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THE AES CORPORATION
GUARANTEE AGREEMENT
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Dated as of October 29, 1997
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TABLE OF CONTENTS
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PAGE
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ARTICLE 1
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DEFINITIONS
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SECTION 1.01. Definitions...............................................2
ARTICLE 2
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TRUST INDENTURE ACT
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SECTION 2.01. Trust Indenture Act; Application..........................5
SECTION 2.02. Lists of Holders of Preferred Securities..................5
SECTION 2.03. Reports by the Guarantee Trust............................5
SECTION 2.04. Periodic Reports to Guarantee Trust.......................5
SECTION 2.05. Evidence of Compliance with Conditions Precedent..........6
SECTION 2.06. Events of Default; Waiver.................................6
SECTION 2.07. Disclosure of Information.................................6
SECTION 2.08. Conflicting Interest......................................6
ARTICLE 3
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POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE
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SECTION 3.01. Powers and Duties of the Guarantee Trustee................7
SECTION 3.02. Certain Rights and Duties of the Guarantee Trustee........8
SECTION 3.03. Not Responsible for Recitals or Issuance of Guarantee....10
ARTICLE 4
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GUARANTEE TRUSTEE
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SECTION 4.01. Qualifications...........................................10
SECTION 4.02. Appointment, Removal and Resignation of Guarantee
Trustee...........................................................11
ARTICLE 5
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GUARANTEE
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SECTION 5.01. Guarantee................................................12
SECTION 5.02. Waiver of Notice.........................................12
SECTION 5.03. Obligations Not Affected.................................12
SECTION 5.04. Enforcement of Guarantee.................................13
SECTION 5.05. Guarantee of Payment.....................................14
SECTION 5.06. Subrogation..............................................14
SECTION 5.07. Independent Obligations..................................14
ARTICLE 6
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LIMITATION OF TRANSACTIONS; SUBORDINATION
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SECTION 6.01. Limitation of Transactions...............................14
SECTION 6.02. Subordination............................................15
ARTICLE 7
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TERMINATION
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SECTION 7.01. Termination..............................................15
ARTICLE 8
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LIMITATION OF LIABILITY; INDEMNIFICATION
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SECTION 8.01. Exculpation..............................................16
SECTION 8.02. Indemnification..........................................16
ARTICLE 9
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MISCELLANEOUS
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SECTION 9.01. Successors and Assigns...................................17
SECTION 9.02. Amendments...............................................17
SECTION 9.03. Notices..................................................17
SECTION 9.04. Genders..................................................18
SECTION 9.05. Benefit..................................................18
SECTION 9.06. Governing Law............................................18
SECTION 9.07. Counterparts.............................................18
SECTION 9.08. Exercise of Overallotment Option.........................18
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THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR")), OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN
AN OFFSHORE TRANSACTION (2) AGREES THAT IT WILL NOT PRIOR TO
THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF
THE SECURITY EVIDENCED HEREBY UNDER RULE 144(k) UNDER THE
SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO AES OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, BEFORE SUCH TRANSFER
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT
OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE TRUST THAT
SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR,
THE TRANSFEROR MUST, BEFORE SUCH TRANSFER, FURNISH TO THE
ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of October 29, 1997, is executed and
delivered by The AES Corporation, a Delaware corporation (the "Guarantor"), and
The First National Bank of Chicago, a national banking association, as the
initial Guarantee Trustee (as defined herein) for the benefit of
the Holders (as defined herein) from time to time of the Preferred Securities
(as defined herein) of AES Trust II, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of October 29, 1997 among the trustees of the Issuer
named therein, The AES Corporation, as Sponsor, and the Holders from time to
time of undivided beneficial interests in the assets of the Issuer, the Issuer
may issue up to $345,000,000 aggregate liquidation amount of its $2.75 Term
Convertible Securities, Series B (the "Preferred Securities") representing
undivided beneficial interests in the assets of the Issuer and having the terms
set forth in Exhibit B to the Declaration, of which $300,000,000 liquidation
amount of Preferred Securities are being issued as of the date hereof. Up to the
remaining $45,000,000 liquidation amount of Preferred Securities may be issued
by the Issuer if and to the extent that the over-allotment option granted by the
Guarantor and the Issuer pursuant to the Purchase Agreement (as defined in the
Declaration) is exercised by the Initial Purchasers named in the Purchase
Agreement.
WHEREAS, as incentive for the Holders to purchase Preferred Securities,
the Guarantor desires to irrevocably and unconditionally agree, to the extent
set forth herein, to pay to the Holders of the Preferred Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by the initial
purchasers thereof of Preferred Securities, which purchase the Guarantor hereby
agrees shall benefit the Guarantor, the Guarantor executes and delivers this
Guarantee Agreement for the benefit of the Holders from time to time of the
Preferred Securities.
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) Capitalized terms used in this Guarantee
Agreement but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.01;
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
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(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections
are to Articles and Sections of this Guarantee Agreement unless otherwise
specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Commission" means the Securities and Exchange Commission.
"Common Securities" means the securities representing undivided
beneficial interests in the assets of the Issuer, having the terms set forth in
Exhibit C to the Declaration.
"Common Stock" means the common stock of the Guarantor, par value $.01
per share.
"Covered Person" means any Holder of Preferred Securities.
"Debentures" means the series of Junior Subordinated Debentures issued
by the Guarantor under the Indenture to the Property Trustee and entitled the
"5.50% Junior Subordinated Convertible Debentures due 2012".
"Distributions" means the periodic distributions and other payments
payable to Holders of Preferred Securities in accordance with the terms of the
Preferred Securities set forth in Exhibit B to the Declaration.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement.
"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions and the redemption price, including all accrued and unpaid
Distributions to the date of
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redemption (the "Redemption Price"), with respect to the Preferred Securities
called for redemption by the Issuer but only if and to the extent that in each
case the Guarantor has made a payment to the Property Trustee of interest or
principal on the Debentures and (ii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Issuer (other than in connection
with the distribution of Debentures to Holders or the redemption of all the
Preferred Securities upon the maturity or redemption of the Debentures as
provided in the Declaration), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Preferred Securities to
the date of payment, to the extent the Issuer has funds available therefor, or
(b) the amount of assets of the Issuer remaining available for distribution to
Holders in liquidation of the Issuer (in either case, the "Liquidation
Distribution").
"Guarantee Trustee" means The First National Bank of Chicago, a
national banking association, until a Successor Guarantee Trustee has been
appointed and accepted such appointment pursuant to the terms of this Guarantee
Agreement and thereafter means each such Successor Guarantee Trustee.
"Holder" shall mean any holder, as registered on the books and records
of the Issuer, of any Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any entity directly or indirectly controlling
or controlled by or under direct or indirect common control with the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, and any officers, directors, shareholders, members, partners,
employees, representatives or agents of the Guarantee Trustee.
"Indenture" means the Junior Subordinated Indenture dated as of March
1, 1997 between the Guarantor and The First National Bank of Chicago, as
trustee, as supplemented by the Second Supplemental Indenture thereto dated as
of October 29, 1997, pursuant to which the Debentures are to be issued.
"Majority in liquidation amount of the Preferred Securities" means,
except as otherwise required by the Trust Indenture Act, Holder(s) of
outstanding Preferred Securities voting together as a single class, who are the
record owners of Preferred Securities whose liquidation amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) represents more than 50% of the liquidation amount of all
outstanding Preferred Securities.
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"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Securities" has the meaning set forth in the first WHEREAS
clause above.
"Property Trustee" means the Person acting as Property Trustee under
the Declaration.
"Redemption Price" has the meaning set forth in the definition of
"Guarantee Payments."
"Responsible Officer" means, with respect to the Guarantee Trustee, the
chairman of the board of directors, the president, any vice-president, any
assistant vice-president, the secretary, any assistant secretary, the treasurer,
any assistant treasurer, any trust officer or assistant trust officer or any
other officer of the Guarantee Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as a Guarantee Trustee under Section
4.01(a).
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application. (a) This Guarantee
Agreement is subject to the provisions of the Trust Indenture Act that are
required to be part of this Guarantee Agreement and shall, to the extent
applicable, be governed by such provisions;
(b) if and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by ss.ss. 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control; and
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(c) the application of the Trust Indenture Act to this Guarantee
Agreement shall not affect the nature of the Preferred Securities as equity
securities representing undivided beneficial interests in the assets of the
Issuer.
SECTION 2.02. Lists of Holders of Preferred Securities. (a) The
Guarantor shall provide the Guarantee Trustee with such information as is
required under ss. 312(a) of the Trust Indenture Act at the times and in the
manner provided in ss. 312(a); and
(b) the Guarantee Trustee shall comply with its obligations under
ss.ss. 310(b), 311 and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Guarantee Trust. Within 60 days after May
15 of each year, commencing May 1998 the Guarantee Trustee shall provide to the
Holders of the Preferred Securities such reports as are required by ss. 313 of
the Trust Indenture Act, if any, in the form, in the manner and at the times
provided by ss. 313 of the Trust Indenture Act. The Guarantee Trustee shall also
comply with the requirements of ss. 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Guarantee Trust. The Guarantor shall
provide to the Guarantee Trustee, the Commission and the Holders of the
Preferred Securities, as applicable, such documents, reports and information as
required by ss. 314(a)(1)-(3) (if any) of the Trust Indenture Act and the
compliance certificates required by ss. 314(a)(4) and (c) of the Trust Indenture
Act, any such certificates to be provided in the form, in the manner and at the
times required by ss. 314(a)(4) and (c) of the Trust Indenture Act (provided
that any certificate to be provided pursuant to ss. 314(a)(4) of the Trust
Indenture Act shall be provided within 120 days of the end of each fiscal year
of the Issuer).
SECTION 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Guarantee Agreement
which relate to any of the matters set forth in ss. 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given pursuant to ss.
314(c) shall comply with ss. 314(e) of the Trust Indenture Act.
SECTION 2.06. Events of Default; Waiver. (a) Subject to Section
2.06(b), Holders of Preferred Securities may by vote of at least a Majority in
liquidation amount of the Preferred Securities, (A) direct the time, method and
place of conducting any proceeding for any remedy available to the Guarantee
Trustee, or exercising any trust or power conferred upon by the Guarantee
Trustee or (B) on behalf of the Holders of all Preferred Securities waive any
past Event of Default
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and its consequences. Upon such waiver, any such default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Guarantee Agreement, but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any right
consequent thereon.
(b) The right of any Holder of Preferred Securities to receive payment
of the Guarantee Payments in accordance with this Guarantee Agreement, or to
institute suit for the enforcement of any such payment, shall not be impaired
without the consent of each such Holder.
SECTION 2.07. Disclosure of Information. The disclosure of information
as to the names and addresses of the Holders of the Preferred Securities in
accordance with ss. 312 of the Trust Indenture Act, regardless of the source
from which such information was derived, shall not be deemed to be a violation
of any existing law, or any law hereafter enacted which does not specifically
refer to ss. 312 of the Trust Indenture Act, nor shall the Guarantee Trustee be
held accountable by reason of mailing any material pursuant to a request made
under ss. 312(b) of the Trust Indenture Act.
SECTION 2.08. Conflicting Interest. The Declaration shall be deemed to
be specifically described in this Guarantee Agreement for the purposes of clause
(i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This
Guarantee Agreement shall be held by the Guarantee Trustee in trust for the
benefit of the Holders of the Preferred Securities. The Guarantee Trustee shall
not transfer its right, title and interest in the Guarantee Agreement to any
Person except a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee of its appointment to act as Guarantee Trustee or to a Holder
of Preferred Securities exercising his or her rights pursuant to Section 5.04.
The right, title and interest of the Guarantee Trustee to the Guarantee
Agreement shall vest automatically in each Person who may hereafter be appointed
as Guarantee Trustee in accordance with Article 4. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered.
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(b) If an Event of Default occurs and is continuing, the Guarantee
Trustee shall enforce this Guarantee Agreement for the benefit of the Holders of
the Preferred Securities.
(c) This Guarantee Agreement and all moneys received by the Property
Trustee hereunder in respect of the Guarantee Payments will not be subject to
any right, charge, security interest, lien or claim of any kind in favor of, or
for the benefit of that Guarantee Trustee or its agents or their creditors.
(d) The Guarantee Trustee shall, within 90 days after the occurrence of
an Event of Default known to the Guarantee Trustee, transmit by mail, first
class postage prepaid, to the holders of the Preferred Securities, as their
names and addresses appear upon the register, notice of all such Events of
Default, unless such defaults shall have been cured before the giving of such
notice; provided, that, the Guarantee Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee,
or a trust committee of directors and/or Responsible Officers, of the Guarantee
Trustee in good faith determine that the withholding of such notice is in the
interests of the Holders of the Preferred Securities. The Guarantee Trustee
shall not be deemed to have knowledge of any default except any default as to
which the Guarantee Trustee shall have received written notice or a Responsible
Officer charged with the administration of this Guarantee Agreement shall have
obtained written notice.
(e) The Guarantee Trustee shall continue to serve as a Trustee unless a
Successor Guarantee Trustee has been appointed and accepted that appointment in
accordance with Article 4.
SECTION 3.02. Certain Rights and Duties of the Guarantee Trustee. (a)
The Guarantee Trustee, before the occurrence of an Event of Default and after
the curing of all Events of Default that may have occurred, shall undertake to
perform only such duties as are specifically set forth in this Guarantee
Agreement, and no implied covenants shall be read into this Guarantee Agreement
against the Guarantee Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.06(a)), the Guarantee Trustee
shall exercise such of the rights and powers vested in it by this Guarantee
Agreement, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except that:
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(i) prior to the occurrence of an Event of Default and after the curing
or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall
be determined solely by the express provisions of this
Guarantee Agreement, and the Guarantee Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Guarantee
Agreement, and no implied covenants or obligations shall be
read into this Guarantee Agreement against the Guarantee
Trustee; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to
the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this Guarantee Agreement; but in the case of
any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Guarantee
Trustee, the Guarantee Trustee shall be under a duty to
examine the same to determine whether or not they conform to
the requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of Preferred Securities as provided
herein relating to the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee Trustee
under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if it shall have
reasonable ground for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Guarantee Agreement or adequate indemnity against such risk or
liability is not reasonably assured to it.
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(c) Subject to the provisions of Section 3.02(a) and (b):
(i) whenever in the administration of this Guarantee Agreement, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part,
request and rely upon a certificate, which shall comply with the
provisions of ss. 314(e) of the Trust Indenture Act, signed by any
authorized officer of the Guarantor;
(ii) the Guarantee Trustee (A) may consult with counsel (which may be
counsel to the Guarantor or any of its Affiliates and may include any
of its employees) selected by it in good faith and with due care and
the written advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon and in accordance with such advice
and opinion and (B) shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement
from any court of competent jurisdiction;
(iii) the Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed by it in good faith and with due care;
(iv) the Guarantee Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Guarantee Agreement
at the request or direction of any Holders of Preferred Securities,
unless such Holders shall have offered to the Guarantee Trustee
reasonable security and indemnity against the costs, expenses
(including its attorneys' fees and expenses) and liabilities that
might be incurred by it in complying with such request or direction;
provided that nothing contained in this clause (iv) shall relieve the
Guarantee Trustee of the obligation, upon the occurrence of an Event
of Default (which has not been cured or waived) to exercise such of
the rights and powers vested in it by this Guarantee Agreement, and to
use the same degree of care and skill in this exercise, as a prudent
person would exercise or use under the circumstances in the conduct of
his or her own affairs; and
(v) any action taken by the Guarantee Trustee or its agents hereunder
shall bind the Holders of the Preferred Securities and the signature of
the Guarantee Trustee or its agents alone shall be sufficient and
effective to
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perform any such action; and no third party shall be required to
inquire as to the authority of the Guarantee Trustee to so act, or as
to its compliance with any of the terms and provisions of this
Guarantee Agreement, both of which shall be conclusively evidenced by
the Guarantee Trustee's or its agent's taking such action.
SECTION 3.03. Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Guarantee shall be taken as the statements of the
Guarantor and the Guarantee Trustee does not assume any responsibility for their
correctness. The Guarantee Trustee makes no representations as to the validity
or sufficiency of this Guarantee Agreement.
ARTICLE 4
GUARANTEE TRUSTEE
SECTION 4.01. Qualifications. (a) There shall at all times be a
Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a national banking association or corporation organized and
doing business under the laws of the United States of America
or any State or Territory thereof or of the District of
Columbia, or a corporation or Person permitted by the
Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus
of at least $50,000,000, and subject to supervision or
examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority
referred to above, then for the purposes of this section
4.01(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
If at any time the Guarantee Trustee shall cease to satisfy the
requirements of clauses (i)-(ii) above, the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.02. If the
Guarantee Trustee has or shall acquire any "conflicting interest" within the
meaning of ss. 310(b) of the Trust
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Indenture Act, the Guarantee Trustee and the Guarantor shall in all respects
comply with the provisions of ss. 310(b) of the Trust Indenture Act.
SECTION 4.02. Appointment, Removal and Resignation of Guarantee
Trustee. (a) Subject to Section 4.02(b), the Guarantee Trustee may be appointed
or removed without cause at any time by the Guarantor except following the
occurrence and during the continuation of an Event of Default.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 4.02(a) until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01(a) has been
appointed and has accepted such appointment by written instrument executed by
such Successor Guarantee Trustee and delivered to the Guarantor and the
Guarantee Trustee being removed.
(c) The Guarantee Trustee appointed to office shall hold office until
his successor shall have been appointed or until its removal or resignation.
(d) The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument (a "Resignation Request") in
writing signed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that no such resignation of the Guarantee
Trustee shall be effective until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01(a) has been
appointed and has accepted such appointment by instrument executed by such
Successor Guarantee Trustee and delivered to Guarantor and the resigning
Guarantee Trustee.
(e) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 delivery to the Guarantor
of a Resignation Request, the resigning Guarantee Trustee may petition any court
of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such
court may thereupon after such notice, if any, as it may deem proper and
prescribe, appoint a Successor Guarantee Trustee.
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ARTICLE 5
GUARANTEE
SECTION 5.01. Guarantee. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by the Issuer) regardless of any defense, right of
set-off or counterclaim which the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders.
SECTION 5.02. Waiver of Notice. The Guarantor hereby waives notice of
acceptance of this Guarantee Agreement and of any liability to which it applies
or may apply, presentment, demand for payment, any right to require a proceeding
first against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 5.03. Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or
any portion of the Distributions (other than an extension of time for
payment of Distributions that results from the extension of any
interest payment period on the Debentures), Redemption Price,
Liquidation Distribution (as defined in the Declaration) or any other
sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the
Preferred Securities, or any action on the part of the Issuer granting
indulgence or extension of any kind;
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(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.03 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.04. Enforcement of Guarantee. The Guarantor and the Guarantee
Trustee expressly acknowledge that (i) this Guarantee Agreement will be
deposited with the Guarantee Trustee to be held for the benefit of the Holders;
(ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on
behalf of the Holders; (iii) Holders representing not less than a Majority in
liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available in
respect of this Guarantee Agreement including the giving of directions to the
Guarantee Trustee, or exercising any trust or other power conferred upon the
Guarantee Trustee under this Guarantee Agreement, and (iv) notwithstanding the
foregoing, if the Guarantor has failed to make any Guarantee Payment hereunder,
any Holder of Preferred Securities may institute a legal proceeding directly
against the Guarantor to enforce its rights under this Guarantee Agreement,
without first instituting a legal proceeding against the Issuer, the Guarantee
Trustee, or any other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates a
guarantee of payment and not merely of collection. This Guarantee Agreement will
not be discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by the Issuer).
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SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders against the Issuer in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
SECTION 5.07. Independent Obligations. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Preferred Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
ARTICLE 6
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01. Limitation of Transactions. So long as any Preferred
Securities remain outstanding, the Guarantor will not declare or pay dividends
on, or redeem, purchase, acquire or make a distribution or liquidation payment
with respect to, any of its common stock or preferred stock or make any
guarantee payment with respect thereto or make any payment of interest, premium
(if any) or principal on any debt securities issued by the Guarantor which rank
pari passu with or junior to the Debentures, if at such time (i) the Guarantor
shall be in default with respect to its Guarantee Payments or other payment
obligations hereunder, (ii) there shall have occurred any event of default under
the Declaration or (iii) the Guarantor shall have given notice of its selection
of an Extension Period (as defined in the Indenture) and such period, or any
extension thereof, is continuing; provided that the foregoing will not apply to
any stock dividends paid by the Guarantor in Common Stock. In addition, so long
as any Preferred Securities remain outstanding, the Guarantor (i) will remain
the sole direct or indirect owner of all of the outstanding Common Securities
and shall not cause or permit the Common Securities to be transferred except to
the extent such transfer is permitted under Section 9.01 of the Declaration;
provided that any permitted successor of the Guarantor under the Indenture may
succeed to the Guarantor's ownership of the Common Securities and (ii) will use
reasonable efforts to cause
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the Issuer to continue to be treated as a grantor trust for United States
federal income tax purposes except in connection with a distribution of
Debentures as provided in the Declaration.
SECTION 6.02. Subordination. This Guarantee Agreement will constitute
an unsecured obligation of the Guarantor and will rank (i) subordinate and
junior in right of payment to all other liabilities of the Guarantor, including
the Debentures, except those made pari passu herewith or subordinate hereto by
their terms, and (ii) pari passu in right of payment with the most senior
preferred stock issued, from time to time, if any, by the Guarantor and with
respect to obligations under other guarantee agreements which the Guarantor may
enter into from time to time to the extent that such agreements shall be entered
into in substantially the form hereof and provide for comparable guarantees by
the Guarantor of payment on preferred securities issued by other AES Trusts.
ARTICLE 7
TERMINATION
SECTION 7.01. Termination. This Guarantee Agreement shall terminate and
be of no further force and effect upon full payment of the Redemption Price of
all Preferred Securities, or upon the distribution of Debentures to Holders of
Preferred Securities and Common Securities in exchange for all of the Preferred
Securities and Common Securities, or upon full payment of the amounts payable in
accordance with the Declaration upon liquidation of the Issuer. Notwithstanding
the foregoing, this Guarantee Agreement will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder must restore payment
of any sums paid with respect to the Preferred Securities or this Guarantee
Agreement.
ARTICLE 8
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 8.01. Exculpation. (a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Guarantor or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith and in a
manner such Indemnified Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this Guarantee Agreement or by
law, except that an Indemnified Person shall be liable for any such loss, damage
or claim incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
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(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.02. Indemnification. (a) To the fullest extent permitted by
applicable law, the Guarantor shall indemnify and hold harmless each Indemnified
Person from and against any loss, damage or claim incurred by such Indemnified
Person by reason of any act or omission performed or omitted by such Indemnified
Person in good faith and in a manner such Indemnified Person reasonably believed
to be within the scope of authority conferred on such Indemnified Person by this
Guarantee Agreement, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Indemnified
Person by reason of negligence or willful misconduct with respect to such acts
or omissions.
(b) To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by the
Guarantor prior to the final disposition of such claim, demand, action, suit or
proceeding upon receipt by the Guarantor of an undertaking by or on behalf of
the Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified as authorized in Section
8.02(a).
(c) The provisions of this Article shall survive the termination of
this Guarantee Agreement or the resignation or removal of the Guarantee Trustee.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Successors and Assigns. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assignees,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders of the Preferred Securities then outstanding. Except in
connection with a consolidation, merger or sale involving the Guarantor that is
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permitted under Article Ten of the Indenture, the Guarantor shall not assign its
obligations hereunder.
SECTION 9.02. Amendments. Except with respect to any changes which do
not adversely affect the rights of Holders (in which case no consent of Holders
will be required), this Guarantee Agreement may only be amended with the prior
approval of the Holders of not less than a Majority in liquidation amount of the
Preferred Securities. The provisions of Section 12.02 of the Declaration
concerning meetings of Holders shall apply to the giving of such approval.
SECTION 9.03. Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied or mailed by first class
mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address as the Guarantor may give notice of to the Holders:
The AES Corporation
1001 North 19th Street
Arlington, Virginia 22209
Facsimile No.: (703) 528-4510
Attention: General Counsel and Secretary
(b) if given to the Guarantee Trustee, to the address set forth below
or such other address as the Guarantee Trustee may give notice to the
Holders:
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Administration
Telecopy: (312) 407-1708
(c) if given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Issuer.
All notices hereunder shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
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SECTION 9.04. Genders. The masculine, feminine and neuter genders used
herein shall include the masculine, feminine and neuter genders.
SECTION 9.05. Benefit. This Guarantee Agreement is solely for the
benefit of the Holders and subject to Section 3.01(a) is not separately
transferable from the Preferred Securities.
SECTION 9.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS).
SECTION 9.07. Counterparts. This Guarantee Agreement may be executed in
counterparts, each of which shall be an original; but such counterparts shall
together constitute one and the same instrument.
SECTION 9.08. Exercise of Overallotment Option. If and to the extent
that Preferred Securities are issued by the Issuer upon exercise of the
overallotment option referred to the second WHEREAS clause, the Guarantor agrees
to give prompt notice thereof to the Guarantee Trustee but the failure to give
such notice shall not relieve the Guarantor of any of its obligations hereunder.
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THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
The AES Corporation
By: /s/ Barry Sharp
-------------------------------------
Name: Barry Sharp
Title: Vice President and Chief
Financial Officer
The First National Bank of Chicago
As Guarantee Trustee
By: /s/ Mary Fonti
-------------------------------------
Name: Mary Fonti
Title: Assistant Vice President
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