called
"Additional Debt Documents"); and
WHEREAS, any such Additional Secured Debt issued after the date hereof
shall be secured equally and ratably with the Securities Obligations, pursuant
to a Pledge Agreement Supplement substantially in the form of Annex A hereto;
and
WHEREAS, it is a condition precedent to the obligations of the initial
purchasers of the Securities under the purchase agreement (the "Purchase
Agreement") entered into in connection with the issuance of the Securities that
the Pledgor shall have executed and delivered to the Collateral Agent this
Agreement and it is to the advantage of the Pledgor that the Securities be
issued.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and in order to
induce the Securities Holders to purchase the Securities, the Pledgor hereby
covenants and agrees with the Collateral Agent for its benefit and the equal and
ratable benefit of the Securities Holders and the Additional Debtholders, which
shall be identified from time to time on Schedule I hereto in accordance with
Section 17.17, in each case to the extent from time to time holding Obligations
of the Pledgor secured hereunder (collectively, and together with the Collateral
Agent, the "Secured Parties") as follows:
SECTION 1A. Definitions. Capitalized terms used herein and not defined
herein shall have the meanings given to such terms in the Indenture. The
following terms when used in this Agreement shall have the following meanings:
"Event of Default" shall mean any Event of Default at any time under,
and as defined in, the Indenture and any Additional Debt Documents.
"Majority Holders" shall mean, at any time, the holders of over 50% in
aggregate principal amount of the outstanding Obligations; provided, that with
respect to any Obligations comprised of indebtedness issued with original issue
discount, the amount outstanding at any time shall be the face amount of such
indebtedness less the remaining unamortized portion of the original issue
discount of such indebtedness at such time as determined in conformity with
GAAP.
"Obligations" shall mean, collectively and without duplication, all
such obligations, liabilities, sums and expenses as follows:
(i) the full and prompt payment when due (whether at stated maturity,
by acceleration or otherwise) of all (x) principal of and interest on
the Senior Notes and the Senior Bonds and (y) all other obligations
(including obligations which, but for the automatic stay under Section
362(a) of the Bankruptcy Code, would become due), liabilities and
indebtedness of the Pledgor to the holders of the Senior Notes and the
Senior Bonds (including, without limitation, interest accruing at the
then applicable rate provided in the Senior Notes and the Senior
Bonds, respectively after the maturity thereof and interest accruing
at the then applicable rate provided in the Senior Notes and the
Senior Bonds, respectively after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding relating to the Pledgor, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred under, arising out of or in
connection with the Senior Notes, the Senior Bonds and the Indenture,
and the due performance of, and compliance with, all of the terms,
conditions and agreements contained therein by the Pledgor (all such
obligations, liabilities and indebtedness described in this clause (i)
being herein collectively called the "Securities Obligations");
(ii) the full and prompt payment when due (whether at stated maturity,
by acceleration or otherwise) of all (x) principal of and interest on
any Additional Secured Debt and (y) all other obligations (including
obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due), liabilities and indebtedness
(including, without limitation, indemnitees, fees and interest
thereon) of the Pledgor to the Additional Debtholders (including,
without limitation, interest accruing at the then applicable rate
provided in any class of Additional Secured Debt after the maturity
thereof and interest accruing at the then applicable rate provided in
such Additional Secured Debt after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding relating to the Pledgor, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) ,
whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred under, arising out of or in
connection with any Additional Debt Documents, and the due performance
of, and compliance with, all of the terms, conditions and agreements
contained therein by the Pledgor (all such obligations, liabilities
and indebtedness described in this clause (ii) being herein
collectively called the "Additional Debt Obligations");
(iii) (x) any and all sums advanced by the Collateral Agent in order
to preserve the Collateral or preserve its security interest in the
Collateral in a manner not in violation of the terms hereof and (y)
any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Collateral Agent in performing its duties
hereunder, or in any way relating to or arising out of its actions as
Collateral Agent in respect of the Pledge Agreement, including any
other unreimbursed fees and expenses for which the Collateral Agent is
to be reimbursed pursuant to Section 13 hereof; except for those
resulting solely from the Collateral Agent's own gross negligence or
willful misconduct;
(iv) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities of the Pledgor
referred to in clauses (i) through (iii) above, after an Event of
Default on any of the Obligations shall have occurred and be
continuing, the reasonable expenses of retaking, holding, preparing
for sale, selling or otherwise disposing of or realizing on the
Collateral or of any exercise by the Collateral Agent of its rights
hereunder, together with reasonable attorneys' fees and costs; and
(v) all amounts paid by any of the Secured Parties as to which such
Secured Party has the right to reimbursement under Section 13 of this
Agreement.
SECTION 1. Pledge. (a) To secure the full and punctual payment when
due and the full and punctual performance of all of the Obligations, the Pledgor
hereby grants to the Collateral Agent, for the benefit of the Collateral Agent
and the other Secured Parties, a security interest, which security interest
shall attach on the Pledge Effective Date (as defined herein), in all of its
right, title and interest in and to the following, whether owned as of the date
hereof or hereafter acquired or arising (the "Collateral"):
(i) all of the issued and outstanding shares of capital stock of CILCO
listed on Schedule II hereto or hereafter acquired (the "Pledged Shares");
(ii) all certificates representing any of the foregoing; and
(iii) all dividends, cash, instruments and other property and proceeds
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any of the foregoing, excluding all cash dividends
paid in respect of the Pledged Shares so long as no Event of Default shall
have occurred and be continuing.
(b) The grant by the Pledgor of the security interest in the
Collateral hereunder shall be effective and shall attach, automatically and with
no further action required to cause such effectiveness and attachment, upon the
earlier to occur of (x) January 31, 2002 and (y) the date on which all of
CILCORP's currently outstanding $30.5 million of Medium-Term Notes, Series A are
no longer outstanding (the "Pledge Effective Date"), of which date the Pledgor
shall deliver notice in writing to the Collateral Agent.
SECTION 2. Delivery of Collateral. (a) The Pledgor shall (i) on the
Pledge Effective Date and (ii) at any time or from time to time thereafter when
the Pledgor shall acquire rights in any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Pledged Shares, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any Pledged Shares, or otherwise in respect
thereof, promptly thereafter, deposit as security with the Collateral Agent the
Pledged Shares owned by the Pledgor and any and all certificates or instruments
representing or evidencing the Collateral. Any and all such certificates or
instruments which shall be held by or on behalf of the Collateral Agent, shall
be in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent.
From and after the Pledge Effective Date, the Collateral Agent shall
have the right, at any time after the occurrence and during the continuance of
an Event of Default, and in its discretion without notice to the Pledgor, to
transfer to or to register in the name of the Collateral Agent or any of its
nominees any or all of the Collateral and to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of different denominations.
(b) Any sums paid upon or in respect of the Pledged Shares upon the
liquidation or dissolution of CILCO shall be paid over to the Collateral Agent
to be held by it hereunder as additional collateral security for the
Obligations, and in case any distribution of capital shall be made on or in
respect of the Pledged Shares or any property shall be distributed upon or with
respect to the Pledged Shares pursuant to the recapitalization or
reclassification of the capital of CILCO or pursuant to the reorganization
thereof, the property so distributed shall, unless otherwise subject to a
perfected security interest in favor of the Collateral Agent, and except as
otherwise expressly permitted hereby, be delivered to the Collateral Agent to be
held by it hereunder as additional collateral security for the Obligations. If
any sums of money or property so paid or distributed in respect of the Pledged
Shares shall be received by the Pledgor, the Pledgor shall, until such money or
property is paid or delivered to the Collateral Agent, hold such money or
property in trust for the Secured Parties, segregated from other funds of the
Pledgor, as additional collateral security for the Obligations.
SECTION 3. Representations and Warranties. The Pledgor hereby
represents and warrants on the date hereof and upon each date the Pledgor
acquires any rights in property that constitutes "Collateral" hereunder (and,
with respect to the representations and warranties in clauses (b), (d) and (e),
on the Pledge Effective Date) as follows:
(a) Each of the Pledgor and CILCO has been duly incorporated, is
validly existing as a corporation in good standing under the laws of
Illinois and has the corporate power and authority required to carry on its
business as it is currently being conducted and to own, lease and operate
its properties, and each is duly qualified and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would not
have a material adverse effect on the business, financial condition or
results of operations of the Pledgor and CILCO, taken as a whole.
(b) The Pledgor is the record and beneficial owner of the Pledged
Shares free and clear of any Lien or claim of any other Person, except for
the Lien created by this Agreement (except for any Liens existing after the
date hereof that are permitted under the Indenture, or any options in favor
of such Pledged Shares).
(c) The Pledgor has the legal right to execute and deliver and to
grant the security interest in the Collateral pursuant to this Agreement,
and the execution, delivery and performance of this Agreement do not (x)
conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Pledgor or any agreement,
indenture or other instrument to which the Pledgor is a party or by which
the Pledgor or its property is bound, or violate or conflict with any laws,
administrative regulations or rulings or court decrees applicable to the
Pledgor or its respective property (including, without limitation,
Regulations T, U and X of the Board of Governors of the Federal Reserve
System), or (y) result in the creation or imposition of any Lien on any
assets of the Pledgor, other than the Lien contemplated hereby.
(d) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(e) The Pledged Shares constitute all of the issued and outstanding
stock of CILCO.
(f) The Pledgor has full power and authority to enter into this
Agreement and has the right to vote, pledge and grant a security interest
in the Collateral as provided by this Agreement.
(g) This Agreement has been duly authorized, executed and delivered by
the Pledgor and constitutes a legal, valid and binding obligation of the
Pledgor, enforceable against the Pledgor in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws affecting
the enforcement of creditors' right and remedies generally and by equitable
principles of general applicability.
(h) Upon the delivery to the Collateral Agent of the Collateral, the
pledge of the Collateral pursuant to this Agreement will create a valid and
perfected first priority (subject to any Liens existing after the date
hereof that are permitted under the Indenture) security interest in the
Collateral, securing the payment of the Obligations for the benefit of the
Collateral Agent and the other Secured Parties, and (except as otherwise
specifically provided herein) enforceable as such against all creditors of
the Pledgor, any Persons purporting to purchase any of the Collateral from
the Pledgor and any other Persons whomsoever.
(i) No consent of any other Person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required to be obtained by the
Pledgor either (i) for the pledge by the Pledgor of the Collateral pursuant
to this Agreement or for the execution, delivery or performance of this
Agreement by the Pledgor, (ii) for the validity or enforceability of the
Agreement or the perfection or enforceability of the Collateral Agent's
security interest in the Collateral or (iii) for the exercise by the
Collateral Agent of the voting or other rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to this
Agreement (except as may be required in connection with such disposition by
laws affecting the offering and sale of securities).
(j) No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the best knowledge
of the Pledgor, threatened by or against the Pledgor or against any of the
Pledgor's properties or revenues with respect to this Agreement or any of
the transactions contemplated hereby.
SECTION 4. Further Assurance. The Pledgor will at all times cause the
security interests granted pursuant to this Agreement to constitute valid
perfected first priority security interests in the Collateral (subject to any
Liens that are permitted under the Indenture), and, (except as otherwise
specifically provided herein) enforceable as such against all creditors of the
Pledgor, any Persons purporting to purchase any Collateral from the Pledgor and
any other Persons whomsoever. The Pledgor will, promptly upon request by the
Collateral Agent, execute and deliver or cause to be executed and delivered to
the Collateral Agent all such instruments and other documents, all in form and
substance satisfactory to the Collateral Agent and take any other actions that
are necessary or desirable to perfect, continue the perfection of, or protect
the first priority of the Collateral Agent's security interest in, the
Collateral, to protect the Collateral against the rights, claims, or interests
of third persons (except to the extent that Liens are permitted under the
Indenture), to enable the Collateral Agent to exercise or enforce its rights and
remedies hereunder, or otherwise to effect the purposes of this Agreement,
including the filing of any financing or continuation statements. The Pledgor
also hereby authorizes the Collateral Agent to file any financing or
continuation statements with respect to the Collateral without the signature of
the Pledgor to the extent permitted by applicable law. The Pledgor will pay all
costs incurred in connection with any of the foregoing; provided, however, the
Collateral Agent shall have no obligation to make such filings.
SECTION 5. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default shall have occurred and be
continuing with respect to which a Default Notice has been delivered to the
Collateral Agent in accordance with Section 11(e) hereof, the Pledgor shall
be entitled to exercise any and all voting and other consensual rights
pertaining to the Pledged Shares or any part thereof for any purpose not
inconsistent with the terms of this Agreement, the Indenture or the
Additional Debt Documents.
(b) So long as no Event of Default shall have occurred and be
continuing with respect to which a Default Notice has been delivered to the
Collateral Agent in accordance with Section 11(e) hereof, and subject to
the terms of the Indenture and the Additional Debt Documents, the Pledgor
shall be entitled to receive, and to utilize free and clear of the Lien of
this Agreement and without any further action on the part of the Pledgor,
the Collateral Agent, the Secured Parties or any other Person, all cash
dividends paid from time to time in respect of the Pledged Shares.
(c) Any and all (i) dividends and other distributions (other than cash
dividends permitted under Section 5(b) hereof) received, receivable or
otherwise distributed in respect of, or in exchange for, any Collateral and
(ii) cash paid, payable or otherwise distributed in redemption of, or in
exchange for, any Collateral, shall in each case be forthwith delivered to
the Collateral Agent to hold as Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the Collateral Agent and
the Secured Parties, be segregated from the other property and funds of the
Pledgor and be forthwith delivered to the Collateral Agent as Collateral in
the same form as so received (with any necessary endorsements). The Pledgor
shall notify the Collateral Agent in writing upon the receipt of any cash
in accordance with the previous sentence.
(d) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights that it is
entitled to exercise pursuant to Sections 5(a) and 5(b) above.
(e) Upon the occurrence and during the continuance of an Event of
Default with respect to which a Default Notice has been delivered to the
Collateral Agent in accordance with Section 11(e) hereof, (i) all rights of
the Pledgor to exercise the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to Section 5(a) shall
cease, and all such rights shall thereupon become vested in the Collateral
Agent, which, to the extent permitted by law, shall thereupon have the sole
right to exercise such voting and other consensual rights, (ii) all
dividends and other distributions payable in respect of the Collateral
shall be paid to the Collateral Agent and the Pledgor's right to receive
such cash payments pursuant to Section 5(b) hereof shall immediately cease
and (iii) any and all rights of conversion, exchange and subscription and
any other rights, privileges or options pertaining to the Pledged Shares
shall become vested in the Collateral Agent, which, to the extent permitted
by law, shall thereupon have the sole right to exercise such rights,
privileges and options.
(f) Upon the occurrence and during the continuance of an Event of
Default with respect to which a Default Notice has been delivered to the
Collateral Agent in accordance with Section 11(e) hereof, the Pledgor shall
execute and deliver (or cause to be executed and delivered) to the
Collateral Agent all such proxies and other instruments as the Collateral
Agent may reasonably request for the purpose of enabling the Collateral
Agent to exercise the voting and other rights that it is entitled to
exercise pursuant to Section 5(e) above.
(g) All payments of dividends and other distributions that are
received by the Pledgor contrary to the provisions of this Section 5 shall
be received in trust for the benefit of the Collateral Agent and the
Secured Parties, shall be segregated from the other property or funds of
the Pledgor and shall be forthwith delivered to the Collateral Agent as
Collateral in the same form as so received (with any necessary
endorsements).
(h) The Collateral Agent shall invest any portion of the Collateral
that is comprised of cash in Permitted Investments as may be directed by
the Pledgor in writing from time to time. "Permitted Investments" means (i)
debt obligations issued or guaranteed by the government of the United
States of America or any agency thereof for which the full faith and credit
of the United States of America is pledged to secure payment in full at
maturity and which are not redeemable at the option of the issuer prior to
maturity and (ii) investments in time deposits, certificates of deposit or
money market deposits entitled to U.S. Federal deposit insurance for the
full amount thereof or issued by a bank or trust company which is organized
under the laws of the United States or any state thereof having capital in
excess of $250 million or any money-market fund sponsored by any registered
broker dealer or mutual fund distributor; provided that no such investment
shall mature later than 180 days after the date of acquisition thereof. The
Collateral Agent shall have no liability (including for lost profits) in
connection with investments of the Collateral.
SECTION 6. Covenants. The Pledgor hereby covenants and agrees with the
Collateral Agent and the other Secured Parties, that from and after the date of
this Agreement and until the Obligations have been paid in full, as follows:
(a) The Pledgor agrees that at all times it will be the sole
beneficial owner of the Collateral and will not (i) except as otherwise
expressly permitted hereby, sell, assign, transfer, convey or otherwise dispose
of, or grant any option or warrant with respect to, any interest in any of the
Collateral without the prior written consent of the Collateral Agent at the
direction of the Majority Holders, (ii) create or permit to exist any Lien upon
or with respect to any of the Collateral, except for the security interest
granted under this Agreement, and except for Liens that are permitted under the
Indenture, (iii) enter into any agreement or understanding that purports to or
that may restrict or inhibit the Collateral Agent's rights or remedies
hereunder, including, without limitation, the Collateral Agent's right to sell
or otherwise dispose of the Collateral, or (iv) take any other action with
respect to the Collateral which would result in a violation of the Indenture,
this Agreement or the Additional Debt Documents.
(b) The Pledgor agrees that immediately upon becoming the beneficial
owner of other equity interests of CILCO it will on or after the Pledge
Effective Date pledge and deliver to the Collateral Agent for its benefit and
the ratable benefit of the Secured Parties and grant to the Collateral Agent for
its benefit and the ratable benefit of the Secured Parties a continuing first
priority security interest in such other equity interests (as well as
instruments of transfer or assignment duly executed in blank and undated, all in
form and substance reasonably satisfactory to the Collateral Agent). The Pledgor
further agrees to deliver to the Collateral Agent a certificate executed by the
Pledgor describing such additional equity interests and certifying that the same
have been duly pledged and delivered to the Collateral Agent hereunder.
SECTION 7. Power of Attorney. The Pledgor hereby appoints and
constitutes the Collateral Agent as the Pledgor's attorney-in-fact to exercise
all of the following powers upon the occurrence and during the continuance of an
Event of Default with respect to which a Default Notice has been delivered to
the Collateral Agent in accordance with Section 11(e) hereof: (i) collection of
proceeds of any Collateral; (ii) conveyance of any item of Collateral to any
purchaser thereof; (iii) giving of any notices or recording of any Liens under
Section 4 hereof; (iv) making of any payments or taking any acts under Section 8
hereof and (v) paying or discharging taxes or Liens levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined in good faith by the
Collateral Agent in its sole discretion ; (vi) defend any suit, action or
proceeding brought against the Pledgor with respect to any Collateral; and (vii)
exercise any of the rights set forth in Sections 5 and 11, make any agreement
with respect to the Collateral or otherwise deal with any Collateral as fully
and completely as though the Collateral Agent were the absolute owner thereof
for all purposes. At the Collateral Agent's request, the Majority Holders,
acting through the Trustee in the case of the Securities and through the
Additional Debtholders (or, if applicable, the Additional Secured Debt Agent) in
the case of the Additional Secured Debt, shall provide written directions to the
Collateral Agent with respect to the taking of any such actions under this
Section 7. The Collateral Agent's authority hereunder shall include, without
limitation, the authority to execute and give receipt for any certificate of
ownership relating to the Collateral, transfer title to any item of Collateral,
sign the Pledgor's name on all financing statements or any other documents
deemed necessary or appropriate to preserve, protect or perfect the security
interest in the Collateral and to file the same, prepare, file and sign the
Pledgor's name on any notice of Lien, and to take any other actions arising from
or incident to the powers granted to the Collateral Agent in this Agreement.
This power of attorney is coupled with an interest and is irrevocable by the
Pledgor.
SECTION 8. Collateral Agent May Perform. If the Pledgor fails to
perform any agreement contained herein, the Collateral Agent may itself perform,
or cause performance of, such agreement, and the expenses of the Collateral
Agent (including the reasonable fees and expenses of its counsel) incurred in
connection therewith shall be payable by the Pledgor pursuant to Section 13
hereof.
SECTION 9. No Assumption of Duties; Reasonable Care. The rights and
powers granted to the Collateral Agent hereunder are being granted in order to
preserve and protect the security interest of the Collateral Agent and the other
Secured Parties in and to the Collateral granted hereby and shall not be
interpreted to, and shall not, impose any duties on the Collateral Agent in
connection therewith. The Collateral Agent shall be deemed to have exercised
reasonable care, under Section 9-207 of the New York Uniform Commercial Code or
otherwise, in the custody and preservation of the Collateral in its possession
if the Collateral is accorded treatment substantially equal to that which the
Collateral Agent accords its own property, it being understood that the
Collateral Agent shall not have any responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relative to any Collateral, whether or not the Collateral Agent
has or is deemed to have knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any parties with respect to any Collateral. The
Collateral Agent shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers, and neither it nor its officers,
directors, employees or agents shall be responsible to the Pledgor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct.
SECTION 10. Subsequent Changes Affecting Collateral. The Pledgor
represents to the Secured Parties that it has made its own arrangements for
keeping informed of changes or potential changes affecting the Collateral
(including, but not limited to, rights to convert, rights to subscribe, payment
of dividends, payments of interest and/or principal, reorganization or other
exchanges, tender offers and voting rights), and the Pledgor agrees that the
Collateral Agent and the Secured Parties shall have no responsibility or
liability for informing the Pledgor of any such changes or potential changes or
for taking any action or omitting to take any action with respect thereto. The
Pledgor covenants that it will not, without the prior written consent of the
Collateral Agent as directed in writing by the Trustee and any Additional
Secured Debt Agent, on behalf of the Majority Holders, vote to enable, or take
any other action to permit, CILCO to issue any capital stock or other securities
convertible into or exercisable for shares of capital stock of CILCO, except
issuances of such capital stock or other securities to CILCORP. The Pledgor will
defend the right, title and interest of the Collateral Agent and the Secured
Parties in and to the Collateral against the claims and demands of all Persons.
The Pledgor will advise the Collateral Agent and the Secured Parties promptly,
in reasonable detail, of (i) any Lien (other than Liens that are permitted under
the Indenture) on any Collateral which could adversely affect the ability of the
Collateral Agent to exercise any of its remedies hereunder and (ii) the
occurrence of any other event which could reasonably be expected to have a
material adverse effect on the security interest created hereby.
SECTION 11. Remedies Upon Default.
(a) If any Event of Default shall have occurred and be
continuing with respect to which a Default Notice has been delivered to the
Collateral Agent in accordance with Section 11(e) hereof, and only to the
extent the Majority Holders have so directed the Collateral Agent in
accordance with Section 11(e), the Collateral Agent shall have and be
entitled to exercise, in addition to all other rights given by law or by
this Agreement, all of the rights and remedies with respect to the
Collateral of a secured party under the Uniform Commercial Code (the "UCC")
as in effect in the State of New York at that time or any other applicable
law and shall also be entitled, without limitation, to exercise the rights
set forth in this Section 11(a). The Collateral Agent may, subject to the
provision of Section 11(e) below, without notice and at its option,
transfer or register, and the Pledgor shall register or cause to be
registered upon request therefor by the Collateral Agent, the Collateral or
any part thereof on the books of CILCO into the name of the Collateral
Agent or the Collateral Agent's nominee(s), with or without any indication
that such Collateral is subject to the security interest hereunder. In
addition, with respect to any Collateral that shall then be in or shall
thereafter come into the possession or custody of the Collateral Agent, the
Collateral Agent may, subject to the provisions of Section 11(e) below,
sell or otherwise dispose of or cause the same to be sold or otherwise
disposed of at any broker's board or at public or private sale, in one or
more sales or lots, for cash or on credit or for future delivery, without
assumption of any credit risk. The purchaser of any or all Collateral so
sold shall thereafter hold the same absolutely, free from any claim,
encumbrance or right of any kind whatsoever. Unless any of the Collateral
threatens to decline speedily in value or is or becomes of a type sold on a
recognized market, the Collateral Agent will give the Pledgor reasonable
notice of the time and place of any public sale thereof, or of the time
after which any private sale or other intended disposition is to be made.
Any sale of the Collateral conducted in conformity with reasonable
commercial practices of banks, insurance companies, commercial finance
companies, or other financial institutions disposing of property similar to
the Collateral shall be deemed to be commercially reasonable. Any
requirements of reasonable notice shall be met if such notice is mailed to
the Pledgor as provided below in Section 17.1, at least ten days before the
time of the sale or disposition. Any other requirement of notice, demand or
advertisement for sale is, to the extent permitted by law, waived. The
Collateral Agent or any other Secured Party may, in its own name or in the
name of a designee or nominee, buy any of the Collateral at any public sale
and, if permitted by applicable law, at any private sale. All expenses
(including court costs and reasonable attorneys' fees and disbursements)
of, or incident to, the enforcement of any of the provisions hereof shall
be recoverable from the proceeds of the sale or other disposition of the
Collateral.
(b) If, subject to the provisions of Section 11(e) below, the
Collateral Agent shall determine to exercise its right to sell any or all
of the Pledged Shares pursuant to Section 11(a) above, and if in the
opinion of counsel for the Collateral Agent it is necessary to have the
Pledged Shares or that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the "Securities
Act"), the Pledgor, upon receipt by the Pledgor of a written request from
the Collateral Agent, as directed by and on behalf of the Majority Holders,
will cause CILCO to (i) execute and deliver, and cause its directors and
officers to execute and deliver, all at the Pledgor's expense, all such
instruments and documents, and to do or cause to be done all such other
acts and things as may be necessary to register such Pledged Shares under
the provisions of the Securities Act, (ii) cause the registration statement
relating thereto to become effective and to remain effective for a period
of one year from the date of the first public offering of such Pledged
Shares, or that portion thereof to be sold and (iii) make all amendments
thereto and/or to the related prospectus that are necessary, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto.
The Pledgor agrees to cause CILCO to comply with the provisions of the
securities or "Blue Sky" laws of any jurisdiction that the Collateral Agent
shall designate for the sale of the Pledged Shares and to make available to
CILCO's security holders, as soon as practicable, an earnings statement
(which need not be audited) that will satisfy the provisions of Section
11(a) of the Securities Act. The Pledgor will cause CILCO to furnish to the
Collateral Agent such number of copies as the Collateral Agent may
reasonably request of each preliminary and final prospectus, to notify the
Collateral Agent promptly of the happening of any event as a result of
which any then effective prospectus includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of then existing circumstances, and to cause the Collateral Agent to
be furnished with such number of copies as the Collateral Agent may request
of such supplement to or amendment of such prospectus. The Pledgor will,
and will cause CILCO, to the maximum extent permitted by law, to indemnify,
defend and hold harmless the Collateral Agent and the Secured Parties from
and against all losses, liabilities, expenses or claims (including
reasonable legal fees and expenses and the reasonable costs of
investigation) that the Collateral Agent or any Secured Party may incur
under the Securities Act or otherwise, insofar as such losses, liabilities,
expenses or claims arise out of or are based upon any alleged untrue
statement of a material fact contained in such registration statement (or
any amendment thereto) or in any preliminary or final prospectus (or any
amendment or supplement thereto), or arise out of or are based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except to the
extent that any such losses, liabilities, expenses or claims arise solely
out of or are based upon any such alleged untrue statement made or such
alleged omission to state a material fact included or excluded on the
written direction of the Collateral Agent. The Pledgor will bear all costs
and expenses of carrying out its obligations and the obligations of CILCO
hereunder.
(c) In view of the fact that federal and state securities laws
may impose certain restrictions on the method by which a sale of the
Collateral may be effected after an Event of Default, the Pledgor agrees
that upon the occurrence and continuance of any Event of Default, the
Collateral Agent may, from time to time, attempt to sell all or any part of
the Collateral by means of a private placement, restricting the prospective
purchasers to those who will represent and agree that they are purchasing
for investment only and not for distribution. In so doing, the Collateral
Agent may solicit offers to buy the Collateral, or any part of it, for
cash, from a limited number of investors who might be interested in
purchasing the Collateral. The Pledgor acknowledges and agrees that any
such private sale may result in prices and terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner. The Collateral Agent shall be under no
obligation to delay a sale of any of the Collateral for the period of time
necessary to permit CILCO to register such securities for public sale under
the Securities Act, or under applicable state securities laws, even if
CILCO agrees to do so.
(d) The Pledgor further agrees to use its reasonable best efforts
to do or cause to be done all such other acts as may be necessary to make
such sale or sales of all or any portion of the Collateral pursuant to this
Section 11 valid and binding and in compliance with any and all other
applicable requirements of law. The Pledgor further agrees that a breach of
any of the covenants contained in this Section 11 will cause irreparable
injury to the Collateral Agent and the Secured Parties, that the Collateral
Agent and the Secured Parties have no adequate remedy at law in respect of
such breach and, as a consequence, that each and every covenant contained
in this Section 11 shall be specifically enforceable against the Pledgor,
and the Pledgor hereby waives and agrees not to assert any defenses against
an action for specific performance of such covenants except for a defense
that no default or Event of Default has occurred and is continuing under
the Indenture or the Additional Debt Documents.
(e) The Collateral Agent shall not commence or otherwise take any
action or proceeding pursuant to this Section 11 or to realize upon any or
all of the Collateral unless and until the Majority Holders, acting through
the Trustee in the case of the Securities and through the Additional
Debtholders (or, if applicable, the Additional Secured Debt Agent) in the
case of the Additional Secured Debt, shall have notified a responsible
officer of the Collateral Agent in writing of the occurrence of an Event of
Default (a "Default Notice") and shall have directed the Collateral Agent
in writing to commence to enforce this Agreement and/or to realize upon any
or all of the Collateral. Upon receipt by the Collateral Agent of any such
notice and direction, the Collateral Agent shall (i) promptly send copies
thereof to all Secured Parties and (ii) subject to the other terms and
provisions of this Agreement, seek to enforce this Agreement and to realize
upon the Collateral. After any such notice and direction has been given,
the Majority Holders shall have the right to give written directions to the
Collateral Agent as to the time, place and manner of the taking of such
actions, and the Collateral Agent shall be required to seek to follow such
directions; provided that, at the time of delivery of such notice, the
Majority Holders shall provide the Collateral Agent with a written
calculation establishing their status as the Majority Holders; provided,
further, that the Collateral Agent, prior to acting on such notice, shall
request, and may conclusively rely upon, a statement from the Trustee
confirming the amounts outstanding under the Indenture, and from the
relevant Additional Secured Debt Agent or Additional Debtholder, as
applicable, confirming the principal amount of the Additional Secured Debt
outstanding, respectively; provided, further, that in the absence of such
notice and direction, 45 days after receipt of the Default Notice, the
Collateral Agent shall have the right to take such actions as it deems
necessary, advisable or appropriate; provided, further, that each of the
Secured Parties, by its acceptance of the benefits of this Agreement,
agrees that if at any time of determination such Secured Party is a
Majority Holder, such Secured Party shall exercise its rights pursuant to
this sentence in good faith for the benefit of all of the Secured Parties;
and provided further that the Majority Holders may give written directions
to the Collateral Agent to cease or materially curtail its efforts seeking
to enforce this Agreement or to cease or materially curtail its efforts
seeking to realize upon any or all of the Collateral. Upon the receipt by a
responsible officer of the Collateral Agent of any such direction to so
cease, the Collateral Agent shall be required to seek to do so, subject to
the rights of the Majority Holders on behalf of the Secured Parties to give
another written notice and direction of the type referred to above.
SECTION 12. Irrevocable Authorization and Instruction to the Issuer.
The Pledgor hereby authorizes and instructs CILCO (a) to comply with any
instruction received by CILCO from the Collateral Agent that (i) states that an
Event of Default has occurred and (ii) is otherwise in accordance with the terms
of this Agreement, without any other or further instructions from the Pledgor,
and the Pledgor agrees that CILCO shall be fully protected in so complying and
(b) unless otherwise expressly permitted hereby, pay any dividends or other
payments with respect to the Pledged Shares directly to the Collateral Agent.
SECTION 13. Fees and Expenses; Indemnity. (a) The Pledgor will, upon
demand, pay to the Collateral Agent the amount of any and all reasonable fees
and expenses (including, without limitation, the reasonable fees and
disbursements of its counsel, of any investment banking firm, accountants,
business broker or other selling agent and of any other such experts and agents
retained by the Collateral Agent, including the allocated costs of inside
counsel, which compensation, expenses and disbursements shall be set forth in
sufficient written detail to the Pledgor) that the Collateral Agent may incur in
connection with (i) the preparation, execution and administration of this
Agreement, and any amendment thereto, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the Collateral Agent
and the Secured Parties hereunder or (iv) the failure by the Pledgor to perform
or observe any of the provisions hereof; except any such expense, disbursement
or advance as may be found by a final and nonappealable decision of a court of
competent jurisdiction to be attributable to the Collateral Agent's gross
negligence or willful misconduct , including any and all recording and filing
fees, or stamp, excise, sales or other taxes, which may be payable or determined
to be payable with respect to any of the Collateral or in connection with any of
the transactions contemplated hereby.
(b) The Pledgor shall fully indemnify and hold harmless each of the
Collateral Agent and each other Secured Party and their respective successors,
assigns, employees, agents, servants and representatives (including the Trustee
and any Additional Secured Debt Agent) hereunder (individually an "Indemnity",
and collectively the "Indemnitees") from and against any and all costs,
expenses, claims and liabilities of any kind or nature whatsoever incurred by
such Indemnitee, arising out of or in connection with the execution, delivery,
enforcement, performance and administration of this Agreement, including (i) any
and all recording and filing fees, or stamp, excise, sales or other taxes, which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated hereby, (ii) the
exercise by any Indemnitee of any right or remedy granted to it hereunder, and
(iii) the costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its rights or remedies
hereunder; unless such cost, expense, claim or liability shall be found by a
final and nonappealable decision of a court of competent jurisdiction to be due
to gross negligence or willful misconduct on the part of such Indemnitee.
SECTION 14. Interest Absolute. All rights of the Collateral Agent and
the other Secured Parties and the security interests created hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or
the Additional Debt Documents or any other agreement or instrument
relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the
Indenture or the Additional Debt Documents;
(c) any exchange, surrender, release or non-perfection of any
other collateral, or any release or amendment or waiver of or consent
to departure from any guarantee, for all or any of the Obligations; or
(d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Pledgor in respect of the
Obligations or of this Agreement other than the satisfaction in full
of the Obligations.
SECTION 15. Application of Proceeds. (a) Upon the occurrence and
during the continuance of an Event of Default with respect to which a Default
Notice has been delivered to the Collateral Agent in accordance with Section
11(e) hereof, the proceeds of any sale of, or other realization upon, all or any
part of the Collateral and any cash held by the Collateral Agent shall be
applied by the Collateral Agent in the following order of priorities:
first, to payment of all Obligations owing to the Collateral Agent of
the type provided in clauses (iii) and (iv) of the definition of
Obligations;
second, an amount equal to the outstanding Primary Obligations (as
defined below) of the Pledgor shall be paid to the Secured Parties as
provided in Section 15(d), with each Secured Party receiving an amount
equal to its outstanding Primary Obligations of the Pledgor or, if the
proceeds are insufficient to pay in full all such Primary Obligations, its
Pro Rata Share (as defined below) of the amount remaining to be
distributed;
third, an amount equal to the outstanding Remaining Obligations of the
Pledgor shall be paid to the Secured Parties as provided in Section 15(d),
with each Secured Party receiving an amount equal to its outstanding
Remaining Obligations of the Pledgor or, if the proceeds are insufficient
to pay in full all such Remaining Obligations, its Pro Rata Share of the
amount remaining to be distributed; and
finally, upon payment of all Remaining Obligations, to payment to the
Pledgor or its successors or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining from such proceeds.
(b) For purposes of this Agreement:
(i) "Pro Rata Share" shall mean, when calculating a Secured Party's
portion of any distribution or amount, that amount (expressed as a
percentage) equal to a fraction the numerator of which is the then unpaid
amount of such Secured Party's Primary Obligations or Remaining
Obligations, as the case may be, of the Pledgor and the denominator of
which is the then outstanding amount of all Principal Obligations or
Remaining Obligations, as the case may be, of the Pledgor;
(ii) "Primary Obligations" of the Pledgor shall mean all Obligations
of the Pledgor secured hereby arising out of or in connection with, the
principal of, premium, if any, and interest on (including all accrued but
unpaid interest) all the outstanding Senior Notes, Senior Bonds and
Additional Secured Debt at the relevant time; provided, that with respect
to any such Obligations comprised of indebtedness issued with original
issue discount, the amount outstanding at any time shall be the face amount
of such indebtedness less the remaining unamortized portion of the original
issue discount of such indebtedness at such time as determined in
conformity with GAAP; and
(iii) "Remaining Obligations" of the Pledgor shall mean all
Obligations of the Pledgor secured hereby other than Primary Obligations.
(c) When payments to Secured Parties are based upon their respective
Pro Rata Shares, the amounts received by such Secured Parties hereunder shall be
applied (for purposes of making determinations under this Section 15 only) (i)
first, to the Primary Obligations of the Pledgor and (ii) second, to the
Remaining Obligations of the Pledgor. If any payment to any Secured Party of its
Pro Rata Share of any distribution would result in overpayment to such Secured
Party, such excess amount shall instead be distributed in respect of the unpaid
Primary Obligations or Remaining Obligations, as the case may be, of the other
Secured Parties, with each Secured Party whose Primary Obligations or Remaining
Obligations, as the case may be, have not been paid in full to receive an amount
equal to such excess amount multiplied by a fraction the numerator of which is
the unpaid Primary Obligations or Remaining Obligations, as the case may be, of
such Secured Party and the denominator of which is the unpaid Primary
Obligations or Remaining Obligations, as the case may be, of all Secured Parties
entitled to such distribution.
(d) All payments required to be made hereunder shall be made (i) if to
the Securities Holders, to the Trustee and (ii) if to Additional Debtholders, to
the Additional Debtholders or, if applicable, the relevant Additional Secured
Debt Agent.
(e) For purposes of applying payments received in accordance with this
Section 15, the Collateral Agent shall be entitled to rely upon the Secured
Parties for a written determination of the outstanding Primary Obligations and
Remaining Obligations owed to the Securities Holders and the Additional
Debtholders, respectively.
(f) It is understood and agreed that the Pledgor shall remain liable
to the extent of any deficiency between the amount of the proceeds of the
Collateral pledged by it hereunder and the aggregate amount of the Obligations
of the Pledgor.
Notwithstanding anything to the contrary in this Agreement, (i) all actions
required or permitted to be taken under this Agreement by the Securities Holders
shall be so taken only by the Trustee on behalf of the Securities Holders as
directed by the Securities Holders, and all actions required or permitted to be
taken under this Agreement by the Additional Debtholders shall be so taken only
by the Additional Debtholders or, if applicable, the relevant Additional Secured
Debt Agent on behalf of the Additional Debtholders as directed by the Additional
Debtholders and (ii) all payments required to be made with respect to the
Securities Obligations shall be paid to the Trustee, and all payments required
to be made with respect to the Additional Debt Obligations under the Additional
Debt Documents shall be paid to the Additional Debtholders or, if applicable,
the relevant Additional Secured Debt Agent and the Pledgee shall be entitled
(but not required) to conclusively rely upon and act in accordance with any
instructions from the Trustee and the Additional Debtholders or, if applicable,
any relevant Additional Secured Debt Agent subject to the terms and conditions
of this Agreement and to assume that such instructions are being given in
accordance with such Indenture and the terms of the Additional Debt Documents,
respectively.
SECTION 16. Uncertificated Securities. Notwithstanding anything to the
contrary contained herein, if any Pledged Shares (whether now owned or hereafter
acquired) are uncertificated Pledged Shares, the Pledgor shall promptly notify
the Collateral Agent, and shall promptly take all actions required to perfect
the security interest of the Collateral Agent under applicable law. The Pledgor
further agrees to take such actions as the Collateral Agent deems necessary or
desirable to effect the foregoing and to permit the Collateral Agent to exercise
any of its rights and remedies hereunder, and agrees to provide an Opinion of
Counsel reasonably satisfactory to the Collateral Agent with respect to any such
pledge of uncertificated Pledged Shares promptly upon request of the Collateral
Agent.
SECTION 17. Miscellaneous Provisions.
17.1 Notices. All notices, approvals, consents or other communications
required or desired to be given hereunder shall be in the form and manner as set
forth on Schedule III hereto.
17.2 Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Pledgor to the Collateral Agent to release any
Collateral, other than Collateral released in accordance with Section 5(b), the
Pledgor shall deliver to the Collateral Agent an Officer's Certificate and/or an
Opinion of Counsel in accordance with the requirements of Sections 13.03 and
13.04 of the Indenture.
17.3 No Adverse Interpretation of Other Agreements. This Agreement may
not be used to interpret another pledge, security or debt agreement of the
Pledgor, CILCO or any subsidiary thereof. No such pledge, security or debt
agreement may be used to interpret this Agreement.
17.4 Severability. The provisions of this Agreement are severable, and
if any clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
in that jurisdiction only such clause or provision, or part thereof, and shall
not in any manner affect such clause or provision in any other jurisdiction or
any other clause or provision of this Agreement in any jurisdiction.
17.5 No Recourse Against Others. No director, officer, employee,
stockholder or affiliate, as such, of CILCORP shall have any liability for any
obligations of the Pledgor under this Agreement or for any claim based on, in
respect of or by reason of such obligations or their creation. Each Secured
Party, by its acceptance of the benefits of this Agreement, waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Securities and for the grant of the security interest in the
Collateral to the Secured Parties.
17.6 Headings. The headings of the Articles and Sections of this
Agreement have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
or provisions hereof.
17.7 Counterpart Originals. This Agreement may be signed in two or
more counterparts. Each signed copy shall be an original, but all of them
together represent one and the same agreement. Each counterpart may be executed
and delivered by telecopy, if such delivery is promptly followed by the original
manually signed copy sent by overnight courier.
17.8 Benefits of Agreement. Nothing in this Agreement, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Secured Parties, any benefit or any legal or
equitable right, remedy or claim under this Agreement.
17.9 Amendments, Waivers and Consents. Any amendment or waiver of any
provision of this Agreement and any consent to any departure by the Pledgor from
any provision of this Agreement shall be effective only if (x) made or given in
compliance with all of the terms and provisions of the Indenture and the
Additional Debt Documents necessary for amendments or waivers of, or consents to
any departure by the Pledgor from any provision of the Indenture or any
Additional Debt Document, as the case may be, and only if such amendment, waiver
or consent is in writing duly signed by the Pledgor and the Collateral Agent
(with the written consent of the Majority Holders, unless such consent would not
be required under the Indenture); provided, however, that any change, waiver,
modification or variance materially adversely affecting the rights and benefits
of a single Class (as defined below) of Secured Parties (and not all Secured
Parties in a like or similar manner) shall also require the written consent of
the Requisite Holders (as defined below) of such affected Class; provided,
further, that any Class shall not be considered to be affected differently from
any other Class due to the Obligations of any such other Class being paid,
repaid, refinanced, renewed or extended and the Collateral being released, in
whole or in part (whether by action of such other Class or otherwise), as
security for a particular Class. For the purpose of this Agreement, the term
"Class" shall mean, at any time, each class of Secured Parties with outstanding
Obligations secured hereby at such time, i.e., (x) the holders of the Senior
Notes secured hereby; (y) the holders of the Senior Bonds secured hereby; and
(z) any other class of Additional Secured Debt secured hereby; provided that,
without limiting the foregoing, it is expressly acknowledged and agreed that
other creditors may be added as "Secured Parties" hereunder (either as part of
an existing Class of creditors or as a newly created Class), and that such
addition shall not require the written consent of the Requisite Holders of the
various Classes. For the purpose of this Agreement, the term "Requisite Holders"
of any Class shall mean each of (i) with respect to the Senior Notes, the
holders of at least a majority of the outstanding principal amount of the Senior
Notes, (ii) with respect to the Senior Bonds, the holders of at least a majority
of the outstanding principal amount of the Senior Bonds, and (iii) with respect
to any other class of Additional Secured Debt, the holders of at least a
majority of such class of Additional Secured Debt outstanding from time to time.
Failure of the Collateral Agent or any Secured Party to exercise, or
delay in exercising, any right, power or privilege hereunder shall not operate
as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy that the Collateral Agent or the Secured Parties would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
17.10 Interpretation of Agreement. Time is of the essence in each
provision of this Agreement of which time is an element. All terms not defined
herein or in the Indenture shall have the meaning set forth in the applicable
UCC, except where the context otherwise requires. To the extent a term or
provision of this Agreement conflicts with the Indenture and is not dealt with
herein with more specificity, the Indenture shall control with respect to the
subject matter of such term or provision.
17.11 Continuing Security Interest; Transfer of Securities. This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the payment in full of all the
Obligations of the Pledgor and all the fees and expenses owing to the Collateral
Agent, (ii) be binding upon the Pledgor, its successors and assigns, provided
that the Pledgor may not assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Collateral Agent and (iii) inure, together with the rights and remedies of the
Collateral Agent hereunder, to the benefit of the Collateral Agent, the Secured
Parties and their respective successors, transferees and assigns.
17.12 Reinstatement. This Agreement shall continue to be effective or
be reinstated if at any time any amount received by the Collateral Agent or any
Secured Party in respect of the Obligations is rescinded or must otherwise be
restored or returned by the Collateral Agent or any Secured Party upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Pledgor or upon the appointment of any receiver, intervenor, conservator,
trustee or similar official for the Pledgor or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
17.13 Survival of Provisions. All representations, warranties and
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Agreement (including the Pledgor's obligations under Section 13
hereof), and shall terminate only upon the full and final payment and
performance by the Pledgor of the Obligations of the Pledgor.
17.14 Waivers. The Pledgor waives presentment and demand for payment
of any of the Obligations, protest and notice of dishonor or default with
respect to any of the Obligations, and all other notices to which the Pledgor
might otherwise be entitled, except as otherwise expressly provided herein or in
the Indenture.
17.15 Authority of the Collateral Agent.
(a) The Collateral Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Collateral Agent by the
terms hereof, together with such powers as are reasonably incident thereto. The
Collateral Agent may perform any of its duties hereunder or in connection with
the Collateral by or through agents or employees and shall be entitled to retain
counsel of its choice and to act in reliance upon the advice of counsel
concerning all such matters. Neither the Collateral Agent nor any director,
officer, employee, attorney or agent of the Collateral Agent shall be
responsible for the validity, effectiveness or sufficiency hereof or of any
document or security furnished pursuant hereto. The Collateral Agent and its
directors, officers, employees, attorneys and agents shall be entitled to rely
on any communication, instrument or document believed by it or them to be
genuine and correct and to have been signed or sent by the proper person or
persons. To the maximum extent permitted by applicable law, the Pledgor waives
all claims, damages, and demands against the Collateral Agent arising out of the
repossession, retention, or sale of the Collateral pursuant to the written
instruction of the Majority Holders as provided herein, except such which may be
found by a final and nonappealable decision of a court of competent jurisdiction
to arise out of the gross negligence or willful misconduct of the Collateral
Agent. Upon the occurrence and during the continuance of an Event of Default,
until the Collateral Agent is able to effect a sale, lease, or other disposition
of the Collateral, the Collateral Agent shall have the right to use or operate
the Collateral, or any part thereof, to the extent that it deems appropriate for
the purpose of preserving the Collateral or its value or for any other purpose
deemed appropriate by the Collateral Agent. The Collateral Agent shall have no
obligation to maintain or preserve the rights of the Pledgor as against third
parties with respect to the Collateral while the Collateral is in the possession
of the Collateral Agent. The Collateral Agent shall use reasonable care with
respect to the Collateral in its possession or under its control. The Collateral
Agent shall not have any other duty as to the Collateral in its possession or
control or in the possession or control of any agent or nominee of the
Collateral Agent, or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto. Upon request of
the Pledgor, the Collateral Agent shall account for any monies received by the
Collateral Agent in respect of any foreclosure on or disposition of the
Collateral. The provisions of Sections 6.01 and 6.03 of the Indenture shall
apply to the Collateral Agent under this Agreement with the same force as they
apply to the Trustee under the Indenture.
(b) The Pledgor acknowledges that the rights and responsibilities of
the Collateral Agent under this Agreement with respect to any action taken by
the Collateral Agent or the exercise or non-exercise by the Collateral Agent of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as among the
Collateral Agent and the Secured Parties, be governed by this Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Collateral Agent and the Pledgor, the Collateral Agent
shall be conclusively presumed to be acting as agent for the Secured Parties
with full and valid authority so to act or refrain from acting, and the Pledgor
shall not be obligated or entitled to make any inquiry respecting such
authority.
17.16 Resignation or Removal of the Collateral Agent. Until such time
as the Obligations shall have been paid in full, the Collateral Agent may at any
time, by giving written notice to the Pledgor, the Trustee and any Additional
Secured Debt Agent or Additional Debtholder, as applicable, resign and be
discharged of the responsibilities hereby created, such resignation to become
effective upon (i) the appointment of a successor Collateral Agent and (ii) the
acceptance of such appointment by such successor Collateral Agent. As promptly
as practicable after the giving of any such notice, the Majority Holders shall
appoint a successor Collateral Agent, which successor Collateral Agent shall be
reasonably acceptable to the Pledgor. If no successor Collateral Agent shall be
appointed and shall have accepted such appointment within 60 days after the
Collateral Agent gives the aforesaid notice of resignation, the Collateral Agent
may apply, at the expense of the Pledgor, to any court of competent jurisdiction
to appoint a successor Collateral Agent to act until such time, if any, as a
successor shall have been appointed as provided in this Section 17.16. Any
successor so appointed by such court shall immediately and without further act
be superseded by any successor Collateral Agent appointed by the Majority
Holders as provided in this Section 17.16. Simultaneously with its replacement
as Collateral Agent hereunder, the Collateral Agent so replaced shall deliver to
its successor all documents, instruments, certificates and other items of
whatever kind (including, without limitation, the certificates and instruments
evidencing the Collateral and all instruments of transfer or assignment) held by
it pursuant to the terms hereof. The Collateral Agent that has resigned shall be
entitled to fees, costs and expenses to the extent incurred or arising, or
relating to events occurring, before its resignation or removal.
17.17 Pledge Agreement Supplement. In connection with the incurrence
by the Pledgor from time to time of any class of Additional Secured Debt, the
Pledgor agrees to enter into a Pledge Agreement Supplement, which shall form a
part of this Agreement, and shall by its terms cause such Additional Debt
Obligations to be secured by a security interest in the Collateral on an equal
and ratable basis with the Obligations secured hereunder. Upon the effectiveness
of any Pledge Agreement Supplement, Schedule I hereto shall be deemed to be
amended to include such Additional Secured Debt identified in such Pledge
Agreement Supplement.
17.18 Termination of Agreement.
Subject to the provisions of Section 17.12 hereof, this Agreement
shall terminate upon full and final payment and performance of the Obligations
of the Pledgor (and upon receipt by the Collateral Agent of the Pledgor's
written certification that all such Obligations have been satisfied). At such
time, the Collateral Agent shall, at the request of the Pledgor, reassign and
redeliver to the Pledgor all of the Collateral hereunder that has not been sold,
disposed of, retained or applied by the Collateral Agent in accordance with the
terms hereof. Such reassignment and redeliver shall be without warranty by or
recourse to the Collateral Agent, except as to the absence of any prior
assignments by the Collateral Agent of its interest in the Collateral and except
to the extent of any breach by the Collateral Agent of its obligations hereunder
(including, without limitation, its obligations under Section 9), and shall be
at the expense of the Pledgor.
17.19 Final Expression. This Agreement, together with any other
agreement executed in connection herewith, is intended by the parties as a final
expression of their Agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
17.20 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
WAIVER OF DAMAGES.
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
(ii) THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS OWN
NAME OR IN THE NAME AND ON BEHALF OF ANY SECURED PARTY, HAVE THE RIGHT, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR THE
PLEDGOR'S PROPERTY IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH
TO ENABLE THE COLLATERAL AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT. THE
PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY
PROCEEDING BROUGHT BY THE COLLATERAL AGENT TO REALIZE ON SUCH PROPERTY, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE COLLATERAL AGENT. THE
PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN
WHICH THE COLLATERAL AGENT HAS COMMENCED A PROCEEDING DESCRIBED IN THIS
PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(iii) THE PLEDGOR AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE
PLEDGOR AT ITS ADDRESS REFERRED TO IN SECTION 17.1 OR AT SUCH OTHER ADDRESS OF
WHICH THE COLLATERAL AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO. THE
PLEDGOR AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN
ANY OTHER JURISDICTION.
(iv) THE PLEDGOR, THE COLLATERAL AGENT AND THE SECURED PARTIES WAIVE
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.
(v) THE PLEDGOR HEREBY AGREES THAT NEITHER THE COLLATERAL AGENT NOR
ANY SECURED PARTY SHALL HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED
AND THE RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR
EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND
NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE COLLATERAL AGENT OR
SUCH SECURED PARTY, AS THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS
OR OMISSIONS ON THE PART OF THE COLLATERAL AGENT OR SUCH SECURED PARTY, AS THE
CASE MAY BE, CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(vi) THE PLEDGOR WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY KIND
PRIOR TO THE EXERCISE BY THE COLLATERAL AGENT OR ANY HOLDER OF ITS RIGHTS DURING
THE CONTINUANCE OF A DEFAULT OR AN EVENT OF DEFAULT TO REPOSSESS THE COLLATERAL
WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL OR OTHER
SECURITY FOR THE OBLIGATIONS. THE PLEDGOR WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED OF THE COLLATERAL AGENT OR ANY SECURED PARTY IN CONNECTION
WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH
OR LEVY UPON COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT OR ANY
SECURED PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING
ORDER OR PRELIMINARY OR PERMANENT INJUNCTION THIS AGREEMENT OR ANY OTHER
AGREEMENT OR DOCUMENT AMONG THE PLEDGOR, THE COLLATERAL AGENT AND THE SECURED
PARTIES. THE PLEDGOR WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
17.21 Acknowledgments. The Pledgor hereby acknowledges that it has
been advised by counsel in the negotiation, execution and delivery of this
Agreement.
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have each
caused this Agreement to be duly executed and delivered as of the date first
above written.
CILCORP INC.
By: /s/ Paul D. Stinson
------------------------------------
Name: Paul D. Stinson
Title: President
THE BANK OF NEW YORK, as Collateral Agent
By: /s/ MaryBeth Lewicki
------------------------------------
Name: MaryBeth Lewicki
Title: Vice President
Accepted and acknowledged as of
the date first above written:
THE BANK OF NEW YORK,
not in its individual capacity, but
solely as Trustee under the Indenture
By: /s/ MaryBeth Lewicki
----------------------------------
Name: MaryBeth Lewicki
Title: Vice President
SCHEDULE I
ADDITIONAL SECURED DEBT:
Title or Name of Additional Secured
Additional Secured Debt: Additional Debt Holders: Debt Agent:
- ----------------------- ----------------------- ------------------
[NONE]
SCHEDULE II
PLEDGED SHARES OF CILCO
Stock Number of Percent of
Class of Stock Certificate Number Shares Shares Outstanding
- -------------- ------------------ ---------- ------------------
Common PE11705 9,000,000 66.353%
Common PE11706 4,563,871 33.647%
SCHEDULE III
If to Pledgor:
CILCORP Inc.
300 Hamilton Blvd.
Suite 300
Peoria, Illinois 61602
Attn: President
If to the Collateral Agent or the Trustee:
The Bank of New York
101 Barclay Street
Floor 21W
New York, New York 10286
Attn: Corporate Trust Administration
If to any Additional Secured Debt Agent:
See Schedule I hereto
ANNEX A
[Form of Pledge Agreement Supplement]
PLEDGE AGREEMENT SUPPLEMENT dated ______________,____, (this
"Supplement") made by CILCORP, Inc., an Illinois corporation (the "Pledgor"), in
favor of The Bank of New York, a New York banking corporation, as collateral
agent (in such capacity, the "Collateral Agent") for the benefit of the Secured
Parties (as defined in the Pledge Agreement referred to below).
1. This Supplement is executed and delivered pursuant to the terms of
the Pledge Agreement, dated as of October 18, 1999 (as supplemented by this
Supplement and as the same has been and may hereafter be supplemented by any
other Pledge Agreement Supplement or otherwise amended or modified, the "Pledge
Agreement"), made by the Pledgor in favor of the Collateral Agent for the
benefit of the Collateral Agent and the Secured Parties. Terms defined in the
Pledge Agreement are used herein with their defined meanings.
2. Pursuant to the terms of the Indenture and the Pledge Agreement,
the Pledgor may incur additional secured indebtedness from time to time that is
by its terms equally and ratably secured under the Pledge Agreement with the
Obligations secured thereunder. The Pledgor and [Additional Secured Debt
Agent/Additional Secured Party], have entered into that certain [name of
additional debt agreement], dated as of ___________, ____, pursuant to which the
Pledgor shall [insert description of additional debt]. The terms of the
[additional debt agreement] require that the Pledgor equally and ratably secure
its obligations under [such additional debt] with the Obligations secured under
the Pledge Agreement. The Pledgor hereby acknowledges and agrees that its
obligations under [such additional debt] shall be deemed to be "Additional Debt
Obligations" pursuant to the Pledge Agreement.
3. The Pledgor confirms and reaffirms the security interest in the
Collateral granted to the Collateral Agent, for the benefit of the Collateral
Agent and the Secured Parties under the Pledge Agreement; and hereby
acknowledges and agrees that all references to "Secured Parties" in the Pledge
Agreement shall be deemed to include all holders of the Additional Secured Debt
as described on Schedule 1 hereto.
4. The Pledgor hereby represents and warrants that the representations
and warranties contained in Section 3 of the Pledge Agreement are true and
correct on the date of this Supplement with all references therein and elsewhere
in the Pledge Agreement to "Additional Secured Debt", "Additional Debtholders"
and, if applicable, "Additional Secured Debt Agent" to include the Additional
Debt, Additional Debtholders and, if applicable, Additional Secured Debt Agent
as listed on Schedule 1 hereto and on Schedule 1 to each Pledge Agreement
Supplement executed prior to the date hereof and with references therein to
"this Pledge Agreement" to mean the Pledge Agreement as supplemented hereby. In
addition, the Pledgor represents and warrants that this Supplement has been duly
executed and delivered by the Pledgor and constitutes a legal, valid and binding
obligation of the Pledgor enforceable against the Pledgor in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws affecting the
enforcement of creditors' rights and remedies generally and by equitable
principles of general applicability.
5. The Additional Debtholders designated on Schedule 1 hereto, by
their acceptance of the benefits of the Pledge Agreement, hereby irrevocably
designate the Collateral Agent to act on their behalf as specified in the Pledge
Agreement. Each such Additional Debtholder hereby irrevocably authorizes, and
each holder of the Additional Debt Obligations by the acceptance of such
Additional Debt Obligation and by the acceptance of the benefits of the Pledge
Agreement shall be deemed irrevocably to authorize the Collateral Agent to take
such action on its behalf under the Pledge Agreement and instruments and
agreements referred to therein and to exercise such powers and to perform such
duties thereunder as are specifically delegated or required of the Collateral
Agent by the terms thereof and such other powers as are reasonably incident
thereto.
6. This Supplement is supplemental to the Pledge Agreement, forms a
part thereof and is subject to all the terms thereof. Schedule I to the Pledge
Agreement does, and shall be deemed to, include each item listed on Schedule 1
hereto, and each such item shall be and is included within the meaning of the
terms "Additional Secured Debt", "Additional Debtholders" and, if applicable,
"Additional Secured Debt Agent" as such terms are used in the Pledge Agreement.
IN WITNESS WHEREOF, the Pledgor has caused this Supplement to be duly
executed and delivered on the date first set forth above.
CILCORP INC.
By:
-----------------------------------
Name:
Title: President
Acknowledged and agreed:
THE BANK OF NEW YORK,
as Collateral Agent
By:
------------------------------
Name:
Title:
[Additional Secured Debt Agent] [Additional Debtholder]
By:
------------------------------
Name:
Title: