Document:

EXHIBIT 4.5

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                              THE AES CORPORATION
                                 as the Company

                                      and

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

                                   as Trustee

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                       Contingent Value Rights Agreement

                         Dated as of December 13, 2002

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

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                              TABLE OF CONTENTS(1)
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                                   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

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     1 Note: The Table of Contents shall not for any purposes be deemed to be a
part of the Agreement.

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                                   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

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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

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     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.

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     "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

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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.

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     "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.

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     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

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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;

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     (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.

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     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

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<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.

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<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

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<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.

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<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<PAGE>
                                                                    Exhibit 4.2

                          THE PHOENIX COMPANIES, INC.

                                      AND

                                 SUNTRUST BANK,

                                   AS TRUSTEE

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

                          SUPPLEMENTAL INDENTURE NO. 1

                         DATED AS OF DECEMBER 20, 2002

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

<PAGE>
         THIS SUPPLEMENTAL INDENTURE No. 1 (this "SUPPLEMENTAL INDENTURE NO.
1"), dated as of December 20, 2002, is between THE PHOENIX COMPANIES, INC., a
Delaware corporation (the "COMPANY"), and SUNTRUST BANK, a Georgia banking
corporation, as Trustee (the "TRUSTEE").

                                   RECITALS

         WHEREAS, the Company has heretofore executed and delivered to the
Trustee a Subordinated Indenture dated as of December __, 2002 (the "BASE
INDENTURE" and together with this Supplemental Indenture No. 1, the
"INDENTURE"), providing for the issuance from time to time of series of the
Company's Securities (as defined in the Base Indenture);

            WHEREAS, Section 901(4) of the Base Indenture provides for the
Company and the Trustee to enter into an indenture supplemental to the Base
Indenture to establish the form or terms of Securities of any series as
permitted by Sections 201 or 301 of the Base Indenture;

            WHEREAS, pursuant to Section 301 of the Base Indenture, the Company
wishes to provide for the issuance of a new series of Securities to be known as
its [__]% Notes due 2008 (the "NOTES"), the form and terms of such Notes and
the terms, provisions and conditions thereof to be set forth as provided in
this Supplemental Indenture No. 1;

         WHEREAS, the Company has requested that the Trustee execute and
deliver this Supplemental Indenture No. 1 and all requirements necessary to
make this Supplemental Indenture No. 1 a valid, binding and enforceable
instrument in accordance with its terms, and to make the Notes, when executed
by the Company and authenticated and delivered by the Trustee, the valid,
binding and enforceable obligations of the Company, have been done and
performed, and the execution and delivery of this Supplemental Indenture No. 1
has been duly authorized in all respects.

            NOW, THEREFORE, in consideration of the covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

                                   ARTICLE 1
                                  DEFINITIONS

         Section 1.01      Relation to Base Indenture. This Supplemental
Indenture No. 1 constitutes an integral part of the Base Indenture.

                                       1
<PAGE>
         Section 1.02.     Definition Of Terms. For all purposes of this
Supplemental Indenture No. 1:

                  (a)      Capitalized terms used herein without definition
         shall have the meanings specified in the Base Indenture, or, if not
         defined in the Base Indenture, in the Purchase Contract Agreement, the
         Pledge Agreement or the Remarketing Agreement;

                  (b)      a term defined anywhere in this Supplemental
         Indenture No. 1 has the same meaning throughout;

                  (c)      the singular includes the plural and vice versa;

                  (d)      headings are for convenience of reference only and
         do not affect interpretation;

                  (e)      the following terms have the meanings given to them
         in this Section 1.02(e):

         "ACCOUNTING EVENT" means the receipt at any time prior to the earlier
of the date of any Successful Remarketing and the Purchase Contract Settlement
Date by the audit committee of the Board of Directors of a written report in
accordance with Statement on Auditing Standards ("SAS") No. 97, "Amendment to
SAS No. 50 - Reports on the Application of Accounting Principles", from the
Company's independent auditors, provided at the request of the management of
the Company, to the effect that, as a result of a change in accounting rules
after the date hereof, the Company must either (i) account for the Purchase
Contract as a derivative under SFAS 133 or (ii) account for the Units using the
if-converted method under SFAS 128, and that such accounting treatment will
cease to apply upon redemption of the Notes.

         "APPLICABLE PRINCIPAL AMOUNT" means the aggregate principal amount of
the Notes that are components of Corporate Units on the Special Event
Redemption Date.

         "BENEFICIAL OWNER" shall have the meaning specified in the Purchase
Contract Agreement.

         "BUSINESS DAY" shall have the meaning specified in the Purchase
Contract Agreement.

         "COMPOUNDED INTEREST" shall have the meaning set forth in Section
2.06(a).

                                       2
<PAGE>
         "CORPORATE UNITS" shall have the meaning specified in the Purchase
Contract Agreement.

         "COUPON RATE" shall have the meaning set forth in Section 2.05(a).

         "DEFERRED INTEREST" shall have the meaning set forth in Section
2.06(a).

         "DEPOSITARY" means a clearing agency registered under Section 17A of
the Securities Exchange Act of 1934, as amended, that is designated to act as
Depositary for the Corporate Units pursuant to the Purchase Contract Agreement.

         "DEPOSITARY PARTICIPANT" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Depositary effects
book entry transfers and pledges of securities deposited with the Depositary.

         "EXTENSION PERIOD" shall have the meaning set forth in Section
2.06(a).

         "FINAL REMARKETING PRICE" shall have the meaning set forth in Section
8.02(b).

         "GLOBAL NOTES" shall have the meaning set forth in Section 2.04.

         "INTEREST PAYMENT DATE" shall have the meaning set forth in Section
2.05(b).

         "MATURITY DATE" shall have the meaning specified in Section 2.02.

         "PLEDGE AGREEMENT" means the Pledge Agreement, dated as of December
20, 2002 among the Company, SunTrust Bank, as Collateral Agent, Custodial Agent
and Securities Intermediary, and SunTrust Bank, as Purchase Contract Agent and
attorney-in-fact for the Holders of the Purchase Contracts, as amended from
time to time.

         "PURCHASE CONTRACT AGREEMENT" means the Purchase Contract Agreement,
dated as of December 20, 2002, between the Company and SunTrust Bank, as
purchase contract agent, as amended from time to time.

         "PURCHASE CONTRACT SETTLEMENT DATE" means February 16, 2006.

         "PUT PRICE" shall have the meaning set forth in Section 8.05.

         "PUT RIGHT" shall have the meaning set forth in Section 8.05.

         "QUOTATION AGENT" means any primary U.S. government securities dealer
selected by the Company.

                                       3
<PAGE>
         "RECORD DATE" means, with respect to any Interest Payment Date for the
Notes, the first Business Day of the calendar month in which such Interest
Payment Date falls; provided that the Company may, at its option, select any
other day as the Record Date for any Interest Payment Date so long as such
Record Date selected is more than one Business Day but less than sixty Business
Days prior to such Interest Payment Date.

         "REDEMPTION AMOUNT" shall mean, for each Note, an amount equal to the
product of the principal amount of that Note and a fraction, the numerator of
which is the Treasury Portfolio Purchase Price and the denominator of which is
the Applicable Principal Amount.

         "REDEMPTION PRICE" shall mean, for each Note, the Redemption Amount
plus any accrued and unpaid interest, including Deferred Interest, on such Note
to but excluding the Special Event Redemption Date.

         "REMARKETED NOTES" shall have the meaning specified in the Remarketing
Agreement.

          "REMARKETING AGENT" means Morgan Stanley & Co. Incorporated, or any
successor thereto or replacement Remarketing Agent appointed by the Company
pursuant to the Remarketing Agreement.

         "REMARKETING AGREEMENT" means the Remarketing Agreement, dated as of
December 20, 2002, among the Company, Morgan Stanley & Co. Incorporated, as
Remarketing Agent and SunTrust Bank, as Purchase Contract Agent, as amended
from time to time.

         "REMARKETING FEE" shall have the meaning specified in the Remarketing
Agreement.

         "REMARKETING PRICE" shall have the meaning set forth in Section
8.02(a).

          "RESET EFFECTIVE DATE" means the date three Business Days following
the date of a Successful Remarketing pursuant to which the Coupon Rate is reset
to a Reset Rate.

         "RESET RATE" means the interest rate per annum on the Notes determined
by the Remarketing Agent (i) in the case of a Successful Remarketing prior to
the Final Remarketing Date, as the rate necessary to remarket the Remarketed
Notes at a price per Remarketed Note such that the aggregate price for the
Remarketed Notes is equal to approximately 100.25% (but not less than 100%, net
of any Remarketing Fee and any other fees and expenses) of the sum of the
Treasury Portfolio Purchase Price and Separate Notes Purchase Price, and (ii)
in the case of

                                       4
<PAGE>
a Successful Remarketing on the Final Remarketing Date, as the rate necessary
to remarket the Remarketed Notes at a price per Remarketed Note such that the
aggregate price for the Remarketed Notes is equal to approximately 100.25% (but
not less than 100%, net of any Remarketing Fee and any other fees and expenses)
of the aggregate principal amount of the Remarketed Notes; provided that if
there are no Corporate Units outstanding and none of the Holders elect to have
Separate Notes held by them remarketed, or in the case of a Failed Remarketing,
the interest rate payable on the Notes will not be reset and the interest rate
payable on the Notes shall continue to be the Coupon Rate; provided further
that in no event shall the Reset Rate (i) be less than the Coupon Rate or (ii)
exceed the maximum rate, if any, permitted by applicable law.

         "SEPARATE NOTES" means Notes that are no longer a component of
Corporate Units.

         "SPECIAL EVENT" shall mean either a Tax Event or an Accounting Event.

         "SPECIAL EVENT REDEMPTION" means the redemption of the Notes pursuant
to the terms hereof following the occurrence of a Special Event.

         "SPECIAL EVENT REDEMPTION DATE" shall have the meaning set forth in
Section 3.01.

         "TAX EVENT" means the receipt by the Company of an opinion of counsel,
rendered by a law firm having a recognized national tax practice, at any time
prior to the earlier of (x) the date of any Successful Remarketing and (y) the
Purchase Contract Settlement Date, to the effect that, as a result of any
amendment to, change in or announced proposed change in the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative decision, pronouncement, judicial decision or action
interpreting or applying such laws or regulations, which amendment or change is
effective or which proposed change, pronouncement, action or decision is
announced on or after the date hereof, there is more than an insubstantial
increase in the risk that interest payable by the Company on the Notes is not,
or within 90 days of the date of such opinion, will not be, deductible by the
Company, in whole or in part, for United States federal income tax purposes.

         "TREASURY PORTFOLIO" means a portfolio of (1) U.S. treasury securities
(or principal or interest strips thereof) that mature on or prior to February
15, 2006 in an aggregate amount at maturity equal to the Applicable Principal
Amount, and (2) (x) in the case of a Successful Remarketing prior to the Final
Remarketing Date, for the scheduled Interest Payment Date on the Purchase
Contract Settlement Date, U.S. treasury securities (or principal or interest
strips thereof)

                                       5
<PAGE>
that mature on or prior to February 15, 2006 in an aggregate amount equal to
the aggregate interest payment (assuming no reset of the interest rate) that
would have been due on the Purchase Contract Settlement Date on the Applicable
Principal Amount, and (y) in the case of a Special Event Redemption, for each
scheduled Interest Payment Date that occurs after the Special Event Redemption
Date to and including the Purchase Contract Settlement Date, U.S. treasury
securities (or principal or interest strips thereof) that mature on or prior to
the business day immediately preceding such scheduled Interest Payment Date in
an aggregate amount at maturity equal to the aggregate interest payment
(assuming no reset of the interest rate) that would have been due on such
scheduled Interest Payment Date on the Applicable Principal Amount.

         "TREASURY PORTFOLIO PURCHASE PRICE" means the lowest aggregate
ask-side price quoted by a Primary Treasury Dealer to the Quotation Agent
between 9:00 a.m. and 11:00 a.m. (New York City time) (i) in the case of a
Special Event Redemption, on the third Business Day immediately preceding the
Special Event Redemption Date for the purchase of the applicable Treasury
Portfolio for settlement on the Special Event Redemption Date, and (ii) in the
case of any Successful Remarketing prior to the Final Remarketing Date, on the
date of such Successful Remarketing for the purchase of the applicable Treasury
Portfolio for settlement on the third Business Day immediately following the
date of such Successful Remarketing.

         The terms "COMPANY," "TRUSTEE," "INDENTURE," "BASE INDENTURE" and
"NOTES" shall have the respective meanings set forth in the recitals to this
Supplemental Indenture No. 1 and the paragraph preceding such recitals.

                                   ARTICLE 2
                   GENERAL TERMS AND CONDITIONS OF THE NOTES

         Section 2.01.     Designation and Principal Amount. There is hereby
authorized a series of Securities designated as [__]% Notes due February 16,
2008 limited in aggregate principal amount to $130,000,000 (or up to
$149,500,000 to the extent that the Underwriters' over-allotment option is
exercised). The Notes may be issued from time to time upon written order of the
Company for the authentication and delivery of Notes pursuant to Section 303 of
the Base Indenture.

         Section 2.02.     Maturity. Unless a Special Event Redemption occurs
prior to the Maturity Date (defined below), the date upon which the Notes shall
become due and payable at final maturity, together with any accrued and unpaid
interest, is February 16, 2008 (the "MATURITY DATE").

                                       6
<PAGE>
         Section 2.03.     Form, Payment and Appointment. Except as provided in
Section 2.04, the Notes shall be issued in fully registered, certificated form,
bearing identical terms. Principal of and interest on the Notes will be
payable, the transfer of such Notes will be registrable, and such Notes will be
exchangeable for Notes of a like aggregate principal amount bearing identical
terms and provisions, at the office or agency of the Company maintained for
such purpose in the Borough of Manhattan, The City of New York, which shall
initially be the Corporate Trust Office of the Trustee; provided, however, that
payment of interest may be made at the option of the Company by check mailed to
the Holder at such address as shall appear in the Security Register or by wire
transfer to an account appropriately designated by the Holder entitled to
payment.

         No service charge shall be made for any registration of transfer or
exchange of the Notes, but the Company may require payment from the Holder of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.

         The Security Registrar and Paying Agent for the Notes shall initially
be the Trustee.

         The Notes shall be issuable in denominations of $25 and integral
multiples of $25 in excess thereof.

         Section 2.04.     Global Notes. Notes that are no longer a component
of the Corporate Units (as defined in the Purchase Contract Agreement) and are
released from the Collateral Account (as defined in the Pledge Agreement) will
be issued in permanent global form (a "GLOBAL NOTE"), and if issued as one or
more Global Notes, the Depositary shall be The Depository Trust Company or such
other depositary as any officer of the Company may from time to time designate.
Unless and until such Global Note is exchanged for Notes in certificated form,
Global Notes may be transferred, in whole but not in part, and any payments on
the Notes shall be made, only to the Depositary or a nominee of the Depositary,
or to a successor Depositary selected or approved by the Company or to a
nominee of such successor Depositary.

         Section 2.05.     Interest. (a) The Notes will bear interest initially
at the rate of [__]% per year (the "COUPON RATE") from the original date of
issuance through and including the earlier of (i) the Maturity Date and (ii)
the day immediately preceding any Reset Effective Date. In the event of a
Successful Remarketing of the Notes, the Coupon Rate may be reset by the
Remarketing Agent at the appropriate Reset Rate with effect from the related
Reset Effective Date, as set forth in Section 8.03. If the Coupon Rate is so
reset, the Notes will bear interest at the Reset Rate from the related Reset
Effective Date until the principal thereof and interest thereon is paid or duly
made available for payment

                                       7
<PAGE>
and shall bear interest, to the extent permitted by law, compounded quarterly,
on any overdue principal and payment of interest at the Coupon Rate through and
including the day immediately preceding the Reset Effective Date and at the
Reset Rate thereafter.

         (b)      Subject to Section 2.06, interest on the Notes shall be
payable quarterly in arrears on February 16, May 16, August 16 and November 16
of each year (each, an "INTEREST PAYMENT DATE"), commencing February 16, 2003,
to the Person in whose name such Note, or any predecessor Note, is registered
at the close of business on the Record Date for such Interest Payment Date.
Interest on the Notes shall accrue from December 20, 2002.

         (c)      The amount of interest payable for any full quarterly period
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. The amount of interest payable for any period shorter than a full
quarterly period for which interest is computed will be computed on the basis
of a 30-day month and, for any period less than a month, on the basis of the
actual number of days elapsed per 30-day month. In the event that any scheduled
Interest Payment Date falls on a day that is not a Business Day, then payment
of interest payable on such Interest Payment 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 calendar year, then such payment will be made on the preceding
Business Day.

         Section 2.06.     Extension Of Interest Payment Period.

         (a)      The Company shall have the right at any time and from time to
time, so long as no Event of Default with respect to the Notes has occurred and
is continuing, to defer payments of interest by extending the interest payment
period of the Notes for a period not extending beyond November 16, 2005 (an
"EXTENSION PERIOD"), during which Extension Period no interest shall be due and
payable. To the extent permitted by applicable law, interest, the payment of
which has been deferred because of the extension of the interest payment period
pursuant to this Section 2.06, will accrue additional interest at the rate of
[___]% per annum to but excluding the date of payment, compounded quarterly for
each quarter of such Extension Period ("COMPOUNDED INTEREST"). At the end of
such Extension Period, which must be an Interest Payment Date, the Company
shall pay all interest accrued and unpaid on the Notes and Compounded Interest
(together, "DEFERRED INTEREST") that shall be payable to the Person in whose
name such Note, or any predecessor Note, is registered at the close of business
on the Record Date for such Interest Payment Date. Prior to the expiration of
any Extension Period, the Company may further extend such period, provided that
such period together with all such previous and further extensions thereof
shall not extend beyond November 16, 2005. Upon termination of any Extension

                                       8
<PAGE>
Period and the payment of all Deferred Interest then due, the Company may
commence a new Extension Period, provided that such Extension Period, together
with all extensions thereof, may not extend beyond November 16, 2005. No
interest shall be due and payable during an Extension Period except at the end
thereof, except that prior to the end of such Extension Period, the Company, at
its option, may prepay on any Interest Payment Date all or any portion of the
interest accrued during the then elapsed portion of such Extension Period.

         (b)      The Company shall give written notice to the Trustee (and the
Trustee shall give notice thereof to Holders of Notes) of its election of any
Extension Period (or any further extension thereof) at least five Business Days
before the earlier of (i) the Interest Payment Date on which interest would
have been payable except for the election to begin or extend the Extension
Period, (ii) the Record Date for such Interest Payment Date, or (ii) the date
the Trustee is required to give notice to any securities exchange or to Holders
of Notes of such Record Date or such Interest Payment Date.

         (c)      In addition to the covenants contained in Article Ten of the
Base Indenture, the Company covenants and agrees for the benefit of the holders
of the Notes that, during the continuance of any Extension Period, the Company
shall not:

                  (i)      declare or pay dividends on, make other
         distributions with respect to, or redeem, purchase or acquire, or make
         a liquidation payment with respect to, any shares of the Company's
         capital stock;

                  (ii)     permit any Subsidiary of the Company to declare or
         pay dividends on, make other distributions with respect to, or redeem,
         purchase or acquire, or make a liquidation payment with respect to,
         any shares of the Company's or such Subsidiary's capital stock;
         provided that the foregoing will not restrict any Subsidiary of the
         Company from declaring or paying such dividends, or making such
         distributions, to the Company or any other Subsidiary of the Company;

                  (iii)    make any payment of principal, interest or premium,
         if any, or repay, repurchase or redeem any security that ranks pari
         passu with the Notes; or

                  (iv)     make any payment of principal, interest or premium,
         if any, or repay, repurchase or redeem any debt securities that rank
         subordinate in right of payment to the Notes or make any guarantee
         payments with respect to any guarantee by the Company of the
         Indebtedness of any Subsidiary of the Company if such guarantee ranks
         subordinate in right of payment to the Notes.

                                       9
<PAGE>
         Section 2.07.     Subordination.

         (a)      The provisions of Article Twelve of the Base Indenture shall
initially apply to the Notes.

         (b)      Notwithstanding Section 2.07(a), from and after November 16,
2005, unless an Event of Default set forth in Sections 501(4) or (5) of the
Base Indenture shall have occurred, (i) the provisions of Article Twelve of the
Base Indenture shall no longer apply to the Notes, (ii) the Notes will rank
equally in right of payment to all of the then-existing and future
unsubordinated Indebtedness of the Company and (iii) the Notes shall be
considered Senior Indebtedness pursuant to the definition thereof in the Base
Indenture and for the purposes of the application of Article Twelve of the Base
Indenture to any Securities, other than the Notes, issued pursuant to the Base
Indenture.

         Section 2.08.     No Defeasance. The provisions of Article 13 of the
Base Indenture shall not apply to the Notes.

         Section 2.09.     No Sinking Fund. The Notes are not entitled to the
benefit of any sinking fund.

                                   ARTICLE 3
                            REDEMPTION OF THE NOTES

         Section 3.01.     Special Event Redemption. If a Special Event shall
occur and be continuing, the Company may, at its option, redeem the Notes in
whole, but not in part, on any Interest Payment Date prior to the earlier of
the date of a Successful Remarketing or the Purchase Contract Settlement Date,
at a price per Note equal to the Redemption Price, payable on the date of
redemption (the "SPECIAL EVENT REDEMPTION DATE") to the Holders of the Notes
registered at the close of business on the Record Date for such Interest
Payment Date. If the Company so elects to redeem the Notes, the Company shall
appoint the Quotation Agent to assist the Collateral Agent in purchasing the
applicable Treasury Portfolio, in consultation with the Company. Notice of any
Special Event Redemption will be mailed by the Company (with a copy to the
Trustee) at least 30 days but not more than 60 days before the Special Event
Redemption Date to each registered Holder of the Notes at its registered
address. In addition, the Company shall notify the Collateral Agent in writing
that a Special Event has occurred and that the Company intends to redeem the
Notes on the Special Event Redemption Date. Unless the Company defaults in the
payment of the Redemption Price, on and after the Special Event Redemption
Date, (a) interest shall cease to accrue on the Notes, (b) the Notes shall
become due and payable at

                                      10
<PAGE>
the Redemption Price, and (c) the Notes shall be void and all rights of the
Holders in respect of the Notes shall terminate and lapse (other than the right
to receive the Redemption Price upon surrender of such Notes but without
interest on such Redemption Price). Following the notice of a Special Event
Redemption, neither the Company nor the Trustee shall be required to register
the transfer of or exchange the Notes to be redeemed.

         Except as set forth in this Section 3.01, the Notes shall not be
redeemable prior to the Maturity Date. The provisions of this Article 3 shall
supersede any conflicting provisions contained in Article Eleven of the Base
Indenture.

         Section 3.02.     Redemption Procedures. On or prior to the Special
Event Redemption Date, the Company shall deposit with the Trustee immediately
available funds in an amount sufficient to pay, on the Special Event Redemption
Date, the aggregate Redemption Price for all outstanding Notes. In exchange for
any Notes surrendered for redemption on or after the Special Event Redemption
Date, the Trustee shall pay an amount equal to the Redemption Price (a) to the
Collateral Agent, in the case of Notes that are included in Corporate Units,
which amount shall be applied by the Collateral Agent in accordance with the
terms of the Pledge Agreement, and (b) to the holders of the Separate Notes, in
the case of Separate Notes.

                                   ARTICLE 4
                                  FORM OF NOTE

         Section 4.01.     Form Of Note. The Notes and the Trustee's
Certificate of Authentication to be endorsed thereon are to be substantially in
the forms attached as Exhibit A hereto, with such changes therein as the
officers of the Company executing the Notes (by manual or facsimile signature)
may approve, such approval to be conclusively evidenced by their execution
thereof.

                                   ARTICLE 5
                            ORIGINAL ISSUE OF NOTES

         Section 5.01.     Original Issue Of Notes. Notes in the aggregate
principal amount of $130,000,000 (or up to $149,500,000 to the extent that the
Underwriters' over-allotment option is exercised) may from time to time, upon
execution of this Supplemental Indenture No. 1, be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Notes to or upon the written order of the Company

                                      11
<PAGE>
pursuant to Section 303 of the Base Indenture without any further action by the
Company (other than as required by the Base Indenture).

                                   ARTICLE 6
                            ORIGINAL ISSUE DISCOUNT

         Section 6.01.     Original Issue Discount. The Company shall file with
the Trustee promptly at the end of each calendar year (i) a written notice
specifying the amount of original issue discount (including daily rates and
accrual periods) accrued on Notes that are Outstanding as of the end of the
year and (ii) such other specific information relating to such original issue
discount as may then be relevant under the Internal Revenue Code of 1986, as
amended from time to time.

                                   ARTICLE 7
                                 MISCELLANEOUS

         Section 7.01.     Ratification Of Indenture. The Indenture, as
supplemented by this Supplemental Indenture No. 1, is in all respects ratified
and confirmed, and this Supplemental Indenture No. 1 shall be deemed part of
the Indenture in the manner and to the extent herein and therein provided.

         Section 7.02.     Trustee Not Responsible For Recitals. The recitals
herein contained are made by the Company and not by the Trustee, and the
Trustee assumes no responsibility for the correctness thereof. The Trustee
makes no representation as to the validity or sufficiency of this Supplemental
Indenture No. 1.

         Section 7.03.     New York Law To Govern. THIS SUPPLEMENTAL INDENTURE
NO. 1 AND EACH NOTE SHALL BE DEEMED TO BE CONTRACTS MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
THEREOF.

         Section 7.04.     Separability. In case any one or more of the
provisions contained in this Supplemental Indenture or in the Notes shall for
any reason be held to be invalid, illegal or unenforceable in any respect,
then, to the extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Supplemental
Indenture No. 1 or of the Notes, but this Supplemental Indenture No. 1 and the
Notes shall be construed as if such invalid or illegal or unenforceable
provision had never been contained herein or therein.

                                      12
<PAGE>
         Section 7.05.     Counterparts. This Supplemental Indenture may be
executed in any number of counterparts each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.

                                   ARTICLE 8
                                  REMARKETING

         Section 8.01.     Remarketing Procedures. (a) Unless a Special Event
Redemption or a Successful Remarketing has occurred prior to the applicable
Remarketing Date, the Company shall engage the Remarketing Agent pursuant to
the Remarketing Agreement for the Remarketing of the Notes. The Company will
request, not later than seven nor more than 15 calendar days prior to the
applicable Remarketing Date, that the Depositary or its nominee notify the
Beneficial Owners or Depositary Participants holding Separate Notes, Corporate
Units and Treasury Units of the procedures to be followed in the applicable
Remarketing.

         (b)      Each Holder of Separate Notes may elect to have Separate
Notes held by such Holder remarketed in any Remarketing. A Holder making such
an election must, pursuant to the Pledge Agreement, notify the Custodial Agent
and deliver such Separate Notes to the Custodial Agent prior to 5:00 P.M. (New
York City time) on or prior to the fifth Business Day immediately preceding the
applicable Remarketing Date (but no earlier than the Interest Payment Date
immediately preceding the applicable Remarketing Date). Any such notice and
delivery may not be conditioned upon the level at which the Reset Rate is
established in the Remarketing. Any such notice and delivery may be withdrawn
prior to 5:00 P.M. (New York City time) on the fifth Business Day immediately
preceding the applicable Remarketing Date in accordance with the provisions set
forth in the Pledge Agreement. Any such notice and delivery not withdrawn by
such time will be irrevocable with respect to such Remarketing. Pursuant to
Section 5.07(c) of the Pledge Agreement, promptly after 11:00 A.M., New York
City time, on the Business Day immediately preceding the applicable Remarketing
Date, the Custodial Agent, based on the notices and deliveries received by it
prior to such time, shall notify the Remarketing Agent of the principal amount
of Separate Notes to be tendered for remarketing and shall cause such Separate
Notes to be presented to the Remarketing Agent. Under Section 5.02 of the
Purchase Contract Agreement, Notes that are components of Corporate Units will
be deemed tendered for Remarketing and will be remarketed in accordance with
the terms of the Remarketing Agreement.

         (c)      The right of each Holder of Remarketed Notes to have such
Notes remarketed and sold on any Remarketing Date shall be limited to the
extent that

                                      13
<PAGE>
(i) the Remarketing Agent conducts a Remarketing pursuant to the terms of the
Remarketing Agreement, (ii) a Special Event Redemption has not occurred prior
to such Remarketing Date, (iii) the Remarketing Agent is able to find a
purchaser or purchasers for Remarketed Notes at the Remarketing Price or the
Final Remarketing Price, as the case may be, and (iv) the purchaser or
purchasers deliver the purchase price therefor to the Remarketing Agent as and
when required.

         (d)      Neither the Trustee, the Company nor the Remarketing Agent
shall be obligated in any case to provide funds to make payment upon tender of
Notes for remarketing.

         Section 8.02.     Remarketing. (a) Unless a Special Event Redemption
has occurred prior to the Initial Remarketing Date, on the Initial Remarketing
Date, the Remarketing Agent shall, pursuant and subject to the terms of the
Remarketing Agreement, use its reasonable efforts to remarket the Remarketed
Notes at a price (the "REMARKETING PRICE") equal to approximately 100.25% (or,
if the Remarketing Agent is unable to remarket the Remarketed Notes at such
rate, at a rate below 100.25% in the discretion of the Remarketing Agent, but
in no event less than 100%, net of any Remarketing Fee and any other fees and
expenses) of the sum of the Treasury Portfolio Purchase Price and the Separate
Note Purchase Price.

         (b)      In the case of a Failed Initial Remarketing and unless a
Special Event Redemption has occurred prior to the Second Remarketing Date, on
the Second Remarketing Date, the Remarketing Agent shall use its reasonable
efforts to remarket the Remarketed Notes at the Remarketing Price. In the case
of a Failed Second Remarketing and unless a Special Event Redemption has
occurred prior to the Third Remarketing Date, on the Third Remarketing Date,
the Remarketing Agent shall use its reasonable efforts to remarket the
Remarketed Notes at the Remarketing Price. In the case of a Failed Third
Remarketing and unless a Special Event Redemption has occurred prior to the
Final Remarketing Date, on the Final Remarketing Date, the Remarketing Agent
shall use its reasonable efforts to remarket the Remarketed Notes at a price
(the "FINAL REMARKETING PRICE") equal to approximately 100.25% (or, if the
Remarketing Agent is unable to remarket the Remarketed Notes at such rate, at a
rate below 100.25% in the discretion of the Remarketing Agent, but in no event
less than 100%, net of any Remarketing Fee and any other fees and expenses) of
the aggregate principal amount of the Remarketed Notes. It is understood and
agreed that Remarketing on any Remarketing Date will be considered successful
and no further attempts will be made if the resulting proceeds are at least
100% (net of any Remarketing Fee and any other fees and expenses) of the sum of
the Treasury Portfolio Purchase Price and the Separate Note Purchase Price, in
the case of a

                                      14
<PAGE>
Remarketing other than the Final Remarketing, or 100% (net of any Remarketing
Fee and any other fees and expenses) of the aggregate principal amount of the
Remarketed Notes, in the case of the Final Remarketing.

         Section 8.03.     Reset Rate. (a) In connection with each Remarketing,
the Remarketing Agent shall determine the Reset Rate (rounded to the nearest
one-thousandth (0.001) of one percent per annum) that the Remarketed Notes
should bear in order to have an aggregate market value equal to the Remarketing
Price or the Final Remarketing Price, as the case may be, and that in the sole
reasonable discretion of the Remarketing Agent will enable it to remarket all
of the Remarketed Notes at the Remarketing Price or Final Remarketing Price, as
the case may be, in such Remarketing.

         (b)      Anything herein to the contrary notwithstanding, the Reset
Rate shall in no event (i) be less than the Coupon Rate or (ii) exceed the
maximum rate permitted by applicable law and the Remarketing Agent shall have
no obligation to determine whether there is any limitation under applicable law
on the Reset Rate or, if there is any such limitation, the maximum permissible
Reset Rate on the Notes and shall rely solely upon written notice from the
Company (which the Company agrees to provide prior to the eighth Business Day
before the Initial Remarketing Date) as to whether or not there is any such
limitation and, if so, the maximum permissible Reset Rate.

         (c)      In the event of a Failed Remarketing or if no Notes are
included in Corporate Units and none of the holders of the Separate Notes elect
to have their Notes remarketed in any Remarketing, the applicable interest rate
on the Notes will not be reset and will continue to be the Coupon Rate.

         (d)      In the event of a Successful Remarketing, the Coupon Rate
shall be reset at the Reset Rate as determined by the Remarketing Agent under
the Remarketing Agreement. The Company shall cause a notice of the Reset Rate
to be published in a daily newspaper in the English language of general
circulation in the City of New York, which is expected to be The Wall Street
Journal.

         Section 8.04.     Failed Remarketing. (a) If, by 4:00 p.m. (New York
City time) on any Remarketing Date, the Remarketing Agent is unable to remarket
all of the Remarketed Notes at the Remarketing Price or the Final Remarketing
Price, as the case may be, pursuant to the terms and conditions of the
Remarketing Agreement, a Failed Remarketing shall be deemed to have occurred,
and the Remarketing Agent shall advise, by telephone, the Depositary, the
Purchase Contract Agent and the Company, and return the Remarketed Notes to the
Collateral Agent or the Custodial Agent, as the case may be.

                                      15
<PAGE>
         (b)      The Company shall cause a notice of such Failed Remarketing
to be published in a daily newspaper in the English language of general
circulation in the City of New York, which is expected to be The Wall Street
Journal.

         Section 8.05.     Put Right. If there has not been a Successful
Remarketing prior to the Purchase Contract Settlement Date, the holders of
Notes will have the right (the "PUT RIGHT") to require the Company to purchase
their Notes on April 1, 2006 (the "EXERCISE DATE") upon a notice to the Trustee
on or prior to the fifth Business Day prior to the Exercise Date, at a price
per Note equal to $25.00 plus accrued and unpaid interest to but excluding the
Exercise Date (the "PUT PRICE"). If there has not been a Successful Remarketing
prior to the Purchase Contract Settlement Date, the Company shall notify, not
more than ten (10) days after the Purchase Contract Settlement Date, Beneficial
Owners of the Notes of the procedures to be followed if any Holder elects to
exercise its Put Right.

         Section 8.06.     Additional Event of Default. In addition to the
events listed as Events of Default in Section 501 of the Base Indenture, it
shall be an additional Event of Default with respect to the Notes, if the
Company defaults in the payment of the Put Price with respect to any Note
following the exercise of the Put Right by any Holder in accordance with
Section 8.05.

                                   ARTICLE 9
                                 TAX TREATMENT

         Section 9.01.     Tax Treatment. The Company agrees, and by acceptance
of the Notes, each holder of Notes will be deemed to have agreed (1) for United
States federal, state and local income and franchise tax purposes to treat the
acquisition of a Corporate Unit as the acquisition of the Note and the Purchase
Contract constituting the Corporate Units and (2) to treat the Notes as
indebtedness for United States federal, state and local income and franchise
tax purposes. A Holder of Notes may obtain the amount of original issue
discount, issue date, yield to maturity, comparable yield and projected payment
schedule for the Notes, determined by the Company pursuant to Treas. Reg. Sec.
1.1275-4, by submitting a written request for it to the Company at the
following address: The Phoenix Companies, Inc., [Nancy Engberg], One American
Row, Hartford, Connecticut 06102.

                                      16
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 1 to be duly executed, as of the day and year first written
above.

                                             THE PHOENIX COMPANIES, INC.

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

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

Attest:

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

                                             SUNTRUST BANK, as
                                             Trustee

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

Attest:

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

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

                                      R-1
<PAGE>
                                                                      EXHIBIT A

[IF THIS NOTE IS TO BE A GLOBAL SECURITY, INSERT:]
THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY OR A
NOMINEE OF THE DEPOSITORY TRUST COMPANY. THIS NOTE IS EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY TRUST
COMPANY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY TO A NOMINEE OF THE DEPOSITORY TRUST COMPANY OR BY A NOMINEE OF THE
DEPOSITORY TRUST COMPANY TO THE DEPOSITORY TRUST COMPANY OR ANOTHER NOMINEE OF
THE DEPOSITORY TRUST COMPANY.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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 AN INTEREST HEREIN.

                          THE PHOENIX COMPANIES, INC.

                       [___]% Notes due February 16, 2008

                                                         CUSIP: _______________

No. _______                                                        $ __________

         THE PHOENIX COMPANIES, INC., a corporation organized and existing
under the laws of Delaware (hereinafter called the "COMPANY", which term
includes any successor corporation under the Indenture hereinafter referred

                                      R-2
<PAGE>
to), for value received, hereby promises to pay to___________, or registered
assigns, the principal sum of [up to] ___________($__________), [as set forth
in the Schedule of Increases or Decreases In Note attached hereto,] on February
16, 2008 (such date is hereinafter referred to as the "MATURITY DATE"), and to
pay interest thereon from December 20, 2002 or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, subject to
the right to defer interest as provided in the Indenture hereinafter referred
to, quarterly in arrears on February 16, May 16, August 16 and November 16
(each, an "INTEREST PAYMENT DATE") of each year, commencing February 16, 2003,
at the rate of [___]% per annum through and including the day immediately
preceding the Reset Effective Date, if any, and thereafter at the Reset Rate,
if any, on the basis of a 360-day year consisting of twelve 30-day months,
until the principal hereof is paid or duly provided for or made available for
payment, and (to the extent that the payment of such interest shall be legally
enforceable) to pay interest, compounded quarterly, at the rate of [___]% per
annum on any overdue principal and payment of interest through and including
the day immediately preceding the Reset Effective Date, if any, and thereafter
at the Reset Rate, if any. The Reset Rate, if any, shall be established
pursuant to the terms of the Indenture and the Remarketing Agreement. The
amount of interest payable for any period shorter than a full quarterly period
for which interest is computed will be computed on the basis of a 30-day month
and, for any period less than a month, on the basis of the actual number of
days elapsed per 30-day month. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Note (or one or more
Predecessor Securities) is registered at the close of business on the Record
Date for such Interest Payment Date.

         Payment of the principal of and interest on this Note will be made at
the office or agency of the Company maintained for that purpose in The City of
New York, which shall initially be the Corporate Trust Office of the Trustee,
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the Holder at such address as shall appear in the Security
Register or by wire transfer to an account appropriately designated by the
Holder entitled to payment.

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

                                      R-3
<PAGE>

         Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

                                      R-4
<PAGE>
         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

Dated:

                                             THE PHOENIX COMPANIES, INC.

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

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

Attest:

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

                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION

This is one of the Notes referred to in the within mentioned Indenture.

Dated: _____________

SUNTRUST BANK,
as Trustee

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

                                      R-5
<PAGE>
                            FORM OF REVERSE OF NOTE

         This Note is one of a duly authorized issue of securities of the
Company (herein called the "NOTES"), issued and to be issued in one or more
series under a Subordinated Indenture (the "BASE INDENTURE"), dated as of
December __, 2002, between the Company and SunTrust Bank, as Trustee (herein
called the "TRUSTEE", which term includes any successor trustee), as amended
and supplemented by Supplemental Indenture No. 1, dated as of December 20,
2002, between the Company and the Trustee (the "SUPPLEMENTAL INDENTURE NO. 1"
and together with the Base Indenture, the "INDENTURE"), to which Indenture
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Notes and of the terms upon which the Notes are, and are to be,
authenticated and delivered. This Note is one of the series designated on the
face hereof, limited in aggregate principal amount to $130,000,000 (or up to
$149,500,000 to the extent that the Underwriters' over-allotment option is
exercised).

         All terms used in this Note that are defined in the Indenture shall
have the meaning assigned to them in the Indenture.

         Subject to the terms and conditions of Section 2.06 of the
Supplemental Indenture No. 1, the Company shall have the right at any time and
from time to time, so long as no Event of Default with respect to the Notes has
occurred and is continuing, to defer payments of interest by extending the
interest payment period of the Notes for a period not extending beyond November
16, 2005 (an "EXTENSION PERIOD"), during which Extension Period no interest
shall be due and payable. To the extent permitted by applicable law, interest,
the payment of which has been deferred because of the extension of the interest
payment period pursuant to Section 2.06 of the Supplemental Indenture No. 1,
will accrue at the rate of [___]% per annum to but excluding November 16, 2005,
compounded quarterly for each quarter of such Extension Period ("COMPOUNDED
INTEREST"). At the end of such Extension Period, which must be an Interest
Payment Date, the Company shall pay all interest accrued and unpaid on the
Notes and Compounded Interest (together, "DEFERRED INTEREST") that shall be
payable to the Person in whose name such Note, or any predecessor Note, is
registered at the close of business on the Record Date for such Interest
Payment Date.

         The indebtedness evidenced by this Note is initially, to the extent
provided in the Indenture, subordinate and subject in right of payments to the
prior payment in full of all Senior Indebtedness, and this Note is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Note by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
actions as may be necessary or

                                      R-1
<PAGE>
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof,
by his acceptance hereof, waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder
of Senior Indebtedness, whether now outstanding or hereafter incurred, and
waives reliance by each such holder upon said provisions.

         Subject to the terms and conditions of the Indenture, from and after
November 16, 2005, unless an Event of Default set forth in Sections 501(4) or
(5) of the Base Indenture shall have occurred, the subordination provisions set
forth above and in Article Twelve of the Base Indenture shall no longer apply
to this Note, (ii) the indebtedness represented by this Note will rank equally
in right of payment to all of the then-existing and future unsubordinated
Indebtedness of the Company and (iii) the indebtedness represented by this Note
shall be considered Senior Indebtedness pursuant to the definition thereof in
the Base Indenture and for the purposes of the application of Article Twelve of
the Base Indenture to any Securities other than the Notes issued pursuant to
the Base Indenture.

         If a Special Event shall occur and be continuing, the Company may, at
its option, redeem the Notes of this series in whole, but not in part, on any
Interest Payment Date prior to the earlier of the date of a Successful
Remarketing or the Purchase Contract Settlement Date, at a price per Note equal
to the Redemption Price as set forth in the Indenture. Except as set forth in
the preceding sentence and in Section 3.01 of the Supplemental Indenture No. 1,
the Company may not redeem the Notes prior to the Maturity Date.

         Pursuant to Section 8.05 of the Supplemental Indenture No. 1, if there
has not been a Successful Remarketing prior to the Purchase Contract Settlement
Date, the holders of Notes will have the right to require the Company to
purchase their Notes on April 1, 2006 (the "EXERCISE DATE") upon a notice to
the Trustee on or prior to the fifth Business Day prior to the Exercise Date,
at a price per Note equal to $25.00 plus accrued and unpaid interest to but
excluding the Exercise Date.

         The Notes are not entitled to the benefit of any sinking fund and will
not be subject to defeasance.

         If an Event of Default with respect to Notes of this series shall
occur and be continuing, the principal of the Notes of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.

         The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the

                                      R-2
<PAGE>
Company and the rights of the Holders of the Notes at any time by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the Notes at the time Outstanding. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Notes at the time Outstanding, on behalf of the Holders of all Notes, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Note shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon
this Note.

         No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest, subject to
the interest period extension provisions of the Indenture, on this Note at the
times, place and rate, and in the coin or currency, herein prescribed.

         As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Security
Register, upon surrender of this Note for registration of transfer at the
office or agency of the Company in any place where the principal of and
interest on this Note are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Securities Registrar duly executed by the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes of this series, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.

         The Notes of this series are issuable only in registered form without
coupons in denominations of $25 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth. Notes of
this series are exchangeable for a like aggregate principal amount of Notes of
this series of a different authorized denomination, as requested by the Holder
surrendering the same.

         No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

         The Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Note is registered as the owner hereof for all
purposes,

                                      R-3
<PAGE>
whether or not this Note be overdue, and neither the Company, the Trustee nor
any such agent shall be affected by notice to the contrary.

         The Company agrees, and by acceptance of the Notes, each holder of
Notes will be deemed to have agreed (1) for United States federal, state and
local income and franchise tax purposes to treat the acquisition of a Corporate
Unit as the acquisition of the Note and the Purchase Contract constituting the
Corporate Unit and (2) to treat the Notes as indebtedness for United States
federal, state and local income and franchise tax purposes. A Holder of Notes
may obtain the amount of original issue discount, issue date, yield to
maturity, comparable yield and projected payment schedule for the Notes,
determined by the Company pursuant to Treas. Reg. Sec. 1.1275-4, by submitting
a written request for it to the Company at the following address: The Phoenix
Companies, Inc., [Nancy Engberg], One American Row, Hartford, Connecticut
06102.

         THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK.

                                      R-4
<PAGE>
                                   ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Note to:

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

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

(Insert assignee's social security or tax identification number)

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

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

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(Insert address and zip code of assignee)
and irrevocably appoints

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

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

-------------------------------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him or her.

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

                                             Signature:
                                                       ------------------------

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

(Sign exactly as your name appears on the other side of this Note)

<PAGE>
                              SIGNATURE GUARANTEE

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

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

                                             ----------------------------------
                                             as Trustee

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

Attest:

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

<PAGE>
                   SCHEDULE OF INCREASES OR DECREASES IN NOTE

The following increases or decreases in a part of this Note have been made:

<TABLE>
<CAPTION>
                                                    PRINCIPAL AMOUNT
                 AMOUNT OF          AMOUNT OF         OF THIS NOTE
                DECREASE IN        INCREASE IN       FOLLOWING SUCH       SIGNATURE OF
              PRINCIPAL AMOUNT   PRINCIPAL AMOUNT     DECREASE (OR         AUTHORIZED
DATE            OF THIS NOTE       OF THIS NOTE         INCREASE)      OFFICER OF TRUSTEE
<S>           <C>                <C>                <C>                <C>

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</TABLE>

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