<SUBMISSION>
<ACCESSION-NUMBER>0000950103-02-001395
<TYPE>8-K
<PUBLIC-DOCUMENT-COUNT>9
<PERIOD>20021217
<ITEMS>5
<ITEMS>7
<FILING-DATE>20021217
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>AES CORPORATION
<CIK>0000874761
<ASSIGNED-SIC>4991
<IRS-NUMBER>541163725
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>001-12291
<FILM-NUMBER>02860679
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1001 N 19TH ST
<STREET2>STE 2000
<CITY>ARLINGTON
<STATE>VA
<ZIP>22209
<PHONE>7035221315
</BUSINESS-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>dec1602_8k.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>AES 8-K</TITLE>


<HR style="MARGIN-TOP: -2px" color=#000000 noShade SIZE=4>
<HR style="MARGIN-TOP: -10px" color=#000000 noShade SIZE=1>
<BR>
<BR>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>SECURITIES AND
EXCHANGE COMMISSION<BR></B> </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Washington, D.C.20549</B> </FONT> </P>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=4><B>FORM 8-K </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>CURRENT REPORT<BR>PURSUANT
TO SECTION 13 OR 15 (d) OF<BR>THE SECURITIES EXCHANGE ACT OF 1934 </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Date of Report (date
of earliest event reported):  December 17, 2002 </B></FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="4"><B>THE AES CORPORATION</B><BR> </FONT>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">(exact name of registrant as specified in its charter) </FONT> </P>

<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR>
<TD align=CENTER width="33%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>DELAWARE</B><BR>
(State of Incorporation)</FONT></TD>
<TD align=CENTER width="33%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>333-15487</B><BR>
(Commission File No.)</font></TD>
<TD align=CENTER width="33%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>54-1163725</B><BR>
(IRS Employer Identification No.)</font></TD>
</TR>
</TABLE>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1001 North 19th Street,
Suite 2000<BR>Arlington, Virginia 22209</B><BR>(Address of principal executive offices, including
zip code) </FONT> </P>


<!-- MARKER FORMAT-SHEET="Center" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Registrant&#146;s
telephone number, including area code: (703) 522-1315 </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOT APPLICABLE</B><BR>(Former
Name or Former Address, if changed since last report) </FONT> </P>

<BR>
<BR>

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<HR style="MARGIN-TOP: -10px" color=#000000 noShade SIZE=4>


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<BR>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 5. Other Events</B> </FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Information
Related to AES Drax Holdings Limited</B> </FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
December 13, 2002, The AES Corporation&#146;s (the &#147;Registrant&#148;) subsidiary
AES Drax Holdings Limited filed a Form 6-K announcing the information contained in the press
release attached as Exhibit 99.1 to this report and incorporated by reference herein.  </FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Documents
Executed in Connection with Bond Exchange and Bank Refinancing</B> </FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the Registrant&#146;s recently completed bond exchange and
bank refinancing (each as described in the Registrant&#146;s current report on
Form 8-K filed on December 13, 2002), the Registrant entered into the
agreements attached to this report as Exhibits 4.1, 4.2, 4.3, 4.4, 4.5, 99.2 and 99.3 and
incorporated by reference herein.  </FONT></P>


<!-- MARKER FORMAT-SHEET="Left" FSL="Workstation" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Item 7. Exhibits.</B> </FONT> </P>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.1 </FONT></TD>
<TD WIDTH="90%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Senior Indenture,
dated December 13, 2002, between The AES Corporation and Wells Fargo Bank Minnesota, National Association,
as Trustee.
</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.2 </FONT></TD>
<TD WIDTH="90%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Collateral Trust Agreement dated as of December 12, 2002 among The AES Corporation, AES International
Holdings II, Ltd., Wilmington Trust Company, as corporate trustee and Bruce L. Bisson, as
individual trustee.
</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.3 </FONT></TD>
<TD WIDTH="90%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Security Agreement dated as of December 12, 2002 made by The AES Corporation to Wilmington Trust
Company, as corporate trustee and Bruce L. Bisson, as individual trustee.
</FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.4 </FONT></TD>
<TD WIDTH="90%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Charge Over Shares dated as of December 12, 2002 between AES International Holdings II, Ltd.
and Wilmington Trust Company, as corporate trustee and Bruce L. Bisson, as individual trustee.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Hang Level 1" FSL="Workstation" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.5 </FONT></TD>
<TD WIDTH="90%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Contingent Value Rights Agreement, dated as of December 13, 2002, between
The AES Corporation and Wells Fargo Bank Minnesota, National Association, as Trustee.
</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">99.1 </FONT></TD>
<TD WIDTH="90%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Press Release issued by AES Drax Holdings Limited dated December 13, 2002.
</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">99.2 </FONT></TD>
<TD WIDTH="90%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Amended and Restated Credit, Reimbursement and Exchange Agreement dated as of December 12, 2002
among The AES Corporation, the Subsidiary Guarantors party thereto, the Banks party thereto, the
Revolving Fronting Banks and the Drax LOC Fronting Bank party thereto and Citicorp USA, Inc.,
as Administrative Agent and as Collateral Agent for the Bank Parties.
</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">99.3 </FONT></TD>
<TD WIDTH="90%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Second Amended and Restated Pledge Agreement dated as of December 12, 2002 between AES EDC
Funding II, L.L.C.  and Citicorp USA, Inc., as Collateral Agent.
</FONT></TD>
</TR>
</TABLE>
<BR>


<br>
<br>
<br clear=all>
<br>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>SIGNATURES</B></FONT></P>


<!-- MARKER FORMAT-SHEET="Indent" FSL="Workstation" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.</FONT></P>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: December 17, 2002</FONT></TD>
<TD WIDTH=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>THE
AES CORPORATION </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>By:  </FONT></TD>
<TD WIDTH=36%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/
Brian Miller<HR ALIGN=left SIZE=1 width="85%"></FONT></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Name Title (With By:)" FSL="Workstation" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=60%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=4%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=36%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Name:
Brian Miller<BR>Title: Corporate Secretary </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>



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<BR>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>INDEX TO EXHIBITS </B></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="BOTTOM">
<TD ALIGN="center" WIDTH="10%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">EXHIBIT<BR><U>NUMBER</U> </FONT></TD>
<TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
<TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>EXHIBIT</U>  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.1 </FONT></TD>
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Senior Indenture,
dated December 13, 2002, between The AES Corporation and Wells Fargo Bank Minnesota, National Association,
as Trustee.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Hang Level 1" FSL="Workstation" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.2 </FONT></TD>
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Collateral Trust Agreement dated as of December 12, 2002 among The AES Corporation, AES International
Holdings II, Ltd., Wilmington Trust Company, as corporate trustee and Bruce L. Bisson, as
individual trustee.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Hang Level 1" FSL="Workstation" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.3 </FONT></TD>
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Security Agreement dated as of December 12, 2002 made by The AES Corporation to Wilmington Trust
Company, as corporate trustee and Bruce L. Bisson, as individual trustee.
</FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.4 </FONT></TD>
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Charge Over Shares dated as of December 12, 2002 between AES International Holdings II, Ltd.
and Wilmington Trust Company, as corporate trustee and Bruce L. Bisson, as individual trustee.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Hang Level 1" FSL="Workstation" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.5 </FONT></TD>
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Contingent Value Rights Agreement, dated as of December 13, 2002, between
The AES Corporation and Wells Fargo Bank Minnesota, National Association, as Trustee.
</FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Hang Level 1" FSL="Workstation" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">99.1 </FONT></TD>
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Press Release issued by AES Drax Holdings Limited dated December 13, 2002.
</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">99.2 </FONT></TD>
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Amended and Restated Credit, Reimbursement and Exchange Agreement dated as of December 12, 2002
among The AES Corporation, the Subsidiary Guarantors party thereto, the Banks party thereto, the
Revolving Fronting Banks and the Drax LOC Fronting Bank party thereto and Citicorp USA, Inc.,
as Administrative Agent and as Collateral Agent for the Bank Parties.
</FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD ALIGN="LEFT" WIDTH="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">99.3 </FONT></TD>
<TD ALIGN="LEFT" WIDTH="5%">&nbsp;</TD>
<TD WIDTH="85%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">
Second Amended and Restated Pledge Agreement dated as of December 12, 2002 between AES EDC
Funding II, L.L.C.  and Citicorp USA, Inc., as Collateral Agent.
</FONT></TD>
</TR>
</TABLE>
<BR>

</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>3
<FILENAME>dec1602_ex4-1.txt
<TEXT>
                                                                    EXHIBIT 4.1


                              THE AES CORPORATION
                                 as the Company


                                      and


                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

                                   as Trustee



                       ---------------------------------

                                Senior Indenture

                         Dated as of December 13, 2002

                       ---------------------------------


<PAGE>

                              TABLE OF CONTENTS(1)
                               -----------------


                                                                           PAGE
                                                                           ----

                                   ARTICLE 1
                   DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01.  Definitions....................................................1
Section 1.02.  Other Definitions.............................................19
Section 1.03.  Rules of Construction.........................................20

                                   ARTICLE 2
                                   THE NOTES

Section 2.01.  Forms Generally, Certain Issues Regarding Preconditions
               for Transfer and Payment......................................20
Section 2.02.  Execution and Authentication..................................21
Section 2.03.  Amount Unlimited..............................................21
Section 2.04.  Denomination and Date of Securities; Payment of Interest......22
Section 2.05.  Registrar and Paying Agent; Agents Generally..................22
Section 2.06.  Paying Agent to Hold Money in Trust...........................23
Section 2.07.  Restrictions on Transfer and Exchange.........................23
Section 2.08.  Registration, Transfer and Exchange...........................24
Section 2.09.  Replacement Notes.............................................27
Section 2.10.  Outstanding Notes.............................................27
Section 2.11.  Temporary Notes...............................................28
Section 2.12.  Cancellation..................................................28
Section 2.13.  CUSIP Numbers.................................................29
Section 2.14.  Defaulted Interest............................................29

                                   ARTICLE 3
                                   REDEMPTION

Section 3.01.  Optional Redemption...........................................29
Section 3.02.  Mandatory Redemption Upon Receipt of Net Cash Proceeds
               from Certain Transactions.....................................29
Section 3.03.  Additional Mandatory Redemption...............................30
Section 3.04.  Notice of Redemption; Partial Redemptions.....................31
Section 3.05.  Payment of Notes Called for Redemption........................32


--------
     (1) Note: The Table of Contents shall not for any purposes be deemed to be
a part of the Indenture.


                                       i
<PAGE>


Section 3.06.  Exclusion of Certain Notes from Eligibility for Selection
               for Redemption................................................33

                                   ARTICLE 4
                                   COVENANTS

Section 4.01.  Payment of Notes..............................................33
Section 4.02.  Maintenance of Office or Agency...............................34
Section 4.03.  Noteholders' Lists............................................34
Section 4.04.  Certificate to Trustee........................................34
Section 4.05.  Reports by the Company........................................35
Section 4.06.  Limitation on Liens...........................................35
Section 4.07.  Equal and Ratable Liens.......................................36
Section 4.08.  Restriction on Subsidiary Guarantees..........................36
Section 4.09.  Limitation on Sale Leaseback Transactions.....................37
Section 4.10.  Transfer of Certain Net Cash Proceeds Received by
               Subsidiaries..................................................37

                                   ARTICLE 5
                             SUCCESSOR CORPORATION

Section 5.01.  When Company May Merge, Etc...................................38
Section 5.02.  Successor Substituted.........................................39

                                   ARTICLE 6
                              DEFAULT AND REMEDIES

Section 6.01.  Events of Default.............................................39
Section 6.02.  Acceleration..................................................40
Section 6.03.  Other Remedies................................................42
Section 6.04.  Waiver of Past Defaults.......................................42
Section 6.05.  Control by Majority...........................................42
Section 6.06.  Limitation on Suits...........................................42
Section 6.07.  Rights of Holders to Receive Payment..........................43
Section 6.08.  Collection Suit by Trustee....................................43
Section 6.09.  Trustee May File Proofs of Claim..............................43
Section 6.10.  Application of Proceeds.......................................44
Section 6.11.  Restoration of Rights and Remedies............................44
Section 6.12.  Undertaking for Costs.........................................44
Section 6.13.  Rights and Remedies Cumulative................................45
Section 6.14.  Delay or Omission Not Waiver..................................45


                                      ii
<PAGE>

                                   ARTICLE 7
                                    TRUSTEE

Section 7.01.  General.......................................................45
Section 7.02.  Certain Rights of Trustee.....................................45
Section 7.03.  Individual Rights of Trustee..................................47
Section 7.04.  Trustee's Disclaimer..........................................47
Section 7.05.  Notice of Default.............................................47
Section 7.06.  Compensation and Indemnity....................................47
Section 7.07.  Replacement of Trustee........................................48
Section 7.08.  Successor Trustee by Merger, Etc..............................49
Section 7.09.  Money Held in Trust...........................................50

                                   ARTICLE 8
           SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS

Section 8.01.  Satisfaction and Discharge of Indenture.......................50
Section 8.02.  Application by Trustee of Funds Deposited for Payment
               of Notes......................................................51
Section 8.03.  Repayment of Moneys Held by Paying Agent......................51
Section 8.04.  Return of Moneys Held by Trustee and Paying Agent
               Unclaimed for Two Years.......................................51
Section 8.05.  Defeasance and Discharge of Indenture.........................51
Section 8.06.  Defeasance of Certain Obligations.............................53
Section 8.07.  Reinstatement.................................................54

                                   ARTICLE 9
                      AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 9.01.  Without Consent of Holders....................................54
Section 9.02.  With Consent of Holders.......................................55
Section 9.03.  Revocation and Effect of Consent..............................56
Section 9.04.  Notation on or Exchange of Notes..............................57
Section 9.05.  Trustee to Sign Amendments, Etc...............................57

                                   ARTICLE 10
                                 MISCELLANEOUS

Section 10.01.  Notices......................................................57
Section 10.02.  Certificate and Opinion as to Conditions Precedent...........59
Section 10.03.  Statements Required in Certificate or Opinion................59
Section 10.04.  Evidence of Ownership........................................59
Section 10.05.  Rules by Trustee, Paying Agent or Registrar..................59
Section 10.06.  Payment Date Other Than a Business Day.......................60
Section 10.07.  Governing Law................................................60


                                      iii
<PAGE>

Section 10.08.  No Adverse Interpretation of Other Agreements................60
Section 10.09.  Successors...................................................60
Section 10.10.  Duplicate Originals..........................................60
Section 10.11.  Separability.................................................60
Section 10.12.  Table of Contents, Headings, Etc.............................60
Section 10.13.  Incorporators, Stockholders, Officers and Directors
                of Company Exempt from Individual Liability..................60
Section 10.14.  Judgment Currency............................................61

                                   ARTICLE 11
                             SECURITY ARRANGEMENTS

Section 11.01.  Security.....................................................61
Section 11.02.  Notice of Payment, Discharge or Defeasance...................63


                                      iv
<PAGE>


     INDENTURE, dated as of December 13, 2002, between The AES Corporation, a
Delaware corporation, as the Company, and Wells Fargo Bank Minnesota, National
Association, a national banking association, as Trustee.

                            RECITALS OF THE COMPANY

     WHEREAS, the Company has duly authorized the execution and delivery of the
Indenture to provide for the issuance from time to time of up to such Principal
amount or amounts as may from time to time be authorized of the Company's 10%
Senior Secured Notes Due 2005 (the "Notes") in accordance with the terms of
this Indenture; and

     WHEREAS, all things necessary to make this Indenture a valid agreement of
the Company, in accordance with its terms, have been done, and the Company has
done all things necessary to make the Notes, when executed by the Company and
authenticated and delivered by the Trustee, the valid obligations of the
Company as hereinafter provided;

     NOW, THEREFORE THIS INDENTURE WITNESSETH

     For and in consideration of the premises and the purchases of the Notes by
the Holders thereof, the Company and the Trustee mutually covenant and agree
for the equal and proportionate benefit of the respective Holders as follows:

                                   ARTICLE 1
                   DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01. Definitions.

     "Additional Collateral Trust Agreement Collateral" means the "Additional
Collateral" referred to in the Collateral Trust Agreement.

     "Additional Notes" means any notes issued under the Indenture in addition
to the Original Notes having the same terms in all respects as the Original
Notes except that interest will accrue on the Additional Notes from the most
recent date to which interest has been paid on the Notes (other than Additional
Notes) or, if no interest has been paid, from the Issue Date.

     "Adjusted Free Cash Flow" means, as of the end of any fiscal year, an
amount equal to (i) the Adjusted Parent Operating Cash Flow for such fiscal
year plus (ii) the aggregate amount of Net Cash Proceeds from Covered Asset
Sales received by the Company and permitted to be retained by the Company under
the terms of this Indenture during such fiscal year less (iii) the aggregate
amount of any Investments (other than Temporary Cash Investments) made in cash
by the

<PAGE>

Company during such fiscal year, less (iv) the aggregate principal amount of
Debt repaid by the Company during such fiscal year, excluding (x) Debt in
respect of revolving loans and letters of credit under the terms of the Senior
Secured Credit Facilities (unless the corresponding revolving credit
commitments are permanently reduced in connection with such repayment), (y)
Debt prepaid with the Net Cash Proceeds of Asset Sales or Covered Capital
Markets Transactions and (z) repayments of Debt financed by incurring other
debt less (iv) the aggregate amount for such fiscal year of Corporate Charges
plus, to the extent not included in Corporate Charges for such fiscal year,
payments made by the Company of dividends and interest on the Tecons and the NY
Sells Loan; provided that so long as any amounts or commitments are outstanding
under the Senior Secured Credit Facilities, Adjusted Free Cash Flow shall have,
at any time of determination, the meaning set forth at such time of
determination in the Senior Secured Credit Facilities.

     "Adjusted Parent Operating Cash Flow" means, for any period, (i) Parent
Operating Cash Flow for such period less (ii) the sum of the following expenses
(determined without duplication), in each case to the extent paid by the
Company during such period and regardless of whether any such amount was
accrued during such period:

     (A) income tax expenses of the Company and its Subsidiaries; and

     (B) corporate overhead expenses.

     "AES Business" means a Power Supply Business or other business operated or
managed (including on a joint basis with others), directly or indirectly, by
the Company.

     "Affiliate" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Company (a "Controlling Person"), or (ii)
any Person (other than the Company or a Subsidiary) which is controlled by or
is under common control with a Controlling Person or (iii) as to any Person
(other than the Company and its Subsidiaries), any other Person that, directly
or indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. As used herein, the term
"control" means possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.


                                       2
<PAGE>

     "Agent" means any Registrar, Paying Agent, transfer agent or
Authenticating Agent.

     "Agent Member" means a member of, or a participant in, the Depositary.

     "Asset Sale" means any sale, lease or other disposition (including any
such transaction effected by way of merger or consolidation or any Equity
Issuance by the Company's Subsidiaries) by the Company or any of its
Subsidiaries of any investment in any Subsidiary or of all the assets of a
Subsidiary substantially in its entirety; provided that a disposition of such
assets not excluded by the following paragraph during any fiscal year shall not
constitute an Asset Sale unless and until (and only to the extent that) the
aggregate Net Cash Proceeds from such disposition, when combined with all other
such dispositions previously made during such fiscal year, exceeds $10,000,000.

     The term "Asset Sale" does not include: (i) any disposition or issuance in
connection with directors' qualifying shares or investments by foreign
nationals mandated by applicable law; (ii) any sale, transfer, conveyance,
lease or other disposition of assets governed by Article 5; (iii) any sale of
shares of preferred stock of a Subsidiary; (iv) the grant of a security
interest by any Person in any assets or shares of Capital Stock securing a
borrowing by, or contractual performance obligation of, such Person or any
Subsidiary of such Person; (v) a sale-leaseback transaction involving
substantially all of the assets of a Power Supply Business where a subsidiary
sells the Power Supply Business to a person in exchange for the assumption by
that Person of the debt financing the Power Supply Business and the subsidiary
leases the Power Supply Business from such Person; (vi) dispositions of
contract rights, development rights and resource data made in connection with
the initial development of a Power Supply Business, made prior to the
commencement of commercial operation of such Power Supply Business; (vii)
transactions made in order to enhance the repatriation of cash proceeds in
connection with any sale or other disposition in respect of the Capital Stock
and/or property of any Subsidiary where such Subsidiary is organized under the
laws of any jurisdiction other than the United States or any state thereof or
any Subsidiary of the type described in Section 936 of the Internal Revenue
Code of 1986, as amended, to the extent that the proceeds of such sale or other
disposition are received by a Person subject in respect of such proceeds to the
tax laws of a jurisdiction other than the United States or any state thereof or
in order to increase the after-tax proceeds thereof available for immediate
distribution; (viii) the sale of Equity Interests in a project in development
or under construction the proceeds from which shall be used to fund the cost of
development or construction of such project; (ix) (1) a disposition resulting
from the bona fide exercise by governmental authority of its claimed or actual
power of eminent domain; (2) a realization upon a security interest; (3) any
cash payments not otherwise prohibited under this Indenture; (4) any sale,
transfer, conveyance, lease or other disposition of an asset pursuant to the
terms of any power sales agreement or


                                       3
<PAGE>

steam sales agreement or other agreement or contract related to the output or
product of, or services rendered by, a Power Supply Business as to which a
Subsidiary is the supplying party; (5) any disposition of any Equity Interest
in a Power Supply Business pursuant to the terms of a joint venture agreement,
shareholders agreement, supply agreement or similar arrangement that requires
one shareholder to transfer its interest to another Person upon terms and in
circumstances customary for the industry; (6) any disposition of assets subject
to a lien transferred to the lien holder or its designee in satisfaction or
settlement of the lien holder's claim; (7) sales of inventory in the ordinary
course of its business and the granting of any option or other right to
purchase, lease or otherwise acquire inventory in the ordinary course of its
business; or (8) sales, transfers or other dispositions of assets among the
Company and its Subsidiaries and Affiliates or among the Company's Subsidiaries
and Affiliates.

     "Attributable Debt" means the present value (discounted at the rate of
7.375% per annum compounded monthly) of the obligations for rental payments
required to be paid during the remaining term of any lease of more than 12
months.

     "Banc of America Securities Option Agreement" means the option agreement
dated December 12, 2002 between Banc of America Securities LLC and the Company.

     "Board of Directors" means either the Board of Directors of the Company or
any committee of such Board duly authorized to act hereunder.

     "Board Resolution" means one or more resolutions of the Board of
Directors, certified by the secretary or an assistant secretary to have been
duly adopted and to be in full force and effect on the date of certification,
and delivered to the Trustee.

     "Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close in the City of New York.

     "BVI Cayman Pledge Agreement" means the Charge and Assignment over Shares
dated December 12, 2002 between AES International Holdings II, Ltd., as
Chargor, Wilmington Trust Company, as Corporate Trustee and Bruce L. Bisson, as
Individual Trustee.

     "BVI Collateral" means the "Collateral" referred to in the BVI Cayman
Pledge Agreement.

     "Capital Commitment" means any contractual commitment or obligation under
an equity contribution or other agreement the primary purpose of which is


                                       4
<PAGE>

for the Company to provide to an AES Business a portion of the capital required
to finance construction projects, the acquisition of additional assets or
capital improvements being undertaken by such AES Business.

     "Capital Markets Debt" means any Debt that is a security (other than
syndicated commercial loans) that is eligible for resale in the United States
pursuant to Rule 144A under the Securities Act or outside the United States
pursuant to Regulation S of the Securities Act or a security (other than
syndicated commercial loans) that is sold or subject to resale pursuant to a
registration statement under the Securities Act.

     "Capital Stock" means, with respect to any Person, any and all shares,
interests, participants or other equivalents (however designated, whether
voting or non-voting) of, or interests in (however designated), the equity of
such Person, including, without limitation, all common stock and preferred
stock and partnership and joint venture interests of such Person.

     "Certificated Note" means a Registered Note in individual form without
interest coupons.

     "Clearstream" means Clearstream Banking SA.

     "Collateral" means the Security Agreement Collateral, the Additional
Collateral Trust Agreement Collateral and the BVI Collateral.

     "Collateral Documents" means the Security Agreement, the Collateral Trust
Agreement, the BVI Cayman Pledge Agreement and any other agreement that creates
or purports to create a Lien in favor of the Collateral Trustees (as defined in
the Collateral Trust Agreement) for the benefit of the Secured Holders.

     "Collateral Trust Agreement" means the agreement dated December 12, 2002
among the Grantors referred to therein, as Grantors and the Collateral
Trustees.

     "Collateral Trustees" means Wilmington Trust Company, as Corporate Trustee
and Bruce L. Bisson, as Individual Trustee under the Collateral Trust
Agreement.

     "Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act.

     "Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article 5 of this Indenture
and thereafter means the successor.


                                       5
<PAGE>

     "Consolidated Net Assets" means the aggregate amount of assets (less
reserves and other deductible items) after deducting current liabilities, as
shown on the consolidated balance sheet of the Company and its Subsidiaries
contained in the latest annual report to the stockholders of the Company and
prepared in accordance with GAAP.

     "Consolidated Subsidiary" means, at any date with respect to any Person,
any Subsidiary of such Person or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date.

     "Corporate Charges" means, for any period, the sum of the following
amounts (determined without duplication), in each case to the extent paid by
the Company during such period and regardless of whether any such amount was
accrued during such period:

     (A) interest expense for such period;

     (B) rental expense for such period; and

     (C) dividends paid on the Company's Redeemable Stock during such period.

     "Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota.

     "Covered Asset Sale" means any Asset Sale other than (a) any Asset Sale of
any of the Capital Stock or assets of any of the Company's Subsidiaries that
guarantee the revolving credit facility and/or tranche A term loan facility
under the Senior Secured Credit Facilities (the "Revolving Credit Loan/Tranche
A Loan Guarantors"), to the extent that the Net Cash Proceeds of such Asset
Sale are applied as set forth in the Senior Secured Credit Facilities, to repay
amounts under the Senior Secured Credit Facilities that are guaranteed by the
Revolving Credit Loan/Tranche A Loan Guarantors or (b) any Asset Sale of any of
the Capital Stock or assets of the Company's Subsidiary that guarantees the
tranche "C" term loan facility under the Senior Secured Credit Facilities (the
"Tranche C Term Loan Guarantor"), to the extent that the Net Cash Proceeds of
such Asset Sale are applied as set forth in the Senior Secured Credit
Facilities, to repay amounts under the Senior Secured Credit Facilities that
are guaranteed by the Tranche C Term Loan Guarantor; provided that, for the
avoidance of doubt, to the extent that the Net Cash Proceeds referred to in
clauses (a) and (b) are not applied as set forth therein, such Net Cash
Proceeds shall be deemed to be, for all purposes under this Indenture, Net Cash
Proceeds from a Covered Asset Sale;


                                       6
<PAGE>

provided further that so long as any amounts or commitments are outstanding
under the Senior Secured Credit Facilities, Covered Asset Sale shall have the
meaning set forth in the Senior Secured Credit Facilities.

     "Covered Capital Markets Transaction" means (i) an Equity Issuance by the
Company; (ii) the incurrence of Capital Markets Debt by the Company; and (iii)
the incurrence of Capital Markets Debt by a Subsidiary for the purpose of
transferring the Net Cash Proceeds thereof to the Company.

     "Creditors' Portion" means, in respect of the Net Cash Proceeds of any
Covered Asset Sale, the following:

     (i)  with respect to the first $600,000,000 of Net Cash Proceeds of
          Covered Asset Sales received after the Original Issue Date, 50% of
          such Net Cash Proceeds;

     (ii) with respect to the next $400,000,000 of Net Cash Proceeds of Covered
          Asset Sales received after the Original Issue Date (after giving
          effect to the Net Cash Proceeds of Covered Asset Sales described in
          clause (i)), 80% of such Net Cash Proceeds of Covered Asset Sales;
          and

     (iii) with respect to all other Net Cash Proceeds of Covered Asset Sales
          received after the Original Issue Date (after giving effect to the
          Net Cash Proceeds of Covered Asset Sales described in clauses (i) and
          (ii)), 60% of such Net Cash Proceeds of Covered Asset Sales.

provided that so long as any amounts or commitments are outstanding under the
Senior Secured Credit Facilities, Creditors' Portion shall have, at any time of
determination, the meaning set forth at such time of determination in the
Senior Secured Credit Facilities.

     "Debt" of any Person means at any date, without duplication, (i) all
Obligations of such Person for borrowed money; (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments;
(iii) all Obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all Obligations of such Person as lessee which are
capitalized in accordance with GAAP; (v) all Obligations (whether contingent or
non-contingent) of such Person to reimburse any bank or other Person in respect
of amounts paid under a letter of credit, surety or performance bond or similar
instrument; (vi) all Debt secured by a Lien on any asset of such Person,
whether or not such Debt is otherwise an obligation of such Person; (vii) all
Debt of others Guaranteed by such Person; and (viii) all Redeemable Stock of
such Person valued at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid


                                       7
<PAGE>

dividends. For purposes hereof, contingent obligations of the type described in
clause (v) of this definition with respect to letters of credit not issued
under the Senior Secured Credit Facilities shall not be treated as "Debt"
hereunder to the extent that such obligations are cash collateralized or to the
extent that the issuer of any such letter of credit is entitled to draw under
any of the revolving letters of credit or other letters of credit issued under
the Senior Secured Credit Facilities, which by their terms require that any
drawing under such letters of credit be applied only to reimburse such issuer
for amounts paid by such issuer under such letter of credit. The obligations of
the Company under any Capital Commitment or under any agreement, in the form of
indemnity or contingent equity contribution agreement or otherwise, pursuant to
which the Company agrees to protect any Person, in whole or in part, from tax
liabilities, environmental liabilities, political risks, including currency
convertibility and transferability risk and changes in law, or construction
cost overruns shall not constitute Debt.

     "Default" means any Event of Default as defined in Section 6.01 and any
event that is, or after notice or passage of time or both would be, an Event of
Default.

     "Depositary" means the depositary of each Global Note, which initially
will be DTC or, as to an Offshore Global Note, a common depositary for
Euroclear and Clearstream unless and until a successor Depositary shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Depositary" shall mean or include each Person who is then a
Depositary hereunder.

     "DTC" means The Depository Trust Company, a New York corporation.

     "DTC Legend" means the legend set forth in Exhibit C.

     "Equity Interest" means, with respect to any Person, shares of capital
stock of (or other ownership or profit interests in) such Person, warrants,
options or other rights for the purchase or other acquisition from such Person
of shares of capital stock of (or other ownership or profit interests in) such
Person, securities convertible into or exchangeable for shares of capital stock
of (or other ownership or profit interests in) such Person or warrants, rights
or options for the purchase or other acquisition from such Person of such
shares (or such other interests), and other ownership or profit interests in
such Person (including, without limitation, partnership, member or trust
interests therein), whether voting or nonvoting, and whether or not such
shares, warrants, options, rights or other interests are authorized or
otherwise existing on any date of determination.

     "Equity Issuance" means, in respect of any Person, the issuance or sale of
Equity Interests of such Person other than any such issuance to directors,
officers


                                       8
<PAGE>

or employees pursuant to employee benefit plans in the ordinary course of
business (including by way of exercise of stock option).

     "Euroclear" means Euroclear Bank S.A./N.V., and its successors or assigns,
as operator of the Euroclear system.

     "Euro-Dollar Business Day" means any Business Day on which commercial
banks are open for international business (including dealings in dollar
deposits) in London.

     "Excess Asset Sale Proceeds" means the product of (a) the Creditors'
Portion of all Net Cash Proceeds of Covered Asset Sales received by the Company
in excess of the first $600 million of Net Cash Proceeds of Covered Asset Sales
received by the Company, multiplied by (b) a fraction, the numerator of which
is the total aggregate Principal amount of Notes outstanding on such date, and
the denominator of which is the sum of (x) the aggregate Principal amount of
Notes outstanding on such date, plus (y) the aggregate Senior Secured Lenders'
Exposure on such date; provided that, if on the date or dates on which the
first $600 million of Net Cash Proceeds of Covered Asset Sales are received,
the Senior Secured Credit Facilities have been repaid in full and all
commitments thereunder have been terminated, then the phrase "in excess of the
first $600 million of Net Cash Proceeds of Covered Asset Sales received by the
Company" shall immediately and automatically be deleted from clause (a) of this
definition.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Final Maturity Date" means December 12, 2005; provided, however, that if,
prior to July 15, 2005, the Company's 4.50% Junior Subordinated Convertible
Debentures have not been refinanced to mature on a date after December 12,
2005, then Final Maturity Date means July 15, 2005; provided further that if
the Final Maturity Date occurs on a day that is not a Euro-Dollar Business Day,
the Final Maturity Date shall occur on the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the Final Maturity Date shall be the next preceding Euro-Dollar
Business Day.

     "Funded Debt" means indebtedness for borrowed money having a maturity of,
or by its terms extendible or renewable for, a period of more than 12 months
after the determination of the amount thereof.

     "GAAP" means generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in by
the


                                       9
<PAGE>

Company's independent public accountants) with the most recent audited
consolidated financial statements of the Company and its Consolidated
Subsidiaries delivered to the Trustee; provided that, if the Company notifies
the Trustee that the Company wishes to amend any covenant in Article 3 or 4 to
eliminate the effect of any change in generally accepted accounting principles
on the operation of such covenant, then the Company's compliance with such
covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Company
and the required Noteholders.

     "Global Note" means a Registered Note in global form without interest
coupons.

     "Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business or, for the avoidance of doubt,
obligations of the Company to provide capital to an AES Business under a
Capital Commitment. The term "Guarantee" used as a verb has a corresponding
meaning.

     "Holder" or "Noteholder" means the registered holder of any Note.

     "Indenture" means this Indenture as originally executed and delivered or
as it may be amended or supplemented from time to time by one or more
indentures supplemental to this Indenture entered into pursuant to the
applicable provisions of this Indenture.

     "Interest Payment Date" means each June 15 and December 15 of each year,
commencing with June 15, 2003.

     "Investment" means any investment in any Person, whether by means of share
purchase, capital contribution, loan, Guarantee, time deposit or otherwise (but
not including any demand deposit).


                                      10
<PAGE>

     "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Indenture, the
Company or any of its Subsidiaries shall be deemed to own subject to a Lien any
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.

     "Make-Whole Amount" means, the excess, if any, of (i) the aggregate
present value as of the date of such redemption of each dollar of Principal
being redeemed and the amount of interest (exclusive of interest accrued to the
redemption date) that would have been payable in respect of such dollar if such
prepayment had not been made, determined by discounting, on a semi-annual
basis, such Principal and interest at the Reinvestment Rate (determined on the
Business Day preceding the date of such redemption) from the respective dates
on which such Principal and interest would have been payable if such payment
had not been made, over (ii) the aggregate Principal amount of the Notes being
redeemed.

     "Material Subsidiary" of any Person means, as of any date, any Subsidiary
of which such Person's proportionate share of such Subsidiary's total assets
(after intercompany eliminations) exceeds 15 percent of the total assets of
such Person on a consolidated basis.

     "Minimum Liquidity Level" means as of the end of any fiscal year, an
amount equal to (i) the aggregate amount of cash and Temporary Cash Investments
of the Company on such date and (ii) the aggregate amount of the unused
revolving credit loan commitments available to be drawn under the Senior
Secured Credit Facilities on such date.

     "Net Cash Proceeds" means (a) with respect to any Asset Sale, cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received (including any cash received upon sale or
disposition of such note or receivable), excluding any other consideration
received in the form of assumption by the acquiring Person of Debt or other
obligations relating to the property disposed of in such Asset Sale or received
in any other noncash form) therefrom, in each case, net of all legal, title and
recording tax expenses, commissions and other fees and expenses incurred
(including, without limitation, consent and waiver fees and any applicable
premiums, earn-out or working interest payments or payments in lieu or in
termination thereof), and all federal, state, provincial, foreign and local
taxes required to be accrued as a liability under GAAP (i) as a consequence of
such Asset Sale, (ii) as a result of the repayment of any Debt in any
jurisdiction other than the jurisdiction where the property


                                      11
<PAGE>

disposed of was located or (iii) as a result of any repatriation to the United
States of any proceeds of such Asset Sale, and in each case net of a reasonable
reserve for the after tax-cost of any indemnification payments (fixed and
contingent) attributable to seller's indemnities to the purchaser undertaken by
the Company or any of its Subsidiaries in connection with such Asset Sale (but
excluding any payments, which by the terms of the indemnities will not, under
any circumstances, be made during the term of the Notes), and net of all
payments made on any debt which is secured by such property, in accordance with
the terms of any lien upon or with respect to such property or which must by
its terms or by applicable law be repaid out of the proceeds from such Asset
Sale, and net of all distributions and other payments made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Sale;
provided that, so long as any amounts or commitments are outstanding under the
Senior Secured Credit Facilities, the Net Cash Proceeds with respect to any
Asset Sale shall mean the greater of (x) the amount determined pursuant to the
foregoing definition and (y) the amount determined pursuant to the definition
of Net Cash Proceeds set forth at such time of determination in the Senior
Secured Credit Facilities, and

     (b) with respect to any Covered Capital Markets Transaction, the aggregate
amount of cash received from time to time on or after the Original Issue Date
(whether as initial consideration or through payment or disposition of deferred
consideration) by the Company and its Subsidiaries from such Covered Capital
Markets Transaction after deducting therefrom (without duplication) (i)
brokerage commissions, underwriting fees and discounts, legal fees, finder's
fees and other similar fees and commissions, (ii) in the case of a Covered
Capital Markets Transaction in the form of incurrence of Debt by a Subsidiary,
the amount of any Debt of such Subsidiary that, by the terms of the agreement
or instrument governing such Debt, is required to be repaid with all or a
portion of the proceeds of such capital markets transaction, and (iii) any
portion of the proceeds of such Covered Capital Markets Transaction required to
prepay or collateralize interest, dividends or fees payable in respect of such
Covered Capital Markets Transaction;

provided that, with respect to both clause (a) and (b) above, for purposes of
determining Net Cash Proceeds received by a Subsidiary required to be applied
pursuant to Section 3.02 of this Indenture, only that portion of such Net Cash
Proceeds received by the Company from such Subsidiary in accordance with
Section 4.10 shall be included.

     "Notes" means any of the notes, as defined in the first paragraph of the
recitals hereof, that are authenticated and delivered under this Indenture.

     "Noteholders' Ratable Share" means, in connection with the application of
Adjusted Free Cash Flow pursuant to 3.02(b), a percentage equal to a fraction,
the numerator of which is the aggregate Principal amount of Notes outstanding
on


                                      12
<PAGE>

such date, and the denominator of which is the sum of (x) the aggregate
Principal amount of Notes outstanding on such date, plus (y) the aggregate
Senior Secured Lenders' Exposure on such date.

     "NY SELLS Loan" means the $300 million secured equity-linked loan due in
2004 issued by the Company's Consolidated Subsidiary, AES New York Funding LLC.

     "Obligation" means, with respect to any Person, any payment, performance
or other obligation of such Person of any kind, including, without limitation,
any liability of such Person on any claim, whether or not the right of any
creditor to payment in respect of such claim is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed,
legal, equitable, secured or unsecured, and whether or not such claim is
discharged, stayed or otherwise affected by any proceeding referred to in
Section 6.01(f) or (g) of this Indenture. Without limiting the generality of
the foregoing, the Obligations of the Company under the Indenture include (a)
the obligation to pay principal, interest, charges, expenses, fees, attorneys'
fees and disbursements, indemnities and other amounts payable by the Company
under the Indenture and (b) the obligation of the Company to reimburse any
amount in respect of any of the foregoing that the Trustee, in its sole
discretion, may elect to pay or advance on behalf of the Company.

     "Officer" means, with respect to the Company, the chairman of the Board of
Directors, the president or chief executive officer, any vice president, the
chief financial officer, the treasurer or any assistant treasurer, or the
secretary or any assistant secretary.

     "Officers' Certificate" means a certificate signed in the name of the
Company (i) by the chairman of the board of directors, the president or chief
executive officer or a vice president and (ii) by the chief financial officer,
the treasurer or any assistant treasurer, or the secretary or any assistant
secretary, complying with Section 10.03 and delivered to the Trustee. Each such
certificate shall include (except as otherwise expressly provided in this
Indenture) the statements provided in Section 10.03.

     "Offshore Global Note" means a Global Note representing Notes issued and
sold pursuant to Regulation S.

     "Opinion of Counsel" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Company, satisfactory to the Trustee
and complying with Section 10.03. Each such opinion shall include the
statements provided in Section 10.03, if and to the extent required thereby.


                                      13
<PAGE>

     "Ordinary Course Cash Needs" means for any Subsidiary, the cash working
capital and other needs of such Subsidiary and its Subsidiaries in the ordinary
course of business (net of other sources of funds available or expected to be
available to it from any source other than from the Company and its
Subsidiaries), determined in good faith by the Company consistent in all
material respects with past practice (subject to appropriate adjustment to the
extent past practice has been modified to reflect changes in the nature of the
business and operations of the Subsidiaries), including reasonably anticipated
needs for repaying Debt and other obligations and making investments in its
business not inconsistent in any material respect with this Indenture, provided
that in determining the ordinary course needs of any Subsidiary, the Company
may take into account its ordinary course of business cash management practices
whereby amounts that would otherwise constitute cash balances of one or more
Subsidiaries are managed by being concentrated in a single Subsidiary.

     "Original Issue Date" means the date on which the Original Notes are first
issued under the Indenture.

     "Original Notes" means the Notes issued on the Original Issue Date and any
Notes issued in replacement thereof.

     "Parent Operating Cash Flow" means, for any period, the sum of the
following amounts (determined without duplication), but only to the extent
received in cash by the Company from a Person during such period:

     (a) dividends paid to the Company by the Company's Subsidiaries during
such period;

     (b) consulting and management fees paid to the Company for such period;

     (c) tax sharing payments made to the Company during such period;

     (d) interest and other distributions paid during such period with respect
to cash and other Temporary Cash Investments other than amounts on deposit to
secure contingent exposure under letters of credit issued under the Senior
Secured Credit Facilities; and

     (e) other cash payments made to the Company by the Company's Subsidiaries
other than (i) returns of invested capital; (ii) payments of the principal of
Debt of any such Subsidiary to the Company and (iii) payments in an amount
equal to the aggregate amount released from debt service reserve accounts upon
the issuance of letters of credit for the benefit of the beneficiaries of such
accounts;


                                      14
<PAGE>

provided that Net Cash Proceeds from Covered Asset Sales and Covered Capital
Markets Transactions received by the Company shall not be included in Parent
Operating Cash Flow for any period.

     "Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

     "Power Supply Business" means an electric power or thermal energy
generation or cogeneration facility or related facilities, or an electric power
transmission, distribution, fuel supply and fuel transportation facilities, or
any combination thereof (all subject to relevant security, if any, under
related project financing arrangements), together with its or their related
power supply, thermal energy and fuel contracts as well as other contractual
arrangements with customers, suppliers and contractors.

     "Principal" of a Note means the principal amount of, and, unless the
context indicates otherwise, includes any premium payable on, the Note.

     "Principal Property" means any building, structure or other facility
(together with the land on which it is erected and fixtures comprising a part
thereof) used primarily for manufacturing, processing, research, warehousing or
distribution owned or leased by the Company and having a net book value in
excess of 2% of Consolidated Net Assets, other than any such building,
structure or other facility or portion thereof which is a pollution control
facility financed by state or local governmental obligations or which the
principal executive officer, president and principal financial officer of the
Company determine in good faith is not of material importance to the total
business conducted or assets owned by the Company and its Subsidiaries as an
entirety.

     "Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the first anniversary of the Final Maturity Date, (ii) redeemable at the option
of the holder of such class or series of Capital Stock at any time prior to the
first anniversary of the Final Maturity Date or (iii) convertible into or
exchangeable for (unless solely at the option of such person) Capital Stock
referred to in clause (i) or (ii) above or Debt having a scheduled maturity
prior to the first anniversary of the Final Maturity Date; provided that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such person to repurchase
or redeem such Capital Stock upon the occurrence of an "asset sale" or a
"change of control" occurring prior to the first anniversary of the Final
Maturity Date shall not constitute Redeemable Stock if such Capital Stock
specifically provides that such person will not repurchase or


                                      15
<PAGE>

redeem any such Capital Stock pursuant to such provisions unless such
repurchase or redemption is permitted under the terms of this Indenture.

     "Registered Note" means any Note registered on the Note Register (as
defined in Section 2.05).

     "Regular Record Date" for the interest payable on any Interest Payment
Date means the fifteenth calendar day preceding such Interest Payment Date.

     "Regulation S" means Regulation S under the Securities Act.

     "Regulation S Certificate" means a certificate substantially in the form
of Exhibit D hereto.

     "Reinvestment Rate" means 1.00 (one percent) plus the arithmetic mean of
the yields under the respective headings "This Week" and "Last Week" published
in the Statistical Release under the caption "Treasury Constant Maturities" for
the maturity (rounded to the nearest month) corresponding to the date on which
the Notes are first redeemable at par. If no maturity exactly corresponds to
such maturity, yields for the two published maturities most closely
corresponding to such maturity shall be calculated pursuant to the immediately
preceding sentence and the Reinvestment Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purpose of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.

     "Responsible Officer" means, when used with respect to the Trustee, any
senior trust officer, any vice president, any trust officer, any assistant
trust officer, or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate
trust matter is referred because of his knowledge of and familiarity with the
particular subject.

     "Restricted Legend" means the legend set forth in Exhibit B hereto.

     "Restricted Period" means the relevant 40 day distribution compliance
period as defined in Regulation S.

     "Rule 144A" means Rule 144A under the Securities Act.

     "Rule 144A Certificate" means a written certification addressed to the
Company and the Trustee to the effect that the Person making such certification
(x) is acquiring such Note (or beneficial interest) for its own account or one
or more accounts with respect to which it exercises sole investment discretion
and that it and each such account is a qualified institutional buyer within the
meaning


                                      16
<PAGE>

of Rule 144A, (y) is aware that the transfer to it or exchange, as applicable,
is being made in reliance upon the exemption from the provisions of Section 5
of the Securities Act provided by Rule 144A and (z) acknowledges that it has
received such information regarding the Company as it has requested pursuant to
Rule 144A(d)(4) or has determined not to request such information.

     "Secured Holders" has the meaning set forth in the Collateral Trust
Agreement.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Security Agreement Collateral" means the "Collateral" referred to in the
Security Agreement.

     "Security Agreement" means the security agreement dated December12, 2002
by the Company, the other Persons listed on the signature page thereof and the
Additional Grantors (as defined therein), as Grantors, to Wilmington Trust
Company, as Corporate Trustee and Bruce L. Bisson, as Individual Trustee, under
the Collateral Trust Agreement.

     "Senior Secured Credit Facilities" means the Amended and Restated Credit
and Reimbursement Agreement dated as of December 12, 2002 between the Company,
as Borrower, the Subsidiary Guarantors (as defined therein), as Subsidiary
Guarantors, Citicorp USA, Inc., as Administrative Agent and Collateral Agent,
Salomon Smith Barney, Inc., as Lead Arranger and Book Runner, Bank of America,
N.A., as Lead Arranger and Book Runner and as Syndication Agent, Union Bank of
California, N.A., as Lead Arranger and Book Runner and as Syndication Agent,
the Banks listed therein, the Revolving Banks (as defined therein) and the Drax
LOC Fronting Banks (as defined therein) listed therein and any related notes,
guarantees, letters of credit, collateral documents, rate protection or hedging
arrangement, instruments and agreements executed in connection therewith, and
in each case, as amended, modified, renewed, refunded, replaced or refinanced
from time to time, including any agreement (i) extending or shortening the
maturity of any indebtedness incurred thereunder or contemplated thereby; (ii)
adding or deleting borrowers or guarantors thereunder; or (iii) otherwise
altering the terms and conditions thereof.

     "Senior Secured Credit Facility Obligations" means all Obligations of the
Company and its Subsidiaries outstanding under the Senior Secured Credit
Facilities, including, without limitation, interest accruing subsequent to the
filing of, or which would have accrued but for the filing of, a petition for
bankruptcy, whether or not such interest is an allowable claim in such
bankruptcy proceeding.

     "Senior Secured Lenders' Exposure" means on any date the sum of (i) the
aggregate principal amount of the loans outstanding under the Senior Secured


                                      17
<PAGE>

Credit Facilities, plus (ii) the aggregate amount of unused commitments under
the Senior Secured Credit Facilities on such date, which amounts include
without limitation the aggregate amount of (x) available amounts and (y) drawn
but unpaid amounts, with respect to the letters of credit to be issued under
the Senior Secured Credit Facilities.

     "Specified Accredited Investors" means Paul T. Hanrahan, an executive
officer of the Company, and the Persimmon Trust, a charitable trust established
by Roger W. Sant, a director of the Company, each of which has certified that
he or it is an accredited investor as defined in Rule 501 under the Securities
Act.

     "Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded U.S. government
securities adjusted to constant maturities or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Company.

     "Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which a majority of the Capital Stock
or other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are at
the time directly or indirectly owned by such Person.

     "Tax Legend" means the legend set forth in Exhibit E hereto.

     "Tecons" means Term Convertible Preferred Securities issued by the
Company's wholly owned special purpose business trusts.

     "Temporary Cash Investment" means any Investment (having a maturity of not
greater than 60 days from the date of issuance thereof) in (A)(i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof; (ii) commercial paper
rated at least the Minimum CP Rating by any two of Standard & Poor's Ratings
Services, Moody's Investors Service, Inc., Fitch IBCA, Inc. and Duff & Phelps
Credit Rating Co., provided that one of such two Minimum CP Ratings is by
Standard & Poor's Ratings Services or Moody's Investors Service, Inc.; (iii)
time deposits with, including certificates of deposit issued by, any office
located in the United States of any bank or trust company which is organized or
licensed under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000; (iv)
medium term notes, auction rate preferred stock, asset backed securities,
bonds, notes and letter of credit supported instruments, issued by any entity
organized under the laws of the United States, or any state or municipality of
the United States and rated in any of the three highest rated categories by
Standard & Poor's Ratings Services or


                                      18
<PAGE>

Moody's Investors Service, Inc.; (v) repurchase agreements with respect to
securities described in clause (i) above entered into with an office of a bank
or trust company meeting the criteria specified in clause (iii) above; (vi)
Euro-Dollar certificates of deposit issued by any bank or trust company which
has capital and unimpaired surplus of not less than $500,000,000 or (vii) with
respect to a Subsidiary, any category of investment designated as permissible
investments under such Subsidiary's loan documentation; provided that in each
case (except clause (vii)) that such Investment matures within fifteen months
from the date of acquisition thereof by the Company or a Subsidiary and (B)
registered investment companies that are "money market funds" within the
meaning of Rule 2a-7 under the Investment Company Act of 1940.

     "Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article 7 and thereafter means such successor.

     "U.S. Global Note" means a Global Note that bears the Restricted Legend
representing Notes issued and sold pursuant to Rule 144A.

     "U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of an agency or instrumentality
of the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such U.S. Government Obligation or a
specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt; provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.

     Section 1.02. Other Definitions. Each of the following terms is defined in
the section set forth opposite such term:

                  Term                             Section
                  ----                             -------
                  Authenticating Agent             2.02
                  Event of Default                 6.01
                  Judgment Currency                10.14
                  Note Register                    2.05
                  Paying Agent                     2.05
                  Registrar                        2.05
                  Required Currency                10.14
                  special record date              2.14


                                      19
<PAGE>

     Section 1.03. Rules of Construction. Unless the context otherwise
requires:

          (i) an accounting term not otherwise defined has the meaning assigned
     to it in accordance with GAAP;

          (ii) words in the singular include the plural, and words in the
     plural include the singular;

          (iii) "herein," "hereof" and other words of similar import refer to
     this Indenture as a whole and not to any particular Article, Section or
     other subdivision;

          (iv) all references to Sections or Articles refer to Sections or
     Articles of this Indenture unless otherwise indicated; and

          (v) use of masculine, feminine or neuter pronouns should not be
     deemed a limitation, and the use of any such pronouns should be construed
     to include, where appropriate, the other pronouns.

                                   ARTICLE 2
                                   THE NOTES

     Section 2.01. Forms Generally, Certain Issues Regarding Preconditions for
Transfer and Payment. (a) Each Note and the related Trustee's certificate of
authentication will be substantially in the form attached as Exhibit A. The
terms and provisions contained in the form of the Notes annexed as Exhibit A
constitute, and are hereby expressly made, a part of the Indenture. The Notes
may have notations, legends or endorsements required by law, rules of or
agreements with national securities exchanges to which the Company is subject,
or usage.

     (b) Each Note will bear the Tax Legend and except as otherwise provided in
paragraph (c) each Note will bear the Restricted Legend.

     (c) If the Company determines (upon the advice of counsel and such other
certifications and evidence as the Company may reasonably require) that any
Note is eligible for resale pursuant to Rule 144(k) under the Securities Act
(or a successor provision) and that the Restricted Legend is no longer
necessary or appropriate in order to ensure that subsequent transfers of the
Note (or a beneficial interest therein) are effected in compliance with the
Securities Act, the Company may instruct the Trustee to cancel the Note and
issue to the Holder


                                      20
<PAGE>

thereof (or to its transferee) a new Note of like tenor and amount, registered
in the name of the Holder thereof (or its transferee), that does not bear the
Restricted Legend, and the Trustee will comply with such instruction.

     (d) By its acceptance of any Note bearing the Restricted Legend (or any
beneficial interest in such a Note), each Holder thereof and each owner of a
beneficial interest therein acknowledges the restrictions on transfer of such
Note (and any such beneficial interest) set forth in the Indenture and in the
Restricted Legend and agrees that it will transfer such Note (and any such
beneficial interest) only in accordance with the Indenture and such legend.

     Section 2.02. Execution and Authentication. Two Officers shall execute the
Notes for the Company by facsimile or manual signature in the name and on
behalf of the Company. If an Officer whose signature is on a Note no longer
holds that office at the time the Note is authenticated, the Note shall
nevertheless be valid.

     The Trustee, at the expense of the Company, may appoint an authenticating
agent (the "Authenticating Agent") to authenticate Notes. The Authenticating
Agent may authenticate Notes whenever the Trustee may do so. Each reference in
this Indenture to authentication by the Trustee includes authentication by such
Authenticating Agent.

     A Note shall not be valid until the Trustee or Authenticating Agent
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture. In authenticating the Notes, the Trustee shall be entitled to
receive prior to the first authentication of any Notes and (subject to Article
7) shall be fully protected in relying upon, unless and until such documents
have been superseded or revoked:

     (a) any Board Resolution by or pursuant to which the form and terms of the
Notes were established;

     (b) an Officers' Certificate setting forth the form and terms of the
Notes, stating that the form and terms of the Notes have been, or will be when
established in accordance with such procedures as shall be referred to therein,
established in compliance with this Indenture; and

     (c) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee.

     Section 2.03. Amount Unlimited. The aggregate principal amount of Notes
which may be authenticated and delivered under this Indenture is unlimited. The
Company may issue Additional Notes under the Indenture from time to time.


                                      21
<PAGE>

     Section 2.04. Denomination and Date of Securities; Payment of Interest.
The Notes shall be issuable in denominations of $1,000 and any integral
multiple thereof. If as a result of the exchange or redemption in part of any
Notes issued hereunder any Holder is entitled to receive Notes in an aggregate
principal amount that is not an integral multiple of $1,000, the principal
amount of such Holder's notes shall be reduced to the nearest $1,000 and such
Holder shall receive a substitute cash payment equal to the principal amount by
which that Holder's Notes are reduced. The Notes shall be numbered, lettered or
otherwise distinguished in such manner or in accordance with such plan as the
Officers of the Company executing the same may determine, as evidenced by their
execution thereof.

     Each Note shall be dated the date of its authentication. The Notes shall
bear interest from the date of the Note, and such interest and shall be payable
on the Interest Payment Date.

     The person in whose name any Note is registered at the close of business
on any Regular Record Date with respect to any Interest Payment Date shall be
entitled to receive the interest, if any, payable on such Interest Payment Date
notwithstanding any transfer or exchange of such Note subsequent to the Regular
Record Date and prior to such Interest Payment Date, except if and to the
extent the Company shall default in the payment of the interest due on such
Interest Payment Date for such series, in which case the provisions of Section
2.14 shall apply.

     Section 2.05. Registrar and Paying Agent; Agents Generally. The Company
shall maintain an office or agency where Notes may be presented for
registration, registration of transfer or for exchange (the "Registrar") and an
office or agency where Notes may be presented for payment (the "Paying Agent"),
which shall be in the Borough of Manhattan, The City of New York. The Company
shall cause the Registrar to keep a register of the Notes and of their
registration, transfer and exchange (the "Note Register"). The Company may have
one or more additional Paying Agents or transfer agents with respect to the
Notes.

     The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any Agent and
any change in the name or address of an Agent. If the Company fails to maintain
a Registrar or Paying Agent, the Trustee shall act as such. The Company may
remove any Agent upon written notice to such Agent and the Trustee; provided
that no such removal shall become effective until (i) the acceptance of an
appointment by a successor Agent to such Agent as evidenced by an appropriate
agency agreement entered into by the Company and such successor Agent and


                                      22
<PAGE>

delivered to the Trustee or (ii) notification to the Trustee that the Trustee
shall serve as such Agent until the appointment of a successor Agent in
accordance with clause (i) of this proviso. The Company or any Affiliate of the
Company may act as Paying Agent or Registrar; provided that neither the Company
nor an Affiliate of the Company shall act as Paying Agent in connection with
the defeasance of the Notes or the discharge of this Indenture under Article 8.

     The Company initially appoints the Trustee as Registrar, Paying Agent and
Authenticating Agent. If, at any time, the Trustee is not the Registrar, the
Registrar shall make available to the Trustee ten days prior to each interest
payment date and at such other times as the Trustee may reasonably request the
names and addresses of the Holders as they appear in the Note Register.

     Section 2.06. Paying Agent to Hold Money in Trust. Not later than 10:00
a.m. New York City time on each due date of any Principal or interest on any
Notes, the Company shall deposit with the Paying Agent money in immediately
available funds sufficient to pay such Principal or interest. The Company shall
require each Paying Agent other than the Trustee to agree in writing that such
Paying Agent shall hold in trust for the benefit of the Holders of such Notes
or the Trustee all money held by the Paying Agent for the payment of Principal
of and interest on such Notes and shall promptly notify the Trustee of any
default by the Company in making any such payment. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and account
for any funds disbursed, and the Trustee may at any time during the continuance
of any payment default, upon written request to a Paying Agent, require such
Paying Agent to pay all money held by it to the Trustee and to account for any
funds disbursed. Upon doing so, the Paying Agent shall have no further
liability for the money so paid over to the Trustee. If the Company or any
Affiliate of the Company acts as Paying Agent, it will, on or before each due
date of any Principal of or interest on the Notes, segregate and hold in a
separate trust fund for the benefit of the Holders thereof a sum of money
sufficient to pay such Principal or interest so becoming due until such sum of
money shall be paid to such Holders or otherwise disposed of as provided in
this Indenture, and will promptly notify the Trustee in writing of its action
or failure to act as required by this Section.

     Section 2.07. Restrictions on Transfer and Exchange. (a) The transfer or
exchange of any Note (or a beneficial interest therein) may only be made in
accordance with this Section, Section 2.08 and in the case of a Global Note (or
a beneficial interest therein), the applicable rules and procedures of the
Depositary. The Trustee shall refuse to register any requested transfer or
exchange that does not comply with the preceding sentence.


                                      23
<PAGE>

     (b) The transfer or exchange of any Note (or a beneficial interest
therein) that bears the Restricted Legend may only be made in compliance with
the provisions of the Restricted Legend.

     (c) The transfer or exchange of a beneficial interest in an Offshore
Global Note or a Certificated Note for a beneficial interest in a U.S. Global
Note may only be made upon receipt by the Trustee of a duly completed Rule 144A
Certificate.

     (d) The transfer or exchange of a beneficial interest in a U.S. Global
Note or a Certificated Note for a beneficial interest in an Offshore Global
Note may only be made upon receipt by the Trustee of a duly completed
Regulation S Certificate.

     (e) During the Restricted Period, beneficial interests in an Offshore
Global Note may be held through the Depositary only through Euroclear and
Clearstream, and their respective direct and indirect participants.

     (f) The Trustee will retain copies of all certificates, opinions and other
documents received in connection with the transfer or exchange of a Note (or a
beneficial interest therein), and the Company will have the right to inspect
and make copies thereof at any reasonable time upon written notice to the
Trustee.

     Section 2.08. Registration, Transfer and Exchange. (a) Registered Global
Form Only. The Notes will be issued in registered form only, without coupons,
and the Company shall cause the Trustee to maintain a register (the "Register")
of the Notes, for registering the record ownership of the Notes by the Holders
and transfers and exchanges of the Notes. The Notes will be issued in global
form only except for Notes to be issued (i) under the circumstances described
in clause (b)(iv) of this Section and (ii) the Notes to be issued to the
Specified Accredited Investors, which shall be issued as Certificated Notes.

     (b) Global Notes. (i) Each Global Note will be registered in the name of
the Depositary or its nominee and, so long as DTC is serving as the Depositary
thereof, will bear the DTC Legend.

          (ii) Each Global Note will be delivered to the Trustee as custodian
     for the Depositary. Transfers of a Global Note (but not a beneficial
     interest therein) will be limited to transfers thereof in whole, but not
     in part, to the Depositary, its successors or their respective nominees,
     except (A) as set forth in paragraph (b)(iv) of this Section and (B)
     transfers of portions thereof in the form of Certificated Notes may be
     made upon request of an Agent Member (for itself or on behalf of a
     beneficial owner) by written notice given to the Trustee by or on behalf
     of


                                      24
<PAGE>

     the Depositary in accordance with customary procedures of the Depositary
     and in the compliance with this Section and Section 2.06.

          (iii) Agent Members will have no rights under the Indenture with
     respect to any Global Note held on their behalf by the Depositary, and the
     Depositary may be treated by the Company, the Trustee and any agent of the
     Company or the Trustee as the absolute owner and Holder of such Global
     Note for all purposes whatsoever. Notwithstanding the foregoing, the
     Depositary or its nominee may grant proxies and otherwise authorize any
     person (including any Agent Member and any Person that holds a beneficial
     interest in a Global Note through an Agent Member) to take any action
     which a Holder is entitled to take under the Indenture or the Notes, and
     nothing herein will impair, as between the Depositary and its Agent
     Members, the operation of customary practices governing the exercise of
     the rights of a holder of any security.

          (iv) If (x) the Depositary (1) notifies the Company that it is
     unwilling or unable to continue as Depositary for a Global Note and a
     successor depositary is not appointed by the Company within 90 days of the
     notice or (2) has ceased to be a clearing agency registered under the
     Exchange Act, (y) an Event of Default has occurred and is continuing and
     the Trustee has received a request from the Depositary, or (z) the
     Company, at its option, notifies the Trustee in writing that it elects to
     cause the issuance of Certificated Notes, the Trustee will promptly
     exchange each beneficial interest in the Global Note for one or more
     Certificated Notes in authorized denominations having an equal aggregate
     principal amount registered in the name of the owner of such beneficial
     interest, as identified to the Trustee by the Depositary, and thereupon
     the Global Note will be deemed canceled. Each Certificated Note issued in
     exchange therefor will bear the Restricted Legend.

     (c) Certificated Notes. Each Certificated Note will be registered in the
name of the Holder thereof.

     (d) Transfers and Exchanges Generally. A Holder may transfer a Note (or a
beneficial interest therein) to another Person or exchange a Note (or a
beneficial interest therein) for another Note or Notes of any authorized
denomination by presenting to the Trustee a written request therefor stating
the name of the proposed transferee or requesting such an exchange, accompanied
by any certification, opinion or other document required by Section 2.07. The
Trustee will promptly register any such transfer or exchange that meets the
requirements of this Section by noting the same in the register maintained by
the Trustee for the purpose; provided that (x) no transfer or exchange will be
effective until the transfer or exchange is registered in such register and (y)
the Trustee will not be required (i) to issue, register the transfer of or
exchange any Note for a


                                      25
<PAGE>

period of 15 days before a selection of Notes to be redeemed, (ii) to register
the transfer of or exchange any Note so selected for redemption in whole or in
part, except, in the case of a partial redemption, that portion of any such
Note not being redeemed, or (iii) if a redemption is to occur after a Regular
Record Date but on or before the corresponding Interest Payment Date, to
register the transfer of or exchange any Note on or after such Regular Record
Date and before the date of redemption. Prior to the registration of any
transfer, the Company, the Trustee and their agents will treat the person in
whose name the Note is registered as the owner and Holder thereof for all
purposes (whether or not the Note is overdue), and will not be affected by
notice to the contrary.

     From time to time the Company will execute and the Trustee will
authenticate replacement or substitute Notes as necessary in order to permit
the registration of a transfer or exchange in accordance with this Section.

     No service charge will be imposed in connection with any transfer or
exchange of any Note, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer tax or other similar governmental
charge payable upon exchange pursuant to paragraph (b)(iv) of this Section).

     (e) Procedures to Be Followed by the Trustee. (i) Global Note to Global
Note. If a beneficial interest in a Global Note is transferred or exchanged for
a beneficial interest in another Global Note, the Trustee will (x) record a
decrease in the principal amount of the Global Note being transferred or
exchanged equal to the principal amount of such transfer or exchange and (y)
record a like increase in the principal amount of the other Global Note. Any
beneficial interest in one Global Note that is transferred to a Person who
takes delivery in the form of an interest in another Global Note, or exchanged
for an interest in another Global Note, will, upon transfer or exchange, cease
to be an interest in such Global Note and become an interest in the other
Global Note and, accordingly, will thereafter be subject to all transfer and
exchange restrictions, if any, and other procedures applicable to beneficial
interests in such other Global Note for as long as it remains such an interest.

          (ii) Certificated Note to Global Note. If a Certificated Note is
     transferred or exchanged for a beneficial interest in a Global Note, the
     Trustee will (x) cancel such Certificated Note, (y) record an increase in
     the principal amount of such Global Note equal to the principal amount of
     such transfer or exchange and (z) in the event that such transfer or
     exchange involves less than the entire principal amount of the canceled
     Certificated Note, deliver to the Holder thereof one or more new
     Certificated Notes in authorized denominations having an aggregate
     principal amount equal to the untransferred or unexchanged portion of the
     canceled Certificated Note, registered in the name of the Holder thereof.


                                      26
<PAGE>

          (iii) Certificated Note to Certificated Note. If a Certificated Note
     is transferred or exchanged for another Certificated Note, the Trustee
     will (x) cancel the Certificated Note being transferred or exchanged, (y)
     deliver one or more new Certificated Notes in authorized denominations
     having an aggregate principal amount equal to the principal amount of such
     transfer or exchange to the transferee (in the case of a transfer) or the
     Holder of the canceled Certificated Note (in the case of an exchange),
     registered in the name of such transferee or Holder, as applicable, and
     (z) if such transfer or exchange involves less than the entire principal
     amount of the canceled Certificated Note, will deliver to the Holder
     thereof one or more new Certificated Notes in authorized denominations
     having an aggregate principal amount equal to the untransferred or
     unexchanged portion of the canceled Certificated Note, registered in the
     name of the Holder thereof.

     Section 2.09. Replacement Notes. If a defaced or mutilated Note is
surrendered to the Trustee or if a Holder claims that its Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Note of such tenor and principal amount bearing a
number not contemporaneously outstanding. If required by the Trustee or the
Company, an indemnity bond must be furnished that is sufficient in the judgment
of both the Trustee and the Company to protect the Company, the Trustee and any
Agent from any loss that any of them may suffer if a Note is replaced. The
Company may charge such Holder for its expenses and the expenses of the Trustee
(including without limitation attorneys' fees and expenses) in replacing a
Note. In case any such mutilated, defaced, lost, destroyed or wrongfully taken
Note has become or is about to become due and payable, the Company in its
discretion may pay such Note instead of issuing a new Note in replacement
thereof.

     Every replacement Note is an additional obligation of the Company and
shall be entitled to the benefits of this Indenture.

     To the extent permitted by law, the foregoing provisions of this Section
are exclusive with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Notes.

     Section 2.10. Outstanding Notes. Notes outstanding at any time are all
Notes that have been authenticated by the Trustee except for those cancelled by
it, those delivered to it for cancellation and those described in this Section
as not outstanding.

     If a Note is replaced pursuant to Section 2.09, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Note is held by a holder in due course.


                                      27
<PAGE>

     If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on the maturity date or any redemption date or date for
repurchase of the Notes money sufficient to pay Notes payable or to be redeemed
or repurchased on that date, then on and after that date such Notes cease to be
outstanding and interest on them shall cease to accrue.

     A Note does not cease to be outstanding because the Company or one of its
Affiliates holds such Note, provided, however, that, in determining whether the
Holders of the requisite principal amount of the outstanding Notes have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Company or any Affiliate of the Company shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Notes as to
which a Responsible Officer of the Trustee has received written notice to be so
owned shall be so disregarded. Any Notes so owned which are pledged by the
Company, or by any Affiliate of the Company, as security for loans or other
obligations, otherwise than to another such Affiliate of the Company, shall be
deemed to be outstanding, if the pledgee is entitled pursuant to the terms of
its pledge agreement and is free to exercise in its or his discretion the right
to vote such Notes, uncontrolled by the Company or by any such Affiliate.

     Section 2.11. Temporary Notes. Until definitive Notes are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have insertions, substitutions, omissions and other variations
determined to be appropriate by the Officers executing the temporary Notes, as
evidenced by their execution of such temporary Notes. If temporary Notes are
issued, the Company will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary
Notes shall be exchangeable for definitive Notes of such tenor upon surrender
of such temporary Notes at the office or agency of the Company designated for
such purpose pursuant to Section 4.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Notes of such tenor and authorized
denominations. Until so exchanged, the temporary Notes shall be entitled to the
same benefits under this Indenture as definitive Notes.

     Section 2.12. Cancellation. The Company at any time may deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold. The Registrar, any
transfer agent and the Paying Agent shall forward to the Trustee any Notes


                                      28
<PAGE>

surrendered to them for transfer, exchange or payment. The Trustee shall
retain, cancel and destroy all Notes surrendered for transfer, exchange,
payment or cancellation and shall deliver a certificate of destruction to the
Company. The Company may not issue new Notes to replace Notes it has paid in
full or delivered to the Trustee for cancellation.

     Section 2.13. CUSIP Numbers. The Company in issuing the Notes may use
"CUSIP" and "CINS" numbers, and the Trustee shall use CUSIP numbers or CINS
numbers, as the case may be, in notices of redemption or exchange as a
convenience to Holders and no representation shall be made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of redemption or exchange.

     Section 2.14. Defaulted Interest. If the Company defaults in a payment of
interest on the Notes, it shall pay, or shall deposit with the Paying Agent
money in immediately available funds sufficient to pay, the defaulted interest
plus (to the extent lawful) any interest payable on the defaulted interest to
the Persons who are Holders on a subsequent special record date, which shall
mean the 15th day next preceding the date fixed by the Company for the payment
of defaulted interest, whether or not such day is a Business Day. At least 15
days before such special record date, the Company shall mail to each Holder and
to the Trustee a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.

                                   ARTICLE 3
                                   REDEMPTION

     Section 3.01. Optional Redemption. At any time and from time to time, the
Company may redeem the Notes in whole or in part at a redemption price equal to
(a) the sum of (i) 100% of the Principal amount thereof plus accrued and unpaid
interest to the redemption date plus (ii) a Make-Whole Amount, if any, if
redeemed on or prior to December 15, 2004; or (b) 100% of the Principal amount
thereof plus accrued and unpaid interest to the redemption date, if redeemed
after December 15, 2004; provided that if the date fixed for redemption is June
15 or December 15, then the interest payable on such date shall be paid to the
holder of record on the next preceding June 15 or December 15.

     Section 3.02. Mandatory Redemption Upon Receipt of Net Cash Proceeds from
Certain Transactions. (a) Within 90 days of the Company's receipt of any Excess
Asset Sale Proceeds, the Company will use such Excess Asset Sale Proceeds to
redeem the Notes at a price equal to 100% of the principal amount thereof plus
accrued and unpaid interest to the date of the redemption; provided that the
Company shall not be obligated to redeem any Notes pursuant to this Section
3.02(a) unless the Excess Asset Sale Proceeds exceeds $10 million


                                      29
<PAGE>

and upon completion of any redemption pursuant to this Section 3.02(a), the
Excess Asset Sale Proceeds under this Indenture will be reset to zero.

     (b) Within 90 days after the end of each fiscal year, so long as the
Minimum Liquidity Level on the last day of such fiscal year is greater than
$400 million, the Company will redeem, at a price equal to 100% of the
principal amount thereof plus accrued and unpaid interest to the date of the
redemption, an aggregate principal amount of outstanding Notes equal to the
lesser of the Noteholders' Ratable Share of (A) 75% of Adjusted Free Cash Flow
for such fiscal year and (B) the maximum amount of Adjusted Free Cash Flow for
such fiscal year so that the Minimum Liquidity Level on the last day of such
fiscal year after giving effect to any mandatory redemption required to be made
pursuant to this Section 3.02(b) and any prepayment made to the lenders under
the Senior Secured Credit Facilities with a portion of the Company's Adjusted
Free Cash Flow would not be less than $400 million; provided that the Company
shall not be obligated to redeem the Notes pursuant to this Section 3.02(b)
unless the Adjusted Free Cash Flow for such fiscal year (together with any
carryover amount described in the next sentence) exceeds $10 million. To the
extent that the Company is not required to redeem any Notes as a result of the
immediately preceding proviso, such amount of Notes that otherwise would have
been redeemed shall be carried forward and on the next date on which the
Company is required to redeem any Notes pursuant to this Section 3.02(b), the
amount of Notes required to be redeemed by the Company shall be increased by
such amount.

     (c) Within 90 days after the Company's receipt of any Net Cash Proceeds of
a Covered Capital Markets Transaction, the Company will use 50% of such Net
Cash Proceeds to redeem the Notes at a price equal to 100% of the principal
amount thereof plus accrued and unpaid interest to the date of the redemption;
provided that the Company shall not be required to redeem the Notes as set
forth in this Section 3.02(c) (i) unless on the date that the Covered Capital
Markets Transaction is consummated, the amount outstanding under the Senior
Secured Credit Facilities is zero and all commitments to extend credit
thereunder have been terminated and (ii) unless the Net Cash Proceeds from all
Covered Capital Markets Transactions subject to this Section 3.02(c) exceed $10
million. Upon completion of any redemption of the Notes pursuant to this
Section 3.02(c), the Net Cash Proceeds from Covered Capital Markets
Transactions under this Indenture will be reset to zero.

     Section 3.03. Additional Mandatory Redemption. On November 25, 2004, the
Company shall redeem, at a price equal to 100% of the principal amount of such
Notes to be redeemed plus accrued and unpaid interest to the redemption date,
Notes with an aggregate principal amount equal to (i) 40% of the aggregate
principal amount of the Notes issued on the Original Issue Date less (ii) the


                                      30
<PAGE>

aggregate principal amount of Notes redeemed on or prior to November 25, 2004
pursuant to Sections 3.01 and 3.02 of this Indenture.

     Section 3.04. Notice of Redemption; Partial Redemptions. Notice of
redemption to the Holders of the Notes to be redeemed as a whole or in part
shall be given by mailing notice of such redemption by first class mail,
postage prepaid, at least 30 days and not more than 60 days prior to the date
fixed for redemption to such Holders of the Notes at their last addresses as
they shall appear upon the Note Register. Any notice which is mailed or
published in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not the Holder receives the notice. Failure to give
notice by mail, or any defect in the notice to the Holder of any Note
designated for redemption as a whole or in part shall not affect the validity
of the proceedings for the redemption of any other Note.

     The notice of redemption to each such Holder shall specify the principal
amount of each Note held by such Holder to be redeemed, the CUSIP numbers of
the Notes to be redeemed, the date fixed for redemption, the redemption price,
the place or places of payment, that payment will be made upon presentation and
surrender of such Notes, that interest accrued to the date fixed for redemption
will be paid as specified in such notice and that on and after said date
interest thereon or on the portions thereof to be redeemed will cease to
accrue. In case any Note is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Note, a new Note or Notes and tenor in principal amount equal
to the unredeemed portion thereof will be issued.

     The notice of redemption of Notes to be redeemed at the option of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.

     On or before 10:00 a.m. New York City time on the redemption date
specified in the notice of redemption given as provided in this Section, the
Company will deposit with the Trustee or with one or more Paying Agents (or, if
the Company is acting as its own Paying Agent, set aside, segregate and hold in
trust as provided in Section 2.06) an amount of money sufficient to redeem on
the redemption date all the Notes so called for redemption at the appropriate
redemption price, together with accrued interest to the date fixed for
redemption. If all of the outstanding Notes are to be redeemed, the Company
will deliver to the Trustee at least 10 days prior to the last date on which
notice of redemption may be given to Holders pursuant to the first paragraph of
this Section 3.04 (or such shorter period as shall be acceptable to the
Trustee) an Officers' Certificate stating that all such Notes are to be
redeemed. If less than all the outstanding Notes are to be redeemed, the
Company will deliver to the Trustee at least 15 days prior to the last date on
which notice of redemption may be given to Holders pursuant to


                                      31
<PAGE>

the first paragraph of this Section 3.04 (or such shorter period as shall be
acceptable to the Trustee) an Officers' Certificate stating the aggregate
principal amount of such Notes to be redeemed. In case of a redemption at the
election of the Company prior to the expiration of any restriction on such
redemption, the Company shall deliver to the Trustee, prior to the giving of
any notice of redemption to Holders pursuant to this Section, an Officers'
Certificate stating that such redemption is not prohibited by such restriction.

     If less than all the Notes are to be redeemed, the Trustee shall select,
pro rata, by lot or in such manner as it shall deem appropriate and fair, Notes
to be redeemed in whole or in part. Notes may be redeemed in part in multiples
equal to the minimum authorized denomination for Notes or any multiple thereof.
The Trustee shall promptly notify the Company in writing of the Notes selected
for redemption and, in the case of any Notes selected for partial redemption,
the principal amount thereof to be redeemed. For all purposes of this
Indenture, unless the context otherwise requires, all provisions relating to
the redemption of Notes shall relate, in the case of any Note redeemed or to be
redeemed only in part, to the portion of the principal amount of such Note
which has been or is to be redeemed.

     Section 3.05. Payment of Notes Called for Redemption. If notice of
redemption has been given as above provided, the Notes or portions of Notes
specified in such notice shall become due and payable on the date and at the
place stated in such notice at the applicable redemption price, together with
interest accrued to the date fixed for redemption, and on and after such date
(unless the Company shall default in the payment of such Notes at the
redemption price, together with interest accrued to such date) interest on the
Notes or portions of Notes so called for redemption shall cease to accrue, and,
except as provided in Section 7.09 and Section 8.02, such Notes shall cease
from and after the date fixed for redemption to be entitled to any benefit
under this Indenture, and the Holders thereof shall have no right in respect of
such Notes except the right to receive the redemption price thereof and unpaid
interest to the date fixed for redemption. On presentation and surrender of
such Notes at a place of payment specified in said notice, said Notes or the
specified portions thereof shall be paid and redeemed by the Company at the
applicable redemption price, together with interest accrued thereon to the date
fixed for redemption; provided that payment of interest becoming due on or
prior to the date fixed for redemption, shall be payable to the Holders of such
Notes registered as such on the relevant record date subject to the terms and
provisions of Section 2.01 and Section 2.14 hereof.

     If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal shall, until paid or duly provided for,
bear interest from the date fixed for redemption at the rate of interest or
Yield to Maturity (in the case of an Original Issue Discount Note) borne by
such Note.


                                      32
<PAGE>

     Upon presentation of any Note redeemed in part only, the Company shall
execute and the Trustee shall authenticate and deliver to or on the order of
the Holder thereof, at the expense of the Company, a new Note or Notes of such
tenor, of authorized denominations, in principal amount equal to the unredeemed
portion of the Note so presented.

     Section 3.06. Exclusion of Certain Notes from Eligibility for Selection
for Redemption. Notes shall be excluded from eligibility for selection for
redemption if they are identified by registration and certificate number in a
written statement signed by an authorized officer of the Company and delivered
to the Trustee at least 40 days prior to the last date on which notice of
redemption may be given as being owned of record and beneficially by, and not
pledged or hypothecated by, either (a) the Company or (b) an entity
specifically identified in such written statement as directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Company.

                                   ARTICLE 4
                                   COVENANTS

     Section 4.01. Payment of Notes. The Company shall pay the Principal of and
interest on the Notes on the dates and in the manner provided in the Notes and
this Indenture. The interest on the Notes shall be payable only to the Holders
thereof and at the option of the Company may be paid by mailing checks for such
interest payable to or upon the written order of such Holders at their last
addresses as they appear on the Note Register of the Company.

     Notwithstanding any provisions of this Indenture and the Notes to the
contrary, if the Company and a Holder of any Note so agree, payments of
interest on, and any portion of the Principal of, such Holder's Note (other
than interest payable at maturity or on any redemption or repayment date or the
final payment of Principal on such Note) shall be made by the Paying Agent,
upon receipt from the Company of immediately available funds by 11:00 A.M., New
York City time (or such other time as may be agreed to between the Company and
the Paying Agent), directly to the Holder of such Note (by Federal funds wire
transfer or otherwise) if the Holder has delivered written instructions to the
Trustee 15 days prior to such payment date requesting that such payment will be
so made and designating the bank account to which such payments shall be so
made and in the case of payments of Principal, surrenders the same to the
Trustee in exchange for a Note or Notes aggregating the same principal amount
as the unredeemed principal amount of the Notes surrendered. The Trustee shall
be entitled to rely on the last instruction delivered by the Holder pursuant to
this Section 4.01 unless a new instruction is delivered 15 days prior to a
payment date. The Company will indemnify and hold each of the Trustee and any
Paying Agent harmless against any loss, liability or expense (including
attorneys' fees) resulting from any act or


                                      33
<PAGE>

omission to act on the part of the Company or any such Holder in connection
with any such agreement or from making any payment in accordance with any such
agreement.

     The Company shall pay interest on overdue Principal, and interest on
overdue installments of interest, to the extent lawful, at the rate per annum
specified in the Notes.

     Section 4.02. Maintenance of Office or Agency. The Company will maintain
in the Borough of Manhattan, The City of New York, an office or agency where
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Company
in respect of the Notes and this Indenture may be served. The Company hereby
initially designates the Corporate Trust Office of the Trustee's Agent, located
in the Borough of Manhattan, The City of New York, as such office or agency of
the Company. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 10.01.

     The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The
City of New York for such purposes. The Company will give prompt written notice
to the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.

     Section 4.03. Noteholders' Lists. The Company will furnish or cause to be
furnished to the Trustee a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of the Notes (a)
semi-annually not more than 15 days after each Regular Record Date, as
hereinabove specified, as of such record date and (b) at such other times as
the Trustee may request in writing, within thirty days after receipt by the
Company of any such request as of a date not more than 15 days prior to the
time such information is furnished.

     Section 4.04. Certificate to Trustee. The Company will furnish to the
Trustee annually, on or before a date not more than four months after the end
of its fiscal year (which, on the date hereof, is a calendar year), a brief
certificate (which need not contain the statements required by Section 10.03)
from its principal executive, financial or accounting officers to his or her
knowledge of the compliance of the Company with all conditions and covenants
under this


                                      34
<PAGE>

Indenture (such compliance to be determined without regard to any period of
grace or requirement of notice provided under this Indenture).

     Section 4.05. Reports by the Company. (a) The Company covenants to file
with the Trustee, within 15 days after the Company has filed the same with the
Commission, copies of the annual reports and of the information, documents, and
other reports which the Company may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act.

     (b) The Company covenants to provide the Trustee, within 50 days of the
effective date of the amendment or waiver, a copy of any amendment or waiver
under the Senior Secured Credit Facilities that amends or waives the
definitions of "Covered Asset Sale", "Creditors' Portion" or Adjusted Free Cash
Flow" set forth therein.

     Section 4.06. Limitation on Liens. (a) If the Company shall incur, issue,
assume or Guarantee any indebtedness for borrowed money represented by notes,
bonds, debentures or other similar evidences of indebtedness, secured by a
mortgage, pledge or other lien on any Principal Property or any Capital Stock
or indebtedness held directly by the Company of any Subsidiary, the Company
shall secure the Notes equally and ratably with (or prior to) such
indebtedness, so long as such indebtedness shall be so secured, unless after
giving effect thereto the aggregate amount of all such indebtedness so secured,
together with all Attributable Debt in respect of sale and leaseback
transactions involving Principal Properties, would not exceed 15% of the
Consolidated Net Assets of the Company. This restriction will not apply to, and
there shall be excluded in computing secured indebtedness for the purpose of
such restriction, indebtedness secured by (i) property of any Subsidiary, (ii)
liens on property of, or on any shares of stock or Debt of, any corporation
existing at the time such corporation becomes a Subsidiary, (iii) liens in
favor of the Company or any Subsidiary, (iv) liens in favor of U.S. or foreign
governmental bodies to secure partial, progress, advance or other payments, (v)
liens on property, shares of stock or Debt existing at the time of acquisition
thereof (including acquisition through merger or consolidation), purchase money
mortgages and construction cost mortgages existing at or incurred within 180
days of the time of acquisition thereof, (vi) liens existing on the first date
on which any Notes are authenticated by the Trustee, (vii) liens under one or
more credit facilities for indebtedness in an aggregate principal amount not to
exceed $900 million at any time outstanding, (viii) liens incurred in
connection with pollution control, industrial revenue or similar financings,
and (ix) any extension, renewal or replacement of any Debt secured by any liens
referred to in the foregoing clauses (i) through (viii), inclusive.

     (b) Without the consent of holders of a majority in principal amount of
the Notes outstanding, the Company shall not pledge the Collateral as security
for any indebtedness, other than (i) all Debt outstanding under the Senior
Secured


                                      35
<PAGE>

Credit Facilities pursuant to the Collateral Documents as amended from time to
time (except that the amount of such Debt may not exceed the original loans and
commitments secured thereunder less permanent repayments and commitment
reductions and any prepayment or repayments of obligations may not be
reborrowed and the commitments shall be reduced accordingly), (ii) up to $225
million aggregate principal amount (or accreted value, if applicable) of other
senior secured Debt, (iii) obligations under interest rate and foreign currency
hedging agreements, and cash management services arrangements provided to the
Company by lenders under the Senior Secured Credit Facilities, (iv) obligations
under the Banc of America Securities Option Agreement, (v) obligations under
the Notes, in aggregate principal amount not to exceed $305 million, (vi) such
other obligations as are permitted to be so secured by the Senior Secured
Credit Facilities, (vii) up to $60 million of other corporate obligations that
by their terms are entitled to be secured on a pari passu basis, and (viii)
obligations the proceeds of which are used to refinance any of the foregoing;
provided that for purposes of determining compliance with this Section 4.06(b),
in the event that an obligation meets the criteria of more than one of the
categories described in clauses (i) through (viii) above, the Company shall, in
its sole discretion, classify such item of indebtedness in any manner that
complies with this covenant and such obligation will be treated as having been
incurred pursuant only to one of such clauses. In addition, the Company may, at
any time, change the classification of an obligation (or any portion thereof)
to any other clause provided that the Company would be permitted to incur such
obligation (or such portion thereof) pursuant to such other clause at such time
of reclassification.

     Section 4.07. Equal and Ratable Liens. (a) To the extent the Company or
any Subsidiary of the Company grants a Lien upon any of its property or assets
to secure the Senior Secured Credit Facilities, the Company or such Subsidiary,
as the case may be, shall, contemporaneously with the granting of such Lien,
secure the Company's Obligations under the Indenture equally and ratably with
the Senior Secured Credit Facility Obligations secured by such Lien.

     (b) Notwithstanding the foregoing, from and after the date when all Liens
granted in favor of the holders of the Senior Secured Credit Facility
Obligations are released (and are not concurrently replaced with any new Liens
on any asset of the Company or any of its Subsidiaries securing Senior Secured
Credit Facility Obligations), the provisions of this Section will no longer
apply. The provisions of Section 4.06 will, however, continue to apply.

     Section 4.08. Restriction on Subsidiary Guarantees. (a) If any of the
Company's Subsidiaries shall Guarantee any indebtedness under the Senior
Secured Credit Facilities, then such Subsidiary shall, contemporaneously with
the granting of such Guarantee, Guarantee the Company's Obligations under the
Indenture equally and ratably with (or prior to) the Senior Secured Credit
Facilities so Guaranteed, so long as the Senior Secured Credit Facilities shall
be


                                      36
<PAGE>

so Guaranteed; provided that this restriction shall not apply to any Guarantees
of the Senior Secured Credit Facilities existing on the Original Issue Date.

     (b) Notwithstanding the foregoing, from and after the date when all
Guarantees granted in favor of the holders of the Senior Secured Credit
Facility Obligations pursuant to clause (a) of this Section 4.08 are released
(and are not concurrently replaced with any new Guarantees), the provisions of
this Section will no longer apply.

     Section 4.09. Limitation on Sale Leaseback Transactions. The Company will
not enter into any sale and leaseback transaction involving any Principal
Property, the acquisition or completion of construction and commencement of
full operation of which has occurred more than 180 days prior thereto, unless
(a) the Company could incur a lien on such property under the restrictions
described in Section 4.06 hereof in an amount equal to the Attributable Debt
with respect to the sale and leaseback transaction without equally and ratably
securing the Notes or (b) the Company, within 180 days after the sale or
transfer by the Company, applies to the retirement of its Funded Debt an amount
equal to the greater of (i) the net proceeds of the sale of the Principal
Property sold and leased pursuant to such arrangement or (ii) the fair market
value of the Principal Property so sold and leased as determined by the Board
of Directors; provided that the amount to be applied to the retirement of
Funded Debt of the Company shall be reduced by (A) the principal amount of any
Notes delivered within 180 days after such sale or transfer to the Trustee for
retirement and cancellation, and (B) the principal amount of Funded Debt, other
than Notes, voluntarily retired by the Company within 180 days after such sale
or transfer; provided further that no retirement referred to in this clause (b)
may be effected by payment at maturity or pursuant to any mandatory sinking
fund payment or any mandatory prepayment provision.

     Section 4.10. Transfer of Certain Net Cash Proceeds Received by
Subsidiaries. The Company will cause its Subsidiaries to transfer to it, by way
of dividend, reduction of capital, or repayment of intercompany loans, the
Creditors' Portion of the Net Cash Proceeds of any Covered Asset Sale and the
Creditors' Portion of the Net Cash Proceeds from any Covered Capital Markets
Transactions within 60 days of such Subsidiary's receipt thereof, but only to
the extent that, after giving effect to such Covered Asset Sale or Covered
Capital Markets Transaction, the cash balances of such Subsidiary exceed its
Ordinary Course Cash Needs, and such transfer shall not be required to be made
if (1) it cannot be made in a tax efficient manner or (2) such transfer would
violate any applicable contracts or would violate applicable law or if
applicable law would require minority shareholder approval, a valuation or a
discretionary order or would, in the Company's good faith determination or the
good faith determination of a majority of the board of directors of such
Subsidiary, involve a reasonable likelihood of there being a breach of
fiduciary duties by the directors of such Subsidiary. In connection with
managing transfers of Net Cash Proceeds pursuant


                                      37
<PAGE>

to this Section 4.10 and making loans, Investments and other advances to
Subsidiaries, the Company may cause Net Cash Proceeds to be transferred among
Subsidiaries, rather than transferred to the Company, in lieu of loans,
Investments or other advances the Company would otherwise be permitted to make
and would make. Notwithstanding the foregoing, (a) in the case of any Net Cash
Proceeds that would otherwise be required to be transferred to the Company
pursuant to this covenant, the Company need not make such transfer if the
Company nonetheless makes the related mandatory redemption of the Notes that
would otherwise be required pursuant to Section 3.02 using funds not otherwise
required to be used for the mandatory redemption of the Notes and (b) if the
Net Cash Proceeds of any Covered Asset Sale or Covered Capital Markets
Transaction received by a Subsidiary are less than $10 million, the Company
shall not be required to cause such Net Cash Proceeds effectively to be
transferred directly or indirectly to it and applied to redeem the Notes until
the aggregate Net Cash Proceeds not so applied equals or exceeds $10 million.

                                   ARTICLE 5
                             SUCCESSOR CORPORATION

     Section 5.01. When Company May Merge, Etc. The Company shall not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially as an entirety in one transaction or a series of
related transactions) to, any Person (other than a consolidation with or merger
with or into a Subsidiary or a sale, conveyance, transfer, lease or other
disposition to a Subsidiary) or permit any Person to merge with or into the
Company unless either (x) the Company shall be the continuing Person or (y) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or to which properties and assets of the Company shall be
a solvent corporation organized and validly existing under the laws of the
United States of America or any state thereof or the District of Columbia and
shall expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, all of the obligations of the Company on all of the Notes issued
under this Indenture and the Company shall have delivered to the Trustee (a) an
Opinion of Counsel stating that such consolidation, merger or transfer and such
supplemental indenture complies with this provision and that all conditions
precedent provided for herein relating to such transaction have been complied
with and that such supplemental indenture constitutes the legal, valid and
binding obligation of the Company or such successor enforceable against such
entity in accordance with its terms, subject to customary exceptions and (b) an
Officers' Certificate to the effect that immediately after giving effect to
such transaction, no Event of Default or Default shall have occurred and be
continuing.


                                      38
<PAGE>

     Section 5.02. Successor Substituted. Upon any consolidation or merger, or
any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein.

                                   ARTICLE 6
                              DEFAULT AND REMEDIES

     Section 6.01. Events of Default. An "Event of Default" shall occur with
respect to the Notes if:

     (a) the Company defaults in the payment of the Principal of the Notes when
the same becomes due and payable at maturity, upon acceleration, redemption or
mandatory repurchase, or otherwise;

     (b) the Company defaults in the payment of interest on the Notes when the
same becomes due and payable, and such default continues for a period of 30
days;

     (c) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture with respect to the
Notes or in the Notes and such default or breach continues for a period of 60
consecutive days after written notice to the Company by the Trustee or to the
Company and the Trustee by the Holders of 25% or more in aggregate principal
amount of the Notes affected thereby;

     (d) an event of default, as defined in any indenture or instrument
evidencing or under which the Company has at the date of the Indenture or shall
thereafter have outstanding any indebtedness, shall happen and be continuing
and, in the case of indebtedness other than indebtedness under the Senior
Secured Credit Facilities, either (i) such default results from the failure to
pay the principal of such indebtedness in excess of $50 million at final
maturity of such indebtedness or (ii) as a result of such default the maturity
of such indebtedness shall have been accelerated so that the same shall be or
become due and payable prior to the date on which the same would otherwise have
become due and payable, and such acceleration shall not be rescinded or
annulled within 60 days and, the principal amount of such indebtedness,
together with the principal amount of any other indebtedness of the Company the
maturity of which has been accelerated, aggregates $50 million or more;
provided that the Trustee shall not be charged with knowledge of any such
default unless written notice thereof shall


                                      39
<PAGE>

have been given to the Trustee by the Company, by the holder or an agent of the
holder of any such indebtedness, by the trustee then acting under any indenture
or other instrument under which such default shall have occurred, or by the
Holders of not less than 25% in the aggregate principal amount of the Notes at
the time outstanding; and provided further that if such default shall be
remedied or cured by the Company or waived by the holder of such indebtedness,
then the Event of Default under the Indenture by reason thereof shall be deemed
likewise to have been remedied, cured or waived without further action on the
part of the Trustee, any Holder or any other person;

     (e) any of the Collateral Documents ceases to be in full force and effect,
or any of the Collateral Documents ceases to give the Holders any of the liens
purported to be created thereby, or any of the Collateral Documents is declared
null and void or the Company denies in writing that it has any further
liability under any Collateral Document or gives written notice to such effect
(in each case other than in accordance with the terms of the Indenture or the
terms of the Collateral Documents); provided that if a failure of the sort
described in this clause (e) is susceptible of cure, no Event of Default shall
arise under this clause (e) with respect thereto until 30 days after notice of
such failure shall have been given to the Company by the Trustee or Holders of
at least 25% in principal amount of the then outstanding Notes;

     (f) a court having jurisdiction in the premises shall enter a decree or
order for (i) relief in respect of the Company or any of its Material
Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, (ii) appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar
official of the Company or any of its Material Subsidiaries or for all or
substantially all of the property and assets of the Company or any of its
Material Subsidiaries or (iii) the winding up or liquidation of the affairs of
the Company or any of its Material Subsidiaries, and, in each case, such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or

     (g) the Company or any of its Material Subsidiaries (i) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case under any such law, (ii) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any of its Material
Subsidiaries or for all or substantially all of the property and assets of the
Company or any of its Material Subsidiaries or (iii) effects any general
assignment for the benefit of creditors.

     Section 6.02. Acceleration. (a) If an Event of Default (other than as
described in clauses (f) or (g) of Section 6.01 with respect to the Company)
with respect to the Notes then outstanding occurs and is continuing, then, and
in each


                                      40
<PAGE>

and every such case, either the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding hereunder by notice in
writing to the Company (and to the Trustee if given by Noteholders), may, and
the Trustee at the request of such Holders shall, declare the entire Principal
of all Notes, and the interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately
due and payable; provided that if an Event of Default has occurred and is
continuing as a result of a default described in clause (d) of Section 6.01
arising under the Senior Secured Credit Facilities (other than a payment
default or a default as a result of which the maturity of the Senior Secured
Credit Facility shall have been accelerated so that it shall be or become due
and payable prior to the date on which the same would otherwise have become due
and payable), such acceleration may not occur until 20 Business Days after the
occurrence of such default unless such default under the Senior Secured Credit
Facility results from a bankruptcy or insolvency related event involving a
Subsidiary of the Company or the acceleration of other indebtedness arising
from such bankruptcy or insolvency related event, in which case such
acceleration may not occur until 60 days after the occurrence of such default.

     (b) If an Event of Default described in clause (f) or (g) of Section 6.01
occurs and is continuing with respect to the Company, then the Principal of all
the Notes then outstanding and interest accrued thereon, if any, shall ipso
facto be and become immediately due and payable, without any declaration or
other action by any Holder or the Trustee.

     The foregoing provisions, however, are subject to the condition that if,
at any time after the Principal of the Notes shall have been so declared due
and payable, and before any judgment or decree for the payment of the moneys
due shall have been obtained or entered as hereinafter provided, the Company
shall pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all the Notes and the Principal of any and all
Notes which shall have become due otherwise than by acceleration (with interest
upon such principal and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest, at the
same rate as the rate of interest specified in the Notes to the date of such
payment or deposit) and such amount as shall be sufficient to cover all amounts
owing the Trustee under Section 7.06, and if any and all Events of Default
under the Indenture, other than the non-payment of the principal of Notes which
shall have become due by acceleration, shall have been cured, waived or
otherwise remedied as provided herein, then and in every such case the Holders
of a majority in aggregate Principal amount of all the then outstanding Notes
that have been accelerated, by written notice to the Company and to the
Trustee, may waive all defaults with respect to the Notes and rescind and annul
such declaration and its consequences, but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon.


                                      41
<PAGE>

     Section 6.03. Other Remedies. If a payment default or an Event of Default
with respect to the Notes occurs and is continuing, the Trustee may pursue, in
its own name or as trustee of an express trust, any available remedy by
proceeding at law or in equity to collect the payment of Principal of and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.

     The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding.

     Section 6.04. Waiver of Past Defaults. Subject to Section 6.02, Section
6.07 and Section 9.02, the Holders of at least a majority in Principal amount
of the outstanding Notes affected, by notice to the Trustee, may waive an
existing Default or Event of Default with respect to the Notes and its
consequences, except a Default in the payment of Principal of or interest on
any Note as specified in clauses (a) or (b) of Section 6.01 or in respect of a
covenant or provision of this Indenture which cannot be modified or amended
without the consent of the Holder of each outstanding Note affected. Upon any
such waiver, such Default shall cease to exist, and any Event of Default with
respect to the Notes arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.

     Section 6.05. Control by Majority. Subject to Section 7.01 and Section
7.02(e), the Holders of at least a majority in aggregate Principal amount of
the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the Notes by this Indenture;
provided, that the Trustee may refuse to follow any direction that conflicts
with law or this Indenture, that may involve the Trustee in personal liability
or that the Trustee determines in good faith may be unduly prejudicial to the
rights of Holders not joining in the giving of such direction; and provided
further, that the Trustee may take any other action it deems proper that is not
inconsistent with any directions received from Holders of Notes pursuant to
this Section 6.05.

     Section 6.06. Limitation on Suits. No Holder of any Note may institute any
proceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:

          (i) such Holder has previously given to the Trustee written notice of
     a continuing Event of Default with respect to the Notes;


                                      42
<PAGE>

          (ii) the Holders of at least 25% in aggregate Principal amount of
     outstanding Notes shall have made written request to the Trustee to pursue
     the remedy;

          (iii) such Holder or Holders have offered and, if requested, provided
     to the Trustee indemnity reasonably satisfactory to the Trustee against
     any costs, liabilities or expenses to be incurred in compliance with such
     request;

          (iv) the Trustee for 60 days after its receipt of such notice,
     request and offer of indemnity has failed to institute any such
     proceeding; and

          (v) during such 60-day period, the Holders of a majority in aggregate
     Principal amount of the outstanding Notes have not given the Trustee a
     direction that is inconsistent with such written request.

     A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.

     Section 6.07. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder of a Note to receive
payment of Principal of or interest, if any, on such Holder's Note on or after
the respective due dates expressed on such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.

     Section 6.08. Collection Suit by Trustee. If an Event of Default with
respect to the Notes in payment of Principal or interest specified in clause
(a) or (b) of Section 6.01 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount of Principal of, and accrued interest remaining unpaid on,
together with interest on overdue Principal of, and, to the extent that payment
of such interest is lawful, interest on overdue installments of interest on,
the Notes, in each case at the rate specified in such Notes, and such further
amount as shall be sufficient to cover all amounts owing the Trustee under
Section 7.06.

     Section 6.09. Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for amounts due
the Trustee under Section 7.06) and the Holders allowed in any judicial
proceedings relative to the Company (or any other obligor on the Notes), its
creditors or its property and shall be entitled and empowered to collect and
receive any moneys, securities or other property payable or deliverable upon
conversion or exchange of the Notes or upon any such claims and to distribute
the


                                      43
<PAGE>

same, and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due to it under Section 7.06. Nothing herein
contained shall be deemed to empower the Trustee to authorize or consent to, or
accept or adopt on behalf of any Holder, any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Holder in any such proceeding

     Section 6.10. Application of Proceeds. Any moneys or properties collected
by the Trustee pursuant to this Article in respect of the Notes shall be
applied in the following order at the date or dates fixed by the Trustee:

          FIRST: To the payment of all amounts due the Trustee under Section
     7.06;

          SECOND: to Holders for amounts then due and unpaid for principal of
     and interest on the Notes, ratably, without preference or priority of any
     kind, according to the amounts due and payable on the Notes for principal
     and interest; and

          THIRD: To the payment of the remainder, if any, to the Company or any
     other person lawfully entitled thereto.

     Section 6.11. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder,
then, and in every such case, subject to any determination in such proceeding,
the Company, the Trustee and the Holders shall be restored to their former
positions hereunder and thereafter all rights and remedies of the Company,
Trustee and the Holders shall continue as though no such proceeding had been
instituted.

     Section 6.12. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, in either case in respect to the
Notes, a court may require any party litigant in such suit (other than the
Trustee) to file an undertaking to pay the costs of the suit, and the court may
assess reasonable costs, including reasonable attorneys' fees, against any
party litigant (other than the Trustee) in the suit having due regard to the
merits and good faith of the claims or defenses made by the party litigant.
This Section 6.12 does not apply to a suit by


                                      44
<PAGE>

a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in
principal amount of the outstanding Notes.

     Section 6.13. Rights and Remedies Cumulative. Except as otherwise provided
with respect to the replacement or payment of mutilated, destroyed, lost or
wrongfully taken Notes in Section 2.09, no right or remedy herein conferred
upon or reserved to the Trustee or to the Holders is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

     Section 6.14. Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any holder to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver
of any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article 6 or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.

                                   ARTICLE 7
                                    TRUSTEE

     Section 7.01. General. The duties and responsibilities of the Trustee
shall be as set forth herein. The Trustee undertakes to perform only the duties
expressly set forth herein and no implied covenant or obligation shall be read
into this Indenture against the Trustee. Notwithstanding the foregoing, no
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, unless
it receives indemnity satisfactory to it against any loss, liability or
expense. Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Article 7.

     Section 7.02. Certain Rights of Trustee. (a) The Trustee may rely and
shall be protected in acting or refraining from acting upon any resolution,
certificate, Officers' Certificate, Opinion of Counsel (or both), statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
person or persons. The Trustee need not investigate any fact or matter stated
in


                                      45
<PAGE>

the document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit;

     (b) before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and/or an Opinion of Counsel, which shall conform to
Section 10.03. The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on such certificate or opinion. Subject to
Section 7.01 and Section 7.02, whenever in the administration of the trusts of
this Indenture the Trustee shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under
the provisions of this Indenture upon the faith thereof;

     (c) the Trustee may act through its attorneys and agents not regularly in
its employ and shall not be responsible for the misconduct or negligence of any
agent or attorney appointed with due care;

     (d) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and any
Board Resolution may be evidenced to the Trustee by a copy thereof certified by
the Secretary or an Assistant Secretary of the Company;

     (e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Holders, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction;

     (f) the Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within its rights or
powers or for any action it takes or omits to take in accordance with the
direction of the Holders in accordance with Section 6.05 relating to the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture;

     (g) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon; and


                                      46
<PAGE>

     (h) prior to the occurrence of an Event of Default hereunder and after the
curing or waiving of all Events of Default, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, Officers' Certificate, Opinion of Counsel, Board Resolution,
statement, instrument, opinion, report, notice, request, consent, order,
approval, appraisal, bond, debenture, note, security, or other paper or
document unless requested in writing so to do by the Holders of not less than a
majority in aggregate Principal amount of the Notes then outstanding; provided
that, if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expenses or liabilities
as a condition to proceeding.

     Section 7.03. Individual Rights of Trustee. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of the Notes and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not the Trustee. Any Agent may do the same with like rights.

     Section 7.04. Trustee's Disclaimer. The recitals contained herein and in
the Notes (except the Trustee's certificate of authentication) and the
Collateral Documents shall be taken as statements of the Company and not of the
Trustee and the Trustee assumes no responsibility for the correctness of the
same. Neither the Trustee nor any of its agents (i) makes any representation as
to the validity or adequacy of this Indenture or the Notes and (ii) shall be
accountable for the Company's use or application of the proceeds from the
Notes, if any.

     Section 7.05. Notice of Default. If any Default with respect to the Notes
occurs and is continuing and if such Default is known to the actual knowledge
of a Responsible Officer of the Trustee, the Trustee shall give to each Holder
of Notes notice of such Default within 90 days after it occurs (or after such
Responsible Officer of the Trustee acquires knowledge thereof) to all Holders,
unless such Default shall have been cured or waived before the mailing or
publication of such notice; provided, however, that, except in the case of a
Default in the payment of the Principal of or interest on any Note, the Trustee
shall be protected in withholding such notice if the Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.

     Section 7.06. Compensation and Indemnity. The Company shall pay to the
Trustee such compensation as shall be agreed upon in writing from time to time
for its services. The compensation of the Trustee shall not be limited by any
law on compensation of a Trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of pocket expenses,
disbursements and advances incurred or made by the Trustee. Such expenses shall
include the reasonable compensation and expenses of the Trustee's agents,


                                      47
<PAGE>

counsel and other persons not regularly in its employ. The Trustee shall not be
required to make any advances hereunder.

     The Company shall indemnify the Trustee for, and hold it harmless against,
any loss or liability or expense incurred by it without gross negligence or bad
faith on its part arising out of or in connection with the acceptance or
administration of this Indenture and the Notes or the issuance of the Notes or
the trusts hereunder and the performance of duties under this Indenture and the
Notes, including the costs and expenses of defending itself against or
investigating any claim or liability and of complying with any process served
upon it or any of its officers in connection with the exercise or performance
of any of its powers or duties under this Indenture and the Notes.

     To secure the Company's payment obligations in this Section 7.06, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay Principal of, and interest on particular Notes.

     The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder and shall survive the
satisfaction and discharge of this Indenture or the rejection or termination of
this Indenture under bankruptcy law. Such additional indebtedness shall be a
senior claim to that of the Notes upon all property and funds held or collected
by the Trustee as such, except funds held in trust for the benefit of the
Holders of particular Notes, and the Notes are hereby subordinated to such
senior claim. If the Trustee renders services and incurs expenses following an
Event of Default under Section 6.01(f) or Section 6.01(g) hereof, the parties
hereto and the Holders by their acceptance of the Notes hereby agree that such
expenses are intended to constitute expenses of administration under any
bankruptcy law.

     Section 7.07. Replacement of Trustee. A resignation or removal of the
Trustee as Trustee and appointment of a successor Trustee as Trustee shall
become effective only upon the successor Trustee's acceptance of appointment as
provided in this Section 7.07.

     The Trustee may resign as Trustee with respect to the Notes at any time by
so notifying the Company in writing. The Holders of a majority in Principal
amount of the outstanding Notes may remove the Trustee as Trustee with respect
to the Notes by so notifying the Trustee in writing and may appoint a successor
Trustee with respect thereto with the consent of the Company. The Company may
remove the Trustee as Trustee with respect to the Notes if: (i) the Trustee is
adjudged a bankrupt or insolvent; (ii) a receiver or other public officer takes


                                      48
<PAGE>

charge of the Trustee or its property; or (iii) the Trustee becomes incapable
of acting.

     If the Trustee resigns or is removed as Trustee with respect to the Notes,
or if a vacancy exists in the office of Trustee with respect to the Notes for
any reason, the Company shall promptly appoint a successor Trustee with respect
thereto. Within one year after the successor Trustee takes office, the Holders
of a majority in Principal amount of the outstanding Notes may appoint a
successor Trustee in respect of such Notes to replace the successor Trustee
appointed by the Company. If the successor Trustee with respect to the Notes
does not deliver its written acceptance required by the next succeeding
paragraph of this Section 7.07 within 30 days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Company or the Holders of a
majority in principal amount of the outstanding Notes may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
thereto.

     A successor Trustee with respect to the Notes shall deliver a written
acceptance of its appointment to the retiring Trustee and to the Company.
Immediately after the delivery of such written acceptance, subject to the Lien
provided for in Section 7.06, (i) the retiring Trustee shall transfer all
property held by it as Trustee in respect of the Notes to the successor
Trustee, (ii) the resignation or removal of the retiring Trustee in respect of
the Notes shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee in respect of the Notes under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder of Notes.

     Upon request of any such successor Trustee, the Company shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts referred to in the
preceding paragraph.

     The Company shall give notice of any resignation and any removal of the
Trustee with respect to the Notes and each appointment of a successor Trustee
in respect of the Notes to all Holders of Notes. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.

     Notwithstanding replacement of the Trustee with respect to the Notes
pursuant to this Section 7.07, the Company's obligations under Section 7.06
shall continue for the benefit of the retiring Trustee.

     Section 7.08. Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national,
banking association, the resulting, surviving or transferee corporation or
national banking


                                      49
<PAGE>

association without any further act shall be the successor Trustee with the
same effect as if the successor Trustee had been named as the Trustee herein.

     Section 7.09. Money Held in Trust. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree in writing
with the Company. Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law and except for money held
in trust under Article 8 of this Indenture.

                                   ARTICLE 8
           SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS

     Section 8.01. Satisfaction and Discharge of Indenture. If at any time (a)
the Company shall have paid or caused to be paid the Principal of, and interest
on all the Notes outstanding hereunder (other than Notes which have been
destroyed, lost or stolen and which have been replaced or paid as provided in
Section 2.09) as and when the same shall have become due and payable, or (b)
the Company shall have delivered to the Trustee for cancellation all notes
theretofore authenticated (other than any Notes which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.06) or (c) (i) all the notes not theretofore delivered to
the Trustee for cancellation shall have become due and payable, or are by their
terms to become due and payable within one year or are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption, and (ii) the Company shall have irrevocably
deposited or caused to be deposited with the Trustee as trust funds the entire
amount in cash (other than moneys repaid by the Trustee or any paying agent to
the Company in accordance with Section 8.04) or U.S. Government Obligations,
maturing as to principal and interest in such amounts and at such times as will
insure the availability of cash sufficient to pay at maturity or upon
redemption all Notes (other than any Notes which shall have been destroyed,
lost or stolen and which shall have been replaced or paid as provided in
Section 2.09) not theretofore delivered to the Trustee for cancellation,
including principal, and interest due or to become due on or prior to such date
of maturity as the case may be, and if, in any such case, the Company shall
also pay or cause to be paid all other sums payable hereunder by the Company
with respect to Notes, then this Indenture shall cease to be of further effect
with respect to the Notes (except as to (i) rights of registration of transfer
and exchange of notes, and the Company's right of optional, redemption, if any,
(ii) substitution of mutilated, defaced, destroyed, lost or stolen Notes, (iii)
rights of holders to receive payments of Principal and interest thereon, upon
the original stated due dates therefor (but not upon acceleration), (iv) the
rights, obligations and immunities of the Trustee hereunder and (v) the rights
of the Noteholders as beneficiaries hereof with respect to the property so
deposited with the Trustee


                                      50
<PAGE>

payable to all or any of them), and the Trustee, on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel, and at the
cost and expense of the Company, shall execute proper instruments acknowledging
such satisfaction of and discharging this Indenture; provided, that the rights
of Holders of the Notes to receive amounts in respect of Principal of and
interest on the Notes held by them shall not be delayed longer than required by
then-applicable mandatory rules or policies of any securities exchange upon
which the Notes are listed. The Company agrees to reimburse the Trustee for any
costs or expenses thereafter reasonably and properly incurred and to compensate
the Trustee for any services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Notes.

     Section 8.02. Application by Trustee of Funds Deposited for Payment of
Notes. Subject to Section 8.04, all moneys deposited with the Trustee pursuant
to Section 8.01 shall be held in trust and applied by it to the payment, either
directly or through any paying agent (including the Company acting as its own
paying agent), to the Holders of the particular Notes for the payment or
redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest; but such money
need not be segregated from other funds except to the extent required by law.

     Section 8.03. Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture, all moneys then held by any
paying agent under the provisions of this indenture shall, upon demand of the
Company, be repaid to it or paid to the Trustee and thereupon such paying agent
shall be released from all further liability with respect to such moneys.

     Section 8.04. Return of Moneys Held by Trustee and Paying Agent Unclaimed
for Two Years. Any moneys deposited with or paid to the Trustee or any paying
agent for the payment of the Principal of or interest on any Note and not
applied but remaining unclaimed for two years after the date upon which such
Principal or interest shall have become due and payable, shall, upon the
written request of the Company and unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property law, be
repaid to the Company by the Trustee or such paying agent, and the Holder of
the Note shall, unless otherwise required by mandatory provisions of applicable
escheat or abandoned or unclaimed property laws, thereafter look only to the
Company for any payment which such Holder may be entitled to collect, and all
liability of the Trustee or any paying agent with respect to such moneys shall
thereupon cease.

     Section 8.05. Defeasance and Discharge of Indenture. The Company shall be
deemed to have paid and shall be discharged from any and all obligations in
respect of the Notes, on the 123rd day after the deposit referred to in clause
(i) hereof has been made, and the provisions of this Indenture shall no longer
be in effect with respect to the Notes (and the Trustee, at the expense of the
Company,


                                      51
<PAGE>

shall execute proper instruments acknowledging the same), except as to: (a)
rights of registration of transfer and exchange, and the Company's right of
optional redemption, (b) substitution of apparently mutilated, defaced,
destroyed, lost or stolen Notes, (c) rights of holders to receive payments of
Principal thereof and interest thereon, upon the original stated due dates
therefore (but not upon acceleration), (d) the rights, obligations and
immunities of the Trustee hereunder and (e) the rights of the Noteholders as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them; provided that the following conditions shall
have been satisfied:

          (i) with reference to this provision the Company has deposited or
     caused to be irrevocably deposited with the Trustee (or another trustee
     satisfying the requirements of Section 7.07) as trust funds in trust,
     specifically pledged as security for, and dedicated solely to, the benefit
     of the Holders of the Notes, (A) money in an amount, or (B) U.S.
     Government Obligations which through the payment of interest and principal
     in respect thereof in accordance with their terms will provide not later
     than one day before the due date of any payment referred to in subclause
     (C) of this clause (i) money in an amount, or (C) a combination thereof,
     sufficient, in the opinion of a nationally recognized firm of independent
     public accountants expressed in a written certification thereof delivered
     to the Trustee, to pay and discharge without consideration of the
     reinvestment of such interest and after payment of all federal, state and
     local taxes or other charges and assessments in respect thereof payable by
     the Trustee the principal of, premium, if any, and each installment of
     interest on the outstanding Notes on the due dates thereof or earlier
     redemption (irrevocably provided for under agreements satisfactory to the
     Trustee), as the case may be, in accordance with the terms of Notes and
     the Indenture;

          (ii) the Company has delivered to the Trustee (A) either (x) an
     Opinion of Counsel to the effect that Holders of Notes will not recognize
     income, gain or loss for federal income tax purposes as a result of the
     Company's exercise of its option under this Section 8.05 and will be
     subject to federal income tax on the same amount and in the same manner
     and at the same times as would have been the case if such deposit,
     defeasance and discharge had not occurred, which Opinion of Counsel must
     be based upon a ruling of the Internal Revenue Service to the same effect
     or a change in applicable federal income tax law or related treasury
     regulations after the date of this Indenture or (y) a ruling directed to
     the Trustee received from the Internal Revenue Service to the same effect
     as the aforementioned Opinion of Counsel and (B) an Opinion of Counsel to
     the effect that the creation of the defeasance trust does not violate the
     Investment Company Act of 1940 and after the passage of 123 days following
     the deposit, the trust fund will, not be subject to the effect of


                                      52
<PAGE>

     Section 547 of the U.S. Bankruptcy Code or Section 15 of the New York
     Debtor and Creditor Law;

          (iii) immediately after giving effect to such deposit on a pro forma
     basis, no Event of Default, or event that after the giving of notice or
     lapse of time or both would become an Event of Default, shall have
     occurred and be continuing on the date of such deposit or during the
     period ending on the 123rd day after the date of such deposit, and such
     deposit shall not result in a breach or violation of, or constitute a
     default under, any other agreement or instrument to which the Company is a
     party or by which the Company is bound; and

          (iv) if at such time the Notes are listed on a national securities
     exchange, the Company has delivered to the Trustee an Opinion of Counsel
     to the effect that the Notes will not be delisted as a result of such
     deposit, defeasance and discharge.

     Section 8.06. Defeasance of Certain Obligations. The Company may omit to
comply with any term, provision or condition set forth in, and this Indenture
will no longer be in effect with respect to, any covenant in Article 4 (other
than Section 4.01), Section 5.01, or Article 11 or in any indenture
supplemental hereto and clause (c) (with respect to any covenants in Article 4
or Section 5.01 or in any indenture supplemental) and clause (e) of Section
6.01 shall be deemed not to be an Event of Default, if

     (a) with reference to this Section 8.06, the Company has deposited or
caused to be irrevocably deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.07) as trust funds in trust,
specifically pledged as security for, and dedicated solely to, the benefit of
the Holders of the Notes and the Indenture with respect to the Notes, (i) money
in an amount or (ii) U.S. Government Obligations which through the payment of
principal and interest in respect thereof in accordance with their terms will
provide not later than one day before the due dates thereof or earlier
redemption (irrevocably provided for under agreements satisfactory to the
Trustee), as the case may be, of any payment referred to in subclause (iii) of
this clause (a) money in an amount, or (iii) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge without consideration of the reinvestment of such
interest and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and each installment of interest on the
outstanding Notes on the due date thereof or earlier redemption (irrevocably
provided for under arrangements satisfactory to the Trustee), as the case may
be;


                                      53
<PAGE>

     (b) the Company has delivered to the Trustee (i) an Opinion of Counsel to
the effect that Holders of Notes will not recognize income, gain or loss for
federal, income tax purposes as a result of the Company's exercise of its
option under this Section 8.06 and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred and (ii) an Opinion of
Counsel to the effect that the creation of the defeasance trust does not
violate the Investment Company Act of 1940 and after the passage of 123 days
following the deposit, the trust fund will not be subject to the effect of
Section 547 of the U.S. Bankruptcy Code or Section 15 of the New York Debtor
and Creditor Law;

     (c) immediately after giving effect to such deposit on a pro forma basis,
no Event of Default, or event that after the giving of notice or lapse of time
or both would become an Event of Default, shall have occurred and be continuing
on the date of such deposit or during the period ending on the 123rd day after
the date of such deposit, and such deposit shall not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Company is a party or by which the Company is bound; and

     (d) if at such time the Notes are listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of Counsel to the
effect that the Notes will not be delisted as a result of such deposit,
defeasance and discharge.

     Section 8.07. Reinstatement. If the Trustee or paying agent is unable to
apply any monies or U.S. Government Obligations in accordance with Article 8 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article until such time as the Trustee or paying agent is permitted to
apply all such monies or U.S. Government Obligations in accordance with Article
8; provided, however, that if the Company has made any payment of principal of,
premium, if any, or interest on any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the monies or U.S. Government
Obligations held by the Trustee or paying agent.

                                   ARTICLE 9
                      AMENDMENTS, SUPPLEMENTS AND WAIVERS

     Section 9.01. Without Consent of Holders. The Company and the Trustee may
amend or supplement this Indenture or the Notes without notice to or the
consent of any Holder:


                                      54
<PAGE>

          (i) to cure any ambiguity, defect or inconsistency in this Indenture;
     provided that such amendments or supplements shall not adversely affect
     the interests of the Holders in any material respect;

          (ii) to comply with Article 5;

          (iii) to comply with any requirements of the Commission in connection
     with the qualification of the Indenture under the Trust Indenture Act of
     1939;

          (iv) to evidence and provide for the acceptance of appointment
     hereunder with respect to the Notes by a successor Trustee;

          (v) establish the form or forms or terms of Notes;

          (vi) to provide for certificated or unregistered securities and to
     make all appropriate changes for such purpose;

          (vii) to directly or indirectly release the Liens created by the
     Collateral Documents on less than all or substantially all the Collateral;
     or

          (viii) to make any change that does not materially and adversely
     affect the rights of any Holder.

     The Collateral Documents may be amended or supplemented as provided
therein and compliance with any of the provisions of the Collateral Documents
may be waived as provided therein.

     Section 9.02. With Consent of Holders. Subject to Section 6.04 and Section
6.07, without prior notice to any Holders, the Company and the Trustee may
amend this Indenture and the Notes with the written consent of the Holders of
not less than a majority in aggregate Principal amount of the outstanding Notes
affected by such amendment (voting as a single class) and the Holders of a
majority in principal amount of the outstanding Notes affected thereby (voting
as a single class) by written notice to the Trustee may waive future compliance
by the Company with any provision of this Indenture or the Notes.

     Notwithstanding the provisions of this Section 9.02, without the consent
of each Holder affected thereby, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:

     (a) change the stated maturity of the Principal of or any installment of
interest on, such Holder's Note;

     (b) reduce the Principal amount thereof or the rate of interest thereon;


                                      55
<PAGE>

     (c) reduce the above stated percentage of outstanding Notes the consent of
whose holders is necessary to modify or amend the Indenture; or

     (d) reduce the percentage or aggregate principal amount of outstanding
Notes the consent of whose Holders is required for any supplemental indenture,
for any waiver of compliance with certain provisions of this Indenture or
certain Defaults and their consequences provided for in this Indenture.

     It shall not be necessary for the consent of any Holder under this Section
9.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.

     After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall give to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. The Company will mail
supplemental indentures to Holders upon request. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture or waiver.

     Section 9.03. Revocation and Effect of Consent. Until an amendment or
waiver becomes effective, a consent to it by a Holder is a continuing consent
by the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same Debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, any such Holder or subsequent
Holder may revoke the consent as to its Note or portion of its Note. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective with
respect to any Notes affected thereby on receipt by the Trustee of written
consents from the requisite Holders of outstanding Notes affected thereby.

     The Company may, but shall not be obligated to, fix a record date (which
may be not less than five nor more than 60 days prior to the solicitation of
consents) for the purpose of determining the Holders of the Notes entitled to
consent to any amendment, supplement or waiver. If a record date is fixed,
then, notwithstanding the immediately preceding paragraph, those Persons who
were such Holders at such record date (or their duly designated proxies) and
only those Persons shall be entitled to consent to such amendment, supplement
or waiver or to revoke any consent previously given, whether or not such
Persons continue to be such Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.

     After an amendment, supplement or waiver becomes effective with respect to
the Notes, it shall bind every Holder unless it is of the type described in any
of clauses (i) through (iv) of Section 9.02. In case of an amendment or waiver
of the


                                      56
<PAGE>

type described in clauses (i) through (iv) of Section 9.02, the amendment or
waiver shall bind each such Holder who has consented to it and every subsequent
Holder of a Note that evidences the same indebtedness as the Note of the
consenting Holder.

     Section 9.04. Notation on or Exchange of Notes. If an amendment,
supplement or waiver changes the terms of any Note, the Trustee may require the
Holder thereof to deliver it to the Trustee. The Trustee may place an
appropriate notation (provided in writing by the Company) on the Note about the
changed terms and return it to the Holder and the Trustee may place an
appropriate notation on any Note thereafter authenticated. Alternatively, if
the Company or the Trustee so determines, the Company in exchange for the Note
shall issue and the Trustee shall authenticate a new Note of the same tenor
that reflects the changed terms.

     Section 9.05. Trustee to Sign Amendments, Etc. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article 9 is authorized or permitted by this
Indenture, stating that all requisite consents have been obtained or that no
consents are required and stating that such supplemental indenture constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to customary exceptions. Subject
to the preceding sentence, the Trustee shall sign such amendment, supplement or
waiver if the same does not adversely affect the rights of the Trustee. The
Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

                                   ARTICLE 10
                                 MISCELLANEOUS

     Section 10.01. Notices. Any notice or communication shall be sufficiently
given if written and (a) if delivered in person when received, or (b) if mailed
by first class mail 5 days after mailing, or (c) as between the Company and the
Trustee if sent by facsimile transmission, where transmission is confirmed, in
each case addressed as follows:


                                      57
<PAGE>

     if to the Company:

             The AES Corporation
             1001 North 19th Street
             Arlington, VA 22209
             Telecopy: (703) 528-4510
             Attention: General Counsel

     if to the Trustee:

             Wells Fargo Bank Minnesota,
             National Association
             Corporate Trust Services
             Sixth Street and Marquette Avenue
             MAC N9303-120
             Minneapolis, MN  55479
             Telecopy: (612) 669-9825
             Attention: AES Corporation Administrator

     The Company or the Trustee by written notice to the other may designate
additional or different addresses for subsequent notices or communications.

     Any notice or communication shall be sufficiently given to Holders by
mailing to such Holders at their addresses as they shall appear on the Note
Register. Notice mailed shall be sufficiently given if so mailed within the
time prescribed. Copies of any such communication or notice to a Holder shall
also be mailed to the Trustee and each Agent at the same time.

     Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. Except as
otherwise provided in this Indenture, if a notice or communication is mailed in
the manner provided in this Section 10.01, it is duly given, whether or not the
addressee receives it.

     Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.

     In case it shall be impracticable to give notice as herein contemplated,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.


                                      58
<PAGE>

     Section 10.02. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:

     (a) an Officers' Certificate stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and

     (b) an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.

     Section 10.03. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:

     (a) a statement that each person signing such certificate or opinion has
read such covenant or condition and the definitions herein relating thereto;

     (b) a brief statement as to the nature and scope of the examination or
investigation upon which the statement or opinion contained in such certificate
or opinion is based;

     (c) a statement that, in the opinion of each such person, be has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and

     (d) a statement as to whether or not, in the opinion of each such person,
such condition or covenant has been complied with; provided, however, that,
with respect to matters of fact, an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.

     Section 10.04. Evidence of Ownership.

     The Company, the Trustee and any agent of the Company or the Trustee may
deem and treat the person in whose name any Note shall be registered upon the
Note Register as the absolute owner of such Note (whether or not such Note
shall be overdue and notwithstanding any notation of ownership or other writing
thereon) for the purpose of receiving payment of or on account of the Principal
of and, subject to the provisions of this Indenture, interest on such Note and
for all other purposes; and neither the Company nor the Trustee nor any agent
of the Company or the Trustee shall be affected by any notice to the contrary.

     Section 10.05. Rules by Trustee, Paying Agent or Registrar. The Trustee
may make reasonable rules for action by or at a meeting of Holders. The Paying
Agent or Registrar may make reasonable rules for its functions.


                                      59
<PAGE>

     Section 10.06. Payment Date Other Than a Business Day. If any date for
payment of Principal or interest on any Note shall not be a Business Day at any
place of payment, then payment of Principal of or interest on such Note, as the
case nay be, need not be made on such date, but may be made on the next
succeeding Business Day at any place of payment with the same force and effect
as if made on such date and no interest shall accrue in respect of such payment
for the period from and after such date.

     Section 10.07. Governing Law. The laws of the State of New York shall
govern this Indenture and the Notes, without giving effect to such state's
conflicts of laws principles.

     Section 10.08. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture or loan or debt
agreement of the Company or any Subsidiary of the Company. No indenture or
agreement may be used to interpret this Indenture except as provided in Section
1.01 with respect to the Senior Secured Credit Facilities.

     Section 10.09. Successors. All agreements of the Company in this Indenture
and the Notes shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successors.

     Section 10.10. Duplicate Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.

     Section 10.11. Separability. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

     Section 10.12. Table of Contents, Headings, Etc. The Table of Contents and
headings of the Articles and Sections of this Indenture 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 and provisions hereof.

     Section 10.13. Incorporators, Stockholders, Officers and Directors of
Company Exempt from Individual Liability. No recourse under or upon any
obligation, covenant or agreement contained in this Indenture or any indenture
supplemental hereto, or in any Note, or because of any indebtedness evidenced
thereby, shall be had against any incorporator, as such or against any past,
present or future stockholder, officer, director or employee, as such, of the
Company or of any successor, either directly or through the Company or any
successor, under any rule of law, statute or constitutional provision or by the
enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability


                                      60
<PAGE>

being expressly waived and released by the acceptance of the Notes by the
holders thereof and as part of the consideration for the issue of the Notes.

     Section 10.14. Judgment Currency. The Company agrees, to the fullest
extent that it may effectively do so under applicable law, that (a) if for the
purpose of obtaining judgment in any court it is necessary to convert the sum
due in respect of the Principal of or interest on the Notes (the "Required
Currency") into a currency in which a judgment will be rendered (the "Judgment
Currency"), the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Trustee could purchase in The City of New
York the Required Currency with the Judgment Currency on the day on which final
unappealable judgment is entered, unless such day is not a Business Day, then,
to the extent permitted by applicable law, the rate of exchange used shall be
the rate at which in accordance with normal banking procedures the Trustee
could purchase in The City of New York the Required Currency with the Judgment
Currency on the Business Day preceding the day on which final unappealable
judgment is entered and (b) its obligations under this Indenture to make
payments in the Required Currency (i) shall not be discharged or satisfied by
any tender, or any recovery pursuant to any judgment (whether or not entered in
accordance with subsection (a)), in any currency other than the Required
Currency, except to the extent that such tender or recovery shall result in the
actual receipt, by the payee, of the full amount of the Required Currency
expressed to be payable in respect of such payments, (ii) shall be enforceable
as an alternative or additional cause of action for the purpose of recovering
in the Required Currency the amount, if any, by which such actual receipt shall
fall short of the full amount of the Required Currency so expressed to be
payable and (iii) shall not be affected by judgment being obtained for any
other sum due under this Indenture.

                                   ARTICLE 11
                             SECURITY ARRANGEMENTS

     Section 11.01. Security. (a) In order to secure the Company's Obligations
under the Indenture equally and ratably with the Senior Secured Credit Facility
Obligations, the Company will, and will cause each of its Subsidiaries named in
any of the Collateral Documents as a party thereto, to execute and deliver to
the Collateral Trustees prior to the Original Issue Date each Collateral
Document to which it is a party. The Company and its Subsidiaries shall comply
with all covenants and agreements contained in the Collateral Documents the
failure to comply with which would have a material and adverse effect on the
Liens purported to be created thereby, unless such failure to comply is waived
by the requisite lenders under the Senior Secured Credit Facilities and if,
after that waiver, the Company is in compliance with Sections 4.06 and 4.07.


                                      61
<PAGE>

The Company will give the Trustee notice of such waiver within 50 consecutive
days of such waiver.

     (b) The Trustee and each holder of each Note by its acceptance of that
Note acknowledges and agrees that:

          (i) this Indenture, as originally executed and delivered by the
     parties hereto, does not create any Lien on any property or securities
     which secures the Company's Obligations under this Indenture or this
     Indenture;

          (ii) the Collateral Documents, when executed and delivered by the
     parties thereto, will comply with the provisions of Sections 4.06 and
     4.07;

          (iii) the Collateral Documents provide, and any security document
     that becomes effective after the Original Issue Date, may provide, that
     the Liens created thereby or thereunder automatically will be released and
     extinguished with respect to any property or security that is transferred
     or otherwise disposed of in accordance with the terms of the Senior
     Secured Credit Facilities;

          (iv) without the necessity of any consent of or notice to the Trustee
     or any holder of the Company's Obligations under the Indenture, the
     Company and the Collateral Trustees may amend, modify, supplement or
     terminate any Collateral Document as long as the Company remains in
     compliance with Sections 4.06 and 4.07; provided that any such amendment,
     modification, supplement or termination which would release, in one
     transaction or in a series of related transactions, the Liens created by
     the Collateral Documents on all or substantially all of the Collateral
     will require the consent of the Holders of a majority in aggregate
     principal amount of the Notes outstanding;

          (v) as among the Trustee and the holders of the Company's Obligations
     under the Indenture and the lenders under the Senior Secured Credit
     Facilities and the Collateral Trustees, those lenders and the Collateral
     Trustees will have the sole ability to control and obtain remedies with
     respect to all Collateral (including on sale or liquidation of any
     Collateral after acceleration of the Notes or the Senior Secured Credit
     Facility Obligations) without the necessity of any consent of or notice to
     the Trustee or any such holder;

          (vi) any or all Liens granted under the Collateral Documents for the
     benefit of the Holders will be automatically released, without the
     necessity of any consent of the Trustee or any Holders, upon a release of


                                      62
<PAGE>

     such Lien or Liens pursuant to the terms of the Collateral Documents and
     the Senior Secured Credit Facilities or if such release is approved by the
     requisite lenders under the Senior Secured Credit Facilities; provided
     that any release, in one transaction or a series of related transactions,
     of the Liens created by the Collateral Documents on all or substantially
     all of the Collateral will require the consent of the Holders of a
     majority in aggregate principal amount of the Notes outstanding.

          (vii) the relative rights of the holders of the Company's Obligations
     under the Indenture and the holders of indebtedness or other obligations
     secured by Liens on the Collateral are governed by, and are subject to the
     terms and conditions of, the Collateral Documents and not this Indenture;
     and

          (viii) without the necessity of any consent of or notice to the
     Trustee or any holder of the Company's Obligations under the Indenture,
     the Company may, on behalf of itself or any of its Subsidiaries, request
     and instruct the Collateral Trustees to, on behalf of each secured party
     under the Collateral Documents, (A) execute and deliver to the Company,
     for the benefit of any Person, such release documents as the Company may
     reasonably request, of all liens and security interests held by the
     Collateral Trustees in such assets, and such Person shall be entitled to
     rely conclusively on such release document, and (B) deliver any such
     assets in the possession of the Collateral Trustees to the Company.

     Section 11.02. Notice of Payment, Discharge or Defeasance. The Trustee and
each Holder, by its acceptance of a Note, agree that upon the payment in full
or discharge pursuant to Article 8 of the Company's Obligations under the
Indenture, the Trustee shall without notice to or consent of any Holder, upon
the written request of the Company, certify to the Collateral Trustees, in
writing, that the Company's Obligations under the Indenture have been paid in
full, or that this Indenture has been discharged in accordance with Article 8.


                                      63
<PAGE>


                                   SIGNATURES

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.

                                 THE AES CORPORATION
                                    as the Company


Attest:                          By:       /s/ Barry J. Sharp
                                       -----------------------------------
                                       Name:   Barry J. Sharp
                                       Title:  Executive Vice President and
                                               Chief Financial Officer


                                 WELLS FARGO BANK MINNESOTA, NATIONAL
                                    ASSOCIATION, as the Trustee


Attest:                          By:      /s/ Jane Y. Schweiger
                                       ----------------------------------
                                       Name:  Jane Y. Schweiger
                                       Title: Vice President



                                      64
<PAGE>

                                                                      EXHIBIT A

                                 [FACE OF NOTE]

                              THE AES CORPORATION

                        10% Senior Secured Note Due 2005

                                                 [CUSIP] [CINS] _______________

                                                               $_______________

     The AES Corporation, a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to ____________________, or its registered assigns,
the principal sum of ____________ DOLLARS ($______) on the Final Maturity Date
(as defined on the reverse hereof).

     Interest Rate:           10% per annum.

     Interest Payment Dates:  June 15 and December 15, commencing _________.

     Regular Record Dates:    June 1 and December 1.

     Reference is hereby made to the further provisions of this Senior Secured
Note set forth on the reverse hereof, which will for all purposes have the same
effect as if set forth at this place.


<PAGE>


     IN WITNESS WHEREOF, the Company has caused this Senior Secured Note to be
signed manually or by facsimile by its duly authorized officers.

Date:                                      THE AES CORPORATION


                                           By:
                                              -------------------------------
                                              Name:
                                              Title:



                                           By:
                                              -------------------------------
                                              Name:
                                              Title:


                                      A-2
<PAGE>


               (Form of Trustee's Certificate of Authentication)

     This is one of the 10% Senior Secured Notes Due 2005 described in the
Indenture referred to in this Note.

                                           WELLS FARGO BANK MINNESOTA,
                                             NATIONAL ASSOCIATION,
                                             as Trustee


                                           By:
                                              -------------------------------
                                              Authorized Signatory



                                      A-3
<PAGE>


                             [REVERSE SIDE OF NOTE]

                              THE AES CORPORATION

                          SENIOR SECURED NOTE DUE 2005

     1. Principal and Interest. THE AES CORPORATION, a Delaware corporation
(the "Company", which definition shall include any successor thereto in
accordance with the Indenture (as defined below)), promises to pay the
principal amount set forth on the reverse side hereof on the Final Maturity
Date.

     The "Final Maturity Date" means December 12, 2005; provided, however, that
if, prior to July 15, 2005, the Company's 4.50% Junior Subordinated Convertible
Debentures have not been refinanced to mature on a date after December 12,
2005, then Final Maturity Date means July 15, 2005; provided further that if
the Final Maturity Date occurs on a day that is not a Euro-Dollar Business Day,
the Final Maturity Date shall occur on the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the Final Maturity Date shall be the next preceding Euro-Dollar
Business Day.

     The Company promises to pay, until the principal hereof is paid or made
available for payment, interest on the principal amount set forth on the
reverse side hereof at a rate of 10% per annum. Interest on this Senior Secured
Note will accrue from and including the most recent date to which interest has
been paid or, if no interest has been paid, from December 13, 2002 through but
excluding the date on which interest is paid. Interest shall be payable in
arrears on December 15 and June 15 of each year (each an "Interest Payment
Date"), commencing ___________. Interest will be computed on the basis of a
360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Senior Secured Notes is not a Business Day, then
payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.

     2. Method of Payment. The Company will pay interest on the Senior Secured
Notes (except defaulted interest) to the Persons who are registered Holders of
Senior Secured Notes at the close of business on the fifteenth calendar day
prior to each Interest Payment Date (each, a "Regular Record Date").

     All payments of principal of, and any interest on the Senior Secured Notes
issued in global form will be made to the Depositary as the registered holder
thereof. The Company expects that the Depositary, upon receipt of any payment


                                      A-4
<PAGE>

of principal or interest on such Senior Secured Notes, will credit the accounts
of persons who have accounts with the Depositary ("participants") with payment
of principal or interest on the date payable in amounts proportionate to their
respective beneficial interests in the principal amount of such Senior Secured
Note as shown on the records of the Depositary. The Company also expects that
payments by participants to owners of beneficial interests in any Senior
Secured Note held through such participants will be governed by standing
instructions and customary practices. Such payments will be the responsibility
of such participants. Holders must surrender any Certificated Notes to a Paying
Agent to collect the principal payment on such Certificated Notes. At the
Company's option, interest on any Certificated Notes will be payable by a U.S.
dollar check mailed to the registered address of the Holder of such
Certificated Note. The Company will pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts.

     3. Paying Agent and Registrar. Initially, Wells Fargo Bank Minnesota,
National Association (the "Trustee") will act as Paying Agent and Registrar.
The Company may change any Paying Agent, Registrar or co-Registrar without
notice.

     4. Indenture. The Company issued the Senior Secured Notes under an
Indenture dated as of December 13, 2002 between the Company and the Trustee.
The terms of the Senior Secured Notes include those stated in the Indenture.
The Senior Secured Notes are subject to all such terms, and Holders of the
Senior Secured Notes are referred to the Indenture for a statement of them.
Capitalized terms used herein and not otherwise defined have the meanings set
forth in the Indenture. The Senior Secured Notes are senior secured obligations
of the Company. The Indenture limits, among other things, the ability of the
Company to incur certain additional secured indebtedness, provide guarantees,
enter into certain sale and leaseback transactions and requires the Company to
use a portion of Adjusted Free Cash Flow and a portion of the Net Cash Proceeds
from certain asset sales and capital markets transactions to redeem the Senior
Secured Notes.

     5. Optional Redemption. The Senior Secured Notes will be redeemable, in
whole or in part, at any time, and from time to time, at the option of the
Company upon not less than 30 nor more than 60 days' notice at a redemption
price equal to (a) the sum of (i) 100% of the principal amount thereof plus
accrued and unpaid interest to the redemption date plus (ii) a Make-Whole
Amount (as defined in the Indenture), if any, if redeemed on or prior to
December 15, 2004 or (b) 100% of the principal amount thereof plus any accrued
and unpaid interest, if redeemed after December 15, 2004.

     6. Mandatory Redemption Upon Receipt of Net Cash Proceeds and Adjusted
Free Cash Flow. (a) Within 90 days of the Company's receipt of the Net Cash
Proceeds from certain Asset Sales, called Covered Asset Sales, the


                                      A-5
<PAGE>

Company may be obligated to use a portion of the Net Cash Proceeds from such
Asset Sales to make a mandatory redemption of the Senior Secured Notes at a
purchase price equal to 100% of the principal amount of such notes plus accrued
interest, if any, to the date of purchase.

     (b) If at the end of any fiscal year the Company has certain Adjusted Free
Cash Flow, the Company may be obligated to use a portion of such Adjusted Free
Cash Flow, within 90 days of such fiscal year end, to make a mandatory
redemption of the Senior Secured Notes at a purchase price equal to 100% of the
principal amount of such notes plus accrued interest, if any, to the date of
purchase.

     (c) Within 90 days of the consummation of a Covered Capital Markets
Transaction, the Company may be obligated to use 50% of the Net Cash Proceeds
from such Covered Capital Markets Transaction to make a mandatory redemption of
the Senior Secured Notes at a price equal to 100% of the principal amount
thereof plus accrued and unpaid interest to the date of redemption; provided
that the Company shall not be obligated to make such mandatory redemption
unless, on the date that such Covered Capital Markets Transaction is
consummated, the amounts outstanding under the Senior Secured Credit Facilities
is zero and all commitments to extend credit thereunder have been terminated.

     The Company's obligations to make the mandatory redemptions set forth in
clauses (a), (b) and (c) above are subject to a number of conditions which are
set forth in Section 3.02 of the Indenture.

     7. Additional Mandatory Redemption. On November 25, 2004, the Company
shall redeem, at a price equal to 100% of the principal amount of such Notes to
be redeemed, plus accrued and unpaid interest, Senior Secured Notes with an
aggregate principal amount equal to (i) 40% of the aggregate principal amount
of the Senior Secured Notes issued on the Original Issue Date less (ii) the
aggregate principal amount of Senior Secured Notes redeemed on or prior to
November 25, 2004 pursuant to the optional and mandatory redemption provisions
described in Section 5 and Section 6 of this Note.

     8. Partial Redemption, Notice of Redemption.

     If less than all the Senior Secured Notes are to be redeemed at any time,
selection of Senior Secured Notes for redemption will be made by the Trustee on
a pro rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided that no Senior Secured Notes of $1,000 or less shall be
redeemed in part.

     Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each Holder of Senior
Secured Notes to be redeemed at its registered address. If any Senior Secured
Note is to be


                                      A-6
<PAGE>

redeemed in part only, the notice of redemption that relates to such Senior
Secured Note shall state the portion of the principal amount thereof to be
redeemed. A new Senior Secured Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon surrender
of the original Senior Secured Note. Senior Secured Notes called for redemption
become due on the date fixed for redemption. On and after the redemption date
the Senior Secured Notes shall cease to be entitled to any benefit under the
Indenture and the Holders thereof shall have no right in respect of such Senior
Secured Notes except the right to receive the redemption price thereof and
unpaid interest to the date fixed for redemption.

     9. Denominations, Transfer, Exchange. The Senior Secured Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. A Holder may transfer or exchange Senior Secured Notes
only in accordance with the Indenture and as set forth in the Restricted Legend
and the DTC Legend. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay to it any
taxes and fees required by law or permitted by the Indenture. The Registrar
need not transfer or exchange any Senior Secured Notes or portion of a Senior
Secured Note selected for redemption, or transfer or exchange any Senior
Secured Notes for a period of 15 days before selection of such Senior Secured
Notes to be redeemed.

     10. Persons Deemed Owners. The registered holder of a Senior Secured Note
may be treated as the owner of it for all purposes.

     11. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Company at its written request. After that, Holders entitled to the
money must look to the Company for payment as general creditors unless an
"abandoned property" law designates another Person.

     12. Amendment, Supplement, Waiver. The Company and the Trustee may,
without the consent of the holders of any outstanding Senior Secured Notes,
amend, waive or supplement the Indenture or the Senior Secured Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, directly or indirectly releasing the Liens created
by the Collateral Documents on less than all or substantially all the
Collateral or making any other change that does not adversely affect the rights
of any Holder in any material respect. Other amendments and modifications of
the Indenture or the Senior Secured Notes may be made by the Company and the
Trustee with the consent of the Holders of not less than a majority of the
aggregate principal amount of the outstanding Senior Secured Notes.


                                      A-7
<PAGE>

     13. Successor Corporation. When a successor corporation assumes all the
obligation of its predecessor under the Senior Secured Notes and the Indenture
and the transaction complies with the terms of Article 5 of the Indenture, the
predecessor corporation, subject to certain exceptions, will be released from
those obligations.

     14. Defaults and Remedies. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.01(f) or (g) of
the Indenture with respect to the Company) occurs and is continuing, then the
holders of not less than 25% in aggregate principal amount of the outstanding
Senior Secured Notes (voting as a single class) may, or the Trustee, may
declare the principal of, plus accrued interest, if any, to be due and payable
immediately; provided that if an Event of Default has occurred and is
continuing as a result of a default described in Section 6.01(d) of the
Indenture arising under the Senior Secured Credit Facilities (other than a
payment default or a default as a result of which the maturity of the Senior
Secured Credit Facilities shall have been accelerated so that they shall be or
become due and payable prior to the date on which the same would otherwise have
become due and payable), such acceleration may not occur until 20 business days
after the occurrence of such default unless such default under the Senior
Secured Credit Facilities results from a bankruptcy or insolvency related event
involving a Subsidiary of the Company or the acceleration of other indebtedness
arising from such bankruptcy or insolvency related event, in which case such
acceleration may not occur until 60 days after the occurrence of such default.
Upon a declaration of acceleration, the principal, premium, if any, and accrued
interest shall be immediately due and payable.

     If an Event of Default specified in Section 6.1(f) or (g) of the Indenture
with respect to the Company occurs and is continuing, the principal of and
accrued interest on all of the Senior Secured Notes shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder. Holders of Senior Secured Notes may not enforce
the Indenture or the Senior Secured Notes except as provided in the Indenture.
The Trustee may require indemnity reasonably satisfactory to it before it
enforces the Indenture or the Senior Secured Notes. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Senior Secured Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Senior Secured Notes notice
of any continuing default (except a default in payment of principal or interest
or a failure to comply with Article 5 of the Indenture) if it determines in
good faith that withholding notice is in their interests.

     15. Security. In order to secure the Company's Obligations under the
Indenture, the Company and certain of its Subsidiaries have entered into the
Collateral Documents. The Company's Obligations under the Indenture shall be


                                      A-8
<PAGE>

secured by Liens on the Collateral in accordance with the terms and provisions
of the Collateral Documents. The Indenture requires that Holders of the Senior
Secured Notes be granted a lien equally and ratably with any lien granted on
additional assets to secure the holders of Senior Secured Credit Facility
Obligations subsequent to the Issue Date. Each Holder of this Senior Secured
Note, by accepting the same, agrees that (i) the Collateral Documents provide,
and any Collateral Document that becomes effective after the Issue Date, may
provide, that the Liens created thereby or thereunder automatically will be
released and extinguished with respect to any property or security that is
transferred or otherwise disposed of in accordance with the terms of the Senior
Secured Credit Facilities; (ii) without the necessity of any consent of or
notice to the Trustee or any Holder under the Indenture, the Company and the
Collateral Trustees may amend, modify, supplement or terminate any Collateral
Document as long as the Company remains in compliance with the Indenture; (iii)
as among the Trustee and the Holders under the Indenture and the lenders under
the Senior Secured Credit Facilities and the Collateral Trustees, those lenders
and the Collateral Trustees will have the sole ability to control and obtain
remedies with respect to all Collateral (including on sale or liquidation of
any Collateral after acceleration of the Senior Secured Notes or the Senior
Secured Credit Facility Obligations) without the necessity of any consent of or
notice to the Trustee or any such holder; (iv) any or all Liens granted under
the Collateral Documents for the benefit of the Holders will be automatically
released, without the necessity of any consent of the Trustee or the Holders,
upon a release of such Lien or Liens pursuant to the terms of the Collateral
Documents and the Senior Secured Credit Facilities or if such release is
approved by the requisite lenders under the Senior Secured Credit Facilities;
provided that any release, in one transaction or a series of related
transactions, of the Liens created by the Collateral Documents on all or
substantially all of the Collateral will require the consent of the Holders of
a majority in aggregate principal amount of the outstanding Senior Secured
Notes; (v) the relative rights of the Holders under the Indenture and the
holders of Indebtedness or other obligations secured by Liens on the Collateral
are governed by, and are subject to the terms and conditions of, the Collateral
Documents and not the Indenture; and (vi) without the necessity of any consent
of or notice to the Trustee or any Holder, the Company may, on behalf of itself
or any of its Subsidiaries, request and instruct the Collateral Trustees to, on
behalf of each secured party under the Collateral Documents, (A) execute and
deliver to the Company, for the benefit of any Person, such release documents
as the Company may reasonably request, of all liens and security interests held
by the Collateral Trustees in such assets, and such Person shall be entitled to
rely conclusively on such release document, and (B) deliver any such assets in
the possession of the Collateral Trustees to the Company.

     16. Trustee Dealing with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform


                                      A-9
<PAGE>

services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.

     17. No Recourse Against Others. A director, officer, employee, stockholder
or beneficiary, as such, of the Company shall not have any liability for any
obligations of the Company under the Senior Secured Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or
their creation. Each Holder of the Senior Secured Notes by accepting a Senior
Secured Note waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Senior Secured Notes.

     18. Defeasance. The Indenture contains provisions (which provisions apply
to this Senior Secured Note) for defeasance at any time of (a) the entire
indebtedness of the Company in respect of this Senior Secured Note and (b)
certain restrictive covenants, certain provisions relating to the Collateral
and Defaults and Events of Default, in each case upon compliance by the Company
with certain conditions set forth therein.

     19. Authentication. This Senior Secured Note shall not be valid until the
Trustee signs the certificate of authentication on the other side of this
Senior Secured Note.

     20. Abbreviations. Customary abbreviations may be used in the name of a
Holder of Senior Secured Notes or an assignee, such as: TEN COM (= tenants in
common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).

     21. GOVERNING LAW. THE INDENTURE AND THIS SENIOR SECURED NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

     The Company will furnish to any Holder of Senior Secured Notes upon
written request and without charge a copy of the Indenture. Requests may be
made to:

     THE AES CORPORATION
     1001 North 19th Street, Suite 2000
     Arlington, Virginia 22209
     Telephone: (703) 522-1315
     Telecopy:  (703) 528-4510
     Attention:  General Counsel



                                     A-10
<PAGE>


                           [FORM OF TRANSFER NOTICE]

     FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto

Insert Taxpayer Identification No.

-------------------------------------------------------------------------------


-------------------------------------------------------------------------------
   Please print or typewrite name and address including zip code of assignee


-------------------------------------------------------------------------------
         the within Note and all rights thereunder, hereby irrevocably
                          constituting and appointing


-------------------------------------------------------------------------------
attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.


                                     A-11
<PAGE>


                 [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL
                   CERTIFICATES BEARING A RESTRICTED LEGEND]

     In connection with any transfer of this Senior Secured Note occurring
prior to ______________, the undersigned confirms that such transfer is made
without utilizing any general solicitation or general advertising and further
as follows:

                                   Check One

[_]      (a) This Note is being transferred to a "qualified institutional
         buyer" in compliance with Rule 144A under the Securities Act of 1933,
         as amended and a Rule 144A Certificate (as defined in the Indenture)
         is being furnished herewith.

[_]      (b) This Note is being transferred to a Non-U.S. Person in compliance
         with the exemption from registration under the Securities Act of 1933,
         as amended, provided by Regulation S thereunder, and certification in
         the form of Exhibit D to the Indenture is being furnished herewith.

[_]      (c) This Note is being transferred to the Company.

         or

[_]      (d) This Note is being transferred other than in accordance with (a),
         (b) or (c) above and documents are being furnished which comply with
         the conditions of transfer set forth in this Note and the Indenture.

         If none of the foregoing boxes is checked, the Trustee is not
obligated to register this Note in the name of any Person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in the Indenture have been satisfied.

Date:____________________


                                        ___________________________________
                                        Seller
                                        By

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within-mentioned instrument in every particular,
without alteration or any change whatsoever.


                                     A-12
<PAGE>



Signature Guarantee:
                     -----------------------------------------------
                     By


     Signatures must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Association Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as amended.



---------------------------------------
                                        To be executed by an executive officer



                                     A-13
<PAGE>


                         SCHEDULE OF EXCHANGES OF NOTES

     The following exchanges of a part of this Global Note for Certificated
Notes or a part of another Global Note have been made:(1)

<TABLE>
                      Amount of          Amount of      Principal amount
                     decrease in        increase in      of this Global    Signature of
                   principal amount   principal amount   Note following     authorized
                    of this Global     of this Global     such decrease     officer of
Date of Exchange         Note               Note          (or increase)      Trustee
---------------------------------------------------------------------------------------
<S>                 <C>                 <C>                 <C>                 <C>
</TABLE>





----------
     (1) This Schedule applies to Global Notes only and will not be attached to
any Certificated Notes.


                                     A-14
<PAGE>


                                                                      EXHIBIT B

                               RESTRICTED LEGEND

     THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE LAWS OF ANY
STATE OR OTHER JURISDICTION AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER

     (1) REPRESENTS THAT

          (A) IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A "QUALIFIED
     INSTITUTIONAL BUYER" (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES
     ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH
     SUCH ACCOUNT, OR

          (B) IT IS NOT A U.S. PERSON (WITHIN THE MEANING OF REGULATION S UNDER
     THE SECURITIES ACT), OR

          (C) IT IS EITHER THE PERSIMMON TRUST, A CHARITABLE TRUST ESTABLISHED
     BY ROGER W. SANT, A DIRECTOR OF THE ISSUER, OR PAUL T. HANRAHAN, AN
     EXECUTIVE OFFICER OF THE ISSUER, AND IS AN ACCREDITED INVESTOR AS DEFINED
     IN RULE 501 UNDER THE SECURITIES ACT, AND

     (2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL,
PLEDGE OR OTHERWISE TRANSFER THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN,
EXCEPT IN ACCORDANCE WITH THE SECURITIES ACT AND ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES AND ONLY

          (A) TO THE COMPANY,

          (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE
     UNDER THE SECURITIES ACT,

          (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
     UNDER THE SECURITIES ACT,

<PAGE>

          (D) IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF
     REGULATION S UNDER THE SECURITIES ACT,

          (E) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
     UNDER THE SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE
     REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(E) ABOVE, THE
COMPANY RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS,
CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO
DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE
AS TO THE AVAILABILITY OF ANY RULE 144 EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.



                                      B-2
<PAGE>


                                                                      EXHIBIT C

                                   DTC LEGEND

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN.

     TRANSFERS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS IN WHOLE, BUT NOT
IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE ARE LIMITED
TO TRANSFERS MADE IN ACCORDANCE WITH THE TRANSFER PROVISIONS OF THE INDENTURE.





<PAGE>


                                                                      EXHIBIT D

                            Regulation S Certificate

                                                        _____________, _____

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
Attention: Corporate Trust Services
Sixth Street and Marquette Avenue
MAC N9303-120
Minneapolis, MN 55470

         Re:    THE AES CORPORATION
                10% Senior Secured Notes Due 2005 (the "Notes") Issued under
                the Indenture (the "Indenture") dated as of December 13, 2002
                relating to the Notes
                -------------------------------------------------------------

Ladies and Gentlemen:

     Terms are used in this Certificate as used in Regulation S ("Regulation
S") under the Securities Act of 1933, as amended (the "Securities Act"), except
as otherwise stated herein.

     [CHECK A OR B AS APPLICABLE.]

[_]  A.   This Certificate relates to our proposed transfer of $____ principal
          amount of Notes issued under the Indenture. We hereby certify as
          follows:

          1.   The offer and sale of the Notes was not and will not be made to
               a person in the United States (unless such person is excluded
               from the definition of "U.S. person" pursuant to Rule
               902(k)(2)(vi) or the account held by it for which it is acting
               is excluded from the definition of "U.S. person" pursuant to
               Rule 902(k)(2)(i) under the circumstances described in Rule
               902(h)(3)) and such offer and sale was not and will not be
               specifically targeted at an identifiable group of U.S. citizens
               abroad.

          2.   Unless the circumstances described in the parenthetical in
               paragraph 1 above are applicable, either (a) at the time the buy
               order was originated, the buyer was outside the United States or
               we and any person acting on our behalf reasonably believed that
               the buyer was outside the United States or (b) the transaction
               was executed in, on or through the facilities of a designated
               offshore securities market, and neither we nor any person acting
               on our behalf knows that the transaction was pre-arranged with a
               buyer in the United States.

<PAGE>

          3.   Neither we, any of our affiliates, nor any person acting on our
               or their behalf has made any directed selling efforts in the
               United States with respect to the Notes.

          4.   The proposed transfer of Notes is not part of a plan or scheme
               to evade the registration requirements of the Securities Act.

          5.   If we are a dealer or a person receiving a selling concession,
               fee or other remuneration in respect of the Notes, and the
               proposed transfer takes place during the Restricted Period (as
               defined in the Indenture), or we are an officer or director of
               the Company, we certify that the proposed transfer is being made
               in accordance with the provisions of Rule 904(b) of Regulation
               S.

[_]  B.   This Certificate relates to our proposed exchange of $____ principal
          amount of Notes issued under the Indenture for an equal principal
          amount of Notes to be held by us. We hereby certify as follows:

          1.   At the time the offer and sale of the Notes was made to us,
               either (i) we were not in the United States or (ii) we were
               excluded from the definition of "U.S. person" pursuant to Rule
               902(k)(2)(vi) or the account held by us for which we were acting
               was excluded from the definition of "U.S. person" pursuant to
               Rule 902(k)(2)(i) under the circumstances described in Rule
               902(h)(3); and we were not a member of an identifiable group of
               U.S. citizens abroad.

          2.   Unless the circumstances described in paragraph 1(ii) above are
               applicable, either (a) at the time our buy order was originated,
               we were outside the United States or (b) the transaction was
               executed in, on or through the facilities of a designated
               offshore securities market and we did not pre-arrange the
               transaction in the United States.

          3.   The proposed exchange of Notes is not part of a plan or scheme
               to evade the registration requirements of the Securities Act.



                                      D-2
<PAGE>


     You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.

                                            Very truly yours,

                                            [NAME OF SELLER (FOR TRANSFERS)
                                               OR OWNER (FOR EXCHANGES)]


                                            By:
                                               --------------------------------
                                               Name:
                                               Title:
                                               Address

Date:
     ------------------------



                                      D-3
<PAGE>


                                                                      EXHIBIT E

                                   TAX LEGEND

     THIS SENIOR SECURED NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR U.S.
FEDERAL INCOME TAX PURPOSES. THE HOLDER OF THIS SENIOR SECURED NOTE MAY CONTACT
THE AES CORPORATION, ATTN: BARRY J. SHARP, EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER, 1001 NORTH 19TH STREET, 20TH FLOOR, ARLINGTON, VA 22209 FOR
INFORMATION REGARDING THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE
DATE, YIELD TO MATURITY, COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE OF
THIS SENIOR SECURED NOTE, SUCH INFORMATION TO BE PROVIDED BEGINNING NO LATER
THAN 10 DAYS AFTER THE ISSUE DATE, PROMPTLY UPON REQUEST.




                                      E-1


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2
<SEQUENCE>4
<FILENAME>dec1602_ex4-2.txt
<TEXT>
                                                                    EXHIBIT 4.2


                                                                 EXECUTION COPY





                           COLLATERAL TRUST AGREEMENT

                         dated as of December 12, 2002

                                     among

                        The Grantors referred to herein
                                  as Grantors

                                      and

                            WILMINGTON TRUST COMPANY
                              as Corporate Trustee

                                      and

                                BRUCE L. BISSON
                             as Individual Trustee

<PAGE>


                               TABLE OF CONTENTS



                                   ARTICLE I

                                  DEFINITIONS

SECTION 1.01. Certain Defined Terms............................................3
SECTION 1.02. Certain References...............................................9

                                   ARTICLE II

                CONFIRMATION AND CREATION OF SECURITY INTERESTS

SECTION 2.01. Collateral Trust Estate..........................................9
SECTION 2.02. Security for Secured Obligations................................10

                                  ARTICLE III

                               COLLATERAL ACCOUNT

SECTION 3.01. Collateral Account..............................................10

                                   ARTICLE IV

                 COLLATERAL TRUST AGREEMENT DEFAULTS; REMEDIES

SECTION 4.01. Collateral Trust Agreement Default Notice.......................11
SECTION 4.02. Direction by Required Representative(s).........................13
SECTION 4.03. Right to Initiate Judicial Proceedings, Etc.....................13
SECTION 4.04. Remedies Not Exclusive..........................................13
SECTION 4.05. Waiver of Certain Rights........................................14
SECTION 4.06. Limitation on Collateral Trustees' Duties in Respect
              of Collateral...................................................14
SECTION 4.07. Limitation by Law...............................................14
SECTION 4.08. Absolute Rights of Secured Holders and Representatives..........15

                                   ARTICLE V

                            APPLICATION OF PROCEEDS

SECTION 5.01. Application of Proceeds.........................................15
SECTION 5.02. Application of Withheld Amounts.................................18
SECTION 5.03. Release of Amounts in Collateral Account........................18
SECTION 5.04. Distribution Date...............................................18

                                   ARTICLE VI

                     AGREEMENTS WITH THE COLLATERAL TRUSTEE

SECTION 6.01. Delivery of Agreements..........................................19
SECTION 6.02. Information as to Representatives...............................19
SECTION 6.03. Compensation and Expenses.......................................20
SECTION 6.04. Stamp and Other Similar Taxes...................................20


                                       i
<PAGE>

SECTION 6.05. Filing Fees, Excise Taxes, Etc..................................20
SECTION 6.06. Indemnification.................................................20
SECTION 6.07. Further Assurances..............................................21

                                  ARTICLE VII

                             THE COLLATERAL TRUSTEE

SECTION 7.01. Declaration of Trust............................................22
SECTION 7.02. Exculpatory Provisions..........................................22
SECTION 7.03. Delegation of Duties............................................23
SECTION 7.04. Reliance by Collateral Trustees.................................23
SECTION 7.05. Limitations on Duties of the Trustees...........................24
SECTION 7.06. Moneys to Be Held in Trust......................................25
SECTION 7.07. Resignation and Removal of Collateral Trustees..................25
SECTION 7.08. Status of Successors to Trustee.................................26
SECTION 7.09. Merger of the Corporate Trustee.................................26
SECTION 7.10. Powers of Individual Trustee....................................26
SECTION 7.11. Additional Co-Trustees; Separate Trustees.......................27
SECTION 7.12. Trustees Appointed Attorneys-in-Fact............................28
SECTION 7.13. Ordinary Care...................................................29

                                  ARTICLE VIII

                             RELEASE OF COLLATERAL

SECTION 8.01. Partial Release of Collateral...................................29
SECTION 8.02. Full Release of Collateral Upon Satisfaction of Certain
              Secured Obligations.............................................30
SECTION 8.03. Effect of Release of Collateral.................................31

                                   ARTICLE IX

                                 MISCELLANEOUS

SECTION 9.01. Amendments, Supplements and Waivers.............................31
SECTION 9.02. Additional Actions of Representatives...........................32
SECTION 9.03. Notices.........................................................33
SECTION 9.04. Headings........................................................34
SECTION 9.05. Severability....................................................34
SECTION 9.06. Treatment of Payee or Indorsee by Trustees......................34
SECTION 9.07. Dealings with the Grantors......................................34
SECTION 9.08. Claims..........................................................34
SECTION 9.09. Binding Effect..................................................34
SECTION 9.10. Governing Law...................................................34
SECTION 9.11. Effectiveness...................................................35


                                      ii
<PAGE>

SECTION 9.12. Reexecution of Agreement........................................35
SECTION 9.13. Effect on Credit Agreements.....................................35
SECTION 9.14. Counterparts....................................................35

Schedule I  -  Fee Schedule




                                      iii
<PAGE>

                           COLLATERAL TRUST AGREEMENT

     COLLATERAL TRUST AGREEMENT, dated December 12, 2002 (as amended, amended
and restated, supplemented or otherwise modified from time to time, this
"Agreement") by and among The AES Corporation, a Delaware corporation (the
"Borrower"), the other Persons listed on the signature pages hereof and the
Additional Grantors (the Borrower, the Persons so listed and the Additional
Grantors being, collectively, the "Grantors"), Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as
corporate trustee (together with any successor corporate trustee appointed
pursuant to Article VII, the "Corporate Trustee"), and Bruce L. Bisson, an
individual residing in the State of Delaware, not in his individual capacity
but solely as individual trustee (together with any successor individual
trustee appointed pursuant to Article VII, the "Individual Trustee"; and,
together with the Corporate Trustee, the "Collateral Trustees"), the foregoing
trustees being trustees for the Secured Holders. Certain capitalized terms used
herein are defined in Article I of this Agreement. Terms defined in the Credit
Agreement and the Security Agreement and not otherwise defined in Article I of
this Agreement are used in this Agreement as defined in the Credit Agreement
and the Security Agreement.

                            PRELIMINARY STATEMENTS:

     (1) The Borrower has entered into an Amended and Restated Credit,
Reimbursement and Exchange Agreement dated as of December 12, 2002 (said
Agreement, as it may hereafter be amended, amended and restated, supplemented
or otherwise modified from time to time, being the "Credit Agreement") with the
Subsidiary Guarantors party thereto, the Banks party thereto (the "Banks"), the
Revolving Fronting Banks and the Drax LOC Fronting Bank party thereto, and
Citicorp USA, Inc., as Administrative Agent for the Bank Parties (in such
capacity, the "Agent") and as Collateral Agent for the Bank Parties (in such
capacity, the "Credit Agreement Collateral Agent"; and together with the Agent,
the "Agents").

     (2) In order to induce the Banks, the Revolving Fronting Banks, the Drax
LOC Fronting Banks and the Agents to enter into the Credit Agreement, the
Grantors have agreed to grant a continuing security interest in and to the
Collateral (as hereinafter defined) to the Collateral Trustees for the ratable
benefit of the Lender Parties to secure the Obligations of the Borrower under
the Credit Agreement and the Notes issued pursuant thereto.

     (3) The Borrower will enter into an Indenture to be dated as of December
13, 2002 (as amended, supplemented or otherwise modified and in effect on the
date hereof and as the same may hereafter be further amended, modified,
extended, renewed, replaced, restated or supplemented from time to time
pursuant to the terms thereof, the "Exchange Note Indenture") with Wells Fargo
Bank Minnesota, National Association (the "Exchange Note Trustee") to exchange
the Borrower's (i) 8.75% Senior Notes due 2002 and (ii) the 7.375% Remarketable
or Redeemable Securities due 2013 for the 10% Senior Secured Exchange Notes due
2005 to be issued on December 13, 2002 (the "Exchange Notes", and together with
the Exchange Note Indenture (only to the extent relating to the Exchange
Notes), the "Exchange Note Agreements").

     (4) In order to induce the Exchange Note Trustee to enter into the
Exchange Note Indenture, the Grantors have agreed to grant a continuing
security interest in and to the

<PAGE>
                                       2


Collateral to the Collateral Trustees for the ratable benefit of the Exchange
Note Holders to secure the Obligations of the Borrower under the Exchange Note
Agreements.

     (5) The Borrower has entered into a Sponsor Agreement dated as of March 7,
2000 (as amended, supplemented or otherwise modified and in effect on the date
hereof and as the same may hereafter be further amended, modified, extended,
renewed, replaced, restated or supplemented from time to time pursuant to the
terms thereof, the "Sponsor Agreement") with BankBoston, N.A., Nassau Branch,
as agent (the "Sul Agent"), pursuant to which the Borrower has agreed to
guarantee the obligations of AES Cayman Guaiba, Ltd. under a Credit Agreement
dated as of March 6, 2001 (as amended, supplemented or otherwise modified and
in effect on the date hereof and as the same may hereafter be further amended,
modified, extended, renewed, replaced, restated or supplemented from time to
time pursuant to the terms thereof, the "Sul Credit Agreement") with
BankBoston, N.A., Nassau Branch, Banc of America Securities, LLC,
Unibanco-Uniao de Bancos Brasilieros S.A. and WestLB AG, New York Branch and
the lenders named therein (collectively, the "Sul Guaranteed Parties"), in an
amount of up to a maximum aggregate amount of $50,000,000 (together with any
other agreement or instrument delivered in connection with such guaranty, the
"Sul Guarantee").

     (6) In order to satisfy certain conditions under the Sul Guarantee, the
Grantors have agreed to grant a continuing security interest in and to the
Collateral to the Collateral Trustees for the ratable benefit of the Sul
Guaranteed Parties to secure the Obligations of the Borrower under the Sul
Guarantee in an amount of up to a maximum aggregate amount of $50,000,000.

     (7) The Borrower has entered into a Gas Transportation Agreement dated as
of July 21, 2000 with Florida Public Utilities Company pursuant to which Fleet
National Bank (the "Lake Worth LOC Bank") issued in favor of Florida Public
Utilities Company irrevocable standby letter of credit number 1S1280134
(together with the application and agreement therefor dated on or about July 6,
2001, the "Lake Worth Letter of Credit") in an aggregate amount not to exceed
$5,490,449.

     (8) In order to satisfy certain conditions under the Lake Worth Letter of
Credit, the Grantors have agreed to grant a continuing security interest in and
to the Collateral to the Collateral Trustees for the ratable benefit of the
Lake Worth LOC Bank to secure the obligation of Lake Worth Generation LLC
("Lake Worth"), a Subsidiary of the Borrower, to reimburse the Lake Worth LOC
Bank for any drawings under the Lake Worth Letter of Credit in an amount of up
to a maximum aggregate amount of $5,490,449.

     (9) This Agreement and the other Shared Collateral Documents are intended
to secure the other Secured Agreements and the Collateral Trustees have agreed
to undertake the rights, powers, duties and responsibilities set forth in this
Agreement and the other Shared Collateral Documents in order to effect such
purpose.

     NOW, THEREFORE, in consideration of the premises and in order to (1)
induce (a) the Banks to continue the Loans and the Revolving Credit Loan Banks
to make Revolving Credit Loans, (b) the Revolving Fronting Banks to issue (or
be deemed to have issued) Revolving Letters of Credit, (c) the Drax LOC
Fronting Bank to be deemed to have issued the

<PAGE>
                                       3


Drax Letter of Credit and to make Drax Loans in respect of Drax L/C Drawings,
(d) the Hedge Banks to enter into Secured Hedge Agreements from time to time,
(e) the entry into the Secured Treasury Management Service Agreements by a Bank
Party or an Affiliate thereof and (f) the Exchange Note Trustee to enter into
the Exchange Note Indenture and (2) satisfy certain conditions under the Sul
Guarantee and the Lake Worth Letter of Credit, each Grantor hereby agrees with
the Collateral Trustees for their benefit and in trust for the ratable benefit
of the Representatives and the Secured Holders (as each term is hereinafter
defined) as follows:

                                   ARTICLE I

                                  DEFINITIONS

     SECTION 1.01. Certain Defined Terms. The following terms shall have the
following meanings as used herein (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):

     "Additional Collateral Trust Agreement Collateral" has the meaning
specified in Section 2.01.

     "Applicable Agreement" means the Credit Agreement Documents, the Shared
Collateral Documents, the Exchange Note Agreements, the Sul Guarantee, the Lake
Worth Letter of Credit and the Other Debt Agreements.

     "Authorized Officer" means the Chairman, the President, the Chief
Executive Officer, the Chief Financial Officer, the Comptroller, any Vice
President, the Secretary, Assistant Secretary, Treasurer or the Assistant
Treasurer of a Person or any other officer designated as an "Authorized
Officer" by the Board of Directors (or equivalent governing body) of such
Person.

     "Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time.

     "Banks" has the meaning specified in the Preliminary Statements to this
Agreement.

     "Borrower" has the meaning specified in the recital of parties to this
Agreement.

     "Business Day" means a day of the year on which banks are not required or
authorized by law to close in New York City or the city in which the Corporate
Trustee maintains its corporate trust office.

     "BVI Cayman Pledge Agreement" means the Charge and Assignment of Shares
(as such agreement may hereafter be amended, amended and restated, supplemented
or otherwise modified from time to time) dated December 12, 2002 between AES
International Holdings II, Ltd. and the Collateral Trustees.

     "Cash Equivalents" means any of the following, to the extent owned by the
Borrower or any of its Subsidiaries free and clear of all Liens other than
Liens created under the

<PAGE>
                                       4


Shared Collateral Documents and having a maturity of not greater than 360 days
from the date of issuance thereof: (a) readily marketable direct obligations of
the Government of the United States or any agency or instrumentality thereof or
obligations unconditionally guaranteed by the full faith and credit of the
Government of the United States, (b) insured certificates of deposit of or time
deposits with any commercial bank that is a Lender Party or a member of the
Federal Reserve System, issues (or the parent of which issues) commercial paper
rated as described in clause (c) below, is organized under the laws of the
United States or any State thereof and has combined capital and surplus of at
least $1 billion or (c) commercial paper in an aggregate amount of no more than
$5,000,000 per issuer outstanding at any time, issued by any corporation
organized under the laws of any State of the United States and rated at least
"Prime-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or
"A-1" (or the then equivalent grade) by Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. The term "Cash Equivalents" shall include any
mutual fund sponsored or managed by an Affiliate of the Corporate Trustee which
mutual fund's assets consist of "Cash Equivalents" as defined herein.

     "Collateral" means the Creditor Group Collateral, as such term is defined
in the Credit Agreement.

     "Collateral Account" has the meaning specified in Section 3.01.

     "Collateral Trustees" has the meaning specified in the recital of parties
to this Agreement.

     "Collateral Trustees' Fees" means the fees and other amounts payable to
the Collateral Trustees pursuant to Sections 6.03, 6.04 and 6.05 and amounts
claimed and unpaid pursuant to Section 6.06.

     "Collateral Trust Agreement Default" means (i) so long as any Secured
Obligation remains outstanding with respect to any Lender Party under the
Credit Agreement or any Revolving Credit Loan Bank has a Revolving Credit Loan
Commitment or any Revolving Letter of Credit or Drax Letter of Credit remains
outstanding, (A) in respect of the exercise of remedies with respect to the
Account Collateral, the Additional Collateral Trust Agreement Collateral and
the Securities Accounts (and all Collateral from time to time credited to the
Deposit Accounts and the Securities Accounts) or the exercise of remedies under
Section 15 of the Security Agreement or Section 11 of the BVI Cayman Pledge
Agreement, an Event of Default described in clauses (a), (e), (f), (g) and (h)
of Section 6.01 of the Credit Agreement and (B) in respect of any other
exercise of rights and remedies under the Shared Collateral Documents, any
Event of Default, in each case, shall have occurred and be continuing under the
Credit Agreement, and as a result thereof, the Credit Agreement Defaulted Party
has the right to declare all of the Secured Obligations of the Loan Parties
under the Credit Agreement to be due and payable prior to the stated maturity
thereof and (ii) at any time that no Secured Obligations remain outstanding
with respect to any Lender Party under the Credit Agreement and no Revolving
Credit Loan Bank has a Revolving Credit Loan Commitment and no Revolving Letter
of Credit or Drax Letter of Credit remains outstanding, (A) in respect of the
exercise of remedies with respect to the Account Collateral, the Additional
Collateral Trust Agreement Collateral and the Securities Accounts (and all
Collateral from time to time credited to the Deposit Accounts and the
Securities Accounts) or the exercise of remedies under Section 15 of the
Security

<PAGE>
                                       5


Agreement or Section 11 of the BVI Cayman Pledge Agreement, events of default
under the Exchange Note Agreements, the Sul Credit Agreement, the Lake Worth
Letter of Credit or any of the Other Debt Agreements of the type described in
clauses (a), (e), (f), (g) and (h) of Section 6.01 of the Credit Agreement and
(B) in respect of any other exercise of rights and remedies under the Shared
Collateral Documents, any event of default, in each case, shall have occurred
and be continuing under the Exchange Note Agreements, the Sul Credit Agreement,
the Lake Worth Letter of Credit or any of the Other Debt Agreements, and as a
result thereof, the Other Debt Defaulted Party has the right to declare all of
the Secured Obligations of the Borrower under the Exchange Note Agreements, the
Sul Credit Agreement, the Lake Worth Letter of Credit or the Other Debt
Agreements to be due and payable prior to the stated maturity thereof.

     "Collateral Trust Agreement Default Notice" means a written notice
delivered in connection with a Collateral Trust Agreement Default.

     "Collateral Trust Estate" means all of the right, title and interest of
the Collateral Trustees, whether now owned or hereafter acquired, in and to the
Collateral.

     "Corporate Trustee" has the meaning specified in the recital of parties to
this Agreement.

     "Credit Agreement" has the meaning specified in the Preliminary
Statements.

     "Credit Agreement Collateral Agent" has the meaning specified in the
Preliminary Statements to this Agreement.

     "Credit Agreement Defaulted Party" means the Agent or the percentage of
the Banks specified in the Credit Agreement that have the right thereunder upon
the occurrence and continuance of an Event of Default under the Credit
Agreement (without the requirement that any further time elapse) to declare all
of the Secured Obligations of the Loan Parties under the Credit Agreement to be
due and payable prior to the stated maturity thereof.

     "Credit Agreement Documents" means (i) the Credit Agreement, (ii) the
Notes, (iii) the Secured Hedge Agreements and (iv) the Secured Treasury
Management Service Agreements, in each case as amended from time to time.

     "Defaulted Agreement Party" means the Credit Agreement Defaulted Party or
the Other Debt Defaulted Party, as applicable.

     "Distribution Date" means any date on which the Collateral Trustees shall
distribute moneys from the Collateral Account pursuant to Section 5.01.

     "Exchange Note Agreements" has the meaning specified in the Preliminary
Statements to this Agreement.

     "Exchange Note Holders" means at any time the registered holders of the
Exchange Notes issued under the Exchange Note Indenture.

<PAGE>
                                       6


     "Exchange Note Indenture" has the meaning specified in the Preliminary
Statements to this Agreement.

     "Exchange Notes" has the meaning specified in the Preliminary Statements
to this Agreement.

     "Exchange Note Trustee" has the meaning specified in the Preliminary
Statements to this Agreement.

     "Grantors" has the meaning specified in the recitals of parties to this
Agreement.

     "Indemnified Event" has the meaning specified in the Section 7.05(e) of
this Agreement.

     "Individual Trustee" has the meaning specified in the recital of parties
to this Agreement.

     "Lake Worth" has the meaning specified in the Preliminary Statements to
this Agreement.

     "Lake Worth Letter of Credit" has the meaning specified in the Preliminary
Statements to this Agreement.

     "Lake Worth LOC Bank" has the meaning specified in the Preliminary
Statements to this Agreement.

     "Lender Parties" means the Agent, the Banks, the Revolving Fronting Banks,
the Drax LOC Fronting Banks, the Hedge Banks and the Credit Agreement
Collateral Agent.

     "Moody's" means Moody's Investor's Service, Inc.

     "Payment Information" has the meaning specified in Section 6.02(a) of this
Agreement.

     "Other Debt" means Debt issued pursuant to any Other Debt Agreement.

     "Other Debt Agreement" means any other agreement or instrument pursuant to
which the Borrower has incurred Debt permitted by Sections 5.07(a)(iii);
5.07(a)(x) and 5.07(a)(xi) of the Credit Agreement.

     "Other Debt Defaulted Party" means the Other Debt Representatives, acting
collectively on behalf of the Required Other Debt Holders.

     "Other Debt Holders" means at any time the registered holders of Other
Debt issued under any Other Debt Agreement.

     "Other Debt Representatives" means the representatives of the Required
Other Debt Holders, and may include, as the case may be, the Exchange Note
Trustee, the Sul Agent,

<PAGE>
                                       7


the Lake Worth LOC Bank or the representative of the Other Debt Holders under
any Other Debt Agreement.

     "Remedies Limitations" has the meaning set forth in Section 7(i) of the
Security Agreement.

     "Representatives" means at any time, collectively, (a) the Agent, as the
representative hereunder for the Lender Parties at such time, (b) the Exchange
Note Trustee, as the representative hereunder for the Exchange Note Holders,
(c) the Sul Agent, as the representative hereunder for the Sul Guaranteed
Parties, (d) the Lake Worth LOC Bank on behalf of itself and (e) the
representatives hereunder for the Other Debt Holders at such time.

     "Required Exchange Note Holder Approval" means the Collateral Trustees
shall have received a certificate from the Exchange Note Trustee that it has
received the consent of those Exchange Note Holders holding a majority of the
principal outstanding amount of the Exchange Notes for such amendment, waiver
or consent.

     "Required Other Debt Holders" means Secured Holders that own or hold
(either by themselves or through their respective Secured Holders) more than
50% of the aggregate amount of the outstanding Debt under the Exchange Note
Agreements, the Sul Guarantee, the Lake Worth Letter of Credit and the Other
Debt Agreements at any given time.

     "Required Representative(s)" means (a) at any time that no Collateral
Trust Agreement Default has occurred or is continuing and any Secured
Obligations remain outstanding with respect to any Lender Party under the
Credit Agreement or any Revolving Credit Loan Bank has a Revolving Credit Loan
Commitment or any Revolving Letter of Credit or Drax Letter of Credit remains
outstanding, the Agent acting in its own discretion or at the direction of the
Required Banks at such time, (b) at any time that no Collateral Trust Agreement
Default has occurred or is continuing, and no Secured Obligations remain
outstanding with respect to any Lender Party under the Credit Agreement and no
Revolving Credit Loan Bank has a Revolving Credit Loan Commitment and no
Revolving Letter of Credit or Drax Letter of Credit remains outstanding, the
Other Debt Representatives acting at the direction of the Required Other Debt
Holders, (c) at any time that a Collateral Trust Agreement Default has occurred
and is continuing and any Secured Obligations remain outstanding with respect
to any Lender Party under any Credit Agreement or any Revolving Credit Loan
Bank has a Revolving Credit Loan Commitment or any Revolving Letter of Credit
or Drax Letter of Credit remains outstanding, the Agent, on behalf of itself
and the Required Banks or (d) at any time that a Collateral Trust Agreement
Default has occurred and is continuing and no Secured Obligations remain
outstanding with respect to any Lender Party under the Credit Agreement and no
Revolving Credit Loan Bank has a Revolving Credit Loan Commitment and no
Revolving Letter of Credit or Drax Letter of Credit remains outstanding, the
Other Debt Representatives, on behalf of the Required Other Debt Holders;
provided, however, that amounts held at such time by the Collateral Trustees on
behalf of a Representative and such Representative's Secured Holders in an
account of the Corporate Trustee established at the request of such
Representative pursuant to Section 5.02 hereof shall be deemed to have been
applied to repay the Secured Obligations of such Secured Holders whether or not
such amount has been so applied. Unless and until the Collateral Trustees shall
have received a notice from the Agent to the effect that at no Secured

<PAGE>
                                       8


Obligations remain outstanding with respect to any Lender Party under the
Credit Agreement and no Revolving Credit Loan Bank has a Revolving Credit Loan
Commitment and no Revolving Letter of Credit or Drax Letter of Credit remains
outstanding, the Collateral Trustees may assume that the Agent is the Required
Representative. After receipt of such notice, the Collateral Trustees may
assume that the Other Debt Representatives are the Required Representative(s).

     "Secured Agreements" means, collectively, the Credit Agreement Documents,
the Exchange Note Agreements, the Sul Guarantee, the Lake Worth Letter of
Credit, the Other Debt Agreements and each agreement or instrument delivered by
the Grantors pursuant thereto (including, without limitation, the Shared
Collateral Documents).

     "Secured Holders" means, at any time, the Lender Parties, the Exchange
Note Holders, the Sul Guaranteed Parties, the Lake Worth LOC Bank and Other
Debt Holders.

     "Secured Obligations" means at any time any obligations, whether matured
or unmatured, contingent or liquidated, of each Grantor arising out of or
evidenced by the Secured Agreements, whether for principal, interest, expenses,
premiums, indemnities, fees or other amounts, whether or not such obligations
are due and payable at such time; provided, however, that (i) Obligations under
the Secured Hedge Agreements, excluding the Banc of America Secured Option,
shall only be secured up to an amount not to exceed $50,000,000 in the
aggregate, (ii) Obligations under the Sul Guarantee shall only be secured up to
an amount not to exceed $50,000,000 and (iii) Obligations under the Lake Worth
Letter of Credit shall only be secured up to an amount not to exceed
$5,490,449.

     "Shared Collateral Documents" means this Agreement, the Security
Agreement, the BVI Cayman Pledge Agreement and each Successor Collateral
Agreement.

     "S&P" means Standard & Poors, a division of The McGraw-Hill Companies,
Inc.

     "Successor Collateral" means, with respect to each Grantor, any property
and assets of such Grantor (or any of its successors and assigns) as such
Grantor (or any such successor or any such assign) may, from time to time, upon
notice to the Collateral Trustees, pursuant to the Credit Agreement Documents,
the Exchange Note Agreements, the Sul Guarantee, the Lake Worth Letter of
Credit and the Other Debt Agreements or otherwise, grant to the Collateral
Trustees as additional collateral for their benefit and in trust for the equal
and ratable benefit of the Representatives, on their behalf and on behalf of
the Secured Holders.

     "Successor Collateral Agreements" means all documents creating, evidencing
or relating to any of the Successor Collateral.

     "Sul Agent" has the meaning specified in the Preliminary Statements to
this Agreement.

     "Sul Credit Agreement" has the meaning specified in the Preliminary
Statements to this Agreement.

<PAGE>
                                       9


     "Sul Guarantee" has the meaning specified in the Preliminary Statements to
this Agreement.

     "Sul Guaranteed Parties" has the meaning specified in the Preliminary
Statements to this Agreement.

     SECTION 1.02. Certain References. In this Agreement, the words "hereof,"
"herein" and "hereunder", and words of similar import, shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
section, schedule and exhibit references set forth in this Agreement are,
unless otherwise specified, references to such section in, or schedule or
exhibit to, this Agreement.

                                  ARTICLE II

                CONFIRMATION AND CREATION OF SECURITY INTERESTS

     SECTION 2.01. Collateral Trust Estate. Each Grantor hereby confirms that,
pursuant to the terms of the Security Agreement and the BVI Cayman Pledge
Agreement, such Grantor has pledged and assigned to the Collateral Trustees for
their benefit and in trust for the equal and ratable benefit of the
Representatives and the Secured Holders, and has granted the Collateral
Trustees for their benefit and in trust for the equal and ratable benefit of
the Representatives and the Secured Holders, a lien on, and security interest
in, the Collateral described therein of such Grantor in order to secure the
Secured Obligations. The Borrower, in order to secure the Secured Obligations,
hereby further pledges and assigns to the Collateral Trustees for their benefit
and in trust for the equal and ratable benefit of the Representatives, on their
behalf and on behalf of the Secured Holders, and hereby grants to the
Collateral Trustees for their benefit and in trust for the equal and ratable
benefit of the Representatives, on their behalf and on behalf of the Secured
Holders, a lien on, and security interest in, the following (collectively,
together with any Successor Collateral, the "Additional Collateral Trust
Agreement Collateral"):

          (i) the Collateral Account established pursuant to Section 3.01(a)
     with the Corporate Trustee at its offices at its corporate trust
     department in the State of Delaware and is, and shall at all times remain,
     under the sole dominion and control of the Corporate Trustee, all funds
     held therein and all certificates and instruments, if any, from time to
     time representing each Collateral Account;

          (ii) all Cash Equivalents held in the Collateral Account from time to
     time and all certificates and instruments, if any, from time to time
     representing or evidencing such Cash Equivalents;

          (iii) all notes, certificates of deposit, deposit accounts, checks
     and other instruments from time to time delivered to or otherwise
     possessed by the Collateral Trustees for or on behalf of the Borrower in
     substitution for or in addition to any or all of the then existing
     Additional Collateral Trust Agreement Collateral;

          (iv) all interest, income, dividends, instruments and other property
     and assets from time to time received, receivable or otherwise distributed
     in respect of or in

<PAGE>
                                      10


     exchange for any or all of the then existing Additional Collateral Trust
     Agreement Collateral referred to in clauses (i) through (iii) of this
     Section 2.01(a); and

          (v) all proceeds of any and all of the foregoing Additional
     Collateral Trust Agreement Collateral (including, without limitation,
     proceeds that constitute property and assets of the types described in
     clauses (i) through (iv) of this Section 2.01(a)) and, to the extent not
     otherwise included, all (A) payments under any indemnity, warranty or
     guaranty payable with respect to any of the foregoing Additional
     Collateral Trust Agreement Collateral and (B) cash.

     SECTION 2.02. Security for Secured Obligations. All of the right, title
and interest of the Collateral Trustees in and to the Collateral Trust Estate
secures the payment of all of the Secured Obligations now or hereafter existing
under or in respect of the Secured Agreements and the performance of, and the
compliance with, all of the covenants and conditions of this Agreement, the
other Shared Collateral Documents and the other Secured Agreements. Without
limiting the generality of the foregoing, the Collateral Trust Estate secures
the payment of all amounts that constitute part of the Secured Obligations and
would be owed by each Grantor to the Collateral Trustees, any Representative or
any Secured Holder under the Shared Collateral Documents or the other Secured
Agreements but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
such Grantor.

                                  ARTICLE III

                               COLLATERAL ACCOUNT

     SECTION 3.01. Collateral Account. (a) Until the date that the Collateral
Trustees release all of the Collateral pursuant to Section 8.02(a), a
non-interest bearing cash collateral account (the "Collateral Account") for the
Representatives and the Secured Holders shall be maintained by the Corporate
Trustee at its offices at its corporate trust department in the State of
Delaware in accordance with the terms of this Agreement. All moneys that are
received by the Collateral Trustees, upon the occurrence and during the
continuance of a Collateral Trust Agreement Default, or upon liquidation or
otherwise in respect of the Collateral shall be deposited in the Collateral
Account and, thereafter, shall be held and applied by the Corporate Trustee all
in accordance with the terms of this Agreement.

     (b) The Corporate Trustee shall, subject to the provisions of Article IV
and Article VIII, from time to time (i) invest amounts on deposit in the
Collateral Account in Cash Equivalents and (ii) invest interest paid on such
Cash Equivalents, and reinvest other proceeds of any such Cash Equivalents that
may mature or be sold, in additional Cash Equivalents, in each case at the
direction of the Grantors so long as no Collateral Trust Agreement Default
shall have occurred and be continuing and at the direction of the Required
Representative(s) if a Collateral Trust Agreement Default shall have occurred
and be continuing. Interest and proceeds that are not invested or reinvested in
Cash Equivalents as provided in the immediately preceding sentence shall be
deposited and held in the Collateral Account. Notwithstanding the foregoing,
the Corporate Trustee shall, to the extent possible, invest any funds to be
distributed on a Distribution Date in Cash Equivalents that shall mature or
become liquid on or prior to such

<PAGE>
                                      11


Distribution Date. All Cash Equivalents made in respect of the Collateral
Account and all interest and income received thereon and therefrom and the net
proceeds realized on the maturity or sale thereof shall be held in the
Collateral Account as part of the Collateral Trust Estate pursuant to the terms
hereof.

     (c) The Collateral Account shall be subject to such applicable laws, and
such applicable regulations of the Board of Governors of the Federal Reserve
System and of any other appropriate banking or regulatory authority, as are in
effect from time to time.

     (d) All dividends, interest and other distributions deposited into the
Collateral Account pursuant to Section 10(b) of this Agreement or Section 6.2
of the BVI Cayman Pledge Agreement shall be released and returned to the
applicable Grantor upon notice to the Collateral Trustees from the Required
Representative(s) that the Collateral Trust Agreement Default giving rise to
such deposit has been cured or waived; provided, that no Collateral Trust
Agreement Default shall have occurred and be continuing at such time.

                                  ARTICLE IV

                 COLLATERAL TRUST AGREEMENT DEFAULTS; REMEDIES

     SECTION 4.01. Collateral Trust Agreement Default Notice. (a) (x) So long
as any Secured Obligations remain outstanding with respect to any Lender Party
under the Credit Agreement or any Revolving Credit Loan Bank has a Revolving
Credit Loan Commitment or any Revolving Letter of Credit or Drax Letter of
Credit remains outstanding, the Credit Agreement Defaulted Party shall have the
exclusive right if a Collateral Trust Agreement Default under the Credit
Agreement shall have occurred and be continuing to give the Collateral Trustees
a Collateral Trust Agreement Default Notice and (y) at any time that no Secured
Obligations remain outstanding with respect to any Lender Party under the
Credit Agreement and no Revolving Credit Loan Bank has a Revolving Credit Loan
Commitment and no Revolving Letter of Credit or Drax Letter of Credit remains
outstanding, the Other Debt Defaulted Party shall have the exclusive right if a
Collateral Trust Agreement Default shall have occurred and be continuing under
the Other Debt Agreements, to give the Collateral Trustees a Collateral Trust
Agreement Default Notice, and if a Credit Agreement Defaulted Party or an Other
Debt Defaulted Party, as the case may be, gives the Collateral Trustees, with a
copy to the Grantors, a Collateral Trust Agreement Default Notice, stating:

          (i) the nature of the Collateral Trust Agreement Default; and

          (ii) the action requested to be taken by the Collateral Trustees with
     respect to the Collateral and the Shared Collateral Documents (which
     action may include, without limitation, the institution of any remedies
     provided by law or this Agreement or any other Shared Collateral
     Document),

then the Collateral Trustees shall forthwith send a copy of the Collateral
Trust Agreement Default Notice to each Representative. The Required
Representative(s) shall provide the Collateral Trustees with a certificate that
shall state whether or not they favor the Collateral Trustees taking such
action. If the Required Representative(s) shall not have provided the
Collateral Trustees with such certificate within 30 Business Days of receipt of
the copy of the

<PAGE>
                                      12


Collateral Trust Agreement Default Notice, the Required Representative(s) shall
be deemed to have not favored the taking of such action. If the Required
Representative(s) shall have directed the Collateral Trustees to commence the
action set forth in the Collateral Trust Agreement Default Notice then, subject
to Section 4.01(b) and the right of the Collateral Trustees to commence such
action under the Shared Collateral Documents, the Collateral Trustees shall
forthwith undertake such action. The Collateral Trustees shall, subject to
Sections 4.01(b), 4.08 and 6.06, follow the directions of the Required
Representative(s) with respect to the time, method and place of taking any
action requested in a Collateral Trust Agreement Default Notice. Each
Collateral Trustee shall be entitled to assume conclusively that no Collateral
Trust Agreement Default has occurred and is continuing until it receives a
Collateral Trust Agreement Default Notice. For the avoidance of doubt, unless
and until the Collateral Trustees shall have received a notice from the Agent
to the effect that no Secured Obligations remain outstanding with respect to
any Lender Party under the Credit Agreement and no Revolving Credit Loan Bank
has a Revolving Credit Loan Commitment and no Revolving Letter of Credit or
Drax Letter of Credit remains outstanding, the Collateral Trustees may presume
that the Credit Agreement Defaulted Party has the exclusive right to deliver a
Collateral Trust Agreement Default Notice. After receipt of such notice, the
Collateral Trustees may presume that the Other Debt Defaulted Party has the
exclusive right to deliver a Collateral Trust Agreement Default Notice.

     (b) If the Collateral Trust Agreement Default, which was the basis for the
giving of a Collateral Trust Agreement Default Notice, shall be cured or waived
in accordance with the terms of the applicable Secured Agreement, the Defaulted
Agreement Party which gave such Collateral Trust Agreement Default Notice shall
promptly notify the Collateral Trustees in writing of such cure or waiver, upon
receipt of such written notice of a cure or waiver (i) such Collateral Trust
Agreement Default Notice shall be deemed withdrawn and (ii) any direction to
the Collateral Trustees to take any action in connection with such Collateral
Trust Agreement Default Notice shall be deemed immediately rescinded. If in
connection solely with such withdrawn Collateral Trust Agreement Default Notice
the Collateral Trustees shall have been directed to take, and shall have
commenced taking but shall not have completed, any action, the Collateral
Trustees shall promptly terminate any such action which they shall not also
have been directed to take in connection with a Collateral Trust Agreement
Default Notice other than that withdrawn.

     (c) Anything contained herein or under any Shared Collateral Agreement to
the contrary notwithstanding, upon the occurrence and continuance of a
Collateral Trust Agreement Default under the Credit Agreement, the Collateral
Trustees shall forebear from exercising any of their rights and remedies
hereunder or under any Shared Collateral Document with respect to the Equity
Interests of AES EDC Funding II L.L.C. pledged as Collateral under the Security
Agreement until the date that occurs 45 days following the date of delivery of
a Collateral Trust Agreement Default Notice by a Credit Agreement Defaulted
Party; provided that such date shall be extended so long as the collateral
agent under the Tranche C Pledge Agreement is actively pursuing its rights and
remedies with respect to the Tranche C Collateral under the Tranche C Pledge
Agreement and the Collateral Trustees have received evidence satisfactory to
them of such pursuit; provided, however, that nothing in this Section 4.01(c)
shall prevent the Collateral Trustees from immediately exercising their rights
and remedies with

<PAGE>
                                      13


respect to all other Collateral as provided for in this Agreement and the other
Shared Collateral Documents.

     SECTION 4.02. Direction by Required Representative(s). As to any matters
not expressly provided for under this Agreement or the other Shared Collateral
Documents (including, without limitation, matters relating to enforcement and
collection of the Secured Obligations), the Collateral Trustees shall not be
required to exercise any discretion or to take any action under this Agreement
or the other Shared Collateral Documents, or in respect of the Collateral, but
shall be required to act or to refrain from acting (and shall be fully
protected in acting or refraining from acting) in accordance with the written
instructions of the Required Representative(s) which instructions shall
reference Section 6.06 hereof.

     SECTION 4.03. Right to Initiate Judicial Proceedings, Etc. (a)
Notwithstanding any other provision of this Agreement, upon the occurrence of
and during the continuance of any Collateral Trust Agreement Default and the
receipt by the Collateral Trustees of a Collateral Trust Agreement Default
Notice that has not been withdrawn pursuant to Section 4.01(b) above, the
Corporate Trustee, and if the Corporate Trustee deems necessary or desirable,
the Individual Trustee, jointly or individually as the Corporate Trustee may
determine, (i) shall have the right and power to institute and maintain such
suits and proceedings as it or they, as the case may be, or the Required
Representative(s) may deem appropriate to protect and enforce the rights vested
in it by this Agreement and the other Shared Collateral Documents and (ii) may
either, after entry or without entry, proceed by suit or suits at law or in
equity to enforce such rights and to foreclose upon the Collateral and to
dispose of, collect or otherwise realize upon, all or any portion of the
Collateral Trust Estate under the judgment or decree of a court of competent
jurisdiction.

     (b) If a receiver of the Collateral Trust Estate shall be appointed in
judicial proceedings, the Collateral Trustees may be appointed, at its
discretion, as such receiver. Notwithstanding the appointment of a receiver,
the Collateral Trustees shall be entitled to retain possession and control of
all cash held by or deposited with them or their agents or co-trustees pursuant
to any provision of this Agreement or any other Shared Collateral Document.

     SECTION 4.04. Remedies Not Exclusive. (a) No remedy conferred upon or
reserved to the Collateral Trustees herein or in the other Shared Collateral
Documents is intended to be a limitation exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or in the other Shared Collateral Documents
or now or hereafter existing at law or in equity or by statute.

     (b) No delay or omission of either of the Collateral Trustees to exercise
any right, remedy or power accruing upon any Collateral Trust Agreement Default
shall impair any such right, remedy or power or shall be construed to be a
waiver of any such Collateral Trust Agreement Default or any acquiescence
therein; and every right, power and remedy given by this Agreement or any other
Shared Collateral Document to the Collateral Trustees may be exercised from
time to time and as often as may be deemed expedient by the Collateral
Trustees.

     (c) In case either of the Collateral Trustees shall have proceeded to
enforce any right, remedy or power under this Agreement or any other Shared
Collateral Document and

<PAGE>
                                      14


the proceeding for the enforcement thereof shall have been discontinued or
abandoned for any reason or shall have been determined adversely to such
Collateral Trustee, then and in every such case the Grantors, the Collateral
Trustees, the Representatives and Secured Holders shall, subject to any
determination in such proceeding, severally be restored to their former
positions and rights hereunder and under such other Shared Collateral Document
with respect to the Collateral Trust Estate, the Collateral Account and in all
other respects, and thereafter all rights, remedies and powers of such
Collateral Trustee shall continue as though no such proceeding had been taken.

     (d) Each Grantor expressly agrees that all rights of action and rights to
assert claims upon or under this Agreement and the other Shared Collateral
Documents may be enforced by the Collateral Trustees without the possession of
any debt instrument or the production thereof in any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Collateral
Trustees shall be brought in either of their names as Collateral Trustee and
any recovery of judgment shall be held as part of the Collateral Trust Estate;
provided that nothing in this Section 4.04(d) shall constitute a waiver of any
right that the Grantors may have or may hereafter acquire to challenge the
amounts outstanding under the Secured Agreements.

     SECTION 4.05. Waiver of Certain Rights. Subject to the Remedies
Limitations, each Grantor, on behalf of itself and all who may claim through or
under it, including, without limitation, any and all subsequent Affiliates,
creditors, vendees, assignees and lienors, expressly waives and releases, to
the fullest extent permitted by law, any, every and all rights to demand or to
have any marshalling of the Collateral Trust Estate upon any enforcement of any
Shared Collateral Document, including, without limitation, upon any sale,
whether made under any power of sale herein granted or pursuant to judicial
proceedings or upon any foreclosure or any enforcement of any Shared Collateral
Document and consents and agrees that all the Collateral Trust Estate and any
such sale may be offered and sold as an entirety.

     SECTION 4.06. Limitation on Collateral Trustees' Duties in Respect of
Collateral. Beyond the duties set forth in this Agreement, the Collateral
Trustees shall not have any duty to the Grantors or the Representatives as to
any Collateral in the Collateral Trustees' possession or control or in the
possession or control of any agent or nominee of the Collateral Trustees or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto, except that each Collateral Trustee shall be
liable for its failure to exercise ordinary care in the handling of moneys and
securities and other property actually received by it.

     SECTION 4.07. Limitation by Law. All rights, remedies and powers provided
by this Article IV may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the
provisions of this Article IV are intended to be subject to all applicable
mandatory provisions of law which may be controlling and to be limited to the
extent necessary so that they will not render this Agreement invalid,
unenforceable in whole or in part or, if the Representatives elect that this
Agreement should be recorded, registered or filed, not entitled to be recorded,
registered, or filed under the provisions of any applicable law.

<PAGE>
                                      15


     SECTION 4.08. Absolute Rights of Secured Holders and Representatives.
Notwithstanding any other provision of this Agreement or any of the other
Shared Collateral Documents, each of the Representatives and each of the
Secured Holders has an absolute and unconditional right to receive payment of
all of the Secured Obligations owing to such Representative or such Secured
Holder, as the case may be, when the same becomes due and payable and at the
time and place and otherwise in the manner set forth in the applicable Secured
Agreement, and the right of each such Representative and each such Secured
Holder to institute proceedings for the enforcement of such payment on or after
the date such payment becomes due and to assert its position as a secured
creditor in a proceeding under the Bankruptcy Code in which any Grantor is a
debtor, and the obligation of such Grantor to pay all of the Secured
Obligations owing to each of the Representatives and each of the Secured
Holders at the time and place expressed therein, shall not be impaired or
affected without the consent of such Representative or such Secured Holder. In
addition, the right of any Secured Holder or any Representative, on behalf of
itself or on behalf of any such Secured Holder, to receive payment or security
from sources other than the Collateral shall not be, and is not hereby,
impaired or affected in any manner. Without limiting the generality of the
foregoing provisions of this Section 4.08, no Representative and no Secured
Holder, on behalf of itself or on behalf of any Secured Holder, shall be
obligated to share with any other Representative or any other Secured Holder
any proceeds of any collateral, guaranty or right of setoff other than pursuant
to, and to the extent expressly required under, this Agreement and the other
Secured Agreements; nor shall any Representative's or any Secured Holder's
right to receive its ratable share of any amounts maintained in the Collateral
Account, if any, or any proceeds of any of the Collateral, or any part thereof,
under the terms of this Agreement and the other Shared Collateral Documents be
diminished or affected in any way by its right to receive proceeds of any other
collateral or right of setoff, or payment upon a guaranty or from any other
source.

                                   ARTICLE V

                            APPLICATION OF PROCEEDS

     SECTION 5.01. Application of Proceeds. (a) If, pursuant to the exercise by
the Defaulted Agreement Party of any rights and remedies set forth in any
Shared Collateral Document, any Collateral is sold or otherwise realized upon
by the Collateral Trustees, the proceeds received by the Collateral Trustees in
respect of such Collateral shall be deposited in the Collateral Account, and
all moneys held by the Corporate Trustee in the Collateral Account, including
the Excess Revolving Letter of Credit Collateral and the Excess Drax LOC
Collateral, shall, to the extent available for distribution, be distributed by
the Corporate Trustee on each date upon which a distribution is made (each, a
"Distribution Date") as follows:

          FIRST, to the payment (in such priority as the Corporate Trustee
     shall elect, but without duplication) of all reasonable legal fees and
     expenses and other reasonable costs or expenses or other liabilities of
     any kind incurred by the Collateral Trustees as secured parties under any
     Shared Collateral Document or otherwise in connection with any Shared
     Collateral Document or this Agreement (including, without limitation, any
     reasonable costs or expenses or liabilities incurred in connection with
     the sale of any assets covered by any Shared Collateral Document, or in
     the operation or maintenance of any of the assets covered by any Shared
     Collateral Document), including the

<PAGE>
                                      16


     reimbursement to any Representative of any amounts theretofore advanced by
     such Representative for the payment of such fees, costs and expenses,
     except only for any such fees, expenses, costs or liabilities incurred by
     any Collateral Trustee as a result of its gross negligence or willful
     misconduct in performing or failing to perform any of its duties to the
     parties hereto expressly set forth herein; provided, however, that nothing
     herein is intended to relieve the Grantors of their duties to pay such
     costs, fees, expenses and liabilities otherwise payable to the Collateral
     Trustees from funds outside of the Collateral Account, as required by this
     Agreement;

          SECOND, to the Collateral Trustees (without duplication) in an amount
     equal to the Collateral Trustees' Fees which are unpaid as of the
     Distribution Date and to any Representative which has theretofore advanced
     or paid any such Collateral Trustees' Fees in an amount equal to the
     amount thereof so advanced or paid by such Representative prior to such
     Distribution Date; provided, however, that nothing herein is intended to
     relieve the Grantors of their duties to pay such fees and claims from
     funds outside of the Collateral Account, as required by this Agreement;

          THIRD, in accordance with paragraph (b) below, with respect to any
     proceeds, ratably to the Representatives on behalf of the respective
     Secured Holders for application to the Secured Obligations of such Secured
     Holders, or, to be held by such Representative (or by the Corporate
     Trustee on behalf of such Representative pursuant to Section 5.02 or
     otherwise) pending such application, until all such Secured Obligations
     have been paid in full; and

          FOURTH, any surplus remaining after the payment in full in cash of
     the Secured Obligations shall, pursuant to the provisions of Section 8.02,
     be paid to the applicable Grantor, its successors or assigns, or to
     whomsoever may be lawfully entitled to receive the same, or as a court of
     competent jurisdiction may direct.

     (b) In order to determine the ratable amount to be distributed to each of
the Representatives pursuant to clause THIRD above on each Distribution Date,
unless otherwise directed in writing by the Required Representative(s), the
Corporate Trustee may rely on a certificate of an Authorized Officer of the
Borrower setting forth the Secured Obligations (identified by type and amount)
outstanding under each Secured Agreement (or with respect to the Sul Guarantee
and the Lake Worth Letter of Credit, whether contingent or outstanding Secured
Obligations under such Secured Agreements) on such Distribution Date. The
ratable portion of the aggregate amount available for distribution hereunder on
any Distribution Date which shall be distributed to each Representative on such
Distribution Date shall be a fraction, (x) the numerator of which shall be the
aggregate amount of Secured Obligations of the Secured Holders represented by
such Representative on such Distribution Date and (y) the denominator of which
shall be the aggregate amount of Secured Obligations of all the Secured Holders
represented by the Representatives on such Distribution Date; provided,
however, that, for such purposes, amounts distributable to a Representative on
a prior Distribution Date and held on behalf of such Representative and the
Secured Holders of such Representative pursuant to Section 5.02 of this
Agreement shall be deemed to have been applied to the Secured Obligations of
the Secured Holders represented by such Representative, regardless of whether
such application has occurred.

<PAGE>
                                      17


     (c) Any amounts to be paid to the Representative of the Lender Parties
pursuant to clause THIRD above shall be applied by the Collateral Trustees for
the ratable benefit of the Lender Parties against the Secured Obligations of
the Secured Holders represented by the Agent under the Credit Agreement as
follows:

          FIRST, paid to the Agents for any amounts then owing to the Agents
     pursuant to Section 10.03 of the Credit Agreement or otherwise under the
     Financing Documents, ratably in accordance with the respective amounts
     then owing to the Agents; and

          SECOND, ratably (A) paid to the Bank Parties (or any of their
     Affiliates) and the Hedge Banks, respectively, for any amounts then owing
     to them, in their capacities as such, under the Credit Agreement, the
     Secured Treasury Management Service Agreements, and the Secured Hedge
     Agreements, respectively, ratably in accordance with such respective
     amounts then owing to such Bank Parties and the Hedge Banks, provided
     that, for purposes of this Section 5.01(c), (x) the amount owing to any
     such Hedge Bank pursuant to any Secured Hedge Agreement to which it is a
     party (other than any amount therefore accrued and unpaid) shall be deemed
     to be equal to the "mark to market" value of such Secured Hedge Agreement
     at such time and (y) the amounts ratably paid to the Hedge Banks,
     collectively, for any amounts owing to them under any Secured Hedge
     Agreement (other than the Banc of America Secured Option) shall not exceed
     $50,000,000 in the aggregate and (B) deposited as Revolving L/C Collateral
     in the Revolving L/C Cash Collateral Account up to an amount equal to 100%
     of the aggregate Available Amount of all outstanding Revolving Letters of
     Credit and as Drax LOC Collateral in the Drax LOC Cash Collateral Account
     up to an amount equal to 100% of the Drax LOC Available Amount.

     (d) Any amounts to be paid to the Representatives of the Exchange Note
Holders, the Sul Guaranteed Parties, the Lake Worth LOC Bank and the Other Debt
Holders pursuant to clause THIRD above shall be applied by the Collateral
Trustees for the ratable benefit of the Exchange Note Holders, the Sul
Guaranteed Parties, the Lake Worth LOC Bank and the Other Debt Holders as
follows:

          FIRST, paid to the Representatives of the Exchange Note Holders, the
     Sul Guaranteed Parties, the Lake Worth LOC Bank and the Other Debt Holders
     for any amounts then owing to them under the Exchange Note Agreements, the
     Sul Guarantee, the Lake Worth Letter of Credit and the Other Debt
     Agreements ratably in accordance with the respective amounts then owing to
     such Representatives; and

          SECOND, ratably (A) paid to the Exchange Note Holders and the Other
     Debt Holders for any amounts then owing to them under the Exchange Note
     Indenture and the Other Debt Agreements, (B) upon the instruction of the
     Sul Agent, either (x) paid to the Sul Guaranteed Parties for any amounts
     then owing to them under the Sul Guarantee or (y) deposited as cash
     collateral in an account designated by the Sul Agent in an amount up to
     $50,000,000 to secure the Obligations of the Borrower under the Sul
     Guarantee and (C) upon the instruction of the Lake Worth LOC Bank, either
     (x) paid to the Lake Worth LOC Bank for any amounts then owing to them
     under the Lake Worth Letter of Credit or (y) deposited as cash collateral
     in an account designated by the Lake Worth LOC Bank in

<PAGE>
                                      18


     an amount up to $5,490,449 to secure the Obligations of Lake Worth under
     the Lake Worth Letter of Credit.

     SECTION 5.02. Application of Withheld Amounts. If on any Distribution Date
any amounts on deposit to the Collateral Account are distributable pursuant to
Section 5.01 to any Representative, and if such Representative shall have given
notice to the Collateral Trustees on or prior to such Distribution Date that
all or a portion of such proceeds which are otherwise distributable to such
Representative pursuant to Section 5.01 shall be held by the Collateral
Trustees on behalf of such Representative for the benefit of the Secured
Holders of such Representative, then the Collateral Trustees shall hold such
amount in a separate non-interest bearing cash collateral account of the
Corporate Trustee for the benefit of such Representative and such Secured
Holders, until such time as such Representative shall deliver a written request
for the delivery thereof from such account to such Representative in accordance
with Section 5.01(c) or 5.01(d), as applicable. If thereafter the Secured
Obligations of the Secured Holders represented by any such Representative shall
have been repaid in full in cash on any date, then (a) upon the written request
of the Borrower certifying as to such payment in full, and (b) after delivery
of such notice by the Collateral Trustees to such Representative, the
Collateral Trustees shall not have received a written notice of objection from
such Representative within 30 days of such Representative's receipt of such
notice, promptly following such 30th day (or the earlier receipt by the
Collateral Trustees of the written consent of such Representative), any amounts
held on account for such Representative pursuant to this Section 5.02 shall be
again deposited by the Collateral Trustee to the Collateral Account and
thereafter distributed as provided in Section 5.01. If the Borrower shall have
failed to deliver to the Collateral Trustees the certificate provided for in
clause (a) of the immediately preceding sentence, the Collateral Trustees may
request payment instructions from the Required Representative(s) and the
Collateral Trustees shall not be required to make any distributions until such
instructions are received. The Corporate Trustee shall invest amounts on
deposit to any such account in such Cash Equivalents as the applicable
Representative may direct from time to time.

     SECTION 5.03. Release of Amounts in Collateral Account. Amounts
distributable to a Representative on any Distribution Date pursuant to Section
5.01 shall be paid to such Representative for the benefit of such
Representative and its Secured Holders by the Corporate Trustee (or deposited
to an account for the benefit of such Representative and its Secured Holders
pursuant to Section 5.02) upon receipt by the Corporate Trustee of a written
certificate of such Representative setting forth appropriate payments
instructions for such Representative. If no such notice is delivered by a
Representative within 10 Business Days thereafter, the Corporate Trustee shall
deposit amounts otherwise distributable to such Representative to an account
for the benefit of such Representative and its Secured Holders pursuant to
Section 5.02 hereof.

     SECTION 5.04. Distribution Date. Upon the occurrence and during the
continuance of a Collateral Trust Agreement Default, any amounts on deposit in
the Collateral Account shall, at the written request of the Required
Representative(s) (with a copy to the Grantors) be distributed as provided in
this Article V.

<PAGE>
                                      19


                                   ARTICLE VI

                     AGREEMENTS WITH THE COLLATERAL TRUSTEE

     SECTION 6.01. Delivery of Agreements. On the Effective Date, the Borrower
shall deliver to the Collateral Trustees a true and complete copy of each
Secured Agreement, including each Shared Collateral Document, as in effect on
the Effective Date. The Borrower agrees that, promptly upon the execution
thereof, the Borrower will deliver to the Collateral Trustees a true and
complete copy of any and all Shared Collateral Documents and other Secured
Agreements entered into subsequent to the date hereof and a true and complete
copy of any and all amendments, modifications or supplements to any of the
foregoing.

     SECTION 6.02. Information as to Representatives. (a) The Borrower agrees
that it shall deliver to the Collateral Trustees from time to time upon the
request of the Collateral Trustees a list setting forth, for each Secured
Agreement, (i) the aggregate principal amount outstanding thereunder, (ii) the
accrued and unpaid interest thereunder, (iii) the accrued and unpaid fees (if
any) thereunder, (iv) the names of the Representatives and of the Secured
Holders (to the extent known to the Borrower) thereunder, and all other unpaid
amounts thereunder known to the Borrower, owing to each such Representative,
for its own account and on behalf of such Secured Holders and (v) such other
information regarding the Representatives, such Secured Holders and the Secured
Agreements as the Collateral Trustees may reasonably request. In addition, the
Borrower shall deliver to the Collateral Trustees, each time a distribution
from the Collateral Trust Estate or, the Collateral Account is to be made
pursuant to the terms hereof, not later than two Business Days after receipt of
a copy of the applicable distribution request delivered by the Required
Representative(s) pursuant to Section 5.04 hereof, a certificate of an
Authorized Officer of the Borrower, setting forth the amounts to be distributed
and the Persons to whom such distributions are to be made, including
appropriate payment instructions therefor (the "Payment Information"), provided
that if any distribution is directed to be made to any Representative, if such
Representative shall have notified the Collateral Trustees in writing that such
Representative is unable to accept such distribution, such distribution shall
be made instead to an account established pursuant to Section 5.02 hereof for
the benefit of such Representative and its Secured Holders. The Borrower will
furnish to the Collateral Trustees, with a copy to each Representative, on the
Effective Date a list setting forth the name and address of each Representative
and each Person to whom notices must be sent under the Secured Agreements and
the Borrower agrees to furnish promptly to the Collateral Trustees any changes
or additions to such list of which the Borrower is made aware. Unless otherwise
specified herein, the Collateral Trustees may for all purposes hereunder, rely
on such information given by the Borrower unless (i) the Collateral Trustees
shall have actual knowledge of an inaccuracy or (ii) any Representative shall
provide contrary information in writing with respect to such Representative in
which case, unless such Representative and the Borrower can reach an agreement
on such issue within a period of 10 days, the Collateral Trustees shall appoint
an independent arbitrator (who shall be reasonably acceptable to the Borrower
and such Representative) to resolve the dispute (at the expense of the
Borrower). Upon the request of the Collateral Trustees, the Agent and the other
Representatives shall deliver the information provided for in this Section
6.02.

<PAGE>
                                      20


     (b) If the Borrower shall not have delivered the Payment Information to
the Collateral Trustees at least two Business days prior to the applicable
Distribution Date, the Collateral Trustees shall request the Payment
Information from the Agent and the other Representatives, and if after such
request the Collateral Trustees shall not have received the Payment Information
from any of the Borrower, the Agent or the other Representatives, the
Collateral Trustees shall not be required to take any action under clause THIRD
of Section 5.01(a) until it receives such Payment Information.

     SECTION 6.03. Compensation and Expenses. Each Grantor agrees to pay to the
Collateral Trustees and any co-trustees or successor trustees appointed
hereunder, from time to time upon demand, (a) such compensation for their
services hereunder and under the other Shared Collateral Documents and for
administering the other Collateral Trust Estate, the Collateral Account and any
account or accounts established pursuant to Section 5.02 hereof as set forth on
the fee schedule attached hereto as Schedule 1, as such Schedule 1 may be
amended, supplemented or otherwise modified by the written agreement of the
Grantors and the Collateral Trustees from time to time and (b) all the
reasonable fees, costs and expenses incurred by any of them (including, without
limitation, the reasonable fees and disbursements of counsel) (i) arising in
connection with the preparation, execution, delivery, modification and
termination of this Agreement and each other Shared Collateral Document or the
enforcement of any of the provisions hereof or thereof or (ii) incurred or
required to be advanced in connection with the administration of the Collateral
Trust Estate, the Collateral Account, any account or accounts established
pursuant to Section 5.02 hereof, the sale or other disposition of Collateral
pursuant to any Shared Collateral Document and the preservation, protection or
defense of their rights under this Agreement and in and to the Collateral, the
Collateral Account, any account or accounts established pursuant to Section
5.02 hereof and the Collateral Trust Estate. As security for such payment, the
Collateral Trustees shall have a prior lien upon all Collateral and other
property and funds held or collected by the Collateral Trustees as part of the
Collateral Trust Estate. Each Grantor's obligation under this Section 6.03
shall survive the termination of this Agreement.

     SECTION 6.04. Stamp and Other Similar Taxes. Each Grantor agrees to
indemnify and hold harmless the Collateral Trustees, each Representative and
each Secured Holder from any present or future claim for liability for any
stamp or other similar tax and any penalties or interest with respect thereto,
which may be assessed, levied or collected by any jurisdiction in connection
with this Agreement, any Shared Collateral Document, the Collateral Trust
Estate, the Collateral Account, any account or accounts established pursuant to
Section 5.02 hereof or any Collateral. The obligations of each Grantor under
this Section 6.04 shall survive the termination of this Agreement.

     SECTION 6.05. Filing Fees, Excise Taxes, Etc. Each Grantor agrees to pay
or to reimburse the Collateral Trustees for any and all amounts in respect of
all reasonable search, filing, recording and registration fees, taxes, excise
taxes and other similar imposts which may be payable or determined to be
payable in respect of the execution, delivery, performance and enforcement of
this Agreement and each other Shared Collateral Document. The obligations of
each Grantor under this Section 6.05 shall survive the termination of this
Agreement.

     SECTION 6.06. Indemnification. (a) Each Grantor agrees to pay, indemnify,
and hold harmless the Collateral Trustees and each of the agents of either
thereof from and against

<PAGE>
                                      21


any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including, without limitation, the costs and expenses of defending
any claim against any of them) with respect to the execution, delivery,
enforcement, performance and administration of this Agreement and the other
Shared Collateral Documents unless and to the extent arising from the gross
negligence or willful misconduct of such of the Collateral Trustees or such of
the agents thereof as are seeking indemnification or any failure of any
Collateral Trustee or any such agent to exercise ordinary care in the handling
of moneys and securities and other property actually received by any such
Collateral Trustee or any such agent. As security for such payment, any such
Collateral Trustee shall have a prior lien upon all Collateral and other
property and funds held or collected by the Collateral Trustees as part of the
Collateral Trust Estate.

     (b) In any suit, proceeding or action brought by the Collateral Trustees
under or with respect to any Shared Collateral Document or the Collateral for
any amount owing thereunder, or to enforce any provisions thereof, each Grantor
will save, indemnify and hold harmless the Collateral Trustees, the
Representatives and the Secured Holders from and against all expense, loss or
damage suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction of liability whatsoever of the obligee thereunder (unless and to the
extent that such expense, loss or damage is caused by the gross negligence or
willful misconduct of the such Collateral Trustee or the failure of any
Collateral Trustee to exercise ordinary care in the handling of moneys and
securities and other property actually received by such Collateral Trustee),
arising out of a breach by such Grantor of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or
in favor of such obligee or its successors from such Grantor and all such
obligations of such Grantor shall be and remain enforceable against and only
against such Grantor and shall not be enforceable against the Collateral
Trustees, any Representative or any Secured Holder. The agreements in this
Section 6.06 shall survive the termination of this Agreement.

     SECTION 6.07. Further Assurances. (a) Each Grantor agrees, from time to
time, at its own expense to execute, acknowledge, deliver, record, re-record,
file, re-file, register and re-register, and cause its Subsidiaries, if any, to
promptly execute, acknowledge, deliver, record, re-record, file, re-file,
register and re-register any and all such further acts, financing statements
and continuations thereof, notices of assignment, transfers, certificates,
assurances and other instruments as may be reasonably necessary or desirable,
or as any Collateral Trustee, any Representative, any Secured Holder through
its Representative, may reasonably request from time to time in order (i) to
carry out more effectively the purposes of this Agreement, (ii) to subject to
the liens and security interests created by any of the Shared Collateral
Documents any of the properties, rights or interests of such Grantor covered or
now or hereafter intended to be covered by any of the Shared Collateral
Documents, (iii) to perfect and maintain the validity, effectiveness and
priority of any of the Shared Collateral Documents and the liens and security
interests intended to be created thereby, (iv) to better assure, convey, grant,
assign, transfer, preserve, protect and confirm unto the Collateral Trustees,
the Representatives and the Secured Holders the rights granted or now or
hereafter intended to be granted to the Collateral Trustees, the
Representatives and the Secured Holders under any Shared Collateral Document or
under any other instrument executed in connection with any Shared Collateral
Document to which it is or may become a party, and (v) to enable the Collateral
Trustees to exercise and enforce their rights and remedies hereunder and under
each other Shared Collateral Document with respect to

<PAGE>
                                      22


any Collateral; provided, however, that this Section 6.07 shall not be
construed to require any Grantor to grant any interest in Collateral other than
pursuant to this Agreement, the Credit Agreement or any other Shared Collateral
Document. Without limiting the generality of the foregoing, each Grantor will
take any such action required to be taken by it pursuant to any Shared
Collateral Document.

     (b) Each Grantor hereby authorizes the Collateral Trustees to file one or
more financing or continuation statements relative to all or any part of the
Collateral, and amendments thereto to correct the name and address of such
Grantor or the Collateral Trustees or to correct the description of the
"Collateral" contained in any of the Shared Collateral Documents to be
consistent with the description of the Collateral contained in such Shared
Collateral Document, in each case without the signature of such Grantor where
permitted by law and which shall be filed by the Collateral Trustees upon the
receipt of an instruction letter from the Required Representatives requesting
the taking of such action and attaching the form of financing statement. A
photocopy or other reproduction of this Agreement, any other Shared Collateral
Document or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.

     (c) The Grantors will furnish such information about the Collateral as the
Collateral Trustees may reasonably request from time to time.

                                  ARTICLE VII

                             THE COLLATERAL TRUSTEE

     SECTION 7.01. Declaration of Trust. Each of the Corporate Trustee and the
Individual Trustee, for itself and its successors, hereby accepts the trusts
created by this Agreement upon the terms and conditions hereof, including those
contained in this Article VII. Further, each of the Corporate Trustee and the
Individual Trustee, for itself and its successors, does hereby declare that it
will hold all of the estate, right, title and interest in (a) the Collateral
Trust Estate and the Collateral Account for the equal and ratable benefit of
the Representatives and the Secured Holders as provided herein, and (b) each
account as may be established pursuant to Section 5.02 at the request of a
Representative upon the trust herein set forth and for the benefit of such
Representative on behalf of its applicable Secured Holders as provided herein.

     SECTION 7.02. Exculpatory Provisions. (a) The Collateral Trustees shall
not be responsible in any manner whatsoever for the correctness of any
recitals, statements, representations or warranties contained herein or in the
other Shared Collateral Documents, all of which are made solely by the Grantors
party thereto. The Collateral Trustees make no representations as to the value
or condition of the Collateral Trust Estate, the Collateral Account or any part
thereof, or as to the title of the Grantors thereto or as to the security
afforded by this Agreement or the other Shared Collateral Documents or as to
the validity, execution (except its own execution), enforceability, legality or
sufficiency of this Agreement, any other Shared Collateral Document or any
Secured Agreement, and the Collateral Trustees shall incur no liability or
responsibility in respect of any such matters. The Collateral Trustees shall
not be responsible for insuring the Collateral Trust Estate or for the payment
of taxes, charges, assessments or liens upon the Collateral Trust Estate or
otherwise as to the maintenance of the

<PAGE>
                                      23


Collateral Trust Estate or the Collateral Account, except that in any event
that any Collateral Trustee enters into possession of a part or all of the
Collateral Trust Estate or the Collateral Account, such Collateral Trustee,
shall preserve the part in its possession.

     (b) The Collateral Trustees shall not be required to ascertain or inquire
as to the performance by the Grantors of any of the covenants or agreements
contained herein, in any other Shared Collateral Document or in any Secured
Agreement.

     SECTION 7.03. Delegation of Duties. The Collateral Trustees may execute
any of the trusts or powers hereof and perform any duty hereunder either
directly or by or through agents or attorneys-in-fact (which shall not include
officers and employees of any Grantor or any Affiliate of any Grantor). The
Collateral Trustees shall be entitled to rely upon advice of reasonably
selected counsel and other professionals concerning all matters pertaining to
such trusts, powers and duties. The Collateral Trustees shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
reasonably selected by them in good faith.

     SECTION 7.04. Reliance by Collateral Trustees. (a) Whenever in the
administration of the trusts of this Agreement or, pursuant to any other Shared
Collateral Document, the Collateral Trustees shall deem it necessary or
desirable that a matter be proved or established in connection with the taking,
suffering or omitting any action hereunder by the Collateral Trustees unless
otherwise provided herein, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved or established by a certificate of an Authorized Officer of the Borrower
delivered to the Collateral Trustees and the Representatives, and such
certificate shall constitute a full warranty to the Collateral Trustees for any
action taken, suffered or omitted in reliance thereon unless (i) the Collateral
Trustees shall have actual knowledge of an inaccuracy therein or (ii) the
Required Representative(s) shall provide contrary information in writing with
respect to such matter within 10 days of receipt thereof by such Required
Representative(s), in which case unless such Required Representative(s) and the
Grantors can reach agreement on such issue within a period of 10 days, the
Collateral Trustees shall appoint, at the expense of the Grantors, an
independent arbitrator (who shall be reasonably acceptable to the Grantors and
such Required Representative(s)) to resolve the dispute.

     (b) The Collateral Trustees may consult with independent counsel,
independent public accountants and other experts selected by it (excluding,
counsel to or any employee of any Grantor or any Affiliate of any Grantor) and
any opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by them hereunder in
accordance therewith unless such Collateral Trustee has actual knowledge of a
reason to question the validity or accuracy of such opinion or of any
assumptions expressed therein as the basis for such opinion. The Collateral
Trustees shall have the right at any time to seek instructions concerning the
administration of the Collateral Trust Estate or the Collateral Account or any
account established pursuant to Section 5.02 hereof from any court of competent
jurisdiction.

     (c) The Collateral Trustees may rely, and shall be fully protected in
acting, upon any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent, order, bond or other paper or document which
they reasonably believe to be genuine and to have

<PAGE>
                                      24


been signed or presented by the proper party or parties or, in the case of
telecopies and telexes, to have been sent by the proper party or parties. In
the absence of its gross negligence or willful misconduct, each Collateral
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any notices, certificates
or opinions furnished to such Collateral Trustee that conform to the
requirements of this Agreement or any other Shared Collateral Document.

     SECTION 7.05. Limitations on Duties of the Trustees. (a) The Collateral
Trustees undertake to perform only the duties expressly set forth herein and no
implied covenant or obligation shall be read into this Agreement against the
Collateral Trustees.

     (b) The Collateral Trustees may exercise the rights and powers granted to
them by this Agreement and the other Shared Collateral Documents, but only
pursuant to the terms of this Agreement, and the Collateral Trustees shall not
be liable with respect to any action taken or omitted by them in accordance
with the direction of the Required Representative(s).

     (c) Except as herein otherwise expressly provided, the Collateral Trustees
shall not be under any obligation to take any action which is discretionary
with the Collateral Trustees under the provisions hereof or under any other
Shared Collateral Document except upon the written request of the Required
Representative(s). The Collateral Trustees shall make available for inspection
and copying by each Representative each certificate or other paper furnished to
the Collateral Trustees by the Grantors, by any Representative, or by any other
Person, under or in respect of this Agreement, any other Shared Collateral
Document or any of the Collateral Trust Estate.

     (d) The Collateral Trustees shall be under no obligation to exercise any
of the rights or powers vested in them by this Agreement or any other Shared
Collateral Document at the request or direction of any Representatives pursuant
to this Agreement, unless such Representatives shall have offered to the
Collateral Trustees security or indemnity satisfactory to the Collateral
Trustees against the costs, expenses and liabilities which might be incurred by
them in compliance with such request or direction.

     (e) Each Secured Holder (other than the Agents and any other
Representative, in its capacity as a "representative") shall, ratably
(determined as provided below) indemnify the Collateral Trustees, each of their
respective Affiliates and the respective directors, officers, agents and
employees of any of them (to the extent not reimbursed by the Borrower) against
any cost, expense (including counsel fees and disbursements), claim, demand,
action, loss or liability (except such as result from such indemnitees' gross
negligence or willful misconduct) (an "Indemnified Event") that such
indemnitees may suffer or incur in connection with its exercise of rights and
remedies with respect to the Account Collateral and the Securities Accounts.
For purposes of this Section 7.05(e), each Secured Holder's ratable share shall
be based on the amounts owing to each such Secured Holder under its respective
Secured Agreement at the time the Indemnified Event arose.

     (f) The Obligations of the Collateral Trustees hereunder are several and
not joint.

<PAGE>
                                      25


     SECTION 7.06. Moneys to Be Held in Trust. All moneys received by the
Corporate Trustee under or pursuant to any provision of this Agreement or any
other Shared Collateral Document shall be segregated and held in trust for the
purposes for which they were paid or are held and the Corporate Trustee shall
exercise ordinary care in the handling of any such moneys actually received by
it. The Individual Trustee shall promptly turn over to the Corporate Trustee
any Collateral, or any part thereof, delivered to or received by the Individual
Trustee.

     SECTION 7.07. Resignation and Removal of Collateral Trustees. (a) Each or
both of the Collateral Trustees may at any time, by giving 30 days' prior
written notice to the Grantors and the Representatives, resign and be
discharged of their responsibilities hereby created, such resignation to become
effective upon the appointment of a successor trustee or trustees by the
Required Representative(s), the acceptance of such appointment by such
successor trustee or trustees and, unless a Collateral Trust Agreement Default
has occurred and is continuing, the consent to the appointment of such
successor trustee or trustees by the Grantors. If a Collateral Trust Agreement
Default has occurred, the Grantors' consent to any such resignation shall not
be required. The Collateral Trustees shall be entitled to their fees and
expenses accrued to the date of the resignation becoming effective. Either or
both of the Collateral Trustees may be removed at any time (with or without
cause) and a successor trustee or trustees appointed by the affirmative vote of
the Required Representative(s), subject to, unless a Collateral Trust Agreement
Default has occurred and is continuing, the consent of the Grantors, provided
that the Collateral Trustees or either of them shall be entitled to their fees
and expenses accrued to the date of removal. If either or both of the
Collateral Trustees resigns or is removed as provided in this Section 7.07 the
consent to the appointment of a successor trustee or trustees shall not be
unreasonably withheld and shall be deemed to have been given if the Grantors
shall not have reasonably objected to any proposed successor trustee or
trustees within five Business Days of receipt of notice of the identity thereof
from the Representatives. If no successor trustee or trustees shall be
appointed and approved within 30 days from the date of the giving of the
aforesaid notice of resignation or within 30 days from the date of such vote
for removal, the Collateral Trustees, shall, or the Required Representative(s)
may, apply to any court of competent jurisdiction to appoint a successor
trustee or trustees to act until such time, if any, as a successor trustee or
trustees shall have been appointed as above provided. Any successor trustee or
trustees so appointed by such court shall immediately and without further act
be superseded by any successor trustee or trustees approved by the Required
Representative(s) as above provided.

     (b) If at any time either or both of the Collateral Trustees shall become
incapable of acting, or if at any time a vacancy shall occur in the office of
the Collateral Trustees for any other cause, a successor trustee or trustees
shall be promptly appointed by the Required Representative(s), subject to,
unless a Collateral Trust Agreement Default has occurred and is continuing, the
consent of the Grantors, which consent shall not be unreasonably withheld, and
the powers, duties, authority and title of the predecessor trustee or trustees
terminated and cancelled without procuring the resignation of such predecessor
trustee or trustees, and without any formality (except as may be required by
applicable law) other than appointment and designation of a successor trustee
or trustees in writing, duly acknowledged, delivered to the predecessor trustee
or trustees and the Grantors and filed for record in each public office, if
any, in which this Agreement is required to be filed.

<PAGE>
                                      26


     (c) The appointment and designation referred to in Section 7.07(b) shall,
after any required filing, be full evidence of the right and authority to make
the same and of all the facts therein recited, and this Agreement shall vest in
such successor trustee or trustees, without any further act, deed or
conveyance, all of the estate and title of its predecessor, and upon such
filing for record the successor trustee or trustees shall become fully vested
with all the estates, properties, rights, powers, trusts, duties, authority and
title of its predecessor; but such predecessor shall, nevertheless, on the
written request of the Required Representative(s), the Grantors or its
successor trustee or trustees, execute and deliver an instrument transferring
to such successor all the estates, properties, rights, powers, trusts, duties,
authority and title of such predecessor hereunder and shall deliver all
securities and moneys held by it or them to such successor trustee or trustees.
Should any deed, conveyance or other instrument in writing from the Grantors be
required by any successor trustee or trustees for more fully and certainly
vesting in such successor trustee or trustees the estates, properties, rights,
powers, trusts, duties, authority and title vested or intended to be vested in
the predecessor trustee or trustees, any and all such deeds, conveyances and
other instruments in writing shall, on request of such successor trustee or
trustees, be executed, acknowledged and delivered by the Grantors.

     (d) Any required filing for record of the instrument appointing a
successor trustee or trustees as hereinabove provided shall be at the expense
of the Grantors. The resignation of any trustee or trustees and the instrument
removing any trustee or trustees, together with all other instruments, deeds
and conveyances provided for in this Article VII shall, if permitted by law, be
forthwith recorded, registered and filed by and at the expense of the Grantors,
wherever this Agreement is recorded, registered and filed.

     SECTION 7.08. Status of Successors to Trustee. Every successor to the
Corporate Trustee appointed pursuant to Section 7.07 shall be a bank or trust
company in good standing and having power so to act, incorporated under the
laws of the United States or any State thereof or the District of Columbia and
having its principal corporate trust office within the State of Delaware, or
another state acceptable to the Required Representative(s), and shall also have
capital, surplus and undivided profits of not less than $100,000,000, if there
be such an institution with such capital, surplus and undivided profits
willing, qualified and able to accept the trust upon reasonable or customary
terms. Any successor to the Individual Trustee appointed pursuant to Section
7.07 shall be an individual residing in the State of Delaware, the State of New
York or another state of the United States acceptable to the Required
Representative(s).

     SECTION 7.09. Merger of the Corporate Trustee. Any corporation into which
the Corporate Trustee may be merged, or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the
Corporate Trustee shall be a party, shall be the Corporate Trustee under this
Agreement without the execution or filing of any paper or any further act on
the part of the parties hereto.

     SECTION 7.10. Powers of Individual Trustee. The Individual Trustee has
been joined as a party hereunder so that if, by any present or future
applicable law in any jurisdiction in which it may be necessary to perform any
act in the execution or enforcement of the trusts hereby created, the Corporate
Trustee may be incompetent, unqualified or unable to act as a Collateral
Trustee, then all of the acts required to be performed in such jurisdiction, in
the execution or enforcement of the trusts hereby created, shall and will be
performed by the

<PAGE>
                                      27


Individual Trustee, acting alone. Notwithstanding any other term or provision
of this Agreement to the contrary, the Corporate Trustee alone shall have and
exercise the rights and powers granted herein and shall be solely charged with
the performance of the duties herein declared on the part of the Collateral
Trustees to be had and exercised or to be performed without any action taken by
the Individual Trustee; provided, however, that if the Corporate Trustee or the
Required Representative(s) deem it necessary or desirable for the Individual
Trustee to act in a particular jurisdiction, the Individual Trustee shall have
and exercise the rights and powers granted herein (but no greater powers) and
shall be charged with the performance of the duties herein declared on the part
of the Collateral Trustees to be had and exercised or to be performed, but only
in such particular jurisdiction.

     SECTION 7.11. Additional Co-Trustees; Separate Trustees. (a) If at any
time or times it shall be necessary or prudent in order to conform to any law
of any jurisdiction in which any of the Collateral shall be located, or the
Collateral Trustees shall be advised by counsel satisfactory to them that it is
so necessary or prudent in the interest of the Representatives on behalf of the
Secured Holders, or the Required Representative shall in writing so request by
notice to the Collateral Trustees and the Grantors, or the Collateral Trustees
shall deem it desirable for their own protection in the performance of their
duties hereunder, or the Grantors shall in writing so request by notice to the
Collateral Trustees with the consent of the Required Representative, the
Collateral Trustees and the Grantors shall execute and deliver all instruments
and agreements necessary or proper to constitute another bank or trust company,
or one or more persons approved by the Collateral Trustees, the Grantors and
the Required Representative, either to act as co-trustee or co-trustees of all
or any of the Collateral, jointly with the Collateral Trustees originally named
herein or any successor, or to act as separate trustee of any such property. In
the event the Grantors shall not have joined in the execution of such
instruments and agreements within 10 days after the receipt of a written
request from the Collateral Trustees so to do, or in case a Collateral Trust
Agreement Default shall have occurred and be continuing, the Collateral
Trustees may act under the foregoing provisions of this Section 7.11 without
the concurrence of the Grantors (but with the concurrence of the Required
Representative), and the Grantors hereby appoint the Collateral Trustees as
their agents and attorneys to act for them under the foregoing provisions of
this Section 7.11 in either of such contingencies.

     (b) Any separate trustee and any co-trustee (other than any trustee which
may be appointed as successor to the Corporate Trustee or the Individual
Trustee pursuant to Section 7.07) shall, to the extent permitted by law, be
appointed and act and be such, subject to the following provisions and
conditions, namely:

          (i) all rights, powers, duties and obligations conferred upon the
     trustees in respect of the custody, control and management of moneys,
     papers or securities shall be exercised solely by the Collateral Trustees
     originally named herein or their successors appointed pursuant to Section
     7.07;

          (ii) all rights, powers, duties and obligations conferred or imposed
     upon the Collateral Trustees hereunder shall be conferred or imposed and
     exercised or performed by the Collateral Trustees and such separate
     trustee or co-trustee, jointly, as shall be provided in the instrument
     appointing such separate trustee or co-trustee, except to the extent that
     under any law of any jurisdiction in which any particular act or acts are
     to be

<PAGE>
                                      28


     performed the Collateral Trustees shall be incompetent or unqualified to
     perform such act or acts, in which event such rights, powers, duties and
     obligations shall be exercised and performed by such separate trustee or
     co-trustee;

          (iii) no power given hereby to, or which it is provided hereby may be
     exercised by, any such co-trustee or separate trustee, shall be exercised
     hereunder by such co-trustee or separate trustee, except jointly with, or
     with the consent in writing of, the Collateral Trustees, anything herein
     contained to the contrary notwithstanding;

          (iv) no trustee hereunder shall be personally liable by reason of any
     act or omission of any other trustee hereunder; and

          (v) the Grantors and the Collateral Trustees, at any time, by an
     instrument in writing, executed by them jointly, may accept the
     resignation of or remove any such separate trustee, and in that case, by
     an instrument in writing executed by the Grantors and the Collateral
     Trustees jointly, may appoint a successor (who shall be acceptable to the
     Required Representative(s)) to such a separate trustee or co-trustee, as
     the case may be, anything herein contained to the contrary
     notwithstanding. In the event that the Grantors shall not have joined in
     the execution of any such instrument within 10 days after the receipt of a
     written request from the Collateral Trustees so to do, or in case a
     Collateral Trust Agreement Default shall have occurred and be continuing,
     the Collateral Trustees shall have the power to accept the resignation of
     or remove any such separate trustee or co-trustee and to appoint (with the
     consent of the Required Representative(s)) a successor without the
     concurrence of the Grantors and the Grantors hereby appoint the Collateral
     Trustees their agents and attorneys to act for them in such connection in
     either of such contingencies. In the event that the Collateral Trustees
     shall have appointed a separate trustee or co-trustee or as above
     provided, they may at any time, by an instrument in writing, accept the
     resignation of or remove any such separate trustee, the successor to any
     such separate trustee to be appointed by the Grantors and the Collateral
     Trustees, or by the Collateral Trustees alone, as hereinbefore provided in
     this Section 7.11.

     SECTION 7.12. Trustees Appointed Attorneys-in-Fact. Each Grantor hereby
irrevocably constitutes and appoints the Collateral Trustees and any officer or
agent thereof, with full power of substitution, as its true and lawful
attorneys-in-fact with full power and authority in the name of such Grantor or
their own name and in the place and stead of such Grantor and in the name of
such Grantor, from time to time at the direction of the Required
Representative(s), to take any action and to execute any instrument which the
same may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation, to receive, endorse and collect all
instruments made payable to such Grantor representing any dividend, interest
payment or other distribution in respect of the Collateral or any part thereof
and to give full discharge for the same in accordance with the terms of the
Shared Collateral Documents. Each Grantor acknowledges and agrees that the
foregoing power of attorney is coupled with an interest and may not be revoked
or modified except with the consent of the Collateral Trustees or as otherwise
provided herein.

<PAGE>
                                      29


     SECTION 7.13. Ordinary Care. The Collateral Trustees shall be deemed to
have exercised ordinary care in the custody and preservation of the Collateral
in their possession if the Collateral is accorded treatment substantially equal
to that which the Collateral Trustees accord their own property, it being
understood that the Collateral Trustees 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 Trustees have or are deemed to have knowledge of
such matters, or (ii) taking any necessary steps to preserve rights against any
parties with respect to any Collateral.

                                  ARTICLE VIII

                             RELEASE OF COLLATERAL

     SECTION 8.01. Partial Release of Collateral. (a) Any Grantor may, from
time to time so long as no Collateral Trust Agreement Default shall have
occurred and be continuing, request the release of the lien and security
interest of the Shared Collateral Documents in any portion of the Collateral of
such Grantor proposed to be sold or otherwise disposed of by such Grantor to
any other Person, upon notice to the Collateral Trustees from an Authorized
Officer of the Borrower (a "Notice of Partial Release"), which Notice of
Partial Release shall be delivered to the other Grantors, the Collateral
Trustees and the Representatives at least twenty Business Days prior to the
date of the proposed sale or other disposition of such Collateral (unless a
shorter period of time is acceptable to the Collateral Trustees and the
Required Representative(s)) and shall

          (i) specify the Collateral to be so sold or otherwise disposed of and
     the proposed date of such sale or other disposition, and

          (ii) certify that the sale or other disposition of such Collateral is
     in compliance with the terms of the Applicable Agreements, and the
     Grantors are not, and after giving effect to such release, would not be,
     in default under the Applicable Agreements.

If a Notice of Partial Release is delivered to the Collateral Trustees in
accordance with the immediately preceding sentence and the Required
Representative(s), shall not have objected in writing thereto prior to the date
of the proposed release, the security interest in such Collateral shall
automatically, without further action, be released and the Collateral Trustees
shall execute and deliver to the Grantors, on the date of the proposed release
(or as promptly thereafter as possible), a release or releases (including,
without limitation, Uniform Commercial Code release statements and instruments
of satisfaction, discharge and/or reconveyance) in recordable form as to the
Collateral specified in such Notice of Partial Release from the liens, security
interests, conveyances and assignments evidenced by the Shared Collateral
Documents, which release shall state that it is effective as of the date of
such disposition; provided, however, that, if prior to the time that the
Collateral Trustees deliver a release pursuant to this Section 8.01(a), the
Collateral Trustees shall have received either (A) a Collateral Trust Agreement
Default Notice that shall not have been withdrawn prior to such time and the
Required Representative(s) shall have directed the Collateral Trustees either
not to deliver such a release or not to deliver releases generally or (B) a
written objection from the Required Representative(s) stating that such sale or
other disposition is not permitted under the Applicable Agreement, then, in
either case, the

<PAGE>
                                      30


Collateral Trustees shall so notify the Grantors and shall not sign any release
or releases in connection with such disposition.

     (b) If, at any time, the Collateral Trustees shall receive a written
notice from an Authorized Officer of the Borrower, (i) stating that any
promissory note or other similar or related instrument evidencing obligations
payable to such Grantor and included in the Collateral has been paid in full in
accordance with its terms (or will be so paid concurrently with the surrender
thereof), and (ii) identifying such note or other instrument in reasonable
detail (including, without limitation, by its date of issuance, the name of its
payee and the principal amount thereof), then the Collateral Trustees shall
promptly deliver a copy of each such notice to the other Grantors, each
Representative and, unless the Required Representative(s) shall have disputed
the accuracy of such notice within ten Business Days of the delivery of such
notice, the Collateral Trustees shall promptly deliver such note or other
instrument to the Borrower, and promptly execute and deliver a release or
releases (including, without limitation, Uniform Commercial Code release
statements) in recordable form as to any such note or other instrument from the
liens, security interests, conveyances and assignments evidenced by the Shared
Collateral Documents, which release shall state that it is effective as of the
date of its delivery.

     SECTION 8.02. Full Release of Collateral Upon Satisfaction of Certain
Secured Obligations. (a) The Collateral Trustees shall promptly release, in
accordance with Section 8.03, all the Collateral upon the latest of the (i)
cash payment in full of all Secured Obligations arising under the Credit
Agreement, the Notes, the Banc of America Secured Option, the Exchange Note
Agreements, the Sul Guarantee, the Lake Worth Letter of Credit, the Other Debt
Agreements and each other agreement or instrument delivered by the Grantors
pursuant thereto, (ii) termination of the Exchange Note Indenture, (iii) the
termination of the Revolving Credit Loan Commitments and (iv) the termination
or expiration of all Revolving Letters of Credit and the Drax Letter of Credit.

     (b) In furtherance of the undertaking set forth above in Section 8.02(a),
the Collateral Trustees shall, upon the request of the Grantors accompanied by
a certificate of an Authorized Officer of each Grantor, upon which the
Collateral Trustees may conclusively rely without independent verification, to
the effect that all Secured Obligations under the Secured Agreements referred
to in clause (i) of the preceding subsection (a) have been, or will,
concurrently with the release of the Collateral be, paid in full in cash and
all Revolving Credit Loan Commitments, all Revolving Letters of Credit and the
Drax Letter of Credit have been terminated (and if such Secured Obligations
have not previously been so paid, describing the source(s) of funds for such
repayment), deliver a notice by registered mail to each of the Representatives
containing the following:

          (i) a statement as to the total amount of moneys in the Collateral
     Account and any account which has been established at the request of any
     Representative pursuant to Section 5.02; and

          (ii) a statement that the Collateral Trustees will release such
     Collateral only upon receipt from the Representatives of instructions to
     do so.

<PAGE>
                                      31


If the Collateral Trustees receive a direction from the Representatives to so
release such Collateral (and the Collateral Trustees shall not have received
any notice that a Collateral Trust Agreement Default has occurred or is
continuing), then the Collateral Trustees shall release all the Collateral from
the security interest in their favor and deliver to the Grantors all Collateral
in the possession of the Collateral Trustees as specified in such instruction;
provided, however, that the Grantors shall have made adequate provision for the
expenses of the Collateral Trustees associated with such release of Collateral
and all other expenses of, or payable to, the Collateral Trustees hereunder. If
the Collateral Trustees shall not have received an instruction so to release
such Collateral (or shall have received a Collateral Trust Agreement Default
Notice which has not been withdrawn), the Collateral Trustees shall not release
the Collateral unless and until the Representatives or a court of competent
jurisdiction so directs the Collateral Trustees pursuant to a final,
non-appealable judgment (including a judgment that becomes non-appealable by
reason of expiration of any period of time limiting the right to appeal
therefrom).

     SECTION 8.03. Effect of Release of Collateral. Upon the effectiveness of
the release of the Collateral pursuant to Section 8.02, all right, title and
interest of the Collateral Trustees and the Representatives on behalf of the
Secured Holders in, to and under the Collateral Trust Estate, the Collateral
and the Shared Collateral Documents shall terminate and shall revert to the
Grantors and their successors and assigns, and the estate, right, title and
interest of the Collateral Trustees therein shall thereupon cease; and in such
case, upon the written request of the Grantors, their successors or assigns,
and at the cost and expense of the Grantors, their successors or assigns, the
Collateral Trustees shall promptly execute and deliver a satisfaction of the
Shared Collateral Documents and such instruments as are necessary or desirable
to terminate and remove of record any documents constituting public notice of
the Shared Collateral Documents and the security interests granted thereunder
and shall transfer, or cause to be transferred, and shall deliver or cause to
be delivered to the Grantors, all property, including all moneys, instruments
and securities of the Grantors then held by the Collateral Trustees. The
cancellation and satisfaction of the Shared Collateral Documents shall be
without prejudice to the rights of the Collateral Trustees or any successor
trustee or trustees to charge and be reimbursed for any expenditures which they
may thereafter incur in connection therewith.

                                   ARTICLE IX

                                 MISCELLANEOUS

     SECTION 9.01. Amendments, Supplements and Waivers. (a) With the written
consent of the Required Representative(s) and the Corporate Trustee, the
Grantors may, from time to time, enter into written agreements supplemental
hereto for the purpose of adding to or waiving any provision of this Agreement
or any other Shared Collateral Document or changing in any manner the rights of
the Collateral Trustees, the Representatives, the Secured Holders and the
Grantors hereunder or thereunder; provided that

     (i) no such amendment, waiver or consent shall, unless the approval of all
the Representatives existing at such time shall have been obtained, amend,
waive or otherwise modify any provision of Sections 5.01, 8.01, 8.02 and 9.01
or amend or otherwise modify the definitions of "Required Representative(s)",
"Secured Agreements", "Secured Holders", "Secured Obligations" or "Collateral
Trust Agreement Default" set forth in Section 1.01,

<PAGE>
                                      32


     (ii) no such amendment, waiver or consent shall amend, waive or otherwise
modify this Agreement or any other Shared Collateral Document unless such
amendment, waiver or consent complies with the amendment provisions (or other
similar provisions) of the then outstanding Applicable Agreements,

     (iii) no such amendment, waiver or consent shall, unless in writing and
signed by the Individual Trustee, amend, waive or otherwise modify any
provision of Section 7.10,

     (iv) any such supplemental agreement shall be binding upon the Grantors,
the Representatives, the Secured Holders and the Collateral Trustees and their
respective successors,

     (v) the Collateral Trustees shall not enter into any such supplemental
agreement unless they shall have received a certificate of an Authorized
Officer of each Grantor to the effect that such supplemental agreement will not
result in a breach of any provision or covenant contained in the Applicable
Agreement, and

     (vi) the Collateral Trustees shall not enter into any such supplemental
agreement unless they shall have received a certificate of the Required
Representative(s) and, in the case that the Required Representative(s) are not
then the Other Debt Representatives, the Other Debt Representatives, in the
case of clause (ii) above, to the effect that, upon receipt of the Corporate
Trustee's written consent, this Section 9.01(a) has been complied with and an
instruction letter requesting the Corporate Trustee and Individual Trustee to
execute such supplemental agreement.

     (b) Notwithstanding the provisions of paragraph (a), (x) so long as the
Obligations of the Borrower with respect to the Banc of America Secured Option
shall remain outstanding, the approval of Banc of America Securities LLC shall
be required for any amendment, waiver or consent of the type set forth in
paragraph (a) that adversely affects the rights of Banc of America Securities
LLC in a way different from the other Secured Holders and (y) the Collateral
Trustees and the Grantors may, at any time and from time to time, without the
consent of the Agent and any other Representative or any Secured Holders, enter
into additional Shared Collateral Documents or one or more agreements
supplemental hereto or to any Shared Collateral Document, in form satisfactory
to the Collateral Trustees,

          (i) to add to the covenants of the Grantors for the benefit of the
     Representatives or any Secured Holder, or to surrender any right or power
     herein conferred upon the Grantors; or

          (ii) to mortgage, pledge or grant a security interest in favor of the
     Collateral Trustees as additional security for the Secured Obligations any
     property or assets which are required to be mortgaged or pledged, or in
     which a security interest is required to be granted, to the Collateral
     Trustees pursuant to any Shared Collateral Document or otherwise.

     SECTION 9.02. Additional Actions of Representatives. Whether or not there
shall be a Collateral Trust Agreement Default, the Collateral Trustees shall
comply and shall be fully protected in complying with any reasonable request of
(a) the Required Representative(s), to take or refrain from taking certain
actions with respect to the Collateral or the Representatives,

<PAGE>
                                      33


and (b) more than 50% of the Secured Holders represented by any Representative
which has requested that an account be opened pursuant to Section 5.02, to take
or refrain from taking certain actions with respect to such account, provided,
in each case, that the Collateral Trustees shall not take or refrain from
taking such actions if to do so would violate applicable law or the terms of
this Agreement, the other Shared Collateral Documents or the Applicable
Agreements or if the Collateral Trustees shall not be indemnified as provided
in Section 6.06(b).

     SECTION 9.03. Notices. All notices, requests, demands and other
communications provided for or permitted hereunder shall, unless otherwise
stated herein, be in writing (including telex and telecopy communications) and
shall be sent by mail (by registered or certified mail, return receipt
requested), overnight prepaid courier, telex, telecopier or hand delivery:

          (a) If to the Grantors, to their addresses specified in the Credit
     Agreement or in any Shared Collateral Document;

          (b) If to the Corporate Trustee, at Rodney Square North, 1100 North
     Market St., Wilmington, DE 19890, Attention: Corporate Trust Division, or
     at such other address as shall be designated by it in a written notice to
     the Grantors and each Representative, with a copy to the Individual
     Trustee, at 1100 North Market St. Rodney Square North Wilmington, DE
     19890, Attention: Corporate Trust Division, or at such other address as
     shall be designated by him in a written notice to the Grantors and each
     Representative; provided that failure to send a copy of any notice to the
     Individual Trustee shall not render any notice to the Collateral Trustees
     ineffective; and

          (c) If to any Representative, to it at the address specified from
     time to time in the list provided by the Grantors to the Collateral
     Trustees pursuant to Section 6.02 with copies to whomever (other than the
     Grantors) is specified by the Grantors pursuant to Section 6.02 as a
     Person to whom notice must be sent under the Secured Agreements, provided
     that in the case that no address is known for a Representative, notice
     shall be given to it in the manner specified by the related Secured
     Agreement, and, in the absence of any such specified means of giving
     notice, by such notice in the national edition of The Wall Street Journal
     or as the Collateral Trustees shall determine to be reasonable. For
     purposes of notice by publication, one notice is sufficient and shall be
     deemed made on the date of its publication.

All such notices, requests, demands and communications shall be deemed to have
been duly given or made, (i) when delivered by hand, (ii) five Business Days
after being deposited in the mail, postage prepaid, (iii) the next Business Day
if delivered by an overnight prepaid courier, (iv) when telexed with answerback
received, (v) when telecopied or (vi) when published in The Wall Street Journal
or such other publication; provided, however, that any notice, request, demand
or other communication to (1) the Collateral Trustees or (2) any Representative
under Article V or Article VIII shall not be effective until received by the
Corporate Trustee or such Representative, as the case may be, and, provided,
further, that any notice to the Collateral Trustees from any Grantor shall be
signed by an Authorized Officer, unless otherwise specifically set forth
herein.

<PAGE>
                                      34


     SECTION 9.04. Headings. Section, subsection and other headings used in
this Agreement are for convenience only and shall not affect the construction
of this Agreement.

     SECTION 9.05. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.

     SECTION 9.06. Treatment of Payee or Indorsee by Trustees. (a) The
Collateral Trustees may treat the registered Secured Holder of any registered
note, and the payee or indorsee of any note or debenture which is not
registered, as the absolute owner thereof for all purposes hereunder and shall
not be affected by any notice to the contrary, whether such promissory note or
debenture shall be past due or not.

     (b) Any person, firm, corporation or other entity which shall be
designated as the duly authorized representative of one or more Representatives
to act as such in connection with any matters pertaining to this Agreement or
any other Shared Collateral Document or the Collateral shall present to the
Collateral Trustees such documents, including, without limitation, opinions of
counsel, as the Collateral Trustees may reasonably require, in order to
demonstrate to the Collateral Trustees the authority of such person, firm,
corporation or other entity to act as the representative of such
Representatives.

     SECTION 9.07. Dealings with the Grantors. Upon any application or demand
by the Grantors to the Collateral Trustees to take or permit any action under
any of the provisions of this Agreement, each Grantor shall (unless otherwise
waived by the Collateral Trustees in writing) furnish to the Collateral
Trustees a certificate signed by an Authorized Officer stating that all
conditions precedent, if any, provided for in this Agreement relating to the
proposed action have been complied with, except that in the case of any such
application or demand as to which the furnishing of such documents is
specifically required by any provision of this Agreement relating to such
particular application or demand, no additional certificate need be furnished.

     SECTION 9.08. Claims. This Agreement is made for the benefit of the
Representatives on behalf of the Secured Holders, and the Representatives may
from time to time enforce their rights as explicit beneficiaries hereunder
pursuant to the terms and conditions of this Agreement and the other Shared
Collateral Documents.

     SECTION 9.09. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and shall inure to the
benefit of the Representatives on behalf of the Secured Holders and their
respective successors and assigns and nothing herein or in any other Shared
Collateral Document is intended or shall be construed to give any other Person
any right, remedy or claim under, to or in respect of this Agreement, any other
Shared Collateral Document, the Collateral, the Collateral Account or the
Collateral Trust Estate or any part thereof.

     SECTION 9.10. Governing Law. The provisions of this Agreement creating a
trust for the benefit of the Representatives on behalf of the Secured Holders
and setting forth the

<PAGE>
                                      35


rights, duties, obligations and responsibilities of the Collateral Trustees
hereunder shall be governed by and construed in accordance with the laws of the
State of Delaware, so long as Wilmington Trust Company shall serve as Corporate
Trustee hereunder. In all other respects, including, without limitation, all
matters governed by the Uniform Commercial Code, and if Wilmington Trust
Company shall cease to serve as Corporate Trustee hereunder, this Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, except as otherwise required by mandatory provisions of law.

     SECTION 9.11. Effectiveness. This Agreement shall become effective on the
execution and delivery hereof and shall remain in effect so long as the
Collateral Trustees shall have any obligations hereunder.

     SECTION 9.12. Reexecution of Agreement. This Agreement shall be reexecuted
at any time and from time to time, at the request of the Required
Representative(s), with such changes in the form hereof (including, without
limitation, changes on the cover page and adding supplemental signatures and
notary statements) as may be necessary to comply with the filing or recording
requirements of any jurisdiction where this Agreement is to be filed.

     SECTION 9.13. Effect on Credit Agreements. Nothing in this Agreement shall
operate or be deemed to prevent any amendment, modification or waiver of the
Credit Agreement or other Credit Agreement Document by the parties thereto in
accordance with the terms thereof.

     SECTION 9.14. Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same instrument.

<PAGE>


     IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.


Corporate Trustee:                       WILMINGTON TRUST COMPANY, not in its
                                         individual capacity, but solely as
                                         Corporate Trustee


                                         By:
                                            ----------------------------------
                                            Title:

<PAGE>


Individual Trustee:
                                         --------------------------------------
                                         BRUCE L. BISSON, not in his individual
                                         capacity, but solely as Individual
                                         Trustee



<PAGE>


Grantors:                                THE AES CORPORATION,
                                         a Delaware corporation


                                         By:
                                            ----------------------------------
                                            Title:


                                         AES INTERNATIONAL HOLDINGS II, LTD.,
                                         a British Virgin Islands company


                                         By:
                                            ----------------------------------
                                            Title:

<PAGE>


                                         ACKNOWLEDGED AND AGREED ON
                                         THE DATE HEREOF BY:


                                         CITICORP USA, INC.,
                                         as Administrative Agent


                                         By:
                                            ----------------------------------
                                            Title:


                                         WELLS FARGO BANK MINNESOTA, NATIONAL
                                         ASSOCIATION, as Exchange Note Trustee


                                         By:
                                            ----------------------------------
                                            Title:


                                         BANKBOSTON, N.A., NASSAU BRANCH,
                                         as Sul Agent


                                         By:
                                            ----------------------------------
                                            Title:


                                         FLEET NATIONAL BANK,
                                         as Lake Worth LOC Bank


                                         By:
                                            ----------------------------------
                                            Title:

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>5
<FILENAME>dec1602_ex4-3.txt
<TEXT>
                                                                    EXHIBIT 4.3


                                                                 EXECUTION COPY





                               SECURITY AGREEMENT


                            Dated December 12, 2002

                                      From

                        The Grantors referred to herein

                                  as Grantors

                                       to

                            WILMINGTON TRUST COMPANY

                              as Corporate Trustee

                                      and

                                Bruce L. Bisson

                             as Individual Trustee

<PAGE>

                               TABLE OF CONTENTS


Section                                                                     Page

Section 1.    Grant of Security................................................4

Section 2.    Security for Obligations.........................................7

Section 3.    Grantors Remain Liable...........................................7

Section 4.    Delivery and Control of Security Collateral......................7

Section 5.    Maintaining the Account Collateral...............................9

Section 6.    Maintaining Letter-of-Credit Rights.............................10

Section 7.    Representations and Warranties..................................11

Section 8.    Further Assurances..............................................13

Section 9.    Post-Closing Changes; Collections on Assigned Agreements,
              Receivables and Related Contracts...............................15

Section 10.   Voting Rights; Dividends; Etc...................................16

Section 11.   As to the Assigned Agreements...................................17

Section 12.   Payments Under the Assigned Agreements; Letters of Credit.......17

Section 13.   Transfers and Other Liens; Additional Shares....................18

Section 14.   Collateral Trustees May Perform.................................18

Section 15.   Remedies........................................................18

Section 16.   Indemnity and Expenses..........................................20

Section 17.   Amendments; Waivers; Additional Grantors; Etc...................21

Section 18.   Notices, Etc....................................................21

Section 19.   Continuing Security Interest; Assignments under the
              Credit Agreement................................................22

Section 20.   Release; Termination............................................22

Section 21.   Security Interest Absolute......................................22

Section 22.   Additional Secured Obligations..................................23

Section 23.   Execution in Counterparts.......................................24

Section 24.   Limitation of Liability.........................................24


                                       i
<PAGE>

Section 25.   Governing Law...................................................24

Section 26.   Submission to Jurisdiction and Waiver...........................24

Schedules

Schedule I      -   Location, Chief Executive Office, Place Where Agreements
                    Are Maintained, Type Of Organization, Jurisdiction Of
                    Organization And Organizational Identification Number
Schedule II     -   Pledged Equity and Pledged Debt
Schedule III    -   Assigned Agreements
Schedule IV     -   Changes in Name, Location, Etc.
Schedule V      -   Account Collateral
Schedule VI     -   Securities Accounts
Schedule VII    -   Excluded Receivables
Schedule VIII   -   Other Deposit Accounts and Other Securities Accounts


Exhibits

Exhibit A       -   Form of Security Agreement Supplement
Exhibit B       -   Form of Account Control Agreement (Deposit
                    Account/Securities Account)
Exhibit C       -   Form of Consent and Agreement
Exhibit D       -   Form of Securities Account Control Agreement


                                    ii
<PAGE>

                               SECURITY AGREEMENT


     SECURITY AGREEMENT dated December 12, 2002 made by The AES Corporation, a
Delaware corporation (the "Borrower"), the other Persons listed on the
signature pages hereof and the Additional Grantors (as defined in Section 17)
(the Borrower, the Persons so listed and the Additional Grantors being,
collectively, the "Grantors"), to Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as corporate trustee
(together with any successor corporate trustee appointed pursuant to Article
VII of the Collateral Trust Agreement (as hereinafter defined), the "Corporate
Trustee"), and Bruce L. Bisson, an individual residing in the State of
Delaware, not in his individual capacity but solely as individual trustee
(together with any successor individual trustee appointed pursuant to
ArticleVII of the Collateral Trust Agreement, the "Individual Trustee"; and,
together with the Corporate Trustee, the "Collateral Trustees"), as trustees
under the Collateral Trust Agreement dated December 12, 2002 (as such agreement
may be amended, supplemented or otherwise modified hereafter from time to time,
the "Collateral Trust Agreement") among the Grantors and the Collateral
Trustees.

     PRELIMINARY STATEMENTS.

     (1) The Borrower has entered into an Amended and Restated Credit,
Reimbursement and Exchange Agreement dated as of December 12, 2002 (said
agreement, as it may hereafter be amended, amended and restated, supplemented
or otherwise modified from time to time, being the "Credit Agreement"; terms
defined therein and not otherwise defined herein shall have the meanings
specified therein) with the Subsidiary Guarantors party thereto, the Banks
party thereto (the "Banks"), the Revolving Fronting Banks and the Drax LOC
Fronting Bank party thereto, and Citicorp USA, Inc., as Administrative Agent
for the Bank Parties (in such capacity, the "Agent") and as Collateral Agent
for the Bank Parties (in such capacity, the "Credit Agreement Collateral
Agent"; and together with the Agent, the "Agents").

     (2) In order to induce the Banks, the Revolving Fronting Banks, the Drax
LOC Fronting Banks and the Agents to enter into the Credit Agreement, the
Grantors have agreed to grant a continuing security interest in and to the
Collateral (as hereinafter defined) to the Collateral Trustees for the ratable
benefit of the Lender Parties to secure the Obligations of the Borrower (the
"Loan Parties") under the Credit Agreement and the Notes issued pursuant
thereto.

     (3) The Borrower will enter into an Indenture to be dated as of December
13, 2002 (as amended, supplemented or otherwise modified and in effect on the
date hereof and as the same may hereafter be further amended, modified,
extended, renewed, replaced, restated or supplemented from time to time
pursuant to the terms thereof, the "Exchange Note Indenture") with Wells Fargo
Bank Minnesota, National Association (the "Exchange Note Trustee") to exchange
the Borrower's (i) 8.75% Senior Notes due 2002 and (ii) the 7.375% Remarketable
or Redeemable Securities due 2013 for the 10% Senior Secured Exchange Notes due
2005 to be issued on December 13, 2002 (the "Exchange Notes", and together with
the Exchange Note Indenture (only to the extent relating to the Exchange
Notes), the "Exchange Note Agreements").

<PAGE>

     (4) In order to induce the Exchange Note Trustee to enter into the
Exchange Note Indenture, the Grantors have agreed to grant a continuing
security interest in and to the Collateral to the Collateral Trustees for the
ratable benefit of the Exchange Note Holders to secure the Obligations of the
Borrower under the Exchange Note Agreements.

     (5) The Borrower has entered into a Sponsor Agreement dated as of March 7,
2000 (as amended, supplemented or otherwise modified and in effect on the date
hereof and as the same may hereafter be further amended, modified, extended,
renewed, replaced, restated or supplemented from time to time pursuant to the
terms thereof, the "Sponsor Agreement") with BankBoston, N.A., Nassau Branch,
as agent (the "Sul Agent"), pursuant to which the Borrower has agreed to
guarantee the obligations of AES Cayman Guaiba, Ltd. under a Credit Agreement
dated as of March 6, 2001 (as amended, supplemented or otherwise modified and
in effect on the date hereof and as the same may hereafter be further amended,
modified, extended, renewed, replaced, restated or supplemented from time to
time pursuant to the terms thereof, the "Sul Credit Agreement") with
BankBoston, N.A., Nassau Branch, Banc of America Securities, LLC,
Unibanco-Uniao de Bancos Brasilieros S.A. and WestLB AG, New York Branch and
the lenders named therein (collectively, the "Sul Guaranteed Parties"), in an
amount of up to a maximum aggregate amount of $50,000,000 (together with any
other agreement or instrument delivered in connection with such guaranty, the
"Sul Guarantee").

     (6) In order to satisfy certain conditions of the Sul Guarantee, the
Grantors have agreed to grant a continuing security interest in and to the
Collateral to the Collateral Trustees for the ratable benefit of the Sul
Guarantee Parties to secure the Obligations of the Borrower under the Sul
Guarantee.

     (7) The Borrower has entered into a Gas Transportation Agreement dated as
of July 21, 2000 with Florida Public Utilities Company pursuant to which Fleet
National Bank (the "Lake Worth LOC Bank") issued in favor of Florida Public
Utilities Company irrevocable standby letter of credit number 1S1280134
(together with the application and agreement therefor dated on or about July 6,
2001, the "Lake Worth Letter of Credit") in an aggregate amount not to exceed
$5,490,449.

     (8) In order to satisfy certain conditions under the Lake Worth Letter of
Credit, the Grantors have agreed to grant a continuing security interest in and
to the Collateral to the Collateral Trustees for the ratable benefit of the
Lake Worth LOC Bank to secure the obligation of Lake Worth Generation LLC
("Lake Worth"), a Subsidiary of the Borrower, to reimburse the Lake Worth LOC
Bank for any drawings under the Lake Worth Letter of Credit in an amount of up
to a maximum aggregate amount of $5,490,449.

     (9) It is a condition precedent to (a) the continuation of the Loans by
the Banks and the making of Revolving Credit Loans by the Revolving Credit Loan
Banks, (b) the issuance (or be deemed to have issued) of Revolving Letters of
Credit by the Revolving Fronting Banks, (c) the deemed issuance of the Drax
Letter of Credit and the making of Drax Loans in respect of Drax L/C Drawings
by the Drax LOC Fronting Banks, (d) the entry into the Secured Hedge Agreements
by the Hedge Banks from time to time, (e) the entry into the Secured Treasury
Management Service Agreements by a Bank Party or any Affiliate thereof, (f) the
entry into the Exchange Note Indenture by the Exchange Note Trustee, (g) the
satisfaction by


                                       2
<PAGE>

Borrower of its obligations under the Sul Guarantee and (h) the satisfaction by
Lake Worth of its obligations under the Lake Worth Letter of Credit, that the
Grantors shall have granted the assignment and security interest and made the
pledge and assignment contemplated by this Agreement.

     (10) The Collateral Trustees have agreed, pursuant to the terms of the
Collateral Trust Agreement, to accept the pledge and assignment, and the grant
of a security interest, under this Agreement as security for the Secured
Obligations (as defined in the Collateral Trust Agreement).

     (11) Each Grantor will derive substantial direct and indirect benefit from
the transactions contemplated by the Secured Agreements.

     (12) The Borrower has the security entitlements (the "Pledged Security
Entitlements") with respect to all the financial assets (the "Pledged Financial
Assets") credited from time to time to the Borrower's securities accounts (the
"Securities Accounts") set forth and as otherwise described in Schedule VI
hereto with the Persons named therein (each a "Securities Intermediary").

     (13) Each Grantor is the owner of the shares of stock or other Equity
Interests (the "Initial Pledged Equity") set forth opposite such Grantor's name
on and as otherwise described in Part I of Schedule II hereto and issued by the
Persons named therein and the Borrower is the owner of the indebtedness (the
"Initial Pledged Debt") set forth opposite the Borrower's name on and as
otherwise described in Part II of Schedule II hereto and issued by the obligors
named therein.

     (14) The Borrower has opened a Collateral Account (as defined in the
Collateral Trust Agreement), under the control of the Corporate Trustee and
subject to the terms of this Agreement and the other Shared Collateral
Documents.

     (15) The Borrower maintains deposit accounts (the "Deposit Accounts") with
banks, in the name of the Borrower and subject to the terms of this Agreement,
as described in Schedule V hereto.

     (16) Terms defined in the Credit Agreement or the Collateral Trust
Agreement and not otherwise defined in this Agreement are used in this
Agreement as defined in the Credit Agreement or the Collateral Trust Agreement.
Further, unless otherwise defined in this Agreement, the Credit Agreement or
the Collateral Trust Agreement, terms defined in Article 8 or 9 of the UCC (as
defined below) and/or in the Federal Book Entry Regulations (as defined below)
are used in this Agreement as such terms are defined in such Article 8 or 9
and/or the Federal Book Entry Regulations. "UCC" means the Uniform Commercial
Code as in effect, from time to time, in the State of New York; provided that,
if perfection or the effect of perfection or non-perfection or the priority of
any security interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than the State of New York, "UCC"
means the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority. The term "Federal Book
Entry Regulations" means (a) the


                                       3
<PAGE>

federal regulations contained in Subpart B ("Treasury/Reserve Automated Debt
Entry System (TRADES)") governing book-entry securities consisting of U.S.
Treasury bonds, notes and bills and Subpart D ("Additional Provisions") of 31
C.F.R. Part 357, 31 C.F.R. ss. 357.2, ss. 357.10 through ss. 357.14 and ss.
357.41 through ss. 357.44 and (b) to the extent substantially identical to the
federal regulations referred to in clause (a) above (as in effect from time to
time), the federal regulations governing other book-entry securities.

     NOW, THEREFORE, in consideration of the premises and in order to (1)
induce (a) the Banks to continue the Loans and the Revolving Credit Loan Banks
to make Revolving Credit Loans, (b) the Revolving Fronting Banks to issue (or
be deemed to have issued) Revolving Letters of Credit, (c) the Drax LOC
Fronting Bank to be deemed to have issued the Drax Letter of Credit and to make
Drax Loans in respect of Drax L/C Drawings, (d) the Hedge Banks to enter into
Secured Hedge Agreements from time to time, (e) the entry into the Secured
Treasury Management Service Agreements by a Bank Party or an Affiliate thereof
and, (f) the Exchange Note Trustee to enter into the Exchange Note Indenture
and (2) satisfy certain conditions of the Sul Guarantee and the Lake Worth
Letter of Credit, each Grantor hereby agrees with the Collateral Trustees for
their benefit and in trust for the ratable benefit of the Representatives and
the Secured Holders as follows:

     Section 1. Grant of Security. Each Grantor, in order to secure the Secured
Obligations, hereby assigns and pledges to the Collateral Trustees for their
benefit and in trust for the equitable and ratable benefit of the
Representatives and the Secured Holders, and hereby grants to the Collateral
Trustees for their benefit and in trust for the equitable and ratable benefit
of the Representatives and the Secured Holders, a lien on and security interest
in, such Grantor's right, title and interest in and to the following, in each
case, as to each type of property described below, whether now owned or
hereafter acquired by such Grantor, wherever located, and whether now or
hereafter existing or arising (collectively, the "Collateral"):

          (a) in the case of the Borrower, all accounts, chattel paper
     (including, without limitation, tangible chattel paper and electronic
     chattel paper), instruments (including, without limitation, promissory
     notes), general intangibles (including, without limitation, payment
     intangibles) and other obligations of any kind, whether or not arising out
     of or in connection with the sale or lease of goods or the rendering of
     services and whether or not earned by performance, and all rights now or
     hereafter existing in and to all supporting obligations and in and to all
     security agreements, mortgages, Liens, leases, letters of credit and other
     contracts securing or otherwise relating to the foregoing property, in
     each case only to the extent such accounts, chattel paper, instruments,
     general intangibles and other obligations are owed to the Borrower from a
     Subsidiary of the Borrower (other than the Subsidiaries listed on Schedule
     VII) (any and all of such accounts, chattel paper, instruments, general
     intangibles and other obligations, to the extent not referred to in clause
     (b), (c) or (d) below, being the "Receivables", and any and all such
     supporting obligations, security agreements, mortgages, Liens, leases,
     letters of credit and other contracts being the "Related Contracts");

          (b) the following (the "Security Collateral"):


                                       4
<PAGE>

               (i) the Initial Pledged Equity and the certificates, if any,
          representing the Initial Pledged Equity, and all dividends,
          distributions, return of capital, cash, instruments and other
          property from time to time received, receivable or otherwise
          distributed in respect of or in exchange for any or all of the
          Initial Pledged Equity and all subscription warrants, rights or
          options issued thereon or with respect thereto;

               (ii) in the case of the Borrower, the Initial Pledged Debt and
          the instruments, if any, evidencing the Initial Pledged Debt, and all
          interest, cash, instruments and other property from time to time
          received, receivable or otherwise distributed in respect of or in
          exchange for any or all of the Initial Pledged Debt;

               (iii) all additional shares of stock and other Equity Interests
          of or in any issuer of the Initial Pledged Equity or any successor
          entity from time to time acquired by such Grantor in any manner and
          all additional shares of stock or Equity Interests of or in any new
          direct Subsidiary (other than a Non-Pledged Subsidiary) of such
          Grantor formed or acquired by such Grantor in any manner after the
          date of this Agreement (such shares and other Equity Interests,
          together with the Initial Pledged Equity, being the "Pledged
          Equity"), and the certificates, if any, representing such additional
          shares or other Equity Interests, and all dividends, distributions,
          return of capital, cash, instruments and other property from time to
          time received, receivable or otherwise distributed in respect of or
          in exchange for any or all of such shares or other Equity Interests
          and all subscription warrants, rights or options issued thereon or
          with respect thereto;

               (iv) all additional indebtedness from time to time owed to the
          Borrower by any obligor of the Initial Pledged Debt or any successor
          entity (such indebtedness, together with the Initial Pledged Debt,
          being the "Pledged Debt") and the instruments, if any, evidencing
          such indebtedness, and all interest, cash, instruments and other
          property from time to time received, receivable or otherwise
          distributed in respect of or in exchange for any or all of such
          indebtedness;

               (v) in the case of the Borrower, the Securities Accounts, all
          Pledged Security Entitlements with respect to all Pledged Financial
          Assets from time to time credited to the Securities Accounts, and all
          Pledged Financial Assets, and all dividends, distributions, return of
          capital, interest, cash, instruments and other property from time to
          time received, receivable or otherwise distributed in respect of or
          in exchange for any or all of such Pledged Security Entitlements or
          such Pledged Financial Assets and all subscription warrants, rights
          or options issued thereon or with respect thereto; and

               (vi) all other investment property (including, without
          limitation, all (A) securities, whether certificated or
          uncertificated, (B) security entitlements and (C) securities
          accounts) in which the Borrower has now, or acquires from time to
          time hereafter, any right, title or interest in any manner, and the
          certificates or


                                       5
<PAGE>

          instruments, if any, representing or evidencing such investment
          property, and all dividends, distributions, return of capital,
          interest, distributions, value, cash, instruments and other property
          from time to time received, receivable or otherwise distributed in
          respect of or in exchange for any or all of such investment property
          and all subscription warrants, rights or options issued thereon or
          with respect thereto;

     provided, however, that if any time after the date of this Agreement the
     Borrower obtains the appropriate consents and regulatory approvals with
     respect to AES Oasis Finco Inc. and AES Oasis Holdco Inc., the Equity
     Interests in AES Oasis Finco, Inc. and AES Oasis Holdco, Inc. shall be
     pledged to the extent permissible at such time;

          (c) in the case of the Borrower each of the agreements listed on
     Schedule III hereto (collectively, the "Assigned Agreements"), including,
     without limitation, (i) all rights of the Borrower to receive moneys due
     and to become due under or pursuant to the Assigned Agreements, (ii) all
     rights of the Borrower to receive proceeds of any insurance, indemnity,
     warranty or guaranty with respect to the Assigned Agreements, (iii) claims
     of the Borrower for damages arising out of or for breach of or default
     under the Assigned Agreements and (iv) the right of the Borrower to
     terminate the Assigned Agreements, to perform thereunder and to compel
     performance and otherwise exercise all remedies thereunder (all such
     Collateral being the "Agreement Collateral");

          (d) the following (collectively, the "Account Collateral"):

               (i) in the case of the Borrower, the Deposit Accounts and all
          funds and financial assets from time to time credited thereto
          (including, without limitation, all Cash Equivalents, all interest,
          dividends, distributions, cash, instruments and other property from
          time to time received, receivable or otherwise distributed in respect
          of or in exchange for any or all of such funds and financial assets,
          and all certificates and instruments, if any, from time to time
          representing or evidencing the Deposit Accounts);

               (ii) all promissory notes, certificates of deposit, deposit
          accounts, checks and other instruments from time to time delivered to
          or otherwise possessed by the Collateral Trustees for or on behalf of
          the Borrower, including, without limitation, those delivered or
          possessed in substitution for or in addition to any or all of the
          then existing Account Collateral; and

               (iii) all interest, dividends, distributions, cash, instruments
          and other property from time to time received, receivable or
          otherwise distributed in respect of or in exchange for any or all of
          the then existing Account Collateral; and

          (e) all proceeds of, collateral for, income, and other payments now
     or hereafter due and payable with respect to, and supporting obligations
     relating to, any and all of the Collateral (including, without limitation,
     proceeds, collateral and supporting obligations that constitute property
     of the types described in clauses (a) through (d) of this Section 1 and
     this clause (e)) and, to the extent not otherwise included, all


                                       6
<PAGE>

     (A) payments under insurance (whether or not the Collateral Trustees are
     the loss payee thereof), or any indemnity, warranty or guaranty, payable
     by reason of loss or damage to or otherwise with respect to any of the
     foregoing Collateral, (B) tort claims, including, without limitation, all
     commercial tort claims and (C) cash.

     Notwithstanding the foregoing provisions of this Section 1 or of any other
Secured Agreement, the grant of a security interest as provided herein shall
not extend to, and the term "Collateral" shall not include, as to each Grantor,
more than 65% of the outstanding voting stock of any CFC (the "Excluded
Assets").

     Section 2. Security for Obligations. This Agreement secures the payment of
all of the Secured Obligations of the Borrower. Without limiting the generality
of the foregoing, this Agreement secures, as to each Grantor, the payment of
all amounts that constitute part of the Secured Obligations and would be owed
by such Grantor to any Secured Holder but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving any Grantor.

     Section 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in such Grantor's Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Collateral Trustees of any of the rights hereunder shall not release any
Grantor from any of its duties or obligations under the contracts and
agreements included in the Collateral and (c) none of the Collateral Trustees,
any Representative or any Secured Holder shall have any obligation or liability
under the contracts and agreements included in the Collateral by reason of this
Agreement or any other Secured Agreement, nor shall any of the Collateral
Trustees, any Representative or any Secured Holder be obligated to perform any
of the obligations or duties of any Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder or thereunder.

     Section 4. Delivery and Control of Security Collateral. (a) All
certificates or instruments representing or evidencing Security Collateral
shall be delivered to and held by or on behalf of the Collateral Trustees
pursuant to this Agreement and the Collateral Trust Agreement and 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 Trustees. The Collateral Trustees
shall have the right, at any time after the occurrence and during the
continuance of a Collateral Trust Agreement Default, in their discretion and
without notice to any Grantor, to transfer to or to register in the name of the
Collateral Trustees or any of their nominees any or all of the Security
Collateral, subject only to the revocable rights specified in Section 10, and
subject to the Remedies Limitations (as defined in Section 7(i)). In addition,
the Collateral Trustees shall have the right at any time, after the occurrence
and during the continuance of a Collateral Trust Agreement Default, to exchange
certificates or instruments representing or evidencing Security Collateral for
certificates or instruments of smaller or larger denominations. Also, the
Collateral Trustee shall have the right at any time, after the occurrence and
during the continuance of a Collateral Trust Agreement Default, to convert
Security Collateral consisting of financial assets credited to the Securities
Accounts to Security Collateral consisting of financial assets held directly by
the Collateral Trustee.


                                       7
<PAGE>

     (b) With respect to any Security Collateral in which any Grantor has any
right, title or interest and that constitutes an uncertificated security,
subject to the Remedies Limitations, such Grantor will cause the issuer thereof
either (i) to register the Collateral Trustees as the registered owners of such
security or (ii) to agree in an authenticated record with such Grantor and the
Collateral Trustees that such issuer will comply with instructions with respect
to such security originated by the Collateral Trustees without further consent
of such Grantor, such authenticated record to be in form and substance
satisfactory to the Collateral Trustees. With respect to any Security
Collateral in which any Grantor has any right, title or interest and that is
not an uncertificated security, upon the request of the Collateral Trustees,
such Grantor will notify each such issuer of Pledged Equity that such Pledged
Equity is subject to the security interest granted hereunder and the Borrower
will notify each such issuer of Pledged Debt that such Pledged Debt is subject
to the security interest granted hereunder.

     (c) With respect to any Security Collateral in which the Borrower has any
right, title or interest and that constitutes a security entitlement in which
the Collateral Trustees are not the entitlement holders, the Borrower will
cause the securities intermediary with respect to such security entitlement
either (i) to identify in its records the Collateral Trustees as the
entitlement holders of such security entitlement against such securities
intermediary or (ii) to agree in an authenticated record with the Borrower and
the Collateral Trustees that such securities intermediary will comply with
entitlement orders (that is, notifications communicated to such securities
intermediary directing transfer or redemption of the financial asset to which
such Grantor has a security entitlement) originated by the Collateral Trustees
upon the occurrence and during the continuance of a Collateral Trust Agreement
Default, without further consent of such Grantor, such authenticated record to
be in substantially the form of Exhibit D hereto or otherwise in form and
substance satisfactory to the Collateral Trustees (such agreement being a
"Securities Account Control Agreement").

     (d) The Borrower agrees that it will not add any securities intermediary
that maintains a securities account for the Borrower or open any new securities
account with any then existing Securities Intermediary unless (i) the
Collateral Trustees and the Required Representatives shall have received at
least 10 days' prior written notice of such additional securities intermediary
or such new securities account and (ii) the Collateral Trustees shall have
received, in the case of a Securities Account that is maintained by a
Securities Intermediary that is not the Corporate Trustee, a Securities Account
Control Agreement authenticated by such new securities intermediary and the
Borrower, or a supplement to an existing Securities Account Control Agreement
with such then existing Securities Intermediary, covering such new securities
account (and, upon the receipt by the Collateral Trustees of such Securities
Account Control Agreement or supplement, Schedule VI hereto shall be
automatically amended to include such new Securities Account). The Borrower
agrees that it will not terminate any Securities Account, except that the
Borrower may terminate a Securities Account, if it gives the Collateral
Trustees and the Required Representatives at least 10 days' prior written
notice of such termination (and, upon such termination, Schedule VI hereto
shall be automatically amended to delete such Securities Intermediary and
Securities Account). The Borrower will not change or add any securities
intermediary that maintains any securities account in which any of the
Collateral is credited or carried, or change or add any such securities
account, in each case without first complying with the provisions of this
Section 4 in order to continuously perfect the security interest granted
hereunder in such Collateral.


                                       8
<PAGE>

     (e) The Borrower shall, with respect to each Securities Account set forth
on Part B of Schedule VIII hereto (the "Other Securities Accounts"), within 7
days of the date of this Agreement (x) terminate such Other Securities Account,
at which time Schedule VI and Part B of Schedule VIII hereto shall be
automatically amended to delete such Securities Account and Other Securities
Account, respectively or (y) enter into a Securities Account Control Agreement
with respect to such Other Securities Account, at which time Part B of Schedule
VIII shall be automatically amended to delete such Other Securities Account.

     (f) Upon any termination by the Borrower of any Securities Account by the
Borrower, or any Securities Intermediary with respect thereto, the Borrower
will immediately transfer all funds and property held in such terminated
Securities Account to another Securities Account listed in Schedule VI.

     (g) Upon the occurrence and during the continuance of a Collateral Trust
Agreement Default, the Collateral Trustees shall have the right to originate a
Notice of Exclusive Control (as such term is defined in the applicable
Securities Account Control Agreement) with respect to any Securities Account
and thereafter shall have the sole and exclusive right to direct the
disposition of the funds and assets with respect to any such Securities
Account.

     Section 5. Maintaining the Account Collateral. So long as any of the
Secured Obligations remain outstanding, any Revolving Letter of Credit or the
Drax Letter of Credit shall be outstanding, or any Revolving Credit Loan Bank
has a Revolving Credit Loan Commitment:

          (a) The Borrower will maintain all Account Collateral only with the
     Corporate Trustee or with banks (the "Pledged Account Banks") that have
     agreed, in a record authenticated by the Borrower, the Collateral Trustees
     and the Pledged Account Banks, to (i) comply with instructions originated
     by the Collateral Trustees directing the disposition of funds in the
     Account Collateral without the further consent of the Borrower upon the
     receipt by the applicable Pledge Account Bank of a Notice of Exclusive
     Control (as defined in the applicable Account Control Agreement referred
     to below) and (ii) waive or subordinate in favor of the Collateral
     Trustees all claims of the Pledged Account Banks (including, without
     limitation, claims by way of a security interest, lien or right of setoff
     or right of recoupment but subject to such exceptions as may be agreed) to
     the Account Collateral, which authenticated record shall be substantially
     in the form of Exhibit B hereto, or shall otherwise be in form and
     substance satisfactory to the Collateral Trustees (the "Account Control
     Agreement").

          (b) The Borrower will cause each Person obligated at any time to make
     any payment to the Borrower for any reason (an "Obligor") to make such
     payment to a Deposit Account.

          (c) The Borrower agrees that it will not add any bank that maintains
     a deposit account for the Borrower or open any new deposit account with
     any then existing Pledged Account Bank unless (i) the Collateral Trustees
     and the Required Representatives shall have received at least 10 days'
     prior written notice of such additional bank or such new deposit account
     and (ii) the Collateral Trustees shall have received, in the case of a
     bank or Pledged Account Bank that is not the Corporate


                                       9
<PAGE>

     Trustee, an Account Control Agreement authenticated by such new bank and
     the Borrower, or a supplement to an existing Account Control Agreement
     with such then existing Pledged Account Bank, covering such new deposit
     account (and, upon the receipt by the Collateral Trustees of such Account
     Control Agreement or supplement, Schedule V hereto shall be automatically
     amended to include such new Deposit Account). The Borrower agrees that it
     will not terminate any bank as a Pledged Account Bank or terminate any
     Account Collateral, except that the Borrower may terminate a Deposit
     Account, and terminate a bank as a Pledged Account Bank with respect to a
     Deposit Account, if it gives the Collateral Trustees and the Required
     Representatives at least 10 days' prior written notice of such termination
     (and, upon such termination, Schedule V hereto shall be automatically
     amended to delete such Pledged Account Bank and Deposit Account). The
     Borrower will not change or add any bank that maintains any deposit
     account in which any of the Account Collateral is credited or carried, or
     change or add any such deposit account, in each case without first
     complying with the provisions of this Section 5 in order to continuously
     perfect the security interest granted hereunder in such Account
     Collateral.

          (d) Upon any termination by the Borrower of any Deposit Account by
     the Borrower, or any Pledged Account Bank with respect thereto, the
     Borrower will immediately (i) transfer all funds and property held in such
     terminated Deposit Account to another Deposit Account listed in Schedule V
     and (ii) notify all Obligors that were making payments to such Deposit
     Account to make all future payments to another Deposit Account listed in
     Schedule V hereto, in each case so that the Collateral Trustees shall have
     a continuously perfected security interest in such Account Collateral,
     funds and property.

          (e) The Borrower shall, with respect to each Deposit Account set
     forth on Part A of Schedule VIII hereto (the "Other Deposit Accounts"),
     within 7 days of the date of this Agreement (x) terminate such Other
     Deposit Account, at which time Schedule V and Part A of Schedule VIII
     hereto shall be automatically amended to delete such Deposit Account and
     Other Deposit Account, respectively or (y) enter into an Account Control
     Agreement with respect to such Other Deposit Account, at which time Part A
     of Schedule VIII shall be automatically amended to delete such Other
     Deposit Account.

          (f) Upon the occurrence and during the continuance of a Collateral
     Trust Agreement Default, the Collateral Trustees shall have the right to
     originate a Notice of Exclusive Control (as such term is defined in the
     applicable Account Control Agreement) with respect to any Deposit Account
     and thereafter shall have the sole and exclusive right at such time to
     direct the disposition of funds with respect to the applicable the Deposit
     Accounts.

     Section 6. Maintaining Letter-of-Credit Rights. So long as any of the
Secured Obligations remain outstanding, any Revolving Letter of Credit or the
Drax Letter of Credit shall be outstanding, or any Revolving Credit Loan Bank
has a Revolving Credit Loan Commitment, each Grantor will maintain all
letter-of-credit rights assigned to the Collateral Trustees so that the
Collateral Trustees have control of the letter-of-credit rights in the manner
specified in Section 9-107 of the UCC.


                                      10
<PAGE>

     Section 7. Representations and Warranties. Each Grantor represents and
warrants as follows:

          (a) Such Grantor's exact legal name, as defined in Section 9-503(a)
     of the UCC, is correctly set forth in Schedule I hereto. Such Grantor is
     located (within the meaning of Section 9-307 of the UCC) in the state or
     jurisdiction set forth on Schedule I hereto. In the case of the Borrower,
     the Borrower has its chief executive office and the office in which it
     maintains the original copies of each Assigned Agreement and Related
     Contract to which the Borrower is a party and all originals of all chattel
     paper that evidence Receivables of the Borrower, in the state or
     jurisdiction set forth in Schedule I hereto. The information set forth in
     Schedule I hereto with respect to such Grantor is true and accurate in all
     respects. Such Grantor has not previously changed its name, location,
     chief executive office, place where it maintains its agreements, type of
     organization, jurisdiction of organization or organizational
     identification number from those set forth in Schedule I hereto except as
     disclosed in Schedule IV hereto.

          (b) Such Grantor is the legal and beneficial owner of the Collateral
     of such Grantor free and clear of any Lien, claim, option or right of
     others, except for the security interest created under this Agreement or
     permitted under the Credit Agreement. No effective financing statement or
     other instrument similar in effect covering all or any part of such
     Collateral or listing such Grantor or any trade name of such Grantor as
     debtor is on file in any recording office, except such as may have been
     filed in favor of the Collateral Trustees relating to the Secured
     Agreements.

          (c) The Pledged Equity pledged by such Grantor hereunder has been
     duly authorized and validly issued and is fully paid and non-assessable.
     With respect to the Pledged Equity that is an uncertificated security,
     subject to the Remedies Limitations, such Grantor has caused the issuer
     thereof either (i) to register the Collateral Trustees as the registered
     owners of such security or (ii) to agree in an authenticated record with
     such Grantor and the Collateral Trustees that such issuer will comply with
     instructions with respect to such security originated by the Collateral
     Trustees without further consent of such Grantor. If such Grantor is an
     issuer of Pledged Equity, such Grantor confirms that it has received
     notice of such security interest. In the case of the Borrower, the Pledged
     Debt pledged by the Borrower hereunder has been duly authorized,
     authenticated or issued and delivered, is the legal, valid and binding
     obligation of the issuers thereof, subject to applicable bankruptcy,
     insolvency, reorganization, moratorium or other laws affecting creditors'
     rights generally and subject to general principles of equity, regardless
     of whether considered in a proceeding in equity or at law, is evidenced by
     one or more promissory notes (which notes have been delivered to the
     Collateral Trustees) and as of the date hereof is not in default. All
     Security Collateral consisting of certificated securities and instruments
     have been delivered to the Collateral Trustees.

          (d) The Initial Pledged Equity pledged by such Grantor constitutes
     the percentage of the issued and outstanding Equity Interests of the
     issuers thereof indicated on Schedule II hereto. In the case of the
     Borrower, the Initial Pledged Debt constitutes all of the outstanding
     indebtedness owed to the Borrower by the issuers thereof and is
     outstanding in the principal amount indicated on Schedule II hereto.


                                      11
<PAGE>

          (e) In the case of the Borrower, the Assigned Agreements to which the
     Borrower is a party, true and complete copies of which have been furnished
     to the Collateral Trustees, have been duly authorized, executed and
     delivered by all parties thereto, have not been amended, amended and
     restated, supplemented or otherwise modified, are in full force and effect
     and are binding upon and enforceable against the Borrower, and to the
     Borrower's knowledge, all parties thereto in accordance with their terms,
     subject to applicable bankruptcy, insolvency, reorganization, moratorium
     or other laws affecting creditors' rights generally and subject to general
     principles of equity, regardless of whether considered in a proceeding in
     equity or at law. There exists no default as of the date hereof under any
     Assigned Agreement to which the Borrower is a party by any party thereto.
     Other than the Borrower, each party to the Assigned Agreements listed on
     Schedule III hereto which requires such parties' consent for assignment
     and to which the Borrower is a party has executed and delivered to the
     Borrower a consent, in substantially the form of Exhibit C hereto or
     otherwise in form and substance satisfactory to the Collateral Trustees,
     to the assignment of the Agreement Collateral to the Collateral Trustees
     pursuant to this Agreement.

          (f) In the case of the Borrower, the Borrower has no deposit
     accounts, other than the Account Collateral listed on Schedule V hereto,
     as such Schedule V may be amended from time to time pursuant to Section
     5(d), and legal, binding and enforceable Account Control Agreements are in
     effect for each deposit account that constitutes Account Collateral (other
     than Account Collateral consisting of Deposit Accounts maintained with the
     Corporate Trustees or the Other Deposit Accounts), except to the extent
     such Account Control Agreements are not required by Section 5(a). The
     Borrower has instructed all existing Obligors to make all payments to a
     Deposit Account.

          (g) In the case of the Borrower, the Borrower has no deposit
     accounts, other than the Other Deposit Accounts listed on Part A of
     Schedule VIII hereto, as Part A of Schedule VIII hereto may be amended
     from time to time pursuant to Section 5(d), which are not the subject of a
     legal, binding and enforceable Account Control Agreement.

          (h) In the case of the Borrower, the Borrower has no securities
     accounts, other than the Securities Accounts listed on Schedule VI hereto,
     as such Schedule VI may be amended from time to time pursuant to Section
     4(d), and legal, binding and enforceable Securities Account Control
     Agreements are in effect for each securities account that constitutes
     Security Collateral (other than Security Collateral maintained with the
     Corporate Trustee in the Collateral Account or the Other Securities
     Accounts), except to the extent such Securities Account Control Agreements
     are not required by Section 4(c).

          (i) In the case of the Borrower, the Borrower has no securities
     accounts, other than the Other Securities Accounts listed on Part B of
     Schedule VIII hereto, as Part B of Schedule VIII hereto may be amended
     from time to time pursuant to Section 4(e), which are not the subject of a
     legal, binding and enforceable Securities Account Control Agreement.

          (j) All filings and other actions (including, without limitation,
     actions necessary to obtain control of Collateral as provided in Sections
     9-104, 9-105, 9-106 and


                                      12
<PAGE>

     9-107 of the UCC) necessary to perfect the security interest in the
     Collateral of such Grantor created under this Agreement have been duly
     made or taken and are in full force and effect, and this Agreement creates
     in favor of the Collateral Trustees for the benefit of the Representatives
     and the Secured Holders a valid and, together with such filings and other
     actions, perfected first priority security interest in the Collateral of
     such Grantor, securing the payment of the Secured Obligations.

          (k) (i) The execution, delivery, recordation, filing or performance
     by such Grantor of this Agreement, (ii) the grant by such Grantor of the
     Liens granted by it pursuant to this Agreement, (iii) the perfection or
     maintenance of the Liens created under this Agreement (including the first
     priority nature thereof), (iv) the exercise by the Collateral Trustees of
     their voting or other rights provided for in this Agreement and (v) the
     exercise by the Collateral Trustees of their remedies in respect of the
     Collateral pursuant to this Agreement and the other Shared Collateral
     Documents, will not require any consent, approval, authorization or other
     order of, or any notice to or filing with, any court, regulatory body,
     administrative agency or other governmental body (other (x) than such
     filings required in order to perfect any security interest granted by this
     Agreement, (y) the actions described in Section 4 with respect to the
     Security Collateral, which actions have been taken and are in full force
     and effect and (z) any other consent, approval, authorization, order,
     notice or filing, the failure of which to make or obtain could not
     reasonably be expected to have a Material Adverse Effect), and will not
     conflict with or constitute a breach of any of the terms or provisions of,
     or a default under, the charter or by-laws of the Borrower or any of the
     Pledged Subsidiaries or any agreement, indenture or other instrument to
     which the Borrower or any of the Pledged Subsidiaries is a party or by
     which the Borrower or any of the Pledged Subsidiaries or any of the
     Borrower's or any of the Pledged Subsidiaries' respective property is
     bound, or violate or conflict with any laws, administrative regulations or
     rulings or court decrees applicable to the Borrower, any of the Pledged
     Subsidiaries or the Borrower's or any of the Pledged Subsidiaries'
     respective property, except for any violation, breach, conflict or default
     that could not reasonably be expected to have a Material Adverse Effect
     and except that in each of the foregoing cases, (A) any foreclosure or
     other exercise of remedies by the Collateral Trustees will require
     additional approvals and consents that have not been obtained from foreign
     and domestic regulators and from lenders to, and suppliers, customers or
     other contractual counterparties of one or more Subsidiaries, and the
     failure to obtain such approval or consent could result in a default
     under, or breach of, agreements or other legal obligations of such
     Subsidiary and (B) disposition of any of the Security Collateral may be
     subject to the receipt of regulatory approvals and to laws affecting the
     offering and sale of securities generally (the exceptions described in the
     foregoing clauses (A) and (B) are referred to as "Remedies Limitations").

     Section 8. Further Assurances. (a) Subject to the Remedies Limitations,
each Grantor agrees that from time to time, at the expense of such Grantor,
such Grantor will promptly execute and deliver, or otherwise authenticate, all
further instruments and documents, and take all further action that may be
necessary or desirable, or that the Collateral Trustees may request and that is
within the power of such Grantor, consistent with its currently existing
contractual and other legal obligations, in order to perfect any pledge,
assignment or security interest granted or purported to be granted by such
Grantor hereunder or to enable the Collateral


                                      13
<PAGE>

Trustees to exercise and enforce their rights and remedies hereunder and under
the other Shared Collateral Documents with respect to any Collateral of such
Grantor. Without limiting the generality of the foregoing, each Grantor will
promptly with respect to Collateral of such Grantor: (i) mark conspicuously
each chattel paper included in Receivables, each Related Contract and, at the
request of the Collateral Trustees, each of its records pertaining to such
Collateral with a legend, in form and substance satisfactory to the Collateral
Trustees, indicating that such chattel paper, Related Contract, Assigned
Agreement or Collateral is subject to the security interest granted hereby;
provided, however, that no such legend shall be required if such Collateral is
delivered to the Collateral Trustees pursuant to clause (ii) below, (ii) if any
such Collateral shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Collateral Trustees hereunder such
note or instrument or chattel paper duly indorsed or accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to the Collateral Trustees, (iii) execute or authenticate and file
such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as the
Collateral Trustees may request, in order to perfect the security interest
granted or purported to be granted by such Grantor hereunder, (iv) deliver and
pledge to the Collateral Trustees for the ratable benefit of the
Representatives and the Secured Holders certificates representing Security
Collateral that constitutes certificated securities, accompanied by undated
stock or bond powers executed in blank, (v) take all action necessary to ensure
that the Collateral Trustees have control of Collateral consisting of deposit
accounts, investment property, letter-of-credit rights and transferable records
as provided in Sections 9-104, 9-105, 9-106 and 9-107 of the UCC, and (vi)
deliver to the Collateral Trustees evidence that all other action that the
Collateral Trustees may deem reasonably necessary or desirable in order to
perfect the security interest created by such Grantor under this Agreement and
the other Shared Collateral Documents has been taken.

     (b) (i) Each Grantor hereby authorizes the Collateral Trustees to file one
or more financing or continuation statements relating to all or any part of the
Collateral of such Grantor, and amendments thereto to correct the name and
address of the Grantor or the Collateral Trustees or to correct the description
of the Collateral contained therein to be consistent with the description of
the Collateral contained in this Agreement, in each case without the signature
of such Grantor where permitted by law and which shall be filed by the
Collateral Trustees upon the receipt of an instruction letter from the Required
Representatives requesting the taking of such action and attaching the form of
financing statement. A photocopy or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

     (ii) Each Grantor ratifies its authorization for the Collateral Trustees
to have filed such financing statements, continuation statements or amendments,
to the extent such amendments are permitted pursuant to clause (i) above, filed
prior to the date hereof.

     (c) Each Grantor will furnish to the Collateral Trustees from time to time
statements and schedules further identifying and describing the Collateral of
such Grantor and such other reports in connection with such Collateral as the
Collateral Trustees may reasonably request, all in reasonable detail.


                                      14
<PAGE>

     Section 9. Post-Closing Changes; Collections on Assigned Agreements,
Receivables and Related Contracts. (a) No Grantor will change its name, type of
organization, jurisdiction of organization, organizational identification
number or location from those set forth in Section 7(a) of this Agreement
without first giving at least 30 days' prior written notice to the Collateral
Trustees and taking all action required by the Collateral Trustees for the
purpose of perfecting or protecting the security interest granted by this
Agreement. The Borrower will not change the location of the place where it
keeps the originals of the Assigned Agreements and Related Contracts to which
the Borrower is a party and all originals of all chattel paper that evidence
Receivables of the Borrower from the locations therefor specified in Section
7(a) without first giving the Collateral Trustees 30 days' prior written notice
of such change. No Grantor will become bound by a security agreement
authenticated by another Person (determined as provided in Section 9-203(d) of
the UCC) without giving the Collateral Trustees 30 days' prior written notice
thereof and taking all action required by the Collateral Trustees to ensure
that the perfection and first priority nature of the Collateral Trustees'
security interest in the Collateral will be maintained. Each Grantor will hold
and preserve its records relating to the Collateral, including, without
limitation, the Assigned Agreements and Related Contracts, and will permit
representatives of the Collateral Trustees at any time during normal business
hours to inspect and make abstracts from such records and other documents. If
the Grantor does not have an organizational identification number and later
obtains one, it will forthwith notify the Collateral Trustees of such
organizational identification number.

     (b) Except as otherwise provided in this subsection (b), each Grantor will
continue to collect, at its own expense, all amounts due or to become due such
Grantor under the Assigned Agreements, Receivables and Related Contracts. In
connection with such collections, such Grantor may take (and, at the Collateral
Trustees' direction, will take) such action as such Grantor may deem necessary
or advisable to enforce collection of the Assigned Agreements, Receivables and
Related Contracts; provided, however, that the Collateral Trustees shall have
the right at any time, upon the occurrence and during the continuance of an
Collateral Trust Agreement Default and upon written notice to such Grantor of
its intention to do so, to notify the Obligors under any Assigned Agreements,
Receivables and Related Contracts of the assignment of such Assigned
Agreements, Receivables and Related Contracts to the Collateral Trustees and to
direct such Obligors to make payment of all amounts due or to become due to
such Grantor thereunder directly to the Collateral Trustees and, upon such
notification and at the expense of such Grantor, to enforce collection of any
such Assigned Agreements, Receivables and Related Contracts, to adjust, settle
or compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done, and to otherwise exercise all rights
with respect to such Assigned Agreements, Receivables and Related Contracts,
including, without limitation, those set forth set forth in Section 9-607 of
the UCC. After receipt by any Grantor of the notice from the Collateral
Trustees referred to in the proviso to the preceding sentence, (i) all amounts
and proceeds (including, without limitation, instruments) received by such
Grantor in respect of the Assigned Agreements, Receivables and Related
Contracts of such Grantor shall be received in trust for the benefit of the
Collateral Trustees hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over to the Collateral Trustees in the same
form as so received (with any necessary indorsement) to be held as cash
collateral in the Collateral Account and either (A) released to such Grantor so
long as no Collateral Trust Agreement Default shall have occurred and be
continuing or (B) upon the occurrence and during the continuance of a
Collateral Trust Agreement Default, the Collateral Trustees shall, upon


                                      15
<PAGE>

receipt of a written notice from the Required Representatives, apply such cash
collateral as provided in the Collateral Trust Agreement and (ii) such Grantor
will not adjust, settle or compromise the amount or payment of any Receivable
or amount due on any Assigned Agreement or Related Contract, release wholly or
partly any Obligor thereof, or allow any credit or discount thereon. No Grantor
will permit or consent to the subordination of its right to payment under any
of the Assigned Agreements, Receivables and Related Contracts to any other
indebtedness or obligations of the Obligor thereof.

     Section 10. Voting Rights; Dividends; Etc. (a) So long as no Collateral
Trust Agreement Default shall have occurred and be continuing:

          (i) Each Grantor shall be entitled to exercise any and all voting and
     other consensual rights pertaining to the Security Collateral of such
     Grantor or any part thereof for any purpose; provided, however, that such
     Grantor will not exercise or refrain from exercising any such right if
     such action would have a material adverse effect on the value of the
     Security Collateral or any part thereof.

          (ii) Each Grantor shall be entitled to receive and retain any and all
     dividends, interest and other distributions paid in respect of the
     Security Collateral of such Grantor if and to the extent that the payment
     thereof is not otherwise prohibited by the terms of the Applicable
     Agreements; provided, however, that any and all dividends, interest and
     other distributions paid or payable other than in cash in respect of, and
     instruments and other property received, receivable or otherwise
     distributed in respect of, or in exchange for, any Security Collateral,
     shall be, and shall be forthwith delivered to the Collateral Trustees to
     hold as Security Collateral and shall, if received by such Grantor, be
     received in trust for the benefit of the Collateral Trustees, be
     segregated from the other property or funds of such Grantor and be
     forthwith delivered to the Collateral Trustees as Security Collateral in
     the same form as so received (with any necessary indorsement).

          (iii) The Collateral Trustees will execute and deliver (or cause to
     be executed and delivered) to each Grantor all such proxies and other
     instruments as such Grantor may reasonably request for the purpose of
     enabling such Grantor to exercise the voting and other rights that it is
     entitled to exercise pursuant to paragraph (i) above and to receive the
     dividends or interest payments that it is authorized to receive and retain
     pursuant to paragraph (ii) above.

     (b) Upon the occurrence and during the continuance of a Collateral Trust
Agreement Default:

          (i) All rights of each Grantor (x) to exercise or refrain from
     exercising the voting and other consensual rights that it would otherwise
     be entitled to exercise pursuant to Section 10(a)(i) shall, upon notice to
     such Grantor by the Collateral Trustees, cease and (y) to receive the
     dividends, interest and other distributions that it would otherwise be
     authorized to receive and retain pursuant to Section 10(a)(ii) shall
     automatically cease, and, subject to the Remedies Limitations, all such
     rights shall thereupon become vested in the Collateral Trustees, who shall
     thereupon have the sole right to exercise or refrain from exercising such
     voting and other consensual rights and to receive and hold as


                                      16
<PAGE>

     Collateral such dividends, interest and other distributions and shall
     deposit the same into the Collateral Account; and

          (ii) All dividends, interest and other distributions that are
     received by any Grantor contrary to the provisions of paragraph (i) of
     this Section 10(b) shall be received in trust for the benefit of the
     Collateral Trustees, shall be segregated from other funds of such Grantor
     and shall be forthwith paid over to the Collateral Trustees to be
     deposited into the Collateral Account.

     Section 11. As to the Assigned Agreements. (a) The Borrower will at its
expense:

          (i) perform and observe all terms and provisions of the Assigned
     Agreements to be performed or observed by it, maintain the Assigned
     Agreements to which it is a party in full force and effect, enforce the
     Assigned Agreements to which it is a party in accordance with the terms
     thereof and take all such action to such end as may be requested from time
     to time by the Collateral Trustees; and

          (ii) furnish to the Collateral Trustees promptly upon receipt thereof
     copies of all notices, requests and other documents received by the
     Borrower under or pursuant to the Assigned Agreements to which it is a
     party, and from time to time (A) furnish to the Collateral Trustees such
     information and reports regarding the Assigned Agreements and such other
     Collateral of the Borrower as the Collateral Trustees may reasonably
     request and (B) upon request of the Collateral Trustees make to each other
     party to any Assigned Agreement to which it is a party such demands and
     requests for information and reports or for action as the Borrower is
     entitled to make thereunder.

     (b) The Borrower agrees that it will not, except to the extent otherwise
permitted under the Applicable Agreements:

          (i) cancel or terminate any Assigned Agreement to which it is a party
     or consent to or accept any cancellation or termination thereof;

          (ii) amend, amend and restate, supplement or otherwise modify any
     such Assigned Agreement or give any consent, waiver or approval
     thereunder;

          (iii) waive any default under or breach of any such Assigned
     Agreement; or

          (iv) take any other action in connection with any such Assigned
     Agreement that would impair the value of the interests or rights of the
     Borrower thereunder or that would impair the interests or rights of any
     Applicable Holder.

     Section 12. Payments Under the Assigned Agreements; Letters of Credit. (a)
The Borrower agrees, and has effectively so instructed each other party to each
Assigned Agreement to which it is a party, that all payments due or to become
due under or in connection with such Assigned Agreement will be made directly
to a Deposit Account.


                                      17
<PAGE>

     (b) Upon the occurrence of a Collateral Trust Agreement Default, each
Grantor will, promptly upon request by the Collateral Trustees, (i) notify (and
such Grantor hereby authorizes the Collateral Trustees to notify) the issuer
and each nominated person with respect to each of the Related Contracts
consisting of letters of credit that the proceeds thereof have been assigned to
the Collateral Trustees hereunder and any payments due or to become due in
respect thereof are to be made directly to the Collateral Trustees or their
designee and (ii) arrange for the Collateral Trustees to become the transferee
beneficiaries of letters of credit.

     Section 13. Transfers and Other Liens; Additional Shares. (a) Each Grantor
agrees that it will not (i) sell, assign or otherwise dispose of, or grant any
option with respect to, any of the Collateral, other than sales, assignments
and other dispositions of Collateral, and options relating to Collateral,
permitted under the terms of the Applicable Agreements or (ii) create or suffer
to exist any Lien upon or with respect to any of the Collateral of such Grantor
except for the pledge, assignment and security interest created under this
Agreement, and permitted under the Credit Agreement or any other Applicable
Agreements.

     (b) Each Grantor agrees that it will (i) cause each issuer of the Pledged
Equity pledged by such Grantor not to issue any Equity Interests or other
securities in substitution for the Pledged Equity issued by such issuer, except
to such Grantor and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional Equity Interests or
other securities of each issuer of the Pledged Equity issued to such Grantor.

     Section 14. Collateral Trustees May Perform. If any Grantor fails to
perform any agreement contained herein, the Collateral Trustees may, but
without any obligation to do so and without notice, themselves perform, or
cause performance of, such agreement, and the expenses of the Collateral
Trustees incurred in connection therewith shall be payable by such Grantor
under Section 16.

     Section 15. Remedies. If a Collateral Trust Agreement Default shall have
occurred and be continuing:

          (a) Subject to the Remedies Limitations, the Collateral Trustees may
     with the consent of the Required Representatives, and shall at the request
     of the Required Representatives, exercise in respect of the Collateral, in
     addition to other rights and remedies provided for herein or otherwise
     available to it, all the rights and remedies of a secured party upon
     default under the UCC (whether or not the UCC applies to the affected
     Collateral) and also may: (i) require each Grantor to, and each Grantor
     hereby agrees that it will at its expense and upon request of the
     Collateral Trustees forthwith, assemble all or part of the Collateral as
     directed by the Collateral Trustees and make it available to the
     Collateral Trustees at a place and time to be designated by the Collateral
     Trustees that is reasonably convenient to all parties, (ii) without notice
     except as specified below, sell the Collateral or any part thereof in one
     or more parcels at public or private sale, at any of the Collateral
     Trustees' offices or elsewhere, for cash, on credit or for future
     delivery, and upon such other terms as the Collateral Trustees may deem
     commercially reasonable, and (iii) exercise any and all rights and
     remedies of any of the Grantors under or in connection with the
     Collateral, or otherwise in respect of the Collateral, including, without
     limitation, (A) any and all rights of such Grantor to demand


                                      18
<PAGE>

     or otherwise require payment of any amount under, or performance of any
     provision of, the Assigned Agreements, the Receivables, the Related
     Contracts and the other Collateral, (B) withdraw, or cause or direct the
     withdrawal, of all funds with respect to the Account Collateral and (C)
     exercise all other rights and remedies with respect to the Assigned
     Agreements, the Receivables, the Related Contracts and the other
     Collateral, including, without limitation, those set forth in Section
     9-607 of the UCC. Each Grantor agrees that, to the extent notice of sale
     shall be required by law, at least ten days' notice to such Grantor of the
     time and place of any public sale or the time after which any private sale
     is to be made shall constitute reasonable notification. The Collateral
     Trustees shall not be obligated to make any sale of Collateral regardless
     of notice of sale having been given. The Collateral Trustees may adjourn
     any public or private sale from time to time by announcement at the time
     and place fixed therefor, and such sale may, without further notice, be
     made at the time and place to which it was so adjourned.

          (b) Any cash held by or on behalf of the Collateral Trustees and all
     cash proceeds received by or on behalf of the Collateral Trustees in
     respect of any sale of, collection from, or other realization upon all or
     any part of the Collateral may, in the discretion of the Collateral
     Trustees, be held by the Collateral Trustees as collateral for, and/or
     then or at any time thereafter applied (after payment of any amounts
     payable to the Collateral Trustees pursuant to Section 16) in whole or in
     part by the Collateral Trustees for the ratable benefit of the
     Representatives and the Secured Holders against, all or any part of the
     Secured Obligations, in accordance with the terms of the Collateral Trust
     Agreement.

          (c) All payments received by the Borrower under or in connection with
     any Assigned Agreement or otherwise in respect of the Collateral shall be
     received in trust for the benefit of the Collateral Trustees, shall be
     segregated from other funds of such Grantor and shall be forthwith paid
     over to the Collateral Trustees in the same form as so received (with any
     necessary indorsement).

          (d) The Collateral Trustees may, without notice to the Borrower
     except as required by law and at any time or from time to time, charge,
     set-off and otherwise apply all or any part of the Secured Obligations
     against any funds held in the Collateral Account or in any other deposit
     account of the Borrower in accordance with clause (b) above.

          (e) If the Collateral Trustees shall determine to exercise their
     right to sell all or any of the Security Collateral of any Grantor
     pursuant to this Section 15, each Grantor agrees that, upon request of the
     Collateral Trustees and subject to the Remedies Limitations, such Grantor
     will, at its own expense:

               (i) execute and deliver, and cause each issuer of such Security
          Collateral contemplated to be sold and the directors and officers
          thereof to execute and deliver, all such instruments and documents,
          and do or cause to be done all such other acts and things, as may be
          necessary or, in the opinion of the Collateral Trustees, advisable to
          register such Security Collateral under the provisions of the
          Securities Act of 1933 (as amended from time to time, the


                                      19
<PAGE>

          "Securities Act"), to cause the registration statement relating
          thereto to become effective and to remain effective for such period
          as prospectuses are required by law to be furnished and to make all
          amendments and supplements thereto and to the related prospectus
          that, in the opinion of the Collateral Trustees, are necessary or
          advisable, all in conformity with the requirements of the Securities
          Act and the rules and regulations of the Securities and Exchange
          Commission applicable thereto;

               (ii) use its best efforts to qualify the Security Collateral
          under the state securities or "Blue Sky" laws and to obtain all
          necessary governmental approvals for the sale of such Security
          Collateral, as requested by the Collateral Trustees;

               (iii) cause each such issuer of such Security Collateral to make
          available to its security holders, as soon as practicable, an
          earnings statement that will satisfy the provisions of Section 11(a)
          of the Securities Act;

               (iv) provide the Collateral Trustees with such other information
          and projections as may be necessary or, in the opinion of the
          Collateral Trustees, advisable to enable the Collateral Trustees to
          effect the sale of such Security Collateral; and

               (v) do or cause to be done all such other acts and things as may
          be necessary to make such sale of such Security Collateral or any
          part thereof valid and binding and in compliance with applicable law.

          (f) The Collateral Trustees are authorized, in connection with any
     sale of the Security Collateral pursuant to this Section 16, to deliver or
     otherwise disclose to any prospective purchaser of the Security
     Collateral: (i) any registration statement or prospectus, and all
     supplements and amendments thereto, prepared pursuant to subsection (e)(i)
     above, (ii) any information and projections provided to it pursuant to
     subsection (e)(iv) above and (iii) any other information in its possession
     relating to such Security Collateral.

          (g) Each Grantor acknowledges the impossibility of ascertaining the
     amount of damages that would be suffered by the Secured Holders by reason
     of the failure by such Grantor to perform any of the covenants contained
     in subsection (e) above and, consequently, agrees that, if such Grantor
     shall fail to perform any of such covenants, it will pay, as liquidated
     damages and not as a penalty, an amount equal to the value of the Security
     Collateral on the date the Collateral Trustees shall demand compliance
     with subsection (e) above.

     Section 16. Indemnity and Expenses. (a) Each Grantor agrees to indemnify,
defend and save and hold harmless the Collateral Trustees, each Representative
and each Secured Holder and each of their Affiliates and their respective
officers, directors, employees, agents and advisors (each, an "Indemnified
Party") from and against, and shall pay on demand, any and all claims, damages,
losses, liabilities and expenses (including, without limitation, reasonable
fees and expenses of counsel) that may be incurred by or asserted or awarded
against


                                      20
<PAGE>

any Indemnified Party, in each case arising out of or in connection with or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement) or any other Shared Collateral Document except to the extent
such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct.

     (b) Each Grantor will upon demand pay to the Collateral Trustees the
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees and expenses of their counsel and of any experts and agents,
that the Collateral Trustees may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from or other realization upon, any of
the Collateral of such Grantor, (iii) the exercise or enforcement of any of the
rights of the Collateral Trustees, the Representatives or the other Secured
Holders hereunder or (iv) the failure by such Grantor to perform or observe any
of the provisions hereof.

     Section 17. Amendments; Waivers; Additional Grantors; Etc. (a) No
amendment or waiver of any provision of this Agreement, and no consent to any
departure by any Grantor herefrom, shall in any event be effective unless the
same shall (i) be in writing and signed by the Collateral Trustees and (ii)
otherwise comply with Section 9.01 of the Collateral Trust Agreement, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No failure on the part of the Collateral
Trustees, the Representatives or any other Secured Holders to exercise, and no
delay in exercising any right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.

     (b) Upon the execution and delivery, or authentication, by any Person of a
security agreement supplement in substantially the form of Exhibit A hereto
(each a "Security Agreement Supplement"), (i) such Person shall be referred to
as an "Additional Grantor" and shall be and become a Grantor hereunder, and
each reference in this Agreement and the other Secured Agreements to "Grantor"
shall also mean and be a reference to such Additional Grantor, and each
reference in this Agreement and the other Secured Agreements to "Collateral"
shall also mean and be a reference to the Supplemental Collateral (as defined
in the Security Agreement Supplement) of such Additional Grantor and (ii) the
supplemental schedules IV attached to each Security Agreement Supplement shall
be incorporated into and become a part of and supplement Schedules IV,
respectively, hereto, and the Collateral Trustees may attach such supplemental
schedules to such Schedules; and each reference to such Schedules shall mean
and be a reference to such Schedules as supplemented pursuant to each Security
Agreement Supplement.

     Section 18. Notices, Etc. All notices, demands, requests, and other
communications provided for hereunder shall be in writing (including
telegraphic, telecopier or telex communication) and mailed, telegraphed,
telecopied, telexed or delivered to, in the case of any Representative, or the
Collateral Trustees, addressed to each at their respective address specified in
the Collateral Trust Agreement, in the case of the Borrower, addressed to it at
its address specified in the Credit Agreement and, in the case of each Grantor
other than the Borrower, addressed to it at its address set forth opposite such
Grantor's name on the signature pages hereto or on the signature page to the
Security Agreement Supplement pursuant to which it


                                      21
<PAGE>


became a party hereto; or, as to any party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and other communications shall, when mailed, telegraphed, telecopied or
telexed, be effective when deposited in the mails, delivered to the telegraph
company, telecopied or confirmed by telex answerback, respectively, addressed
as aforesaid; except that notices and other communications to the Collateral
Trustees shall not be effective until received by the Collateral Trustees.
Delivery by telecopier of an executed counterpart of any amendment or waiver of
any provision of this Agreement or of any Security Agreement Supplement or
Schedule hereto shall be effective as delivery of an original executed
counterpart thereof.

     Section 19. Continuing Security Interest; Assignments under the Credit
Agreement. This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until all of the
Collateral is released, and this Agreement is terminated, in accordance with
Section 8.02 of the Collateral Trust Agreement, (b) be binding upon each
Grantor, its successors and assigns and (c) inure, together with the rights and
remedies of the Collateral Trustees hereunder, to the benefit of the Collateral
Trustees, the Representatives on behalf of themselves and on behalf of the
Secured Holders and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), any Bank Party may
assign or otherwise transfer all or any portion of its rights and obligations
under the Credit Agreement (including, without limitation, all or any portion of
its Revolving Credit Loan Commitment, the Loans owing to it and the Note or
Notes, if any, held by it) to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to such
Bank Party in the Shared Collateral Documents or otherwise, in each case as
provided in Section 10.06 of the Credit Agreement.

     Section 20. Release; Termination. The Collateral Trustees shall release all
or any portion of the Collateral solely on terms and subject to the conditions
set forth in Article 8 of the Collateral Trust Agreement.

     Section 21. Security Interest Absolute The obligations of each Grantor
under this Agreement are independent of the Secured Obligations or any other
obligations of any other Loan Party under or in respect of the Credit Agreement
Documents and the Shared Collateral Documents, and a separate action or actions
may be brought and prosecuted against each Grantor to enforce this Agreement,
irrespective of whether any action is brought against such Grantor or any other
Loan Party or whether such Grantor or any other Loan Party is joined in any such
action or actions. All rights of the Collateral Trustees, the Representatives
and the other Secured Holders and the pledge, assignment and security interest
hereunder and under the other Shared Collateral Documents, and all obligations
of each Grantor hereunder, shall be irrevocable, absolute and unconditional
irrespective of, and each Grantor hereby irrevocably waives (to the maximum
extent permitted by applicable law) any defenses it may now have or may
hereafter acquire in any way relating to, any or all of the following:

          (a) any lack of validity or enforceability of any Secured Agreement 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 Secured Obligations or any other
     Obligations of any other Loan


                                       22
<PAGE>


     Party under or in respect of the Secured Agreements or any other amendment
     or waiver of or any consent to any departure from any Secured Agreement,
     including, without limitation, any increase in the Secured Obligations
     resulting from the extension of additional credit to any Loan Party or any
     of its Subsidiaries or otherwise;

          (c) any taking, exchange, release or non-perfection of any Collateral
     or any other collateral, or any taking, release or amendment or waiver of
     or consent to departure from any guaranty, for all or any of the Secured
     Obligations;

          (d) any manner of application of any Collateral or any other
     collateral, or proceeds thereof, to all or any of the Secured Obligations,
     or any manner of sale or other disposition of any Collateral or any other
     collateral for all or any of the Secured Obligations or any other
     Obligations of any other Grantor under or in respect of the Secured
     Agreements or any other assets of any Grantor or any of its Subsidiaries;

          (e) any change, restructuring or termination of the corporate
     structure or existence of any Grantor or any of its Subsidiaries;

          (f) any failure of any Secured Holder to disclose to any Grantor any
     information relating to the business, condition (financial or otherwise),
     operations, performance, assets, nature of assets, liabilities or prospects
     of any other Grantor now or hereafter known to such Secured Holder (each
     Grantor waiving any duty on the part of the Secured Holders to disclose
     such information);

          (g) the failure of any other Person to execute this Agreement or any
     other Shared Collateral Document, guaranty or agreement or the release
     (other than as provided in Section 20) or reduction of liability of any
     Grantor or other grantor or surety with respect to the Secured Obligations;
     or

          (h) any other circumstance (including, without limitation, any statute
     of limitations) or any existence of or reliance on any representation by
     any Secured Holder that might otherwise constitute a defense available to,
     or a discharge of, such Grantor or any other Grantor or a third party
     grantor of a security interest.

     This Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Secured Obligations is
rescinded or must otherwise be returned by the Collateral Trustees, any
Representative or any Secured Holder upon the insolvency, bankruptcy or
reorganization of any Grantor or otherwise, all as though such payment had not
been made.

     Section 22. Additional Secured Obligations. Each of the Grantors, the
Collateral Trustees, the Representatives and the Secured Holders acknowledges
and agrees that the Collateral hereunder may secure additional Obligations of
the Borrower in respect of the incurrence of new Debt by the Borrower or the
refinancing, extension, or renewal of certain Debt of the Borrower, in each
case, only as permitted by the terms and conditions of the Credit Agreement.
Upon the execution and delivery to the Collateral Trustees of an acknowledgement
by the Persons to whom the obligations referred to in the immediately preceding
sentence are owed, in form and substance satisfactory to the Collateral
Trustees, that (i) such Persons


                                       23
<PAGE>


acknowledge the terms and conditions of this Agreement and agree to be bound
thereby and (ii) such Persons agree to pay their ratable share of the fees and
expenses of the Collateral Trustees and to ratably indemnify the Collateral
Trustees, in each case, on terms and conditions similar to those contained in
the Credit Agreement, such Persons shall become "Secured Holders" hereunder and
shall be entitled to share ratably in the Collateral for all purposes hereunder.

     Section 23. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Agreement.

     Section 24. Limitation of Liability. Each Grantor, and by its acceptance of
this Agreement, the Collateral Trustees, the Representatives and the Secured
Holders, hereby confirms that it is the intention of all such Persons that this
Agreement and the Obligations of the Grantors hereunder not constitute a
fraudulent conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign,
federal or state law to the extent applicable to this Agreement and the
Obligations of the Grantors hereunder. To effectuate the foregoing intention,
the Collateral Trustees, the Representatives and the Secured Holders and the
Grantors hereby irrevocably agree that the Obligations of the Grantors under
this Agreement at any time shall be limited to the maximum amount as will result
in the Obligations of the Grantors under this Agreement not constituting a
fraudulent transfer or conveyance.

     Section 25. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.

     Section 26. Submission to Jurisdiction and Waiver.

          (a) Each Grantor hereby irrevocably and unconditionally submits, for
     itself and its property, to the nonexclusive jurisdiction of any New York
     State court or federal court of the United States of America sitting in New
     York City, and any appellate court from any thereof, in any action or
     proceeding arising out of or relating to this Agreement and the other
     Secured Agreements to which it is or is to be a party, or for recognition
     or enforcement of any judgment, and each Guarantor hereby irrevocably and
     unconditionally agrees that all claims in respect of any such action or
     proceeding may be heard and determined in any such New York State court or,
     to the extent permitted by law, in such federal court. Each Grantor agrees
     that a final judgment in any such action or proceeding shall be conclusive
     and may be enforced in other jurisdictions by suit on the judgment or in
     any other manner provided by law. Nothing in this Agreement shall affect
     any right that any party may otherwise have to bring any action or
     proceeding relating to this Agreement in the courts of any jurisdiction.

          (b) Each Grantor irrevocably and unconditionally waives, to the
     fullest extent it may legally and effectively do so, any objection that it
     may now or hereafter have to the laying of venue of any suit, action or
     proceeding arising out of or relating to this Agreement to which it is or
     is to be a party in any New York State or federal court. Each


                                       24
<PAGE>


     Grantor hereby irrevocably waives, to the fullest extent permitted by law,
     the defense of an inconvenient forum to the maintenance of such suit,
     action or proceeding in any such court.

          (c) EACH GRANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
     IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
     OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LOANS OR
     THE ACTIONS OF ANY BANKS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
     ENFORCEMENT THEREOF.


                      [SIGNATURE PAGES IMMEDIATELY FOLLOW]


                                       25
<PAGE>


     IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.


                                                     THE AES CORPORATION


                                                     By:
                                                         -----------------------
                                                         Title:


Acknowledged on the date hereof by:

WILMINGTON TRUST COMPANY,
as Corporate Trustee


By:
    ----------------------------------
    Title:


BRUCE L. BISSON,
as Individual Trustee


By:
    ----------------------------------
    Title:


WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Exchange Note Trustee


By:
    ----------------------------------
    Title:


CITICORP USA, INC.,
as Administrative Agent


By:
    ----------------------------------
    Title:


BANKBOSTON, N.A., NASSAU BRANCH,
as Sul Agent


By:
    ----------------------------------
    Title:



<PAGE>


FLEET NATIONAL BANK,
as Lake Worth LOC Bank


By:
    ----------------------------------
    Title:



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.4
<SEQUENCE>6
<FILENAME>dec1602_ex4-4.txt
<TEXT>
                                                                    EXHIBIT 4.4


                                                                  EXECUTION COPY


                                12 December 2002


                       AES International Holdings II, Ltd.
                                  (as Chargor)

                                       and

                            Wilmington Trust Company
                             (as Corporate Trustee)

                                       and
                                 Bruce L. Bisson
                             (as Individual Trustee)



                               CHARGE OVER SHARES
                                       in
                              AES El Salvador Ltd.
                                       and
                        AES South American Holdings Ltd.





<PAGE>


CHARGE AND ASSIGNMENT OF SHARES


THIS CHARGE AND ASSIGNMENT is made on the 12th day of December 2002

BETWEEN:

(1)  AES International Holdings II, Ltd., a company incorporated in the British
     Virgin Islands, the registered office of which is at the offices of Citco
     Building, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin
     Islands (the "Chargor"); and

(2)  Wilmington Trust Company, a banking corporation organized in Delaware, of
     Rodney Square North, 1100 North Market Street, Wilmington, DE 19890 (the
     "Corporate Trustee") and Bruce L. Bisson, an individual residing in the
     State of Delaware (the "Individual Trustee"; and together with the
     Corporate Trustee, the "Collateral Trustees"), as trustees under the
     Collateral Trust Agreement dated 12 December 2002 (as such agreement may be
     amended, amended and restated, supplemented or otherwise modified hereafter
     from time to time, the "Collateral Trust Agreement") among the Grantors (as
     defined in the Security Agreement), the Chargor and the Collateral
     Trustees.


WHEREAS:

     (1) The AES Corporation (the "Borrower") has entered into an Amended and
Restated Credit, Reimbursement and Exchange Agreement dated as of 12 December
2002 (said Agreement, as it may hereafter be amended, amended and restated,
supplemented or otherwise modified from time to time, being the "Credit
Agreement") with the Subsidiary Guarantors party thereto, the Banks party
thereto (the "Banks"), the Revolving Fronting Banks and the Drax LOC Fronting
Bank party thereto, and Citicorp USA, Inc., as Administrative Agent for the Bank
Parties (in such capacity, the "Agent") and as Collateral Agent for the Bank
Parties (in such capacity, the "Credit Agreement Collateral Agent"; and together
with the Agent, the "Agents").

     (2) Terms defined in the Credit Agreement, the Security Agreement (referred
to below) or the Collateral Trust Agreement and not otherwise defined in this
Charge or in Section 1 hereof, are used in this Charge as defined in the Credit
Agreement, the Security Agreement or the Collateral Trust Agreement.

     (3) In order to induce the Banks, the Revolving Fronting Banks, the Drax
LOC Fronting Banks and the Agents to enter into the Credit Agreement, the
Chargor has agreed to grant a continuing security interest in and to the
Collateral (as hereinafter defined) to the Collateral Trustees for the ratable
benefit of the Lender Parties to secure the Obligations of the Borrower under
the Credit Agreement and the Notes issued pursuant thereto.


<PAGE>


     (4) The Borrower will enter into an Indenture to be dated as of 13
December 2002 (as amended, supplemented or otherwise modified and in effect on
the date hereof and as the same may hereafter be further amended, modified,
extended, renewed, replaced, restated or supplemented from time to time
pursuant to the terms thereof, the "Exchange Note Indenture") with Wells Fargo
Bank Minnesota, National Association (the "Exchange Note Trustee") to exchange
the Borrower's (i) 8.75% Senior Notes due 2002 and (ii) the 7.375% Remarketable
or Redeemable Securities due 2013 for the 10% Senior Secured Exchange Notes due
2005 to be issued on December 13, 2002 (the "Exchange Notes", and together with
the Exchange Note Indenture (only to the extent relating to the Exchange
Notes), the "Exchange Note Agreements").

     (5) In order to induce the Exchange Note Trustee to enter into the Exchange
Note Indenture, the Chargor has agreed to grant a continuing security interest
in and to the Collateral to the Collateral Trustees for the ratable benefit of
the Exchange Note Holders to secure the Obligations of the Borrower under the
Exchange Note Agreements (as defined in the Collateral Trust Agreement).

     (6) The Borrower and certain other Persons party thereto (the "Grantors")
have entered into a Security Agreement dated 12 December 2002 in favor of the
Collateral Trustees (said agreement, as it may hereafter be amended, amended and
restated, supplemented or otherwise modified from time to time, being the
"Security Agreement") pursuant to which the Grantors have granted to the
Collateral Trustees, for their benefit and in trust for the equitable and
ratable benefit of the Representatives and the Secured Holders (as defined in
the Collateral Trust Agreement), a lien and security interest in certain
collateral of the Grantors.

     (7) The Borrower has entered into a Sponsor Agreement dated as of 7 March
2000 (as amended, supplemented or otherwise modified and in effect on the date
hereof and as the same may hereafter be further amended, modified, extended,
renewed, replaced, restated or supplemented from time to time pursuant to the
terms thereof, the "Sponsor Agreement") with BankBoston, N.A., Nassau Branch, as
agent (the "Sul Agent"), pursuant to which the Borrower has agreed to guarantee
the obligations of AES Cayman Guaiba, Ltd. under a Credit Agreement dated as of
6 March 2001 (as amended, supplemented or otherwise modified and in effect on
the date hereof and as the same may hereafter be further amended, modified,
extended, renewed, replaced, restated or supplemented from time to time pursuant
to the terms thereof, the "Sul Credit Agreement") with BankBoston, N.A., Nassau
Branch, Banc of America Securities, LLC, Unibanco-Uniao de Bancos Brasilieros
S.A. and WestLB AG, New York Branch and the lenders named therein (collectively,
the "Sul Guaranteed Parties"), in an amount of up to a maximum aggregate amount
of $50,000,000 (together with any other agreement or instrument delivered in
connection with such guaranty, the "Sul Guarantee").

     (8) In order to satisfy certain conditions under the Sul Guarantee, the
Chargor has agreed to grant a continuing security interest in and to the
Collateral to the Collateral Trustees for the ratable benefit of the Sul
Guaranteed Parties to secure the Obligations of the Borrower under the Sul
Guarantee in an amount of up to a maximum aggregate amount of $50,000,000.

<PAGE>


     (9) The Borrower has entered into a Gas Transportation Agreement dated as
of July 21, 2000 with Florida Public Utilities Company pursuant to which Fleet
National Bank (the "Lake Worth LOC Bank") issued in favour of Florida Public
Utilities Company irrevocable standby letter of credit number 1S1280134
(together with the application and agreement therefor dated on or about July 6,
2001, the "Lake Worth Letter of Credit") in an aggregate amount not to exceed
$5,490,449.

     (10) In order to satisfy certain conditions under the Lake Worth Letter of
Credit, the Chargor has agreed to grant a continuing security interest in and to
the Collateral to the Collateral Trustees for the ratable benefit of the Lake
Worth LOC Bank to secure the obligation of Lake Worth Generation LLC ("Lake
Worth"), a Subsidiary of the Borrower, to reimburse the Lake Worth LOC Bank for
any drawings under the Lake Worth Letter of Credit in an amount of up to a
maximum aggregate amount of $5,490,449.

     (11) It is a condition precedent to (a) the continuation of the Loans by
the Banks and the making of Revolving Credit Loans by the Revolving Credit Loan
Banks, (b) the issuance (or be deemed to have issued) of Revolving Letters of
Credit by the Revolving Fronting Banks, (c) the deemed issuance of the Drax
Letter of Credit and the making of Drax Loans in respect of Drax L/C Drawings by
the Drax LOC Fronting Banks, (d) the entry into the Secured Hedge Agreements by
the Hedge Banks from time to time, (e) the entry into the Secured Treasury
Management Service Agreements by a Bank Party or any Affiliate thereof, (f) the
entry into the Exchange Note Indenture by the Exchange Note Trustee, (g) the
satisfaction by the Borrower of its obligations under the Sul Guarantee, (h) the
satisfaction by Lake Worth of its obligations under the Lake Worth Letter of
Credit, (i) the acknowledgement of the Security Agreement by the Collateral
Trustees and (j) the entry into the Collateral Trust Agreement by the Collateral
Trustees that the Chargor shall have granted the assignment and security
interest and made the pledge and assignment contemplated by this Charge.


IT IS AGREED as follows:

1    DEFINITIONS AND INTERPRETATION

1.1  The following words and expressions shall have the following meanings:

     "Charged Shares"         means the  shares to be  charged  as set out in
                              Schedule 1 hereto and any other shares of the
                              Companies now or at any time in the future
                              beneficially owned by the Chargor or in which the
                              Chargor has any interest and all additional shares
                              of or in any new direct Subsidiary of the Chargor
                              formed or acquired by the Chargor in any manner
                              after the date of this Charge to the extent such
                              new Subsidiary is a company incorporated in the
                              Cayman Islands; provided, that the term "Charged
                              Shares" shall not include, as to the Chargor, more
                              than 65% of the outstanding voting shares of any
                              of the Companies.


<PAGE>


     "Collateral"             has the meaning given to it in Clause 3.

     "Companies"              means AES El Salvador Ltd. and AES South American
                              Holdings Ltd., each a company incorporated in the
                              Cayman Islands, and any new direct Subsidiary of
                              the Chargor formed or acquired by the Chargor in
                              any manner after the date of this Charge to the
                              extent such new Subsidiary is a company
                              incorporated in the Cayman Islands or in any other
                              jurisdiction.

     "Receiver"               has the meaning given to it in Clause 8.

     "Security Interest"      means the security interest in the Collateral
                              granted hereunder securing the Secured
                              Obligations.

1.2    In this Charge:

       1.2.1  any reference to a Recital, Clause or Schedule is to the relevant
              Recital, Clause or Schedule of or to this Charge and any reference
              to a sub-clause or paragraph is to the relevant sub-clause or
              paragraph of the Clause or Schedule in which it appears;

       1.2.2  the clause headings are included for convenience only and shall
              not affect the interpretation of this Charge;

       1.2.3  use of the singular includes the plural and vice versa;

       1.2.4  use of any gender includes the other genders;

       1.2.5  any phrase introduced by the terms "including", "include", "in
              particular" or any similar expression shall be construed as
              illustrative and shall not limit the sense of the words preceding
              those terms; and

       1.2.6  references to any document or agreement are to be construed as
              references to such document or agreement as is in force for the
              time being and as amended, varied supplemented, substituted or
              novated from time to time.

1.3    The Recitals and Schedules form part of this Charge and shall have effect
       as if set out in full in the body of this Charge and any reference to
       this Charge includes the Recitals and Schedules.

<PAGE>


2      CHARGED SHARES

       The Chargor represents and warrants as follows as of the date of this
       Charge and on any date on which additional or new shares of the Companies
       become the subject of this Charge.

2.1    The Chargor owns all of the Charged Shares, free and clear of any Liens
       other than the Security Interest created by this Charge. All of the
       Charged Shares have been duly authorised and validly issued, and are
       fully paid and non-assessable, and are subject to no rights or options to
       purchase of any Person. The Chargor is not and will not become a party to
       or otherwise bound by any agreement, other than this Charge, which
       restricts in any manner the rights of any present or future holder of any
       of the Charged Shares with respect thereto.

2.2    This Charge constitutes its legal, valid, binding and enforceable
       obligation and is a first priority security interest over the Charged
       Shares effective in accordance with its terms.

2.3    (a) The execution, delivery, recordation, filing or performance by the
       Chargor of this Charge, (b) the grant by the Chargor of the Liens granted
       by it pursuant to this Charge, (c) the perfection or maintenance of the
       Liens created under this Charge (including the first priority nature
       thereof), (d) the exercise by the Collateral Trustees of their voting or
       other rights provided for in this Charge and (e) the exercise by the
       Collateral Trustees of their remedies in respect of the Collateral
       pursuant to this Charge and the other Shared Collateral Documents, will
       not require any consent, approval, authorization or other order of, or
       any notice to or filing with, any court, regulatory body, administrative
       agency or other governmental body (other than any consent, approval,
       authorization, order, notice or filing, the failure of which to make or
       obtain could not reasonably be expected to have a Material Adverse
       Effect), and will not conflict with or constitute a breach of any of the
       terms or provisions of, or a default under, the charter, by-laws or
       memorandum and articles of association of the Borrower, the Chargor or
       the other Pledged Subsidiaries or any agreement, indenture or other
       instrument to which the Borrower, the Chargor or any other Pledged
       Subsidiary is a party or by which the Borrower, the Chargor and the other
       Pledged Subsidiaries, or any of the Borrower's, the Chargor's or the
       other Pledged Subsidiaries' respective property is bound, or violate or
       conflict with any laws, administrative regulations or rulings or court
       decrees applicable to the Borrower, the Chargor or any of the other
       Pledged Subsidiaries or the Borrower's, the Chargor's or the other
       Pledged Subsidiaries' respective property, except for any violation,
       breach, conflict or default that could not reasonably be expected to have
       a Material Adverse Effect and except that in the foregoing cases, (A) any
       foreclosure or other exercise of remedies by the Collateral Trustees will
       require additional approvals and consents that have not been obtained
       from foreign and domestic regulators and from lenders to, and suppliers,
       customers or other contractual counterparties of one or more
       Subsidiaries, and the failure to obtain such approval or consent could
       result in a default under, or breach of, agreements or other legal
       obligations of such Subsidiary and (B) disposition of any of

<PAGE>


       the Collateral may be subject to the receipt of regulatory approvals and
       to laws affecting the offering and sale of securities generally (the
       exceptions described in the foregoing clauses (A) and (B) are referred to
       herein as "Remedies Limitations").

2.4    As of this date, there is no action or proceeding pending or, to its
       knowledge, threatened against the Chargor or the Companies, before any
       court or governmental authority or arbitrator, which could affect the
       legality, validity or enforceability of this Charge.


3      CHARGE

3.1    The Chargor, in order to secure the Secured Obligations, hereby charges
       by way of first fixed charge as a continuing security for the payment and
       discharge of the Secured Obligations, all its right, title, interest and
       benefit present and future in, to and under the Charged Shares and all
       proceeds, income and profits thereon, and all interest, dividends and
       other payments and distributions with respect thereto (the "Collateral")
       subject to the provisions for release of this Charge set out below.

3.2    This Charge secures the payment of all Secured Obligations of the
       Borrower and the Chargor. Without limiting the generality of the
       foregoing, this Charge secures, as to the Chargor, the payment of all
       amounts that constitute part of the Secured Obligations and that would be
       owed by the Chargor but for the fact that they are unenforceable or not
       allowable due to the existence of a bankruptcy, reorganization or similar
       proceeding involving the Chargor.

3.3    The Security Interest is granted as security only and shall not subject
       the Collateral Trustees and Representatives or any other Secured Holder
       to, or transfer or in any way affect or modify, any obligation or
       liability of the Chargor with respect to any of the Collateral or any
       transaction in connection therewith.


4      COVENANTS BY THE CHARGOR

So long as any of the Secured Obligations remain outstanding, any Revolving
Letter of Credit or the Drax Letter of Credit shall be outstanding, or any
Revolving Credit Loan Bank has a Revolving Credit Loan Commitment, the Chargor
covenants that:

4.1    it shall forthwith and from time to time deposit with the Collateral
       Trustees all certificates and other documents of title relating to the
       Charged Shares;

4.2    it shall deliver to the Collateral Trustees as security in accordance
       with the terms of this Charge the following (on the date hereof and on
       any date on which additional or new shares of the Companies become the
       subject of this Charge):

       4.2.1  original share certificate in respect of the Charged Shares;

<PAGE>


       4.2.2  blank, signed and undated share transfer certificates in respect
              of the Charged Shares in the forms set out in Schedule 2 to this
              Charge;

       4.2.3  a shareholder proxy in favour of the Collateral Trustees in the
              forms set out in Schedule 3 to this Charge in respect of Charged
              Shares;

       4.2.4  executed but undated letters of resignation and release together
              with letters of authority to date the same from each of the
              directors, alternate directors and officers of the Companies
              appointed by the Chargor in the forms set out in Parts I and II of
              Schedule 4 to this Charge; and

       4.2.5  an undertaking from the Company to register transfers of the
              Charged Shares to the Chargee or its nominee in the form set out
              in Schedule 5 to this Charge.

4.3    upon the issue of additional Charged Shares which become the subject of
       this charge it shall provide the Collateral Trustees, for the benefit of
       the Representatives and the Secured Holders, with an opinion of the
       General Counsel of AES that such additional Charged Shares are duly
       authorised and validly issued, fully paid and non-assessable (or the
       equivalent thereof) and are subject to no rights or options to purchase
       of any Person.


5      FILING; FURTHER ASSURANCES

Subject to the Remedies Limitations, the Chargor agrees that it will, at its
expense and in such manner and form as the Collateral Trustees may reasonably
require, execute, deliver, file and record any financing statement, specific
assignment or other paper and take any other action that may be necessary or
that the Collateral Trustees may reasonably request and that is within the power
of the Chargor, consistent with its currently existing contractual and other
legal obligations, in order to create, preserve, perfect or validate the
Security Interest or to enable the Collateral Trustees to exercise and enforce
their rights hereunder with respect to any of the Collateral; and
notwithstanding the generality of such provisions, the Chargor covenants that
immediately following execution of this Charge it shall deliver to the
Collateral Trustee a copy of the Chargor's complete register of mortgages,
charges and other encumbrances as maintained at its registered office, certified
as a true copy by the registered agent of the Chargor in the British Virgin
Islands containing particulars of the security created hereunder and shall
procure that a further copy of the same is submitted for registration with the
Registrar of Companies in the British Virgin Islands.

The Collateral Trustees may after the occurrence and during the continuance of a
Collateral Trust Agreement Default, in their sole discretion, cause any or all
of the Charged Shares to be transferred of record into the name of the
Collateral Trustees or their nominee. The Chargor will promptly give to the
Collateral Trustees copies of any notices or other communications received by it
with respect to the Charged Shares registered in the name of the Chargor and the
Collateral Trustees will promptly give the Chargor copies of any notices and
communications

<PAGE>


       received by the Collateral Trustees with respect to the Chargor
       registered in the name of the Collateral Trustees or their nominee.


6      RIGHT TO RECEIVE DISTRIBUTIONS AND RIGHT TO VOTE CHARGED SHARES

6.1    So long as no Collateral Trust Agreement Default shall have occurred and
       be continuing:

       6.1.1  The Chargor shall be entitled to exercise any and all voting and
              other consensual rights pertaining to the Collateral or any part
              thereof for any purpose; provided, however, that the Chargor will
              not exercise or refrain from exercising any such right if such
              action would have a material adverse effect on the value of the
              Collateral or any part thereof.

       6.1.2  The Chargor shall be entitled to receive and retain any and all
              dividends, interest and other distributions paid in respect of the
              Collateral if and to the extent that the payment thereof is not
              otherwise prohibited by the terms of the Applicable Agreements;
              provided, however, that any and all dividends, interest and other
              distributions paid or payable other than in cash in respect of,
              and instruments and other property received, receivable or
              otherwise distributed in respect of, or in exchange for, any
              Collateral shall be, and shall be forthwith delivered to the
              Collateral Trustees to hold as Collateral, and shall, if received
              by the Chargor, be received in trust for the benefit of the
              Collateral Trustees, be segregated from the other property or
              funds of the Chargor and be forthwith delivered to the Collateral
              Trustees as Collateral in the same form as so received (with any
              necessary indorsement).

       6.1.3  The Collateral Trustees will execute and deliver (or cause to be
              executed and delivered) to the Chargor all such proxies and other
              instruments as the Chargor may reasonably request for the purpose
              of enabling the Chargor to exercise the voting and other rights
              that it is entitled to exercise pursuant to Section 6.1.1 above
              and to receive the dividends or interest payments that it is
              authorized to receive and retain pursuant to Section 6.1.2 above.

6.2    Upon the occurrence and during the continuance of a Collateral Trust
       Agreement Default:

       6.2.1  All rights of the Chargor (x) to exercise or refrain from
              exercising the voting and other consensual rights that it would
              otherwise be entitled to exercise pursuant to Section 6.1.1 shall,
              upon notice to the Chargor by the Collateral Trustees, cease and
              (y) to receive the dividends, interest and other distributions
              that it would otherwise be authorized to receive and retain
              pursuant to Section 6.1.2 shall automatically cease, and, subject
              to the Remedies Limitations, all such rights shall thereupon
              become vested in the Collateral Trustees, who shall thereupon have
              the sole right to exercise or refrain from exercising such voting
              and

<PAGE>


              other consensual rights and to receive and hold as Collateral such
              dividends, interest and other distributions and shall deposit the
              same into the Collateral Account; and

       6.2.2  All dividends, interest and other distributions that are received
              by the Chargor contrary to the provisions of Section 6.2.1 shall
              be received in trust for the benefit of the Collateral Trustees,
              shall be segregated from other funds of the Chargor and shall be
              forthwith paid over to the Collateral Trustees to be deposited
              into the Collateral Account. Upon receipt of notice from the
              Required Representative(s) that all Collateral Trust Agreement
              Defaults have been cured, the Collateral Trustees' right to retain
              dividends under this Section 6 shall cease and the Collateral
              Trustees shall pay over to the Chargor any such Collateral
              retained by them during the continuance of a Collateral Trust
              Agreement Default.


7      GENERAL AUTHORITY

The Chargor hereby irrevocably appoints the Collateral Trustees its true and
lawful attorney, with full power of substitution, in the name of the Chargor,
the Collateral Trustees, the Representatives and the Secured Holders or
otherwise, for the sole use and benefit of the Collateral Trustees on behalf of
the Representatives and the Secured Holders, but at the expense of the Chargor,
to the extent permitted by law to exercise, at any time and from time to time
while a Collateral Trust Agreement Default has occurred and is continuing, all
or any of the following powers with respect to all or any of the Collateral:

              (a) to demand, sue for, collect, receive and give acquittance for
       any and all monies due or to become due upon or by virtue thereof,

              (b) to settle, compromise, compound, prosecute or defend any
       action or proceeding with respect thereto,

              (c) to sell, transfer, assign or otherwise deal in or with the
       same or the proceeds or avails thereof, as fully and effectually as if
       the Collateral Trustees were the absolute owner thereof, and

              (d) to extend the time of payment of any or all thereof and to
       make any allowance and other adjustments with reference thereto;

provided, that the Collateral Trustees shall give the Chargor not less than ten
days' prior notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which threatens to
decline speedily in value or is of a type customarily sold on a recognized
market.


8      RECEIVER

If a Collateral Trust Agreement Default shall have occurred and be continuing,
the Collateral Trustees may by writing without notice to the Chargor appoint one
or more person or persons as the Collateral Trustees think fit to be a receiver
(the "Receiver") in relation to the

<PAGE>


Collateral. Where the Collateral Trustees appoint two or more persons as
Receiver, the Receivers may act jointly or independently.

8.1    The Receiver may take such action in relation to the enforcement of this
       Charge including, without limitation, to sell, charge or otherwise
       dispose of the Collateral, to exercise any powers, discretion, voting or
       other rights or entitlements in relation to the Collateral and generally
       to carry out any other action which he may in his sole discretion deems
       necessary in relation to the enforcement of this Charge.

8.2    The Receiver shall have, in addition to the other powers set-out in this
       Clause, the following powers:

       8.2.1  power to take possession of, collect and get in the Collateral
              and, for that purpose, to take such proceedings as may seem to him
              to be expedient;

       8.2.2  power to raise or borrow money and grant security therefor over
              the Collateral;

       8.2.3  power to appoint an attorney or accountant or other professionally
              qualified person to assist him in the performance of his
              functions;

       8.2.4  power to bring or defend any action or other legal proceedings in
              the name of and on behalf of the Chargor in respect of the
              Collateral;

       8.2.5  power to do all acts and execute in the name and on behalf of the
              Chargor any document or deed in respect of the Collateral;

       8.2.6  power to make any payment which is necessary or incidental to the
              performance of his functions;

       8.2.7  power to make any arrangement or compromise on behalf of the
              Chargor in respect of the Collateral;

       8.2.8  power to rank and claim in the insolvency or liquidation of the
              Companies and to receive dividends and to accede to agreements for
              the creditors of the Companies;

       8.2.9  power to present or defend a petition for the winding up of the
              Companies; and

       8.2.10 power to do all other things incidental to the exercise of the
              foregoing powers.

8.3    The Receiver shall be the agent of the Chargor and the Chargor alone
       shall be responsible for his acts and defaults and liable on any
       contracts made, entered into or adopted by the Receiver. The Collateral
       Trustees shall not be liable for the Receiver's

<PAGE>


       acts, omissions, negligence or default, nor be liable on contracts
       entered into or adopted by the Receiver.


9      INDEMNIFICATION AND EXPENSES

9.1    The Chargor agrees to indemnify, defend and save and hold harmless the
       Collateral Trustees, each Representative and each Secured Holder and each
       of their Affiliates and their respective officers, directors, employees,
       agents and advisors (each, an "Indemnified Party") from and against, and
       shall pay on demand, any and all claims, damages, losses, liabilities and
       expenses (including, without limitation, reasonable fees and expenses of
       counsel) that may be incurred by or asserted or awarded against any
       Indemnified Party, in each case arising out of or in connection with or
       resulting from this Charge (including, without limitation, enforcement of
       this Charge) or any other Shared Collateral Document except to the extent
       such claim, damage, loss, liability or expense is found in a final,
       non-appealable judgment by a court of competent jurisdiction to have
       resulted from such Indemnified Party's gross negligence or willful
       misconduct.

9.2    The Chargor will upon demand pay to the Collateral Trustees the amount of
       any and all reasonable expenses, including, without limitation, the
       reasonable fees and expenses of their counsel and of any experts and
       agents, that the Collateral Trustees may incur in connection with (a) the
       administration of this Charge (b) the custody, preservation, use or
       operation of, or the sale of, collection from or other realization upon,
       any of the Collateral, (c) the exercise or enforcement of any of the
       rights of the Collateral Trustees, the Representatives or the other
       Secured Holders hereunder or (d) the failure by the Chargor to perform or
       observe any of the provisions hereof.

Any such amount not paid on demand shall bear interest at a per annum rate of 2%
plus the Base Rate.


10     LIMITATION ON DUTY OF THE COLLATERAL AGENT IN RESPECT OF CHARGED SHARES

Beyond the exercise of reasonable care in the custody thereof, the Collateral
Trustees shall have no duty as to any Collateral in their possession or control.
The Collateral Trustees shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in their possession if the Collateral
is accorded treatment substantially equal to that which it accords its own
property and shall not be liable or responsible for any loss or damage to any of
the Collateral, or for any diminution in the value thereof, by reason of any act
or omission of any agent or bailee selected by the Collateral Trustees in good
faith, other than any act or omission caused by the gross negligence or willful
misconduct of such bailee or any act or omission made in breach of this Charge.
Any direction of the Required Representative(s) to the Collateral Trustees to
take any action hereunder shall be subject to section 7.05(d) of the Collateral
Trust Agreement.

<PAGE>


11     REMEDIES AND APPLICATIONS OF PROCEEDS

If a Collateral Trust Agreement Default shall have occurred and be continuing:

11.1   Any cash held by or on behalf of the Collateral Trustees and all cash
       proceeds received by or on behalf of the Collateral Trustees in respect
       of any sale of, collection from, or other realization upon all or any
       part of the Collateral may, in the discretion of the Collateral Trustees,
       be held by the Collateral Trustees as collateral for, and/or then or at
       any time thereafter applied (after payment of any amounts payable to the
       Collateral Trustees pursuant to Section 9 of this Charge) in whole or in
       part by the Collateral Trustees for the ratable benefit of the
       Representatives and the Secured Holders against, all or any part of the
       Secured Obligations, in accordance with the terms of the Collateral Trust
       Agreement.

11.2   All payments received by the Chargor in respect of the Collateral shall
       be received in trust for the benefit of the Collateral Trustees, shall be
       segregated from other funds of the Chargor and shall be forthwith paid
       over to the Collateral Trustees to be deposited into the Collateral
       Account.

11.3   The Collateral Trustees may, without notice to the Chargor except as
       required by law and at any time or from time to time, charge, set-off and
       otherwise apply all or any part of the Secured Obligations against any
       funds held in the Collateral Account or in any other deposit account of
       the Borrower in accordance with Section 11.1 above.

11.4   If the Collateral Trustees shall determine to exercise their right to
       sell all or any of the Collateral pursuant to this Section 11, the
       Chargor agrees that, upon request of the Collateral Trustees and subject
       to the Remedies Limitations, the Chargor will, at its own expense:

       11.4.1 execute and deliver, and cause each issuer of such Collateral
              contemplated to be sold and the directors and officers thereof to
              execute and deliver, all such instruments and documents, and do or
              cause to be done all such other acts and things, as may be
              necessary or, in the opinion of the Collateral Trustees, advisable
              to register such Collateral under the provisions of the Securities
              Act of 1933 of the United States of America (as amended from time
              to time, the "Securities Act"), to cause the registration
              statement relating thereto to become effective and to remain
              effective for such period as prospectuses are required by law to
              be furnished and to make all amendments and supplements thereto
              and to the related prospectus that, in the opinion of the
              Collateral Trustees, are necessary or advisable, all in conformity
              with the requirements of the Securities Act and the rules and
              regulations of the Securities and Exchange Commission applicable
              thereto;

<PAGE>


       11.4.2 use its best efforts to qualify the Collateral under the state
              securities or "Blue Sky" laws of the United States of America and
              to obtain all necessary governmental approvals for the sale of
              such Collateral, as requested by the Collateral Trustees;

       11.4.3 cause each such issuer of such Collateral to make available to its
              security holders, as soon as practicable, an earnings statement
              that will satisfy the provisions of Section 11(a) of the
              Securities Act;

       11.4.4 provide the Collateral Trustees with such other information and
              projections as may be necessary or, in the opinion of the
              Collateral Trustees, advisable to enable the Collateral Trustees
              to effect the sale of such Collateral; and

       11.4.5 do or cause to be done all such other acts and things as may be
              necessary to make such sale of such Collateral or any part thereof
              valid and binding and in compliance with applicable law.

11.5   The Collateral Trustees are authorized, in connection with any sale of
       the Collateral pursuant to this Section 11 to deliver or otherwise
       disclose to any prospective purchaser of the Collateral

       11.5.1 any registration statement or prospectus, and all supplements and
              amendments thereto, prepared pursuant to Section 11.4.1 above;

       11.5.2 any information and projections provided to it pursuant to Section
              11.4.4 above; and

       11.5.3 any other information in its possession relating to such
              Collateral.

11.6   The Chargor acknowledges the impossibility of ascertaining the amount of
       damages that would be suffered by the Secured Holders by reason of the
       failure by the Chargor to perform any of the covenants contained in
       Section 11.4 above and, consequently, agrees that, if the Chargor shall
       fail to perform any of such covenants, it will pay, as liquidated damages
       and not as a penalty, an amount equal to the value of the Collateral on
       the date the Collateral Trustees shall demand compliance with Section
       11.4 above.


12     TERMINATION OF SECURITY INTEREST; RELEASE OF CHARGED SHARES

The Collateral Trustees shall release all or any portion of the Collateral
solely on terms and subject to the conditions set forth in Article 8 of the
Collateral Trust Agreement.


<PAGE>


13     NOTICES

All notices, communications and distributions hereunder shall be given in
accordance with Section 9.03 of the Collateral Trust Agreement.


14     WAIVERS; NON-EXCLUSIVE REMEDIES

No failure on the part of the Collateral Trustees, the Representatives or any
other Secured Holder to exercise, and no delay in exercising and no course of
dealing with respect to, any right under this Charge shall operate as a waiver
thereof; nor shall any single or partial exercise of any right under the Secured
Agreements or this Charge preclude any other or further exercise thereof or the
exercise of any other right. The rights in the Secured Agreements and this
Charge are cumulative and are not exclusive of any other remedies provided by
law.


15     ADDITIONAL SECURED OBLIGATIONS

Each of the Chargor, the Collateral Trustees, the Representatives and the
Secured Holders acknowledges and agrees that the Collateral hereunder may secure
additional Obligations of the Borrower in respect of the incurrence of new Debt
by the Borrower or the refinancing, extension, or renewal of certain Debt of the
Borrower, in each case, only as permitted by the terms and conditions of the
Credit Agreement. Upon the execution and delivery to the Collateral Trustees of
an acknowledgment by the Persons to whom the Obligations referred to in the
immediately preceding sentence are owed, in form and substance satisfactory to
the Collateral Trustees, that such Persons acknowledge the terms and conditions
of this Charge and the other Shared Collateral Documents and agree to be bound
thereby, such Persons shall become a "Secured Holder" for all purposes under the
Shared Collateral Documents and shall be entitled to share ratably in the
Collateral for all purposes hereunder.


16     SUCCESSORS AND ASSIGNS; CONTINUING SECURITY INTEREST

This Charge shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until all of the Collateral is
released, and this Charge is terminated, in accordance with Section 8.02 of the
Collateral Trust Agreement, (b) be binding upon the Chargor, its successors and
assigns and (c) inure, together with the rights and remedies of the Collateral
Trustees hereunder, to the benefit of the Collateral Trustees, the
Representatives on behalf of themselves and on behalf of the Secured Holders and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), any Bank Party may assign or otherwise
transfer all or any portion of its rights and obligations under the Credit
Agreement (including, without limitation, all or any portion of its Revolving
Credit Loan Commitment, the Loans owing to it and the Note or Notes, if any,
held by it) to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Bank Party in
the Shared Collateral Documents or otherwise, in each case as provided in
Section 10.06 of the Credit Agreement.

<PAGE>


17     CHANGES IN WRITING

No amendment or waiver of any provision of this Charge, and no consent to any
departure by the Chargor herefrom, shall in any event be effective unless the
same shall (a) be in writing and signed by the Collateral Trustees and (b)
otherwise comply with Section 9.01 of the Collateral Trust Agreement, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.


18     PROTECTION OF PURCHASERS

No purchaser or other person dealing with the Collateral Trustees or their
delegate shall be bound to see or inquire whether the right of the Collateral
Trustees to exercise any of their powers has arisen or become exercisable or be
concerned with notice to the contrary, or be concerned to see whether the
delegation by the Collateral Trustees pursuant to the terms of this Charge shall
have lapsed for any reason or been revoked.


19     LAW AND JURISDICTION

19.1   This Charge is governed by, and shall be construed in accordance with,
       the law of the Cayman Islands.

19.2   The Chargor irrevocably agrees for the exclusive benefit of the
       Collateral Trustees, the Representatives and the Secured Holders that the
       courts of the Cayman Islands shall have jurisdiction to hear and
       determine any suit, action or proceeding and to settle any dispute which
       may arise out of or in connection with this Charge and for such purposes
       irrevocably submits to the jurisdiction of such courts.


20     COUNTERPARTS

This Charge may be executed in any number of counterparts and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.


<PAGE>


IN WITNESS WHEREOF this Charge has been executed and delivered as a Deed the day
and year first above written.

EXECUTED UNDER THE COMMON SEAL OF   )
AES INTERNATIONAL HOLDINGS II, LTD. )     ......................................
                                    )     Name:
                                    )     Title:
                                    )
In the presence of:

                      Witness
----------------------


EXECUTED AS A DEED by               )
WILMINGTON TRUST COMPANY            )     ......................................
                                    )     Name:
                                    )     Title:
In the presence of:

                      Witness
----------------------


EXECUTED AS A DEED by               )
BRUCE L. BISSON                     )     ......................................
                                    )     Name:
                                    )     Title:
In the presence of:

                      Witness
----------------------




<PAGE>


ACKNOWLEDGED by                       )
Citicorp USA, Inc., as Administrative )
Agent                                 )   ......................................
                                      )   Name:
                                      )   Title:
In the presence of:

                      Witness
----------------------



ACKNOWLEDGED by                       )
Wells Fargo Bank Minnesota,           )
National Association, as Exchange     )
Note Trustee                          )   ......................................
                                      )   Name:
                                      )   Title:
In the presence of:

                      Witness
----------------------



ACKNOWLEDGED by                       )
BankBoston, N.A., Nassau Branch,      )
as Sul Agent                          )   ......................................
                                      )   Name:
                                      )   Title:
In the presence of:

                      Witness
----------------------


ACKNOWLEDGED by                       )
Fleet National Bank,                  )
as Lake Worth LOC Bank                )   ......................................
                                      )   Name:
                                      )   Title:
In the presence of:

                      Witness
----------------------



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.5
<SEQUENCE>7
<FILENAME>dec1602_ex4-5.txt
<TEXT>
                                                                    EXHIBIT 4.5


--------------------------------------------------------------------------------





                              THE AES CORPORATION
                                 as the Company


                                      and


                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

                                   as Trustee



                       ---------------------------------

                       Contingent Value Rights Agreement

                         Dated as of December 13, 2002

                       ---------------------------------





--------------------------------------------------------------------------------

<PAGE>


                              TABLE OF CONTENTS(1)
                               ------------------


                                                                           PAGE
                                                                           ----


                                   ARTICLE 1
                   DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01.  Definitions....................................................1
Section 1.02.  Other Definitions..............................................5
Section 1.03.  Rules of Construction..........................................5

                                   ARTICLE 2
                                    THE CVRs

Section 2.01.  Title and Terms................................................5
Section 2.02.  Execution and Authentication...................................6
Section 2.03 . Paying Agent; Paying Agent to Hold Money in Trust..............7
Section 2.04.  No Transfer and Exchange.......................................8
Section 2.05.  Registration...................................................8
Section 2.06.  Replacement CVRs...............................................9
Section 2.07.  Outstanding CVRs...............................................9
Section 2.08.  Temporary CVRs................................................10
Section 2.09.  Cancellation..................................................10
Section 2.10.  CUSIP Numbers.................................................11

                                   ARTICLE 3
                                   COVENANTS

Section 3.01.  Payment of CVRs...............................................11
Section 3.02.  Maintenance of Office or Agency...............................11

                                   ARTICLE 4
                             SUCCESSOR CORPORATION

Section 4.01.  When Company May Merge, Etc...................................12
Section 4.02.  Successor Substituted.........................................12


--------------------
     1 Note: The Table of Contents shall not for any purposes be deemed to be a
part of the Agreement.


                                       i
<PAGE>


                                   ARTICLE 5
                              DEFAULT AND REMEDIES

Section 5.01.  Events of Default.............................................12
Section 5.02.  Remedies......................................................12
Section 5.03.  Limitation on Suits...........................................13
Section 5.04.  Rights of Holders to Receive Payment..........................13
Section 5.05.  Collection Suit by Trustee....................................13
Section 5.06.  Trustee May File Proofs of Claim..............................14
Section 5.07.  Application of Proceeds.......................................14
Section 5.08.  Restoration of Rights and Remedies............................15
Section 5.09.  Undertaking for Costs.........................................15
Section 5.10.  Rights and Remedies Cumulative................................15
Section 5.11.  Delay or Omission Not Waiver..................................15

                                   ARTICLE 6
                                    TRUSTEE

Section 6.01.  General.......................................................15
Section 6.02.  Certain Rights of Trustee.....................................16
Section 6.03.  Individual Rights of Trustee..................................17
Section 6.04.  Trustee's Disclaimer..........................................17
Section 6.05.  Notice of Event of Default....................................17
Section 6.06.  Compensation and Indemnity....................................18
Section 6.07.  Replacement of Trustee........................................18
Section 6.08.  Successor Trustee by Merger, Etc..............................19
Section 6.09.  Money Held in Trust...........................................20

                                   ARTICLE 7
                      AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 7.01.  Without Consent of Holders....................................20
Section 7.02.  With Consent of Holders.......................................20
Section 7.03.  Effect of Amendments..........................................21
Section 7.04.  Notation on or Exchange of CVRs...............................21
Section 7.05.  Trustee to Sign Amendments, Etc...............................21

                                   ARTICLE 8
                                 MISCELLANEOUS

Section 8.01.  Notices.......................................................22
Section 8.02.  Certificate and Opinion as to Conditions Precedent............23
Section 8.03.  Statements Required in Certificate or Opinion.................23
Section 8.04.  Evidence of Ownership.........................................24
Section 8.05.  Rules by Paying Agent.........................................24


                                       ii
<PAGE>


Section 8.06.  Governing Law.................................................24
Section 8.07.  No Adverse Interpretation of Other Agreements.................24
Section 8.08.  Successors....................................................24
Section 8.09.  Duplicate Originals...........................................24
Section 8.10.  Separability..................................................24
Section 8.11.  Table of Contents, Headings, Etc..............................24
Section 8.12.  Incorporators, Stockholders, Officers and Directors
                 of Company Exempt from Individual Liability.................24




                                      iii
<PAGE>




     AGREEMENT, dated as of December 13, 2002, between The AES Corporation, a
Delaware corporation, as the Company, and Wells Fargo Bank Minnesota, National
Association, a national banking association, as Trustee.

                            RECITALS OF THE COMPANY

     WHEREAS, the Company has duly authorized the creation of an issue of
contingent value rights (the "CVRs"), of the tenor and amount set forth herein,
and to provide therefor the Company has duly authorized the execution and
delivery of this Agreement;

     WHEREAS the Company, pursuant to the Amended and Restated Offering
Memorandum and related letter of transmittal each dated as of November 12, 2002,
has agreed to issue, to each holder of the Company's 7.375% Remarketable or
Redeemable Securities due 2013 ("ROARS") that validly tenders such ROARS to the
Company on or prior to the Expiration Date of the Exchange Offer (as defined
below) and does not withdraw such ROARS, one CVR for each $1,000 principal
amount of ROARS tendered;

     WHEREAS, all things necessary to make this Agreement a valid agreement of
the Company, in accordance with its terms, have been done, and the Company has
done all things necessary to make the CVRs, when executed by the Company and
authenticated and delivered by the Trustee, the valid obligations of the Company
as hereinafter provided;

     NOW, THEREFORE THIS AGREEMENT WITNESSETH

     For and in consideration of the premises and the consummation of the
transactions referred to above, it is mutually covenanted and agreed, for the
equal and proportionate benefit of the respective holders of the CVRs as
follows:

                                   ARTICLE 1
                   DEFINITIONS AND INCORPORATION BY REFERENCE

     Section 1.01. Definitions.

     "Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with") when used with respect to any Person means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.


<PAGE>


     "Agent" means any Paying Agent, transfer agent or Authenticating Agent.

     "Agent Member" means a member of, or a participant in, the Depositary.

     "Agreement" means this Agreement as originally executed and delivered or as
it may be amended or supplemented from time to time by one or more amendments to
this Agreement entered into pursuant to the applicable provisions of this
Agreement.

     "Amended and Restated Offering Memorandum" means the offering memorandum
dated November 12, 2002, as amended or supplemented through the Expiration Date,
which describes the terms and conditions of the Exchange Offer.

     "Board of Directors" means either the Board of Directors of the Company or
any committee of such Board duly authorized to act hereunder.

     "Board Resolution" means one or more resolutions of the Board of Directors
or any committee authorized or designated by the Board of Directors to act on
its behalf, certified by the secretary or an assistant secretary to have been
duly adopted and to be in full force and effect on the date of certification,
and delivered to the Trustee.

     "Certificated CVR" means a Registered CVR in individual form.

     "CILCORP Sale" means the sale of all of the issued and outstanding shares
of common stock, without par value, of CILCORP Inc., an Illinois corporation, to
Ameren Corporation pursuant to the Stock Purchase Agreement dated as of April
28, 2002.

     "Company" means the party named as such in the first paragraph of this
Agreement until a successor replaces it pursuant to Article 4 of this Agreement
and thereafter means the successor.

     "Contingent Payment" means a payment of $20 for each CVR; provided that the
Company shall have no obligation to make such payment unless and until the
CILCORP Sale is consummated.

     "Contingent Payment Date" means the date, if any, on which the Company
makes the Contingent Payment which shall be within 30 days of the date on which
the CILCORP Sale is consummated.

     "Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Agreement,
located at Sixth Street


                                       2
<PAGE>


and Marquette Avenue, Minneapolis, Minnesota, Attention: AES Corporation
Administrator.

     "CVRs" means any of the contingent value rights, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Agreement.

     "Default Interest Rate" means 10% per annum, compounded semi-annually on
the basis of a 360-day year of twelve 30-day months.

     "Depositary" means the depositary of each Global CVR, which initially will
be DTC unless and until a successor Depositary shall have become such pursuant
to the applicable provisions of this Agreement, and thereafter "Depositary"
shall mean or include each Person who is then a Depositary hereunder.

     "DTC" means The Depository Trust Company, a New York corporation.

     "DTC Legend" means the legend set forth in Exhibit B.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Exchange Offer" means the Company's offer to exchange its outstanding
8.75% Senior Notes and ROARS for new 10% Senior Secured Notes due 2005 plus a
cash amount, and, in the case of the ROARS, a CVR, as described in the Amended
and Restated Offering Memorandum.

     "Expiration Date" means December 12, 2002, the expiration date of the
Exchange Offer.

     "GAAP" means generally accepted accounting principles in the U.S. as in
effect as of the date of this Agreement applied on a basis consistent with the
principles, methods, procedures and practices employed in the preparation of the
Company's audited financial statements, including, without limitation, those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as is approved by a significant segment of the
accounting profession.

     "Global CVR" means a Registered CVR in global form.

     "Holder" means the registered holder of any CVR and all beneficial holders
thereof.


                                       3
<PAGE>


     "Officer" means, with respect to the Company, the chairman of the Board of
Directors, the president or chief executive officer, any vice president, the
chief financial officer, the treasurer or any assistant treasurer, or the
secretary or any assistant secretary.

     "Officers' Certificate" means a certificate signed in the name of the
Company (i) by the chairman of the Board of Directors, the president or chief
executive officer or a vice president and (ii) by the chief financial officer,
the treasurer or any assistant treasurer, or the secretary or any assistant
secretary, complying with Section 8.03 and delivered to the Trustee. Each such
certificate shall include (except as otherwise expressly provided in this
Agreement) the statements provided in Section 8.03.

     "Opinion of Counsel" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Company, satisfactory to the Trustee and
complying with Section 8.03. Each such opinion shall include the statements
provided in Section 8.03, if and to the extent required thereby.

     "Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

     "Registered CVR" means any CVR registered on the CVR Register (as defined
in Section 2.05).

     "Responsible Officer" means, when used with respect to the Trustee, any
senior trust officer, any vice president, any trust officer, any assistant trust
officer, or any other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge of and familiarity with the particular
subject.

     "Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which a majority of the capital stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by such Person.

     "Trustee" means the party named as such in the first paragraph of this
Agreement until a successor replaces it in accordance with the provisions of
Article 6 and thereafter means such successor.

     "8.75% Senior Notes" means the 8.75% Senior Notes due December 15, 2002
issued by the Company.


                                       4
<PAGE>


     Section 1.02. Other Definitions. Each of the following terms is defined in
the section set forth opposite such term:

                  Term                                  Section
                  ----                                  -------
                  Authenticating Agent                    2.02
                  CVR Register                            2.05
                  Event of Default                        5.01
                  Paying Agent                            2.03

     Section 1.03. Rules of Construction. Unless the context otherwise requires:

          (i) an accounting term not otherwise defined has the meaning assigned
     to it in accordance with GAAP;

          (ii) words in the singular include the plural, and words in the plural
     include the singular;

          (iii) "herein," "hereof" and other words of similar import refer to
     this Agreement as a whole and not to any particular Article, Section or
     other subdivision;

          (iv) all references to Sections or Articles refer to Sections or
     Articles of this Agreement unless otherwise indicated; and

          (v) use of masculine, feminine or neuter pronouns should not be deemed
     a limitation, and the use of any such pronouns should be construed to
     include, where appropriate, the other pronouns.

                                   ARTICLE 2
                                    THE CVRs

     Section 2.01. Title and Terms. (a) The aggregate number of CVRs which may
be authenticated and delivered under this Agreement is limited to one CVR for
each $1,000 aggregate principal amount of ROARS validly tendered in the
Exchange Offer on or prior to the Expiration Date and not validly withdrawn,
except for CVRs authenticated and delivered in exchange for, or in lieu of,
other CVRs pursuant to Section 2.06, 2.08 or 7.04.

     (b) The CVRs shall be known and designated as "Contingent Value Rights" of
the Company.

     (c) Each CVR and the related Trustee's certificate of authentication will
be substantially in the form attached hereto as Exhibit A. The terms and


                                       5
<PAGE>


provisions contained in the form of the CVRs annexed as Exhibit A constitute,
and are hereby expressly made, a part of this Agreement.

     (d) The CVRs shall be issuable in denominations of one CVR for each $1,000
aggregate principal amount of ROARS validly tendered in the Exchange Offer on or
prior to the Expiration Date and not validly withdrawn. The CVRs shall be
numbered, lettered or otherwise distinguished in such manner or in accordance
with such plan as the Officers of the Company executing the same may determine,
as evidenced by their execution thereof. Each CVR shall be dated the date of its
authentication.

     (e) If and when the Contingent Payment Date occurs, the Company shall make
the Contingent Payment to each Holder.

     (f) In the event that it is finally determined in good faith that the
CILCORP Sale will not be consummated and that the condition for payment of the
CVRs will not occur, the Company shall give to the Trustee and each Holder
notice of such determination. Upon such determination, absent manifest error,
the CVRs shall terminate and become null and void and the Holders thereof shall
have no further rights with respect thereto. The failure to give such notice or
any defect therein shall not affect the validity of such determination.

     Section 2.02. Execution and Authentication. Two Officers shall execute the
CVRs for the Company by facsimile or manual signature in the name and on behalf
of the Company. If an Officer whose signature is on a CVR no longer holds that
office at the time the CVR is authenticated, the CVR shall nevertheless be
valid.

     The Trustee, at the expense of the Company, may appoint an authenticating
agent (the "Authenticating Agent") to authenticate CVRs. The Authenticating
Agent may authenticate CVRs whenever the Trustee may do so. Each reference in
this Agreement to authentication by the Trustee includes authentication by such
Authenticating Agent.

     A CVR shall not be valid until the Trustee or Authenticating Agent manually
signs the certificate of authentication on the CVR. The signature shall be
conclusive evidence that the CVR has been authenticated under this Agreement. In
authenticating the CVRs, the Trustee shall be entitled to receive prior to the
first authentication of any CVRs and (subject to Article 6) shall be fully
protected in relying upon, unless and until such documents have been superseded
or revoked:

     (a) any Board Resolution by or pursuant to which the form and terms of the
CVRs were established;


                                       6
<PAGE>


     (b) An Officers' Certificate setting forth the form and terms of the CVRs,
stating that the form and terms of the CVRs have been established in compliance
with this Agreement; and

     (c) an Opinion of Counsel substantially to the effect that the form and
terms of the CVRs have been established in compliance with this Agreement, and
the CVRs have been duly authorized and, if executed and authenticated in
accordance with the provisions of the Agreement and delivered to the holders of
the ROARS pursuant to the terms of the Exchange Offer on the date of such
opinion, would be entitled to the benefits of the Agreement and would be valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws affecting
creditors' rights generally, general principles of equity and such other matters
as shall be specified therein.

     Section 2.03. Paying Agent; Paying Agent to Hold Money in Trust. The
Company shall maintain an office or agency where CVRs may be presented for
payment (the "Paying Agent"), which shall be in the Borough of Manhattan, The
City of New York. The Company initially appoints the Trustee as Paying Agent.
The Trustee's function as Paying Agent will be performed through its Agent in
The City of New York.

     (b) Not later than 10:00 a.m. New York City time on the Contingent Payment
Date, the Company shall deposit with the Paying Agent money in immediately
available funds sufficient to make the Contingent Payment for each CVR. The
Company shall require each Paying Agent other than the Trustee to agree in
writing that such Paying Agent shall hold in trust, for the benefit of the
Holders of such CVRs or the Trustee, all money held by the Paying Agent for the
payment of the Contingent Payment for each CVR and shall promptly notify the
Trustee of any default by the Company in making any such payment. The Company at
any time may require a Paying Agent to pay all money held by it to the Trustee
and account for any funds disbursed, and the Trustee may at any time during the
continuance of any payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon doing so, the Paying Agent shall have no
further liability for the money so paid over to the Trustee. If the Company or
any Affiliate of the Company acts as Paying Agent, it will, on or before the
Contingent Payment Date or any date upon which any amounts are due to the
Holders of the CVRs, segregate and hold in a separate trust fund for the benefit
of the Holders thereof a sum of money sufficient to make such payment until such
sum of money shall be paid to such Holders or otherwise disposed of as provided
in this Agreement, and will promptly notify the Trustee in writing of its action
or failure to act as required by this Section.


                                       7
<PAGE>


     Section 2.04. No Transfer and Exchange. (a) The CVRs many not be
transferred or exchanged except as set forth in Section 2.05(b)(iv) in
accordance with the applicable rules and procedures of the Depositary. The
Trustee shall refuse to register any requested transfer or exchange that does
not comply with the preceding sentence. In addition, no transfer or exchange of
a beneficial interest in the CVRs will be permitted or recognized by the
Trustee, except as otherwise required by law.

     (b) The Trustee will retain copies of all certificates, opinions and other
documents received in connection with the transfer or exchange of a CVR (or a
beneficial interest therein), and the Company will have the right to inspect and
make copies thereof at any reasonable time upon written notice to the Trustee.

     (c) By its acceptance of any CVR (or any beneficial interest in such CVR),
each Holder thereof and each owner of a beneficial interest therein acknowledges
and agrees that such CVR (or a beneficial interest therein) is nontransferable
except as set forth in clause (a) above.

     Section 2.05. Registration. (a) Registered Global Form Only. The CVRs will
be issued in registered form only, without coupons, and the Company shall cause
the Trustee to maintain a register (the "CVR Register") of the CVRs, for
registering the record ownership of the CVRs by the Holders. The CVRs will be
issued in global form only except for CVRs to be issued under the circumstances
described in clause (b)(iv) of this Section.

     (b) Global CVRs. (i) Each Global CVR will be registered in the name of the
Depositary or its nominee and, so long as DTC is serving as the Depositary
thereof, will bear the DTC Legend.

          (ii) Each Global CVR will be delivered to the Trustee as custodian for
     the Depositary. Transfers of a Global CVR (but not a beneficial interest
     therein) will be limited to transfers thereof in whole, but not in part, to
     the Depositary, its successors or their respective nominees, except as set
     forth in paragraph (b)(iv) of this Section.

          (iii) Agent Members will have no rights under the Agreement with
     respect to any Global CVR held on their behalf by the Depositary, and the
     Depositary may be treated by the Company, the Trustee and any agent of the
     Company or the Trustee as the absolute owner and Holder of such Global CVR
     for all purposes whatsoever. Notwithstanding the foregoing, the Depositary
     or its nominee may grant proxies and otherwise authorize any person
     (including any Agent Member and any Person that holds a beneficial interest
     in a Global CVR through an Agent Member) to take any action which a Holder
     is entitled to take under the Agreement or the CVRs, and nothing herein
     will impair, as between the Depositary and


                                       8
<PAGE>


     its Agent Members, the operation of customary practices governing the
     exercise of the rights of a holder of any security.

          (iv) If (x) the Depositary (1) notifies the Company that it is
     unwilling or unable to continue as Depositary for a Global CVR and a
     successor depositary is not appointed by the Company within 90 days of the
     notice or (2) has ceased to be a clearing agency registered under the
     Exchange Act, (y) an Event of Default has occurred and is continuing and
     the Trustee has received a request from the Depositary, or (z) the Company,
     at its option, notifies the Trustee in writing that it elects to cause the
     issuance of Certificated CVRs, the Trustee will promptly exchange each
     beneficial interest in the Global CVR for one or more Certificated CVRs in
     authorized denominations registered in the name of the owner of such
     beneficial interest, as identified to the Trustee by the Depositary, and
     thereupon the Global CVR will be deemed canceled.

     Section 2.06. Replacement CVRs. If a defaced or mutilated CVR is
surrendered to the Trustee or if a Holder claims that its CVR has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement CVR bearing a number not contemporaneously
outstanding. If required by the Trustee or the Company, an indemnity bond must
be furnished that is sufficient in the judgment of both the Trustee and the
Company to protect the Company, the Trustee and any Agent from any loss that any
of them may suffer if a CVR is replaced. The Company may charge such Holder for
its expenses and the expenses of the Trustee (including without limitation
attorneys' fees and expenses) in replacing a CVR. In case any such mutilated,
defaced, lost, destroyed or wrongfully taken CVR has become or is about to
become due and payable, the Company in its discretion may pay such CVR instead
of issuing a new CVR in replacement thereof.

     Every replacement CVR is an additional obligation of the Company and shall
be entitled to the benefits of this Agreement.

     To the extent permitted by law, the foregoing provisions of this Section
are exclusive with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken CVRs.

     Section 2.07. Outstanding CVRs. CVRs outstanding at any time are all CVRs
that have been authenticated by the Trustee except for those cancelled by it,
those delivered to it for cancellation and those described in this Section as
not outstanding.

     If a CVR is replaced pursuant to Section 2.06, it ceases to be outstanding
unless and until the Trustee and the Company receive proof satisfactory to them
that the replaced CVR is held by a holder in due course.


                                       9
<PAGE>


     If the Paying Agent (other than the Company or an Affiliate of the Company)
holds on the Contingent Payment Date, money sufficient to pay CVRs payable on
that date, then on and after that date such CVRs cease to be outstanding.

     A CVR does not cease to be outstanding because the Company or one of its
Affiliates holds such CVR, provided, however, that, in determining whether the
Holders of the outstanding CVRs have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, CVRs owned by the Company or any
Affiliate of the Company shall be disregarded and deemed not to be outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only CVRs as to which a Responsible Officer of the Trustee has received
written notice to be so owned shall be so disregarded. Any CVRs so owned which
are pledged by the Company, or by any Affiliate of the Company, as security for
loans or other obligations, otherwise than to another such Affiliate of the
Company, shall be deemed to be outstanding, if the pledgee is entitled pursuant
to the terms of its pledge agreement and is free to exercise in its or his
discretion the right to vote such CVRs, uncontrolled by the Company or by any
such Affiliate.

     Section 2.08. Temporary CVRs. Until definitive CVRs are ready for delivery,
the Company may prepare and the Trustee shall authenticate temporary CVRs.
Temporary CVRs shall be substantially in the form of definitive CVRs but may
have insertions, substitutions, omissions and other variations determined to be
appropriate by the Officers executing the temporary CVRs, as evidenced by their
execution of such temporary CVRs. If temporary CVRs are issued, the Company will
cause definitive CVRs to be prepared without unreasonable delay. After the
preparation of definitive CVRs, the temporary CVRs shall be exchangeable for
definitive CVRs of such tenor upon surrender of such temporary CVRs at the
office or agency of the Company designated for such purpose pursuant to Section
3.02, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary CVRs the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like number of CVRs of the same
tenor. Until so exchanged, the temporary CVRs shall be entitled to the same
benefits under this Agreement as definitive CVRs.

     Section 2.09. Cancellation. The Company at any time may deliver to the
Trustee for cancellation any CVRs previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any CVRs previously authenticated
hereunder which the Company has not issued and sold. Any transfer agent and the
Paying Agent shall forward to the Trustee any CVRs surrendered to them for
transfer, exchange or payment. The Trustee shall cancel and destroy all CVRs
surrendered for transfer, exchange, payment or cancellation and shall deliver a


                                       10
<PAGE>


certificate of destruction to the Company. The Company may not issue new CVRs to
replace CVRs it has paid in full or delivered to the Trustee for cancellation.

     Section 2.10. CUSIP Numbers. The Company in issuing the CVRs may use
"CUSIP" and "CINS" numbers, and the Trustee shall use CUSIP numbers or CINS
numbers, as the case may be, in notices of redemption or exchange as a
convenience to Holders and no representation shall be made as to the correctness
of such numbers either as printed on the CVRs or as contained in any notice of
redemption or exchange.

                                   ARTICLE 3
                                   COVENANTS

     Section 3.01. Payment of CVRs. The Company shall duly and punctually pay
the amounts, if any, in the manner provided for in Section 2.03, payable on the
CVRs in accordance with the terms of the CVRs and this Agreement.

     Section 3.02. Maintenance of Office or Agency. So long as any of the CVRs
remain outstanding, the Company will maintain in the Borough of Manhattan, The
City of New York, an office or agency where CVRs may be surrendered or presented
for payment and where notices and demands to or upon the Company in respect of
the CVRs and this Agreement may be served. The Company hereby initially
designates the Corporate Trust Office of the Trustee, located in the Borough of
Manhattan, The City of New York, as such office or agency of the Company. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 8.01.

     The Company may also from time to time designate one or more other offices
or agencies where the CVRs may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.


                                       11
<PAGE>


                                   ARTICLE 4
                              SUCCESSOR CORPORATION

     Section 4.01. When Company May Merge, Etc. The Company shall not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially as an entirety in one transaction or a series of
related transactions) to, any Person (other than a consolidation with or merger
with or into a Subsidiary or a sale, conveyance, transfer, lease or other
disposition to a Subsidiary) or permit any Person to merge with or into the
Company unless either (x) the Company shall be the continuing Person or (y) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or to which properties and assets of the Company shall be
a solvent corporation organized and validly existing under the laws of the
United States of America or any state thereof or the District of Columbia and
shall expressly assume, by an amendment to this Agreement, executed and
delivered to the Trustee, all of the obligations of the Company on all of the
CVRs issued under this Agreement and the Company shall have delivered to the
Trustee an Opinion of Counsel stating that such consolidation, merger or
transfer and such amendment complies with this provision and that all conditions
precedent provided for herein relating to such transaction have been complied
with and that such amendment constitutes the legal, valid and binding obligation
of the Company or such successor enforceable against such entity in accordance
with its terms, subject to customary exceptions.

     Section 4.02. Successor Substituted. Upon any consolidation or merger, or
any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 4.01 of this Agreement, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if such successor Person had been named
as the Company herein.

                                   ARTICLE 5
                              DEFAULT AND REMEDIES

     Section 5.01. Events of Default. An "Event of Default" shall occur with
respect to the CVRs if the Company defaults in making the Contingent Payment
when the same becomes due and payable on the Contingent Payment Date.

     Section 5.02. Remedies. If an Event of Default with respect to the CVRs
occurs and is continuing, the Trustee may pursue, in its own name or as trustee
of an express trust, any available remedy by proceeding at law or in equity to
collect the payments due on the CVRs. In addition, Default Interest will accrue
at the


                                       12
<PAGE>


Default Interest Rate from the scheduled Contingent Payment Date until the date
on which the Company makes the Contingent Payment.

     The Trustee may maintain a proceeding even if it does not possess any of
the CVRs or does not produce any of them in the proceeding.

     Section 5.03. Limitation on Suits. No Holder of any CVR may institute any
proceeding, judicial or otherwise, with respect to this Agreement or the CVRs,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:

          (i) such Holder has previously given to the Trustee written notice of
     a continuing Event of Default with respect to the CVRs;

          (ii) the Holders of at least 25% of outstanding CVRs shall have made
     written request to the Trustee to pursue the remedy;

          (iii) such Holder or Holders have offered and, if requested, provided
     to the Trustee indemnity reasonably satisfactory to the Trustee against any
     costs, liabilities or expenses to be incurred in compliance with such
     request;

          (iv) the Trustee for 60 days after its receipt of such notice, request
     and offer of indemnity has failed to institute any such proceeding; and

          (v) during such 60-day period, the Holders of a majority in
     outstanding CVRs have not given the Trustee a direction that is
     inconsistent with such written request.

     A Holder may not use this Agreement to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.

     Section 5.04. Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Agreement, the right of any Holder of a CVR to receive
payment of the amount payable in respect of such CVR on or after the Contingent
Payment Date expressed in such CVR, or to bring suit for the enforcement of any
such payment on or after such date, shall not be impaired or affected without
the consent of such Holder.

     Section 5.05. Collection Suit by Trustee. If an Event of Default occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount in cash that then
shall have become due and payable on all CVRs (with interest from the date due
and payable to the date of such payment upon the overdue amount at the


                                       13
<PAGE>


Default Interest Rate) and such further amount as shall be sufficient to cover
all amounts owing the Trustee under Section 6.06.

     Section 5.06. Trustee May File Proofs of Claim. The Trustee may file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for amounts due
the Trustee under Section 6.06) and the Holders allowed in any judicial
proceedings relative to the Company (or any other obligor on the CVRs), its
creditors or its property and shall be entitled and empowered to collect and
receive any moneys, securities or other property payable or deliverable upon
conversion or exchange of the CVRs or upon any such claims and to distribute the
same, and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due to it under Section 6.06. Nothing herein
contained shall be deemed to empower the Trustee to authorize or consent to, or
accept or adopt on behalf of any Holder, any plan of reorganization,
arrangement, adjustment or composition affecting the CVRs or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Holder in any such proceeding.

     Section 5.07. Application of Proceeds. Any moneys collected by the Trustee
pursuant to this Article in respect of the CVRs shall be applied in the
following order at the date or dates fixed by the Trustee:

          FIRST: To the payment of all amounts due the Trustee under Section
     6.06;

          SECOND: to Holders for amounts then due and unpaid for the Contingent
     Payment and any Default Interest on the CVRs, ratably, without preference
     or priority of any kind, according to the amounts due and payable on the
     CVRs for the Contingent Payment and any Default Interest, and in the case
     such moneys shall be insufficient to pay in full the whole amount so due
     and unpaid upon the CVRs, then to the payment of such amounts without
     preference or priority of any kind, ratably, to the aggregate of such
     amounts due and payable; and

          THIRD: To the payment of the remainder, if any, to the Company or any
     other person lawfully entitled thereto.


                                       14
<PAGE>


     Section 5.08. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Agreement and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then, and in
every such case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored to their former positions
hereunder and thereafter all rights and remedies of the Company, Trustee and the
Holders shall continue as though no such proceeding had been instituted.

     Section 5.09. Undertaking for Costs. In any suit for the enforcement of any
right or remedy under this Agreement or in any suit against the Trustee for any
action taken or omitted by it as Trustee, in either case with respect to the
CVRs, a court may require any party litigant in such suit (other than the
Trustee) to file an undertaking to pay the costs of the suit, and the court may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant (other than the Trustee) in the suit having due regard to the merits
and good faith of the claims or defenses made by the party litigant. This
Section 5.09 does not apply to a suit by a Holder pursuant to Section 5.04 or a
suit by Holders of more than 10% of the CVRs outstanding.

     Section 5.10. Rights and Remedies Cumulative. Except as otherwise provided
with respect to the replacement or payment of mutilated, destroyed, lost or
wrongfully taken CVRs in Section 2.06, no right or remedy herein conferred upon
or reserved to the Trustee or to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.

     Section 5.11. Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any Holder to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy given
by this Article 5 or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.

                                   ARTICLE 6
                                    TRUSTEE

     Section 6.01. General. The duties and responsibilities of the Trustee shall
be as set forth herein. The Trustee undertakes to perform only the duties


                                       15
<PAGE>


expressly set forth herein and no implied covenant or obligation shall be read
into this Agreement against the Trustee. Notwithstanding the foregoing, no
provision of this Agreement shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, unless
it receives indemnity satisfactory to it against any loss, liability or
expense. Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Article 6.

     Section 6.02. Certain Rights of Trustee. (a) The Trustee may rely and
shall be protected in acting or refraining from acting upon any Board
Resolution, Officers' Certificate, Opinion of Counsel, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper person or
persons. The Trustee need not investigate any fact or matter stated in the
document, but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit;

     (b) before the Trustee acts or refrains from acting, it may require an
Officers' Certificate and/or an Opinion of Counsel, which shall conform to
Section 8.03. The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on such certificate or opinion. Subject to
Section 6.01 and Section 6.02, whenever in the administration of the trusts of
this Agreement the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Agreement upon the faith thereof;

     (c) the Trustee may act through its attorneys and agents not regularly in
its employ and shall not be responsible for the misconduct or negligence of any
agent or attorney appointed with due care;

     (d) any request, direction, order or demand of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;


                                       16
<PAGE>


     (e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement at the request, order or direction of
any of the Holders, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction;

     (f) the Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within its rights or
powers;

     (g) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon; and

     (h) prior to the occurrence of an Event of Default hereunder and after the
curing or waiving of all Events of Default, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, Officers' Certificate, Opinion of Counsel, Board Resolution,
statement, instrument, opinion, report, notice, request, consent, order,
approval, appraisal, bond, debenture, note, security, or other paper or document
unless requested in writing so to do by the Holders of not less than a majority
of the CVRs then outstanding; provided that, if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be incurred
by it in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require reasonable indemnity against such
expenses or liabilities as a condition to proceeding.

     Section 6.03. Individual Rights of Trustee. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of the CVRs and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not the Trustee. Any Agent may do the same with like rights.

     Section 6.04. Trustee's Disclaimer. The recitals contained herein and in
the CVRs (except the Trustee's certificate of authentication) shall be taken as
statements of the Company and not of the Trustee and the Trustee assumes no
responsibility for the correctness of the same. Neither the Trustee nor any of
its agents makes any representation as to the validity or adequacy of this
Agreement or the CVRs.

     Section 6.05. Notice of Event of Default. If any Event of Default with
respect to the CVRs occurs and is continuing and if such Event of Default is
known to the actual knowledge of a Responsible Officer of the Trustee, the
Trustee shall give to each Holder of CVRs notice of such Event of Default within


                                       17
<PAGE>


90 days after it occurs to all Holders, unless such Event of Default shall have
been cured or waived before the mailing or publication of such notice.

     Section 6.06. Compensation and Indemnity. The Company shall pay to the
Trustee such compensation as shall be agreed upon in writing from time to time
for its services. The compensation of the Trustee shall not be limited by any
law on compensation of a Trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of pocket expenses,
disbursements and advances incurred or made by the Trustee. Such expenses shall
include the reasonable compensation and expenses of the Trustee's agents,
counsel and other persons not regularly in its employ.

     The Company shall indemnify the Trustee for, and hold it harmless against,
any loss or liability or expense incurred by it without gross negligence or bad
faith on its part arising out of or in connection with the acceptance or
administration of this Agreement and the CVRs or the issuance of the CVRs or the
trusts hereunder and the performance of duties under this Agreement and the
CVRs, including the costs and expenses of defending itself against or
investigating any claim or liability and of complying with any process served
upon it or any of its officers in connection with the exercise or performance of
any of its powers or duties under this Agreement and the CVRs.

     To secure the Company's payment obligations in this Section 6.06, the
Trustee shall have a lien prior to the CVRs on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay amounts due with respect to particular CVRs.

     The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute additional indebtedness hereunder and shall survive the
satisfaction and discharge of this Agreement or the rejection or termination of
this Agreement under bankruptcy law. Such additional indebtedness shall be a
senior claim to that of the CVRs upon all property and funds held or collected
by the Trustee as such, except funds held in trust for the benefit of the
Holders of particular CVRs, and the CVRs are hereby subordinated to such senior
claim.

     Section 6.07. Replacement of Trustee. A resignation or removal of the
Trustee as Trustee and appointment of a successor Trustee as Trustee shall
become effective only upon the successor Trustee's acceptance of appointment as
provided in this Section 6.07.

     The Trustee may resign as Trustee with respect to the CVRs at any time by
so notifying the Company in writing. The Holders of a majority of outstanding
CVRs may remove the Trustee as Trustee with respect to the CVRs by so


                                       18
<PAGE>


notifying the Trustee in writing and may appoint a successor Trustee with
respect thereto with the consent of the Company. The Company may remove the
Trustee as Trustee with respect to the CVRs if: (i) the Trustee is adjudged a
bankrupt or insolvent; (ii) a receiver or other public officer takes charge of
the Trustee or its property; or (iii) the Trustee becomes incapable of acting.

     If the Trustee resigns or is removed as Trustee with respect to the CVRs,
or if a vacancy exists in the office of Trustee with respect to the CVRs for any
reason, the Company shall promptly appoint a successor Trustee with respect
thereto. Within one year after the successor Trustee takes office, the Holders
of a majority of outstanding CVRs may appoint a successor Trustee in respect of
such CVRs to replace the successor Trustee appointed by the Company. If the
successor Trustee with respect to the CVRs does not deliver its written
acceptance required by the next succeeding paragraph of this Section 6.07 within
30 days after the retiring Trustee resigns or is removed, the retiring Trustee,
the Company or the Holders of a majority of the outstanding CVRs may petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect thereto.

     A successor Trustee with respect to the CVRs shall deliver a written
acceptance of its appointment to the retiring Trustee and to the Company.
Immediately after the delivery of such written acceptance, subject to the lien
provided for in Section 6.06, (i) the retiring Trustee shall transfer all
property held by it as Trustee in respect of the CVRs to the successor Trustee,
(ii) the resignation or removal of the retiring Trustee in respect of the CVRs
shall become effective and (iii) the successor Trustee shall have all the
rights, powers and duties of the Trustee in respect of the CVRs under this
Agreement. A successor Trustee shall mail notice of its succession to each
Holder of CVRs.

     Upon request of any such successor Trustee, the Company shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts referred to in the
preceding paragraph.

     The Company shall give notice of any resignation and any removal of the
Trustee with respect to the CVRs and each appointment of a successor Trustee in
respect of the CVRs to all Holders of CVRs. Each notice shall include the name
of the successor Trustee and the address of its Corporate Trust Office.

     Notwithstanding replacement of the Trustee with respect to the CVRs
pursuant to this Section 6.07, the Company's obligations under Section 6.06
shall continue for the benefit of the retiring Trustee.

     Section 6.08. Successor Trustee by Merger, Etc. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all of


                                       19
<PAGE>


its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.

     Section 6.09. Money Held in Trust. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree in writing
with the Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.

                                   ARTICLE 7
                       AMENDMENTS, SUPPLEMENTS AND WAIVERS

     Section 7.01. Without Consent of Holders. (a) The Company and the Trustee
may amend or supplement this Agreement or the CVRs without notice to or the
consent of any Holder:

          (i) to cure any ambiguity, defect or inconsistency in this Agreement;
     provided that such amendments or supplements shall not adversely affect the
     interests of the Holders in any material respect;

          (ii) to comply with Article 4;

          (iii) to evidence and provide for the acceptance of appointment
     hereunder with respect to the CVRs by a successor Trustee; and

          (iv) to make any change that does not materially and adversely affect
     the rights of any Holder.

     Section 7.02. With Consent of Holders. Subject to Section 5.04, without
prior notice to any Holders, the Company and the Trustee may amend this
Agreement and the CVRs with the written consent of the Holders of not less than
a majority of the outstanding CVRs by written notice to the Trustee, and the
Holders of a majority of the outstanding CVRs by written notice to the Trustee
may waive future compliance by the Company with any provision of this Agreement
or the CVRs.

     Notwithstanding the provisions of this Section 7.02, without the consent of
the Holder of each outstanding CVR, an amendment or waiver, may not:

          (a) change the Contingent Payment Date or the Contingent Payment
     amount;


                                       20
<PAGE>


          (b) reduce the above stated percentage of outstanding CVRs the consent
     of whose holders is necessary to modify or amend the Agreement; or

          (c) reduce the percentage of outstanding CVRs the consent of whose
     Holders is required for any waiver of compliance with certain provisions of
     this Agreement.

     It shall not be necessary for the consent of any Holder under this Section
7.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.

     After an amendment, supplement or waiver under this Section 7.02 becomes
effective the Company will mail copies of any amendments or waivers to Holders
upon request. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such amendment or waiver.

     Section 7.03. Effect of Amendments. Upon the execution of any amendment
under this Article, this Agreement shall be modified in accordance therewith,
and such amendment shall form a part of this Agreement for all purposes; and
every Holder of CVRs theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.

     Section 7.04. Notation on or Exchange of CVRs. If an amendment, supplement
or waiver changes the terms of any CVR, the Trustee may require the Holder
thereof to deliver it to the Trustee. The Trustee may, but is not required to,
place an appropriate notation on the CVR about the changed terms and return it
to the Holder. Alternatively, if the Company so determines, the Company in
exchange for the CVR may issue and the Trustee shall authenticate a new CVR of
the same tenor that reflects the changed terms.

     Section 7.05. Trustee to Sign Amendments, Etc. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article 7 is authorized or permitted by this
Agreement, stating that all requisite consents have been obtained or that no
consents are required and stating that such amendment constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to customary exceptions. Subject to the
preceding sentence, the Trustee shall sign such amendment, supplement or waiver
if the same does not adversely affect the rights of the Trustee. The Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver that affects the Trustee's own rights, duties or immunities under this
Agreement or otherwise.


                                       21
<PAGE>


                                   ARTICLE 8
                                 MISCELLANEOUS

     Section 8.01. Notices. Any notice or communication shall be sufficiently
given if written and (a) if delivered in person when received, or (b) if mailed
by first class mail 5 days after mailing, or (c) as between the Company and the
Trustee if sent by facsimile transmission, where transmission is confirmed, in
each case addressed as follows:

     if to the Company:

          The AES Corporation
          1001 North 19th Street
          Arlington, VA 22209
          Telecopy:  (703) 528-4510
          Attention:  General Counsel

     if to the Trustee:

          Wells Fargo Bank Minnesota,
          National Association
          Corporate Trust Services
          Sixth Street and Marquette Avenue
          MAC N9303-120
          Minneapolis, MN  55479
          Telecopy:  (612) 667-9825
          Attention:  AES Corporation Administrator

     The Company or the Trustee by written notice to the other may designate
additional or different addresses for subsequent notices or communications.

     Any notice or communication shall be sufficiently given to Holders by
mailing to such Holders at their addresses as they shall appear on the CVR
Register. Notice mailed shall be sufficiently given if so mailed within the time
prescribed. Copies of any such communication or notice to a Holder shall also be
mailed to the Trustee and each Agent at the same time.

     Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. Except as
otherwise provided in this Agreement, if a notice or communication is mailed in
the manner provided in this Section 8.01, it is duly given, whether or not the
addressee receives it.

     Where this Agreement provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or


                                       22
<PAGE>


after the event, and such waiver shall be the equivalent of such notice. Waivers
of notice by Holders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance upon
such waiver.

     In case it shall be impracticable to give notice as herein contemplated,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.

     Section 8.02. Certificate and Opinion as to Conditions Precedent. Upon any
request or application by the Company to the Trustee to take any action under
this Agreement, the Company shall furnish to the Trustee:

          (a) an Officers' Certificate stating that, in the opinion of the
     signers, all conditions precedent, if any, provided for in this Agreement
     relating to the proposed action have been complied with; and

          (b) an Opinion of Counsel stating that, in the opinion of such
     counsel, all such conditions precedent have been complied with.

     Section 8.03. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Agreement shall include:

          (a) a statement that each person signing such certificate or opinion
     has read such covenant or condition and the definitions herein relating
     thereto;

          (b) a brief statement as to the nature and scope of the examination or
     investigation upon which the statement or opinion contained in such
     certificate or opinion is based;

          (c) a statement that, in the opinion of each such person, he or she
     has made such examination or investigation as is necessary to enable him to
     express an informed opinion as to whether or not such covenant or condition
     has been complied with; and

          (d) a statement as to whether or not, in the opinion of each such
     person, such condition or covenant has been complied with; provided,
     however, that, with respect to matters of fact, an Opinion of Counsel may
     rely on an Officers' Certificate or certificates of public officials.


                                       23
<PAGE>


     Section 8.04. Evidence of Ownership.

     The Company, the Trustee and any agent of the Company or the Trustee may
deem and treat the person in whose name any CVR shall be registered upon the CVR
Register as the absolute owner of such CVR (whether or not such CVR shall be
overdue and notwithstanding any notation of ownership or other writing thereon)
for the purpose of receiving any payments related to the CVR and for all other
purposes; and neither the Company nor the Trustee nor any agent of the Company
or the Trustee shall be affected by any notice to the contrary.

     Section 8.05. Rules by Paying Agent. The Paying Agent may make reasonable
rules for its functions.

     Section 8.06. Governing Law. The laws of the State of New York shall govern
this Agreement and the CVRs, without giving effect to such state's conflicts of
law principles.

     Section 8.07. No Adverse Interpretation of Other Agreements. This Agreement
may not be used to interpret another agreement, indenture or loan or debt
agreement of the Company or any Subsidiary of the Company. Any such agreement or
indenture may not be used to interpret this Agreement.

     Section 8.08. Successors. All agreements of the Company in this Agreement
and the CVRs shall bind its successors. All agreements of the Trustee in this
Agreement shall bind its successors.

     Section 8.09. Duplicate Originals. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.

     Section 8.10. Separability. In case any provision in this Agreement or in
the CVRs shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

     Section 8.11. Table of Contents, Headings, Etc. The Table of Contents and
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 and provisions hereof.

     Section 8.12. Incorporators, Stockholders, Officers and Directors of
Company Exempt from Individual Liability. No recourse under or upon any
obligation, covenant or agreement contained in this Agreement or any amendment
hereto or in any CVR, or because of any indebtedness evidenced thereby, shall be
had against any incorporator, as such or against any past, present or future


                                       24
<PAGE>


stockholder, officer, director or employee, as such, of the Company or of any
successor, either directly or through the Company or any successor, under any
rule of law, statute or constitutional provision or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of the CVRs by
the holders thereof and as part of the consideration for the issue of the CVRs.
















                                       25
<PAGE>


                                   SIGNATURES

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the date first written above.


                                 THE AES CORPORATION
                                   as the Company

Attest:                          By:       /s/ Barry J. Sharp
                                       -----------------------------------
                                       Name:   Barry J. Sharp
                                       Title:  Executive Vice President and
                                               Chief Financial Officer


                                 WELLS FARGO BANK MINNESOTA, NATIONAL
                                    ASSOCIATION, as the Trustee


Attest:                          By:      /s/ Jane Y. Schweiger
                                       ----------------------------------
                                       Name:  Jane Y. Schweiger
                                       Title: Vice President



                                       26

<PAGE>

                                                                      EXHIBIT A

                              [FACE OF GLOBAL CVR]

                              THE AES CORPORATION

                                                 [CUSIP] [CINS] _______________


     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO THE PROHIBITIONS ON
TRANSFER SET FORTH IN THE CONTINGENT VALUE RIGHTS AGREEMENT (AS HEREIN DEFINED)
AND MAY NOT BE TRANSFERRED OR EXCHANGED EXCEPT IN THE LIMITED CIRCUMSTANCE
DESCRIBED THEREIN.

     AES Corporation, a Delaware corporation (the "Company"), for value
received, promises to pay to Cede & Co ("CEDE"), or its registered assigns, the
Contingent Payment (as defined in the Contingent Value Rights Agreement
described below) on the Contingent Payment Date (as defined in the Contingent
Value Rights Agreement described below).

     This being a Global Security deposited with The Depository Trust Company
("DTC") acting as depositary, and registered in the name of CEDE, a nominee of
DTC, CEDE, as holder of record of this Global Security, shall be entitled to
receive the Contingent Payment by wire transfer of immediately available funds.

     This Contingent Value Right ("CVR") is being issued pursuant to the terms
of and subject to the conditions of the Contingent Value Rights Agreement dated
as of December 13, 2002 (the "Contingent Value Rights Agreement") between the
Company and Wells Fargo Bank Minnesota, National Association, as trustee.

     Reference is hereby made to the further provisions of this CVR set forth
on the reverse hereof, which will for all purposes have the same effect as if
set forth at this place.

<PAGE>


     IN WITNESS WHEREOF, the Company has caused this CVR to be signed manually
or by facsimile by its duly authorized officers.

Date:                                   THE AES CORPORATION


                                        By:
                                           ------------------------------
                                           Name:
                                           Title:



                                        By:
                                           ------------------------------
                                           Name:
                                           Title:


                                      A-2
<PAGE>


               (Form of Trustee's Certificate of Authentication)

     This is one of the CVRs described in the Contingent Value Rights Agreement
referred to in this CVR.

                                      WELLS FARGO BANK MINNESOTA,
                                         NATIONAL ASSOCIATION,
                                         as Trustee


                                      By:
                                         ----------------------------------
                                         Authorized Signatory



                                      A-3
<PAGE>


                             [REVERSE SIDE OF CVR]

                              THE AES CORPORATION

                             CONTINGENT VALUE RIGHT

     This CVR is being issued pursuant to the terms of and subject to the
conditions of the Contingent Value Rights Agreement dated as of December 13,
2002 (the "Contingent Value Rights Agreement") between the Company and Wells
Fargo Bank Minnesota, National Association, as Trustee (the "Trustee"). The
terms and provisions contained in the Contingent Value Rights Agreement are
incorporated by reference herein and made a part hereof. Reference is hereby
made to the Contingent Value Rights Agreement for a full statement of the
respective rights, limitations of rights, duties, obligations and immunities
thereunder of the Company, the Trustee and the Holders of the CVRs. Terms not
defined herein are used as defined in the Contingent Value Rights Agreement.
Copies of the Contingent Value Rights Agreement can be obtained by contacting
the Trustee.

     By acceptance of this CVR the Holder consents to all the terms and
provisions hereof including the terms and provisions of the Contingent Value
Rights Agreement incorporated by reference herein.

     1. Contingent Payment. THE AES CORPORATION, a Delaware corporation (the
"Company", which definition shall include any successor thereto in accordance
with the Contingent Value Rights Agreement) promises to pay the Contingent
Payment to the holders of the CVRs on the Contingent Payment Date if such date
occurs. Such payment shall be made exclusively in such coin or currency of the
United States of America as at the time of payment shall be legal tender for
the payment of public and private debts.

     In the event that it is finally determined in good faith that the CILCORP
Sale will not be consummated and that the condition for payment of the CVRs
will not occur, the Company shall give to the Trustee and each registered
holder notice of such determination. Upon such determination, absent manifest
error, the CVRs shall terminate and become null and void and the Holders
thereof shall have no further rights with respect thereto. The failure to give
such notice or any defect therein shall not affect the validity of such
determination.

     2. Method of Payment. The Contingent Payment will be made to the
Depositary as the registered holder of the CVRs. The Company expects that the
Depositary, upon receipt of the Contingent Payment, will credit the accounts of
persons who have accounts with the Depositary ("participants") with an amount
proportionate to their respective beneficial interests in the total amount of
CVRs


                                      A-4
<PAGE>

as shown on the records of the Depositary. The Company also expects that
payments by participants to owners of beneficial interests in CVRs held through
such participants will be governed by standing instructions and customary
practices. Such payments will be the responsibility of such participants.

     2. Paying Agent and Registrar. The Trustee will act as Paying Agent and
registrar. The Company may change any Paying Agent, Registrar or co-Registrar
without notice.

     3. No Transfer or Exchange. The CVRs are in registered form without
coupons. A Holder may not transfer or exchange the CVRs except in the limited
circumstance set forth in the Contingent Value Rights Agreement.

     4. Persons Deemed Owners. The registered holder of the CVR may be treated
as the owner of it for all purposes.

     5. Amendment, Supplement, Waiver. The Company and the Trustee may, without
the consent of the holders of any outstanding CVRs, amend, waive or supplement
the Contingent Value Rights Agreement or the CVRs for certain specified
purposes, including, among other things, curing ambiguities, defects or
inconsistencies, or making any other change that does not adversely affect the
rights of any Holder in any material respect. Subject to Section 5.04 and
Section 7.02 of the Contingent Value Rights Agreement, other amendments and
modifications of the Contingent Value Rights Agreement or the CVRs may be made
by the Company and the Trustee with the consent of the Holders of not less than
a majority of the outstanding CVRs.

     6. Successor Corporation. When a successor corporation assumes all the
obligation of its predecessor under the CVRs and the Contingent Value Rights
Agreement and the transaction complies with the terms of Article 4 of the
Contingent Value Rights Agreement, the predecessor corporation, subject to
certain exceptions, will be released from those obligations.

     7. Defaults and Remedies. Events of Default are set forth in the
Contingent Value Rights Agreement.

     Holders of CVRs may not enforce the Contingent Value Rights Agreement or
the CVRs except as provided in the Contingent Value Rights Agreement. The
Trustee may require indemnity reasonably satisfactory to it before it enforces
the Contingent Value Rights Agreement or the CVRs. Subject to certain
limitations, Holders of a majority of the then outstanding CVRs may direct the
Trustee in its exercise of any trust or power.

     8. Trustee Dealing with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform


                                      A-5
<PAGE>

services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.

     9. No Recourse Against Others. A director, officer, employee, stockholder
or beneficiary, as such, of the Company shall not have any liability for any
obligations of the Company under the CVRs or the Contingent Value Rights
Agreement or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of the CVRs by accepting a CVR
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the CVRs.

     10. Authentication. This CVR shall not be valid until the Trustee signs
the certificate of authentication on the other side of this CVR.

     11. Abbreviations. Customary abbreviations may be used in the name of a
Holder of CVRs, such as: TEN COM (= tenants in common), TENANT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).

     12. GOVERNING LAW. THE CONTINGENT VALUE RIGHTS AGREEMENT AND THIS CVR
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.

     The Company will furnish to any Holder of CVRs upon written request and
without charge a copy of the Contingent Value Rights Agreement. Requests may be
made to:

     THE AES CORPORATION
     1001 North 19th Street, Suite 2000
     Arlington, Virginia 22209
     Telephone: (703) 522-1315
     Telecopy:  (703) 528-4510

     Attention:  General Counsel


                                      A-6
<PAGE>


                                                                      EXHIBIT B

                                   DTC LEGEND

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN.

     TRANSFERS OF THIS GLOBAL CVR ARE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CVR ARE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE TRANSFER PROVISIONS OF THE CONTINGENT VALUE RIGHTS
AGREEMENT.



                                      B-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>8
<FILENAME>dec1602_ex99-1.txt
<TEXT>
                                                                    EXHIBIT 99.1


AES Drax Holdings Limited

News Release

December 13, 2002

AES Drax Holdings Limited signs Standstill Agreement with its Senior Creditors

     On December 12, 2002, AES Drax Holdings entered into the Standstill
Agreement with, among other parties, the Bond Trustee under the Eurobonds
financed by a syndicate of banks (the Senior Lenders), certain Senior
Bondholders representing a majority in sterling equivalent principal amount of
such Senior Bonds (the Consenting Bondholders), and the Senior Bond Trustee.

     The standstill period expires on May 31, 2003, unless extended. The Senior
Lenders and the Consenting Bondholders have agreed to waive certain defaults
and events of default under the Eurobonds or the Senior Bonds, as applicable,
not to accelerate payment of the obligations and not to seek to enforce
security. In addition, the parties to the Standstill Agreement have agreed to
certain amendments and waivers to the respective financing documents, which,
amongst other things, permits AES Drax to have access to at least
(pound)30,000,000 of funds currently unavailable under the financing
documentation, which funds may be used to provide credit support to electricity
counterparties and suppliers and for working capital needs.

     The consents and waivers provided under the Standstill Agreement will
permit AES Drax Holdings to pay interest due to the Senior Lenders and Senior
Bondholders on December 31, 2002.

     The purpose of the Standstill Agreement is to provide AES Drax and its
senior creditors with a period of stability during which discussions regarding
consensual restructuring of the Drax power station project can take place.

Garry Levesley, Chief Executive & Station Manager of AES Drax commented:

"Drax is the UK's largest and most efficient coal fired power station and
plays an important and strategic role in the UK's power supply. The signing of
the Standstill Agreement allows Drax to continue to meet the UK's electricity
needs in an environmentally sound manner and contributes to the country's fuel
diversity for electricity generation. With the recent problems at British
Energy and with the future increased dependence of the UK on imported gas it is
important that abated coal plants like Drax are able to compete in a fair
marketplace. AES Drax is currently running at high levels of output and with
the



<PAGE>


further credit now available we expect our robust operational performance
to continue."

     AES Drax Holdings has furnished a Form 6-K including a conformed copy of
the Standstill Agreement to the US Securities and Exchange Commission.



                                       2
<PAGE>


Forward Looking Statements

     Certain statements included herein are forward-looking statements as that
term is defined in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements speak only as of the date hereof. Forward looking
statements can be identified by the use of forward-looking terminology such as
"believe," "expects," "may," "intends," "will," "should," or "anticipates," or
the negative forms of other variations of these terms of comparable
terminology, or by discussions of strategy. Future results covered by the
forward-looking statements may not be achieved. Forward looking statements are
subject to risks, uncertainties and other factors, which could cause actual
results to differ materially from future results expressed or implied by such
forward-looking statements.

     Under the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, we have identified some of these risks, uncertainties and
other important factors herein and you should also review "Item 1. Key
Information - Risk Factors" in AES Drax Holdings Limited's Annual Report on Form
20-F for the year ended December 31, 2001, ("2001 Annual Report") which is
hereby incorporated by reference herein.

     You should also consider, among others, the following important factors:

     o    general economic and business conditions in the UK;

     o    changes in governmental regulations affecting the Drax Power Station
          and the UK electric power industry generally, including the impact of
          the New Electricity Trading Arrangements ("NETA") that were
          implemented on March 27, 2001 on the market for electricity in the
          UK;

     o    power prices and resource availability and pricing;

     o    general industry trends;

     o    changes to the competitive environment;

     o    changes in business strategy, development plans or vendor
          relationships, in the market for power in the UK and that AES Drax's
          principal hedging arrangement relating to power sales has been
          terminated and it will now be operating as a fully merchant plant;

     o    availability, terms and development of capital;

     o    interest rate volatility;


                                       3
<PAGE>


     o    changes in currency exchange rates, inflation rates and conditions in
          financial markets; and

     o    availability of qualified personnel.

     These forward-looking statements speak only as of the date hereof. We do
     not intend to publicly update or revise these forward-looking statements
     to reflect events or circumstances after the date hereof, and we do not
     assume any responsibility to do so.


                                       4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>9
<FILENAME>dec1602_ex99-2.txt
<TEXT>
                                                                    EXHIBIT 99.2


                                                                 EXECUTION COPY

                          AMENDED AND RESTATED CREDIT,

                      REIMBURSEMENT AND EXCHANGE AGREEMENT

                                  dated as of

                               December 12, 2002

                                     among

                              THE AES CORPORATION,
                                  as Borrower,

                         AES OKLAHOMA HOLDINGS, L.L.C.,
                      AES HAWAII MANAGEMENT COMPANY, INC.,
        AES SOUTHLAND FUNDING, L.L.C., AES WARRIOR RUN FUNDING, L.L.C.,
                        AND AES EDC FUNDING II, L.L.C.,
                           as Subsidiary Guarantors,

                               CITICORP USA, INC.
                as Administrative Agent and as Collateral Agent,

                          SALOMON SMITH BARNEY, INC.,
                       as Lead Arranger and Book Runner,

                             BANK OF AMERICA, N.A.,
           as Lead Arranger and Book Runner and as Syndication Agent
        (Revolving Credit Loan Facility, Drax Letter of Credit Facility
                       and Tranche A Term Loan Facility),

                        UNION BANK OF CALIFORNIA, N.A.,
           as Lead Arranger and Book Runner and as Syndication Agent
                        (Tranche B Term Loan Facility),

                          THE BANKS LISTED HEREIN, AND

                          THE REVOLVING FRONTING BANKS

                  AND THE DRAX LOC FRONTING BANK LISTED HEREIN

<PAGE>


                               TABLE OF CONTENTS

                                                                           Page
                                                                           ----

                                   ARTICLE I
                                  DEFINITIONS

Section 1.01 Definitions......................................................2
Section 1.02 Accounting Terms and Determinations.............................34
Section 1.03 Types of Borrowing..............................................35
Section 1.04 Currency Equivalents Generally..................................35

                                   ARTICLE II
                                  THE CREDITS

Section 2.01 Commitment to Lend..............................................35
Section 2.02 Notice of Borrowing.............................................36
Section 2.03 Revolving Letters of Credit.....................................37
Section 2.04 Evidence of Debt................................................44
Section 2.05 Maturity of Loans...............................................45
Section 2.06 Interest Rates..................................................45
Section 2.07 Method of Electing Interest Rates...............................46
Section 2.08 Fees............................................................47
Section 2.09 Repayment of Term Loan Facility and Drax Letter of
               Credit Facility...............................................48
Section 2.10 Termination or Reduction of Commitments.........................48
Section 2.11 Prepayment of the Loans.........................................49
Section 2.12 General Provisions as to Payments...............................52
Section 2.13 Funding Losses..................................................53
Section 2.14 Computation of Interest and Fees................................53
Section 2.15 Revolving L/C Cash Collateral Account...........................53
Section 2.16 Computations of Outstandings; Determination of Available
               Amount of Alternative Currency Letters of Credit..............55
Section 2.17 Alternative Currency Letter of Credit Issuances.................56
Section 2.18 Drax Letter of Credit...........................................57
Section 2.19 Drax LOC Cash Collateral Account................................62
Section 2.20 Extension of Drax Letter of Credit Termination Date.............63

                                  ARTICLE III
                                   CONDITIONS

Section 3.01 Closing.........................................................64
Section 3.02 Extension of Credit.............................................68


                                       i
<PAGE>

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

Section 4.01 Corporate Existence and Power...................................69
Section 4.02 Corporate and Governmental Authorization and Filings;
               No Contravention..............................................69
Section 4.03 Compliance with Laws............................................70
Section 4.04 Binding Effect..................................................70
Section 4.05 Financial Information...........................................71
Section 4.06 Litigation......................................................71
Section 4.07 Compliance with ERISA...........................................71
Section 4.08 Environmental Matters...........................................71
Section 4.09 Taxes...........................................................72
Section 4.10 Material AES Entities...........................................72
Section 4.11 Not an Investment Company.......................................73
Section 4.12 Public Utility Holding Company Act..............................73
Section 4.13 Full Disclosure.................................................73
Section 4.14 Collateral Documents and Collateral.............................73
Section 4.15 Existing Revolving Letters of Credit............................75
Section 4.16 Solvency........................................................75
Section 4.17 Pledged Subsidiaries............................................75
Section 4.18 Qualified Holding Companies Debt................................75
Section 4.19 Banks Parties...................................................75

                                   ARTICLE V
                                   COVENANTS

Section 5.01 Information.....................................................75
Section 5.02 Payment of Obligations..........................................79
Section 5.03 Maintenance of Property; Insurance..............................79
Section 5.04 Conduct of Business and Maintenance of Existence................79
Section 5.05 Compliance with Laws............................................80
Section 5.06 Inspection of Property, Books and Records.......................80
Section 5.07 Limitation on Debt..............................................80
Section 5.08 Use of Proceeds.................................................86
Section 5.09 Restricted Payments.............................................86
Section 5.10 Negative Pledge.................................................87
Section 5.11 Consolidations and Mergers......................................88
Section 5.12 Collateral Coverage Ratio.......................................89
Section 5.13 Cash Flow Coverage..............................................89
Section 5.14 Recourse Debt to Cash Flow Ratio................................90
Section 5.15 Transaction with Affiliates.....................................90
Section 5.16 Investments in Other Persons....................................91
Section 5.17 No Prepayment of Debt...........................................94
Section 5.18 Upstreaming of Net Cash Proceeds by Subsidiaries................95
Section 5.19 Sales, Etc., of Assets..........................................95


                                      ii
<PAGE>

Section 5.20 Off Balance Sheet Obligations; Derivative Obligations...........98
Section 5.21 Covenant to Give Security.......................................98
Section 5.22 Further Assurances..............................................99
Section 5.23 Cilcorp Purchase...............................................100

                                   ARTICLE VI
                                    DEFAULTS

Section 6.01 Events of Default..............................................100
Section 6.02 Notice of Default..............................................103
Section 6.03 Cash Collateral................................................103

                                  ARTICLE VII
                                   THE AGENT

Section 7.01 Appointment and Authorization..................................103
Section 7.02 Agent and Affiliates...........................................104
Section 7.03 Consultation with Experts......................................104
Section 7.04 Liability of Agent and Collateral Agent........................104
Section 7.05 Indemnification................................................105
Section 7.06 Credit Decision................................................105
Section 7.07 Successor Agent or Collateral Agent............................105
Section 7.08 Administrative Agent May File Proofs of Claim..................106
Section 7.09 Agents' Fee....................................................107

                                  ARTICLE VIII
                            CHANGE IN CIRCUMSTANCES

Section 8.01 Basis for Determining Interest Rate Inadequate or Unfair.......107
Section 8.02 Illegality.....................................................108
Section 8.03 Increased Cost and Reduced Return..............................108
Section 8.04 Taxes..........................................................109
Section 8.05 Base Rate Loans Substituted for Affected Euro-Dollar Loans.....112

                                   ARTICLE IX
                              SUBSIDIARY GUARANTY

Section 9.01 The Subsidiary Guaranty........................................112
Section 9.02 Guaranty Absolute..............................................113
Section 9.03 Discharge Only Upon Payment in Full, Reinstatement
               in Certain Circumstances.....................................114
Section 9.04 Revolving L/C Cash Collateral Account..........................115
Section 9.05 Waiver by the Subsidiary Guarantors............................116
Section 9.06 Subrogation....................................................116
Section 9.07 Stay of Acceleration...........................................116


                                      iii
<PAGE>

Section 9.08 Limitation of Liability........................................116
Section 9.09 Release of Subsidiary Guarantors...............................116
Section 9.10 Representations and Warranties.................................117
Section 9.11 Covenants......................................................117

                                   ARTICLE X
                                 MISCELLANEOUS

Section 10.01 Notices.......................................................117
Section 10.02 No Waivers....................................................117
Section 10.03 Expenses; Indemnification.....................................118
Section 10.04 Sharing of Set-offs...........................................118
Section 10.05 Amendments and Waivers........................................119
Section 10.06 Successors and Assigns........................................120
Section 10.07 No Margin Stock...............................................123
Section 10.08 Governing Law; Submission to Jurisdiction.....................123
Section 10.09 Release of Collateral.........................................123
Section 10.10 Counterparts; Integration; Effectiveness......................123
Section 10.11 Confidentiality...............................................123
Section 10.12 WAIVER OF JURY TRIAL..........................................124
Section 10.13 Severability; Modification to Conform to Law..................124
Section 10.14 Judgment Currency.............................................124



                                      iv
<PAGE>


Appendix I            -   Revolving Credit Loan Facility
Appendix II           -   Tranche A Term Loan Facility
Appendix III          -   Tranche B Term Loan Facility
Appendix IV           -   Tranche C Term Loan Facility
Appendix V            -   Existing Letters of Credit
Schedule I            -   Pledged Subsidiaries
Schedule II           -   Assigned Agreements
Schedule III          -   Non-Pledged Subsidiaries
Schedule IV           -   Excluded Subsidiaries
Schedule 5.07(b)(ii)  -   Subsidiary Debt
Schedule 5.15         -   Existing Agreements with Affiliates
Schedule 5.16(xv)     -   Investments in Subsidiaries for Development Costs
Schedule V            -   Qualified Holding Companies
Schedule VI           -   Existing Debt
Exhibit A-1           -   Form of Revolving Credit Loan Note
Exhibit A-2           -   Form of Tranche A Term Loan Note
Exhibit A-3           -   Form of Tranche B Term Loan Note
Exhibit A-4           -   Form of Tranche C Term Loan Note
Exhibit A-5           -   Form of Drax Loan Note
Exhibit B-1           -   Form of Opinion of the General Counsel, International
                          of the Borrower
Exhibit B-2           -   Form of Opinion of Davis Polk & Wardwell, Special
                          Counsel for the Borrower
Exhibit B-3           -   Form of Opinion of Special Counsel for certain
                          Subsidiaries of the Borrower


                                       v
<PAGE>


Exhibit B-4           -   Form of Opinion of Morris, Nichols, Arsht & Tunnell,
                          Delaware counsel for the Borrower
Exhibit B-5           -   Form of Opinion of Maples and Calder, Cayman Islands
                          counsel for the Borrower
Exhibit B-6           -   Form of Opinion of Conyers Dill & Pearman, British
                          Virgin Islands counsel for the Borrower
Exhibit B-7           -   Form of Opinion of Shearman & Sterling, Special
                          Counsel for the Agent
Exhibit C-1           -   Form of Security Agreement
Exhibit C-2           -   Form of Collateral Trust Agreement
Exhibit C-3           -   Form of Tranche C Pledge Agreement
Exhibit C-4           -   Form of BVI Cayman Pledge Agreement
Exhibit D             -   Form of Assignment and Assumption Agreement


                                      vi
<PAGE>


                             AMENDED AND RESTATED,
                      REIMBURSEMENT AND EXCHANGE AGREEMENT

     AMENDED AND RESTATED CREDIT, REIMBURSEMENT AND EXCHANGE AGREEMENT dated as
of December 12, 2002 among THE AES CORPORATION, a Delaware corporation (the
"Borrower"), the Subsidiary Guarantors listed herein, the BANKS listed on the
signatures pages hereof, the REVOLVING FRONTING BANKS AND THE DRAX LOC FRONTING
BANK listed herein, SALOMON SMITH BARNEY, INC., as Lead Arranger and Book
Runner, BANK OF AMERICA, N.A. ("Bank of America"), as Lead Arranger and Book
Runner, and Syndication Agent (for the Revolving Credit Facility, the Drax
Letter of Credit Facility and the Tranche A Term Loan Facility), UNION BANK OF
CALIFORNIA, N.A. ("UBOC"), as Lead Arranger and Book Runner, and Syndication
Agent (for the Tranche B Term Loan Facility), and CITICORP USA, INC., as
Administrative Agent (in such capacity, the "Agent") and as Collateral Agent
for the Bank Parties (in such capacity, the "Collateral Agent").

     PRELIMINARY STATEMENTS:

     1. The Borrower is party to (i) an $850,000,000 Credit Agreement dated as
of March 31, 2000 (as amended, amended and restated, supplemented or otherwise
modified through the date hereof, the "Existing Revolving Credit Facility")
among the banks party thereto, the fronting banks listed therein, Bank of
America, N.A., as Documentation Agent, Morgan Guaranty Trust Company of New
York, as Syndication Agent and Citibank, N.A., as Agent; (ii) a $425,000,000
Credit Agreement dated as of September 24, 2001 (as amended, amended and
restated, supplemented or otherwise modified through the date hereof, the
"Existing Term Credit Facility") among the banks party thereto and UBOC as the
Administrative Agent; (iii) a (pound)52,250,000 Reimbursement Agreement dated
as of January 18, 2002 (as amended, amended and restated, supplemented or
otherwise modified through the date hereof, the "Existing Drax LOC Facility")
among Bank of America, as Fronting Bank and as Administrative Agent, and the
other banks party thereto and (iv) a $350,000,000 Amended and Restated Loan
Agreement dated as of November 16, 2000 (as amended, amended and restated,
supplemented or otherwise modified through the date hereof, the "Existing AES
EDC SELLS Facility") among AES EDC Funding II, L.L.C. ("AES EDC"), a Delaware
limited liability company and a wholly-owned subsidiary of the Borrower, the
banks party thereto, and Citibank, N.A., as Agent. The Existing Revolving
Credit Facility, Existing Term Credit Facility, the Existing Drax LOC Facility
and the Existing AES EDC SELLS Facility are collectively referred to herein as
the "Existing Bank Credit Agreements".

     2. The Borrower wishes to amend and restate each of the Existing Bank
Credit Agreements by execution of this Agreement to, among other things, extend
the maturities of the Existing Bank Credit Agreements, restructure certain
other provisions of the Existing Bank Credit Agreements and the Borrower wishes
to offer to exchange certain of the existing loans under the Existing AES EDC
SELLS Facility for Tranche B Term Loans (as hereinafter defined).

<PAGE>
                                       2


     NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree to amend
and restate each of the Existing Bank Credit Agreements as follows:

     The parties hereto agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

     Section 1.01 Definitions.

     The following terms, as used herein, have the following meanings:

     "4.50% Junior Subordinated Convertible Debentures" means the debentures
issued by the Borrower pursuant to the First Supplemental Indenture dated as of
August 10, 1998 to the Junior Subordinated Indenture dated as of August 10,
1998.

     "Actionable Default" means an Event of Default described in clauses (a),
(e), (f), (g) and (h) of Section 6.01.

     "Additional Collateral Trust Agreement Collateral" means the "Additional
Collateral" referred to in the Collateral Trust Agreement.

     "Adjusted Free Cash Flow" means, as of the end of any fiscal year, an
amount equal to (i) the Adjusted Parent Operating Cash Flow for such fiscal
year plus (ii) the aggregate amount of Net Cash Proceeds from Covered Asset
Sales received by the Borrower and permitted to be retained by the Borrower
under the terms of this Agreement during such fiscal year less (iii) the
aggregate amount of any Investments (other than Temporary Cash Investments)
made in cash by the Borrower during such fiscal year in accordance with the
terms of this Agreement, less (iv) the aggregate principal amount of Debt
repaid or prepaid with cash by the Borrower during such fiscal year in
accordance with the terms of this Agreement, excluding (x) Debt in respect of
Revolving Credit Loans and Revolving Letters of Credit (unless the Revolving
Credit Commitments are permanently reduced in a corresponding amount in
connection with such repayment or prepayment), (y) Debt required to be repaid
or prepaid with the Net Cash Proceeds of Asset Sales or an Equity Issuance in
accordance with the requirements of Section 2.11(b) and (z) repayments or
prepayments of Debt financed by incurring other Debt less (v) the aggregate
amount for such fiscal year of Corporate Charges.

     "Adjusted London Interbank Offered Rate" means, for any Interest Period
and subject to Section 2.02(a)(iv), a rate per annum equal to the quotient
obtained (rounded upward, if necessary, to the next higher 1/100th of 1%) by
dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus
the Euro-Dollar Reserve Percentage.

     "Adjusted Parent Operating Cash Flow" means, for any period, (i) Parent
Operating Cash Flow for such period less (ii) the sum of the following expenses
(determined without duplication), in each case to the extent paid by the
Borrower during such period and regardless of whether any such amount was
accrued during such period:

<PAGE>
                                       3


     (A) income tax expenses of the Borrower and its Subsidiaries; and

     (B) corporate overhead expenses, including, without limitation,
development costs.

     "Administrative Questionnaire" means, with respect to each Bank Party, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.

     "Adverse Alternative Currency Letters of Credit" has the meaning set forth
in Section 2.17.

     "AES" means The AES Corporation, a Delaware corporation, and its
successors.

     "AES Business" shall have the meaning set forth in Section 5.07(b)(ii).

     "AES BVI II" means AES International Holdings II, Ltd., a company
organized under the laws of the British Virgin Islands.

     "AES EDC" has the meaning set forth in the first preliminary statement
hereto.

     "AES Electric" means Applied Energy Services Electric Limited, an English
corporation, and its successors.

     "AES Hawaii Management" means AES Hawaii Management Company, Inc., a
Delaware corporation and a Subsidiary of the Borrower, and its successors.

     "AES Management Group" means (i) individuals who are members of the board
of directors or officers of the Borrower or the president of any Material AES
Entity; (ii) their respective spouses, children, grandchildren, siblings and
parents; (iii) trusts established for the sole or principal benefit of Persons
described in clauses (i) and (ii) above; (iv) heirs, executors, administrators
and personal or legal representatives of Persons described in clauses (i) and
(ii) above; and (v) any corporation or other Person that is controlled by, and
a majority of the equity interests in which are directly owned by, Persons
described in clauses (i) and (ii) above.

     "AES N.Y. Funding Credit Facility" means the Loan Agreement dated as of
November 30, 2001, as amended, supplemented or otherwise modified from time to
time, among AES New York Funding, L.L.C., the banks party thereto, and
Citibank, as agent.

     "AES Oklahoma" means AES Oklahoma Holdings, L.L.C., a Delaware limited
liability company and a Subsidiary of the Borrower, and its successors.

     "AES Southland" means AES Southland Funding, L.L.C., a Delaware limited
liability company and a Wholly-Owned Consolidated Subsidiary of the Borrower,
and its successors.

<PAGE>
                                       4


     "AES Warrior Run" means AES Warrior Run Funding, L.L.C., a Delaware
limited liability company and a Wholly-Owned Consolidated Subsidiary of the
Borrower, and its successors.

     "Affiliate" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Borrower (a "Controlling Person"), or (ii)
any Person (other than the Borrower or a Subsidiary) which is controlled by or
is under common control with a Controlling Person or (iii) as to any Person
(other than the Borrower and its Subsidiaries), any other Person that, directly
or indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. As used herein, the term
"control" means possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.

     "Agent" means Citicorp USA, Inc., in its capacity as administrative agent
for the Bank Parties hereunder, and its successors in such capacity.

     "Alternative Currency" means (i) any lawful currency (other than Dollars)
that is freely transferable and convertible into Dollars or (ii) with respect
to any Revolving Letter of Credit issued by a Revolving Fronting Bank, any
other lawful currency (other than Dollars) that such Revolving Fronting Bank
agrees may be used as the designated currency of such Revolving Letter of
Credit; provided that such Revolving Fronting Bank is able to provide, and
continues to provide, to the Agent the information required pursuant to Section
2.16(b) with respect to such Revolving Letter of Credit.

     "Alternative Currency Letter of Credit" means any Revolving Letter of
Credit having a stated amount denominated in an Alternative Currency.

     "Amortization Amount" means (i) in respect of each Term Loan Facility, the
amount equal to the difference between (x) in the case of the Tranche A Term
Loan Facility, $425,000,000, in the case of the Tranche B Term Loan Facility,
$213,625,000 and in the case of the Tranche C Term Loan Facility $130,125,000
and (y) the aggregate principal amount of all prepayments made in respect of
such Term Loan Facility prior to November 25, 2004 and (ii) in respect of the
Drax Letter of Credit Facility, equal to the difference between (x) 50% of the
original Drax LOC Available Amount and (y) the aggregate principal amount of
all prepayments and cash collateralization payments made in respect of the Drax
Letter of Credit Facility prior to November 25, 2004.

     "Applicable Lending Office" means, with respect to any Bank Party, (i) in
the case of its Base Rate Loans, its Domestic Lending Office and (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.

     "Arranger Parties" means Salomon Smith Barney, Inc., as Lead Arranger and
Book Runner, Bank of America, N.A., as Lead Arranger and Book Runner and as
Syndication Agent (Revolving Credit Loan Facility, Drax Letter of Credit
Facility and Tranche A Term Loan Facility), and Union Bank of California, N.A.,
as Lead Arranger and Book Runner and Syndication Agent (Tranche B Term Loan
Facility).

<PAGE>
                                       5


     "Asset Sale" means any sale, lease, transfer or other disposition
(including any such transaction effected by way of merger or consolidation or
by way of an Equity Issuance by a Subsidiary) by the Borrower or any of its
Subsidiaries, but excluding any transactions permitted by the provisions of
Section 5.19 (other than subsection (iv) thereof); provided that a disposition
of such assets not excluded during any fiscal year shall not constitute an
Asset Sale unless and until (and only to the extent that) the aggregate Net
Cash Proceeds from such disposition, when combined with all other such
dispositions previously made during such fiscal year, exceeds $10,000,000.

     "Assigned Agreements" has the meaning set forth in Section 4.14(d).

     "Assignee" has the meaning set forth in Section 10.06(c).

     "Assignment and Assumption" means an assignment and assumption agreement
substantially in the form of Exhibit D hereto.

     "Automatic Acceleration Event" means the occurrence, with respect to the
Borrower, of any of the Events of Default listed in clauses (g) and (h) of
Section 6.01.

     "Available Amount" means, for any Revolving Letter of Credit on any date
of determination, the maximum aggregate amount (which, in the case of an
Alternative Currency Letter of Credit, shall be the Dollar Equivalent on such
date of determination of such amount) available to be drawn under such
Revolving Letter of Credit at any time on or after such date, the determination
of such maximum amount to assume the compliance with and satisfaction of all
conditions for drawing enumerated therein.

     "Banc of America Secured Option" means the Hedge Agreement entered into by
the Borrower with Banc of America Securities LLC in connection with the
amendment of the Remarketing Agreement to permit the Exchange Note Offering.

     "Bank" means each lender listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 10.06(c), and their
respective successors. Without limiting the generality of the foregoing
sentence, the term "Banks" shall include the Tranche A Term Loan Banks, the
Tranche B Term Loan Banks, the Tranche C Term Loan Banks and the Drax LOC
Banks.

     "Bank Party" means any Bank, any Revolving Fronting Bank and the Drax LOC
Fronting Bank.

     "Banks' Ratable Share" means (i) in respect of the Creditors' Portion of
any Net Cash Proceeds from Covered Asset Sales, in respect of the first
$600,000,000 of Net Cash Proceeds from Covered Asset Sales received after the
Effective Date, a percentage of the Creditors' Portion equal to a fraction (x)
the numerator of which is the Total Bank Exposure at such time and (y) the
denominator of which is the sum of the Total Bank Exposure at such time plus
the aggregate principal amount of Debt incurred in accordance with the
provisions of Section 5.07(a)(xi), (ii) in respect of all other Net Cash
Proceeds from Covered Asset Sales and the incurrence of any Debt permitted by
Section 5.07(a)(xii) or 5.07(b)(iv) relating to a bridge financing of any
Covered Asset Sale, a percentage of the Creditors' Portion equal to, and in

<PAGE>
                                       6


connection with the application of Adjusted Free Cash Flow pursuant to Section
2.11(b)(vii), a percentage equal to, a fraction (x) the numerator of which is
the Total Bank Exposure at such time and (y) the denominator of which is the
sum of the Total Bank Exposure at such time plus the aggregate principal amount
of the Senior Secured Exchange Notes issued on or prior to the date hereof and
outstanding at such time plus (without duplication) the aggregate principal
amount of Debt incurred in accordance with the provisions of Section
5.07(a)(xi), (iii) in connection with incurrence of any Debt (other than the
incurrence of any Debt permitted by Section 5.07(a)(xii) or 5.07(b)(iv)
relating to a bridge financing of any Covered Asset Sale or the incurrence of
any Debt described by Section 2.11(b)(ii) (to the extent that any amounts
remain outstanding under the Tranche A Term Loan Facility or the Revolving
Credit Loan Facility or any Revolving Credit Loan Commitments remain
outstanding) or Section 2.11(b)(iii) (to the extent that any amounts remain
outstanding under the Tranche C Term Loan Facility)) or any Equity Issuance, a
percentage equal to a fraction (x) the numerator of which is the Total Bank
Exposure at such time and (y) the denominator of which is the sum of the Total
Bank Exposure at such time plus the aggregate principal amount of Debt incurred
in accordance with the provisions of Section 5.07(a)(xi), (iv) until the
Tranche A Term Loan Facility is repaid in full and the Revolving Credit Loan
Facility is repaid in full and the Revolving Credit Loan Commitments are
permanently reduced to zero, in connection with the Net Cash Proceeds from
Asset Sales or the incurrence of Debt described in Section 2.11(b)(ii), a
percentage equal to 100% and (v) until the Tranche C Term Loan Facility is
repaid in full, in connection with the Net Cash Proceeds from Asset Sales or
the incurrence of Debt described in Section 2.11(b)(iii), a percentage equal to
100%.

     "Bankruptcy Law" means any law relating to bankruptcy, insolvency, winding
up, reorganization, suspension of payments, arrangement, liquidation, relief of
debtors, receivership, compromise, amalgamation, assignment for the benefit of
creditors or composition or readjustment of debts, or any equivalent or similar
proceeding or action.

     "Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the rate of interest publicly announced by Citicorp USA, Inc. from time to
time as its Base Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.

     "Base Rate Borrowing" has the meaning set forth in the definition of
"Borrowing" herein.

     "Base Rate Loan" means a Loan which bears interest at the Base Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or the provisions of Section 2.07(a) or Article 8 plus the Base Rate
Margin.

     "Base Rate Margin" means a rate per annum equal to 5.50%.

     "Benefit Arrangement" means, at any time, an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer
Plan and which is maintained or otherwise contributed to by any member of the
ERISA Group.

     "Borrower" has the meaning specified in the recital of the parties to this
Agreement.

<PAGE>
                                       7


     "Borrowing" means a borrowing hereunder consisting of Revolving Credit
Loans made to the Borrower at the same time by the Revolving Credit Loan Banks
pursuant to Section 2.01(a). A Borrowing is a "Base Rate Borrowing" if such
Revolving Credit Loans are Base Rate Loans or a "Euro-Dollar Borrowing" if such
Revolving Credit Loans are Euro-Dollar Loans.

     "BVI Cayman Pledge Agreement" has the meaning set forth in 3.01(j).

     "BVI Collateral" means the "Collateral" referred to in the BVI Cayman
Pledge Agreement.

     "Capital Commitment" means any contractual commitment or obligation under
an equity contribution or other agreement the primary purpose of which is for
the Borrower to provide to an AES Business a portion of the capital required to
finance construction projects, the acquisition of additional assets or capital
improvements being undertaken by such AES Business.

     "Capital Stock" means, with respect to any Person, any and all shares,
interests, participants or other equivalents (however designated, whether
voting or non-voting) of, or interests in (however designated), the equity of
such Person, including, without limitation, all common stock and preferred
stock and partnership and joint venture interests of such Person.

     "Cash Flow Coverage Ratio" means, for any period, the ratio of (i)
Adjusted Parent Operating Cash Flow for such period to (ii) Corporate Charges
for such period.

     "CFC" means any entity that is a controlled foreign corporation under
Section 957 of the Internal Revenue Code (or any successor provision thereto).

     "Cilcorp" means Cilcorp, Inc., an Illinois corporation.

     "Cilcorp Purchase Agreement" means the purchase agreement dated as of
April 28, 2002 between the Borrower and Ameren Corporation regarding the sale
by the Borrower of 100% of its ownership interests in Cilcorp.

     "Closing Date" means the date on or after the Effective Date on which the
Agent shall have received the fees and documents specified in or pursuant to
Section 3.01.

     "Collateral" means the Creditor Group Collateral and the Tranche C
Collateral.

     "Collateral Account" has the meaning as set forth in the Collateral Trust
Agreement.

     "Collateral Agent" means Citicorp USA, Inc., in its capacity as collateral
agent for the Lender Parties under the Financing Documents and its successors
in such capacity.

     "Collateral Coverage Ratio" means, at any time, the ratio of (i) the
Collateral Value at such time to (ii) the sum of (in each case to the extent
not collateralized by cash or Temporary Cash Investments) (A) the aggregate
principal amount of Loans then outstanding, (B) the aggregate amount of the
Unused Revolving Credit Loan Commitments at such time,

<PAGE>
                                       8


(C) the aggregate Available Amount at such time, (D) the Drax LOC Available
Amount at such time, (E) the aggregate principal amount of Senior Secured
Exchange Notes then outstanding, (F) the "mark to market" value of the Banc of
America Secured Option at such time and the "mark to market" value of all
outstanding Secured Hedge Agreements at such time in an amount up to
$50,000,000, (G) the amounts payable by the Borrower pursuant to any Secured
Treasury Management Service Agreement, (H) the aggregate amount payable by the
Borrower pursuant to the terms of the Sul Guarantee at such time in an amount
up to $50,000,000, (I) the reimbursement obligations pursuant to the Lake Worth
Letter of Credit in an amount up to $5,490,449 at such time and (J) the
aggregate principal amount of Debt permitted by Sections 5.07(a)(iii) and (x).

     "Collateral Documents" means the Security Agreement, the Collateral Trust
Agreement, the BVI Cayman Pledge Agreement, the Tranche C Pledge Agreement and
any other agreement that creates or purports to create a Lien in favor of (x)
the Collateral Trustees for the benefit of the Secured Holders or (y) the
Collateral Agent for the benefit of the Tranche C Secured Parties.

     "Collateral Trust Agreement" has the meaning specified in Section 3.01(h).

     "Collateral Value" means, at any time, the aggregate book value at such
time of the percentage of Equity Interests pledged in favor of the Secured
Holders (other than the Equity Interests of the Excluded Subsidiaries);
provided that the book value of each Subsidiary whose Equity Interests are
being pledged shall be determined at such time (without giving effect to any
accumulated other comprehensive gain or loss) by the sum of (i) its contributed
capital less (ii) its intercompany receivables, plus (iii) its pre-tax retained
earnings, plus (iv) its intercompany payables and less (v) dividends paid to
the Borrower by such Subsidiary; provided further that for purposes of
determining IPALCO's book value, IPALCO's contributed capital shall be
calculated on a purchase accounting basis.

     "Completion of the Exchange Note Offering" means the satisfaction and/or
waiver of all the conditions to the exchange by the holders of at least 80% of
the aggregate principal face amount of each of (i) the Borrower's 8.75% Senior
Notes due 2002 and (ii) the Borrower's 7.375% Remarketable or Redeemable
Securities due 2013 (collectively referred to as the "Old Securities") for the
Senior Secured Exchange Notes on or prior to the Closing Date pursuant to the
Senior Secured Exchange Note Indenture.

     "Conduit Lender" means any special purpose corporation organized and
administered by any Bank for the purpose of making Loans hereunder otherwise
required to be made by such Bank and designated by such Bank in a written
instrument, subject to the consent of the Agent and the Borrower (which, in
each case, shall not be unreasonably withheld or delayed); provided that the
designation by any Bank of a Conduit Lender shall not relieve the designating
Bank of any of its obligations to fund a Loan under the Agreement if, for any
reason, its Conduit Lender fails to fund any such Loan, and the designating
Bank (and not the Conduit Lender) shall have the sole right and responsibility
to deliver all consents and waivers required or requested under this Agreement
with respect to its Conduit Lender, and provided further that no Conduit Lender
shall (a) be entitled to receive any greater amount pursuant to Section 8.03,
8.04 or 10.03 than the designating Lender would have been entitled to receive
in respect of the

<PAGE>
                                       9


extensions of credit made by such Conduit Lender or (b) be deemed to have any
Revolving Credit Commitment hereunder.

     "Consolidated Subsidiary" means, at any date with respect to any Person,
any Subsidiary of such Person or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date.

     "Controlling Person" has the meaning set forth in the definition of
"Affiliate" herein.

     "Corporate Charges" means, for any period, the sum of the following
amounts (determined without duplication), in each case to the extent paid by
the Borrower during such period and regardless of whether any such amount was
accrued during such period:

     (A) interest expense of the Borrower for such period:

          (i) including, without limitation, interest expense attributable to
     (x) the accretion of original issue discount on Debt issued at less than
     face value thereof and (y) any interest added to the principal amount of
     Debt but;

          (ii) excluding any interest expense to the extent that (x) the
     Borrower has the option or obligation to pay or satisfy such interest
     expense by the issuance of Capital Stock of the Borrower or other
     securities of the Borrower which would not constitute Recourse Debt and
     (y) the Borrower has not paid or satisfied such interest expense during
     such period with cash or by the issuance of Recourse Debt; and

     (B) rental expense of the Borrower for such period;

     (C) dividends paid on the Borrower's Redeemable Stock during such period;

     (D) dividends paid on the Existing Trust Preferred Securities; and

     (E) interest expense of AES New York Funding L.L.C. in respect of the AES
N.Y. Funding Credit Facility.

     "Covered Asset Sale" means any Asset Sale other than (a) any Asset Sale of
any of the Capital Stock of any Revolving Credit Loan/Tranche A Loan Guarantors
or any Asset Sale of any assets of a Revolving Credit Loan/Tranche A Loan
Guarantors or any of their Subsidiaries to the extent that the Net Cash
Proceeds are applied as set forth in Section 2.11(b)(ii) and (b) any Asset Sale
of any Capital Stock of the Tranche C Term Loan Guarantor or any Asset Sale of
any asset of the Tranche C Term Loan Guarantor or any of its Subsidiaries to
the extent that such Net Cash Proceeds are applied as set forth in Section
2.11(b)(iii). For the avoidance of doubt, to the extent that the Net Cash
Proceeds referred to in clauses (a) and (b) are not applied as set forth in
Sections 2.11(b)(ii) and 2.11(b)(iii), respectively, such Net Cash Proceeds
shall be deemed to be for all purposes under this Agreement to be Net Cash
Proceeds from a "Covered Asset Sale".

<PAGE>
                                      10


     "Credit Agreement Documents" has the meaning set forth in the Collateral
Trust Agreement.

     "Credit Party" has the meaning set forth in Section 8.03.

     "Creditor Group Collateral" means the Security Agreement Collateral, the
Additional Collateral Trust Agreement Collateral and the BVI Collateral.

     "Creditors' Portion" means, in respect of any Net Cash Proceeds from (x)
Covered Asset Sales or (y) Debt permitted by Section 5.07(a)(xii) or Section
5.07(b)(iv), in each case referred to in clause (y) relating to a bridge
financing of any Covered Asset Sale (the "Bridge Debt"), the following:

          (i) with respect to the first $600,000,000 of Net Cash Proceeds from
     Covered Asset Sales and/or Bridge Debt received after the Effective Date,
     50% of such Net Cash Proceeds from Covered Asset Sales and/or Bridge Debt;

          (ii) with respect to the next $400,000,000 of Net Cash Proceeds from
     Covered Asset Sales and/or Bridge Debt received after the Effective Date
     (after giving effect to the Net Cash Proceeds from Covered Asset Sales
     and/or Bridge Debt described in clause (i)), 80% of such Net Cash Proceeds
     from Covered Asset Sales and/or Bridge Debt; and

          (iii) with respect to all other Net Cash Proceeds from Covered Asset
     Sales and/or Bridge Debt received after the Effective Date (after giving
     effect to the Net Cash Proceeds from Covered Asset Sales and/or Bridge
     Debt described in clauses (i) and (ii)), 60% of such Net Cash Proceeds
     from Covered Asset Sales and/or Bridge Debt.

     "Debt" of any Person means at any date, without duplication, (i) all
Obligations of such Person for borrowed money; (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments;
(iii) all Obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all Obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles; (v)
all Obligations (whether contingent or non-contingent) of such Person to
reimburse any bank or other Person in respect of amounts paid under a letter of
credit, surety or performance bond or similar instrument; (vi) all Debt secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person; (vii) all Debt of others Guaranteed by such Person
and (viii) all Redeemable Stock of such Person valued at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends. For purposes hereof, contingent obligations of the type described in
clause (v) of this definition with respect to letters of credit not issued
hereunder shall not be treated as "Debt" hereunder to the extent that such
obligations are cash collateralized or to the extent that the issuer of any
such letter of credit is entitled to draw under a Revolving Letter of Credit
issued hereunder or the Drax Letter of Credit which by its terms requires that
Revolving L/C Drawings or Drax L/C Drawings, as the case may be, under such
letter of credit be applied only to reimburse such issuer for amounts paid by
such issuer under such letter of credit. The obligations of the Borrower under
any Capital Commitment or under any agreement, in the form of indemnity or
contingent equity contribution agreement or

<PAGE>
                                      11


otherwise, pursuant to which the Borrower agrees to protect any Person, in
whole or in part, from tax liabilities, environmental liabilities, political
risks, including currency convertibility and transferability risk and changes
in law, or construction cost overruns shall not constitute Debt.

     "Debt Exchange Equity Issuance" means an Equity Issuance by the Borrower
in exchange for any Debt of the Borrower permitted by Section 5.07(a)(ii)
("Equity Exchanged Debt"), provided that (a) in no event shall the Equity
Interests issued in respect of such Equity Issuance be Redeemable Stock and (b)
such Equity Interests shall, by their terms, not require the payment of any
cash dividend or any other cash payment during any calendar year prior to
December 31, 2005 that is greater than the interest payable in cash that would
have been payable on the Equity Exchanged Debt during such calendar year to any
holder thereof.

     "Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.

     "Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions. For purposes of determining the aggregate amount of Derivative
Obligations on any date or the Recourse Debt to Cash Flow Ratio on any date,
the Derivative Obligations of the applicable Person in respect of any Hedging
Agreement shall be the maximum aggregate amount (after giving effect to any
netting agreements to the extent such netting agreements are with the same
Person to whom any such Derivative Obligations are owed or with Affiliates of
such Person) that the applicable Person would be required to pay if such
Hedging Agreement were terminated at such time.

     "Direct Exposure" has the meaning set forth in Section 2.15(c).

     "Disclosed Matters" means matters disclosed in any SEC Filings made prior
to December 9, 2002 or in written materials sent by or on behalf of the
Borrower to all of the Bank Parties prior to December 9, 2002.

     "Dollar Equivalent" means, on any date of determination with respect to
any Alternative Currency Letter of Credit, (i) in calculating the maximum
aggregate amount available to be drawn under such Alternative Currency Letter
of Credit at any time on or after such date, the amount thereof in Dollars most
recently reported to the Agent pursuant to Section 2.16 in calculating the
amount of any Revolving L/C Drawing under such Alternative Currency Letter of
Credit, the aggregate amount of Dollars paid by the relevant Revolving Fronting
Bank to purchase the Alternative Currency paid by such Revolving Fronting Bank
in respect of such Revolving L/C Drawing.

     "Dollars" has the meaning set forth in Section 2.17.

<PAGE>
                                      12


     "Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City are authorized by law to close.

     "Domestic Lending Office" means, as to each Bank Party, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank Party may hereafter designate as its Domestic Lending
Office by notice to the Borrower and the Agent.

     "Drax Agreement" has the meaning set forth in Section 2.18(c)(iv).

     "Drax L/C Drawing" means a drawing effected under the Drax Letter of
Credit.

     "Drax Letter of Credit" means the Existing Drax Letter of Credit issued
under the Existing Drax LOC Facility by Bank of America, N.A., as the Drax LOC
Fronting Bank and deemed to be issued hereunder pursuant to Section 2.18, as
the same may be amended, amended and restated, extended or replaced pursuant to
the terms hereof.

     "Drax Letter of Credit Commission Rate" means a rate per annum equal to
6.50%.

     "Drax Letter of Credit Facility" means, at any time, the Drax LOC
Commitments of the Drax LOC Fronting Bank.

     "Drax Letter of Credit Initial Termination Date" means January 22, 2004.

     "Drax Letter of Credit Termination Date" means the Drax Letter of Credit
Initial Termination Date; provided, however that upon the satisfaction of the
terms and conditions set forth in Section 2.20, the "Drax Letter of Credit
Termination Date" shall have the meaning set forth in such Section.

     "Drax Loan" means a loan made by the Drax LOC Fronting Bank pursuant to
Section 2.18(e).

     "Drax Loan Note" means a promissory note of the Borrower to the order of
the Drax LOC Fronting Bank, in substantially the form of Exhibit A-5 hereto,
evidencing the indebtedness of the Borrower to the Drax LOC Fronting Bank
resulting from the Drax Loans deemed to have been made by the Drax LOC Fronting
Bank.

     "Drax LOC Available Amount" means, for the Drax Letter of Credit on any
date of determination, the maximum aggregate amount available to be drawn under
the Drax Letter of Credit at any time on or after such date, the determination
of such maximum amount to assume the compliance with and satisfaction of all
conditions for drawing enumerated therein.

     "Drax LOC Bank" means the Drax LOC Fronting Bank, each Assignee pursuant
to Section 10.06(c), and their respective successors.

     "Drax LOC Cash Collateral Account" has the meaning set forth in Section
2.19(a).

<PAGE>
                                      13


     "Drax LOC Collateral" has the meaning set forth in Section 2.19(b).

     "Drax LOC Commitment" means, with respect to the Drax LOC Fronting Bank,
(pound)52,250,000 and the obligation of the Drax LOC Fronting Bank to extend
the expiry date of the Drax Letter of Credit Initial Termination Date to the
Drax Letter of Credit Termination Date as provided in this Agreement.

     "Drax LOC Direct Exposure" has the meaning set forth in Section 2.19(c).

     "Drax LOC Fronting Bank" means Bank of America, N.A., or any Assignee that
becomes a Drax LOC Fronting Bank under Section 10.06.

     "Drax LOC Liabilities" means, at any time and in respect of the Drax
Letter of Credit, the sum, without duplication, of (i) the Drax LOC Available
Amount plus (ii) the aggregate outstanding amount of the Drax Loans in respect
of previous Drax L/C Drawings under the Drax Letter of Credit.

     "Drax LOC Relevant Contingent Exposure" has the meaning set forth in
Section 2.19(c).

     "Drax LOC Total Exposure" means, at any time, with respect to any Drax LOC
Bank, its Drax LOC Total Outstandings.

     "Drax LOC Total Outstandings" means at any time, as to any Drax LOC Bank,
its participation in the Drax LOC Liabilities.

     "Effective Date" means the date this Agreement becomes effective in
accordance with Section 10.10.

     "Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment, including, without limitation, ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.

     "Equity Basket" means, at any time of determination, the aggregate amount
of Net Cash Proceeds received by the Borrower after the Effective Date and
prior to such time of determination from Equity Issuances that are not required
to prepay the Facilities as set forth in Section 2.11, less the aggregate
amount of such Net Cash Proceeds that were applied to the refinancing of any
Debt prior to such time in accordance with the provisions of Section
5.17(viii), less the aggregate amount of such Net Cash Proceeds that were used
prior to such time in connection with any Investment permitted by Section 5.16.

<PAGE>
                                      14


     "Equity Credit Preferred Securities" means, at any date:

          (i) Debt of the Borrower (A) that is owed to a Special Purpose
     Financing Subsidiary of the Borrower; (B) that is issued in connection
     with the issuance by such Special Purpose Financing Subsidiary of Trust
     Preferred Securities; (C) that is subordinated in right of payment to
     other Debt of the Borrower of at least the types and to at least the
     extent as was, on the date of issuance thereof, the Junior Subordinated
     Debentures issued by AES in connection with the issuance by AES Trust III
     of its $3.375 Term Convertible Securities, Series C, on October 7, 1999
     (or otherwise satisfactory to the Agent); (D) as to which, at such date,
     AES has the right to defer the payment of all interest for the period of
     at least 19 consecutive quarters beginning at such date and (E) that does
     not mature, in whole or in part, and is not subject to any required
     repayment or prepayment, any required sinking fund or similar payment or
     any repayment or prepayment or sinking fund or similar payment at the
     option of the holder thereof, prior to the fifth anniversary of the
     Termination Date; and

          (ii) Guarantees by the Borrower of the obligations of the issuer of
     any Trust Preferred Securities in respect of such Trust Preferred
     Securities; and

          (iii) Mandatorily convertible securities (such as those known as
     "DECS" (including tax deductible DECS)) consisting of Debt of the Borrower
     that is subordinated in right of payment to other Debt of the Borrower of
     at least the types and to at least the extent as was, on the date of
     issuance thereof, the Junior Subordinated Debentures issued by the
     Borrower in connection with the issuance by AES Trust III of its $3.375
     Term Convertible Securities, Series C, on October 7, 1999, (or otherwise
     satisfactory to the Agent) and which is mandatorily convertible into, or
     redeemable with the proceeds of, Capital Stock of the Borrower (other than
     Redeemable Stock).

     "Equity Interest" means, with respect to any Person, shares of capital
stock of (or other ownership or profit interests in) such Person, warrants,
options or other rights for the purchase or other acquisition from such Person
of shares of capital stock of (or other ownership or profit interests in) such
Person, securities convertible into or exchangeable for shares of capital stock
of (or other ownership or profit interests in) such Person or warrants, rights
or options for the purchase or other acquisition from such Person of such
shares (or such other interests), and other ownership or profit interests in
such Person (including, without limitation, partnership, member or trust
interests therein), whether voting or nonvoting, and whether or not such
shares, warrants, options, rights or other interests are authorized or
otherwise existing on any date of determination.

     "Equity Issuances" means, in respect of any Person, the issuance or sale
of Equity Interests of such Person other than any such issuance to directors,
officers or employees pursuant to employee benefit plans in the ordinary course
of business (including by way of exercise of stock options).

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.

<PAGE>
                                      15


     "ERISA Group" means the Borrower, its Subsidiaries and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any of
its Subsidiaries, are treated as a single employer under Section 414 of the
Internal Revenue Code.

     "Euro-Dollar Borrowing" has the meaning set forth in the definition of
"Borrowing" herein.

     "Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.

     "Euro-Dollar Lending Office" means, as to each Bank Party, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank Party as it may hereafter designate as its Euro-Dollar Lending Office by
notice to the Borrower and the Agent.

     "Euro-Dollar Loan" means a Loan which bears interest at the Adjusted
London Interbank Offered Rate pursuant to the applicable Notice of Borrowing or
Notice of Interest Rate Election plus the Euro-Dollar Margin.

     "Euro-Dollar Margin" means a rate per annum equal to 6.50%.

     "Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents). The Adjusted London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.

     "Event of Default" has the meaning set forth in Section 6.01.

     "Excess Drax LOC Collateral" has the meaning set forth in Section 2.19(d).

     "Excess Revolving L/C Collateral" has the meaning set forth in Section
2.15(d).

     "Exchanged Debt" has the meaning set forth in Section 5.07(a)(iv).

     "Exchange Note Holders" means the holders of the Senior Secured Exchange
Notes.

<PAGE>
                                      16


     "Exchange Note Offering" means the offer by the Borrower to exchange the
Old Securities for the Senior Secured Exchange Notes pursuant to the Senior
Secured Exchange Note Indenture.

     "Excluded Power Project" means the Drax Power Supply Business located in
the United Kingdom and any Power Supply Business located in Brazil (other than
the Power Supply Business known as "Tiete") or Argentina.

     "Excluded Subsidiary" means any Subsidiary set forth on Schedule IV, as
such Schedule IV may be updated pursuant to Section 5.01(l)(2) whose assets
consist only of any of the Excluded Power Projects and direct or indirect
Investments therein.

     "Existing Bank Credit Agreements" has the meaning set forth in the first
preliminary statement hereto.

     "Existing Converted Revolving Credit Loans" means, with respect to each
Tranche A Term Loan Bank, the "Loans" (as defined in the Existing Revolving
Credit Facility) designated to be Tranche A Term Loans hereunder and set forth
opposite its name on Appendix II hereto under the caption "Existing Converted
Revolving Credit Loans".

     "Existing Drax Letter of Credit" means the "Letter of Credit" (as defined
in the Existing Drax LOC Facility) issued under the Existing Drax LOC Facility
listed on Part B of Appendix V under the heading "Existing Drax Letter of
Credit".

     "Existing Drax LOC Facility" has the meaning set forth in the first
preliminary statement hereto.

     "Existing AES EDC SELLS Facility" has the meaning set forth in the first
preliminary statement hereto.

     "Existing Letter of Credit" means a "Letter of Credit" (as defined in the
Existing Revolving Credit Facility) issued under the Existing Revolving Credit
Facility that is outstanding on the Effective Date and listed on Part A of
Appendix V under the heading "Existing Revolving Letters of Credit".

     "Existing Revolving Credit Facility" has the meaning set forth in the
first preliminary statement hereto.

     "Existing Revolving Credit Loans" means, with respect to each Revolving
Credit Loan Bank, the "Loans" (as defined in the Existing Revolving Credit
Facility) set forth in Column B opposite its name on Appendix I hereto.

     "Existing Term Credit Facility" has the meaning set forth in the first
preliminary statement hereto.

     "Existing Tranche B Term Loans" means, with respect to each Tranche B Term
Loan Bank, the "Loan" (as defined in the Existing Term Credit Facility) set
forth opposite its name on Appendix III hereto under the caption "Existing
Tranche B Term Loans".

<PAGE>
                                      17


     "Existing Tranche C Term Loans" means, with respect to each Tranche C Term
Loan Bank, the "Loan" (as defined in the Existing AES EDC SELLS Facility) set
forth opposite its name on Part A or Part B (as the case may be) of Appendix IV
hereto under the caption "Existing Tranche C Term Loans".

     "Existing Trust Preferred Securities" means (i) the $3.375 Trust Preferred
Securities, Series C issued by AES Trust III on October 7, 1999 and (ii) the
$3.00 Trust Convertible Preferred Securities issued by AES Trust VII on May 17,
2000.

     "Extension of Credit" means (i) a Borrowing pursuant to Section 2.01 or
(ii) the issuance of a Revolving Letter of Credit pursuant to Section 2.03.

     "Facilities" means the Revolving Credit Loan Facility, the Tranche A Term
Loan Facility, the Tranche B Term Loan Facility, the Tranche C Term Loan
Facility and the Drax Letter of Credit Facility.

     "Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day; provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Citicorp USA, Inc. on such day on such
transactions as determined by the Agent.

     "Financing Documents" means this Agreement, the Collateral Documents and
the Notes.

     "Financing Parties" means (i) the Bank Parties hereunder and (ii) Exchange
Note Holders.

     "Foreign Subsidiary" means a Pledged Subsidiary or a Subsidiary of a
Pledged Subsidiary (other than an Excluded Subsidiary) organized under the laws
of a jurisdiction other than the United States or any State thereof.

     "Form 10-K" means the Borrower's annual report on Form 10-K for the year
ended December 31, 2001, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.

     "Form 10-Q" means the Borrower's quarterly report on Form 10-Q for the
quarter ended September 30, 2002, as filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934.

     "GAAP" has the meaning set forth in Section 1.02.

<PAGE>
                                      18


     "Group of Loans" means, at any time, a group of Loans consisting of (i)
all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans
having the same Interest Period at such time; provided that if a Loan of any
particular Bank is converted to or made as a Base Rate Loan pursuant to Article
8, such Loan shall be included in the same Group or Groups of Loans from time
to time as it would have been in if it had not been so converted or made.

     "Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business or, for the avoidance of doubt,
obligations of the Borrower to provide capital to an AES Business under a
Capital Commitment. The term "Guarantee" used as a verb has a corresponding
meaning.

     "Guaranteed Obligations" has the meaning set forth in Section 9.01(b).

     "Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and
other hydrocarbons, or any substance having any constituent elements displaying
any of the foregoing characteristics.

     "Hedge Agreement" means any contract, instrument or agreement in respect
of Derivative Obligations.

     "Hedge Bank" means any Bank Party or an Affiliate of a Bank Party in its
capacity as a party to a Secured Hedge Agreement.

     "Indemnitee" has the meaning set forth in Section 10.03(b).

     "Interest Period" means, with respect to each Euro-Dollar Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in an applicable Notice of Interest Rate
Election and ending one, two, three, six, nine or, if available, twelve months
thereafter, as the Borrower may elect in such notice; provided that:

          (a) any Interest Period which would otherwise end on a day which is
     not a Euro-Dollar Business Day shall be extended to the next succeeding
     Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
     another calendar month, in which case such Interest Period shall end on
     the next preceding Euro-Dollar Business Day;

          (b) any Interest Period which begins on the last Euro-Dollar Business
     Day of a calendar month (or on a day for which there is no numerically
     corresponding day in the

<PAGE>
                                      19


     calendar month at the end of such Interest Period) shall, subject to
     clause (c) below, end on the last Euro-Dollar Business Day of a calendar
     month; and

          (c) any Interest Period that would otherwise end after the
     Termination Date shall end on the Termination Date.

     "Intermediate Holding Companies" has the meaning set forth in Section
5.16(b).

     "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.

     "Investment" means any investment in any Person, whether by means of share
purchase, capital contribution, loan, Guarantee, time deposit or otherwise (but
not including any demand deposit).

     "IPALCO" means Ipalco Enterprises, Inc., an Indiana corporation.

     "Lake Worth Letter of Credit" has the meaning set forth in the Collateral
Trust Agreement.

     "Lender Parties" has the meaning set forth in the Collateral Trust
Agreement.

     "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any of its Subsidiaries shall be deemed to own subject to a Lien
any asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.

     "Loan" means a Revolving Credit Loan, a Tranche A Term Loan, a Tranche B
Term Loan, a Tranche C Term Loan or a Drax Loan, each of which may be a Base
Rate Loan or a Euro-Dollar Loan and "Loans" means Revolving Credit Loans,
Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans or Drax Loans,
each of which may be Base Rate Loans or Euro-Dollar Loans or any combination of
the foregoing.

     "Loan Party" means each Obligor and AES BVI II.

     "London Interbank Offered Rate" means, for any Interest Period, the
average (rounded upward, if necessary, to the next higher 1/16th of 1%) of the
respective rates per annum at which deposits in dollars are offered to each of
the Reference Banks in the London interbank market at approximately 11:00 A.M.
(London time) two business days before the first day of such Interest Period in
an amount approximately equal to the principal amount of the Euro-Dollar Loan
of such Reference Bank to which such Interest Period is to apply and for a
period of time comparable to such Interest Period.

<PAGE>
                                      20


     "Material Adverse Effect" means a material adverse effect on (a) the
business, consolidated results of operations, consolidated financial condition
or prospects of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of the Loan Parties to perform their material obligations under any
Financing Document or (c) the rights of and remedies available to any Bank
Party under any Financing Document.

     "Material AES Entity" means (i) any Subsidiary Guarantor and (ii) any
other Person in which the Borrower has a direct or indirect equity Investment
if such Person's contribution to Parent Operating Cash Flow for the four most
recently completed fiscal quarters of the Borrower constitutes 15% or more of
Parent Operating Cash Flow for such period.

     "Material Debt" means, with respect to any Person, Debt (other than the
Loans and the Reimbursement Obligations) of such Person arising in one or more
related or unrelated transactions, in an aggregate principal amount exceeding
$50,000,000.

     "Material Hedge Agreement" means, with respect to any Person, a Hedge
Agreement entered into by such Person in respect of which the Derivative
Obligations of such Person exceed $50,000,000.

     "Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $50,000,000.

     "Maximum Outstanding Exposure" has the meaning set forth in Section 2.16.

     "Minimum CP Rating" means (i) A-1 for Standard & Poor's Ratings Services;
(ii) P-1 for Moody's Investors Service, Inc.; (iii) F-1 for Fitch IBCA, Inc.
and (iv) D-1 for Duff & Phelps Credit Rating Co.

     "Minimum Liquidity Level" means, as of the end of any fiscal year, an
amount equal to (i) the aggregate amount of cash and Temporary Cash Investments
of the Borrower on such date and (ii) the aggregate amount of the Unused
Revolving Credit Loan Commitments on such date.

     "Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.

     "Net Cash Proceeds": (A) with respect to an Equity Issuance or the
incurrence of Debt (a "Covered Transaction"), means the aggregate amount of
cash received from time to time (whether as initial consideration or through
payment or disposition of deferred consideration) by the Borrower and its
Subsidiaries from such Covered Transaction after deducting therefrom (without
duplication) (a) brokerage commissions, underwriting fees and discounts, legal
fees, finder's fees and other similar fees and commissions, (b) in the case of
a Covered Transaction in the form of incurrence of Debt by a Subsidiary, the
amount of any Debt of such Subsidiary that, by the terms of the agreement or
instrument governing such Debt or applicable law, is required to be repaid or
prepaid and is actually so repaid or prepaid with all or

<PAGE>
                                      21


a portion of the proceeds of such Covered Transaction and (c) any portion of
the proceeds of such Covered Transaction required to prepay or collateralize
interest or dividends payable in respect of such Covered Transaction during one
six-month period; and

     (B) with respect to any Asset Sale, means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received (including any cash received upon sale or disposition of such note or
receivable), excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to the
property disposed of in such Asset Sale or received in any other noncash form)
therefrom, in each case, net of all legal, title and recording tax expenses,
commissions and other customary fees and expenses incurred (including, without
limitation, consent and waiver fees and any applicable premiums, earn-out or
working interest payments or payments in lieu or in termination thereof), and
all federal, state, provincial, foreign and local taxes payable to the relevant
tax authority (i) as a direct consequence of such Asset Sale, (ii) as a result
of the required repayment of any Debt in any jurisdiction other than the
jurisdiction where the property disposed of was located or (iii) as a result of
any repatriation to the U.S. of any proceeds of such Asset Sale, and in each
case net of a reasonable reserve (which reserve shall be deposited into an
escrow account on terms and conditions reasonably acceptable to the Agent) for
any indemnification payments (fixed and contingent) attributable to seller's
indemnities to the purchaser undertaken by the Borrower or any of its
Subsidiaries in connection with such Asset Sale (but excluding any payments,
which by the terms of the indemnities will not, under any circumstances, be
made prior to the Termination Date) provided that any amounts in such reserve
to the extent not paid to the purchaser as an indemnification payment after the
expiration of any applicable time period set forth in the agreements in respect
of such Asset Sale shall be treated as "Net Cash Proceeds" for all purposes of
the Agreement, and net of all payments made on any Debt which must by its terms
or by applicable law be repaid out of the proceeds from such Asset Sale, and
net of all required distributions and other required payments made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Sale;

provided that for purposes of determining Net Cash Proceeds received by a
Subsidiary required to be applied pursuant to Section 2.11, only that portion
of such Net Cash Proceeds received by the Borrower or a Qualified Holding
Company whose Equity Interests have been pledged to the Secured Holders
pursuant to the Collateral Documents from such Subsidiary in accordance with
Section 5.18 shall be included.

     "Non-Pledged Subsidiaries" means (i) as of the Closing Date, each of the
direct Subsidiaries of the Borrower or of AES BVI II listed on Schedule III or
(ii) after the Closing Date, in addition to the "Non-Pledged Subsidiaries" set
forth on Schedule III, any newly formed or acquired direct (1) Subsidiary of
the Borrower whose aggregate assets have a fair market value not in excess of
$1,000,000 and, together with the fair market value of the assets of all
Non-Pledged Subsidiaries (other than any Subsidiary which is described in
clause (2) below), does not exceed $50,000,000 or (2) Subsidiaries of the
Borrower for which a grant or perfection of a Lien on such Subsidiary's stock
would require approvals and consents from foreign and domestic regulators and
from lenders to, and suppliers, customers or other contractual counterparties
of, such Subsidiary.

<PAGE>
                                      22


     "Note" means a Revolving Credit Loan Note, a Tranche A Term Loan Note, a
Tranche B Term Loan Note, Tranche C Term Loan Note or the Drax Loan Note.

     "Notice of Borrowing" has the meaning set forth in Section 2.02.

     "Notice of Interest Rate Election" has the meaning set forth in Section
2.07(a).

     "Notice of Issuance" has the meaning set forth in Section 2.03(d).

     "Obligation" means, with respect to any Person, any payment, performance
or other obligation of such Person of any kind, including, without limitation,
any liability of such Person on any claim, whether or not the right of any
creditor to payment in respect of such claim is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed,
legal, equitable, secured or unsecured, and whether or not such claim is
discharged, stayed or otherwise affected by any proceeding referred to in
Section 6.01(g) or (h). Without limiting the generality of the foregoing, the
Obligations of the Borrower and the Subsidiary Guarantors under the Loan
Documents include (a) the obligation to pay principal, interest, Revolving
Letter of Credit commissions, charges, expenses, fees, attorneys' fees and
disbursements, indemnities and other amounts payable by the Borrower and such
Subsidiary Guarantor under any Financing Document and (b) the obligation of the
Borrower and such Subsidiary Guarantor to reimburse any amount in respect of
any of the foregoing that any Bank Party, in its sole discretion, may elect to
pay or advance on behalf of the Borrower and such Subsidiary Guarantor.

     "Obligors" means the Borrower and the Subsidiary Guarantors.

     "Off Balance Sheet Obligation" means, with respect to any Person, any
Obligation of such Person under a synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing classified
as an operating lease in accordance with GAAP, if such Obligations would give
rise to a claim against such Person in a proceeding referred to in Section
6.01(h).

     "Old Securities" has the meaning set forth in the definition of
"Completion of the Exchange Note Offering" herein.

     "Other Taxes" has the meaning set forth in Section 8.04(b).

     "Parent" means, with respect to any Bank Party, any Person controlling
such Bank Party.

     "Parent Operating Cash Flow" means, for any period, the sum of the
following amounts (determined without duplication), but only to the extent
received in cash by the Borrower from a Person during such period:

          (A) dividends paid to the Borrower by its Subsidiaries during such
     period;

          (B) consulting and management fees paid to the Borrower for such
     period;

<PAGE>
                                      23


          (C) tax sharing payments made to the Borrower during such period;

          (D) interest and other distributions paid during such period with
     respect to cash and other Temporary Cash Investments of the Borrower
     (other than with respect to amounts on deposit in the Revolving L/C Cash
     Collateral Account or the Drax LOC Cash Collateral Account); and

          (E) other cash payments made to the Borrower by its Subsidiaries
     other than (i) returns of invested capital; (ii) payments of the principal
     of Debt of any such Subsidiary to the Borrower and (iii) payments in an
     amount equal to the aggregate amount released from debt service reserve
     accounts upon the issuance of letters of credit for the account of the
     Borrower and the benefit of the beneficiaries of such accounts.

          For purposes of determining Parent Operating Cash Flow:

          (1) net cash payments received by a Qualified Holding Company whose
     Equity Interests have been pledged to the Secured Holders pursuant to the
     Collateral Documents during any period which could have been (without
     regard for any cash held by such Qualified Holding Company at the
     beginning of such period), but were not, paid as a dividend to the
     Borrower during such period due to tax or other cash management
     considerations may be included in Parent Operating Cash Flow for such
     period; provided that any amounts so included will not be included in
     Parent Operating Cash Flow if and when paid to a Borrower in any
     subsequent period; and

          (2) Net Cash Proceeds from Asset Sales, Equity Issuances or the
     incurrence of Debt shall not be included in Parent Operating Cash Flow for
     any period.

     "Participant" has the meaning set forth in Section 10.06(b).

     "Payment Restriction" means any provision in any agreement limiting the
ability of any of the Borrower's Subsidiaries to declare or pay dividends or
other distributions in respect of its Equity Interests or repay or prepay any
Debt owed to, make loans or advances to, or otherwise transfer assets to or
invest in, the Borrower or any Subsidiary of the Borrower (whether through a
covenant restricting dividends, loans, asset transfers or investments, a
financial covenant or otherwise).

     "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

     "Permitted Investment Basket" means at any date of determination an amount
equal to (A)(i) from the Effective Date until December 31, 2002, $27,500,000,
(ii) for the calendar year ending on December 31, 2003, $200,000,000, (iii) for
the calendar year ending on December 31, 2004, $50,000,000 and (iv) for the
calendar year ending on December 31, 2005, $25,000,000, provided that to the
extent the amounts set forth above for each time period are not used in such
time period, such amounts to the extent not used shall be carried forward to
future periods, plus (B) the aggregate amount of the Equity Basket at such
time.

<PAGE>
                                      24


     "Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

     "Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for employees of any Person
which was at such time a member of the ERISA Group.

     "Pledged Debt" shall have the meaning specified in the Security Agreement.

     "Pledged Subsidiary" means a direct Subsidiary of the Borrower or AES BVI
II listed on Schedule I hereto, whose Equity Interests have been pledged to the
Collateral Trustees for the benefit of the Secured Holders by the Borrower or
AES BVI II, as applicable, pursuant to the Security Agreement or the BVI Cayman
Pledge Agreement.

     "Power Supply Business" means an electric power or thermal energy
generation or cogeneration facility or related facilities, or an electric power
transmission, distribution, fuel supply and fuel transportation facilities, or
any combination thereof (all subject to relevant security, if any, under
related project financing arrangements), together with its or their related
power supply, thermal energy and fuel contracts as well as other contractual
arrangements with customers, suppliers and contractors.

     "PUHCA" has the meaning set forth in Section 4.12.

     "Qualified Holding Company" means any Wholly-Owned Consolidated Subsidiary
of the Borrower that satisfies, and all of whose direct or indirect holding
companies (other than the Borrower) are Wholly-Owned Consolidated Subsidiaries
of AES that satisfy, the following conditions:

          (i) its direct and indirect interest in any AES Business shall be
     limited to the ownership of Capital Stock or Debt obligations of a Person
     with a direct or indirect interest in such AES Business;

          (ii) except as a result of the Financing Documents (and permitted
     refinancings thereof), no consensual encumbrance or restriction of any
     kind shall exist on its ability to make payments, distributions, loans,
     advances or transfers to the Borrower;

          (iii) it shall not have outstanding any Debt other than Guarantees of
     Debt under, or Liens constituting Debt under, the Financing Documents (and
     permitted refinancings thereof) and Debt to other Qualified Holding
     Companies (other than AES BVI II);

          (iv) it shall engage in no business or other activity, shall enter
     into no binding agreements and shall incur no obligations other than (A)
     the holding of the Capital Stock

<PAGE>
                                      25


     and Debt obligations permitted under clause (i) above, (B) the holding of
     cash received from its Subsidiaries and the investment thereof in
     Temporary Cash Investments, (C) the payment of dividends to the Borrower,
     (D) ordinary business development activities, (E) the making (but not the
     entering into binding obligations to make) of Investments in AES
     Businesses owned by its Subsidiaries and (F) in the case of AES Electric,
     the making of Investments in Power Supply Business owned by NIGEN Limited
     and Medway Power Limited as of the date of this Agreement under any
     agreement by which it is bound as of the date of this Agreement; and

          (v) is listed on Schedule V hereto (as supplemented from time to time
     by written notice to the Agent by the Borrower).

     "Quarterly Payment Date" means each March 31, June 30, September 30 and
December 31.

     "Recourse Debt" means, on any date, the sum of (A) Debt of the Borrower
(other than Equity Credit Preferred Securities) plus (B) Derivative Obligations
of the Borrower.

     "Recourse Debt to Cash Flow Ratio" means, for any period, the ratio of:

          (i) the sum of the Recourse Debt as of the end of such period to;

          (ii) the Adjusted Parent Operating Cash Flow during such period.

     "Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the first anniversary of the Termination Date, (ii) redeemable at the option of
the holder of such class or series of Capital Stock at any time prior to the
first anniversary of the Termination Date or (iii) convertible into or
exchangeable for (unless solely at the option of such person) Capital Stock
referred to in clause (i) or (ii) above or Debt having a scheduled maturity
prior to the first anniversary of the Termination Date; provided that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such person to repurchase
or redeem such Capital Stock upon the occurrence of an "asset sale" or a
"change of control" occurring prior to the first anniversary of the Termination
Date shall not constitute Redeemable Stock if such Capital Stock specifically
provides that such person will not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption is permitted
under the terms of this Agreement.

     "Reduction Amount" has the meaning set forth in Section 2.11(d).

     "Reference Banks" means the respective principal London offices of
Citicorp USA, Inc., Bank of America, N.A. and Union Bank of California, N.A.
and "Reference Bank" means any one of such Reference Banks.

     "Refunding Borrowing" means a Borrowing which, after application of the
proceeds thereof, results in no net increase in the Total Outstandings of any
Revolving Credit Loan Bank.

<PAGE>
                                      26


     "Register" has the meaning set forth in Section 10.06(f).

     "Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.

     "Reimbursement Obligations" means at any date the obligations then
outstanding of the Borrower under Section 2.03(f) or Section 2.18(e) to
reimburse the Revolving Fronting Banks or the Drax LOC Fronting Bank, as the
case may be, for Revolving L/C Drawings under Revolving Letters of Credit or
for Drax L/C Drawings under the Drax Letter of Credit.

     "Related Fund" means with respect to any Bank Party that is a fund that
invests in bank loans, any other fund that invests in commercial loans and is
managed or advised by the same investment advisor as such Bank party or by an
Affiliate of such investment advisor.

     "Relevant Contingent Exposure" has the meaning set forth in Section
2.15(c).

     "Remaining Old Securities" has the meaning set forth in Section
5.07(a)(iii).

     "Remarketing Agreement" means the Remarketing Agreement dated June 5, 2001
between the Borrower and Banc of America Securities LLC, entered into in
connection with the Borrower's $200,000,000 7.375% Remarketable or Redeemable
Securities due 2013.

     "Required Banks" means, at any time, Bank Parties owed or holding at least
a majority in interest of the aggregate principal amount (based in the case of
any Revolving Letter of Credit denominated in an Alternative Currency other
than Dollars, on the Dollar Equivalent at such time) of the sum of (a) the
aggregate principal amount of the Loans outstanding at such time, (b) the
aggregate Revolving Letter of Credit Liabilities and Drax LOC Liabilities
outstanding at such time and (c) the aggregate Unused Revolving Credit Loan
Commitments at such time.

     "Required Revolving Credit Loan Banks" means at any time the Revolving
Credit Loan Banks having at least a majority of the aggregate Total Exposures
at such time.

     "Required Tranche A Term Loan Banks" means at any time the Tranche A Term
Loan Banks owed or holding at least a majority in interest of the aggregate
principal amount of the Tranche A Term Loans.

     "Required Tranche C Term Loan Banks" means at any time the Tranche C Term
Loan Banks owed or holding at least a majority in interest of the aggregate
principal amount of the Tranche C Term Loans.

     "Responsible Officer" means any duly authorized officer of the Borrower or
any of its Subsidiaries.

     "Revolving Credit Loan" has the meaning set forth in Section 2.01(a).

<PAGE>
                                      27


     "Revolving Credit Loan Bank" means each Bank having a Revolving Credit
Loan Commitment.

     "Revolving Credit Loan Commitment" means, at any time, with respect to any
Revolving Credit Loan Bank at any time, the amount set forth opposite such
Bank's name on Appendix I hereto under the caption "Revolving Credit Loan
Commitment" or, if such Bank has entered into one or more Assignment and
Assumptions, the amount set forth for such Bank in the Register maintained by
the Agent pursuant to Section 10.06(g) as such Bank's "Revolving Credit Loan
Commitment", as such amount may be reduced at or prior to such time pursuant to
Sections 2.10 or 2.11.

     "Revolving Credit Loan Facility" means, at any time, the aggregate amount
of the Revolving Credit Loan Banks' Revolving Credit Loan Commitments.

     "Revolving Credit Loan Note" means a promissory note of the Borrower to
the order of any Revolving Credit Loan Bank, in substantially the form of
Exhibit A-1 hereto, evidencing the indebtedness of the Borrower to such Bank
resulting from the Revolving Credit Loans made or deemed to have been made by
such Lender.

     "Revolving Credit Loan/Tranche A Term Loan Guarantors" means AES Oklahoma,
AES Hawaii Management, AES Southland and AES Warrior Run.

     "Revolving Credit Loan/Tranche A Term Loan Obligations" shall have the
meaning set forth in Section 9.01(a).

     "Revolving Credit Period" means the period from and including the
Effective Date to but excluding the Termination Date.

     "Revolving Fronting Bank" means (i) with respect to each Existing Letter
of Credit deemed to have been issued pursuant to the second sentence of Section
2.03(a), each Bank listed as issuer thereof on Appendix V hereto, as the case
may be and (ii) with respect to all other Letters of Credit, any Bank or any
Affiliate of any Bank (A) a majority of whose common equity is owned, directly
or indirectly, by such Bank; (B) that owns, directly or indirectly, a majority
of the common equity of such Bank or (C) a majority of whose common equity is
owned, directly or indirectly, by a Person that owns, directly or indirectly, a
majority of the common equity of such Bank and any Subsidiary of any Bank a
majority of whose common equity is owned directly or indirectly, by such Bank,
that shall, in the case of any such Bank, Affiliate or Subsidiary agree to
issue letters of credit hereunder with the consent of the Agent (which consent
will be deemed to have been given unless the Agent shall have notified the
Borrower to the contrary within one day of the Agent's receipt of notice that
such Bank, Affiliate or Subsidiary is to be a Revolving Fronting Bank).

     "Revolving L/C Cash Collateral Account" has the meaning set forth in
Section 2.15(a).

     "Revolving L/C Drawing" means a drawing effected under any Revolving
Letter of Credit.

<PAGE>
                                      28


     "Revolving Letter of Credit" means a letter of credit issued by a
Revolving Fronting Bank pursuant to Section 2.03(a) and shall also include each
Existing Letter of Credit.

     "Revolving Letter of Credit Commission Rate" means a rate per annum equal
to 6.50%.

     "Revolving Letter of Credit Liabilities" means, at any time and in respect
of any Revolving Letter of Credit, the sum, without duplication, of (i) the
Available Amount of such Revolving Letter of Credit plus (ii) the aggregate
unpaid amount of all Reimbursement Obligations in respect of previous Revolving
L/C Drawings made under such Revolving Letter of Credit.

     "Revolving Letter of Credit Termination Date" has the meaning set forth in
Section 2.03(h)(i).

     "SEC Filings" means public filings made by the Borrower with the
Securities and Exchange Commission on Form 8-K, Form 10-Q or Form 10-K, and any
filed amendments to any of the foregoing.

     "Secured Hedge Agreement" means any Hedge Agreement, including, without
limitation, the Banc of America Secured Option, permitted under Article V that
is entered into by and between the Borrower and any Hedge Bank.

     "Secured Holders" has the meaning set forth in the Collateral Trust
Agreement.

     "Secured Obligations" has the meaning specified in the Collateral Trust
Agreement.

     "Secured Treasury Management Service Agreements" means any agreement
between the Borrower and a Bank Party or an Affiliate of a Bank Party to
provide treasury management services to the Borrower.

     "Security Agreement" has the meaning specified in Section 3.01(h).

     "Security Agreement Collateral" means the "Collateral" referred to in the
Security Agreement.

     "Senior Secured Exchange Notes" means the 10% Exchange Notes due December
15, 2005 issued by the Borrower pursuant to the Senior Secured Exchange Note
Indenture and any other Debt issued by the Borrower under the Senior Secured
Exchange Note Indenture to refinance, replace or refund the Remaining Old
Securities.

     "Senior Secured Exchange Note Indenture" means that certain Indenture
between the Borrower and Wells Fargo Bank Minnesota, National Association,
Trustee to be dated as of December 13, 2002.

     "Shady Point Financing Documents" means (1) the Amended and Restated
Application for Letter of Credit and Reimbursement Agreement, dated as of
September 28, 1994,

<PAGE>
                                      29


among AES Shady Point, Bank of Tokyo, Ltd., as Issuing Bank and the banks named
therein and Union Bank of California, N.A., as agent for such banks, (2) the
Subordinated Debt Agreement, dated as of June 23, 1987, among AES Shady Point,
the subordinated lenders named therein and Nichimen America, Inc. as agent for
such lenders, (3) the Subordinated Debt Agreement, dated as of December 6,
1991, between AES Shady Point and The AES Corporation as subordinated lender
(it being understood that this debt may be refinanced by Additional
Subordinated Debt (as defined therein) and secured on a pari passu basis with
the Nichimen subordinated debt referred to above) and (4) the other "Project
Documents" referred to therein, as each of the above may be amended from time
to time, and any successor credit facility providing for the refinancing of the
Debt under such documents.

     "Shared Collateral Documents" means the Security Agreement, the Collateral
Trust Agreement, the BVI Cayman Pledge Agreement and any other agreement that
creates or purports to create a Lien in favor of the Collateral Trustees for
the Lender Parties.

     "Significant AES Entity" means (i) any Material AES Entity (other than AES
Southland), (ii) AES BVI II and (iii) any other Person (other than any Excluded
Subsidiary) in which the Borrower has a direct or indirect equity Investment if
(A) such Person's contribution to Parent Operating Cash Flow for the four most
recently completed fiscal quarters of the Borrower constitutes 10% or more of
Parent Operating Cash Flow for such period, or (B) on any date of
determination, the Borrower's direct or indirect interest in the total assets
of such Person if such Person is a Consolidated Subsidiary or in the net assets
of such Person in all other cases is at least equal to 10% of the consolidated
assets of the Borrower and its Consolidated Subsidiaries, taken as a whole, on
such date of determination.

     "Significant Subsidiary" means a Subsidiary of the Borrower that would
constitute a "significant subsidiary" within the meaning of Article I of
Regulation S-X under the Securities Exchange Act of 1934, as amended, solely as
a result of clause (w)(3) of section 1-02 thereof.

     "Solvent" and "Solvency" mean, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (b) the present fair salable value of
the assets of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured, (c) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay such debts
and liabilities as they mature and (d) such Person is not engaged in business
or a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute an unreasonably small capital.
The amount of contingent liabilities at any time shall be computed as the
amount that, in the light of all the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an actual
or matured liability.

     "Special Purpose Financing Subsidiary" means a Consolidated Subsidiary
that has no direct or indirect interest in a Power Supply Business or other AES
Business and was formed solely for the purpose of issuing Equity Credit
Preferred Securities.

<PAGE>
                                      30


     "Subsidiary" means, with respect to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person.

     "Subsidiary Bankruptcy" means a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:

          (i) is for relief against any Subsidiary in an involuntary case;

          (ii) appoints a custodian of any Subsidiary, or for all or
     substantially all of the property of either such person;

          (iii) orders the liquidation of any Subsidiary.

     "Subsidiary Bankruptcy Cross Default" means any Event of Default that
exists under Section 6.01(f)(iii) of this Agreement solely as a result of a
Subsidiary Bankruptcy Default. For purposes of the Financing Documents, a
Subsidiary Bankruptcy Cross Default will be automatically cured and waived if
the Subsidiary Bankruptcy Default that gave rise to such Subsidiary Bankruptcy
Cross Default is cured or waived.

     "Subsidiary Bankruptcy Default" means any Subsidiary Bankruptcy of a
Significant Subsidiary that constitutes an event or condition that permits, or
with the giving of notice or lapse of time or both, would permit, the holders
of any Material Debt of the Borrower, or any Person acting on behalf of such
holders, to accelerate the maturity of such Material Debt of the Borrower.

     "Subsidiary Guarantors" means AES Oklahoma, AES Hawaii Management, AES
Southland, AES Warrior Run and AES EDC.

     "Subsidiary Guaranty" has the meaning set forth in Section 9.01(b).

     "Sul Guarantee" means the Guaranty in the Sponsor Agreement dated as of
March 7, 2001 between the Borrower and BankBoston, N.A. Nassau Branch, as agent
("BankBoston") for the lenders under the Sul Credit Agreement referred to below
by the Borrower to Guarantee the obligations of AES Cayman Guaiba, Ltd., a
Cayman Islands corporation (the "Sul Borrower") under the Credit Agreement
dated as of March 6, 2001 (the "Sul Credit Agreement"), with BankBoston, Banc
of America Securities, LLC, Unibanco - Uniao de Bancos Brasilieros S.A. and
Westdeutsche Landesbank Girozentrale, New York Branch, and the lenders named
therein in an amount of up to a maximum aggregate amount of $50,000,000.

     "Supermajority Banks" means, at any time, Bank Parties owed or holding at
least a 66 2/3% interest of the aggregate principal amount (based in the case
of any Revolving Letter of Credit denominated in an Alternative Currency other
than Dollars, on the Dollar Equivalent at such time) of the sum of (a) the
aggregate principal amount of the Loans outstanding at such time, (b) the
aggregate Revolving Letter of Credit Liabilities and Drax LOC

<PAGE>
                                      31


Liabilities outstanding at such time and (c) the aggregate Unused Revolving
Credit Loan Commitments at such time.

     "Surviving Debt" means Debt of the Borrower and its Subsidiaries
outstanding immediately before and after giving effect to the transactions
contemplated by the Financing Documents.

     "Taxes" has the meaning set forth in Section 8.04(a).

     "Temporary Cash Investment" means any Investment (having a maturity of not
greater than 60 days from the date of issuance thereof) in (A)(i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof; (ii) commercial paper
rated at least the Minimum CP Rating by any two of Standard & Poor's Ratings
Services, Moody's Investors Service, Inc., Fitch IBCA, Inc. and Duff & Phelps
Credit Rating Co., provided that one of such two Minimum CP Ratings is by
Standard & Poor's Ratings Services or Moody's Investors Service, Inc.; (iii)
time deposits with, including certificates of deposit issued by, any office
located in the United States of any bank or trust company which is organized or
licensed under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000; (iv)
medium term notes, auction rate preferred stock, asset backed securities,
bonds, notes and letter of credit supported instruments, issued by any entity
organized under the laws of the United States, or any state or municipality of
the United States and rated in any of the three highest rated categories by
Standard & Poor's Ratings Services or Moody's Investors Service, Inc.; (v)
repurchase agreements with respect to securities described in clause (i) above
entered into with an office of a bank or trust company meeting the criteria
specified in clause (iii) above; (vi) Euro-Dollar certificates of deposit
issued by any bank or trust company which has capital and unimpaired surplus of
not less than $500,000,000 or (vii) with respect to a Subsidiary, any category
of investment designated as permissible investments under such Subsidiary's
loan documentation; provided that in each case (except clause (vii)) that such
Investment matures within fifteen months from the date of acquisition thereof
by the Borrower or a Subsidiary and (B) registered investment companies that
are "money market funds" within the meaning of Rule 2a-7 under the Investment
Company Act of 1940.

     "Term Loans" means the Tranche A Term Loans, the Tranche B Term Loans and
the Tranche C Term Loans.

     "Term Loan Facilities" means the Tranche A Term Loan Facility, the Tranche
B Term Loan Facility and the Tranche C Term Loan Facility.

     "Termination Date" means July 15, 2005; provided, however, that if, prior
to July 15, 2005, the 4.50% Junior Subordinated Convertible Debentures have
been refinanced to mature on a date after December 12, 2005, then "Termination
Date" shall mean December 12, 2005; provided further that if the Termination
Date occurs on a day that is not a Euro-Dollar Business Day, the Termination
Date shall occur on the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the
Termination Date shall be the next preceding Euro-Dollar Business Day.

<PAGE>
                                      32


     "Total Bank Exposure" at any time means the sum of (i) the aggregate
principal amount of the Loans outstanding at such time plus (ii) the aggregate
amount of the Revolving Letter of Credit Liabilities at such time plus (iii)
the Drax LOC Available Amount at such time plus (iv) the aggregate amount of
the Unused Revolving Credit Loan Commitments.

     "Total Exposure" means at any time with respect to each Revolving Credit
Loan Bank, its Revolving Credit Loan Commitment or, if the Revolving Credit
Loan Commitments shall have terminated, its Total Outstandings.

     "Total Outstandings" means at any time, as to any Revolving Credit Loan
Bank, the sum of the aggregate outstanding principal amount of such Revolving
Credit Loan Bank's Loans and its participation in the Revolving Letter of
Credit Liabilities and all unreimbursed Revolving L/C Drawings.

     "Tranche A Term Loan" means, with respect to each Tranche A Term Loan
Bank, the amount set forth opposite its name on Appendix II hereto under the
caption "Existing Converted Revolving Credit Loans" or, if such Bank has
entered into one or more Assignment and Assumptions, the amount set forth for
such Bank in the Register maintained by the Agent pursuant to Section 10.06(g).

     "Tranche A Term Loan Bank" means each Bank having a Tranche A Term Loan.

     "Tranche A Term Loan Facility" means, at any time, the aggregate amount of
the Tranche A Term Loan Banks' Tranche A Term Loans at such time.

     "Tranche A Term Loan Note" means a promissory note of the Borrower to the
order of any Tranche A Term Loan Bank, in substantially the form of Exhibit A-2
hereto, evidencing the indebtedness of the Borrower to such Bank resulting from
the Tranche A Term Loan deemed to have been made by such Lender.

     "Tranche B Term Loan" means, with respect to each Tranche B Term Loan
Bank, the amount set forth opposite its name on Part A of Appendix III hereto
under the caption "Existing Tranche B Term Loans" or Part B of Appendix III
hereto under the caption "Tranche B Term Loans" or, if such Bank has entered
into one or more Assignment and Assumptions, the amount set forth for such Bank
in the Register maintained by the Agent pursuant to Section 10.06(f).

     "Tranche B Term Loan Bank" means each Bank having a Tranche B Term Loan.

     "Tranche B Term Loan Facility" means, at any time, the aggregate amount of
the Tranche B Term Loan Banks' Tranche B Term Loans at such time.

     "Tranche B Term Loan Note" means a promissory note of the Borrower to the
order of any Tranche B Term Loan Bank, in substantially the form of Exhibit A-3
hereto, evidencing the indebtedness of the Borrower to such Bank resulting from
the Tranche B Term Loan deemed to have been made by such Lender.

<PAGE>
                                      33


     "Tranche C Collateral" has the meaning set forth in the Tranche C Pledge
Agreement.

     "Tranche C Percentage" means, as of any date of determination, a
percentage equal to a fraction the numerator of which is an amount equal to the
outstanding principal amount of the Tranche C Term Loans on such date and the
denominator of which is an amount equal to the sum of the outstanding principal
amount of the Tranche C Term Loans plus the outstanding principal balance of
the "Loans" (as defined in the AES N.Y. Funding Credit Facility.

     "Tranche C Pledge Agreement" has the meaning specified in Section 3.01(i).

     "Tranche C Secured Obligations" has the meaning set forth in the Tranche C
Pledge Agreement.

     "Tranche C Secured Parties" has the meaning set forth in the Tranche C
Pledge Agreement.

     "Tranche C Term Loan" means, with respect to each Tranche C Term Loan
Bank, the amount set forth opposite its name on Part A of Appendix IV hereto
under the caption "Existing Tranche C Term Loans" or, if such Bank has entered
into one or more Assignment and Assumptions, the amount set forth for such Bank
in the Register maintained by the Agent pursuant to Section 10.06(f).

     "Tranche C Term Loan Bank" means each Bank having a Tranche C Term Loan.

     "Tranche C Term Loan Facility" means, at any time, the aggregate amount of
the Tranche C Term Loan Banks' Tranche C Term Loans at such time.

     "Tranche C Term Loan Guarantor" means AES EDC.

     "Tranche C Term Loan Note" means a promissory note of the Borrower to the
order of any Tranche C Term Loan Bank, in substantially the form of Exhibit A-4
hereto, evidencing the indebtedness of the Borrower to such Bank resulting from
the Tranche C Term Loan deemed to have been made by such Lender.

     "Tranche C Term Loan Obligations" has the meaning set forth in Section
9.01(b).

     "Trust Preferred Securities" means, at any date:

          (i) any Existing Trust Preferred Securities, and

          (ii) any other equity interests in a Special Purpose Financing
     Subsidiary of AES (such as those known as "TECONS", "MIPS" or "RHINOS"):
     (I) that are not (A) required to be redeemed or redeemable at the option
     of the holder thereof prior to the fifth anniversary of the Termination
     Date or (B) convertible into or exchangeable for

<PAGE>
                                      34


     (unless solely at the option of AES) equity interests referred to in
     clause (A) above or Debt having a scheduled maturity, or requiring any
     repayments or prepayments of principal or any sinking fund or similar
     payments in respect of principal or providing for any such repayment,
     prepayment, sinking fund or other payment at the option of the holder
     thereof prior to the fifth anniversary of the Termination Date and (II) as
     to which, at such date, AES has the right to defer the payment of all
     dividends and other distributions in respect thereof for the period of at
     least 19 consecutive quarters beginning at such date.

     "Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed
by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.

     "United States" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.

     "Unused Revolving Credit Loan Commitments" means, with respect to any
Revolving Credit Loan Bank at any time, (a) such Bank's Revolving Credit Loan
Commitment at such time minus (b) the sum of (i) the aggregate principal amount
of all Revolving Credit Loans outstanding at such time plus (ii) such Bank's
participation in the Revolving Letter of Credit Liabilities and all
unreimbursed Revolving L/C Drawings at such time.

     "Wholly-Owned Consolidated Subsidiary" means any Consolidated Subsidiary
all of the shares of Capital Stock or other ownership interests of which
(except directors' qualifying shares) are at the time directly or indirectly
owned by AES.

     Section 1.02 Accounting Terms and Determinations.

     Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks ("GAAP"); provided that, if the Borrower
notifies the Agent that the Borrower wishes to amend any covenant in Article 5
to eliminate the effect of any change in generally accepted accounting
principles on the operation of such covenant (or if the Agent notifies the
Borrower that the Required Banks wish to amend Article 5 for such purpose),
then the Borrower's compliance with such covenant shall be determined on the
basis of generally accepted accounting principles in effect immediately before
the relevant change in generally accepted accounting principles became
effective, until either such notice is withdrawn or such covenant is amended in
a manner satisfactory to the Borrower and the Required Banks.

<PAGE>
                                      35


     Section 1.03 Types of Borrowing.

     The term "Borrowing" denotes (a) the aggregation of Loans made (or deemed
to have been made) or to be made to the Borrower by one or more Banks pursuant
to Article 2 on the same day, all of which Loans are of the same type (subject
to Article 8) and, except in the case of Base Rate Loans, have the same initial
Interest Period or (b) if the context so requires, the borrowing of such Loans.
Borrowings are classified for purposes hereof by reference to the pricing of
Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing
comprised of Euro-Dollar Loans). It is understood and agreed that all
Borrowings will be made in Dollars.

     Section 1.04 Currency Equivalents Generally.

     For purposes of this Agreement, the equivalent in any Alternative Currency
of an amount in Dollars shall be determined at the rate of exchange quoted by
the Agent in New York, at 11:00 A.M. (New York time) on the date of
determination, to prime banks in New York for the spot purchase in the New York
foreign exchange market of such amount of Dollars with such Alternative
Currency.

                                  ARTICLE II

                                  THE CREDITS

     Section 2.01 Commitment to Lend.

     (a) Revolving Credit Facility. (i) Each Revolving Credit Loan Bank
severally agrees, on the terms and conditions set forth in this Agreement, to
make loans (each a "Revolving Credit Loan") to the Borrower pursuant to this
Section 2.01(a) from time to time during the Revolving Credit Period in amounts
such that the Total Outstandings of such Revolving Credit Loan Bank at any time
shall not exceed the amount of its Revolving Credit Loan Commitment at such
time. Each of the Revolving Credit Loan Banks acknowledges and agrees that the
Existing Revolving Credit Loans shall continue as Revolving Credit Loans for
all purposes under this Agreement and the Financing Documents. Each Borrowing
under this subsection (a) shall be in an aggregate principal amount of
$5,000,000 or any larger multiple of $1,000,000 (except for Refunding
Borrowings and that any such Borrowing may be in the aggregate amount available
in accordance with Section 3.02(b)) and shall be made from the several
Revolving Credit Loan Banks ratably in proportion to their respective Revolving
Credit Loan Commitments. Within the foregoing limits, the Borrower may borrow
under this Section 2.01(a), repay, or, to the extent permitted by Section 2.11,
prepay Revolving Credit Loans and reborrow at any time during the Revolving
Credit Period.

     (b) Tranche A Term Loan Facility. Each Tranche A Term Loan Bank severally
agrees on the terms and conditions set forth in this Agreement that the
Existing Converted Revolving Credit Loans set forth on Appendix II for such
Tranche A Term Loan Bank shall be Tranche A Term Loans for all purposes under
this Agreement and the Financing Documents.

<PAGE>
                                      36


     (c) Tranche B Term Loan Facility. (i) Each Tranche B Term Loan Bank listed
on Part A of Appendix III severally agrees on the terms and conditions set
forth in this Agreement that the Existing Tranche B Term Loans set forth on
Part A of Appendix III for such Tranche B Term Loan Bank shall be Tranche B
Term Loans for all purposes under this Agreement and the Financing Documents.

     (ii) The Borrower hereby offers to each Tranche B Term Loan Bank listed on
Part B of Appendix III to exchange the Existing Tranche C Term Loans set forth
on Part B of Appendix IV for such Tranche B Term Loan Bank for Tranche B Term
Loans and each such Tranche B Term Loan Bank agrees on the terms and conditions
set forth in this Agreement to exchange its Existing Tranche C Term Loans for
Tranche B Term Loans.

     (d) Tranche C Term Loan Facility. Each Tranche C Term Loan Bank listed on
Part A of Appendix IV severally agrees on the terms and conditions set forth in
this Agreement that such Existing Tranche C Term Loans set forth on Part A of
Appendix IV for such Tranche C Term Loan Bank shall be Tranche C Term Loans for
all purposes under this Agreement and the Financing Documents.

     (e) Term Loan Facilities. The Tranche A Term Loans, Tranche B Term Loans
and the Tranche C Term Loans are not revolving in nature, and amounts repaid or
prepaid in respect thereof may not be reborrowed.

     Section 2.02 Notice of Borrowing.

     (a) The Borrower shall give the Agent notice (a "Notice of Borrowing") not
later than 11:00 A.M. (New York City time) on (x) the date of each Base Rate
Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar
Borrowing, specifying:

          (i) the date of such Borrowing, which shall be a Domestic Business
     Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in
     the case of a Euro-Dollar Borrowing;

          (ii) the aggregate amount of such Borrowing;

          (iii) whether the Loans comprising such Borrowing are to bear
     interest initially at the Base Rate or the Adjusted London Interbank
     Offered Rate; and

          (iv) in the case of a Euro-Dollar Borrowing, the duration of the
     initial Interest Period applicable thereto, subject to the provisions of
     the definition of "Interest Period."

     (b) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's ratable share of such
Borrowing and such Notice of Borrowing shall not thereafter be revocable by the
Borrower.

     (c) Not later than 2:00 P.M. (New York City time) on the date of each
Borrowing, each Bank shall (except as provided in subsection (d) of this
Section 2.02) make available its ratable share of such Borrowing, in Federal or
other funds immediately available in New York City, to the Agent at its address
referred to in Section 10.01. Unless the Agent

<PAGE>
                                      37


determines that any applicable condition specified in Article 3 has not been
satisfied, the Agent will make the funds so received from the Banks available
to the Borrower requesting such Borrowing at the Agent's aforesaid address.

     (d) If any Bank makes a new Loan hereunder to the Borrower on a day on
which the Borrower is to repay all or any part of an outstanding Loan from such
Bank, such Bank shall apply the proceeds of its new Loan to make such repayment
and only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Bank to
the Agent as provided in subsection (c) of this Section 2.02, or remitted by
the Borrower to the Agent as provided in Section 2.12, as the case may be.

     (e) Unless the Agent shall have received notice from a Bank prior to the
date of any Borrowing that such Bank will not make available to the Agent such
Bank's share of such Borrowing, the Agent may assume that such Bank has made
such share available to the Agent on the date of such Borrowing in accordance
with subsections (c) and (d) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Agent, such Bank and the Borrower severally
agree to repay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the Agent, at
(i) in the case of the Borrower, a rate per annum equal to the higher of the
Federal Funds Rate and the interest rate applicable thereto pursuant to Section
2.06 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank
shall repay to the Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.

     Section 2.03 Revolving Letters of Credit.

     (a) Issuance of Letters of Credit. Subject to the terms and conditions
hereof, each Revolving Fronting Bank referred to in clause (ii) of the
definition of "Revolving Fronting Bank" in Section 1.01 agrees to issue letters
of credit under this Section 2.03(a) upon the Borrower's request and for the
Borrower's account or the account of any of the Borrower's Subsidiaries, from
time to time during the Revolving Credit Period; provided, however, that in no
event shall (i) the aggregate Available Amount for all Revolving Letters of
Credit exceed the Revolving Credit Loan Facility at such time and (ii) a
Revolving Letter of Credit be issued with an Available Amount in excess of the
Unused Revolving Credit Commitments of the Revolving Credit Loan Banks at such
time. In addition, and notwithstanding any reference in any Existing Letter of
Credit to the Existing Revolving Credit Facility, on and as of the Effective
Date, each Existing Letter of Credit shall be deemed to be a Revolving Letter
of Credit and to have been issued on the Effective Date (by the Revolving
Fronting Bank that issued or was deemed to have issued such Existing Letter of
Credit under the Existing Revolving Credit Facility) pursuant to this Section
2.03(a); provided, however, that nothing in this Section 2.03(a) shall extend,
modify or otherwise affect the existing expiry date under any such Existing
Letter of Credit.

     (b) Participations in Letters of Credit. Upon the issuance (or deemed
issuance) of each Revolving Letter of Credit by a Revolving Fronting Bank
pursuant to Section 2.03(a), such Revolving Fronting Bank shall be deemed,
without further action by any

<PAGE>
                                      38


party hereto, to have sold to each Revolving Credit Loan Bank (other than such
Revolving Fronting Bank) and each such Revolving Credit Loan Bank shall be
deemed, without further action by any party hereto, to have purchased from such
Revolving Fronting Bank a participation in such Revolving Letter of Credit and
the related Revolving Letter of Credit Liabilities in the amount required so
that the participations of the Revolving Credit Loan Banks (including such
Revolving Fronting Bank's retained participation) therein shall be in
proportion to their respective Revolving Credit Loan Commitments.

     (c) Required Terms. Each Revolving Letter of Credit issued hereunder
shall:

          (i) by its terms expire no later than the earlier of (i) five
     Domestic Business Days prior to the Termination Date and (2) two years
     after its date of issuance;

          (ii) be in a face amount of (x) not less than $300,000 (or the
     equivalent thereof in an Alternative Currency); provided that up to five
     Revolving Letters of Credit may be issued with stated amounts less than
     $300,000 (or the equivalent thereof in an Alternative Currency) and (y)
     not more than the amount that would, after giving effect to the issuance
     thereof (and the related purchase and sale of participations therein
     pursuant to Section 2.03(b)) cause the Total Outstandings of any Revolving
     Credit Loan Bank to equal its Revolving Credit Loan Commitment; and

          (iii) be in a form acceptable to the Revolving Fronting Bank.

     (d) Notice of Issuance. Except in the case of Existing Letters of Credit,
the Borrower may request that a Revolving Letter of Credit be issued by giving
the Agent and the Revolving Fronting Bank for such Revolving Letter of Credit a
notice (a "Notice of Issuance") at least two Domestic Business Days before such
Revolving Letter of Credit is to be issued (or such shorter period of time as
shall be acceptable to the Agent and the relevant Revolving Fronting Bank),
specifying:

          (i) the date of issuance of such Revolving Letter of Credit;

          (ii) the expiry date of such Revolving Letter of Credit (which shall
     comply with the requirements of Section 2.03(c)(i));

          (iii) the proposed terms of such Revolving Letter of Credit (or the
     proposed form thereof shall be attached to such Notice of Issuance),
     including the face amount thereof (which shall comply with the
     requirements of Section 2.03(c)(ii));

          (iv) the transaction that is to be supported or financed with such
     Revolving Letter of Credit, including identification of the Power Supply
     Business or other AES Business, if any, to which such transaction relates
     and the name of the proposed account party for such Revolving Letter of
     Credit (which may be a Borrower and any subsidiary of the Borrower); and

          (v) the identity of the Revolving Fronting Bank for such Revolving
     Letter of Credit, which shall comply with the definition of "Revolving
     Fronting Bank" hereunder.

<PAGE>
                                      39


     Upon the receipt of a Notice of Issuance, the Agent shall promptly notify
each Revolving Credit Loan Bank of the contents thereof and of the amount of
such Revolving Credit Loan Bank's participation in such Revolving Letter of
Credit and such Notice of Issuance shall not thereafter be revocable by the
Borrower.

     (e) Revolving L/C Drawings under Revolving Letters of Credit.

          (i) Upon receipt from the beneficiary of any Revolving Letter of
     Credit of demand for payment under such Revolving Letter of Credit, the
     Revolving Fronting Bank shall determine in accordance with the terms of
     such Revolving Letter of Credit whether such request for payment should be
     honored.

          (ii) If the Revolving Fronting Bank determines that a demand for
     payment by the beneficiary of a Revolving Letter of Credit should be
     honored, the Revolving Fronting Bank shall make available to the
     beneficiary in accordance with the terms of such Revolving Letter of
     Credit the amount of the Revolving L/C Drawing under such Revolving Letter
     of Credit. The Revolving Fronting Bank shall thereupon promptly notify the
     Borrower, the Agent and each Revolving Credit Loan Bank of the amount of
     such Revolving L/C Drawing paid by it and the amount of each Revolving
     Credit Loan Bank's participation therein (which, in the case of any
     Revolving L/C Drawing under an Alternative Currency Letter of Credit shall
     be the Dollar Equivalent thereof).

     (f) Reimbursement and Other Payments by the Borrower.

          (i) If any amount is drawn under any Revolving Letter of Credit
     issued at the request of or for the account of the Borrower or any
     Subsidiary of the Borrower, the Borrower irrevocably and unconditionally
     agrees to reimburse the applicable Revolving Fronting Bank in Dollars for
     all amounts paid by such Revolving Fronting Bank upon such Revolving L/C
     Drawing (which, in the case of any Revolving L/C Drawing under an
     Alternative Currency Letter of Credit shall be the Dollar Equivalent
     thereof), together with any and all reasonable charges and expenses which
     any Revolving Credit Loan Bank or Revolving Fronting Bank may pay or incur
     relative to such Revolving L/C Drawing and all such amounts due from the
     Borrower shall bear interest, payable on the date upon which such amounts
     shall be due and payable, on the amount drawn for each day from and
     including the date such amount is drawn to but excluding the date such
     reimbursement payment is due and payable at a rate per annum equal to the
     rate applicable to Base Rate Loans for such day. If a Revolving Fronting
     Bank makes any payment under a Revolving Letter of Credit, the Borrower
     shall reimburse such Revolving Fronting Bank by paying such amount to the
     Agent not later than 12:00 noon (New York City time) on the day that such
     payment is made, if the Borrower receives notice of such payment before
     10:00 A.M. (New York City time) on such day, or if such notice has not
     been received by the Borrower before such time on such day, then not later
     than 12:00 noon (New York City time) on (i) the Domestic Business Day that
     the Borrower receives such notice, if such notice is received before 10:00
     A.M. (New York City time) on the day of receipt, or (ii) the next Domestic
     Business Day, if such notice is not received before such time on the day
     of receipt; provided that if such payment is at least $1,000,000, the
     Borrower may, subject to the conditions to borrowing set forth

<PAGE>
                                      40


     herein, request in accordance with Section 2.02, that such payment be made
     with the proceeds of a Base Rate Borrowing (which shall consist of
     Revolving Credit Loans) in an equivalent amount and, to the extent so
     financed, the Borrower's obligation to make such payment shall be
     discharged and replaced by the resulting Base Rate Borrowing (which shall
     consist of Revolving Credit Loans). Any overdue reimbursement payment, or
     overdue interest thereon, shall bear interest, payable on demand, for each
     day until paid at a rate per annum equal to the sum of the rate applicable
     to Base Rate Loans for such day plus 2%.

          (ii) Each payment to be made by the Borrower pursuant to this Section
     2.03(f) shall be made, in Federal or other funds immediately available, to
     the applicable Revolving Fronting Bank at its address referred to in
     Section 10.01.

          (iii) The obligations of each Borrower to reimburse the Revolving
     Fronting Banks under this Section 2.03(f) shall be absolute, unconditional
     and irrevocable, and shall be performed strictly in accordance with the
     terms of this Agreement, under all circumstances whatsoever, including
     without limitation the following circumstances:

               (A) any lack of validity or enforceability of any Financing
          Document;

               (B) any amendment or waiver of or any consent to departure from
          any Financing Document (except, in the case of an effective amendment
          to, waiver of or consent to a departure from any provision of this
          Agreement, to the extent specified herein);

               (C) the existence of any claim, set-off, defense or other right
          which the Borrower may have at any time against the beneficiary of
          any Revolving Letter of Credit (or any Person or entity for whom such
          beneficiary may be acting), the Agent, any Revolving Fronting Bank or
          any Revolving Credit Loan Bank or any other Person or entity, whether
          in connection with this Agreement, any other Financing Document or
          any unrelated transaction;

               (D) any statement or any other document presented under any
          Revolving Letter of Credit proving to be forged, fraudulent, invalid
          or insufficient in any respect or any statement therein being untrue
          or inaccurate in any respect whatsoever;

               (E) payment by a Revolving Fronting Bank under any Revolving
          Letter of Credit against presentation of a draft or document which
          does not comply with the terms of such Revolving Letter of Credit; or

               (F) to the extent permitted under applicable law, any other
          circumstance or happening whatsoever, whether or not similar to any
          of the foregoing.

     (g) Payments by Revolving Credit Loan Banks with Respect to Revolving
Letters of Credit.

<PAGE>
                                      41


          (i) Each Revolving Credit Loan Bank shall make available an amount
     equal to its ratable share of any Revolving L/C Drawing under a Revolving
     Letter of Credit, in Federal or other funds immediately available in New
     York City, to the applicable Revolving Fronting Bank by 3:00 P.M. (New
     York City time) on the date on which the Borrower is required to reimburse
     such Revolving Fronting Bank with respect to such Revolving L/C Drawing
     pursuant to Section 2.03(f)(i), together with interest on such amount for
     the period from and including the date of such Revolving L/C Drawing to
     but excluding the date upon which such amount is to be made available at
     the Federal Funds Rate on the date of such Revolving L/C Drawing, at such
     Revolving Fronting Bank's address referred to in Section 10.01; provided
     that each Revolving Credit Loan Bank's obligation shall be reduced by its
     pro rata share of any reimbursement theretofore paid by the Borrower in
     respect of such Revolving L/C Drawing pursuant to Section 2.03(f)(i). The
     applicable Revolving Fronting Bank shall notify each Revolving Credit Loan
     Bank of the amount of such Revolving Credit Loan Bank's obligation (which,
     in the case of any payment under an Alternative Currency Letter of Credit,
     shall be the Dollar Equivalent thereof) in respect of any Revolving L/C
     Drawing under a Revolving Letter of Credit not later than 1:30 P.M. (New
     York City time) on the day such payment by such Revolving Credit Loan Bank
     is due. Each Revolving Credit Loan Bank shall be subrogated to the rights
     of the applicable Revolving Fronting Bank against the Borrower to the
     extent such payment due from such Revolving Credit Loan Bank to such
     Revolving Fronting Bank is paid, plus interest thereon, from and including
     the day such amount is due from such Revolving Credit Loan Bank to such
     Revolving Fronting Bank to but excluding the day the Borrower makes
     payment to such Revolving Fronting Bank pursuant to Section 2.03(f)(i),
     whether before or after judgment, at a rate per annum equal to the sum of
     2% plus the rate applicable to Base Rate Loans for such day. In the event
     that, on the date of any Revolving L/C Drawing, (x) Total Outstandings
     exceeds the Maximum Outstanding Exposure, (y) the applicable Revolving
     Fronting Bank is not reimbursed by the Borrower on such date for the
     entire amount of such Revolving L/C Drawing, and (z) the Revolving Credit
     Loan Banks, pursuant to the last sentence of subsection (iv) below, are
     not obligated to reimburse such Revolving Fronting Bank for the entire
     amount of such Revolving L/C Drawing, the Agent shall, solely for purposes
     of determining the portion of such Revolving L/C Drawing to be reimbursed
     by each Revolving Credit Loan Bank, (A) allocate the respective Revolving
     Credit Loan Commitments of the Revolving Credit Loan Banks to the
     Revolving Letter of Credit Liabilities of each Revolving Letter of Credit
     on such date on a pro rata basis (based upon (1) the proportion of the
     Revolving Credit Loan Commitments to the aggregate amount of the Revolving
     Letter of Credit Liabilities of all outstanding Revolving Letters of
     Credit and (2) each Revolving Credit Loan Bank's pro rata share of the
     Revolving Credit Loan Commitments), (B) based on such allocation,
     determine the reimbursement obligation of each Revolving Credit Loan Bank
     with respect to such Revolving L/C Drawing and (C) promptly notify each
     Revolving Credit Loan Bank of the amount of its reimbursement obligation
     with respect to such Revolving L/C Drawing.

          (ii) If any Revolving Credit Loan Bank fails to pay any amount
     required pursuant to subsection (i) of this Section 2.03(g) on the date on
     which such payment is due, interest, payable on demand, shall accrue on
     such Revolving Credit Loan Bank's obligation to make such payment, for
     each day from and including the date such payment

<PAGE>
                                      42


     becomes due to but excluding the date such Revolving Credit Loan Bank
     makes such payment at a rate per annum equal to the Federal Funds Rate.
     Any payment made by any Revolving Credit Loan Bank after 3:00 P.M. (New
     York City time) on any Domestic Business Day shall be deemed for purposes
     of the preceding sentence to have been made on the next succeeding
     Domestic Business Day.

          (iii) If the Borrower shall reimburse a Revolving Fronting Bank for
     any Revolving L/C Drawing under a Revolving Letter of Credit after the
     Revolving Credit Loan Banks shall have made funds available to such
     Revolving Fronting Bank with respect to such Revolving L/C Drawing in
     accordance with subsection (i) of this Section 2.03(g), such Revolving
     Fronting Bank shall promptly upon receipt of such reimbursement distribute
     to each Revolving Credit Loan Bank its pro rata share thereof, including
     interest, to the extent received by such Revolving Fronting Bank.

          (iv) The several obligations of the Revolving Credit Loan Banks to
     the Revolving Fronting Banks hereunder shall be absolute, irrevocable and
     unconditional under any and all circumstances whatsoever and shall not be
     affected by any circumstance, including, without limitation, (1) any
     set-off, counterclaim, recoupment, defense or other right which any such
     Revolving Credit Loan Bank or any other Person may have against the Agent,
     any Revolving Fronting Bank or any other Person for any reason whatsoever;
     (2) the occurrence or continuance of a Default or an Event of Default or
     the termination of the Revolving Credit Loan or any Revolving Letter of
     Credit; (3) any adverse change in the condition (financial or otherwise)
     of any Obligor or any other Person; (4) any breach of any Financing
     Document by any party thereto; (5) the fact that any condition precedent
     to the issuance of, or the making of any payment under, any Revolving
     Letter of Credit was not in fact met; (6) any violation or asserted
     violation of law by any Revolving Credit Loan Bank or any affiliate
     thereof; or (7) to the extent permitted under applicable law, any other
     circumstance, happening or event whatsoever, whether or not similar to any
     of the foregoing. Each payment by each Revolving Credit Loan Bank to a
     Revolving Fronting Bank for its own account shall be made without any
     offset, abatement, withholding or reduction whatsoever. If a Revolving
     Fronting Bank is required at any time (whether before or after the
     Termination Date) to return to the Borrower or to a trustee, receiver,
     liquidator, custodian or other similar official any portion of the
     payments made by the Borrower to such Revolving Fronting Bank in payment
     of any Reimbursement Obligation or interest thereon upon the insolvency of
     the Borrower, or the commencement of any case or proceeding under any
     bankruptcy, insolvency or other similar law with respect to the Borrower,
     each Revolving Credit Loan Bank shall, on demand of such Revolving
     Fronting Bank, forthwith return to such Revolving Fronting Bank any
     amounts transferred to such Revolving Credit Loan Bank by such Revolving
     Fronting Bank in respect thereof pursuant to this subsection plus such
     Revolving Credit Loan Bank's pro rata share of any interest on such
     payments required to be paid to the Person recovering such payments plus
     interest on the amount so demanded from the day such demand is made, if
     such demand is made by 2:00 P.M. (New York City time), or from the next
     following Domestic Business Day, if such demand is made after 2:00 P.M.
     (New York City time), to but not including the day such amounts are
     returned by such Revolving Credit Loan Bank to such Revolving Fronting
     Bank at a rate per annum for each day equal to (A) the Federal Funds Rate
     for the day of such demand

<PAGE>
                                      43


     and (B) the Base Rate plus 1% for each day thereafter. Notwithstanding the
     foregoing or any other provision contained herein, in no event shall any
     Revolving Credit Loan Bank be obligated to make any payment to a Revolving
     Fronting Bank to the extent that such payment would cause such Bank's pro
     rata share of the Total Outstandings hereunder to exceed such Bank's
     Revolving Credit Loan Commitment; provided that the foregoing shall not
     affect the obligation of the Borrower (which is absolute, unconditional
     and irrevocable) to reimburse each Revolving Fronting Bank for the entire
     amount of each payment made by such Revolving Fronting Bank under a
     Revolving Letter of Credit, including any amount thereof that is not paid
     by any Revolving Credit Loan Bank to such Revolving Fronting Bank
     (pursuant to this sentence or otherwise).

     (h) Revolving Letter of Credit Commission; Issuance Fee.

          (i) Revolving Letter of Credit Commission. The Borrower agrees to pay
     to the Agent a letter of credit commission with respect to each Revolving
     Letter of Credit issued at its request or for its account, computed for
     each day from and including the date of issuance of such Revolving Letter
     of Credit to but excluding the last day a Revolving L/C Drawing is
     available under such Revolving Letter of Credit (the "Revolving Letter of
     Credit Termination Date"), at the Revolving Letter of Credit Commission
     Rate on the aggregate amount available for drawing under such Revolving
     Letter of Credit from time to time (whether or not any conditions to
     drawing can then be met), such fee to be for the account of the Revolving
     Credit Loan Banks ratably in proportion to their Total Exposures. Such fee
     shall be payable quarterly in arrears on the last Domestic Business Day of
     each January, April, July and October and upon the Termination Date.

          (ii) Issuance Fee. The Borrower shall pay to each Revolving Fronting
     Bank for its own account such fees with respect to each Revolving Letter
     of Credit issued by such Revolving Fronting Bank for the account of the
     Borrower as shall have been agreed between the Borrower and such Revolving
     Fronting Bank.

          (iii) Limited Liability of the Revolving Fronting Bank. As between a
     Revolving Fronting Bank, on the one hand, and the Borrower, on the other,
     the Borrower assumes all risks of any acts or omissions of the beneficiary
     and any transferee of any Revolving Letter of Credit with respect to its
     use of such Revolving Letter of Credit. Neither a Revolving Fronting Bank
     nor any of its respective employees, officers or directors shall be liable
     or responsible for: (1) the use which may be made of any Revolving Letter
     of Credit or for any acts or omissions of any beneficiary or transferee in
     connection therewith; (2) the validity, sufficiency or genuineness of
     documents, or of any endorsement(s) thereon, even if such documents should
     in fact prove to be in any or all respects invalid, insufficient,
     fraudulent or forged; (3) payment by the Revolving Fronting Bank against
     presentation of documents which do not comply with the terms of any
     Revolving Letter of Credit, including failure of any documents to bear any
     reference or adequate reference to such Revolving Letter of Credit; or (4)
     any other circumstance whatsoever in making or failing to make payment
     under any Revolving Letter of Credit; provided that the Borrower shall
     have a claim against the applicable Revolving Fronting Bank, and such
     Revolving Fronting Bank shall be liable to the Borrower, to the extent,
     but only to the extent, of any direct, as opposed to consequential or
     special, damages

<PAGE>
                                      44


     suffered by the Borrower which are found in a final, unappealable judgment
     of a court of competent jurisdiction to have been caused by (x) such
     Revolving Fronting Bank's willful misconduct or gross negligence in
     determining whether documents presented under any Revolving Letter of
     Credit comply with the terms thereof or (y) such Revolving Fronting Bank's
     willful failure to pay, or gross negligence resulting in a failure to pay,
     any Revolving L/C Drawing after the presentation to it by the beneficiary
     (or any transferee of the Revolving Letter of Credit) of a draft and other
     required documentation strictly complying with the terms and conditions of
     the Revolving Letter of Credit. In furtherance and not in limitation of
     the foregoing, a Revolving Fronting Bank may accept documents that appear
     on their face to be in order, without responsibility for further
     investigation.

          (iv) Revolving Fronting Banks and Affiliates. Each Revolving Fronting
     Bank shall have the same rights and powers under the Financing Documents
     as any other Bank and may exercise or refrain from exercising the same as
     though they were not Revolving Fronting Banks (in each case to the extent
     such Revolving Fronting Bank is also a Bank), and the Revolving Fronting
     Banks and their respective affiliates may accept deposits from, lend money
     to, and generally engage in any kind of business with the Borrower or any
     Subsidiary or affiliate of the Borrower as if they were not Revolving
     Fronting Banks hereunder.

     (i) Applicability of ISP98. Unless otherwise expressly agreed by the
Revolving Fronting Bank and the Borrower when a Revolving Letter of Credit is
issued (or deemed issued), the rules of the "International Standby Practices
1998" published by the Institute of International Banking Law and Practice (or
such later version thereof as may be in effect at the time issuance) shall
apply to the Revolving Letter of Credit.

     Section 2.04 Evidence of Debt.

     (a) Each Bank Party shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such Bank
Party resulting from each Loan owing to such Bank Party from time to time,
including the amounts of principal and interest payable and paid to such Bank
Party from time to time hereunder. The Borrower agrees that upon notice by any
Bank Party to the Borrower (with a copy of such notice to the Agent) to the
effect that a promissory note or other evidence of indebtedness is required or
appropriate in order for such Bank Party to evidence (whether for purposes of
pledge, enforcement or otherwise) the Loans owing to, or to be made by, such
Bank Party, the Borrower shall promptly execute and deliver to such Bank Party,
with a copy to the Agent, a Revolving Credit Loan Note, a Tranche A Term Loan
Note, a Tranche B Term Loan Note, a Tranche C Term Loan Note, or the Drax Loan
Note, as applicable, in substantially the form of Exhibits A-1, A-2, A-3, A-4
and A-5 hereto, respectively, payable to the order of such Bank Party in a
principal amount equal to the Loans owing to, or to be made by, such Bank
Party. All references to Notes in the Financing Documents shall mean Notes, if
any, issued hereunder.

     (b) The Register maintained by the Agent pursuant to Section 10.06(f)
shall include a control account, and a subsidiary account for each Bank Party,
in which accounts (taken together) shall be recorded (i) the date and amount of
each Loan made hereunder (or

<PAGE>
                                      45


deemed to be made hereunder), whether such Loan bears interest at the Base Rate
or the Adjusted London Interbank Offered Rate, and, if appropriate, the
Interest Period applicable thereto; (ii) the terms of each Assignment and
Assumption delivered to and accepted by it; (iii) the amount of any principal
or interest due and payable or to become due and payable from the Borrower to
each Bank Party hereunder; and (iv) the amount of any sums received by the
Agent from the Borrower hereunder and each Bank Party's share thereof.

     (c) Entries made in good faith by the Agent in the Register pursuant to
subsection (b) above, and by each Bank Party in its account or accounts
pursuant to subsection (a) above, shall be prima facie evidence of the amount
of principal and interest due and payable or to become due and payable from the
Borrower to, in the case of the Register, each Bank Party and, in the case of
such account or accounts, such Bank Party, under this Agreement, absent
manifest error; provided, however, that the failure of the Agent or such Bank
Party to make an entry, or any finding that an entry is incorrect, in the
Register or such account or accounts, shall not limit or otherwise affect the
obligations of the Borrower under this Agreement.

     Section 2.05 Maturity of Loans.

     Each Loan shall mature, and the principal amount thereof shall be due and
payable (together with interest accrued thereon), on the Termination Date.

     Section 2.06 Interest Rates.

     (a) Each Base Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Loan is made until it becomes
due, at a rate per annum equal to the Base Rate Margin plus the Base Rate for
such day. Such interest shall be payable quarterly in arrears on each Quarterly
Payment Date.

     (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus
the Adjusted London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.

     (c) Upon the occurrence and during the continuance of an Event of Default
described in Section 6.01(a) or an Event of Default described in Section
6.01(g) or 6.01(h) with respect to the Borrower, the Borrower shall pay
interest on (X) (i) the outstanding principal amount of each Base Rate Loan
owing to each Bank Party, payable on demand, at a rate per annum equal at all
times to 2% per annum above the rate per annum required to be paid on such Base
Rate Loan pursuant to Section 2.06(a) above and (ii) to the fullest extent
permitted by law, the amount of any interest that is not paid when due, from
the date such amount shall be due until such amount shall be paid in full, at a
rate per annum equal to 2% per annum above the rate per annum required to be
paid on the Base Rate Loans on which such interest has accrued pursuant to
Section 2.06(a) above and (Y)(i) the outstanding principal amount of each
Euro-Dollar Rate Loan owing to each Bank Party payable on demand, at a rate per
annum equal at all times to a rate per annum equal to the higher of (i) the sum
of 2% plus the Euro-Dollar Margin for such day

<PAGE>
                                      46


plus the Adjusted London Interbank Offered Rate applicable to such Euro-Dollar
Loan and (ii) the sum of 2% plus the Euro-Dollar Margin for such day plus the
quotient obtained (rounded upward, if necessary, to the next higher 1/100th of
1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16th of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days, then
for such other period of time not longer than three months as the Agent may
select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Reference Banks are offered to such Reference Bank
in the London interbank market for the applicable period determined as provided
above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the
circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a
rate per annum equal to the sum of 2% plus the rate applicable to Base Rate
Loans for such day)(the "Euro-Dollar Default Rate") and (ii) to the fullest
extent permitted by law, the amount of any interest that is not paid when due,
from the date such amount shall be due until such amount shall be paid in full,
at a rate per annum equal to the Euro-Dollar Default Rate the Euro-Dollars
Loans on which such interest has accrued pursuant to Section 2.06(b) above.

     (d) The Agent shall determine each interest rate applicable to the Loans
and Reimbursement Obligations hereunder. The Agent shall give prompt notice to
the Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.

     (e) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available
on a timely basis, the provisions of Section 8.01 shall apply.

     Section 2.07 Method of Electing Interest Rates.

     (a) The Loans included in each Borrowing shall bear interest initially at
the type of rate specified by the Borrower in the applicable Notice of
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject to
Section 2.07(d) and the provisions of Article 8), as follows:

          (i) if such Loans are Base Rate Loans, the Borrower may elect to
     convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business
     Day;

          (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
     convert such Loans to Base Rate Loans as of any Domestic Business Day or
     elect to continue such Loans as Euro-Dollar Loans for an additional
     Interest Period, subject to Section 2.14 if any such conversion is
     effective on any day other than the last day of an Interest Period
     applicable to such Loans.

     Each such election shall be made by delivering a notice (a "Notice of
Interest Rate Election") to the Agent not later than 11:00 A.M. (New York City
time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective (unless the relevant
Loans are to be converted from Euro-Dollar Loans to Base Rate

<PAGE>
                                      47


Loans, in which case such notice shall be delivered to the Agent not later than
11:00 A.M. (New York City time) on the date such conversion is to be
effective). A Notice of Interest Rate Election may, if it so specifies, apply
to only a portion of the aggregate principal amount of the relevant Group of
Loans; provided that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such Notice applies, and
the remaining portion to which it does not apply, are each at least $5,000,000
(unless such portion is comprised of Base Rate Loans). If no such notice is
timely received before the end of an Interest Period for any Group of
Euro-Dollar Loans, the Borrower shall be deemed to have elected that such Group
of Loans be converted to Base Rate Loans at the end of such Interest Period.

     (b) Each Notice of Interest Rate Election shall specify:

          (i) the Group of Loans (or portion thereof) to which such notice
     applies;

          (ii) the date on which the conversion or continuation selected in
     such notice is to be effective, which shall comply with the applicable
     clause of Section 2.07(a) above;

          (iii) if the Loans comprising such Group are to be converted, the new
     type of Loans and, if the Loans resulting from such conversion are to be
     Euro-Dollar Loans, the duration of the next succeeding Interest Period
     applicable thereto; and

          (iv) if such Loans are to be continued as Euro-Dollar Loans for an
     additional Interest Period, the duration of such additional Interest
     Period.

     Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.

     (c) Promptly after receiving a Notice of Interest Rate Election from the
Borrower pursuant to Section 2.07(a) above, the Agent shall notify each Bank of
the contents thereof and such notice shall not thereafter be revocable by any
Borrower.

     (d) A Borrower shall not be entitled to elect to convert any Loans to, or
continue any Loans for an additional Interest Period as, Euro-Dollar Loans if
(i) the aggregate principal amount of any Group of Euro-Dollar Loans created or
continued as a result of such election would be less than $5,000,000 or (ii) a
Default shall have occurred and be continuing when the Borrower delivers notice
of such election to the Agent.

     (e) If any Loan is converted to a different type of Loan, the applicable
Borrower shall pay, on the date of such conversion, the interest accrued to
such date on the principal amount being converted.

     Section 2.08 Fees.

     (a) Commitment Fee. The Borrower shall pay to the Agent, for the account
of the Revolving Credit Loan Banks, ratably in proportion to their Revolving
Credit Loan Commitments, a commitment fee of 1/2 of 1% per annum on the daily
amount by which the aggregate amount of the Revolving Credit Loan Commitments
exceeds the aggregate Total Outstandings. Such commitment fee shall accrue from
and including the Effective Date to but

<PAGE>
                                      48


excluding the Termination Date (or earlier date of termination of the Revolving
Credit Loan Commitments in their entirety). Accrued commitment fees under this
Section 2.08(a) shall be payable quarterly in arrears on each March 31, June
30, September 30 and December 31 and upon the date of termination of the
Revolving Credit Commitments in their entirety.

     (b) Upfront Fee. The Borrower shall pay to the Agent on the Closing Date,
for the account of each Bank Party, an upfront fee equal to 1.00% of (i) in the
case of the Revolving Credit Loan Banks, each such Bank's Revolving Credit Loan
Commitment; (ii) in the case of the Tranche A Term Loan Banks, Tranche B Term
Loan Banks and Tranche C Term Loan Banks, each such Bank's outstanding Loans
and (iii) in the case of the Drax LOC Fronting Bank, its Drax LOC Commitment.

     (c) Additional Fee. The Borrower shall pay to the Agent on January 31,
2004 and on January 31, 2005, for the account of each Bank Party, a fee equal
to 1.00% of (i) in the case of the Revolving Credit Loan Banks, each such
Bank's Revolving Credit Loan Commitment on such date; (ii) in the case of the
Tranche A Term Loan Banks, Tranche B Term Loan Banks and Tranche C Term Loan
Banks, each such Bank's outstanding Term Loans on such date and (iii) in the
case of the Drax LOC Fronting Bank, its Drax LOC Commitment on such date, in
each case after giving effect to any prepayment of the Loans made pursuant to
Section 2.11(b)(vii) on or prior to such date.

     Section 2.09 Repayment of Term Loan Facility and Drax Letter of Credit
Facility.

     (a) Repayment. The Borrower shall, on November 25, 2004, repay an
aggregate principal amount of each Term Loan Facility and repay or cash
collateralize the Drax Letter of Credit Facility in an amount equal to the
Amortization Amount for such Facility.

     (b) Application of Repayment to Drax Letter of Credit Facility. The
repayment of the Drax Letter of Credit Facility made pursuant to clause (a)
above shall be first applied to repay the Drax Loans then outstanding and
second deposited in the Drax LOC Cash Collateral Account to cash collateralize
100% of the Drax LOC Available Amount then outstanding.

     Section 2.10 Termination or Reduction of Commitments.

     (a) Optional. The Borrower may, upon at least three Domestic Business
Days' notice to the Agent, (i) terminate the Revolving Credit Loan Commitments
in their entirety at any time, if no Revolving Credit Loans or Revolving
Letters of Credit are outstanding at such time or (ii) ratably reduce from time
to time by an aggregate amount of $5,000,000 or any larger multiple thereof,
the aggregate amount of the Revolving Credit Loan Commitments in excess of the
aggregate Total Outstandings.

     (b) Mandatory. (i) Scheduled Termination. The Revolving Credit Loan
Commitments shall terminate on the Termination Date, and any Revolving Credit
Loans and Reimbursement Obligations then outstanding (together with accrued
interest thereon) shall be due and payable on such date.

<PAGE>
                                      49


     (ii) Net Cash Proceeds of Asset Sales. On and after the date on which all
of the Term Loan Facilities have been paid in full and the Drax LOC Liabilities
have been paid in full or otherwise fully cash collateralized, in the event
that the Borrower shall at any time, or from time to time, receive any Net Cash
Proceeds from Covered Asset Sales, the Revolving Credit Loan Commitments of the
Revolving Credit Loan Banks shall, unless the Required Banks otherwise agree,
be ratably reduced by such amounts and at such times as may be required to
avoid any requirement that all or any portion of such Net Cash Proceeds be
applied to repay, prepay, repurchase or defease any Debt of the Borrower that
is subordinated in right of payment to the Debt of the Borrower under the
Financing Documents.

     (iii) Prepayment. Any prepayment of the Revolving Credit Facility pursuant
to Section 2.11(b)(ii) below shall automatically and permanently reduce, on the
date of such prepayment, the Revolving Credit Loan Commitments of the Revolving
Credit Loan Banks on a pro rata basis by the applicable Reduction Amount.

     (c) Reductions Permanent. All reductions of the Revolving Credit Loan
Commitments pursuant to this Section 2.10 shall be permanent.

     Section 2.11 Prepayment of the Loans.

     (a) Optional. (i) Subject in the case of any Euro-Dollar Loans to Section
2.13, the Borrower may, upon at least one Domestic Business Day's notice to the
Agent, prepay any Loans that bear interest at the Base Rate or upon at least
three Euro-Dollar Business Days' notice to the Agent, prepay any Euro-Dollar
Loans, in each case in whole at any time, or from time to time in part in
amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying
the principal amount to be prepaid together with accrued interest thereon to
the date of prepayment. No Term Loan or Drax Loan shall be prepaid unless all
Term Loans and Drax Loans are ratably prepaid (it being understood that for
purposes of calculating such ratable share prior to the Tranche A Term Loan
Facility being paid in full, the aggregate amount of the Revolving Credit Loan
Commitments shall be deemed to be part of the Tranche A Term Loan Facility).
Any prepayment of Loans in respect of any Term Loan Facility or the Drax Letter
of Credit Facility shall be applied ratably to prepay the Loans under the Term
Loan Facilities and prepay or cash collateralize the Drax LOC Liabilities in
accordance with the provisions of Section 2.11(c).

     (ii) Upon receipt of a notice of prepayment pursuant to this Section, the
Agent shall promptly notify each Bank of the contents thereof and of such
Banks' Ratable Share of such prepayment and such notice shall not thereafter be
revocable by the Borrower.

     (b) Mandatory. (i) The Borrower shall, reasonably promptly following the
receipt by the Borrower of (A) Net Cash Proceeds from any Covered Asset Sales
but in no event later than three Business Days after receipt thereof, (B) Net
Cash Proceeds from the incurrence of Debt permitted by Section 5.07(a)(xii)
relating to a bridge financing of any Covered Asset Sale or (C) Net Cash
Proceeds from the incurrence of Debt permitted by Section 5.07(b)(iv) relating
to a bridge financing of any Covered Asset Sale, prepay an aggregate principal
amount of the Term Loans and prepay or cash collateralize the Drax LOC
Liabilities in an amount equal to the Banks' Ratable Share of such Net Cash
Proceeds. Each such prepayment shall be applied

<PAGE>
                                      50


ratably to each of the Term Loan Facilities and the Drax Letter of Credit
Facility as set forth in clause (c) below (it being understood that for
purposes of calculating such ratable share prior to the Tranche A Term Loan
Facility being paid in full, the aggregate amount of the Revolving Credit Loan
Commitments shall be deemed to be part of the Tranche A Term Loan Facility).

     (ii) The Borrower shall, reasonably promptly following the receipt of (A)
Net Cash Proceeds from any Asset Sale of any Capital Stock of a Revolving
Credit Loan/Tranche A Term Loan Guarantor or any Asset Sale of any assets of
such Revolving Credit Loan/Tranche A Term Loan Guarantor or any of its
Subsidiaries, (B) Net Cash Proceeds from the incurrence of Debt permitted by
Section 5.07(a)(xii) relating to a bridge financing of any Asset Sale described
in clause (A), (C) Net Cash Proceeds from the incurrence of Debt permitted by
Section 5.07(b)(iv) relating to a bridge financing of any Asset Sale described
in clause (A) or (D) until the Tranche A Term Loan Facility is repaid in full
and the Revolving Credit Loan Facility is repaid in full and the Revolving
Credit Loan Commitments are permanently reduced to zero, an amount equal to the
Net Cash Proceeds from the incurrence by a Revolving Credit Loan/Tranche A Loan
Guarantor or any of its Subsidiaries of Debt permitted by Section 5.07(b)(viii)
but in no event later than three Business Days after receipt thereof, prepay
the Revolving Credit Loan Facility and the Tranche A Term Loan Facility in an
aggregate amount equal to the Banks' Ratable Share of such Net Cash Proceeds.
Each such prepayment shall be applied ratably to the Tranche A Term Loan
Facility and the Revolving Credit Loan Facility based on the amounts
outstanding at such time under the Tranche A Term Loan Facility and the
aggregate amount of the Revolving Credit Commitments at such time.

     (iii) The Borrower shall, reasonably promptly following receipt of (A) Net
Cash Proceeds from any Asset Sale of any Capital Stock of the Tranche C Term
Loan Guarantor or any Asset Sale of any assets of the Tranche C Term Loan
Guarantor or any of its Subsidiaries, (B) Net Cash Proceeds from the incurrence
of Debt permitted by Section 5.07(a)(xii) relating to a bridge financing of any
Asset Sale described in clause (A), (C) Net Cash Proceeds from the incurrence
of Debt permitted by Section 5.07(b)(iv) relating to a bridge financing of any
Asset Sale described in clause (A) or (D) until the Tranche C Term Loan
Facility is repaid in full, an amount equal to the Net Cash Proceeds from the
incurrence by the Tranche C Term Loan Guarantor or any of its Subsidiaries of
Debt permitted by Section 5.07(b)(ix) but in no event later than three Business
Days after receipt thereof, prepay the Tranche C Term Loan Facility in an
aggregate amount equal to the Banks' Ratable Share of such Net Cash Proceeds.

     (iv) The Borrower shall, reasonably promptly following the date of receipt
of Net Cash Proceeds from the issuance of Debt by the Borrower permitted by
Section 5.07(a)(xi) but in no event later than three Business Days after
receipt thereof, prepay an aggregate principal amount of the Term Loans and
prepay or cash collateralize the Drax LOC Liabilities in an aggregate amount
equal to the Banks' Ratable Share of such Net Cash Proceeds. Each such
prepayment shall be applied ratably to each of the Term Loan Facilities and the
Drax Letter of Credit Facility as set forth in clause (c) below (it being
understood that for purposes of calculating such ratable share prior to the
Tranche A Term Loan Facility being paid in full, the aggregate amount of the
Revolving Credit Commitments shall be deemed to be part of the Tranche A Term
Loan Facility).

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                                      51


     (v) Subject to clause (e) below, the Borrower shall, reasonably promptly
following the date of receipt of Net Cash Proceeds from any Equity Issuance by
the Borrower but in no event later than three Business Days after receipt
thereof, prepay an aggregate principal amount of the Term Loans and prepay or
cash collateralize the Drax LOC Liabilities in an aggregate amount equal to the
Banks' Ratable Share of 50% of such Net Cash Proceeds. Each such prepayment
shall be applied ratably to each of the Term Loan Facilities and the Drax
Letter of Credit Facility as set forth in clause (c) below (it being understood
that for purposes of calculating such ratable share prior to the Tranche A Term
Loan Facility being paid in full, the aggregate amount of the Revolving Credit
Commitments shall be deemed to be part of the Tranche A Term Loan Facility).

     (vi) The Borrower shall, on the date of receipt of Net Cash Proceeds in
excess of $100,000,000 from the issuance of Debt by any Subsidiary of the
Borrower permitted pursuant to Section 5.07(b)(ii) (but only to the extent
applicable pursuant to the second proviso thereof), Section 5.07(b)(vi),
5.07(b)(viii) (to the extent that the Tranche A Term Loan Facility is repaid in
full and the Revolving Credit Facility is repaid in full and the Revolving
Credit Loan Commitments are permanently reduced to zero) and 5.07(b)(ix) (to
the extent the Tranche C Term Loan Facility is repaid in full) prepay an
aggregate principal amount of the Term Loans and prepay or cash collateralize
the Drax LOC Liabilities in an aggregate amount equal to the Banks' Ratable
Share of an amount equal to 100%, in the case of Debt issued by IPALCO, and in
all other cases, an amount equal to 75% of such Net Cash Proceeds. Each such
prepayment shall be applied ratably to each of the Term Loan Facilities and the
Drax Letter of Credit Facility as set forth in clause (c) below (it being
understood that for purposes of calculating such ratable share prior to the
Tranche A Term Loan Facility being paid in full, the aggregate amount of the
Revolving Credit Commitments shall be deemed to be part of the Tranche A Term
Loan Facility).

     (vii) The Borrower shall, not later than 31 days after the end of each
fiscal year, so long as the Minimum Liquidity Level on the last day of such
fiscal year is greater than $400,000,000, prepay an aggregate principal amount
of the Term Loans and prepay or cash collateralize the Drax LOC Liabilities in
an aggregate amount equal to the lesser of the Banks' Ratable Share of (A) 75%
of the Adjusted Free Cash Flow for such fiscal year and (B) the maximum amount
of Adjusted Free Cash Flow for such fiscal year so that the Minimum Liquidity
Level on the last day of such fiscal year after giving effect to this
prepayment would not be less than $400,000,000. Each such prepayment shall be
applied ratably to each of the Term Loan Facilities and the Drax Letter of
Credit Facility as set forth in clause (c) below (it being understood that for
purposes of calculating such ratable share prior to the Tranche A Term Loan
Facility being paid in full, the aggregate amount of the Revolving Credit
Commitments shall be deemed to be part of the Tranche A Term Loan Facility).

     (c) Application of Prepayments to Drax Letter of Credit Facility.
Prepayments of the Drax Letter of Credit Facility made pursuant to clauses
(a)(i), (b)(i), (iv), (v), (vi) or (vii) above shall be first applied to prepay
the Drax Loans and second deposited in the Drax LOC Cash Collateral Account to
cash collateralize 100% of the Drax LOC Available Amount then outstanding.

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                                      52


     (d) Application of Prepayments to Revolving Credit Loan Facility.
Prepayments of the Revolving Credit Loan Facility made pursuant to clause
(b)(ii) above shall be first applied to prepay ratably any unpaid Reimbursement
Obligations in respect of Revolving L/C Drawings, second applied to prepay
Revolving Credit Loans then outstanding and third deposited in the Revolving
L/C Cash Collateral Account to cash collateralize 100% of the Available Amount
of the Revolving Letters of Credit then outstanding; and the amount remaining
(if any) (up to the aggregate Unused Revolving Credit Loan Commitments at such
time) after such prepayments and cash collateralization (the sum of such
prepayment amounts and cash collateralization amounts and remaining amount (up
to the aggregate Unused Revolving Credit Loan Commitments at such time) being
referred to herein as the "Reduction Amount") may be retained by the Borrower
and the Revolving Credit Facility shall be permanently reduced as set forth in
Section 2.10(b)(ii).

     (e) Application of Prepayment to Tranche C Term Loan in Certain
Circumstances. Notwithstanding anything in Section 2.11(b) to the contrary, the
Borrower shall, reasonably promptly following the date of receipt of the first
$162,500,000 of Net Cash Proceeds from any Equity Issuance by the Borrower but
in no event later than three Business Days after receipt thereof, prepay
ratably an aggregate principal amount of the Tranche C Term Loans equal to the
Tranche C Percentage of such Net Cash Proceeds up to $87,500,000.

     Section 2.12 General Provisions as to Payments.

     (a) The Borrower shall make each payment of principal of, and interest on,
the Loans and Reimbursement Obligations and of fees hereunder, not later than
12:00 Noon (New York City time) on the date when due, in Federal or other funds
immediately available in New York City, without set-off, counterclaim or other
deduction, to the Agent at its address referred to in Section 10.01. The Agent
will promptly distribute to each Bank Party its ratable share of each such
payment received by the Agent for the account of the Bank Parties. Whenever any
payment of principal of, or interest on, the Base Rate Loans or Reimbursement
Obligations or of fees shall be due on a day which is not a Domestic Business
Day, the date for payment thereof shall be extended to the next succeeding
Domestic Business Day. Whenever any payment of principal of, or interest on,
the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business
Day, the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable
for such extended time.

     (b) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due from the Borrower to the Bank Parties
hereunder that the Borrower will not make such payment in full, the Agent may
assume that such Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank Party on such due date an amount equal to the amount
then due such Bank Party. If and to the extent that the Borrower shall not have
so made such payment, each Bank Party shall repay to the Agent forthwith on
demand such amount distributed to such Bank Party together with interest
thereon, for each day from the date such

<PAGE>
                                      53


amount is distributed to such Bank Party until the date such Bank Party repays
such amount to the Agent, at the Federal Funds Rate.

     Section 2.13 Funding Losses.

     If the Borrower makes any payment of principal with respect to any
Euro-Dollar Loan or any Euro-Dollar Loan is converted to a Base Rate Loan
(pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day
of an Interest Period applicable thereto, or the last day of an applicable
period fixed pursuant to Section 2.06(c), or if the Borrower fails to borrow,
prepay, convert or continue any Euro-Dollar Loans after notice has been given
to any Bank Party in accordance with Section 2.02(b), 2.07(c) or 2.11(a), the
Borrower shall reimburse each Bank Party within 15 days after demand for any
resulting loss or expense incurred by it (or by an existing or prospective
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties,
but excluding loss of margin for the period after such payment or conversion or
failure to borrow, prepay, convert or continue; provided that such Bank Party
shall have delivered to the Borrower a certificate as to the amount of such
loss or expense, which certificate shall be conclusive in the absence of
manifest error.

     Section 2.14 Computation of Interest and Fees.

     Interest based on the Base Rate hereunder shall be computed on the basis
of a year of 365 days (or 366 days in a leap year) and paid for the actual
number of days elapsed (including the first day but excluding the last day).
All other interest and fees shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed (including the first day
but excluding the last day).

     Section 2.15 Revolving L/C Cash Collateral Account.

     (a) All amounts required to be deposited as cash collateral with the
Collateral Agent pursuant to Section 2.11, 2.16 or Section 6.03 (other than
with respect to the cash collateral deposited on account of the Drax LOC
Liabilities) shall be deposited in a cash collateral account (the "Revolving
L/C Cash Collateral Account") established by the Borrower with the Collateral
Agent, to be held, applied or released for application as provided in this
Section 2.15 and Section 2.16.

     (b) The Borrower hereby grants to the Collateral Agent for the ratable
benefit of the Revolving Fronting Banks and the other Lender Parties as their
respective interests appear, a security interest in the Borrower's right, title
and interest in and to the Revolving L/C Cash Collateral Account and all funds
and financial assets from time to time credited thereto, all interest,
dividends, distributions, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such funds and financial assets, and all certificates and
instruments, if any, from time to time representing or evidencing the Revolving
L/C Cash Collateral Account and all of proceeds of any of the foregoing (the
"Revolving L/C Collateral"), to secure all of the Borrower's Obligations
hereunder and the other Credit Agreement Documents.

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                                      54


     (c) If and when any portion of the Revolving Letter of Credit Liabilities
on which any deposit of cash collateral was based (the "Relevant Contingent
Exposure") shall become fixed (a "Direct Exposure") as a result of the payment
by a Revolving Fronting Bank of a draft presented under any relevant Revolving
Letter of Credit (including any such payment under an Alternative Currency
Letter of Credit for which the relevant Revolving Fronting Bank, as a result of
fluctuations in currency exchange rates, is not reimbursed in full by the
Revolving Credit Loan Banks), the amount of such Direct Exposure (but not more
than the amount in the Revolving L/C Cash Collateral Account at the time) shall
be withdrawn by the Agent from the Revolving L/C Cash Collateral Account and
shall be paid to the relevant Revolving Fronting Bank to be applied against
such Direct Exposure and the Relevant Contingent Exposure shall thereupon be
reduced by such amount.

     (d) Interest and other payments and distributions made on or with respect
to the Revolving L/C Collateral held by the Collateral Agent shall be for the
account of the Borrower and shall constitute additional Revolving L/C
Collateral to be held by the Agent; provided that the Agent shall have no
obligation to invest any Revolving L/C Collateral on behalf of the Borrower or
any other Person. Beyond the exercise of reasonable care in the custody
thereof, the Agent shall have no duty as to any Revolving L/C Collateral in its
possession or control or in the possession or control of any agent or bailee or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto. The Collateral Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Revolving
L/C Collateral in its possession if the Revolving L/C Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Revolving L/C Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any agent or bailee selected by the Collateral Agent
in good faith. All expenses and liabilities incurred by the Collateral Agent in
connection with taking, holding and disposing of any Revolving L/C Collateral
(including customary custody and similar fees with respect to any Revolving L/C
Collateral held directly by the Agent and the Revolving L/C Cash Collateral
Account) shall be paid by the Borrower from time to time upon demand. Upon an
Actionable Default, the Collateral Agent shall be entitled to apply (and, at
the request of the Required Banks but subject to applicable law, shall apply)
Revolving L/C Collateral or the proceeds thereof to payment of any such
expenses, liabilities and fees. After the termination of the Revolving Credit
Loan Commitments of the Revolving Loan Credit Loan Banks, the termination of
all Revolving Letters of Credit and the repayment in full of all outstanding
Reimbursement Obligations in respect of the Revolving Letters of Credit, the
Collateral Agent shall transfer the remaining Revolving L/C Collateral or the
proceeds thereof (the "Excess Revolving L/C Collateral") to the Collateral
Account. Notwithstanding any other term or provision of this Agreement, and for
the avoidance of doubt, the Revolving L/C Collateral shall be paid first to the
relevant Revolving Fronting Bank in satisfaction of any Direct Exposures or
Relevant Contingent Exposures and no Revolving L/C Collateral shall be released
or disbursed to any party other than the relevant Revolving Fronting Banks
until the satisfaction of all Revolving Letter of Credit Liabilities and the
termination of the Revolving Credit Loan Commitments and all Revolving Letters
of Credit.

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                                      55


     Section 2.16 Computations of Outstandings; Determination of Available
Amount of Alternative Currency Letters of Credit.

     (a) Whenever reference is made in this Agreement to the Total Outstandings
on any date under this Agreement, such reference shall refer to the Total
Outstandings on such date after giving effect to all Extensions of Credit to be
made on such date. For purposes of calculating the Total Outstandings on any
date of determination, the aggregate Available Amount in respect of all
Alternative Currency Letters of Credit shall be deemed to equal the amount
thereof most recently reported to the Agent pursuant to subsection (b) below.
At no time shall the Total Outstandings under this Agreement exceed the sum of
(i) the aggregate amount of the Revolving Credit Loan Commitments, plus (ii)
the amounts on deposit in the Revolving L/C Cash Collateral Account (such sum
being referred to herein as the "Maximum Outstanding Exposure"). References to
the Unused Revolving Credit Loan Commitments shall refer to the excess, if any,
of the Revolving Credit Loan Commitments over the Total Outstandings; and
references to the unused portion of any Revolving Credit Loan Commitment shall
refer to the Unused Revolving Credit Loan Commitment of such Bank.

     (b) Each Revolving Fronting Bank that issues an Alternative Currency
Letter of Credit shall (i) on the first Domestic Business Day of each calendar
month, deliver to the Agent a schedule listing (A) each outstanding Alternative
Currency Letter of Credit issued by such Revolving Fronting Bank, (B) the
maximum aggregate amount available to be drawn under each such Alternative
Currency Letter of Credit at any time on or after such date (denominated in the
applicable Alternative Currency, assuming the compliance with and satisfaction
of all conditions for Revolving L/C Drawing enumerated therein) and (C) the
equivalent in Dollars of such amount (as determined by such Revolving Fronting
Bank on the basis of exchange rates available to or otherwise used by such
Revolving Fronting Bank), together with the applicable exchange rate utilized
by such Revolving Fronting Bank and the source thereof (it being agreed and
understood that such applicable exchange rate may be adjusted by a reasonable
and customary volatility factor as agreed by the Borrower and such Revolving
Fronting Bank); (ii) on the date of issuance of any Alternative Currency Letter
of Credit (including, if any Alternative Currency Letters of Credit are issued
or deemed issued on the Closing Date, on the Closing Date), deliver to the
Agent a schedule listing the information described in clauses (B) and (C)
above; (iii) on the date of any increase or decrease in the Available Amount of
any Alternative Currency Letter of Credit (other than any increase or decrease
attributable solely to currency exchange rate fluctuations), deliver to the
Agent a schedule listing the information described in clauses (B) and (C) above
after giving effect to such increase or decrease (as the case may be) and (iv)
not later than one Domestic Business Day after its receipt of a written request
therefor from the Agent or any Bank, deliver to the Agent a schedule listing
the information described in clauses (A), (B) and (C) above. The Collateral
Agent shall promptly after its receipt thereof deliver a copy of each such
schedule to the Collateral Agent, the Borrower and the Banks. For all purposes
under this Agreement, unless otherwise expressly set forth herein, the
Available Amount in respect of each Alternative Currency Letter of Credit shall
be deemed to equal, on any date of determination, the Dollar Equivalent thereof
as most recently reported to the Agent by the relevant Revolving Fronting Bank
pursuant to this subsection (b).

     (c) If, on (i) the date that any schedule is delivered by a Revolving
Fronting Bank to the Agent pursuant to subsection (b) above; (ii) any date,
after giving effect to reduction

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                                      56


in the Revolving Credit Loan Commitments or (iii) any other date, Total
Outstandings on such date (calculated pursuant to subsection (a) and (b) above)
exceeds the Maximum Outstanding Exposure, then within two Domestic Business
Days thereafter the Borrower shall be obligated to deposit cash collateral with
the Collateral Agent in the Revolving L/C Cash Collateral Account in an amount
equal to such excess to be held, applied or released for application as
provided in Section 2.15.

     (d) If at any time the Maximum Outstanding Exposure exceeds the Total
Outstandings hereunder, the Borrower may provide a written notice to the
Collateral Agent requesting the Collateral Agent to withdraw such excess amount
from the Revolving L/C Cash Collateral Account and pay such amount to the
Borrower, and, provided that no Actionable Default shall have occurred and be
continuing, the Collateral Agent shall promptly undertake such actions in
accordance with the instructions of the Borrower. If an Actionable Default
shall have occurred and be continuing, the Collateral Agent shall not take any
of the foregoing actions and, if and when requested by the Required Banks, the
amounts held in the Revolving L/C Cash Collateral Account shall be withdrawn by
the Collateral Agent, and the proceeds thereof shall be first applied by the
Collateral Agent to repay the Total Outstandings and other due and unpaid
amounts required to be paid by the Borrower hereunder and second, held, applied
or transferred as provided in Section 2.15.

     Section 2.17 Alternative Currency Letter of Credit Issuances.

     It is understood that, if Revolving Letters of Credit are issued in an
Alternative Currency, a circumstance may arise where the United States dollars
("Dollars") needed to reimburse a Revolving Fronting Bank may exceed the Unused
Revolving Credit Loan Commitment of the Revolving Credit Loan Banks and the
amounts on deposit in the Revolving L/C Cash Collateral Account available for
that purpose. This situation could occur if an Alternative Currency exchange
rate between the currency of a Revolving Letter of Credit issuance and Dollars
changes between the date of issuance of, and the date of funding a Revolving
L/C Drawing on, an Alternative Currency Letter of Credit (or funding a deposit
to the Revolving L/C Cash Collateral Account to cover issuances in excess of
the Revolving Credit Loan Commitments) so that more Dollars are needed to
purchase the Alternative Currency on the date of funding of the Revolving L/C
Drawing on an Alternative Currency Letter of Credit (or funding a deposit to
the Revolving L/C Cash Collateral Account) than would have been needed to fund
a Revolving L/C Drawing made on the issuance date of such Revolving Letter of
Credit (i.e., the currency of issuance has appreciated against the Dollar
between the date of issuance and the date of funding or cash collateral
deposit). In such a circumstance, the Revolving Fronting Banks agree as
follows: (a) (x) Any shortfall under the Revolving Credit Loan Commitment to
purchase participations in Revolving L/C Drawings under Revolving Letters of
Credit shall be allocated pro rata among the Revolving Fronting Banks who have
issued Alternative Currency Letters of Credit for which the currency of
issuance has appreciated against the Dollar ("Adverse Alternative Currency
Letters of Credit"); (y) the pro rata allocation shall be based on the Dollar
Equivalent of the face amount of each Adverse Alternative Currency Letter of
Credit, measured at the issuance date of each such Adverse Alternative Currency
Letter of Credit and (z) Revolving Credit Loan Commitments shall not be used to
purchase participations in Adverse Alternative Currency Letters of Credit to
the extent that use of those Revolving Credit Loan Commitments covers any
increase in the Dollar Equivalent of an Adverse Alternative Currency

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                                      57


Letters of Credit since the date of issuance of the Revolving Letter of Credit
if following such purchase remaining Unused Revolving Credit Loan Commitments
are insufficient to purchase participations in the remaining outstanding
Revolving Letters of Credit and (b) amounts deposited in the Revolving L/C Cash
Collateral Account shall be allocated first to cover shortfalls to the extent
existing on the last date of actual deposit to the Revolving L/C Cash
Collateral Account, or if later, the most recent date of determination pursuant
to Section 2.16(b), and second to any additional shortfalls (allocated pro rata
among such shortfalls); provided that funds on deposit in the Revolving L/C
Cash Collateral Account, if any, may not be applied to fund a Revolving L/C
Drawing on an Adverse Alternative Currency Letter of Credit to the extent those
funds have been allocated to cover an exposure existing on the last date of
deposit to the Revolving L/C Cash Collateral Account if following the
application a previously covered exposure is left without cash collateral.

     Section 2.18 Drax Letter of Credit.

     (a) Deemed Issuance of a Drax Letter of Credit. On and as of the Effective
Date, the Existing Drax Letter of Credit shall be the Drax Letter of Credit for
all purposes hereunder.

     (b) Participations in Drax Letter of Credit. Upon the Effective Date, the
Drax LOC Fronting Bank shall be deemed, without further action by any party
hereto, to have sold to each Drax LOC Bank (other than the Drax LOC Fronting
Bank) and each Participant, and each such Drax LOC Bank and each such
Participant shall be deemed, without further action by any party hereto, to
have purchased from the Drax LOC Fronting Bank, a participation in the Drax
Letter of Credit and the related Drax LOC Liabilities, in the amount required
so that the participations of the Drax LOC Banks (including the Drax LOC
Fronting Bank's retained participation) and the Participants therein shall be
in proportion to their respective Drax LOC Commitment or their respective
participation interests, as the case may be.

     (c) Required Terms for Drax Letter of Credit. The Drax Letter of Credit
shall:

          (i) by its terms expire on the Drax Letter of Credit Termination
     Date;

          (ii) have a Drax LOC Available Amount equal to not more than the
     amount of the Drax LOC Fronting Bank's Drax LOC Commitment;

          (iii) be in a form acceptable to the Drax LOC Fronting Bank; and

          (iv) be available (and the Borrower agrees that it shall use the Drax
     Letter of Credit and any proceeds in respect thereof) solely to fulfill
     obligations of AES Drax Limited, AES Drax Holdings Limited, AES Drax
     Electric Limited and AES Drax Power Limited (formerly named National Power
     Drax Limited) under the Group Account Agreement dated 30th November, 1999
     as amended on 10th April, 2000 and further amended and restated on 2nd
     August, 2000 (the "Drax Agreement"). None of such proceeds will be used,
     directly or indirectly, for the purpose, whether immediate, incidental or
     ultimate, of buying or carrying any "margin stock" within the meaning of
     Regulation U.

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                                      58


     (d) Drax L/C Drawings Under the Drax Letter of Credit.

     (i) Upon receipt from the beneficiary of the Drax Letter of Credit of
demand for payment under the Drax Letter of Credit, the Drax LOC Fronting Bank
shall determine in accordance with the terms of the Drax Letter of Credit
whether such request for payment should be honored.

     (ii) If the Drax LOC Fronting Bank determines that a demand for payment by
the beneficiary of the Drax Letter of Credit should be honored, the Drax LOC
Fronting Bank shall make available to the beneficiary in accordance with the
terms of the Drax Letter of Credit the amount of the Drax L/C Drawing under the
Drax Letter of Credit. The Drax LOC Fronting Bank shall thereupon promptly
notify the Borrower and the Agent of the amount of such Drax L/C Drawing paid
by it.

     (e) Reimbursement and Other Payments by the Borrower.

     (i) If any amount is drawn under the Drax Letter of Credit, the Borrower
irrevocably and unconditionally agrees to reimburse the Drax LOC Fronting Bank
for all amounts paid by the Drax LOC Fronting Bank upon such Drax L/C Drawing,
together with any and all reasonable charges and expenses which the Drax LOC
Fronting Bank may pay or incur relative to such Drax L/C Drawing and all such
amounts due from the Borrower shall bear interest, payable on the date upon
which such amounts shall be due and payable, on the amount drawn for each day
from and including the date such amount is drawn to but excluding the date such
reimbursement payment is paid. If the Drax LOC Fronting Bank makes any payment
under the Drax Letter of Credit, such payment by the Drax LOC Fronting Bank of
such amounts shall constitute for all purposes of this Agreement the making by
the Drax LOC Fronting Bank of a Drax Loan to the Borrower in the amount equal
to the Dollar equivalent (as determined on the date of such payment) of such
payment and such Drax Loan shall constitute the reimbursement by the Borrower
of the amounts paid by the Drax LOC Fronting Bank upon the related Drax L/C
Drawing. Each such Drax Loan shall initially be made as a Base Rate Loan,
subject to the Borrower's right to convert each such Loan to a Euro Dollar Loan
pursuant to Section 2.07. In no event shall the aggregate outstanding principal
amount of Drax Loans exceed on any date of determination the Dollar equivalent
(as determined on such date) of the Drax LOC Fronting Bank's Drax LOC
Commitment. Drax Loans are not revolving in nature, and amounts repaid or
prepaid in respect thereof may not be reborrowed. The Borrower shall reimburse
the Drax LOC Fronting Bank by repaying all outstanding Drax Loans on the
Termination Date. Such repayment shall be in addition to the Borrower's payment
of Obligations arising under Sections 2.09 and 2.10 hereof.

     (ii) Each payment to be made by the Borrower pursuant to this Section
2.18(e) shall be made, in Federal or other funds immediately available, to the
Agent at its address specified in Section 10.01.

     (iii) The Obligations of the Borrower to reimburse the Drax LOC Fronting
Bank under this Section 2.18(e) by repaying the Drax Loans shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under all circumstances whatsoever,
including, without limitation, the following circumstances:

<PAGE>
                                      59


          (1) any lack of validity or enforceability of any Financing Document;

          (2) any amendment or waiver of or any consent to departure from any
     Financing Document (except, in the case of an effective amendment to,
     waiver of or consent to a departure from any provision of this Agreement,
     to the extent specified herein);

          (3) the existence of any claim, set-off, defense or other right which
     the Borrower may have at any time against the beneficiary of the Drax
     Letter of Credit (or any Person or entity for whom such beneficiary may be
     acting), the Agent, the Drax LOC Fronting Bank or any other Person or
     entity, whether in connection with this Agreement, any other Financing
     Document or any unrelated transaction;

          (4) any statement or any other document presented under the Drax
     Letter of Credit proving to be forged, fraudulent, invalid or insufficient
     in any respect or any statement therein being untrue or inaccurate in any
     respect whatsoever;

          (5) payment by the Drax LOC Fronting Bank under any Drax Letter of
     Credit against presentation of a draft or document which does not comply
     with the terms of the Drax Letter of Credit; or

          (6) to the extent permitted under applicable law, any other
     circumstance or happening whatsoever, whether or not similar to any of the
     foregoing.

     (f) Payments by Drax LOC Banks and Participants with Respect to the Drax
Letter of Credit.

     (i) Each Drax LOC Bank and each Participant shall make available an amount
equal to its ratable share of any Drax L/C Drawing under the Drax Letter of
Credit, in Federal or other funds immediately available in New York City, to
the Drax LOC Fronting Bank by 3:00 P.M. (New York City time) on the date on
which such Drax L/C Drawing is made, together with interest on such amount for
the period from and including the date of such Drax L/C Drawing to but
excluding the date upon which such amount is to be made available at the
Federal Funds Rate on the date of such Drax L/C Drawing, at the Drax LOC
Fronting Bank's address referred to in Section 10.01. Each Drax LOC Bank and
each Participant shall be subrogated to the rights of the Drax LOC Fronting
Bank against the Borrower to the extent such payment due from such Drax LOC
Bank or such Participant, as the case may be, to the Drax LOC Fronting Bank is
paid, plus interest thereon, from and including the day such amount is due from
the Drax LOC Bank to such Drax LOC Fronting Bank to but excluding the day the
Borrower makes payment to the Drax LOC Fronting Bank in respect of a Drax Loan,
whether before or after judgment, at a rate per annum equal to the sum of the
Adjusted London Interbank Offered Rate plus the Euro-Dollar Margin.

     (ii) If any Drax LOC Bank or Participant fails to pay any amount required
pursuant to subsection (i) of this Section 2.18(f) on the date on which such
payment is due, interest, payable on demand, shall accrue on the obligation of
such Drax LOC Bank or such Participant, as the case may be, to make such
payment, for each day from and including the date such payment becomes due to
but excluding the date such Drax LOC Bank or such Participant,

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                                      60


as the case may be, makes such payment at a rate per annum equal to the Federal
Funds Rate. Any payment made by any Drax LOC Bank or any Participant, as the
case may be, after 3:00 P.M. (New York City time) on any Domestic Business Day
shall be deemed for purposes of the preceding sentence to have been made on the
next succeeding Domestic Business Day.

     (iii) If the Borrower shall reimburse the Drax LOC Fronting Bank by
repaying or prepaying any Drax Loan in respect of any Drax L/C Drawing under
the Drax Letter of Credit after the Drax LOC Banks and the Participants shall
have made funds available to the Drax LOC Fronting Bank with respect to such
Drax L/C Drawing in accordance with subsection (i) of this Section 2.18(f), the
Drax LOC Fronting Bank shall promptly upon receipt of such reimbursement
distribute to each Drax LOC Bank and each Participant its pro rata share
thereof, including interest, to the extent received by the Drax LOC Fronting
Bank.

     (iv) The several obligations of the Drax LOC Banks and the Participants to
the Drax LOC Fronting Bank hereunder shall be absolute, irrevocable and
unconditional under any and all circumstances whatsoever and shall not be
affected by any circumstance, including, without limitation, (1) any set-off,
counterclaim, recoupment, defense or other right which any such Drax LOC Bank,
any such Participant or any other Person may have against the Agent, the Drax
LOC Fronting Bank or any other Person for any reason whatsoever; (2) the
occurrence or continuance of a Default or an Event of Default or the
termination of the Drax LOC Commitments or the Drax Letter of Credit; (3) any
adverse change in the condition (financial or otherwise) of the Borrower or any
other Person; (4) any breach of any Financing Document by any party thereto;
(5) the fact that any condition precedent to the issuance of, or the making of
any payment under, the Drax Letter of Credit was not in fact met; (6) any
violation or asserted violation of law by any Bank or any affiliate thereof; or
(7) to the extent permitted under applicable law, any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
Each payment by each Drax LOC Bank and each Participant to the Drax LOC
Fronting Bank for its own account shall be made without any offset, abatement,
withholding or reduction whatsoever. If the Drax LOC Fronting Bank is required
at any time (whether before or after the Termination Date) to return to the
Borrower or to a trustee, receiver, liquidator, custodian or other similar
official any portion of the payments made by the Borrower to the Drax LOC
Fronting Bank in payment of any Drax Loan or interest thereon upon the
insolvency of the Borrower, or the commencement of any case or proceeding under
any bankruptcy, insolvency or other similar law with respect to the Borrower,
each Drax LOC Bank and each Participant shall, on demand of the Drax LOC
Fronting Bank, forthwith return to the Drax LOC Fronting Bank any amounts
transferred to such Drax LOC Bank or such Participant, as the case may be, by
the Drax LOC Fronting Bank in respect thereof pursuant to this subsection plus
such Drax LOC Bank's or such Participant's (as the case may be) pro rata share
of any interest on such payments required to be paid to the Person recovering
such payments plus interest on the amount so demanded from the day such demand
is made, if such demand is made by 2:00 P.M. (New York City time), or from the
next following Domestic Business Day, if such demand is made after 2:00 P.M.
(New York City time), to but not including the day such amounts are returned by
such Drax LOC Bank or such Participant, as the case may be, to the Drax LOC
Fronting Bank at a rate per annum for each day equal to (A) the Federal Funds
Rate for the day of such demand and (B) the Adjusted London Interbank Offered
Rate plus 1% for each day thereafter. Notwithstanding the foregoing or any
other provision contained herein, in no event shall any Drax LOC Bank or any
Participant be obligated to make any payment to the

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                                      61


Drax LOC Fronting Bank to the extent that such payment would cause such Drax
LOC Bank's or such Participant's (as the case may be) pro rata share of the
Drax LOC Total Outstandings hereunder to exceed such Drax LOC Bank's Drax LOC
Commitment or such Participant's participation interest, as the case may be;
provided that the foregoing shall not affect the obligation of the Borrower
(which is absolute, unconditional and irrevocable) to reimburse the Drax LOC
Fronting Bank for the entire amount of each payment made by the Drax LOC
Fronting Bank under the Drax Letter of Credit by repaying each Drax Loan made
in respect of each such payment, including any amount thereof that is not paid
by any Drax LOC Bank or any Participant to the Drax LOC Fronting Bank (pursuant
to this sentence or otherwise).

     (g) Drax Letter of Credit Commission; Issuance Fee.

     (i) Letter of Credit Commission. The Borrower agrees to pay to the Agent a
letter of credit commission with respect to the Drax Letter of Credit issued at
its request or for its account, computed for each day from and including the
date of issuance of the Drax Letter of Credit to but excluding the Drax Letter
of Credit Termination Date, at the Drax Letter of Credit Commission Rate on the
aggregate amount available for a Drax L/C Drawing under the Drax Letter of
Credit from time to time (whether or not any conditions to a Drax L/C Drawing
can then be met), such fee to be for the account of the Drax LOC Banks ratable
in proportion to their Drax LOC Total Exposures. Such fee shall be payable
quarterly in arrears on the last Domestic Business Day of each January, April,
July and October and upon the Termination Date.

     (ii) Issuance Fee. The Borrower shall pay to the Drax LOC Fronting Bank
for its own account such fees with respect to the Drax Letter of Credit issued
by the Drax LOC Fronting Bank as shall have been agreed between the Borrower
and the Drax LOC Fronting Bank.

     (iii) Limited Liability of Drax LOC Fronting Bank. As between the Drax LOC
Fronting Bank, on the one hand, and the Borrower, on the other, the Borrower
assumes all risks of any acts or omissions of the beneficiary and any
transferee of the Drax Letter of Credit with respect to its use of the Drax
Letter of Credit. Neither the Drax LOC Fronting Bank nor any of its respective
employees, officers or directors shall be liable or responsible for: (1) the
use which may be made of the Drax Letter of Credit or for any acts or omissions
of any beneficiary or transferee in connection therewith; (2) the validity,
sufficiency or genuineness of documents, or of any endorsement(s) thereon, even
if such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (3) payment by the Drax LOC Fronting Bank
against presentation of documents which do not comply with the terms of the
Drax Letter of Credit, including failure of any documents to bear any reference
or adequate reference to the Drax Letter of Credit; or (4) any other
circumstance whatsoever in making or failing to make payment under the Drax
Letter of Credit; provided that the Borrower shall have a claim against the
Drax LOC Fronting Bank, and the Drax LOC Fronting Bank shall be liable to the
Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential or special, damages suffered by the Borrower which are found in a
final, unappealable judgment of a court of competent jurisdiction to have been
caused by (x) the Drax LOC Fronting Bank's willful misconduct or gross
negligence in determining whether documents presented under the Drax Letter of
Credit comply with the terms thereof or (y) the Drax LOC Fronting Bank's
willful failure to pay, or gross negligence resulting in a failure to pay, any
Drax L/C Drawing after the

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                                      62


presentation to it by the beneficiary (or any transferee of the Drax Letter of
Credit) of a draft and other required documentation strictly complying with the
terms and conditions of the Drax Letter of Credit. In furtherance and not in
limitation of the foregoing, the Drax LOC Fronting Bank may accept documents
that appear on their face to be in order, without responsibility for further
investigation.

     (iv) Drax LOC Fronting Banks and Affiliates. The Drax LOC Fronting Bank
shall have the same rights and powers under the Financing Documents as any
other Drax LOC Bank and may exercise or refrain from exercising the same as
though it were not the Drax LOC Fronting Bank (in each case to the extent the
Drax LOC Fronting Bank is also an Drax LOC Bank), and the Drax LOC Fronting
Bank and its respective affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any Subsidiary or
affiliate of the Borrower as if it were not the Drax LOC Fronting Bank
hereunder.

     (h) Applicability of ISP98. Unless otherwise expressly agreed by the Drax
LOC Fronting Bank and the Borrower, the rules of the "International Standby
Practices 1998" published by the Institute of International Banking Law and
Practice (or such later version thereof as may be in effect at the time
issuance) shall apply to the Drax Letter of Credit.

     Section 2.19 Drax LOC Cash Collateral Account.

     (a) All amounts required to be deposited as cash collateral with respect
to the Drax LOC Liabilities with the Agent pursuant to Section 2.11 or Section
6.03 shall be deposited in a cash collateral account (the "Drax LOC Cash
Collateral Account") established by the Borrower with the Collateral Agent, to
be held, applied or released for application as provided in this Section 2.19.

     (b) The Borrower hereby grants to the Collateral Agent for the benefit of
the Drax LOC Fronting Bank and the other Lender Parties as their respective
interests appear, a security interest in, the Borrower's right, title and
interest in and to the Drax LOC Cash Collateral Account and all funds and
financial assets from time to time credited thereto, all interest, dividends,
distributions, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such funds and financial assets, and all certificates and instruments, if
any, from time to time representing or evidencing the Drax LOC Cash Collateral
Account and all of the proceeds of any of the foregoing (the "Drax LOC
Collateral"), to secure all of the Borrower's Obligations hereunder and the
other Credit Agreement Documents.

     (c) If and when any portion of the Drax LOC Liabilities on which any
deposit of cash collateral was based (the "Drax LOC Relevant Contingent
Exposure") shall become fixed (a "Drax LOC Direct Exposure") as a result of the
payment by the Drax LOC Fronting Bank of a Drax L/C Drawing presented under the
Drax Letter of Credit, the amount of such Drax LOC Direct Exposure (but not
more than the amount in the Drax LOC Cash Collateral Account at the time) shall
be withdrawn by the Collateral Agent from the Drax LOC Cash Collateral Account
and shall be paid to the Drax LOC Fronting Bank to be applied against such Drax
LOC Direct Exposure and the Drax LOC Relevant Contingent Exposure shall
thereupon be reduced by such amount.

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                                      63


     (d) Interest and other payments and distributions made on or with respect
to the Drax LOC Collateral held by the Collateral Agent shall be for the
account of the Borrower and shall constitute Drax LOC Collateral to be held by
the Collateral Agent; provided that the Agent shall have no obligation to
invest any of the Drax LOC Collateral on behalf of the Borrower or any other
Person. Beyond the exercise of reasonable care in the custody thereof, the
Collateral Agent shall have no duty as to any Drax LOC Collateral in its
possession or control or in the possession or control of any agent or bailee or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto. The Collateral Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Drax LOC
Collateral in its possession if the Drax LOC Collateral is accorded treatment
substantially equal to that which it accords its own property, and shall not be
liable or responsible for any loss or damage to any of the Drax LOC Collateral,
or for any diminution in the value thereof, by reason of the act or omission of
any agent or bailee selected by the Collateral Agent in good faith. All
expenses and liabilities incurred by the Collateral Agent in connection with
taking, holding and disposing of any Drax LOC Collateral (including customary
custody and similar fees with respect to any Drax LOC Collateral held directly
by the Collateral Agent) shall be paid by the Borrower from time to time upon
demand. Upon an Actionable Default, the Collateral Agent shall be entitled to
apply (and, at the request of the Drax LOC Fronting Bank but subject to
applicable law, shall apply) the Drax LOC Collateral or the proceeds thereof to
payment of any such expenses, liabilities and fees. After the termination of
the Drax LOC Commitments of the Drax LOC Banks, the termination of the Drax
Letter of Credit, and the repayment of all outstanding Drax Loans and all other
Reimbursement Obligations in respect of the Drax Letter of Credit, the
Collateral Agent shall transfer the remaining Drax LOC Collateral or the
proceeds thereof (the "Excess Drax LOC Collateral") to the Collateral Account.
Notwithstanding any other term or provision of this Agreement, and for the
avoidance of doubt, the Drax LOC Collateral shall be paid first to the Drax LOC
Fronting Bank in satisfaction of Drax LOC Direct Exposures and no Drax LOC
Collateral shall be released or disbursed to any party other than the Drax LOC
Fronting Bank until the satisfaction of all Drax LOC Liabilities and the
termination of the Drax LOC Commitments and the Drax Letter of Credit.

     Section 2.20 Extension of Drax Letter of Credit Termination Date.

     (a) Upon the request of the Borrower and the consent of the Drax Letter of
Credit beneficiary, the Drax LOC Fronting Bank shall (i) if the Termination
Date at the time of such request is July 15, 2005, extend the Drax Letter of
Credit Termination Date to July 15, 2005, and the "Drax Letter of Credit
Termination Date" shall mean July 15, 2005 and (ii) if the Termination Date at
the time of such request is December 12, 2005, extend the Drax Letter of Credit
Termination Date to December 12, 2005, and the "Drax Letter of Credit
Termination Date" shall mean December 12, 2005.

     (b) If the Drax Letter of Credit Termination Date is extended to July 15,
2005 pursuant to clause (a)(i) above, upon the request of the Borrower and the
consent of the Drax Letter of Credit beneficiary, the Drax LOC Fronting Bank
shall extend the Drax Letter of Credit Termination Date to December 12, 2005
and the "Drax Letter of Credit Termination Date" shall mean December 12, 2005
provided that (i) the "Termination Date" shall mean December 12, 2005 at such
time and (ii) the Agent has certified to the Drax LOC Fronting Bank prior to
the

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                                      64


July 15, 2005 that the 4.50% Junior Subordinated Convertible Debentures have
been refinanced to mature on a date after December 12, 2005.

                                  ARTICLE III

                                   CONDITIONS

     Section 3.01 Closing.

     The closing hereunder shall occur when all the following conditions have
been satisfied:

          (a) The Borrower shall have paid all accrued fees of the Agent, the
     Collateral Agent, the Arranger Parties and the Banks and all accrued
     expenses of the Agent and the Collateral Agent (including, without
     limitation, all fees and expenses of counsel to the Agent payable pursuant
     to Section 10.03);

          (b) The Agent shall have received, if requested, duly executed Notes
     of the Borrower for the account of each Bank that has so requested, dated
     on or before the Closing Date complying with the provisions of Section
     2.04;

          (c) The Agent shall have received (i) an opinion of the General
     Counsel, International of the Borrower, substantially in the form of
     Exhibit B-1 hereto, (ii) an opinion of Davis Polk & Wardwell, special
     counsel for the Borrower, substantially in the form of Exhibit B-2 hereto,
     (iii) opinions of special counsel for certain Subsidiaries of the Borrower
     in each of the jurisdictions in which the Required Banks may reasonably
     request, substantially in the form of Exhibit B-3 hereto, (iv) an opinion
     of Morris, Nichols, Arsht & Tunnell, Delaware counsel for the Borrower,
     substantially in the form of Exhibit B-4 hereto, (v) an opinion of Maples
     and Calder, Cayman Islands counsel for the Borrower, substantially in the
     form of Exhibit B-5 hereto, and (vi) an opinion of Conyers Dill & Pearman,
     British Virgin Islands counsel for the Borrower, substantially in the form
     of Exhibit B-6 hereto, each dated the Closing Date (except for the
     opinions to be delivered pursuant to clause (iii) above which shall be
     dated on or about the Closing Date) and covering such additional matters
     relating to the transactions contemplated hereby as the Required Banks may
     reasonably request;

          (d) The Agent shall have received an opinion of Shearman & Sterling,
     special counsel for the Agent, substantially in the form of Exhibit B-7
     hereto, dated the Closing Date and covering such additional matters
     relating to the transactions contemplated hereby as the Required Banks may
     reasonably request;

          (e) The Agent shall have received evidence satisfactory to it that
     all the shares of common stock of the Borrower pledged to secure the
     obligations of AES EDC under the Existing AES EDC SELLS Facility have been
     released;

          (f) The Agent shall have received evidence satisfactory to it of the
     Completion of the Exchange Note Offering;

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                                      65


          (g) The Agent shall have received evidence, satisfactory to it, in
     the form of pro forma calculations, that the making of Borrowings
     (including the continuation of certain Loans pursuant to Section 2.01) and
     the issuance (or deemed issuance) of, and Revolving L/C Drawings and Drax
     L/C Drawings under, the Revolving Letters of Credit and the Drax Letter of
     Credit, respectively, under this Agreement are permitted under the terms
     of the Debt of the Borrower outstanding on the Closing Date;

          (h) The Agent shall have received a Security Agreement in
     substantially the form of Exhibit C-1 hereto (the "Security Agreement"),
     and a Collateral Trust Agreement in substantially the form of Exhibit C-2
     hereto (the "Collateral Trust Agreement") duly executed by the Borrower,
     together with:

               (A) Certificates representing the Pledged Stock (as defined in
          the Security Agreement) accompanied by undated stock powers executed
          in blank and instruments evidencing the Pledged Debt (as defined in
          the Security Agreement), if any, endorsed in blank or accompanied by
          undated bond powers executed in blank;

               (B) Copies of UCC-1 financing statements in proper form for
          filing under the Uniform Commercial Code of all jurisdictions that
          the Agent may deem necessary or desirable in order to perfect the
          first priority liens and security interests created under the
          Security Agreement, covering the Collateral (as defined in the
          Security Agreement) described in the Security Agreement;

               (C) Completed requests for information, dated on or before the
          Closing Date, listing effective financing statements filed in the
          jurisdictions referred to in clause (B) above that name the Borrower
          as debtor, together with copies of such other financing statements;

               (D) To the extent required by the Security Agreement, the
          Account Control Agreements and the Securities Account Control
          Agreements referred to in the Security Agreement, duly executed by
          each of the parties thereto for the Deposit Accounts listed on
          Schedule V to the Security Agreement and the Securities Accounts
          listed on Schedule VI to the Security Agreement;

               (E) Evidence of the completion of all other recordings and
          filings of or with respect to the Security Agreement that the Agent
          may deem necessary or desirable in or to perfect the Liens created
          thereby; and

               (F) Evidence that all other action that the Agent may deem
          necessary or desirable in order to perfect the first priority liens
          and security interests created under the Security Agreement has been
          taken (including, without limitation, the consent agreements);

          (i) The Agent shall have received a Pledge Agreement in substantially
     the form of Exhibit C-3 hereto (the "Tranche C Pledge Agreement"), duly
     executed by AES EDC, together with:

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                                      66


               (A) Certificates representing the EDC Pledged Stock (as defined
          in the Tranche C Pledge Agreement) accompanied by undated stock
          powers executed in blank; and

               (B) Evidence of the completion of all other recordings and
          filings of or with respect to the Tranche C Pledge Agreement that the
          Agent may deem necessary or desirable in or to perfect the Liens
          created thereby; and

               (C) Evidence that all other action that the Agent may deem
          necessary or desirable in order to perfect the first priority liens
          and security interests created under the Tranche C Pledge Agreement
          has been taken.

          (j) The Agent shall have received a Pledge Agreement in substantially
     the form of Exhibit C-4 hereto (the "BVI Cayman Pledge Agreement"), duly
     executed by AES BVI II, together with:

               (A) Certificates representing the BVI Pledged Stock (as defined
          in the BVI Cayman Pledge Agreement) accompanied by undated stock
          powers executed in blank; and

               (B) Evidence of the completion of all other recordings and
          filings of or with respect to the BVI Cayman Pledge Agreement that
          the Agent may deem necessary or desirable in or to perfect and
          protect the Liens created thereby, including:

                    (i) deposit with the Collateral Trustees all certificates
               and other documents of title relating to the Charged Shares (as
               defined in the BVI Cayman Pledge Agreement), from time to time,

                    (ii) deliver to the Collateral Trustees:

                         (A) original share certificates in respect of the
                    Charged Shares,

                         (B) blank, signed and undated transfer in respect of
                    the Charged Shares, and

                         (C) shareholder proxy in favor of the Collateral
                    Trustees; and

                         (D) Evidence that all other action that the Agent may
                    deem necessary or desirable in order to perfect and protect
                    the first priority liens and security interests created
                    under the BVI Cayman Pledge Agreement has been taken.

          (k) The Agent shall have received copies of the resolutions of the
     Board of Directors (or, in the case of any limited liability companies,
     Board of Representatives or the equivalent) of each Loan Party authorizing
     the execution, delivery and performance

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                                      67


     by such Loan Party of the Financing Documents to which it is a party,
     certified by a duly authorized officer of such Loan Party (which
     certificate shall state that such resolutions are in full force and effect
     on the Closing Date);

          (l) The Agent shall have received certified copies of all approvals,
     authorizations or consents of, or notices to or registrations with, any
     governmental body or agency required for each Loan Party, if necessary, to
     enter into the Financing Documents to which it is a party;

          (m) The Agent shall have received a certificate of a duly authorized
     officer of each Loan Party certifying the names and true signatures of the
     officers of such Loan Party authorized to sign the Financing Documents to
     which it is a party and the other documents to be delivered by such Loan
     Party hereunder;

          (n) The Agent shall have received a certificate signed by a duly
     authorized officer of the Borrower dated the Closing Date, to the effect
     that: (i) the representations and warranties contained in Article 4 hereof
     are true and correct on and as of the Closing Date as though made on and
     as of such date; and (ii) no Default has occurred and is continuing or
     would result from the issuance of the Revolving Letters of Credit
     requested by the Borrower to be issued on such date (including, without
     limitation, the deemed issuance of the Revolving Letters of Credit
     pursuant to the second sentence of Section 2.03(a) and the deemed issuance
     of the Drax Letter of Credit pursuant to Section 2.18(a)) and the
     Borrowings (including, without limitation, the continuation of certain
     Loans pursuant to Section 2.01) requested by the Borrower to be made on
     such date;

          (o) The Agent shall have received a certificate signed by a duly
     authorized officer of the Borrower to the effect that the execution,
     delivery and performance by each Loan Party of the Financing Documents to
     which it is a party are within such Loan Party's corporate or other
     organizational powers, have been duly authorized by all necessary
     corporate or other organizational action, require no action by or in
     respect of, or filing with, any governmental body, agency or official
     (other than the filing of UCC-1 financing statements and other filings
     required to perfect security interests) and do not contravene, or
     constitute a default under, any provision of applicable law or regulation
     or of the certificate of incorporation (or certificate of formation, as
     applicable) or by-laws (or other organizational documents, as applicable)
     of such Loan Party or of any agreement, judgment, injunction, order,
     decree or other instrument binding upon the Borrower or any of its
     Subsidiaries that could reasonably be expected to result in a Material
     Adverse Effect or result in the creation or imposition of any Lien on any
     asset of the Borrower or of AES BVI II or of any Material AES Entity or of
     any Pledged Subsidiary (except for Liens created by the Financing
     Documents) provided that any foreclosure or other exercise of remedies by
     the Collateral Trustees or the Collateral Agent will require additional
     approvals and consents that have not been obtained from foreign and
     domestic regulators and from lenders to, and suppliers, customers or other
     contractual parties of one or more Subsidiaries and failure to obtain such
     approval or consent could result in a default, or a breach of agreement or
     other legal obligations of such Subsidiaries;

<PAGE>
                                      68


          (p) The Agent shall have received all documents it may reasonably
     request relating to the existence of the Loan Parties, the corporate or
     other organizational authority for and the validity of this Agreement and
     the other Financing Documents, and any other matters relevant hereto, all
     in form and substance satisfactory to the Agent; and

          (q) The Agent shall have received evidence satisfactory to it that
     the Banc of America Secured Option has been entered into by the Borrower
     and Banc of America Securities LLC.

          (r) The Agent shall have received evidence satisfactory to it that
     the Borrower's limited partnership interest in Global Power Holdings,
     C.V., a Dutch partnership, has been transferred to GPH Holdings, LLC, a
     Delaware limited liability company.

     The Agent shall promptly notify the Borrower and the Banks of the Closing
Date, and such notice shall be conclusive and binding on all parties hereto.

     Section 3.02 Extension of Credit.

     The obligation of each Bank to make a Loan on the occasion of each
Borrowing (including the continuation of certain Loans pursuant to Section
2.01) and the obligation of a Revolving Fronting Bank to issue a Revolving
Letter of Credit on the occasion of each request therefor by the Borrower shall
in each case be subject to the satisfaction of the following conditions:

          (a) receipt by the Agent of a Notice of Borrowing (except in the case
     of the continuation of certain Loans pursuant to Section 2.01 or the
     deemed issuance of Revolving Letters of Credit pursuant to the second
     sentence of Section 2.03(a) or the deemed issuance of the Drax Letter of
     Credit pursuant to Section 2.18(a)) or a Notice of Issuance as required by
     Section 2.02 or 2.03, as the case may be;

          (b) the fact that, immediately after such Extension of Credit, after
     giving effect to all direct and indirect applications of the proceeds of
     such Extension of Credit made substantially simultaneously with the
     extension thereof, the aggregate Total Outstandings of any Revolving
     Credit Loan Bank will not exceed its Revolving Credit Loan Commitment;

          (c) the fact that the making of the Borrowings, the continuation of
     certain Loans and the issuance of, and the Revolving L/C Drawings and the
     Drax L/C Drawings under, the Revolving Letters of Credit and the Drax
     Letter of Credit, respectively, under this Agreement are permitted under
     the terms of the Debt of the Borrower outstanding as of the date of the
     making of such Loan or the issuance of, and the Revolving L/C Drawings and
     the Drax L/C Drawings under such Revolving Letter of Credit or the Drax
     Letter of Credit, as applicable;

          (d) the fact that, immediately before and after such Extension of
     Credit, no Default shall have occurred and be continuing; and

<PAGE>
                                      69


          (e) the fact that the representations and warranties of the Obligors
     contained in the Financing Documents (except (i) in the case of a
     Refunding Borrowing, the representations and warranties set forth in
     Section 4.05(b) and 4.06 as to any matter which has heretofore been
     disclosed in writing by the Borrower to the Bank Parties and (ii) in the
     case of the representations and warranties set forth in Section 4.16 which
     shall be true on and as of the date hereof) shall be true on and as of the
     date of such Extension of Credit.

     Each Extension of Credit hereunder shall be deemed to be a representation
and warranty by the Borrower on the date of such Extension of Credit as to the
facts specified in clauses (b) through (e) of this Section.

                                   ARTICLE IV

                                 REPRESENTATIONS

     The Borrower represents and warrants that:

     Section 4.01 Corporate Existence and Power.

     Each Loan Party is a corporation (or limited liability company, as
applicable) duly incorporated (or formed, as applicable), validly existing and
in good standing under the laws of the jurisdiction of its incorporation (or
formation) and has all corporate or other organizational powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.

     Section 4.02 Corporate and Governmental Authorization and Filings; No
Contravention.

     (a) The execution, delivery and performance by each Loan Party of the
Financing Documents to which it is a party are within such Loan Party's
corporate or other organizational powers, have been duly authorized by all
necessary corporate or other organizational action, require no action by or in
respect of, or filing with, any governmental body, agency or official (other
than the filing of UCC-1 financing statements and other filings required to
perfect security interests) and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of the certificate of
incorporation (or certificate of formation, as applicable) or by-laws (or other
organizational documents, as applicable) of such Loan Party or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower or any of its Subsidiaries that could reasonably be expected to result
in a Material Adverse Effect or result in the creation or imposition of any Lien
on any asset of the Borrower, AES BVI II or of any Material AES Entity or of any
Pledged Subsidiary (except for Liens created by the Financing Documents).

     (b) Upon (i) the filing of UCC-1 financing statements in the form attached
to the Security Agreement and the Tranche C Pledge Agreement with the offices of
the Secretary of State of the State of Delaware, (ii) the entry by AES BVI II of
the particulars of the BVI Cayman Pledge Agreement in its register of mortgages
and charges and the submission by AES BVI II for registration a copy of its
completed register of mortgages and charges to the Registrar of Companies in

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the British Virgin Islands and (iii) certain filings required by the Collateral
Documents to be made, all filings and other actions necessary to perfect the
security interest granted by each Loan Party in the Collateral created under the
Collateral Documents will have been duly made or taken and are in full force and
effect, and (w) the Security Agreement creates in favor of the Collateral
Trustees for the benefit of the Secured Holders a valid and, together with such
filings and other actions, perfected first priority security interest in the
Security Agreement Collateral (subject to no Liens other than Liens permitted by
the Financing Documents), securing the payment of the Secured Obligations, and
(x) the BVI Cayman Pledge Agreement creates in favor of the Collateral Trustees
for the benefit of the Secured Holders a valid and, together with such other
actions, perfected first priority security interests in the BVI Collateral
(subject to no Liens other than Liens permitted by the Financing Documents),
securing the payment of the Secured Obligations, (y) the Collateral Trust
Agreement creates in favor of the Collateral Trustees for the benefit of the
Secured Holders, a valid and, together with such filings and other actions,
perfected first priority security interest in the Additional Collateral Trust
Agreement Collateral, and (z) the Tranche C Pledge Agreement creates in favor of
the Collateral Agent for the benefit of the Tranche C Secured Parties a valid
and, together with such filings and other actions, perfected first priority
security interests in the Tranche C Collateral (subject to no Liens other than
Liens permitted by the Financing Documents), securing the payment of the Tranche
C Secured Obligations, and in each case all filings and other actions necessary
to perfect such security interests have been duly taken; provided that any
foreclosure or other exercise of remedies by the Collateral Trustees or the
Collateral Agent will require additional approvals and consents that have not
been obtained from foreign and domestic regulators and from lenders to, and
suppliers, customers or other contractual counterparties of one or more
Subsidiaries and failure to obtain such approval or consent could result in a
default, or a breach of agreement or other legal obligations of such
Subsidiaries. The Borrower is the legal and beneficial owner of the Security
Agreement Collateral and the Additional Collateral Trust Agreement Collateral,
AES BVI II is the legal and beneficial owner of the BVI Collateral and AES EDC
is the legal and beneficial owner of the Tranche C Collateral, in each case free
and clear of any Lien, except for Liens permitted by the Financing Documents.

     Section 4.03 Compliance with Laws.

     The Borrower is and each of its Subsidiaries are in compliance with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws and
ERISA and the rules and regulations thereunder) except for any non-compliance
that could not reasonably be expected to have a Material Adverse Effect.

     Section 4.04 Binding Effect.

     This Agreement constitutes a valid and binding agreement of each Obligor
and each other Financing Document, when executed and delivered in accordance
with this Agreement, will constitute a valid and binding obligation of each Loan
Party that is a party thereto, in each case enforceable in accordance with its
terms.


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     Section 4.05 Financial Information.

     (a) The consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of December 31, 2001 and the related consolidated statements of
operations and cash flows for the fiscal year then ended, reported on by
Deloitte & Touche and set forth in the Form 10-K, a copy of which has been
delivered to each of the Bank Parties, fairly present, in conformity with
generally accepted accounting principles, the consolidated financial position of
the Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal year.

     (b) Except for Disclosed Matters, since December 31, 2001 there has been no
material adverse change in the business, financial position, results of
operations or prospects of the Borrower and its Consolidated Subsidiaries,
considered as a whole.

     Section 4.06 Litigation.

     Except for Disclosed Matters, there is no action, suit, investigation,
litigation or proceeding pending against, or to the knowledge of the Borrower
threatened against or affecting, the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could have a
Material Adverse Effect or which in any manner draws into question the legality,
validity or enforceability of any Financing Document, and there shall have been
no change in the status of, or in the financial effect on the Borrower or its
Subsidiaries from the actions, suits, investigations, litigations or proceedings
set forth in the Disclosed Matters that could reasonably be expected to have a
Material Adverse Effect.

     Section 4.07 Compliance with ERISA.

     Each member of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Internal Revenue Code with respect to
each Plan and is in compliance in all material respects with the currently
applicable provisions of ERISA and the Internal Revenue Code with respect to
each Plan. No member of the ERISA Group has (a) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect of
any Plan; (b) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security under
ERISA or the Internal Revenue Code or (c) incurred any liability in excess of
$100,000 under Title IV of ERISA other than a liability to the PBGC for premiums
under Section 4007 of ERISA.

     Section 4.08 Environmental Matters.

     (a) In the ordinary course of its business, each of the Borrower and its
Subsidiaries conducts an ongoing review of the effect of Environmental Laws on
the business, operations and properties of the Borrower or such Subsidiary, in
the course of which it identifies and evaluates associated liabilities and costs
(including, without limitation, any capital or operating expenditures required
for clean-up or closure of properties presently or previously owned, any capital
or operating expenditures required for investigation, to achieve or maintain

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                                       72


compliance with environmental protection standards imposed by Environmental Laws
or as a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site disposal
of wastes or Hazardous Substances by the Borrower or its Subsidiaries, and any
actual or potential liabilities to third parties, including employees, and any
related costs and expenses). On the basis of this review, the Borrower has
reasonably concluded that such associated liabilities and costs, including the
costs of compliance with Environmental Laws, are unlikely to have a Material
Adverse Effect.

     (b) There are no facts, circumstances or conditions that are reasonably
likely to result in liabilities arising under Environmental Laws that could have
a material adverse effect on the business, financial conditions, results of
operations or prospects of the Borrower and its Consolidated Subsidiaries,
considered as a whole.

     Section 4.09 Taxes.

     United States Federal income tax returns of the Borrower and its
Subsidiaries and any other material tax returns filed by them have been examined
and closed (other than for the limited purposes of net operating loss
carry-forwards) through the fiscal year ended December 31, 1998, there are no
ongoing or pending tax audits or examinations, and no deficiencies or other
claims for unpaid taxes are proposed in respect of any taxes due from the
Borrower, its Subsidiaries or any Material AES Entity that could have a Material
Adverse Effect. The Borrower, its Subsidiaries and all Material AES Entities
have filed all United States Federal income tax returns and the Borrower, its
Subsidiaries and all Material AES Entities have filed all other material tax
returns which are required to be filed by them, all such United States Federal
income tax returns and all such other material returns are true, correct and
complete in all material respects and all taxes due as indicated on such returns
or pursuant to any assessment received by the Borrower or any Subsidiary or any
Material AES Entity have been paid, other than any such taxes that are being
diligently contested in good faith through appropriate proceedings and for which
adequate reserves have been established in accordance with generally accepted
accounting principals. The charges, accruals and reserves on the books of the
Borrower, its Subsidiaries and all Material AES Entities in respect of taxes or
other governmental charges are, in the opinion of the Borrower, adequate.

     Section 4.10 Material AES Entities.

     Each Material AES Entity is a corporation (or limited liability company, as
applicable) duly incorporated (or formed, as applicable), validly existing and
(other than any Material AES Entity that is not incorporated under the laws of
the United States or any political subdivision thereof) in good standing under
the laws of its jurisdiction of incorporation (or jurisdiction of formation, as
applicable). Each Material AES Entity has all corporate or other organizational
powers and all material governmental licenses, authorization, consents and
approvals required to carry on its business as proposed to be conducted and has
all governmental licenses, authorizations, consents and approvals required to
have been obtained prior to the date hereof and which are material to the
operation of its business as proposed to be conducted, except to the extent that
the failure to obtain any such license, authorization, consent or approval,


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individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.

     Section 4.11 Not an Investment Company.

     None of the Obligors is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

     Section 4.12 Public Utility Holding Company Act.

     Neither the Borrower nor any of its Subsidiaries is subject to regulation
as a "holding company" or a "subsidiary company" of a holding company or an
"affiliate" of a subsidiary or holding company or a "public utility company"
under Section 2(a) of the Public Utility Holding Company Act of 1935, as amended
("PUHCA"), except that the Borrower and certain of its Subsidiaries are exempt
holding companies under Section 3(a) of PUHCA by order of the Securities and
Exchange Commission.

     Section 4.13 Full Disclosure.

     All information heretofore furnished by the Borrower to the Agent or any
Bank Party for purposes of or in connection with any Financing Document or any
transaction contemplated hereby or thereby is, and all such information
hereafter furnished by the Borrower to the Agent or any Bank Party will be, true
and accurate in all material respects on the date as of which such information
is stated or certified in the light of the circumstances under which such
information was provided (as modified or supplemented by other information so
furnished, when taken together as a whole and with the Disclosed Matters);
provided that, with respect to projected financial information, the Borrower
represents only that such information was prepared in good faith based on
assumptions believed to be reasonable at the time, it being recognized by the
Bank Parties that such projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by any such
projections may differ from the projected results. The Borrower has disclosed to
the Bank Parties, in the Disclosed Matters or otherwise in writing, any and all
facts specific to the Borrower and its Subsidiaries and known as of the date
hereof to a responsible officer of the Borrower that could reasonably be
expected to result in a Material Adverse Effect, which materially and adversely
affect or may affect (to the extent any Borrower can now reasonably foresee),
the business, operations or financial condition of the Borrower and its
Consolidated Subsidiaries, taken as a whole, or the ability of any Obligor to
perform its obligations under the Financing Documents.

     Section 4.14 Collateral Documents and Collateral.

     (a) (i) The execution, delivery, recordation, filing or performance by the
Borrower, AES BVI II and AES EDC of the Collateral Documents; (ii) the grant by
the Borrower, AES BVI II and AES EDC of the Liens granted by each of them
pursuant to the Collateral Documents; (iii) the perfection or maintenance of the
Liens created under the Collateral Documents (including the first priority
nature thereof) and (iv) the exercise by the Collateral Trustees or the
Collateral Agent, as the case may be, of its remedies in respect of the
Collateral pursuant to the Collateral Documents, will not require any consent,
approval, authorization or other order of, or any notice to or filing with, any
court, regulatory body,


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                                       74


administrative agency or other governmental body (other than such filings
required in order to perfect any security interest granted by the Collateral
Documents and other than any consent, approval, authorization, order, notice or
filing the failure of which to make or obtain could not reasonably be expected
to have a Material Adverse Effect), and will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the charter or
by-laws of the Borrower, AES BVI II, AES EDC or any of the other Pledged
Subsidiaries or any agreement, indenture or other instrument to which the
Borrower, AES BVI II, AES EDC or any of the other Pledged Subsidiaries is a
party or by which the Borrower, AES BVI II, AES EDC or any of the other Pledged
Subsidiaries or the Borrower's, AES BVI II's or AES EDC's or the other Pledged
Subsidiaries' respective property is bound, or violate or conflict with any
laws, administrative regulations or rulings or court decrees applicable to the
Borrower, AES BVI II, AES EDC, any of the other Pledged Subsidiaries or the
Borrower's, AES BVI II's or the other Pledged Subsidiaries' respective property
except for any violation, breach, conflict or default that could not reasonably
be expected to have a Material Adverse Effect and except that in each of the
foregoing cases any foreclosure or other exercise of remedies by the Collateral
Trustees or the Collateral Agent will require additional approvals and consents
that have not been obtained from foreign and domestic regulators and from
lenders to, and suppliers, customers or other contractual counterparties of, one
or more Subsidiaries and failure to obtain such approval or consent could result
in a default under, or a breach of, agreements or other legal obligations of
such Subsidiaries.

     (b) Each of the representations and warranties of the Borrower, AES BVI II
and AES EDC contained in the Collateral Documents is true and correct.

     (c) Set forth on Schedule I hereto is a complete and accurate list of all
Pledged Subsidiaries, showing as of the date hereof (as to each such Pledged
Subsidiary) its legal name, its jurisdiction of incorporation, the type and
number of shares of each class of its Equity Interests authorized, and the type
and number outstanding, on the date hereof and the percentage of each such class
of its Equity Interests owned (directly or indirectly) by the Borrower and the
certificate number corresponding to each such Equity Interest. All of the
outstanding Equity Interests to be pledged to the Collateral Trustees for the
benefit of the Secured Holders pursuant to the Security Agreement and the BVI
Cayman Pledge Agreement in each Pledged Subsidiary have been validly issued, are
fully paid and non-assessable and are owned by the Borrower or AES BVI II, as
applicable, free and clear of all Liens, except those created under the
Financing Documents.

     (d) Set forth on Schedule II hereto is a complete and accurate list of all
assigned agreements of the Borrower and its Subsidiaries (the "Assigned
Agreements"), showing as of the date hereof the parties, subject matter and term
thereof. Each such Assigned Agreement has been duly authorized, executed and
delivered by all parties thereto, has not been amended or otherwise modified, is
in full force and effect and is valid and binding upon and enforceable against
all parties thereto, are in full force and effect, except as the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by equitable principles of general applicability
and there exists no default under any Assigned Agreement by any party thereto.

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                                       75


     Section 4.15 Existing Revolving Letters of Credit.

     Appendix V hereto identifies each Existing Revolving Letter of Credit
outstanding as of the date hereof and as of the Effective Date.

     Section 4.16 Solvency.

     Each of AES BVI II, AES EDC, AES Oklahoma, AES Hawaii and AES Warrior Run
is, individually, and together with its Subsidiaries, taken as a whole, Solvent
as of the date hereof.

     Section 4.17 Pledged Subsidiaries.

     Other than the Non-Pledged Subsidiaries, the Pledged Subsidiaries listed on
Schedule I hereto most recently delivered to the Bank Parties in accordance with
Section 5.01(l), are, as of the date set forth on such Schedule, all of the
direct Subsidiaries of the Borrower and all of the direct Subsidiaries of AES
BVI II.

     Section 4.18 Qualified Holding Companies Debt.

     None of the Qualified Holding Companies is an obligor or a contingent
obligor on any of the Debt permitted by Section 5.07(b)(iii) or a contingent
obligor on any of the Debt permitted by Section 5.07(a)(ii), other than Debt
permitted by the definition of "Qualified Holding Company".

     Section 4.19 Banks Parties. Each of the lenders party to the Existing Bank
Credit Agreements immediately prior to the Closing Date is a Bank Party party to
this Agreement as of the Closing Date.

                                   ARTICLE V

                                   COVENANTS

     The Borrower agrees that, so long as any Loan or any other Obligation of
any Loan Party under any Financing Document shall remain unpaid or any Revolving
Credit Loan Bank has any Revolving Credit Loan Commitment hereunder or any
amount payable under any Note remains unpaid or any Revolving Letter of Credit
or the Drax Letter of Credit or any Reimbursement Obligation remains
outstanding:

     Section 5.01 Information.

     The Borrower will deliver to each of the Bank Parties (it being understood
that delivery to the Agent and the posting by the Agent of each of the following
items on an electronic website shall constitute delivery to each of the Bank
Parties, and the Agent hereby agrees to post on an electronic website or
otherwise distribute to the Bank Parties any such item delivered by the Borrower
to the Agent):


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                                       76


          (a) as soon as available and in any event within 120 days after the
     end of each fiscal year of the Borrower, a consolidated and consolidating
     balance sheet of each Obligor as of the end of such fiscal year, an
     unconsolidated balance sheet of the Borrower as of the end of such fiscal
     year, the related consolidated, consolidating and unconsolidated (as
     applicable) statements of operations for such fiscal year and the related
     consolidated and unconsolidated statements of cash flows for such fiscal
     year, setting forth in each case in comparative form the figures for the
     previous fiscal year, said consolidated financial statements to be reported
     on, in a manner acceptable to the Securities and Exchange Commission, by
     Deloitte & Touche or other independent public accountants of nationally
     recognized standing and such consolidating and unconsolidated financial
     statements to be certified as to fairness of presentation, generally
     accepted accounting principles (other than failure to consolidate) and
     consistency by the chief executive officer, president, chief financial
     officer or chief accounting officer of the Borrower;

          (b) as soon as available and in any event within 60 days after the end
     of each of the first three quarters of each fiscal year of the Borrower, a
     consolidated balance sheet of each Obligor as of the end of such quarter
     and an unconsolidated balance sheet of the Borrower as of the end of such
     fiscal quarter and the related consolidated and unconsolidated statements
     of operations for such quarter and for the portion of such Obligor's fiscal
     year ended at the end of such quarter and the related consolidated and
     unconsolidated statements of cash flows for the portion of such Obligor's
     fiscal year ended at the end of such quarter, setting forth in the case of
     such consolidated statements of operations and cash flows, in comparative
     form the figures for the corresponding quarter and the corresponding
     portion of such Obligor's previous fiscal year, all certified (subject to
     normal year-end adjustments) as to fairness of presentation, generally
     accepted accounting principles and consistency by the chief executive
     officer, president, chief financial officer or chief accounting officer of
     the Borrower;

          (c) (1) as soon as available and in any event no later than the date
     on which financial statements are required to be delivered pursuant to
     clause (a) and (b) above, forecasts prepared by management of the Borrower,
     in form satisfactory to the Agent, of cash flow statements on a monthly
     basis for the fiscal year following such fiscal year and on an annual basis
     for each fiscal year thereafter until the Termination Date and (2) as soon
     as available and in any event no later than the date financial statements
     are required to be delivered pursuant to clause (a) and (b) above, a
     statement of the monthly cash flows to the Borrower of each Subsidiary of
     the Borrower for each of the twelve months ending prior to the date of such
     financial statements;

          (d) simultaneously with the delivery of each set of financial
     statements referred to in clauses (a) and (b) above, a certificate of the
     chief executive officer, president, chief financial officer or chief
     accounting officer of the Borrower (i) setting forth in reasonable detail
     the calculations required to establish whether the Borrower was in
     compliance with the requirements of Sections 5.07, 5.09, 5.11, 5.12, 5.13,
     5.14 and 5.16 on the date of such financial statements; (ii) stating to the
     knowledge of the Borrower whether any Default exists on the date of such
     certificate and, if any Default then exists, setting forth the details
     thereof and the action which the Borrower is taking or


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                                       77


     proposes to take with respect thereto and (iii) accompanied by a schedule
     setting forth in reasonable detail a description, including, where
     applicable, the expected and maximum dollar amounts thereof, of all
     material contingent liabilities not disclosed in such financial statements;

          (e) simultaneously with the delivery of each set of financial
     statements referred to in clause (a) above, a statement of the firm of
     independent public accountants which reported on such statements (i)
     whether anything has come to their attention as a result of their audit
     (which was not directed primarily toward obtaining knowledge of
     noncompliance) to cause them to believe that the Borrower has failed to
     comply with the terms, covenants, provisions or conditions as they relate
     to accounting of financial matters addressed in Sections 5.07 to 5.18,
     inclusive, and (ii) confirming the calculations set forth in the officer's
     certificate delivered simultaneously therewith pursuant to clause (d)
     above;

          (f) within five days after any officer of the Borrower obtains
     knowledge of any Default, if such Default is then continuing, a certificate
     of the chief executive officer, president, executive vice-president or
     chief financial officer of the Borrower setting forth the details thereof
     and the action which the Borrower is taking or proposes to take with
     respect thereto;

          (g) promptly upon the mailing thereof to the shareholders of the
     Borrower generally, copies of all financial statements, reports and proxy
     statements so mailed;

          (h) promptly upon the filing thereof, copies of all registration
     statements (other than the exhibits thereto and any registration statements
     on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
     their equivalents) which the Borrower shall have filed with the Securities
     and Exchange Commission;

          (i) if and when any member of the ERISA Group (i) gives or is required
     to give notice to the PBGC of any "reportable event" (as defined in Section
     4043 of ERISA) with respect to any Plan which might constitute grounds for
     a termination of such Plan under Title IV of ERISA, or knows that the plan
     administrator of any Plan has given or is required to give notice of any
     such reportable event, a copy of the notice of such reportable event given
     or required to be given to the PBGC; (ii) receives notice of complete or
     partial withdrawal liability under Title IV of ERISA or notice that any
     Multiemployer Plan is in reorganization, is insolvent or has been
     terminated, a copy of such notice; (iii) receives notice from the PBGC
     under Title IV of ERISA of an intent to terminate, impose liability (other
     than for premiums under Section 4007 of ERISA) in respect of, or appoint a
     trustee to administer any Plan, a copy of such notice; (iv) applies for a
     waiver of the minimum funding standard under Section 412 of the Internal
     Revenue Code, a copy of such application; (v) gives notice of intent to
     terminate any Plan under Section 4041(c) of ERISA, a copy of such notice
     and other information filed with the PBGC; (vi) gives notice of withdrawal
     from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
     (vii) fails to make any payment or contribution to any Plan or
     Multiemployer Plan or in respect of any Benefit Arrangement or makes any
     amendment to any Plan or Benefit Arrangement which has resulted or could
     result in the

<PAGE>
                                       78


     imposition of a Lien or the posting of a bond or other security, a
     certificate of the chief executive officer, president, chief financial
     officer or chief accounting officer of the Borrower setting forth details
     as to such occurrence and the action, if any, which the Borrower or the
     applicable member of the ERISA Group is required or proposes to take;

          (j) not less than one day prior to the anticipated receipt by the
     Borrower or any Subsidiary of the Borrower of Net Cash Proceeds from any
     Asset Sale, issuance of Debt or Equity Issuance, a certificate of the chief
     executive officer, president, chief financial officer or chief accounting
     officer of the Borrower setting forth (i) a description of the transaction
     giving rise to such Net Cash Proceeds, (ii) the date or dates upon which
     such Net Cash Proceeds are anticipated to be received by the Borrower or
     such Subsidiary, (iii) the amount of Net Cash Proceeds anticipated to be
     received on such date or each of such dates (together with a schedule
     detailing the calculations necessary to determine the amount of Net Cash
     Proceeds), (iv) the amount of such Net Cash Proceeds that is anticipated to
     prepay the Loans and cash collateralize the Drax Letter of Credit Facility
     and (v) in the case of the receipt by a Subsidiary of any such Net Cash
     Proceeds, in the event that such Subsidiary is unable to transfer such Net
     Cash Proceeds to the Borrower or a Qualified Holding Company whose Equity
     Interests have been pledged to the Secured Holders pursuant to the
     Collateral Documents, such certificate shall also set forth a reasonably
     detailed explanation of the circumstances preventing such Subsidiary from
     transferring such Net Cash Proceeds to the Borrower or a Qualified Holding
     Company whose Equity Interests have been pledged to the Secured Holders
     pursuant to the Collateral Documents;

          (k) promptly after receipt by the Borrower or any Subsidiary of the
     Borrower, a copy of each complaint, order, citation, notice or other
     written communication from any Person with respect to the existence or
     alleged existence of a material violation of any applicable Environmental
     Law or the incurrence of any liability, obligation, loss, damage, cost,
     expense, fine, penalty or sanction or the requirement to commence any
     remedial action resulting from or in connection with any air emission,
     water discharge, noise emission, Hazardous Substance or any other
     environmental, health or safety matter at, upon, under or within any of the
     properties now or previously owned, leased or operated by the Borrower, any
     of its Subsidiaries or any Material AES Entity, or due to the operations or
     activities of the Borrower, any Subsidiary of the Borrower, any Material
     AES Entity or any other Person on or in connection with any such property
     or any part thereof,

          (l) simultaneously with the delivery of each set of financial
     statements referred to in clause (a) and (b) above, (1) a revised Schedule
     I showing as of the last day of such quarter all of the direct Subsidiaries
     of the Borrower and AES BVI II (other than Non-Pledged Subsidiaries) and
     (2) a revised Schedule IV showing as of the last day of such quarter all
     the Subsidiaries of the Borrower whose assets consist only of any of the
     Excluded Power Projects and direct or indirect Investments therein, and

          (m) promptly upon request thereof, deliver to the Agent and the
     Collateral Trustees (A) a list setting forth, for each Secured Agreement,
     (i) the aggregate principal amount outstanding thereunder, (ii) the accrued
     and unpaid interest thereunder, (iii) the


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                                       79


     accrued and unpaid fees (if any) thereunder, (iv) the names of the
     Representatives (as defined in the Collateral Trust Agreement) and of the
     Secured Holders (to the extent known to the Borrower) thereunder, and all
     other unpaid amounts thereunder known to the Borrower, owing to each such
     Representative, for its own account and on behalf of such Secured Holders
     and (v) such other information regarding the Representatives, such Secured
     Holders and the Secured Agreements as the Agent may reasonably request and
     (B) the Payment Information (as defined in the Collateral Trust Agreement).

          (n) from time to time such additional information regarding the
     financial position or business of the Borrower and its Subsidiaries as the
     Agent, at the request of any Bank Party, may reasonably request.

     Section 5.02 Payment of Obligations.

     The Borrower will pay and discharge, and will cause each Subsidiary
Guarantor (other than AES Southland and AES Warrior Run), IPALCO and Cilcorp (in
each case, for so long as each Person is a Subsidiary of the Borrower) to pay
and discharge, all its material obligations and liabilities, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings, and will maintain, and will cause each
Subsidiary of the Borrower to maintain, in accordance with generally accepted
accounting principles, appropriate reserves for the accrual of any of the same.

     Section 5.03 Maintenance of Property; Insurance.

     (a) The Borrower will keep, and will cause each of its Subsidiaries to
keep, all property useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted.

     (b) The Borrower will, and will cause each of its Subsidiaries to, maintain
(either in the name of the Borrower or in such Subsidiary's own name) with
financially sound and responsible insurance companies, insurance of such types,
in at least such amounts and against at least such risks (and with such risk
retention) as are usually insured against in similar circumstances in the same
general area by companies of established repute engaged in the same or a similar
business; and will furnish to each Bank Party upon request information presented
in reasonable detail as to the insurance so carried.

     Section 5.04 Conduct of Business and Maintenance of Existence.

     The Borrower (a) will continue, and will cause each of AES BVI II, the
Material AES Entities and the Pledged Subsidiaries to continue, to engage in
business of the same general type as now conducted by the Borrower and its
Subsidiaries; (b) will continue, and will cause AES BVI II, each Material AES
Entity and each Pledged Subsidiary to continue, to operate their respective
businesses on a basis substantially consistent with the policies and standards
of the Borrower, AES BVI II or such Material AES Entity or such Pledged
Subsidiary as in effect on the date hereof and (c) will preserve, renew and keep
in full force and effect, and will cause AES BVI II, each Material AES Entity
and each Pledged Subsidiary to preserve, renew and keep in full force and effect
their respective corporate existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business; provided
that nothing in


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                                       80


this Section 5.04 shall prohibit (i) the merger of a Subsidiary into the
Borrower or the merger or consolidation of a Subsidiary with or into another
Person if the Person surviving such consolidation or merger is a Subsidiary and
if, in each case, after giving effect thereto (x) no Default shall have occurred
and be continuing, (y) neither the Borrower or any Subsidiary Guarantor shall be
liable for any Debt of such Subsidiary except to the extent it was liable for
such Debt prior to giving effect to such merger and (z) the transaction is
otherwise permitted by Section 5.11, (ii) any asset disposition by the Borrower
or any of its Subsidiaries permitted by Section 5.19 and (iii) the termination
of the corporate existence of any Subsidiary (other than a Subsidiary Guarantor)
if the Borrower in good faith determines that such termination is in the best
interest of the Borrower and is not materially disadvantageous to the Bank
Parties.

     Section 5.05 Compliance with Laws.

     The Borrower will comply, and cause each of its Subsidiaries to comply, in
all material respects with all applicable laws, ordinances, rules, regulations,
and requirements of governmental authorities (including, without limitation,
Environmental Laws and ERISA and the rules and regulations thereunder) (a)
except for such non-compliance as would result solely in the payment of monetary
compensation by the Borrower or such Subsidiary in an amount not to exceed
$200,000 for each such non-compliance and (b) except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings (and
the pendency of such proceedings themselves shall not have a material adverse
effect on the Borrower and its Subsidiaries, taken as a whole).

     Section 5.06 Inspection of Property, Books and Records.

     The Borrower will keep, and will cause each of its Subsidiaries to keep,
proper books of record and account in which full, true and correct entries shall
be made of all dealings and transactions in relation to its business and
activities; and will permit, and will cause each Significant AES Entity to
permit, representatives of any Bank Party at such Bank Party's expense to visit
and inspect any of their respective properties, to examine and make abstracts
from any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times and as often as may
reasonably be desired.

     Section 5.07 Limitation on Debt.

     The Borrower shall not, and shall not permit any Subsidiary of the Borrower
to, incur, assume, create or suffer to exist any Debt, except for:

     (a) in the case of the Borrower:

          (i) Debt under the Financing Documents;

          (ii) Debt existing on the date hereof and set forth on Schedule VI;

          (iii) Debt incurred to refinance, replace, refund or extend the Old
     Securities that were not tendered in the Exchange Note Offering (the
     "Remaining Old Securities"), provided that (v) the aggregate principal
     amount of such Debt

<PAGE>
                                       81


     shall not be greater than the aggregate principal amount of the Remaining
     Old Securities, (w) the Borrower and AES BVI II (to the extent set forth in
     the Financing Documents) shall be the only direct or contingent obligors in
     respect of such Debt provided that if, after the date hereof any additional
     Subsidiaries of the Borrower Guarantee the Borrower's Obligations
     hereunder, such Subsidiaries may also be contingent obligors in respect of
     such Debt, (x) the final maturity of such Debt is on or later than December
     12, 2005, (y) the material terms taken as a whole of any such Debt, and of
     any agreement entered into and of any instrument issued in connection
     therewith, are no less favorable in any material respect to the Obligors or
     the Bank Parties than the terms of any agreement or instrument governing
     the Senior Secured Exchange Notes and (z) the interest rate applicable to
     any such Debt does not exceed the then applicable market interest rate;

          (iv) Debt issued in exchange for any of the Debt permitted by Section
     5.07(a)(ii) (the "Exchanged Debt"), provided that (v) the aggregate
     principal amount of such Debt on the date of such exchange shall not be
     greater than the aggregate principal amount of the Exchanged Debt, (w) the
     final maturity of such Debt shall in no event be prior to December 12,
     2005, (x) such Debt shall not contain any Payment Restriction more
     restrictive than the Payment Restrictions contained in the Exchanged Debt,
     (y) the parties to whom such Debt is owed are the same as the parties to
     whom the Exchanged Debt was owed on the date of such exchange and (z) the
     annual interest payable in cash during any calendar year ending on or prior
     to December 31, 2005 in respect of such Debt shall not be greater than the
     interest payable in cash during such calendar year in respect of the
     Exchanged Debt;

          (v) Debt representing a refinancing, replacement or refunding of Debt
     permitted by Section 5.07(a)(ii) whose final maturity date is prior to
     December 12, 2005; provided that:

               (A) (w) the aggregate principal amount of such Debt outstanding
          or available will not exceed the principal amount outstanding or
          available at the time of such refinancing, replacement or refunding
          (plus fees and expenses, including any premium and defeasance costs
          relating to such refinancing, replacement or refunding), (x) the final
          maturity of such Debt is later than December 12, 2005, (y) such Debt
          shall not contain any Payment Restriction more restrictive than the
          Payment Restrictions contained in the Debt being refinanced, replaced
          or refunded and (z) the interest rate applicable to any such
          refinancing, replacement or refunding Debt does not exceed the then
          applicable market interest rate; and

               (B) no obligor shall be liable for any such Debt except to the
          extent that it was liable for the Debt so refinanced, replaced or
          refunded.

          (vi) Debt owing by the Borrower to a Consolidated Subsidiary of the
     Borrower so long as such Debt is subordinated on terms reasonably
     satisfactory to the Agent to the Debt of the Borrower under the Financing
     Documents;


<PAGE>
                                       82


          (vii) any Lien permitted by Section 5.10 that constitutes Debt not
     otherwise permitted by this Section;

          (viii) Letters of credit, surety bonds, Guarantees and performance
     bonds supporting obligations of Subsidiaries so long as, after giving
     effect to such letters of credit, surety bonds, Guarantees and performance
     bonds (and the Investments represented thereby), the Borrower would be in
     compliance with Section 5.16;

          (ix) the Sul Guarantee;

          (x) other Debt, in the aggregate, not to exceed at any one time
     outstanding $225,000,000 so long as (i) the final maturity of such Debt
     shall in no event be prior to December 12, 2005 and (ii) such Debt shall
     not have any scheduled amortization prior to December 12, 2005; provided
     that if the Debt permitted under this clause (x) is incurred to refinance,
     replace, refund or extend any Debt, such Debt may be incurred to only
     refinance, replace, refund or extend the Debt outstanding under the AES
     N.Y. Funding Credit Facility; provided, further that if the Debt permitted
     under this Section 5.07(a)(x) is not used for the purposes set forth in the
     immediately preceding proviso, and if the aggregate amount of cash and
     Temporary Cash Investments of the Borrower and the aggregate Unused
     Revolving Credit Loan Commitments is equal to or greater than $200,000,000
     on the Business Day immediately preceding the incurrence of such Debt, only
     $75,000,000 of such other Debt shall be permitted by this Section
     5.07(a)(x).

          (xi) Debt incurred to refinance, replace, refund or extend any or all
     of the Debt of the Borrower under the Financing Documents, provided that
     (u) the aggregate principal amount of such Debt shall not be greater than
     the aggregate principal amount of the Debt being refinanced, replaced,
     refunded or extended, (v) the Obligors shall be the only direct or
     contingent obligors in respect of such Debt solely to the extent such
     Obligor is liable in respect of the Debt being refinanced, replaced,
     refunded or extended, provided that if, after the date hereof any
     additional Subsidiaries of the Borrower Guarantee the Borrower's
     Obligations hereunder, such Subsidiaries may also be contingent obligors in
     respect of such Debt, (w) the final maturity of such Debt is later than
     December 12, 2005, (x) the material terms taken as a whole of such Debt,
     and of any agreement entered into and of any instrument issued in
     connection therewith, are no less favorable in any material respect to the
     Obligors or the Bank Parties than the terms hereof, (y) the interest rate
     applicable to such Debt does not exceed the then applicable market interest
     rate and (z) the Net Cash Proceeds from the incurrence of such Debt shall
     be applied as set forth in Section 2.11(b)(iv);

          (xii) Debt incurred as a bridge financing for a proposed Asset Sale,
     provided that (x) the only direct or contingent obligor in respect of such
     Debt is the holder of the asset that is the subject of such Asset Sale, (y)
     the interest rate applicable to such Debt does not exceed the then
     applicable market interest rate


<PAGE>
                                       83


     and (z) the Net Cash Proceeds from the incurrence of such Debt shall be
     applied as set forth in Section 2.11(b);

          (xiii) Debt incurred to refinance, replace or refund any of the
     obligations arising in respect of the Existing Trust Preferred Securities,
     provided that (x) the only direct or contingent obligor in respect of such
     Debt is the Borrower, (y) the annual interest payable in cash during any
     calendar year ending on or prior to December 31, 2005 in respect of such
     Debt shall not be greater than the interest payable during such calendar
     year in respect of the Existing Trust Preferred Securities being
     refinanced, replaced or refunded and (z) the final maturity of such Debt
     shall be later than December 12, 2005; and

          (xiv) the Lake Worth Letter of Credit.

     (b) in the case of the Borrower's Subsidiaries:

          (i) Guarantees of Debt of the Borrower under the Financing Documents,
     Debt permitted by clause (a)(iii) above, the Senior Secured Exchange Notes
     and Debt permitted by clause (a)(xii) above (it being understood that if,
     after the date hereof, any Subsidiary (other than the Subsidiary Guarantors
     and any Subsidiary of the Subsidiary Guarantors) Guarantees the Debt of the
     Borrower under the Financing Documents, such Subsidiary may also Guarantee
     the Debt permitted by clause (a)(iii) above, the Senior Secured Exchange
     Notes and the Debt permitted by clause (a)(xii) above);

          (ii) Debt incurred by a Subsidiary:

               (x) to finance the on-going construction, operation, maintenance
          (including modifications and upgrades to comply with applicable laws
          and regulations) or working capital requirements (including letters of
          credit or guarantees to fund debt service reserve accounts or similar
          accounts or for the benefit of power purchase agreements or commodity
          hedging counterparties) of a Power Supply Business or other business
          owned, operated or managed (including on a joint basis with others),
          directly or indirectly, by the Borrower (an "AES Business"); and

               (y) that is not also the Debt of any other Subsidiary with an
          interest in any other AES Business (except for Debt incurred or
          assumed by Intermediate Holding Companies which, at the time such Debt
          was incurred or assumed, in the aggregate, contributed less than 50%
          of the Parent Operating Cash Flow for the immediately preceding four
          fiscal quarters);

          provided, however, that (A) the Subsidiaries listed on Schedule
          5.07(b)(ii) hereto can incur Debt pursuant to this Section 5.07(b)(ii)
          in the amounts and for the purposes set forth on such Schedule and (B)
          each Subsidiary can incur Debt pursuant to this Section 5.07(b)(ii) in
          an aggregate amount up to 10% of the


<PAGE>
                                       84


          aggregate amount of Debt of such Subsidiary outstanding on the Closing
          Date; provided, further that with respect to clause (A) in the
          immediately preceding proviso, to the extent that the Debt incurred
          pursuant to this Section 5.07(b)(ii) is not used for the purposes set
          forth on Schedule 5.07(b)(ii) for such Debt, unless such Debt is
          permitted by another provision hereunder, the portion of Net Cash
          Proceeds of such Debt not used for such purposes shall be received by
          the Borrower or a Qualified Holding Company whose Equity Interests
          have been pledged to the Secured Holders pursuant to the Collateral
          Documents and such Net Cash Proceeds shall be applied to prepay the
          Debt hereunder pursuant to and in the amounts and order of priority
          set forth in Section 2.11(b);

               (iii) Debt existing on the date hereof;

               (iv) Debt incurred by a Subsidiary as a bridge financing for a
          proposed Asset Sale, provided that (x) the only direct or contingent
          obligor in respect of such Debt is the holder of the asset that is the
          subject of such Asset Sale, (y) the interest rate applicable to such
          Debt does not exceed the then applicable market interest rate and (z)
          the Net Cash Proceeds from the incurrence of such Debt shall be
          applied as set forth in Section 2.11(b);

               (v) Debt owing to the Borrower or a Consolidated Subsidiary of
          the Borrower; provided that Debt owed to the Borrower shall constitute
          Pledged Debt (to the extent such Debtor is required to pledge such
          Debt pursuant to the Collateral Documents) and delivered to the
          Collateral Trustees pursuant to the terms of the Security Agreement;
          provided further that except for Pledged Debt or Debt between
          Qualified Holding Companies whose Equity Interests have been pledged
          to the Secured Holders pursuant to the Collateral Documents, Debt
          owing to a Consolidated Subsidiary of the Borrower that is a Pledged
          Subsidiary or a Subsidiary of a Pledged Subsidiary shall only be
          permitted if (x) (1) the obligor of such Debt is either a direct or
          indirect Subsidiary of such Consolidated Subsidiary or directly or
          indirectly owns such Consolidated Subsidiary, (2) the obligor of such
          Debt is a Domestic Subsidiary and such Consolidated Subsidiary is a
          Domestic Subsidiary or (3) the obligor of such Debt is a Foreign
          Subsidiary and such Consolidated Subsidiary is a Foreign Subsidiary,
          and (y) any such Debt is permitted under Section 5.16;

               (vi) Debt incurred by a Subsidiary, the Net Cash Proceeds of
          which are received by the Borrower or a Qualified Holding Company
          whose Equity Interests have been pledged to the Secured Holders
          pursuant to the Collateral Documents and (x) in the case of Debt
          incurred by IPALCO, an amount equal to the Banks' Ratable Share of
          100% of such Net Cash Proceeds and (y) in the case of any other
          Subsidiary, an amount equal to the Banks' Ratable share of 75% of such
          Net Cash Proceeds are applied to prepay the Debt hereunder pursuant to
          and in the amount and order of priority set forth in Section 2.11(b);
          provided, however that (A) none of the Subsidiary Guarantors or
          Cilcorp or any of their respectively owned Subsidiaries can incur Debt
          pursuant to this Section 5.07(b)(vi);


<PAGE>
                                       85


               (vii) Debt representing a refinancing, replacement or refunding
          of Debt permitted by clauses (b)(ii), (b)(iii), (b)(iv), (b)(vi),
          (b)(viii) and (b)(ix) above; provided that:

                    (A) (w) the aggregate principal amount of such Debt
               outstanding or available will not exceed the principal amount
               outstanding or available at the time of such refinancing,
               replacement or refunding (plus fees and expenses, including any
               premium and defeasance costs) relating to such refinancing,
               replacement or refunding, (x) the final maturity of such Debt is
               later than the final maturity of the Debt being refinanced,
               replaced or refunded unless the holders of the Debt being
               refinanced, replaced or refunded can accelerate the final
               maturity date thereof, (y) the Payment Restrictions in such Debt
               (1) shall be no more restrictive than the Payment Restrictions
               contained in the Debt being refinanced, replaced or refunded or
               (2) in the opinion of the Borrower, are consistent with customary
               market terms for a financing of its nature and do not adversely
               affect the ability of the Borrower to meet its payment
               Obligations under the Financing Documents and (z) the interest
               rate applicable to any such refinancing, replacement, refunding
               or extending Debt does not exceed the then applicable market
               interest rate;

                    (B) after giving effect to the issuance of such Debt, no
               Default shall have occurred and be continuing under Section
               5.16(b); and

                    (C) if any Debt being refinanced, replaced or refunded is
               subordinated to the Debt of any Subsidiary Guarantor, such Debt
               shall be subordinated at least to the same extent; and

          (viii) Debt incurred by a Revolving Credit Loan/Tranche A Term Loan
     Guarantor or any of its Subsidiaries, so long as the Net Cash Proceeds of
     such Debt are received by the Borrower or a Qualified Holding Company whose
     Equity Interests have been pledged to the Secured Holders pursuant to the
     Collateral Documents and (x) until the Tranche A Term Loan Facility is
     repaid in full and the Revolving Credit Loan Facility is repaid in full and
     the Revolving Credit Loan Commitments are permanently reduced to zero, an
     amount equal to the Banks' Ratable Share of 100% of such Net Cash Proceeds
     and (y) at any time thereafter, an amount equal to the Banks' Ratable Share
     of 75% of such Net Cash Proceeds are applied to prepay the Debt hereunder
     pursuant to Section 2.11(b)(ii) and (vi).

          (ix) Debt incurred by the Tranche C Guarantor or any of its
     Subsidiaries, so long as the Net Cash Proceeds of such Debt are received by
     the Borrower or a Qualified Holding Company whose Equity Interests have
     been pledged to the Secured Holders pursuant to the Collateral Documents
     and (x) until the Tranche C Term Loan Facility is repaid in full, an amount
     equal to the Banks' Ratable Share of 100% of such Net Cash Proceeds and (y)
     at any time thereafter, an amount equal to the Banks' Ratable Share of 75%
     of such Net Cash Proceeds are applied to prepay the Debt hereunder pursuant
     to and in the amount and order of priority set forth in Section
     2.11(b)(iii) and (vi).


<PAGE>
                                       86


          (x) any Lien permitted by Section 5.10 that constitutes Debt not
     otherwise permitted by this Section 5.07.

     Notwithstanding any of the foregoing in this Section 5.07(b), in no event
shall Qualified Holding Companies incur any Debt other than Debt permitted by
the definition of "Qualified Holding Company."

     Section 5.08 Use of Proceeds.

     The proceeds of the Loans made (or deemed to be continued), the Revolving
Letters of Credit issued (or deemed issued) under this Agreement will be used by
the Borrower for working capital and other general corporate purposes. The
proceeds of the Drax Letter of Credit deemed to be issued under this Agreement
shall be used solely for the purposes described in Section 2.19(c)(iv). None of
such proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.

     Section 5.09 Restricted Payments.

     (a) The Borrower will not declare or pay any dividends, purchase, redeem,
retire, defease or otherwise acquire for value any of its Equity Interests now
or hereafter outstanding, return any capital to its stockholders as such, make
any distribution of assets, Equity Interests, obligations or securities to its
stockholders, or permit any of its Subsidiaries to purchase, redeem, retire,
defease or otherwise acquire for value any Equity Interests in the Borrower,
except (A) the Borrower may declare and pay cash dividends to the holders of the
Existing Trust Preferred Securities and refinance, replace or refund any of the
Obligations arising in respect of the Existing Trust Preferred Securities as
provided in Section 5.07(a)(xiii) and (B) AES New York Funding, L.L.C. may
acquire Equity Interests in the Borrower to the extent required under the AES
N.Y. Funding Credit Facility.

     (b) Notwithstanding Section 5.09(a) above, so long as any Revolving Credit
Loan/Tranche A Term Loan Obligation remains outstanding, no Revolving Credit
Loan/Tranche A Term Loan Guarantor will, without the prior written consent of
the Required Revolving Credit Loan Banks and the Required Tranche A Term Loan
Banks, if, and for so long as, an Actionable Default shall have occurred and be
continuing, (i) declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account of any
shares of any class of capital stock of such Revolving Credit Loan/Tranche A
Term Loan Guarantor (other than stock splits and dividends payable solely in
equity securities of such Revolving Credit Loan/Tranche A Term Loan Guarantor),
or purchase, redeem or otherwise acquire for value (or permit any of its
Subsidiaries to do so), any shares of any class of capital stock of such
Subsidiary Guarantor or any warrants, rights or options to acquire any such
shares, now or hereafter outstanding or (ii) make any Investment in or otherwise
advance any funds to the Borrower, or, except as may be required by the Shady
Point Financing Documents, any Subsidiary of the Borrower; and

     (c) Notwithstanding Section 5.09(a) above, so long as any Tranche C Term
Loan Obligation remains outstanding, Tranche C Term Loan Guarantor will not,
without the


<PAGE>
                                       87


prior written consent of the Required Tranche C Term Loan Banks, if, and for so
long as, an Actionable Default shall have occurred and be continuing, (i)
declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of any shares of
any class of capital stock of the Tranche C Term Loan Guarantor (other than
stock splits and dividends payable solely in equity securities of Tranche C Term
Loan Guarantor), or purchase, redeem or otherwise acquire for value (or permit
any of its Subsidiaries to do so), any shares of any class of capital stock of
such Subsidiary Guarantor or any warrants, rights or options to acquire any such
shares, now or hereafter outstanding or (ii) make any Investment in or otherwise
advance any funds to the Borrower.

     Section 5.10 Negative Pledge.

     Neither the Borrower nor any Subsidiary of the Borrower will create, assume
or suffer to exist any Lien on any asset now owned or hereafter acquired by it,
except:

          (a) Liens created under the Financing Documents;

          (b) Liens existing on the date of this Agreement securing Debt
     outstanding on the date of this Agreement;

          (c) any Lien existing on any asset of any Person at the time such
     Person becomes a Subsidiary of the Borrower and not created in
     contemplation of such event;

          (d) any Lien on any asset securing Debt incurred or assumed for the
     purpose of financing all or any part of the cost of acquiring such asset;
     provided that such Lien attaches to such asset concurrently with or within
     90 days after the acquisition thereof;

          (e) any Lien on any asset of any Person existing at the time such
     Person is merged or consolidated with or into the Borrower or a Subsidiary
     of the Borrower and not created in contemplation of such event; provided
     that such Lien shall not attach to any asset held by the Borrower or any
     Subsidiary of the Borrower immediately prior to such merger or
     consolidation;

          (f) any Lien existing on any asset prior to the acquisition thereof by
     the Borrower or a Subsidiary of the Borrower and not created in
     contemplation of such acquisition;

          (g) any Lien arising out of the refinancing, extension, renewal or
     refunding of any Debt secured by any Lien permitted by any of the foregoing
     clauses or clause (m) or (n) of this Section; provided that such Debt is
     not increased and is not secured by any additional assets (other than, in
     the case of Debt permitted under Section 5.07(b)(vii), Liens on assets of
     any Subsidiary permitted under such Section 5.07(b)(vii) and Section
     5.16(b) to be obligated on such Debt);

          (h) Liens arising in the ordinary course of its business which do not
     secure obligations in an aggregate amount in excess of $25,000,000 and do
     not in the aggregate materially detract from the value of its assets or
     materially impair the use thereof in the operation of its business;


<PAGE>
                                       88


          (i) Liens in connection with worker's compensation, social security
     obligations, taxes, assessments, statutory obligations or other similar
     charges, good faith deposits in connection with tenders, contracts or
     leases to which the Borrower or any of its Subsidiaries is a party or other
     deposits required to be made in the ordinary course of business and not in
     connection with borrowing money or obtaining advances or credit; provided
     in each case that the obligation or liability arises in the ordinary course
     of business and if overdue is being contested in good faith by appropriate
     proceedings;

          (j) inchoate materialmen's, mechanics', workmen's, repairmen's,
     employees', carriers', warehousemen's, or other like Liens arising in the
     ordinary course of business of the Borrower or its Subsidiaries;

          (k) with respect to real property, easements, rights of way,
     reservations and other minor defects or irregularities in title which do
     not materially impair the use thereof for the purposes for which it is held
     by the Borrower or its Subsidiaries;

          (l) Liens securing any future interest or dividends payable in respect
     of any Debt permitted to be issued under Section 5.07 for one six month
     period with respect to such Debt on cash or Temporary Cash Investments
     which constituted a portion of the cash proceeds to the Borrower or a
     Subsidiary of the Borrower from the issuance of such Debt;

          (m) Liens on cash and Temporary Cash Investments securing Derivatives
     Obligations of the Subsidiaries permitted by Section 5.20(c);

          (n) Liens on cash and Temporary Cash Investments that secure
     contingent obligations to reimburse any bank or other Person for amounts
     paid under a letter of credit, Guarantees, surety or performance bond or
     similar instrument that supports obligations to make Investments in
     Subsidiaries permitted to be made under Section 5.16;

          (o) (i) Liens securing Debt of Subsidiaries (other than Subsidiary
     Guarantors) permitted by Section 5.07(b)(ii), (vi), (vii), (viii) or (ix),
     5.07(b)(vii) or utility obligations or other customer, supplier or
     contractor obligations associated with AES Businesses that are limited to
     the assets and revenues of the related AES Businesses and the Capital Stock
     or other assets (including contract rights) of Subsidiaries of the Borrower
     having a direct or indirect interest in such AES Businesses;

          (p) Liens on the Creditor Group Collateral securing the Debt of the
     Borrower permitted by Section 5.07(a)(iii), (ix), (x), (xi) and (xiv); and

          (q) Liens securing Debt permitted by Section 5.07(a)(xii) or Section
     5.07(b)(iv), provided that such Debt is secured solely by the asset that is
     the subject of the proposed Asset Sale related to such Debt.

     Section 5.11 Consolidations and Mergers.

     The Borrower will not merge into or consolidate with any Person or permit
any Person to merge into it, or permit any of its Subsidiaries to do so, except
that:


<PAGE>
                                       89


          (i) any Subsidiary of the Borrower may merge into or consolidate with
     any other Subsidiary, provided that, in the case of any such merger or
     consolidation, the Person formed by such merger or consolidation shall be a
     wholly owned Subsidiary of the Borrower and any third-party consents or
     waivers necessary for such merger or consolidation shall have been
     obtained, provided further that, (A), in the case of any such merger or
     consolidation to which a Pledged Subsidiary is a party, the Person formed
     by such merger or consolidation shall be a "Pledged Subsidiary" and (B) in
     the case of any such merger or consolidation to which a Subsidiary
     Guarantor is a party, the Person formed by such merger or consolidation
     shall be a Subsidiary Guarantor; and

          (ii) in connection with any sale or other disposition permitted under
     Section 5.19 (other than clause (ii) thereof), any Subsidiary of the
     Borrower may merge into or consolidate with any other Person or permit any
     other Person to merge into or consolidate with it; and

          (iii) the Borrower may merge with another Person;

provided, however, that in each case, such merger or consolidation is otherwise
in compliance with this Agreement and immediately before and after giving effect
thereto, no Default shall have occurred and be continuing and, in the case of
any merger to which the Borrower is a party, the Borrower is the Person
surviving such merger.

     Notwithstanding any of the foregoing in clauses (i) and (ii) of this
Section 5.11, the Borrower will not permit any Subsidiary of the Borrower with
any direct or indirect interest in (x) a Power Supply Business to consolidate or
merge with, any other Person with a direct or indirect interest in any other
Power Supply Business or any unrelated business or (y) any unrelated business to
consolidate or merge with, any other Person with a direct or indirect interest
in any Power Supply Business, subject to the proviso set forth in Section
5.16(b).

     Section 5.12 Collateral Coverage Ratio.

     The Collateral Coverage Ratio at any date shall not be less than 2.75:1.0
through and including June 30, 2003, and thereafter, shall not be less than
3.00:1.0.

     Section 5.13 Cash Flow Coverage.

     The Borrower will maintain at the end of each fiscal quarter of the
Borrower, a Cash Flow Coverage Ratio of not less than the ratio set forth below
for each period set forth below:

           ---------------------------       --------------------------
                         Four                Minimum Cash Flow Coverage
                Fiscal Quarters Ending                  Ratio
           ---------------------------       --------------------------
           December 31, 2002                            1.50
           March 31, 2003                               1.20
           June 30, 2003                                1.10
           September 30, 2003                           1.00
           December 31, 2003                            1.00


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                                       90


           March 31, 2004                               1.10
           June 30, 2004                                1.20
           September 30, 2004                           1.25
           December 31, 2004                            1.30
           March 31, 2005                               1.30
           June 30, 2005                                1.35
           September 30, 2005                           1.40

     Section 5.14 Recourse Debt to Cash Flow Ratio.

     The Borrower will maintain at the end of each fiscal quarter of the
Borrower, a Recourse Debt to Cash Flow Ratio of not more than the ratio set
forth below for each period set forth below:

            --------------------------        -------------------------
                          Four                 Maximum Recourse Debt to
                 Fiscal Quarter Ending              Cash Flow Ratio
            --------------------------        -------------------------

            December 31, 2002                            7.00
            March 31, 2003                               9.05
            June 30, 2003                                10.25
            September 30, 2003                           11.75
            December 31, 2003                            11.90
            March 31, 2004                               10.75
            June 30, 2004                                10.50
            September 30, 2004                           10.20
            December 31, 2004                            9.50
            March 31, 2005                               9.35
            June 30, 2005                                9.20
            September 30, 2005                           9.00

     Section 5.15 Transaction with Affiliates.

     Except pursuant to agreements existing on the date hereof and listed on
Schedule II attached hereto, the Borrower will not, and will not permit any
Subsidiary of the Borrower to, directly or indirectly, in any transaction
involving aggregate consideration in excess of $1,000,000, pay any funds to or
for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with any joint enterprise or other joint arrangement with, any
Affiliate; provided, however, that the foregoing provisions of this Section
shall not prohibit (a) the Borrower or any Subsidiary of the Borrower from
making sales to or purchases from any Affiliate and, in connection therewith,
extending credit or making payments, or from making payments for services
rendered by any Affiliate, if such sales or purchases are made or such services
are rendered in the ordinary course of business and on terms and conditions at
least as favorable to the Borrower or such Subsidiary as the terms and
conditions which would apply in a similar transaction with a Person not an
Affiliate; (b) the Borrower or any Subsidiary of the


<PAGE>
                                       91


Borrower from making payments of principal, interest and premium on any Debt of
the Borrower or such Subsidiary held by an Affiliate if the terms of such Debt
are substantially as favorable to the Borrower or such Subsidiary as the terms
which could have been obtained at the time of the creation of such Debt from a
lender which was not an Affiliate and (c) the Borrower or any Subsidiary of the
Borrower from participating in, or effecting any transaction in connection with,
any joint enterprise or other joint arrangement with any Affiliate if the
Borrower or such Subsidiary participates in the ordinary course of its business
and on a basis no less advantageous than the basis on which such Affiliate
participates. The provisions of this Section 5.15 shall not apply to (x)
transactions between the Borrower or any of its Subsidiaries, on the one hand,
and any officer, director or employee of the Borrower or any of its
Subsidiaries, on the other hand, that are approved by the Board of Directors of
the Borrower or any committee of the Board of Directors consisting of the
Borrower's independent directors and (y) the payment of reasonable and customary
regular fees to directors of the Borrower or a Subsidiary of the Borrower.

     Section 5.16 Investments in Other Persons.

     (a) The Borrower shall not make or hold, or permit any of its Subsidiaries
to make or hold, any Investment in any Person, except:

          (i) (A) Investments by the Borrower and its Subsidiaries in their
     Subsidiaries outstanding on the date hereof, (B) additional equity
     Investments in Obligors and (C) additional Investments in Obligors
     consisting of intercompany Debt provided that any Debt owing to the
     Borrower shall (x) constitute Pledged Debt and be delivered to the
     Collateral Trustees pursuant to the terms of the Security Agreement and (y)
     be subordinated in all respects to the Obligations of the Obligors under
     the Financing Documents;

          (ii) loans and advances to employees in the ordinary course of the
     business of the Borrower and its Subsidiaries as presently conducted in an
     aggregate principal amount not to exceed $10,000,000 at any time
     outstanding;

          (iii) Investments by the Borrower and its Subsidiaries in Temporary
     Cash Investments;

          (iv) Investments existing on the date hereof and Investments in
     Subsidiaries resulting from drawings under, or renewals or extensions of,
     letters of credit, surety bonds, Guarantees or performance bonds supporting
     obligations of Subsidiaries issued and outstanding on the Closing Date
     (including renewals and extensions thereof) and Investments in Subsidiaries
     to cash collateralize obligations supported by such letters of credit,
     bonds or Guarantees if they expire or are cancelled undrawn;

          (v) Investments by the Borrower and its Subsidiaries in any non-cash
     proceeds received by the Borrower or such Subsidiary in connection with any
     transaction permitted by the provisions of Section 5.19;


<PAGE>
                                       92


          (vi) Investments by the Borrower and its Subsidiaries in AES New York
     Funding, L.L.C. to the extent necessary for AES New York Funding, L.L.C. to
     make required interest payments under the AES N.Y. Funding Credit Facility;

          (vii) Investments by the Borrower and its Subsidiaries in AES New York
     Funding, L.L.C. made in connection with Debt incurred pursuant to Section
     5.07(a)(x) to the extent necessary for AES New York Funding, L.L.C. to make
     required repayments under the AES N.Y. Funding Credit Facility or to prepay
     in full the Debt under the AES N.Y. Funding Credit Facility;

          (viii) Investments by the Borrower and its Subsidiaries in any of
     their Debt in the form of any payments, redemption or repurchase of such
     Debt not prohibited by this Agreement;

          (ix) Investments by an Excluded Subsidiary in another Excluded
     Subsidiary or in another Person, the assets of which shall not consist of
     Debt or Equity Interests of the Borrower or any of its Subsidiaries, other
     than Debt of the Borrower or any of its Subsidiaries with a fair market
     value (together with the fair market value of Debt of the Borrower or any
     of its Subsidiaries received by the Borrower or any Subsidiary as non-cash
     proceeds in any transaction permitted by the provisions of Section 5.19)
     not in excess of $15,000,000 in the aggregate;

          (x) Investments by the Borrower and its Subsidiaries in their
     Subsidiaries resulting from the creation, dissolution or reorganization of
     the holdings of any Subsidiary permitted by Section 5.16(b) that does not
     result in the net increase in the amount invested by the Borrower and its
     Subsidiaries in their Subsidiaries and does not result in a Default;

          (xi) Investments received in connection with the bankruptcy or
     reorganization of, or settlement of delinquent accounts and disputes with,
     or as a result of a default by, customers or suppliers to, or co-investors
     in, an AES Business (including, without limitation, pursuant to the
     Borrower's existing settlement agreement with PSEG pursuant to which the
     Borrower will acquire the minority interests currently held by PSEG in
     certain AES Businesses located in Argentina in exchange for a $30,000,000
     settlement payment, of which $15,000,000 has been paid prior to the date
     hereof);

          (xii) Investments by the Borrower and its Subsidiaries not otherwise
     permitted under this Section 5.16 in an aggregate amount not to exceed the
     Permitted Investment Basket; provided that, with respect to each Investment
     made pursuant to this clause (xii):

               (A) such Investment shall not be in respect of any Excluded
          Subsidiary;

               (B) such Investment shall be in property and assets which are
          part of, or in lines of business which are, substantially the same
          lines of business as one or more of the principal businesses of the
          Borrower and its Subsidiaries in the ordinary course;


<PAGE>
                                       93


               (C) any determination of the amount of such Investment shall
          include all cash and noncash consideration (including, without
          limitation, the fair market value of all Equity Interests issued or
          transferred to the sellers thereof, all indemnities, earnouts and
          other contingent payment obligations to, and the aggregate amounts
          paid or to be paid under noncompete, consulting and other affiliated
          agreements with, the sellers thereof, all write-downs of property and
          assets and reserves for liabilities with respect thereto and all
          assumptions of debt, liabilities and other obligations in connection
          therewith) paid by or on behalf of the Borrower and its Subsidiaries
          in connection with such Investment; and

               (D) (1) immediately before and immediately after giving pro forma
          effect to any such purchase or other acquisition, no Default shall
          have occurred and be continuing and (2) immediately after giving
          effect to such purchase or other acquisition, the Borrower and its
          Subsidiaries shall be in pro forma compliance with all of the
          covenants set forth in Sections 5.12, 5.13 and 5.14, such compliance
          to be determined on the basis of the financial information most
          recently delivered to the Agent and the Bank Parties as though such
          Investment had been consummated as of the first day of the fiscal
          period covered thereby;

          (xiii) (A) Investments by any Subsidiary with funds or other property
     received by such Subsidiary from the Borrower or a Subsidiary as a result
     of an Investment otherwise permitted hereby and (B) Investments by any
     Subsidiary (other than a Qualified Holding Company) with funds or other
     property generated by its operations (including by way of financings
     permitted hereby) or by the operations (including by way of financings
     permitted hereby) of its Subsidiaries in any other Subsidiary which either
     is a direct or indirect Subsidiary of such investing Subsidiary or a direct
     or indirect parent company of such investing Subsidiary and the proceeds of
     such Investment shall be applied by the Subsidiary receiving such
     Investment solely for funding the operation, maintenance (including
     modifications and upgrades to comply with applicable laws and regulations),
     on-going construction or working capital requirements which are necessary
     for the operation of the business of such Subsidiary or for such Subsidiary
     to satisfy its contractual and legal obligations (it being understood that
     no Investments made pursuant to this clause (xiii) will be used for the
     expansion of any such business);

          (xiv) Investments by any Subsidiary of the Borrower consisting of
     loans made to any Person which directly or indirectly holds the Equity
     Interests of such Subsidiary;

          (xv) Investments by the Borrower or any Qualified Holding Company in
     the Subsidiaries listed on Schedule 5.16(xv) solely for purposes of funding
     development costs to the extent that such development costs are included in
     the calculation of Adjusted Parent Cash Flow but in no event greater than
     $35,000,000 in any calendar year; and

          (xvi) Investments of up to $31 million in AES Andres, B.V. ("Andres")
     made, directly or indirectly, with the proceeds of Debt incurred by
     Dominican Power Partners, LDC ("Los Mina") pursuant to Section 5.07(b)(ii)
     to be used by Andres to finance completion of natural gas facilities that
     will provide fuel to Los Mina when it converts to natural gas as a fuel
     supply.


<PAGE>
                                       94


     (b) Notwithstanding any of the foregoing in clause (a) above, the Borrower
will not permit any Subsidiary of the Borrower with any direct or indirect
interest in (i) a Power Supply Business to make any Investment in, or
consolidate or merge with, any other Person with a direct or indirect interest
in any other Power Supply Business or any unrelated business or (ii) any
unrelated business to make any Investment in, or to consolidate or merge with,
any other Person with a direct or indirect interest in any Power Supply
Business; provided that (x) Investments permitted by Section 5.16(a)(ii), (iii),
(v), (viii), (ix), (x), (xi), (xiv) and [(xvi)] shall be permitted and (y) a
Subsidiary of the Borrower (each, an "Intermediate Holding Company") may serve
as a holding company for any or all of the Borrower's direct and indirect
interests in a Power Supply Business or an unrelated business, so long as:

          (1) each such Intermediate Holding Company's direct and indirect
     interest in any Power Supply Business or unrelated business shall be
     limited to the ownership of Capital Stock or Debt obligations of a Person
     with a direct or indirect interest in such Power Supply Business or
     unrelated business;

          (2) no Lien shall exist upon any asset of any Intermediate Holding
     Company (other than Liens on the Capital Stock of, or loan to, the Borrower
     or a Subsidiary of an Intermediate Holding Company securing Debt of such
     Intermediate Holding Company or such Subsidiary and Liens securing Debt
     permitted by Sections 5.07(b)(i), (b)(ii), (b)(iii), (b)(iv), (b)(vi),
     (b)(vii), (b)(viii) and (b)(ix)); and

          (3) no Intermediate Holding Company shall incur, assume, create or
     suffer to exist any Debt (including any Guarantee of Debt) other than Debt
     owing to the Borrower, any Qualified Holding Company or any Subsidiary of
     such Intermediate Holding Company and Debt permitted by Sections
     5.07(b)(i), (ii), (iii), (iv), (vi), (vii), (viii) or (ix).

     Section 5.17 No Prepayment of Debt.

     Neither the Borrower nor any Subsidiary shall, directly or indirectly,
prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled
maturity thereof in any manner, or make any payment in violation of any
subordination terms of, any Debt, except (i) the prepayment of the Loans in
accordance with this Agreement, the required payments of the Senior Secured
Exchange Notes in accordance with the Senior Secured Exchange Note Indenture and
any required prepayments of Debt permitted to be incurred pursuant to Section
5.07(a)(iii) or 5.07(a)(xi); (ii) the refinancing or acquisition of Debt to the
extent permitted hereunder; (iii) regularly scheduled or required repayments or
redemptions of Debt; (iv) the exchange of Debt permitted by Section 5.07(a)(iv);
(v) the exchange of Debt for an Equity Issuance by the Borrower pursuant to a
Debt Exchange Equity Issuance; (vi) the repayment or prepayment of Debt
permitted by Section 5.07(b)(v); (vii) regularly scheduled or required
repayments or redemptions of the Existing Trust Preferred Securities; (viii) any
repayment of Debt with the Equity Basket at such time; (ix) the prepayment,
redemption, purchase, defeasance or other satisfaction prior to the scheduled
maturity thereof by any Excluded Subsidiary of its outstanding Debt; (x) the
refinancing, replacement or refunding of the Existing Trust Preferred Securities
permitted by Section 5.07(a)(xiii) and (xi) prepayments by a Subsidiary of its
outstanding Debt that reduce or eliminate Payment Restrictions applicable to
such Subsidiary or make it more


<PAGE>
                                       95


likely that such Subsidiary will be able to transfer amounts to the Borrower or
a Qualified Holding Company whose Equity Interests have been pledged to the
Secured Holders pursuant to the Collateral Documents.

     Section 5.18 Upstreaming of Net Cash Proceeds by Subsidiaries.

     The Borrower shall cause any of its Subsidiaries who have received Net Cash
Proceeds from (i) any Asset Sale, (ii) the incurrence or sale of any Debt
permitted by Section 5.07(b)(vii) or (iii) any Equity Issuance to transfer such
Net Cash Proceeds to the Borrower; provided that such transfer shall not be
required to be made if such transfer would violate any applicable contracts or
would violate applicable law or if applicable law would require minority
shareholder approval (it being understood that the Borrower shall use reasonable
efforts to obtain such minority shareholder approval), a valuation or a
discretionary order or would, in the Borrower's good faith determination or the
good faith determination of a majority of the board of directors of such
Subsidiary, involve a reasonable likelihood of there being a breach of fiduciary
duties by the directors of such Subsidiary. In connection with managing
transfers of Net Cash Proceeds pursuant to this Section 5.18, (a) the Borrower
may cause Net Cash Proceeds to be transferred to Qualified Holding Companies
whose Equity Interests have been pledged to the Secured Holders pursuant to the
Collateral Documents if the Borrower nonetheless makes the related mandatory
prepayment that would otherwise be required by Section 2.11(b) using funds not
otherwise required to be made the basis of any mandatory prepayment and (b) if
the Net Cash Proceeds are less than $10,000,000, the Borrower shall not be
required to cause such Net Cash Proceeds effectively to be transferred directly
or indirectly to the Borrower and applied pursuant to Section 2.11(b) until the
aggregate Net Cash Proceeds not so applied equal or exceed $10,000,000. In
connection with managing transfers of Net Cash Proceeds pursuant to this Section
5.18 and making loans, investments and other advances to Subsidiaries, the
Borrower may cause Net Cash Proceeds to be transferred among Subsidiaries as
permitted by Section 5.16, rather than transferred to the Borrower, in lieu of
loans, investments or other advances the Borrower would otherwise be permitted
to make as permitted by Section 5.16 and would make; provided that amounts that
otherwise would be paid to the Borrower or a Qualified Holding Company whose
Equity Interests have been pledged to the Secured Holders pursuant to the
Collateral Documents shall be treated as an Investment and such Investment must
be permitted by Section 5.16.

     Section 5.19 Sales, Etc., of Assets.

     The Borrower will not sell, lease, transfer or otherwise dispose of, or
permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of,
any assets, or grant any option or other right to purchase, lease or otherwise
acquire any assets, except:

          (i) sales of assets in the ordinary course of its business and the
     granting of any option or other right to purchase, lease or otherwise
     acquire assets in the ordinary course of its business;

          (ii) in a transaction permitted by Section 5.11;


<PAGE>
                                       96


          (iii) sales, transfers or other dispositions of assets among the
     Borrower and its Subsidiaries; provided, however, that (a) in respect of
     sales, transfers or other dispositions by the Borrower to its Subsidiaries,
     the Borrower shall not sell, lease, transfer or otherwise dispose of any
     assets to any Excluded Subsidiary, and (b) in respect of sales, transfers
     or other dispositions by Subsidiaries to other Subsidiaries, (1) with
     respect to Excluded Subsidiaries, only Excluded Subsidiaries may sell,
     transfer or otherwise dispose of assets to another Excluded Subsidiary and
     (2) with respect to other Subsidiaries, such sales, transfers or other
     dispositions are either permitted by Section 5.16 or the transferring
     Subsidiary has received fair value for such sales, transfers or
     dispositions; and

          (iv) sales, transfers or other dispositions of assets so long as (i)
     the consideration received by the Borrower and its Subsidiaries for such
     asset shall have been determined on the basis of arms-length negotiations
     with a non-Affiliate, (ii) except for sales of assets or Equity Interests
     of, or other Investments in, Excluded Subsidiaries, no less than 90% of the
     purchase price for such asset shall be paid to the Borrower and its
     Subsidiaries solely in cash or securities or other obligations that can be
     readily converted to cash so long as such securities or other obligations
     are converted to cash on the closing date of such sale, transfer or other
     disposition; provided that (A) not less than 80% of the purchase price
     shall consist of cash in the case of the sale of the Power Supply
     Businesses known as "Meghnaghat", "Haripur", and "Kelanitissa" and (B) in
     the case of a sale, transfer or other disposition of a Power Supply
     Business in development or under construction, the applicable amount of the
     purchase price required to be received in cash shall be reduced dollar for
     dollar by the amount that such sale reduces any Capital Commitment of the
     Borrower and (iii) any non-cash proceeds received by the Borrower or AES
     BVI II from the sale of such assets shall not consist of Debt or Equity
     Interests of the Borrower or any of its Subsidiaries (other than Debt of
     the Borrower or any of its Subsidiaries with a fair market value (together
     with the fair market value of the Debt of the Borrower or any of its
     Subsidiaries comprising the assets of any Person in which an Excluded
     Subsidiary has made an Investment pursuant to Section 5.16(a)(ix) not in
     excess of $15,000,000 in the aggregate) and shall be pledged to the
     Collateral Trustees as Security Agreement Collateral under the Security
     Agreement;

          (v) Liens permitted by the Financing Documents;

          (vi) the sale of Equity Interests in a project in development or under
     construction the proceeds from which shall be used to fund the cost of
     development or construction of such project;

          (vii) (1) a disposition resulting from the bona fide exercise by
     governmental authority of its claimed or actual power of eminent domain;
     (2) any cash payments otherwise permitted under this Agreement; (3) any
     sale, transfer, conveyance, lease or other disposition of an asset in the
     ordinary course of business and consistent with past practice pursuant to
     the terms of any power sales agreement or steam sales agreement or other
     agreement or contract related to the output or product of, or services
     rendered by, a Power Supply Business as to which a Subsidiary is the
     supplying party; (4) any disposition of any Equity Interest in a Power
     Supply Business pursuant to the terms of a


<PAGE>
                                       97


     joint venture agreement, shareholders agreement or similar arrangement
     existing as of the date hereof that requires one shareholder to transfer
     its interest to another upon terms and in circumstances customary for the
     industry (provided that any cash received in connection with such
     disposition shall be treated as Net Cash Proceeds from a Covered Asset
     Sale); or (5) any disposition of assets subject to a Lien permitted hereby
     that is transferred to the lienholder or its designee in satisfaction or
     settlement of the lienholder's claim or a realization upon a security
     interest permitted under this Agreement;

          (viii) any disposition in connection with directors' qualifying shares
     or investments by foreign nationals mandated by applicable law;

          (ix) any sale of shares of Redeemable Stock of a Subsidiary to the
     extent such shares constitute Debt permitted by Section 5.07;

          (x) a sale-leaseback transaction involving substantially all of the
     assets of a Power Supply Business where a Subsidiary sells the Power Supply
     Business to a Person in exchange for the assumption by that Person of the
     Debt financing the Power Supply Business and the Subsidiary leases the
     Power Supply Business from such Person; provided that such sale, assumption
     and lease are consummated in each case on a no less than fair market value
     basis;

          (xi) dispositions of contract rights, development rights and resource
     data made in connection with the initial development of a Power Supply
     Business and prior to the commencement of commercial operation of such
     Power Supply Business for reasonably equivalent value; and

          (xii) transactions made in order to enhance the repatriation of cash
     proceeds in connection with any sale or other disposition in respect of the
     capital stock and/or property of any Subsidiary where such Subsidiary is
     organized under the laws of any jurisdiction other than the United States
     or any state thereof to the extent that the proceeds of such sale or other
     disposition are received by a Person subject in respect of such proceeds to
     the tax laws of a jurisdiction other than the United States or any state
     thereof or in order to increase the after-tax proceeds thereof available
     for immediate distribution (provided that if any asset that is the subject
     of such transaction is subject to a Lien in favor of the Secured Holders
     immediately prior to such transaction then such asset shall be subject to a
     Lien in favor of the Secured Holders immediately after such transaction).

     provided that in the case of sales of assets pursuant to clause (iv) above,
     the Borrower shall apply the Net Cash Proceeds from such sale to prepay the
     Loans and make a deposit in the Drax LOC Cash Collateral Account pursuant
     to, and in the amount and order of priority set forth in, Section 2.11(b),
     as specified therein.


<PAGE>
                                       98


     Section 5.20 Off Balance Sheet Obligations; Derivative Obligations.

     (a) The Borrower shall not have, incur or undertake, or permit any of its
Subsidiaries to have, incur or undertake any Off Balance Sheet Obligations,
other than Off Balance Sheet Obligations existing on the date hereof.

     (b) The Borrower shall not enter into any Hedging Agreement, except for the
Banc of America Secured Option and other Hedging Agreements entered into to
hedge against fluctuations in interest rates or foreign exchange rates incurred
in the ordinary course of business and consistent with prudent business
practice.

     (c) The Borrower shall not permit its Subsidiaries to enter into any
Hedging Agreements, except Hedging Agreements entered into to hedge against
fluctuations in interest rates, foreign exchange, and commodity prices incurred
in the ordinary course of business and consistent with prudent business
practice.

     Section 5.21 Covenant to Give Security.

     (a) Upon (x) the formation or acquisition of any new direct Subsidiaries by
the Borrower or AES BVI II or (y) the Investment by the Borrower and its
Subsidiaries in any direct Subsidiary of the Borrower or AES BVI II that was not
a "Pledged Subsidiary" on the Closing Date such that aggregate assets of such
Subsidiary have a fair market value in excess of $1,000,000, then in each case
at the Borrower's expense:

          (i) within 10 days after (A) such formation or acquisition and (B)
     such Investment, furnish to the Agent a description of such Subsidiary, in
     each case in detail satisfactory to the Agent,

          (ii) within 15 days after such formation or acquisition of any new
     Subsidiary or such Investment in any direct Subsidiary of the Borrower or
     AES BVI II that was not a "Pledged Subsidiary" on the Closing Date, duly
     execute and deliver security agreement supplements (if necessary) as
     specified by, and in form and substance satisfactory to the Agent, securing
     payment of all of the Obligations of the Borrower under the Financing
     Documents; provided that if such new Subsidiary is a CFC, only 65% of such
     Equity Interests shall be pledged in favor of the Secured Holders,

          (iii) within 30 days after such formation or acquisition, take, and
     cause each Loan Party to take, whatever action (including, without
     limitation, the recording of mortgages, the filing of Uniform Commercial
     Code financing statements, the giving of notices and the endorsement of
     notices on title documents) may be necessary or advisable in the opinion of
     the Agent to vest in the Collateral Trustees (or in any representative of
     the Collateral Trustees designated by it) valid and subsisting Liens on the
     properties purported to be subject to the pledges, security agreement
     supplements, and security agreements delivered pursuant to this Section
     5.21, enforceable against all third parties in accordance with their terms,
     and

          (iv) at any time and from time to time, promptly execute and deliver
     any and all further instruments and documents and take all such other
     action as the Agent may


<PAGE>
                                       99


     deem necessary or desirable in obtaining the full benefits of, or in
     perfecting and preserving the Liens of, such pledges, assignments, security
     agreement supplements and security agreements.

     provided, however that Section 5.21(a)(y) shall not be applicable to
     Subsidiaries for which a grant or perfection of a Lien on such Subsidiary's
     stock would require approvals and consents from foreign and domestic
     regulations and from lenders to, and suppliers, customers or other
     contractual counterparties of, such Subsidiary.

     (b) Other than with respect to the Non-Pledged Subsidiaries, the Secured
Holders shall have valid, perfected first priority Lien on (i) 65% of the Equity
Interests of each direct Subsidiary of the Borrower that is (A) organized under
the laws of a jurisdiction other than the United States or any state thereof, or
(B) a limited liability company organized under the laws of the United States or
any state thereof the direct or indirect Subsidiary of which is organized under
the laws of a jurisdiction other than the United States or any state thereof,
(ii) 100% of the Equity Interests of each direct Subsidiary of the Borrower that
is organized under the laws of the United States or any state thereof other than
those Subsidiaries described by clause (i)(B) above and (iii) 65% of the Equity
Interests of each direct Subsidiary of AES BVI II.

     Section 5.22 Further Assurances.

     (a) Promptly upon request by the Agent, or any Bank Party through the
Agent, correct, and cause each of the other Loan Parties promptly to correct,
any material defect or error that may be discovered in any Financing Document or
in the execution, acknowledgment, filing or recordation thereof that affect the
validity or enforceability thereof, and

     (b) Promptly upon request by the Agent, or any Bank Party through the
Agent, do, execute, acknowledge, deliver, record, re-record, file, re-file,
register and re-register any and all such further acts, pledge agreements,
assignments, financing statements and continuations thereof, termination
statements, notices of assignment, transfers, certificates, assurances and other
instruments as the Agent, or any Bank Party through the Agent, may reasonably
require from time to time in order to (A) carry out more effectively the
purposes of the Financing Documents, (B) to the fullest extent permitted by
applicable law, subject to the Borrower's properties, assets, rights or
interests to the Liens now or hereafter intended to be covered by any of the
Collateral Documents, (C) perfect and maintain the validity, effectiveness and
priority of any of the Collateral Documents and any of the Liens intended to be
created thereunder and (D) assure, convey, grant, assign, transfer, preserve,
protect and confirm more effectively unto the Secured Holders and the Tranche C
Secured Parties the rights granted or now or hereafter intended to be granted to
the Secured Holders and the Tranche C Secured Parties under any Financing
Document or under any other instrument executed in connection with any Financing
Document to which any Loan Party is or is to be a party.


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     Section 5.23 Cilcorp Purchase.

     If (i) the Cilcorp Purchase Agreement is either terminated or abandoned or
(ii) the sale of Cilcorp by the Borrower pursuant to the Cilcorp Purchase
Agreement fails to close prior to June 30, 2003, within 10 days of such
termination, abandonment or failure to close, the Borrower shall (x) duly
execute and deliver such pledges, assignments, security agreement supplements
and other security agreements as specified by, and in form and substance
satisfactory to the Agent and (y) take whatever other actions the Agent may
request in its sole discretion in order to grant to the Collateral Trustees on
behalf of the Secured Holders a first priority Lien on all of the Borrower's
Equity Interests in Cilcorp. Within 20 days upon request therefor by the Agent
in its sole discretion, the Borrower shall deliver to the Agent a signed copy of
a favorable opinion, addressed to the Agent and the other Secured Holders, of
counsel for the Obligors acceptable to the Agent as to such pledges,
assignments, security agreement supplements and security agreements being the
legal, valid and binding obligations of the Borrower enforceable in accordance
with their terms and that all other actions necessary to create valid perfected
Liens on the Borrower's Equity Interest in Cilcorp have been taken and that the
Agent and the other Secured Holders have a valid, perfected Lien on such Equity
Interests.

                                   ARTICLE VI

                                    DEFAULTS

     Section 6.01 Events of Default.

     If one or more of the following events ("Events of Default") shall have
occurred and be continuing:

          (a) any Loan Party shall fail to pay when due any principal of any
     Loan or any Reimbursement Obligation, or shall fail to pay within three
     days of the date when due any interest, fees or other amounts payable under
     any Financing Document;

          (b) the Borrower shall fail to observe or perform any covenant
     contained in Sections 5.07 to 5.19, inclusive, or except in accordance with
     the terms hereof, the Subsidiary Guaranty in Article 9 shall cease to be in
     full force and effect;

          (c) any Loan Party shall fail to observe or perform any covenant or
     agreement contained in any Financing Document (other than those covered by
     clause (a) or (b) above) for 20 days after written notice thereof has been
     given to the Borrower by the Agent at the request of any Bank Party;

          (d) any representation, warranty, certification or statement made by
     any Loan Party in any Financing Document or in any certificate, financial
     statement or other document delivered pursuant to any Financing Document
     shall prove to have been incorrect in any material respect when made (or
     deemed made);

          (e) the Borrower shall fail to make any payment in respect of any
     Material Debt or Material Hedge Agreement when due or within any applicable
     grace period;


<PAGE>
                                      101


          (f) any event or condition shall occur which (i) results in the
     acceleration of the maturity of any Material Debt of the Borrower or the
     early termination of a Material Hedge Agreement of the Borrower by the
     Borrower's counterparty or the acceleration of any Material Debt or the
     early termination by the counterparty of such Subsidiary or Subsidiaries of
     any Material Hedge Agreement of any (x) Subsidiary of the Borrower that
     contributed 15% or more to Parent Operating Cash Flow for the four most
     recently completed fiscal quarters of the Borrower or (y) Subsidiaries of
     the Borrower that in the aggregate contributed 15% or more to Parent
     Operating Cash Flow for the four most recently completed fiscal quarters of
     the Borrower (in the case of clauses (x) and (y) above, together with any
     Person in which such Subsidiary or Subsidiaries have a direct or indirect
     equity Investment); (ii) results in the termination of any commitment to
     provide financing in an amount in excess of $50,000,000 to the Borrower or
     any Material AES Entity (other than AES Southland) or (iii) in the case of
     the Borrower, enables (or, with the giving of notice or lapse of time or
     both, would enable) the holder of any Material Debt or counterparty to any
     Material Hedge Agreement of the Borrower or any Person acting on such
     holder's or counterparty's behalf to, in the case of any Material Debt,
     accelerate the maturity thereof or, in the case of any Material Hedge
     Agreement, to terminate such Material Hedge Agreement;

          (g) the Borrower or any Significant AES Entity (other than AES
     Southland) shall commence a voluntary case or other proceeding seeking
     liquidation, reorganization or other relief with respect to itself or its
     debts under any bankruptcy, insolvency or other similar law now or
     hereafter in effect or seeking the appointment of a trustee, receiver,
     liquidator, custodian or other similar official of it or any substantial
     part of its property, or shall consent to any such relief or to the
     appointment of or taking possession by any such official in an involuntary
     case or other proceeding commenced against it, or shall make a general
     assignment for the benefit of creditors, or shall fail generally to pay its
     debts as they become due, or shall take any corporate action to authorize
     any of the foregoing;

          (h) an involuntary case or other proceeding shall be commenced against
     the Borrower or any Significant AES Entity (other than AES Southland)
     seeking liquidation, reorganization or other relief with respect to it or
     its debts under any bankruptcy, insolvency or other similar law now or
     hereafter in effect or seeking the appointment of a trustee, receiver,
     liquidator, custodian or other similar official of it or any substantial
     part of its property, and such involuntary case or other proceeding shall
     remain undismissed and unstayed for a period of 60 days; or an order for
     relief shall be entered against the Borrower or any Significant AES Entity
     under the federal bankruptcy laws as now or hereafter in effect;

          (i) any member of the ERISA Group shall fail to pay when due an amount
     or amounts aggregating in excess of $15,000,000 which it shall have become
     liable to pay under Title IV of ERISA; or notice of intent to terminate a
     Material Plan shall be filed under Title IV of ERISA by any member of the
     ERISA Group, any plan administrator or any combination of the foregoing; or
     the PBGC shall institute proceedings under Title IV of ERISA to terminate,
     to impose liability (other than for premiums under Section 4007 of ERISA)
     in respect of, or to cause a trustee to be appointed to administer any
     Material


<PAGE>
                                      102


     Plan; or a condition shall exist by reason of which the PBGC would be
     entitled to obtain a decree adjudicating that any Material Plan must be
     terminated; or there shall occur a complete or partial withdrawal from, or
     a default, within the meaning of Section 4219(c)(5) of ERISA, with respect
     to, one or more Multiemployer Plans which could cause one or more members
     of the ERISA Group to incur a current payment obligation in excess of
     $15,000,000;

          (j) a judgment or order for the payment of money in excess of
     $25,000,000 shall be rendered against the Borrower or (x) any Subsidiary of
     the Borrower that contributed 10% or more to Parent Operating Cash Flow for
     the four most recently completed fiscal quarters of the Borrower or (y)
     more than one Subsidiary of the Borrower and such Subsidiaries in the
     aggregate contributed 15% or more to Parent Operating Cash Flow for the
     four most recently completed fiscal quarters of the Borrower (in the case
     of clauses (x) and (y) above, together with any Person in which such
     Subsidiary or Subsidiaries have a direct or indirect equity Investment),
     and such judgment or order shall continue unsatisfied and unstayed for a
     period of 10 days;

          (k) any person or group of persons (within the meaning of Section 13
     or 14 of the Securities Exchange Act of 1934, as amended) other than a
     member of the AES Management Group shall have acquired beneficial ownership
     (within the meaning of Rule 13d-3 promulgated by the Securities and
     Exchange Commission under said Act) of 32.5% or more of the outstanding
     shares of common stock of the Borrower; during any period of twelve
     consecutive calendar months, individuals who were directors of the Borrower
     on the first day of such period (or who were appointed or nominated for
     election as directors of the Borrower by at least a majority of the
     individuals who were directors on the first day of such period) shall cease
     to constitute a majority of the board of directors of the Borrower; or

          (l) any Collateral Document after delivery thereof pursuant to Section
     3.01 shall for any reason (other than pursuant to the terms thereof) cease
     to create a valid and perfected first priority lien on and security
     interest in a material portion of the Collateral purported to be covered
     thereby,

then, and in every such event, the Agent shall (i) if requested by the Required
Banks, by notice to the Borrower terminate the Revolving Credit Loan Commitments
and the Drax LOC Commitment and they shall thereupon terminate and (ii) if
requested by the Required Banks, by notice to the Borrower declare the Notes,
all interest thereon, and all other amounts payable under this Agreement and the
other Financing Documents to be, and the Notes, all such interest thereon and
all such other amounts shall thereupon become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; provided that in the case of any Automatic
Acceleration Event, without any notice to the Borrower or any other act by the
Agent or the Banks, the Revolving Credit Loan Commitments and the Drax LOC
Commitment shall thereupon terminate and the Notes, all interest thereon, and
all other amounts payable under this Agreement and the other Financing Documents
shall become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.


<PAGE>
                                      103


     Notwithstanding the foregoing, upon the occurrence of an Event of Default
arising solely as a result of a Subsidiary Bankruptcy Cross Default, the Bank
Parties hereto agree that they shall not exercise any right or remedy available
to them under the Financing Documents until the earlier to occur of (i) the date
on which the holders of the relevant Material Debt exercise any right or remedy
available to them and (ii) the date which is 50 days following the date of the
occurrence of such Subsidiary Bankruptcy Default.

     Section 6.02 Notice of Default.

     The Agent shall give notice to the Borrower under Section 6.01(c) promptly
upon being requested to do so by any Bank Party and shall thereupon notify all
the Banks thereof.

     Section 6.03 Cash Collateral.

     If any Automatic Acceleration Event shall occur or the Loans of the Bank
Parties shall have otherwise been accelerated or the Revolving Credit Loan
Commitments and the Drax LOC Commitment have been terminated pursuant to Section
6.01, then without any request or the taking of any other action by the Agent or
any of the Bank Parties, the Borrower shall be obligated forthwith to pay (I) to
the Collateral Agent an amount in immediately available funds equal to the then
aggregate amount available for Revolving L/C Drawings (regardless of whether any
conditions to any such Revolving L/C Drawings can then be met) under all
Revolving Letters of Credit at the time outstanding, to be held by the
Collateral Agent as cash collateral as provided in Section 2.15 and Section
2.16, in the case of all Revolving Letters of Credit and (II) to the Collateral
Agent an amount in immediately available funds equal to the then aggregate
amount available for Drax L/C Drawings (regardless of whether any conditions to
any such Drax L/C Drawings can then be met), to be held by the Collateral Agent
as Drax LOC Collateral as provided in Section 2.19 to be held by the Collateral
Agent as Drax LOC Collateral as provided in Section 2.19, in the case of the
Drax Letter of Credit.

                                  ARTICLE VII

                                    THE AGENT

     Section 7.01 Appointment and Authorization.

     Each Bank Party (on behalf of itself and its Affiliates as potential Hedge
Banks) irrevocably appoints and authorizes the Agent and the Collateral Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement and the other Financing Documents as are
delegated to the Agent or the Collateral Agent, as the case may be, by the terms
hereof and thereof, together with all such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
the Financing Documents (including, without limitation, enforcement or
collection of the Notes), neither the Agent nor the Collateral Agent shall be
required to exercise any discretion or to take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Banks, and such
instructions shall be binding upon all Bank Parties and all the holders of
Notes; provided, however, that neither the Agent nor the Collateral Agent shall
be required to take any action that exposes such agent to


<PAGE>
                                      104


personal liability or that is contrary to this Agreement or applicable law.
Without limiting any of the foregoing in this Section 7.01, the Agent shall not
be required to take any action with respect to any Default, except as expressly
provided in Article 6. Each of the Collateral Agent and the Agent agrees to give
each Bank Party prompt notice of each notice given to it by the Borrower
pursuant to the terms of this Agreement.

     Section 7.02 Agent and Affiliates.

     Citicorp USA, Inc. and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from, acquire Equity Interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with each of the Loan Parties and their respective Affiliates
as though Citicorp USA, Inc. were not the Agent or the Collateral Agent
hereunder and without notice to or consent of the Bank Parties. The Bank Parties
acknowledge that, pursuant to such activities, Citicorp USA, Inc. or its
Affiliates may receive information regarding any Loan Party or its Affiliates
(including information that may be subject to confidentiality obligations in
favor of such Loan Party or such Affiliate) and acknowledge that neither the
Agent nor the Collateral Agent shall be under any obligation to provide such
information to them. With respect to its Loans or any Revolving Letters of
Credit, Citicorp USA, Inc. shall have the same rights and powers under this
Agreement or any other Financing Document as any other Bank Party and may
exercise such rights and powers as though it were not the Agent or the
Collateral Agent, and the terms "Bank" and "Banks" include Citicorp USA, Inc. in
its individual capacity.

     Section 7.03 Consultation with Experts.

     The Agent and the Collateral Agent may execute any of their respective
duties under this Agreement or any other Financing Document (including for
purposes of holding or enforcing any Lien on the Collateral (or any portion
thereof) granted under the Collateral Documents or of exercising any rights and
remedies thereunder) by or through agents, employees or attorneys-in-fact and
shall be entitled to advice of counsel, independent public accountants and other
consultants or experts concerning all matters pertaining to such duties. Neither
the Agent nor the Collateral Agent shall be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects in the absence of
gross negligence or willful misconduct.

     Section 7.04 Liability of Agent and Collateral Agent.

     Neither the Agent, the Collateral Agent nor any of their Affiliates nor any
of their respective directors, officers, agents or employees shall be liable for
any action taken or not taken by it in connection with this Agreement or any
other Financing Document (a) with the consent or at the request of the Required
Banks or (b) in the absence of its own gross negligence or willful misconduct.
Neither the Agent, the Collateral Agent nor any of their Affiliates nor any of
their respective directors, officers, agents or employees shall be responsible
for or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made by any Loan Party in connection with the
Financing Documents or any Extension of Credit hereunder, or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent or the Collateral Agent under or in connection with this Agreement
or any other Financing Document; (ii) the performance or observance of any of
the covenants or


<PAGE>
                                      105


agreements of any Loan Party; (iii) the perfection or priority of any Lien or
security interest created or purported to be created under the Collateral
Documents; (iv) the satisfaction of any condition specified in Article 3, except
receipt of items required to be delivered to the Agent or (v) the validity,
effectiveness, genuineness, enforceability or sufficiency of the Financing
Documents or any other instrument or writing furnished in connection therewith.
Neither the Agent nor the Collateral Agent shall incur any liability by acting
in reliance upon any notice, consent, certificate, statement or other writing
(which may be a bank wire, telex, facsimile transmission or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.

     Section 7.05 Indemnification.

     Each Bank Party shall, ratably (determined as provided below) indemnify the
Agent, the Collateral Agent, each Revolving Fronting Bank and the Drax LOC
Fronting Bank, each of their respective Affiliates and the respective directors,
officers, agents and employees of any of them (to the extent not reimbursed by
the Obligors) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with the Financing Documents or
any action taken or omitted by such indemnitees thereunder. For purposes of this
Section 7.05, the Bank Party's ratable share of any amount shall be determined,
at any time, according to the sum of (a) the aggregate principal amount of Loans
outstanding at such time and owing to the respective Bank Party; (b) the
aggregate Revolving Letter of Credit Liabilities and Drax LOC Liabilities
outstanding at such time and owing to the respective Bank Party and (c) their
respective Unused Revolving Credit Loan Commitments outstanding at such time.

     Section 7.06 Credit Decision.

     Each Bank Party acknowledges that it has, independently and without
reliance upon the Agent, the Collateral Agent, any Revolving Fronting Bank, the
Drax LOC Fronting Bank, or any other Bank or any Arranger Party, and based on
the financial statements referred to in Section 4.05 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank Party also acknowledges that it
will, independently and without reliance upon the Agent, the Collateral Agent,
or any other Bank Party, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking any action under this Agreement.

     Section 7.07 Successor Agent or Collateral Agent.

     The Agent or the Collateral Agent may resign at any time by giving notice
thereof to the Bank Parties and the Borrower. Upon any such resignation, the
Required Banks shall have the right to appoint a successor Agent or a successor
Collateral Agent. If no successor Agent or successor Collateral Agent shall have
been so appointed by the Required Banks, and shall have accepted such
appointment, within 30 days after the retiring Agent or Collateral Agent gives
notice of resignation, then the retiring Agent or Collateral Agent (as the case
may be), on behalf of the Bank Parties, shall appoint a successor Agent or a
successor Collateral Agent (as


<PAGE>
                                      106


applicable), which shall be a commercial bank organized or licensed under the
laws of the United States and having a combined capital and surplus of at least
$250,000,000. Upon the acceptance of its appointment as Agent or Collateral
Agent (as the case may be) hereunder by a successor Agent or a successor
Collateral Agent, upon the execution and filing or recording of such financing
statements, or amendment, thereto, and such other instruments or notices, as may
be necessary or desirable, or as the Required Lenders may request with respect
to the Security Agreement and the BVI Cayman Pledge Agreement, or as the
Required Tranche C Term Loan Banks may request with respect to the Tranche C
Pledge Agreement in order to continue the perfection of the Liens granted or
purported to be granted by the Collateral Documents, such successor Agent or
Collateral Agent (as applicable) shall thereupon succeed to and become vested
with all the rights and duties of the retiring Agent or Collateral Agent (as the
case may be), and the retiring Agent or Collateral Agent shall be discharged
from its duties and obligations hereunder. If within 45 days after written
notice is given of the retiring Agent's or Collateral Agent's (as the case may
be) resignation under this Section 7.07 no successor Agent or Collateral Agent
(as the case may be) shall have been appointed and shall have accepted such
appointment, then on such 45th day (i) the retiring Agent's or Collateral
Agent's (as the case may be) resignation shall become effective, (ii) the
retiring Agent or Collateral Agent (as the case may be) shall thereupon be
discharged from its duties and obligations under the Financing Documents and
(iii) the Required Banks shall thereafter perform all duties of the retiring
Agent or Collateral Agent (as the case may be) until such time, if any, as the
Required Banks appoint a successor Agent or a successor Collateral Agent as
provided above. After any retiring Agent's or Collateral Agent's (as the case
may be) resignation hereunder as Agent or Collateral Agent (as the case may be)
the provisions of this Article shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent or Collateral Agent (as
the case may be).

     Section 7.08 Administrative Agent May File Proofs of Claim.

     In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to any Obligor, the Agent (irrespective of whether
the principal of any Loan or Revolving Letter of Credit Liabilities or the Drax
LOC Liabilities shall then be due and payable as herein expressed or by
declaration or otherwise and irrespective of whether the Agent shall have made
any demand on the Borrower) shall be entitled and empowered, by intervention in
such proceeding or otherwise:

          (a) to file and prove a claim for the whole amount of the principal
     and interest owing and unpaid in respect of the Loans, the Revolving Letter
     of Credit Liabilities, the Drax LOC Liabilities and all other Obligations
     that are owing and unpaid and to file such other documents as may be
     necessary or advisable in order to have the claims of the Bank Parties and
     the Agent (including any claim for the reasonable compensation, expenses,
     disbursements and advances of the Bank Parties and the Agent and their
     respective agents and counsel and all other amounts due the Bank Parties
     and the Agent and the Collateral Agent under this Agreement) allowed in
     such judicial proceeding;

          (b) to collect and receive any monies or other property payable or
     deliverable on any such claims and to distribute the same; and


<PAGE>
                                      107


          (c) any custodian, receiver, assignee, trustee, liquidator,
     sequestrator or other similar official in any such judicial proceeding is
     hereby authorized by each Bank Party to make such payments to the Agent
     and, in the event that the Agent shall consent to the making of such
     payments directly to the Bank Parties, to pay to the Agent any amount due
     for the reasonable compensation, expenses, disbursements and advances of
     the Agent, the Collateral Agent and their respective agents and counsel,
     and any other amounts due the Agent under this Agreement.

     Nothing contained herein shall be deemed to authorize the Agent to
authorize or consent to or accept or adopt on behalf of any Bank Party any plan
of reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Bank Party or to authorize the Agent to vote in
respect of the claim of any Bank Party in any such proceeding.

     Section 7.09 Agents' Fee.

     The Borrower shall pay to the Agent and the Collateral Agent for their own
account fees in the amounts and at the times previously agreed upon between the
Borrower, the Agent and the Collateral Agent.

                                  ARTICLE VIII

                             CHANGE IN CIRCUMSTANCES

     Section 8.01 Basis for Determining Interest Rate Inadequate or Unfair.

     If on or prior to the first day of any Interest Period for any Euro-Dollar
Borrowing:

          (a) the Agent is advised by the Reference Banks that deposits in
     Dollars (in the applicable amounts) are not being offered to the Reference
     Banks in the relevant market for such Interest Period, or

          (b) the Required Banks advise the Agent that the Adjusted London
     Interbank Offered Rate as determined by the Agent will not adequately and
     fairly reflect the cost to such Banks of funding their Euro-Dollar Loans
     for such Interest Period, the Agent shall forthwith give notice thereof to
     the Borrower and the Bank Parties, whereupon until the Agent notifies the
     Borrower that the circumstances giving rise to such suspension no longer
     exist, (i) the obligations of the Bank Parties to make Euro-Dollar Loans,
     or to continue or convert outstanding Loans as or into Euro-Dollar Loans,
     shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be
     converted into a Base Rate Loan on the last day of the then current
     Interest Period applicable thereto. Unless the Borrower notifies the Agent
     at least two Domestic Business Days before the date of any Euro-Dollar
     Borrowing for which a Notice of Borrowing has previously been given that it
     elects not to borrow on such date, such Borrowing shall instead be made as
     a Base Rate Borrowing.


<PAGE>
                                      108


     Section 8.02 Illegality.

     If, on or after the date of this Agreement, the adoption of any applicable
law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank Party (or
its Euro-Dollar Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Bank Party (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to
the Borrower and such Bank Party shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Bank Parties and the Borrower,
whereupon until such Bank Party notifies the Borrower and the Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank Party to make Euro-Dollar Loans to the Borrower, or to convert
outstanding Loans into Euro-Dollar Loans or continue outstanding Loans as
Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent
pursuant to this Section 8.02, such Bank Party shall designate a different
Euro-Dollar Lending Office if such designation will avoid the need for giving
such notice and will not, in the judgment of such Bank Party, be otherwise
disadvantageous to such Bank Party. If such notice is given, each Euro-Dollar
Loan of such Bank Party then outstanding shall be converted to a Base Rate Loan
either (a) on the last day of the then current Interest Period applicable to
such Euro-Dollar Loan if such Bank Party may lawfully continue to maintain and
fund such Loan as a Euro-Dollar Loan to such day or (b) immediately if such Bank
Party shall determine that it may not lawfully continue to maintain and fund
such Loan as a Euro-Dollar Loan to such day. Interest and principal on any such
Base Rate Loan shall be payable on the same dates as, and on a pro rata basis
with, the interest and principal payable on the related Euro-Dollar Loans of the
other Bank Parties.

     Section 8.03 Increased Cost and Reduced Return.

     (a) If on or after the date hereof, the adoption of any applicable law,
rule or regulation, or any change in any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) or any Revolving Fronting Bank or any Drax LOC Fronting Bank (any Bank
(or its Applicable Lending Office) and any Revolving Fronting Bank and any Drax
LOC Fronting Bank being referred to in this Section 8.03 as a "Credit Party")
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
with respect to any Euro-Dollar Loan any such requirement included in an
applicable Euro-Dollar Reserve Percentage), special deposit, insurance
assessment or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Credit Party or shall impose on any
Credit Party or on the London interbank market any other condition affecting its
Euro-Dollar Loans, its Note or Notes, the Revolving Letters of Credit, the Drax
Letter of Credit or its participation therein or its obligation to make
Euro-Dollar Loans or to issue Revolving Letters of Credit, the Drax Letter of
Credit or to participate therein and the result of any of the foregoing is to
increase the cost to such Credit


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Party of making or maintaining any Euro-Dollar Loan or issuing any Revolving
Letter of Credit or participating therein, or to reduce the amount of any sum
received or receivable by such Credit Party under this Agreement or under its
Note or Notes with respect thereto, by an amount deemed by such Credit Party to
be material, then, within 15 days after demand by such Credit Party (with a copy
to the Agent), the Borrower shall pay to such Credit Party such additional
amount or amounts as will compensate such Credit Party for such increased cost
or reduction.

     (b) If any Credit Party shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Credit Party (or its Parent) as a consequence of such Credit
Party's obligations hereunder to a level below that which such Credit Party (or
its Parent) could have achieved but for such adoption, change, request or
directive (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Credit Party to be material, then from
time to time, within 15 days after demand by such Credit Party (with a copy to
the Agent), the Borrower shall pay to such Credit Party such additional amount
or amounts as will compensate such Credit Party (or its Parent) for such
reduction.

     (c) Each Credit Party will promptly notify the Borrower and the Agent of
any event of which it has knowledge, occurring after the date hereof, which will
entitle such Credit Party to compensation pursuant to this Section 8.03(c) and
will designate a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will not, in
the judgment of such Credit Party, be otherwise disadvantageous to such Credit
Party. A certificate of any Credit Party claiming compensation under this
Section 8.03(c) and setting forth the additional amount or amounts to be paid to
it hereunder shall be conclusive in the absence of manifest error. In
determining such amount, such Bank Party may use any reasonable averaging and
attribution methods.

     Section 8.04 Taxes.

     (a) Any and all payments by the Borrower and any other Loan Party to or for
the account of any Bank Party, the Agent or the Collateral Agent hereunder or
under any other Financing Document shall be made free and clear of and without
deduction for any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Bank Party, the Agent and the Collateral Agent,
taxes imposed on its income (including branch profit taxes), franchise and
similar taxes and other taxes imposed on it that, in any such case, would not
have been imposed but for a material connection between such Bank Party, the
Agent or the Collateral Agent (as the case may be) and the jurisdiction imposing
such taxes (other than a material connection arising by reason of this Agreement
or any other Financing Document or the receipt of payments made hereunder or
thereunder or the exercise of any rights by a Bank Party, the Agent or the
Collateral Agent (as the case may be) hereunder or thereunder) (all such
non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as


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"Taxes"). If the Borrower or any other Loan Party shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
other Financing Document to any Bank Party, the Agent or the Collateral Agent
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 8.04) such Bank Party, the Agent or the Collateral Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made; (ii) the Borrower shall make such deductions;
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (iv) the
Borrower shall furnish to the Agent, at its address referred to in Section
10.01, the original or a certified copy of a receipt or other satisfactory
documentation evidencing payment thereof.

     (b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes and any other excise or property taxes, or charges or similar
levies which arise from any payment made by it hereunder or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any other Financing Document (hereinafter referred to as "Other Taxes").

     (c) The Borrower agrees to indemnify each Bank Party, the Agent and the
Collateral Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 8.04) paid by such Bank Party, the Agent or
the Collateral Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
This indemnification shall be made within 15 days from the date such Bank Party,
the Agent or the Collateral Agent (as the case may be) makes demand therefor.

     (d) Each Bank Party that is organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of a Bank Party listed on the signature
pages hereof or on or prior to the date on which it becomes a Bank Party in the
case of each other Bank Party and in the case any Bank Party changes
jurisdiction of its Applicable Lending Office and from time to time thereafter
as requested in writing by the Borrower (but only so long thereafter as such
Bank Party remains lawfully able to do so), shall deliver to the Borrower and
the Agent such certificates, documents or other evidence, as required by the
Code or Treasury Regulations issued pursuant thereto, including Internal Revenue
Service Form W-8BEN, Form W-8 IMY or Form W-8ECI and any other certificate or
statement of exemption specified by the Borrower and required by Treasury
Regulation Section 1.1441-4(a) or Section 1.1441-6(c) or any subsequent version
thereof, properly completed and duly executed by such Bank Party establishing
that any payment under this Agreement or any other Financing Documents is (i)
not subject to withholding under the Code because such payment is effectively
connected with the conduct by such Bank Party of a trade or business in the
United States, or (ii) fully or partially exempt from United States tax under a
provision of an applicable tax treaty, or (iii) not subject to withholding under
the portfolio interest exception under Section 881(c) of the Code (and, if such
Bank Party delivers a Form W-8BEN claiming the benefits of exemption from United
States withholding tax under Section 881(c), a certificate representing that
such Bank Party is not a "bank" for purposes of Section 881(c) of the Code, is
not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the
Code) of the Borrower and is not a controlled foreign corporation


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related to the Borrower (within the meaning of Section 864(d)(4) of the Code).
Unless the Borrower and the Agent have received forms or other documents
reasonably satisfactory to them indicating that payments hereunder are not
subject to United States withholding tax or are subject to such tax at a rate
reduced by an applicable tax treaty, the Borrower or the Agent shall withhold
taxes from such payments at the applicable statutory rate in the case of
payments to or for any Bank Party organized under the laws of a jurisdiction
outside the United States. If a Bank Party is unable to deliver one of these
forms or if the forms provided by a Bank Party at the time such Bank Party first
becomes a party to this Agreement or at the time a Bank Party changes its
Applicable Lending Office (other than at the request of the Borrower) or
designates a Conduit Lender that indicates a United States interest withholding
tax rate in excess of zero, withholding tax at such rate shall be considered
excluded from Taxes unless and until such Bank Party provides the appropriate
forms certifying that a lesser rate applies, whereupon withholding tax at such
lesser rate only shall be considered excluded from Taxes for periods governed by
such appropriate forms; provided, however, that (i) that should a Bank Party,
which is otherwise exempt from or subject to a reduced rate of withholding tax,
becomes subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Bank Party shall
reasonably request to assist such Bank Party to recover such Taxes and (ii) if
at the effective date of a transfer pursuant to which a Bank Party becomes a
party to this Agreement, the Bank Party assignor was entitled to payments under
Section 8.04(a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Bank Party assignee on such date.

     (e) If the Borrower is required to pay additional amounts to or for the
account of any Bank Party pursuant to this Section 8.04, then such Bank Party
shall use reasonable effort (consistent with internal policy and regulatory
restrictions) to change the jurisdiction of its Applicable Lending Office so as
to eliminate or reduce any such additional payment which may thereafter accrue
if such change, in the judgment of such Bank Party, is not otherwise
disadvantageous to such Bank Party.

     (f) Each Bank Party, the Agent and the Collateral Agent agrees that it will
promptly (within 30 days) after receiving notice thereof from any taxing
authority, notify the Borrower of the assertion of any liability by such taxing
authority with respect to Taxes or Other Taxes; provided that the failure to
give such notice shall not relieve the Borrower of its obligations under this
Section 8.04 except to the extent that the Borrower has been prejudiced by such
failure and except that the Borrower shall not be liable for penalties, interest
or expenses accruing after such 30 day period until such time as it receives the
notice contemplated above, after which time it shall be liable for interest,
penalties and expenses accruing after such receipt.

     (g) If any Bank Party, the Agent or the Collateral Agent shall receive a
credit or refund from a taxing authority (as a result of any error in the
imposition of Taxes or Other Taxes by such taxing authority) with respect to and
actually resulting from an amount of such Taxes or Other Taxes paid by the
Borrower pursuant to subsection (a) or (c) above, such Bank Party, the Agent or
the Collateral Agent shall promptly pay to the Borrower the amount so received
(without interest thereon, whether or not received).


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                                      112


     (h) Without prejudice to the survival of any other agreement contained
herein, the agreements, covenants and obligations contained in this Section 8.04
shall survive the payment in full of the principal of and interest on all Loans,
Notes and other advances made hereunder.

     Section 8.05 Base Rate Loans Substituted for Affected Euro-Dollar Loans.

     If (a) the obligation of any Bank Party to make, or to continue or to
convert outstanding Loans as or to, Euro-Dollar Loans to the Borrower has been
suspended pursuant to Section 8.02 or (b) any Bank Party has demanded
compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar Loans to
the Borrower and the Borrower shall, by at least five Euro-Dollar Business Days'
prior notice to such Bank Party through the Agent, have elected that the
provisions of this Section 8.05 shall apply to such Bank Party, then, unless and
until such Bank Party notifies the Borrower that the circumstances giving rise
to such suspension or demand for compensation no longer exist, all Loans to the
Borrower which would otherwise be made by such Bank Party as (or continued or
converted to) Euro-Dollar Loans shall be made instead as Base Rate Loans (on
which interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Bank Parties). If such Bank Party notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist, the principal amount of each such Base Rate Loan
shall be converted into a Euro-Dollar Loan on the first day of the next
succeeding Interest Period applicable to the related Euro-Dollar Loans of the
other Bank Parties.

                                   ARTICLE IX

                               SUBSIDIARY GUARANTY

     Section 9.01 The Subsidiary Guaranty.

     Subject in each case to the provisions of Section 9.08, (a) each of the
Revolving Credit Loan/Tranche A Term Loan Guarantors hereby, jointly and
severally, unconditionally guarantees as primary obligor and not merely as
surety, the full and punctual payment as and when the same shall become due and
payable (whether at stated maturity, upon acceleration or otherwise) of the
principal and interest on each Revolving Credit Loan Note and Tranche A Term
Loan Note issued by the Borrower under this Agreement, the full and punctual
payment of each Reimbursement Obligation in respect of the Revolving Letters of
Credit under this Agreement and the full and punctual payment of all amounts
payable by the Borrower under this Agreement in respect of the Revolving Credit
Loan Facility and the Tranche A Term Loans (the "Revolving Credit Loan/Tranche A
Term


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Loan Obligations") and (b) the Tranche C Term Loan Guarantor hereby
unconditionally guarantees as primary obligor and not merely as surety, the full
and punctual payment as and when the same shall become due and payable (whether
at stated maturity, upon acceleration or otherwise) of the principal and
interest on each Tranche C Term Loan Note issued by the Borrower under this
Agreement and the full and punctual payment of all amounts payable by the
Borrower under this Agreement in respect of the Tranche C Term Loans (the
"Tranche C Term Loan Obligations") (the guarantees referred to in clauses (a)
and (b) above are collectively referred to as the "Subsidiary Guaranty"). Upon
failure by the Borrower to pay punctually any such amount, the Revolving Credit
Loan/Tranche A Term Loan Guarantors, in respect of the Revolving Credit
Loan/Tranche A Term Loan Obligations, and the Tranche C Term Loan Guarantor, in
respect of the Tranche C Term Loan Obligations, shall forthwith on demand pay
the amount not so paid at the place and in the manner specified in the
Agreement. The Revolving Credit Loan/Tranche A Term Loan Obligations of the
Borrower guaranteed by the Revolving Credit Loan/Tranche A Term Loan Guarantors
are referred to as the "Revolving Credit Loan/Tranche A Term Loan Guaranteed
Obligations" and the Tranche C Term Loan Obligations of the Borrower guaranteed
by the Tranche C Term Loan Guarantor are referred to as the "Tranche C Term Loan
Guaranteed Obligations". The Revolving Credit Loan/Tranche A Term Loan
Guaranteed Obligations and the Tranche C Term Loan Guaranteed Obligations are
collectively referred to as the "Guaranteed Obligations". Without limiting the
generality of the foregoing, each Subsidiary Guarantor's liability hereunder
shall extend to all amounts which constitute part of the obligations guaranteed
by it hereunder and would be owed by the Borrower hereunder but for the fact
that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Borrower.

     Section 9.02 Guaranty Absolute.

     Each Revolving Credit Loan/Tranche A Term Loan Guarantor, jointly and
severally, and the Tranche C Term Loan Guarantor, guarantees that, subject to
Section 9.09, the Revolving Credit Loan/Tranche A Term Loan Guaranteed
Obligations, in the case of the Revolving Credit Loan/Tranche A Term Loan
Guarantors, and the Tranche C Term Loan Guaranteed Obligations, in the case of
the Tranche C Term Loan Guarantor, will be paid strictly in accordance with the
terms of this Agreement, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Banks and the Agent with respect thereto. The respective
obligations of each of the Subsidiary Guarantors under the Subsidiary Guaranty
are independent of the Revolving Credit Loan/Tranche A Term Loan Obligations, in
the case of the Revolving Credit Loan/Tranche A Term Loan Guarantors, and of the
Tranche C Term Loan Obligations, in respect of the Tranche C Term Loan
Guarantors. The obligations of each Subsidiary Guarantor hereunder shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:

          (i) any extension, renewal, settlement, compromise, waiver or release
     in respect of any Obligation of any other Loan Party under any Financing
     Document, by operation of law or otherwise;

          (ii) any lack of validity or enforceability of any Financing Document
     or any other agreement or instrument relating thereto;

          (iii) any change in the time, manner or place of payment of, or in any
     other term of, all or any of the Guaranteed Obligations or any other
     obligations of the Borrower under the Financing Documents, or any other
     amendment or waiver of or any consent to departure from any Financing
     Document, including, without limitation, any increase in the Guaranteed
     Obligations resulting from the extension of additional credit to the
     Borrower or otherwise;


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                                      114


          (iv) any taking, exchange, release, impairment, invalidity or
     nonperfection of any Collateral;

          (v) any manner of application of the Collateral or proceeds thereof,
     to all or any of the Guaranteed Obligations, or any manner of sale or other
     disposition of any Collateral for all or any of the Guaranteed Obligations
     or any other Obligations of the Loan Parties under the Financing Documents,
     or any other property or assets of the Loan Parties or any of their
     Subsidiaries;

          (vi) any failure by the Agent, the Collateral Agent or any other
     Lender Party to disclose to any Loan Party any information relating to the
     financial condition, operations, properties or prospects of any other Loan
     Party now or hereafter known to the Agent, the Collateral Agent or such
     Lender Party, as the case may be (such Subsidiary Guarantor waiving any
     duty on the part of the Agent, the Collateral Agent or the Lender Parties
     to disclose such information);

          (vii) any change in the corporate existence, structure or ownership of
     any Loan Party, or any insolvency, bankruptcy, reorganization or other
     similar proceeding affecting any other Loan Party or its assets or any
     resulting release or discharge of any obligation of any other Loan Party
     contained in any Financing Document;

          (viii) the existence of any claim, set-off or other rights which such
     Subsidiary Guarantor may have at any time against any other Loan Party, the
     Agent, the Collateral Agent, any Bank Party or any other Person, whether in
     connection herewith or with any unrelated transactions; provided that
     nothing herein shall prevent the assertion of any such claim by separate
     suit or compulsory counterclaim;

          (ix) any invalidity or unenforceability relating to or against any
     other Loan Party for any reason of any Financing Document, or any provision
     of applicable law or regulation purporting to prohibit the payment by any
     other Obligor of the principal of or interest on any Note or any other
     amount payable by it under any Financing Document; or

          (x) any other act or omission to act or delay of any kind by any
     Obligor, the Agent, the Collateral Agent, any Bank Party or any other
     Person or any other circumstance whatsoever which might, but for the
     provisions of this paragraph, constitute a legal or equitable discharge of
     or defense to a Subsidiary Guarantor's obligations hereunder.

     Section 9.03 Discharge Only Upon Payment in Full, Reinstatement in Certain
Circumstances.

     Each Subsidiary Guarantor's obligations hereunder shall remain in full
force and effect until, in the case of the Revolving Credit Loan/Tranche A Term
Loan Guarantors, the Revolving Credit Loan/Tranche A Term Loan Obligations have
been paid in full and the Revolving Credit Loan Commitments have been terminated
and, in the case of the Tranche C Term Loan Guarantor, the Tranche C Term Loan
Obligations have been paid in full. If at any time the payment of principal of
or interest on any Note or any other amount payable by the


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                                      115


Borrower, in respect of the Revolving Credit Loan Facility and the Tranche A
Term Loans or the Tranche C Term Loans under any Financing Document is rescinded
or must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, the applicable Subsidiary
Guarantor's obligations hereunder with respect to such payment shall be
reinstated at such time as though such payment had been due but not made at such
time.

     Section 9.04 Revolving L/C Cash Collateral Account.

     (a) Each Revolving Credit Loan/Tranche A Term Loan Guarantor further agrees
that if the Borrower shall fail to deposit in the Revolving L/C Cash Collateral
Account any amount required to be deposited therein pursuant to this Agreement,
the Revolving Credit Loan/Tranche A Term Loan Guarantors shall deposit such
amount in a subaccount of the Revolving L/C Cash Collateral Account as
collateral security for each Revolving Credit Loan/Tranche A Term Loan
Guarantor's potential obligations hereunder. If the Revolving Credit
Loan/Tranche A Term Loan Guarantors shall fail to furnish such funds, the Agent
shall be authorized to debit any accounts the Revolving Credit Loan/Tranche A
Term Loan Guarantors maintain with the Agent in such amount. Cash deposited in
such subaccount of the Revolving L/C Cash Collateral Account pursuant to this
Section 9.04 shall be returned to the Revolving Credit Loan/Tranche A Term Loan
Guarantors depositing the same to the extent that funds deposited by the
Borrower in the Revolving L/C Cash Collateral Account would have been required
to be returned to the Borrower.

     (b) Each Revolving Credit Loan/Tranche A Term Loan Guarantor hereby pledges
and grants to the Agent, for the benefit of the Banks and the Agent, a
continuing lien on and security interest in all right, title and interest of
such Revolving Credit Loan/Tranche A Term Loan Guarantor with respect to any
funds held in the Revolving L/C Cash Collateral Account from time to time, and
all proceeds thereof, as security for the payment of the Revolving Credit
Loan/Tranche A Term Loan Guaranteed Obligations.

     (c) The Agent may, at any time or from time to time after the funds are
deposited in the Revolving L/C Cash Collateral Account, apply funds then held in
the Revolving L/C Cash Collateral Account to the payment of any of the Revolving
Credit Loan/Tranche A Term Loan Guaranteed Obligations.

     (d) Neither the Revolving Credit Loan/Tranche A Term Loan Guarantors nor
any person or entity claiming on behalf of or through the Revolving Credit
Loan/Tranche A Term Loan Guarantors shall have any right to withdraw any of the
funds held in the Revolving L/C Cash Collateral Account.

     (e) Each Revolving Credit Loan/Tranche A Term Loan Guarantor agrees that it
will not (i) sell or otherwise dispose of any interest in the Revolving L/C Cash
Collateral Account or any funds held therein or (ii) create or permit to exist
any lien, security interest or other charge or encumbrance upon or with respect
to the Revolving L/C Cash Collateral Account or any funds held therein, except
as contemplated by the terms of this Section 9.04.


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                                      116


     Section 9.05 Waiver by the Subsidiary Guarantors.

     Each Subsidiary Guarantor irrevocably waives promptness, diligence, notice
of acceptance, presentment, protest and any other notice with respect to any of
its Guaranteed Obligations and this Subsidiary Guaranty and waives any
requirement that the Agent, the Collateral Agent or any Bank Party protect,
secure, perfect or insure any security interest or Lien on the Collateral or
exhaust any action against the Borrower against the Borrower or any other Person
or entity or any Collateral.

     Section 9.06 Subrogation.

     Upon making any payment with respect to the Borrower under this Article 9,
the applicable Subsidiary Guarantor shall be subrogated to the rights of the
payee against the Borrower with respect to such payment; provided that no
Subsidiary Guarantor shall enforce any payment by way of subrogation until all
amounts of principal of and interest on the Notes and all other amounts payable
by the Borrower under any Financing Document shall have been paid in full.

     Section 9.07 Stay of Acceleration.

     In the event that acceleration of the time for payment of any amount
payable by the Borrower under any Financing Document is stayed upon insolvency,
bankruptcy or reorganization of the Borrower, all such amounts otherwise subject
to acceleration under the terms of this Agreement shall nonetheless be payable
by the applicable Subsidiary Guarantor hereunder forthwith on demand by the
Agent made at the request of the requisite proportion of the Bank Parties
specified in Article 6 of this Agreement.

     Section 9.08 Limitation of Liability.

     The obligations of each Subsidiary Guarantor under this Article 9 shall be
limited to an aggregate amount equal to the largest amount that would not render
its obligations under this Article 9 subject to avoidance under Section 548 of
the Bankruptcy Code or any comparable provisions of any applicable state law
(including, without limitation, the provisions of the Uniform Fraudulent
Transfer Act and the Uniform Fraudulent Conveyance Act, to the extent
incorporated in applicable state law).

     Section 9.09 Release of Subsidiary Guarantors.

     Upon any Asset Sale of all of the Capital Stock of a Subsidiary Guarantor
in accordance with the terms of the Financing Documents and the application of
the Net Cash Proceeds from such Asset Sale to prepay the Debt hereunder pursuant
to and in the amount and order of priority set forth in Section 2.11(b), such
Subsidiary Guarantor shall be released from all of its Obligations under this
Article 9 and shall not be a "Subsidiary Guarantor" for any purpose under the
Financing Documents.


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                                      117


     Section 9.10 Representations and Warranties.

     Each Subsidiary Guarantor, as to itself, hereby makes the representations
and warranties set forth in Section 4.01, 4.02(a) and 4.04.

     Section 9.11 Covenants.

     (a) Each Revolving Credit Loan/Tranche A Guarantor hereby agrees to comply
with the covenant set forth in Section 5.09(b).

     (b) The Tranche C Term Loan Guarantor hereby agrees to comply with the
covenant set forth in Section 5.09(c).

                                   ARTICLE X

                                 MISCELLANEOUS

     Section 10.01 Notices.

     All notices, requests and other communications to any party hereunder shall
be in writing (including bank wire, telex, facsimile transmission or similar
writing) and shall be given to such party: (a) in the case of the Borrower, any
Revolving Fronting Bank, any Drax LOC Fronting Bank, the Agent or the Collateral
Agent, at its address or telex or facsimile transmission number set forth on the
signature pages hereof; (b) in the case of any Bank, at its address or telex or
facsimile transmission number set forth in its Administrative Questionnaire or
(c) in the case of any other party, at such other address or telex or facsimile
transmission number as such party may hereafter specify for the purpose by
notice to the Agent, the Collateral Agent, the Revolving Fronting Banks, the
Drax LOC Fronting Bank and the Borrower. Each such notice, request or other
communication shall be effective (x) if given by telex, when such telex is
transmitted to the telex number specified in or pursuant to this Section 10.01
and the appropriate answerback is received; (y) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (z) if given by any other means, when delivered at the
address specified in or pursuant to this Section 10.01; provided that notices to
the Agent, the Collateral Agent, a Revolving Fronting Bank or the Drax LOC
Fronting Bank under Article 2 or Article 8 shall not be effective until
received.

     Section 10.02 No Waivers.

     No failure or delay by the Agent, the Collateral Agent or any Bank Party in
exercising any right, power or privilege hereunder or under any other Financing
Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.


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                                      118


     Section 10.03 Expenses; Indemnification.

     (a) The Borrower shall pay (i) all out-of-pocket expenses of the Agent and
the Collateral Agent, including, without limitation, (A) reasonable fees and
disbursements of outside counsel for the Agent and the Collateral Agent in
connection with the preparation and administration of this Agreement and the
other Financing Documents, any waiver or consent hereunder or any amendment
hereof or any Default or alleged Default hereunder, (B) the reasonable fees and
disbursements of the Collateral Trustees and their outside counsel and (ii) if
an Event of Default occurs, all out-of-pocket expenses incurred by the Agent,
the Collateral Agent, each Revolving Fronting Bank, the Drax LOC Fronting Bank
and each Bank, including (without duplication) the fees and disbursements of
outside counsel and the allocated cost of inside counsel, in connection with
such Event of Default and collection, bankruptcy, insolvency, workout,
restructuring and other enforcement proceedings resulting therefrom.

     (b) The Borrower agrees to indemnify the Agent, the Collateral Agent and
each Bank Party, their respective Affiliates and the respective directors,
officers, agents and employees of the foregoing (each, an "Indemnitee") and hold
each Indemnitee harmless from and against any and all liabilities, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by such
Indemnitee in connection with any investigative, administrative or judicial
proceeding (whether or not such Indemnitee shall be designated a party thereto)
brought or threatened relating to or arising out of the Financing Documents or
any actual or proposed use of proceeds of Loans or the issuance or deemed
issuance of any Revolving Letter of Credit or the deemed issuance of the Drax
Letter of Credit hereunder; provided that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.

     Section 10.04 Sharing of Set-offs.

     (a) Each Bank Party agrees that if it shall, by exercising any right of
set-off or counterclaim or otherwise (including, without limitation, through the
application of any proceeds of the Creditor Group Collateral, the Excess
Revolving L/C Collateral and the Excess Drax LOC Collateral), receive payment of
a proportion of the aggregate amount due and payable to such Bank Party
hereunder which is greater than the proportion received by any other Bank Party
(A) on account of Obligations due and payable to such Bank Party hereunder and
under the Notes at such time in excess of its ratable share (according to the
proportion of (i) the amount of such Obligations due and payable to such Bank
Party at such time to (ii) the aggregate amount of Obligations due and payable
to all Bank Parties hereunder and under the Notes at such time) of payments on
account of the Obligations due and payable to all the Bank Parties hereunder and
under the Notes at such time obtained by all the Bank Parties at such time or
(B) on account of Obligations owing (but not due and payable) to such Bank Party
hereunder and under the Notes at such time in excess of its ratable share
(according to the proportion of (i) the amount of such Obligations owing (but
not due and payable) to such Bank Party at such time to (ii) the aggregate
amount of Obligations owing (but not due and payable) to all Bank Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations owing (but not due and payable) to all Bank Parties hereunder and
under the Notes at such time obtained by all of the Bank Parties at such time,
such Bank Party shall forthwith purchase from the other Bank Parties


<PAGE>
                                      119


such participations in the Obligations due and payable or owing to them, as the
case may be, as shall be necessary to cause such purchasing Bank Party to share
the excess payment ratably with each of them; provided that nothing in this
Section 10.04 shall impair the right of any Bank Party to exercise any right of
set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower owing to it. The
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in a Note or in any Revolving Letter of
Credit Liability or in any Drax LOC Liability, whether or not acquired pursuant
to the foregoing arrangements, may exercise rights of set-off or counterclaim
and other rights with respect to such participation as fully as if such holder
of a participation were a direct creditor of the Borrower in the amount of such
participation.

     (b) Notwithstanding anything to the contrary in Section 10.04(a), (i) the
Revolving Credit Loan Banks and the Tranche A Term Loan Banks shall not be
required to share any payment received (by exercising any right of set-off or
counterclaim or otherwise) from the Revolving Credit Loan/Tranche A Term Loan
Guarantors in respect of the Revolving Credit Loan/Tranche A Term Loan
Guaranteed Obligations and (ii) the Tranche C Term Loan Banks shall not be
required to share any payment received (by exercising any right of set-off or
counterclaim or otherwise) from the Tranche C Term Loan Guarantors in respect of
the Tranche C Term Loan Guaranteed Obligations or from any disposition of the
Tranche C Collateral, in each case with any other Bank Party.

     Section 10.05 Amendments and Waivers.

     Any provision of this Agreement or any other Financing Document may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by the Borrower and the Required Banks (and, if the rights or duties of
the Agent or the Collateral Agent are affected thereby, by the Agent or the
Collateral Agent); provided that (a) no such amendment or waiver shall, unless
signed by all the Bank Parties, (i) waive any of the conditions specified in
Section 3.01 or 3.02 (with respect to the Extensions of Credit made or deemed to
be made on the Closing Date); (ii) change the number of Bank Parties or the
percentage of (x) the Unused Revolving Credit Loan Commitments, (y) the
aggregate unpaid principal amount of the Loans or (z) the aggregate Revolving
Letter of Credit Liabilities and Drax LOC Liabilities that, in each case, shall
be required for the Bank Parties or any of them to take any action hereunder;
(iii) release all or substantially all of the Collateral in any transaction or
series of related transactions; (iv) amend Section 10.04 or this Section 10.05;
(v) postpone the date fixed for any payment of principal of or interest on any
Loan or Reimbursement Obligation or any fees hereunder or (vi) postpone the
final maturity of the Loans, (b) no such amendment or waiver shall, unless
signed by the Required Banks and each Bank Party if such Bank Party is directly
adversely affected by such amendment or waiver, (i) in the case of any Revolving
Credit Loan Bank, increase the Revolving Credit Loan Commitment of such
Revolving Credit Loan Bank; (ii) reduce the principal of, or interest on, the
Notes held by such Bank Party or Loans outstanding to such Bank Party or any
fees or other amounts payable to such Bank Party; (iii) reduce or limit the
Obligations of any Subsidiary Guarantor under Article 9 or release any
Subsidiary Guarantor (other than in connection with a sale or disposition
permitted hereunder) or otherwise limit such Subsidiary Guarantor's liability
with respect to the Obligations owing to the Agent, the Collateral Agent and the
Bank Parties, (iv) reduce the principal of or rate of interest


<PAGE>
                                      120


on any Loan or Reimbursement Obligation or any fees hereunder or (v) change the
order of application in the prepayment of Loans and the cash collateralization
of the Drax Letter of Credit Facility among the Facilities or any reduction in
the Revolving Credit Loan Commitments from the application thereof set forth in
the applicable provisions of Sections 2.10 and 2.11 in any manner that
materially affects the Bank Parties under such Facilities, (c) no such amendment
or waiver shall, unless signed by the Required Revolving Credit Loan Banks,
amend, waive or delete the provisions of Section 3.02(d) or Section 3.02(e) and
(d) no such amendment or waiver shall, unless signed by the Supermajority Banks
(i) change the pro rata application of Net Cash Proceeds from Asset Sales or
prepayments from Adjusted Free Cash Flow among the Bank Parties, on the one
hand, and the other Financing Parties, on the other hand, set forth in Section
2.11(b)(i) and (b)(vii) by amending the definition of "Banks' Ratable Share" or
otherwise or (ii) amend the definition of "Secured Holders" or "Secured
Obligations" in the Collateral Trust Agreement or amend Sections 5.01, 8.01,
8.02 or 9.01 of the Collateral Trust Agreement; provided further that no such
amendment or waiver shall, unless signed by the Revolving Fronting Banks or the
Drax LOC Fronting Bank, as the case may be, affect the rights and obligations of
the Revolving Fronting Banks or the Drax LOC Fronting Bank, as the case may be,
under this Agreement; and provided further that no such amendment or waiver
shall (x) release all or substantially all of the Creditor Group Collateral or
(y) change the pro rata application of Net Cash Proceeds from Asset Sales or
prepayments from Adjusted Free Cash Flow among the Financing Parties set forth
in Section 2.11(b)(i) and (b)(vii) by amending the definition of "Banks' Ratable
Share" or otherwise unless the Agent shall have received evidence satisfactory
to it from the trustee under the Senior Secured Exchange Note Indenture that it
has received the consent of those Exchange Note Holders holding a majority of
the principal outstanding amount of the Senior Secured Exchange Notes.

     Notwithstanding anything of the foregoing, no amendment or waiver shall be
required to release any Subsidiary Guarantor which is sold pursuant to the terms
and conditions of the Financing Documents so long as the Borrower shall, on the
date of receipt by the Borrower of the Net Cash Proceeds from such sale, prepay
the Loans and make a deposit in the Revolving L/C Cash Collateral Account
pursuant to, and in the order of priority set forth in Section 2.11(b), as
specified therein.

     Section 10.06 Successors and Assigns.

     (a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except neither the Borrower nor any Subsidiary Guarantor may assign or otherwise
transfer any of its rights and obligations under this Agreement without the
prior written consent of all of the Bank Parties (other than in the case of
Subsidiary Guarantors in connection with any transaction permitted by the
Financing Documents).

     (b) Any Bank other than a Conduit Lender may, without notice to or consent
of the Borrower and Agent, at any time grant to one or more banks or other
institutions (each, a "Participant") participating interests in its Unused
Revolving Credit Loan Commitment or any or all of its Loans or participating
interests in its Revolving Letter of Credit Liabilities or its Drax LOC
Liabilities. In the event of any such grant by a Bank of a participating
interest to a Participant, whether or not upon notice to the Borrower, the
Revolving Fronting Banks, the Drax


<PAGE>
                                      121


LOC Fronting Bank and the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrower, the Revolving
Fronting Bank, the Drax LOC Fronting Bank and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement pursuant to which any Bank may
grant such a participating interest shall provide that such Bank shall retain
the sole right and responsibility to enforce the obligations of the Borrower
hereunder including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement or any other Financing
Document; provided that such participation agreement may provide that such Bank
will not agree to any modification, amendment or waiver of this Agreement
described in clauses (a) (i), (iv) through (vi) and clause (b) of Section 10.05
without the consent of the Participant. The Borrower agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article 8 with respect to its participating
interest. An assignment or other transfer which is not permitted by subsection
(c) or (d) below shall be given effect for purposes of this Agreement only to
the extent of a participating interest granted in accordance with this
subsection (b).

     (c) Any Bank Party other than a Conduit Lender may at any time assign to
one or more banks or other institutions (each, an "Assignee") all, or a
proportionate part of all (or in the case of an assignment by the Drax LOC
Fronting Bank as a "fronting bank" under the Drax Letter of Credit Facility, all
but not less than all), in each case in an amount not less than $1,000,000 (or
such lesser amount as may be agreed to by the Borrower and the Agent), of its
rights and obligations under this Agreement and the other Financing Documents,
and such Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption in substantially the form of Exhibit D hereto executed
by such Assignee and such transferor Bank Party, with (and subject to) the
subscribed consent of the Agent, the Borrower (which shall not be unreasonably
withheld or delayed but which shall not be required if (1) an Event of Default
shall have occurred and is continuing, (2) in the case of assignments with
respect to the Term Loan Facilities or the Drax Loans, (3) in the case of
assignments by a Bank Party to a Related Fund of such Bank Party and (4) in the
case of assignments with respect to the Revolving Credit Facility, if the
proposed Assignee has a senior unsecured debt rating of "BBB" or higher by
Standard & Poor's Rating Services or "Baa2" or higher by Moody's Investor
Service, Inc.), and, in the case of assignments with respect to the Revolving
Credit Loan Facility, the Revolving Fronting Banks (such consent not to be
unreasonably withheld or delayed), and, in the case of assignments with respect
to the Drax Letter of Credit Facility, the Drax LOC Fronting Bank (such consent
not to be unreasonably withheld or delayed); provided that if an Assignee is an
Affiliate of such transferor Bank Party, no such consent shall be required; and
provided, further that under no circumstances may the Borrower or any of its
Affiliates be an "Assignee" hereunder. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank Party of an
amount equal to the purchase price agreed between such transferor Bank Party and
such Assignee, such Assignee shall be a Bank Party party to this Agreement and
shall have all the rights and obligations of a Bank Party as set forth in such
instrument of assumption, and the transferor Bank Party shall be released from
its obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank Party, the Agent and the
Borrower shall make appropriate arrangements so that, if required, new Notes are
issued to the Assignee. In connection with any such assignment, the transferor
Bank Party or Assignee shall pay to the Agent an administrative fee for
processing


<PAGE>
                                      122


such assignment in the amount of $3,500. If the Assignee is not incorporated
under the laws of the United States of America or a state thereof, it shall
deliver to the Borrower and the Agent certification as to exemption from, or
reduction in, deduction or withholding of any United States federal income taxes
as required by Section 8.04. Notwithstanding the foregoing, any Conduit Lender
may assign at any time to its designating Bank hereunder without the consent of
the Borrower or the Agent any or all of the Loans it may have funded hereunder
and pursuant to its designation agreement and without regard to the limitations
set forth in the first sentence of this Section 10.06(c).

     (d) Any Bank Party may at any time assign all or any portion of its rights
under this Agreement and the other Financing Documents to a Federal Reserve
Bank. No such assignment shall release the transferor Bank Party from its
obligations hereunder. In the case of any Bank Party that is a fund that invests
in bank loans, such Bank Party may, without the consent of the Borrower or the
Agent, assign or pledge all or any portion of its rights under this Agreement,
including the Loans and Notes or any other instrument evidencing its rights as a
Bank Party under this Agreement, to any holder of, trustee for, or any other
representative of holders of, obligations owed or securities issued, by such
fund, as security for such obligations or securities; provided that unless and
until such holder, trustee or representative actually becomes a Bank Party in
compliance with the other provisions of this Section 10.06, (i) no such pledge
shall release the pledging Bank Party from any of its obligations under the
Financing Documents and (ii) such holder, trustee or representative shall not be
entitled to exercise any of the rights of a Bank Party under the Financing
Documents even though such trustee may have acquired ownership rights with
respect to the pledged interest through foreclosure or otherwise.

     (e) Each of the Borrower, the Agent and each Bank hereby confirms that it
will not institute against a Conduit Lender or join any other Person in
instituting against a Conduit Lender any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding under any state bankruptcy or
similar law, for one year and one day after the payment in full of the latest
maturing commercial paper note issued by such Conduit Lender; provided, however,
that each Bank designating any Conduit Lender hereby agrees to indemnify, save
and hold harmless each other party hereto for any loss, cost, damage or expense
arising out of its inability to institute such a proceeding against such Conduit
Lender during such period of forbearance.

     (f) The Agent shall maintain at its address referred to in Section 10.01, a
copy of each Assignment and Assumption delivered to and accepted by it and a
register for the recordation of the names and addresses of the Bank Parties, the
Revolving Credit Loan Commitments of, the amount of the Revolving Letter of
Credit issued by, the principal amount of the Reimbursement Obligations owing
to, and the principal amount of the Loans owing to, each Bank Party from time to
time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the Agent and
the Bank Parties may treat each Person whose name is recorded in the Register as
a Bank Party hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Bank Party at any reasonable
time and from time to time upon reasonable prior notice.


<PAGE>
                                      123


     Section 10.07 No Margin Stock.

     Each of the Bank Parties represents to the Agent and each of the other Bank
Parties that it in good faith is not relying upon any "margin stock" (as defined
in Regulation U) as collateral in the extension or maintenance of the credit
provided for in this Agreement.

     Section 10.08 Governing Law; Submission to Jurisdiction.

     This Agreement and the other Financing Documents shall be governed by and
construed in accordance with the laws of the State of New York. The Borrower
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State court
sitting in New York City for purposes of all legal proceedings arising out of or
relating to this Agreement and the other Financing Documents or the transactions
contemplated hereby. The Borrower irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.

     Section 10.09 Release of Collateral.

     Upon the sale, lease, transfer or other disposition of any item of
Collateral of any Obligor (including, without limitation, as result of the sale,
in accordance with the terms of the Financing Documents, of any Obligor that
owns such Collateral) in accordance with the terms of the Financing Documents,
the Agent will, at the Borrower's expense, execute and deliver to such Obligor
such documents as such Obligor may reasonably request to evidence the release of
such item of Collateral from the assignment and security interest granted under
the Collateral Documents in accordance with the terms of the Financing
Documents.

     Section 10.10 Counterparts; Integration; Effectiveness.

     This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement and the other Financing
Documents constitute the entire agreement and understanding among the parties
hereto and supersede any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof. This Agreement shall become
effective upon receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any such party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex, facsimile transmission or other
written confirmation from such party of execution of a counterpart hereof by
such party).

     Section 10.11 Confidentiality.

     The Agent and each Bank Party agrees to keep confidential all non-public
information provided to it by the Borrower pursuant to this Agreement that is
designated by the Borrower as confidential; provided that nothing herein shall
prevent the Agent or any Bank Party from disclosing any such information (a) to
the Agent, any other Bank Party or any affiliate of any Bank Party; (b) to any
(i) actual or prospective transferee or (ii) Derivatives Obligations


<PAGE>
                                      124


counterparty (or such contractual counterparty's professional advisor), in each
case that agrees to comply with the provisions of this Section 10.11; (c) to its
employees, directors, agents, attorneys, accountants and other professional
advisors or those of any of its affiliates; (d) upon the request or demand of
any governmental authority; (e) in response to any order of any court or other
governmental authority or as may otherwise be required pursuant to any
requirement of law; (f) if required to do so in connection with any litigation
or similar proceeding; (g) that has been publicly disclosed; (h) to the National
Association of Insurance Commissioners or any similar organization or any
nationally recognized rating agency that requires access to information about a
Bank Party's investment portfolio in connection with ratings issued with respect
to such Bank Party; (i) to any direct or indirect contractual counterparty in
any sway, hedge or similar agreement (or to any such contractual counterparty's
professional advisor), so long as such contractual counterparty (or such
professional advisor) agrees to be bound by the provisions of this Section
10.11; or, in connection with the exercise of any remedy hereunder or under any
other Financing Documents.

     Section 10.12 WAIVER OF JURY TRIAL.

     EACH OF THE BORROWER, THE AGENT, THE COLLATERAL AGENT AND THE BANK PARTIES
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. Section 10.13
Severability; Modification to Conform to Law.

     It is the intention of the parties that this Agreement be enforceable to
the fullest extent permissible under applicable law, but that the
unenforceability (or modification to conform to such law) of any provision or
provisions hereof shall not render unenforceable, or impair, the remainder
hereof. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, this Agreement shall, as
to such jurisdiction, be deemed amended to modify or delete, as necessary, the
offending provision or provisions and to alter the bounds thereof in order to
render it or them valid and enforceable to the maximum extent permitted by
applicable law, without in any manner affecting the validity or enforceability
of such provision or provisions in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.

     Section 10.14 Judgment Currency.

     If for the purposes of enforcing the obligations of the Borrower hereunder
it is necessary to convert a sum due from such Person in Dollars into another
currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent, the Collateral Agent and
the Bank Parties could purchase Dollars with such currency at or about 11:00
A.M. (New York City time) on the Domestic Business Day preceding that on which
final judgment is given. The obligations in respect of any sum due to the Agent,
the Collateral Agent and the Bank Parties hereunder shall, notwithstanding any
adjudication expressed in a currency other than Dollars, be discharged only to
the extent that on the Domestic Business Day following


<PAGE>
                                      125


receipt by the Agent, the Collateral Agent and the Bank Parties of any sum
adjudged to be so due in such other currency the Agent, the Collateral Agent and
the Bank Parties may in accordance with normal banking procedures purchase
Dollars with such other currency; if the amount of Dollars so purchased is less
than the sum originally due to the Agent, the Collateral Agent and the Bank
Parties in Dollars, the Borrower agrees, to the fullest extent that it may
effectively do so, as a separate obligation and notwithstanding any such
adjudication, to indemnify the Agent, the Collateral Agent and the Bank Parties
against such loss, and if the amount of Dollars so purchased exceeds the sum
originally due to the Agent, the Collateral Agent and the Bank Parties, it shall
remit such excess to the Borrower.


                      [SIGNATURE PAGES IMMEDIATELY FOLLOW]

<PAGE>


     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.


THE AES CORPORATION,
as Borrower

By
   -------------------------------------
   Title:
   Address: 1001 North 19th Street
            Arlington, VA 22209

   Fax:     (703) 528-4510


<PAGE>


SUBSIDIARY GUARANTORS:

AES EDC FUNDING II, L.L.C.,
as Subsidiary Guarantor

By
   -------------------------------------
   Title:
   Address:
   Fax:


AES HAWAII MANAGEMENT COMPANY, INC.,
as Subsidiary Guarantor

By
   -------------------------------------
   Title:
   Address:
   Fax:


AES OKLAHOMA HOLDINGS, L.L.C.,
as Subsidiary Guarantor

By
   -------------------------------------
   Title:
   Address:
   Fax:


AES SOUTHLAND FUNDING, L.L.C.,
as Subsidiary Guarantor

By
   -------------------------------------
   Title:
   Address:
   Fax:


AES WARRIOR RUN FUNDING, L.L.C.,
as Subsidiary Guarantor

By
   -------------------------------------
   Title:
   Address:
   Fax:


<PAGE>


BANKS:


CITICORP USA, INC.

By
   -------------------------------------
   Title:


BANK OF AMERICA, N.A.

By
   -------------------------------------
   Title:


UNION BANK OF CALIFORNIA, N.A.

By
   -------------------------------------
   Title::


<PAGE>


DRAX LOC FRONTING BANK AND REVOLVING FRONTING BANKS:

BANK OF AMERICA, N.A.,
as Drax LOC Fronting Bank
and as Revolving Fronting Bank

By
   -------------------------------------
   Title:
   Address:

   Fax:
   Attention:


<PAGE>


AGENT:


CITICORP USA, INC.,
as Agent and as Collateral Agent

By
   -------------------------------------
   Title:
   Address:   388 Greenwich Street, 21st Floor
              New York, NY 10013

   Fax:       (212) 816-8098
   Attention: Stuart Glen


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>10
<FILENAME>dec1602_ex99-3.txt
<TEXT>
                                                                    EXHIBIT 99.3


                                                                  EXECUTION COPY


                  SECOND AMENDED AND RESTATED PLEDGE AGREEMENT

     SECOND AMENDED AND RESTATED PLEDGE AGREEMENT (this "Agreement") dated as of
December 12, 2002 by and between AES EDC FUNDING II LLC, a Delaware limited
liability company (with its successors, the "Pledgor") and Citicorp USA, Inc.,
("Citibank") as collateral agent (in such capacity, the "Collateral Agent").

     PRELIMINARY STATEMENTS:

     (1) The Pledgor is party to a Loan Agreement originally dated as of October
6, 2000, as amended and restated on November 16, 2000 (as amended and restated,
the "Original Loan Agreement"), with the banks referred to therein (the
"Original Banks") and Citibank (as successor to Morgan Guaranty Trust Company of
New York ("Morgan"), in its capacity as agent).

     (2) In connection with the Original Loan Agreement, the Pledgor entered
into a Pledge Agreement in favor of Citibank (as successor to Morgan, in its
capacity as collateral agent), originally dated as of October 6, 2000, as
amended and restated on November 16, 2000 (as amended and restated, the
"Original Pledge Agreement"), pursuant to which the Pledgor assigned and pledged
to Citibank for its benefit and the ratable benefit of the Original Banks the
Initial Shares (as defined below), the EDC Holdco Stock (as defined below) and
certain other securities required to be pledged under the Original Pledge
Agreement to secure all of the Secured Obligations (as defined in the Original
Pledge Agreement) of the Pledgor under the Original Loan Agreement.

     (3) The Pledgor wishes to amend and restate the Original Loan Agreement by
execution of an Amended and Restated Credit, Reimbursement and Exchange
Agreement dated as of December 12, 2002 (the "Credit Agreement"; terms defined
therein and not otherwise defined herein shall have the meanings specified
therein), with The AES Corporation, a Delaware corporation ("AES"), the other
Subsidiary Guarantors party thereto, the Banks referred to therein and Citibank,
as Administrative Agent and as Collateral Agent, to, among other things, extend
the maturity of the Existing Bank Credit Agreements, including the Original Loan
Agreement, and restructure certain provisions of the Existing Bank Credit
Agreements.

     (4) In connection with the execution of the Credit Agreement, the Pledgor
wishes to amend and restate the Original Pledge Agreement by execution of this
Agreement to assign and pledge to the Collateral Agent for its benefit and
ratable benefit of the Tranche C Term Loan Banks (the "Tranche C Secured
Parties") the Pledged Stock (as defined below) to secure all of the Tranche C
Secured Obligations (as defined below) of the Pledgor under the Credit
Agreement.

     (5) The parties now wish to amend and restate the Original Pledge Agreement
by the execution of this Agreement.

<PAGE>


     NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     Section 1. Definitions.

     The following additional terms, as used herein, have the following
respective meanings:

     "Act" means the Securities Act of 1933, as amended.

     "AES Common Stock" means shares of the common stock, $.01 par value, of
AES.

     "EDC Holdco Stock" means the 10 units of membership interests of
Intermediate EDC Shareholder.

     "Initial Shares" means 15,000,000 shares of AES Common Stock.

     "Intermediate EDC Shareholder" means AES EDC Holding LLC, a Delaware
limited liability company, and its successors.

     "Pledged Stock" means (i) the EDC Holdco Stock and (ii) any other
securities required to be pledged to the Collateral Agent pursuant to Section
3(b).

     "Tranche C Collateral" has the meaning assigned to such term in Section
3(a).

     "Tranche C Secured Obligations" means the Obligations of the Pledgor
hereunder and under the Subsidiary Guaranty in respect of the Tranche C Term
Loan Guaranteed Obligations.

     "Tranche C Security Interest" means the security interest in the Tranche C
Collateral granted hereunder securing the Tranche C Secured Obligations.

     Unless otherwise defined herein, or unless the context otherwise requires,
all terms used herein that are defined in the New York Uniform Commercial Code
as in effect on the date hereof shall have the meanings therein stated.

     Section 2. Representations and Warranties.

     The Pledgor represents and warrants as follows as of the date of this
agreement and as of any date on which the Pledgor pledges additional EDS Holdco
Stock pursuant to Section 3(b):

     (a) Title to Pledged Stock. The Pledgor owns all of the Pledged Stock, free
and clear of any Liens other than the Tranche C Security Interest. All of the
Pledged Stock has been duly authorized and validly issued, and is fully paid and
non-assessable, and is subject to no rights or options to purchase of any
Person. The Pledgor is not and will not become a party to or otherwise bound by
any agreement, other than this Agreement, which restricts in any manner the
rights of any present or future holder of any of the Pledged Stock with respect
thereto.

     (b) Validity, Perfection and Priority of Tranche C Security Interest. Upon
delivery to the Collateral Agent of the certificates representing the Pledged
Stock in accordance with


                                       2
<PAGE>


Section 4 and filing of UCC-1's, the Collateral Agent will have a valid and
perfected first priority security interest in the Tranche C Collateral. No
registration, recordation or filing with any governmental body, agency or
official is required in connection with the execution or delivery of this
Agreement or necessary for the validity or enforceability hereof or for the
perfection or enforcement of the Tranche C Security Interest. The Pledgor has
not performed and will not perform any acts which might prevent the Collateral
Agent from enforcing any of the terms and conditions of this Agreement or which
would limit the Collateral Agent in any such enforcement.

     Section 3. The Tranche C Security Interest.

     In order to secure the full payment of the Tranche C Secured Obligations in
accordance with the terms thereof and to secure the performance of all of the
obligations of the Pledgor hereunder:

     (a) The Pledgor hereby assigns, pledges and grants to the Collateral Agent
for its benefit and the ratable benefit of the Tranche C Secured Parties a
security interest in the Pledged Stock, and all of its rights and privileges
with respect to the Pledged Stock, and all proceeds, income and profits thereon,
and all interest, dividends and other payments and distributions with respect
thereto (the "Tranche C Collateral"). On or before the date hereof, the Pledgor
shall deliver to the Collateral Agent certificates representing the EDC Holdco
Stock, and the Collateral Agent shall deliver a receipt therefor to the Pledgor.

     (b) (i) If Intermediate EDC Shareholder at anytime issues additional
membership interests or other equity interests, the Pledgor shall immediately
pledge to the Collateral Agent such additional securities and shall deliver to
the Collateral Agent certificates representing such additional securities.

     (ii) All such additional securities delivered pursuant to this subsection
constitute Pledged Stock and shall be subject to all provisions of this
Agreement. In connection with the delivery of any additional securities pursuant
to this section, the Pledgor shall provide to the Collateral Agent an opinion of
the General Counsel of AES that such additional securities are duly authorized
and validly issued, fully paid and non-assessable (or the equivalent thereof)
and are subject to no rights or options to purchase of any Person.

     (c) The Tranche C Security Interest is granted as security only and shall
not subject the Collateral Agent or any other Tranche C Secured Party to, or
transfer or in any way affect or modify, any obligation or liability of the
Pledgor with respect to any of the Tranche C Collateral or any transaction in
connection therewith.

     Section 4. Delivery of Pledged Stock.

     (a) All certificates representing Pledged Stock delivered to the Collateral
Agent by the Pledgor pursuant hereto shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, all in form and
substance satisfactory to the Collateral Agent.


                                       3
<PAGE>


     (b) The Collateral Agent acknowledges that, as of the date hereof, the
Pledged Stock has not been registered under the Act, or under any state
securities law.

     (c) The Collateral Agent understands that the Pledged Stock constitutes
"restricted securities" under the Act and that the rules of the Securities and
Exchange Commission provide in substance that holders thereof may dispose of the
Pledged Stock only pursuant to an effective registration statement under the Act
or an exemption from such registration, if available.

     (d) The Collateral Agent hereby acknowledges that the certificates for the
Pledged Stock may bear a legend to the effect that the shares represented by the
certificate have not been registered under the Securities Act of 1933 and may
not be offered, sold or transferred in the absence of a favorable opinion of
recognized counsel or other evidence reasonably satisfactory to the issuer to
the effect that registration thereof under such Act is not required for the
effective registration thereof under such Act.

     Section 5. Filing; Further Assurances.

     The Pledgor agrees that it will, at its expense and in such manner and form
as the Collateral Agent may reasonably require, execute, deliver, file and
record any financing statement, specific assignment or other paper and take any
other action that may be necessary or that the Collateral Agent may reasonably
request, in order to create, perfect or validate the Tranche C Security Interest
or to enable the Collateral Agent to exercise and enforce its rights hereunder
with respect to any of the Tranche C Collateral. To the extent permitted by
applicable law, the Pledgor hereby authorizes the Collateral Agent to file, in
the name of the Pledgor or otherwise, Uniform Commercial Code financing
statements (which may be carbon, photographic, photostatic or other
reproductions of this Agreement or of a financing statement relating to this
Agreement) which the Collateral Agent in its sole discretion may deem necessary
or appropriate to further perfect the Tranche C Security Interest.

     The Collateral Agent may at any time or from time to time, after the
occurrence and during the continuance of an Event of Default, in its sole
discretion, cause any or all of the Pledged Stock to be transferred of record
into the name of the Collateral Agent or its nominee. The Pledgor will promptly
give to the Collateral Agent copies of any notices or other communications
received by it with respect to Pledged Stock registered in the name of the
Pledgor and the Collateral Agent will promptly give the Pledgor copies of any
notices and communications received by the Collateral Agent with respect to
Pledged Stock registered in the name of the Collateral Agent or its nominee.

     Section 6. Right to Receive Distributions on Tranche C Collateral.

     Unless and until an Event of Default has occurred and is continuing and to
the extent permitted by the Credit Agreement, the Pledgor shall be entitled to
receive and retain all dividends, interest and other payments made on or with
respect to the Tranche C Collateral ("Dividends"). During the continuance of an
Event of Default, the Collateral Agent shall have the right to receive and to
retain as Tranche C Collateral hereunder all Dividends and the Pledgor shall
take all such action as the Collateral Agent may deem necessary or appropriate
to give


                                       4
<PAGE>


effect to such right. If the Collateral Agent receives any cash Dividend at a
time when an Event of Default is not continuing, the Collateral Agent shall pay
to the Pledgor such Dividend.

     Any Dividends that are received by the Pledgor during the continuance of an
Event of Default shall be received in trust for the benefit of the Collateral
Agent and the Tranche C Secured Parties and, if the Collateral Agent so directs,
shall be segregated from other funds of the Pledgor and shall, forthwith upon
demand by the Collateral Agent, be paid to the Collateral Agent as Tranche C
Collateral in the same form as received (with any necessary endorsement). After
all Events of Default have been cured, the Collateral Agent's right to retain
Dividends under this Section 6 shall cease and the Collateral Agent shall pay
over to the Pledgor any such Tranche C Collateral retained by it during the
continuance of an Event of Default.

     Section 7. Right to Vote Pledged Stock.

     If an Event of Default shall have occurred and be continuing, the
Collateral Agent shall have the right, to the extent permitted by law, and the
Pledgor shall take all such action as may be necessary or appropriate to give
effect to such right, to vote and to give consents, ratifications and waivers,
and take any other action with respect to any or all of the Pledged Stock, with
the same force and effect as if the Collateral Agent was the absolute and sole
owner thereof, subject to the receipt of any necessary regulatory approvals.
Unless and until an Event of Default has occurred and is continuing, the Pledgor
shall have the sole right to vote and to give consents, ratifications and
waivers, and take any other actions with respect to any or all of the Pledged
Stock as it deems necessary or appropriate and the Collateral Agent shall, upon
receiving a written request from the Pledgor accompanied by a certificate signed
by its principal financial officer stating that no Event of Default has occurred
and is continuing, deliver to the Pledgor such proxies, powers of attorney,
consents, ratifications and waivers in respect of any of the Pledged Stock which
is registered in the name of the Collateral Agent or its nominee as shall be
specified in such request and be in form and substance reasonably satisfactory
to the Collateral Agent.

     Section 8. General Authority.

     The Pledgor hereby irrevocably appoints the Collateral Agent its true and
lawful attorney, with full power of substitution, in the name of the Pledgor,
the Collateral Agent, the Tranche C Secured Parties or otherwise, for the sole
use and benefit of the Collateral Agent and the other Tranche C Secured Parties,
but at the expense of the Pledgor, to the extent permitted by law to exercise,
at any time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Tranche C Collateral:

          (a) to demand, sue for, collect, receive and give acquittance for any
     and all monies due or to become due upon or by virtue thereof,

          (b) to settle, compromise, compound, prosecute or defend any action or
     proceeding with respect thereto,


                                       5
<PAGE>


          (c) to sell, transfer, assign or otherwise deal in or with the same or
     the proceeds or avails thereof, as fully and effectually as if the
     Collateral Agent were the absolute owner thereof, and

          (d) to extend the time of payment of any or all thereof and to make
     any allowance and other adjustments with reference thereto;

provided that the Collateral Agent shall give the Pledgor not less than ten
days' prior notice of the time and place of any sale or other intended
disposition of any of the Tranche C Collateral except any Tranche C Collateral
which is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Collateral Agent and the Pledgor
agree that such notice constitutes "reasonable notification" within the meaning
of Section 9-612 of the Uniform Commercial Code.

     Section 9. Remedies.

     (a) Subject to the receipt of any necessary regulatory approvals, if an
Actionable Default shall have occurred and be continuing and the Required Banks
shall have begun to exercise their rights and remedies with respect to the
Creditor Group Collateral, then, in addition to the remedies described in
Sections 6, 7 and 8 above, the Collateral Agent may exercise all the rights of a
secured party under the Uniform Commercial Code (whether or not in effect in the
jurisdiction where such rights are exercised) and, in addition, the Collateral
Agent may, without being required to give any notice except as herein provided
or as may be required by mandatory provisions of law, (i) apply the cash, if
any, then held by it as Tranche C Collateral as specified in Section 12 and (ii)
if there shall be no such cash or to the extent such cash shall be insufficient
to pay all the Tranche C Secured Obligations in full, sell, subject to Section
9(b), the Tranche C Collateral or any part thereof at public or private sale or
at any broker's board or on any securities exchange, for cash, upon credit or
for future delivery, and at such price or prices as the Collateral Agent may
deem satisfactory and hold the proceeds as Tranche C Collateral hereunder or
apply such proceeds as specified in Section 12. The Collateral Agent may be the
purchaser of any or all of the Tranche C Collateral sold pursuant to this
subsection at any public sale (or, if the Tranche C Collateral so sold is
Pledged Stock or other Tranche C Collateral of a type customarily sold in a
recognized market or of a type which is the subject of widely distributed
standard price quotations, at any private sale). The Collateral Agent, instead
of exercising the power of sale conferred upon it in this subsection, may
proceed by a suit or suits at law or in equity to foreclose the Tranche C
Security Interest and sell the Tranche C Collateral, or any portion thereof,
under a judgment or decree of a court or courts of competent jurisdiction.

     (b) The Collateral Agent is authorized, in connection with any sale
pursuant to this Agreement, if it deems it advisable to do so, (i) if the
Pledged Stock is not then subject to a currently effective registration
statement under the Act or if otherwise necessary to comply with the Act or any
other law, to restrict the prospective bidders on or purchasers of any of the
Pledged Stock to a limited number of sophisticated investors who will represent
and agree that they are purchasing for their own account for investment and not
with a view to the distribution or sale of any of such Pledged Stock, (ii) if
the Pledged Stock is not then subject to a currently effective registration
statement under the Act, to cause to be placed on certificates for any or all of
the Pledged Stock or on any other securities pledged hereunder a legend to the
effect that such


                                       6
<PAGE>


security has not been registered under the Act and may not be disposed of in
violation of the provisions of the Act, and (iii) to impose such other
limitations or conditions in connection with any such sale as the Required
Tranche C Term Loan Banks deem necessary or advisable in order to comply with
the Act or any other law.

     (c) The Pledgor covenants and agrees that it will execute and deliver such
documents and take such other action as the Collateral Agent deems necessary or
advisable in order that any sale of Tranche C Collateral permitted hereunder may
be made in compliance with law. Upon any such sale, the Collateral Agent shall
have the right to deliver, assign and transfer to the purchaser thereof the
Tranche C Collateral so sold, subject to the receipt of any necessary regulatory
approvals. Each purchaser at any such sale shall hold the Tranche C Collateral
so sold absolutely free from any claim or right of whatsoever kind, including
any equity or right of redemption of the Pledgor which may be waived, and the
Pledgor, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal that it has or may have under any law now
existing or hereafter adopted. Any notice of a sale required by law shall (i) in
the case of a public sale, state the time and place fixed for such sale, (ii) in
the case of sale at a broker's board or on a securities exchange, state the
board or exchange at which such sale is to be made and the day on which the
Tranche C Collateral, or the portion thereof so being sold, will first be
offered for sale at such board or exchange, and (iii) in the case of a private
sale, state the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Collateral Agent may fix in the notice of such sale.
At any such sale, the Tranche C Collateral may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may determine. The Collateral
Agent shall not be obligated to make any such sale pursuant to any such notice.
The Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In case of any sale of all or
any part of the Tranche C Collateral on credit or for future delivery, the
Tranche C Collateral so sold may be retained by the Collateral Agent until the
selling price is paid by the purchaser thereof, but the Collateral Agent shall
not incur any liability in case of the failure of such purchaser to take up and
pay for the Tranche C Collateral so sold and, in case of any such failure, such
Tranche C Collateral may again be sold upon like notice.

     (d) In taking any action under this Section 9 or otherwise hereunder, the
Collateral Agent shall act upon the instructions of the Required Tranche C Term
Loan Banks.

     Section 10. Expenses.

     The Pledgor agrees that it will forthwith upon demand pay to the Collateral
Agent:

          (a) the amount of any taxes that the Collateral Agent may have been
     required to pay by reason of the Tranche C Security Interest or to free any
     of the Tranche C Collateral from any Lien thereon, and

          (b) the amount of any and all reasonable out-of-pocket expenses,
     including the reasonable fees and disbursements of legal counsel and of any
     other experts, which the Collateral Agent may incur in connection with (i)
     the administration or enforcement


                                       7
<PAGE>


     of this Agreement, including such expenses as are incurred to preserve the
     value of the Tranche C Collateral and the validity, perfection, rank and
     value of any Tranche C Security Interest, (ii) the collection, sale or
     other disposition of any of the Tranche C Collateral permitted hereunder,
     or (iii) the exercise by the Collateral Agent of any of the rights
     conferred upon it hereunder.

     Any such amount not paid on demand shall bear interest at a per annum rate
of 2% plus the Base Rate.

     Section 11. Limitation on Duty of the Collateral Agent in Respect of
Tranche C Collateral.

     Beyond the exercise of reasonable care in the custody thereof, the
Collateral Agent shall have no duty as to any Tranche C Collateral in its
possession or control. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Tranche C Collateral in
its possession if the Tranche C Collateral is accorded treatment substantially
equal to that which it accords its own property and shall not be liable or
responsible for any loss or damage to any of the Tranche C Collateral, or for
any diminution in the value thereof, by reason of any act or omission of any
agent or bailee selected by the Collateral Agent in good faith, other than any
act or omission caused by the gross negligence or willful misconduct of such
bailee or any act or omission made in breach of this Agreement.

     Section 12. Application of Proceeds.

     Upon the occurrence and during the continuance of an Actionable Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Tranche C Collateral and any cash held shall be applied by the Collateral Agent
in the following order of priority:

          first, paid to the Collateral Agent for any amounts then owing to the
     Collateral Agent pursuant to Section 10.03 of the Credit Agreement, Section
     10 hereof or otherwise under the Financing Documents;

          second, ratably paid to the Tranche C Term Loan Banks for any amounts
     then owing to them, in their capacity as Tranche C Term Loan Banks, under
     the Credit Agreement ratably in accordance with such respective amounts;

          third, paid to the Pledgor or its successors or assigns, or as a court
     of competent jurisdiction may direct, in respect of any surplus then
     remaining from such proceeds.

     Section 13. Release of the Initial Shares; Termination of Tranche C
Security Interest; Release of Tranche C Collateral.

     (a) Upon the execution and delivery of this Agreement by the parties hereto
and the satisfaction of the conditions set forth in Section 3.01 of the Credit
Agreement (other than the condition set forth in clause 3.01(f)), all
certificates representing the Initial Shares and all other shares of AES Common
Stock delivered to the Collateral Agent by the Pledgor pursuant to the Original
Pledge Agreement (the "AES Shares") shall be released by the Collateral Agent
and the


                                       8
<PAGE>


Collateral Agent will, at the expense of the Pledgor, execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence the
release of the AES Shares.

     (b) Upon the repayment in full of all Tranche C Secured Obligations, the
Tranche C Security Interest shall terminate and all rights to the Tranche C
Collateral shall revert to the Pledgor. At any time and from time to time prior
to such termination of the Tranche C Security Interest, the Collateral Agent may
release any of the Tranche C Collateral with the prior written consent of the
Required Tranche C Term Loan Banks. Upon such termination or release of the
Tranche C Security Interest, the Collateral Agent will, at the expense of the
Pledgor, execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence the termination of the Tranche C Security
Interest or the release of such Tranche C Collateral, as the case may be.

     (c) Upon the sale, lease, transfer or other disposition of the Intermediate
EDC Shareholder in accordance with the terms of the Credit Agreement (including,
without limitation, as result of the sale, in accordance with the terms of the
Credit Agreement, of all of the Equity Interests of the Pledgor), the security
interest in the Tranche C Collateral shall automatically terminate and the
Collateral Agent shall, at the Pledgor's expense, execute and deliver to the
Pledgor such documents as the Pledgor may reasonably request to evidence the
release of the Tranche C Collateral from the assignment and security interest
granted hereunder.

     Section 14. Notices.

     All notices, communications and distributions hereunder shall be given in
accordance with Section 10.01 of the Credit Agreement.

     Section 15. Waivers; Non-exclusive Remedies.

     No failure on the part of the Collateral Agent to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Collateral Agent of any right under the Credit Agreement or this
Agreement preclude any other or further exercise thereof or the exercise of any
other right. The rights in this Agreement and the Credit Agreement are
cumulative and are not exclusive of any other remedies provided by law.

     Section 16. Successors and Assigns; Continuing Security Interest.

     This Agreement is for the benefit of the Collateral Agent and the Tranche C
Secured Parties and their successors and assigns, and in the event of an
assignment of all or any of the Tranche C Secured Obligations, the rights
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Agreement shall be binding on the
Pledgor and its successors and assigns. The Pledgor hereby acknowledges the
grant of security interest in and to all the Collateral (other than the AES
Shares) as defined in and under the Original Pledge Agreement. Such grant of
security interest (i) shall continue in full force and effect by this amendment
and restatement of the Original Pleldge Agreement and (ii) is hereby ratified
and confirmed in all respects.


                                       9
<PAGE>


     Section 17. Changes in Writing.

     Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated except in accordance with Section 10.05 of the Credit
Agreement.

     Section 18. New York Law.

     This Agreement shall be construed in accordance with and governed by the
laws of the State of New York, except as otherwise required by mandatory
provisions of law and except to the extent that remedies provided by the laws of
any jurisdiction other than New York are governed by the laws of such
jurisdiction.

     Section 19. Severability.

     If any provision hereof is invalid or unenforceable in any jurisdiction,
then, to the fullest extent permitted by law (a) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in order to carry out the intentions of the parties hereto
as nearly as may be possible and (b) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.

     Section 20. Concerning the Collateral Agent.

     The provisions of Section 10.03, Section 8.04 and Article 7 of the Credit
Agreement shall inure to the benefit of the Collateral Agent in respect of this
Agreement and shall be binding upon the parties to the Credit Agreement in such
respect. In furtherance and not in derogation of the rights, privileges and
immunities of the Collateral Agent therein set forth:

     (a) The Collateral Agent is authorized to take all such action as is
provided to be taken by it as Collateral Agent hereunder and all other action
reasonably incidental thereto. As to any matters not expressly provided for
herein (including any determination to exercise remedies hereunder, and the
timing and methods of realization upon the Tranche C Collateral) the Collateral
Agent shall act or refrain from acting in accordance with written instructions
from the Required Tranche C Term Loan Banks or, in the absence of such
instructions, in accordance with its discretion.

     (b) The Collateral Agent shall not be responsible for the existence,
genuineness or value of any of the Tranche C Collateral or for the validity,
perfection, priority or enforceability of the Tranche C Security Interests in
any of the Tranche C Collateral, whether impaired by operation of law or by
reason of any action or omission to act on its part hereunder. The Collateral
Agent shall have no duty to ascertain or inquire as to the performance or
observance of any of the terms of this Agreement by the Pledgor.

     Section 21. Appointment of Co-Agents.

     At any time or times, in order to comply with any legal requirement in any
jurisdiction, the Agent may appoint another bank or trust company or one or more
other persons, either to act as co-agent or co-agents, jointly with the
Collateral Agent, or to act as separate agent or agents


                                       10
<PAGE>


on behalf of the Tranche C Secured Parties with such power and authority as may
be necessary for the effectual operation of the provisions hereof and may be
specified in the instrument of appointment (which may, in the discretion of the
Collateral Agent, include provisions for the protection of such co-agent or
separate agent similar to the provisions of Section 20).



































                                       11
<PAGE>


     IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
caused this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.


                                        AES EDC FUNDING II LLC


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:



                                        CITICORP USA, INC., as Collateral Agent


                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:





                                       12

</TEXT>
</DOCUMENT>
</SUBMISSION>
