Document:

Exhibit
4.2

 

EXECUTION
COPY

 

SECOND
PRIORITY COLLATERAL TRUST AGREEMENT

 

dated as of May 8,
2003

 

among

 

The Grantors
referred to herein, 

as Grantors,

 

and

 

WELLS FARGO BANK
MINNESOTA, NATIONAL ASSOCIATION,

as Second Priority
Corporate Trustee,

 

and

 

Jeffery T. Rose,

as Second Priority
Individual Trustee

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  
	
  DEFINITIONS

  
	
   

  
	
  SECTION
  1.01. Certain Defined Terms

  
	
  SECTION
  1.02. Certain References

  
	
   

  
	
  ARTICLE II

  
	
  CONFIRMATION AND CREATION OF SECURITY
  INTERESTS

  
	
   

  
	
  SECTION
  2.01. Second Priority Collateral Trust Estate

  
	
  SECTION
  2.02. Security for Second Priority Secured Obligations

  
	
   

  
	
  ARTICLE III

  
	
  SECOND PRIORITY COLLATERAL ACCOUNT

  
	
   

  
	
  SECTION
  3.01. Second Priority Collateral Account

  
	
   

  
	
  ARTICLE IV

  
	
  SECOND PRIORITY COLLATERAL TRUST AGREEMENT
  DEFAULTS; REMEDIES

  
	
   

  
	
  SECTION
  4.01. Second Priority Collateral Trust Agreement Default Notice

  
	
  SECTION
  4.02. Direction by Required Second Priority Representative(s)

  
	
  SECTION
  4.03. Right to Initiate Judicial Proceedings, Etc

  
	
  SECTION
  4.04. Remedies Not Exclusive

  
	
  SECTION
  4.05. Waiver of Certain Rights

  
	
  SECTION
  4.06. Limitation on Second Priority Collateral Trustees’ Duties in Respect of
  Collateral

  
	
  SECTION
  4.07. Limitation by Law

  
	
  SECTION
  4.08. Absolute Rights of Second Priority Secured Holders and Second Priority
  Representatives

  
	
   

  
	
  ARTICLE V

  
	
  APPLICATION OF PROCEEDS

  
	
   

  
	
  SECTION
  5.01. Application of Proceeds

  
	
  SECTION
  5.02. Application of Withheld Amounts

  
	
  SECTION
  5.03. Release of Amounts in Second Priority Collateral Account

  
	
  SECTION 5.04. Distribution Date

  
	
   

  
	
  ARTICLE
  VI

  
	
  AGREEMENTS WITH THE COLLATERAL TRUSTEES

  
	
   

  
	
  SECTION
  6.01. Delivery of Agreements

  
	
  SECTION
  6.02. Information as to Second Priority Representatives

  

 

i

 

	
  SECTION
  6.03. Compensation and Expenses

  
	
  SECTION
  6.04. Stamp and Other Similar Taxes

  
	
  SECTION
  6.05. Filing Fees, Excise Taxes, Etc

  
	
  SECTION
  6.06. Indemnification

  
	
  SECTION
  6.07. Further Assurances

  
	
   

  
	
  ARTICLE VII

  
	
  THE COLLATERAL TRUSTEES

  
	
   

  
	
  SECTION
  7.01. Declaration of Trust

  
	
  SECTION
  7.02. Exculpatory Provisions

  
	
  SECTION
  7.03. Delegation of Duties

  
	
  SECTION
  7.04. Reliance by Second Priority Collateral Trustees

  
	
  SECTION
  7.05. Limitations on Duties of the Trustees

  
	
  SECTION
  7.06. Moneys to Be Held in Trust

  
	
  SECTION
  7.07. Resignation and Removal of Second Priority Collateral Trustees

  
	
  SECTION
  7.08. Status of Successors to Trustees

  
	
  SECTION
  7.09. Merger of the Second Priority Corporate Trustee

  
	
  SECTION
  7.10. Powers of Second Priority Individual Trustee

  
	
  SECTION
  7.11. Additional Co-Trustees; Separate Trustees

  
	
  SECTION
  7.12. Trustees Appointed Attorneys-in-Fact

  
	
  SECTION
  7.13. Ordinary Care

  
	
   

  
	
  ARTICLE VIII

  
	
  RELEASE OF COLLATERAL

  
	
   

  
	
  SECTION
  8.01. Partial Release of Collateral

  
	
  SECTION
  8.02. Full Release of Collateral upon Satisfaction of Certain Second Priority
  Secured Obligations

  
	
  SECTION
  8.03. Effect of Release of Collateral

  
	
   

  
	
  ARTICLE
  IX

  
	
  RELATIVE PRIORITIES OF LIENS IN COLLATERAL

  
	
   

  
	
  SECTION
  9.01. Relative Priorities of Security Interests and Liens

  
	
  SECTION
  9.02. Rights in Collateral

  
	
  SECTION 9.03. Obligations Unconditional

  
	
  SECTION
  9.04. Waiver of Claims

  
	
  SECTION
  9.05. Agreement by the Grantors

  
	
  SECTION
  9.06. No Warranties, Etc

  
	
  SECTION
  9.07. Reinstatement of First Priority Secured Obligations

  
	
  SECTION
  9.08. Sharing Arrangements

  

 

ii

 

	
  SECTION
  9.09. First Priority Collateral Trustees as Bailee

  
	
   

  
	
  ARTICLE
  X

  
	
  MISCELLANEOUS

  
	
   

  
	
  SECTION
  10.01. Amendments, Supplements and Waivers

  
	
  SECTION
  10.02. Additional Actions of Second Priority Representatives

  
	
  SECTION
  10.03. Notices

  
	
  SECTION
  10.04. Headings

  
	
  SECTION
  10.05. Severability

  
	
  SECTION
  10.06. Treatment of Payee or Indorsee by Trustees

  
	
  SECTION
  10.07. Dealings with the Grantors

  
	
  SECTION
  10.08. Claims

  
	
  SECTION
  10.09. Binding Effect

  
	
  SECTION
  10.10. Governing Law

  
	
  SECTION
  10.11. Effectiveness

  
	
  SECTION
  10.12. Reexecution of Agreement

  
	
  SECTION
  10.13. Effect on Senior Note Indenture

  
	
  SECTION
  10.14. Third-Party Beneficiaries

  
	
  SECTION
  10.15. Counterparts

  
	
   

  
	
  Schedule
  I - Fee Schedule

  
	
  Schedule II – Non-Pledged Subsidiaries

  

 

iii

 

SECOND PRIORITY
COLLATERAL TRUST AGREEMENT

 

SECOND PRIORITY COLLATERAL TRUST AGREEMENT, dated May 8, 2003 (said
agreement, as amended, amended and restated, supplemented or otherwise modified
from time to time, this “Agreement”)
by and among The AES Corporation, a Delaware corporation (the “Borrower”), the other Persons listed on the
signature pages hereof and the Additional Grantors (the Borrower, the Persons
so listed and the Additional Grantors being, collectively, the “Grantors”), Wells Fargo Bank Minnesota,
National Association, a national banking corporation, not in its individual
capacity but solely as corporate trustee (together with any successor corporate
trustee appointed pursuant to Article VII, the “Second Priority Corporate Trustee”), and Jeffery T. Rose, an
individual residing in the State of Minnesota, not in his individual capacity
but solely as individual trustee (together with any successor individual
trustee appointed pursuant to Article VII, the “Second Priority Individual Trustee”; and, together with the
Second Priority Corporate Trustee, the “Second
Priority Collateral Trustees”), the foregoing trustees being
trustees for the Second Priority Secured Holders as hereinafter defined.  Certain capitalized terms used herein are
defined in Article I of this Agreement. 
Terms defined in the Senior Note Indenture and the Second Priority
Security Agreement and not otherwise defined in Article I of this Agreement are
used in this Agreement as defined in the Senior Note Indenture and the Second
Priority Security Agreement.

 

PRELIMINARY STATEMENTS:

 

(1)           The Borrower entered into an Amended
and Restated Credit, Reimbursement and Exchange Agreement dated as of December
12, 2002 (said agreement, as amended, amended and restated, supplemented,
extended, renewed, replaced, refinanced or otherwise modified from time to
time, being the “Credit Agreement”)
with the subsidiary guarantors party thereto, the financial institutions party
thereto (the “Credit Agreement Parties”)
and Citicorp USA, Inc., as administrative agent (in such capacity, the “Agent”) and as collateral agent (in such
capacity, the “Credit Agreement Collateral
Agent”; and, together with the Agent, the “Agents”).

 

(2)           In order to induce the Credit
Agreement Parties and the Agents to enter into the Credit Agreement, the
Grantors granted, pursuant to the terms of (a) a Security Agreement dated as of
December 12, 2002 (said agreement (including, without limitation, the schedules
thereto), as amended, amended and restated, supplemented or otherwise modified
from time to time, being the “First Priority
Security Agreement”) made by the Grantors to Wilmington Trust
Company, a Delaware banking corporation, not in its individual capacity but
solely as corporate trustee (together with any successor corporate trustee
appointed pursuant to Article VII of the First Priority Collateral Trust
Agreement (as hereinafter defined), the “Existing
Corporate Trustee”), and Bruce L. Bisson, an individual residing in
the State of Delaware, not in his individual capacity but solely as individual
trustee (together with any successor individual trustee appointed pursuant to
Article VII of the First Priority Collateral Trust Agreement, the “Existing Individual Trustee”; and, together
with the Existing Corporate Trustee, the “Existing
Collateral Trustees”), as trustees under the Collateral Trust
Agreement dated as of December 12, 2002 (said agreement, as amended, amended
and restated, 

 

 

supplemented or otherwise modified from time to time,
being the “First Priority Collateral Trust
Agreement”) and (b) a Charge and Assignment Over Shares dated as of
December 12, 2002 (said agreement (including, without limitation, the schedules
thereto), as amended, amended and restated, supplemented or otherwise modified
from time to time, being the “First Priority
Charge”) made by AES International Holdings II, Ltd. (the “Chargor”) to the Existing Collateral
Trustees, as trustees under the First Priority Collateral Trust Agreement, a
continuing first priority security interest in and to the Collateral (as
hereinafter defined) to the Existing Collateral Trustees for the ratable
benefit of the Lender Parties (as defined in the First Priority Collateral
Trust Agreement) to secure the obligations of the Borrower and the other
Obligors (as defined in the Credit Agreement) under the Credit Agreement and
the Notes (as defined in the Credit Agreement) issued pursuant thereto.

 

(3)           The Borrower entered into an
Indenture dated as of December 13, 2002 (said agreement, as amended, amended
and restated, supplemented or otherwise modified from time to time, being the “Exchange Note Indenture”) with Wells Fargo
Bank Minnesota, National Association (the “Exchange
Note Trustee”) to exchange the Borrower’s (i) 8.75% Senior Notes due
2002 and (ii) 7.375% Remarketable or Redeemable Securities due 2013 for the 10%
Senior Secured Exchange Notes due 2005 issued on December 13, 2002 (the “Exchange Notes”, and together with the
Exchange Note Indenture (only to the extent relating to the Exchange Notes),
the “Exchange Note Agreements”).

 

(4)           In order to induce the Exchange Note
Trustee to enter into the Exchange Note Indenture, the Grantors agreed pursuant
to the First Priority Security Agreement and the First Priority Charge, as the
case may be, to grant a continuing security interest in and to the Collateral
to the Existing Collateral Trustees for the ratable benefit of the holders of
the Exchange Notes to secure the obligations of the Borrower under the Exchange
Note Agreements.

 

(5)           In order to satisfy certain other
obligations of the Borrower, the Grantors agreed pursuant to the First Priority
Security Agreement and the First Priority Charge, as the case may be, to grant
a continuing security interest in and to the Collateral to the Existing
Collateral Trustees for the ratable benefit of the other First Priority Secured
Holders to secure the obligations of the Borrower under the other First
Priority Secured Agreements.

 

(6)           The Borrower entered into an
Indenture dated as of May 8, 2003 (said agreement, as amended, amended and
restated, supplemented or otherwise modified from time to time, being the “Senior Note Indenture”) with Wells Fargo
Bank Minnesota, National Association, as indenture trustee  (the “Senior
Note Trustee”) in connection with the Borrower’s issuance on May 8,
2003 of (i) 8.75% Second Priority Senior Secured Notes due 2013 and (ii) 9.00%
Second Priority Senior Secured Notes due 2015 (the “Senior Notes”, and together with the Senior Note Indenture,
the “Senior Note Indenture Agreements”).

 

(7)           In order to induce the Senior Note
Trustee to enter into the Senior Note Indenture, the Grantors have agreed to
grant, pursuant to the terms of (a) a Security Agreement dated as of May 8,
2003 (said agreement (including, without limitation, the schedules thereto), as
amended, amended and restated, supplemented or otherwise modified from time to
time, being the “Second Priority Security
Agreement”) made by the Grantors (as such term is defined in the
Second Priority Security Agreement) to the Second Priority Collateral Trustees,
as trustees 

 

2

 

under this Agreement and (b) a Charge and Assignment
Over Shares dated as of May 8, 2003 (said agreement (including, without
limitation, the schedules thereto), as amended, amended and restated,
supplemented and otherwise modified from time to time, being the “Second Priority Charge”) made by the
Chargor to the Second Priority Collateral Trustees, as trustees under this
Agreement, a continuing security interest in and to the Collateral to the
Second Priority Collateral Trustees for the ratable benefit of the Senior Note
Holders (as hereinafter defined) to secure the obligations of the Borrower
under the Senior Note Indenture.

 

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

 

NOW, THEREFORE, in consideration of the premises and in order to induce
the Senior Note Trustee to enter into the Senior Note Indenture, each Grantor
hereby agrees with the Second Priority Collateral Trustees for their benefit
and in trust for the ratable benefit of the Second Priority Representatives (as
hereinafter defined) and the Second Priority Secured Holders as follows:

 

ARTICLE I

 

DEFINITIONS

 

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

 

“Additional
Second Priority Collateral Trust Agreement Collateral” has the
meaning specified in Section 2.01.

 

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

 

“Applicable
Agreement” means the First Priority Secured Agreements, the
First Priority Collateral Documents, the Senior Note Indenture Agreements, the
Second Priority Collateral Documents and the Other Indenture Debt Agreements.

 

“Authorized
Officer” means the Chairman, the President, the Chief Executive
Officer, the Chief Financial Officer, the Comptroller, any Vice President, the
Secretary, Assistant Secretary, Treasurer or the Assistant Treasurer of a
Person or any other officer 

 

3

 

designated as an “Authorized Officer” by the Board of
Directors (or equivalent governing body) of such Person.

 

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

 

“Bankruptcy Law”
means any law relating to bankruptcy, insolvency, winding up, reorganization,
suspension of payments, arrangement, liquidation, relief of debtors,
receivership, compromise, amalgamation, assignment for the benefit of creditors
or composition or readjustment of debts, or any equivalent or similar
proceeding or action.

 

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

 

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

 

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

 

“CFC”
means any entity that is a controlled foreign corporation under Section 957 of
the Internal Revenue Code (or any successor provision thereto).

 

“Chargor”
has the meaning specified in the Preliminary Statements to this Agreement.

 

“Controlling
Collateral Trustees” means (a) at any time that the First
Priority Secured Obligations are secured by any Lien under the First Priority
Collateral Documents, the First Priority Collateral Trustees and (b) otherwise,
the Second Priority Collateral Trustees.

 

“Credit
Agreement” has the meaning specified in the Preliminary
Statements to this Agreement.

 

4

 

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

 

“Credit
Agreement Parties” has the meaning specified in the Preliminary
Statements to this Agreement.

 

“Debt”
has the meaning set forth in the Senior Note Indenture.

 

“Defaulted Party”
means the Senior Note Indenture Defaulted Party or the Other Indenture Debt
Defaulted Party.

 

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

 

“Eligible Debt”
means any Debt permitted to be incurred by the Borrower pursuant to Section
4.07 of the Senior Note Indenture and which constitutes a First Priority
Secured Obligation other than an Existing First Priority Secured Obligation.

 

“Eligible
Debt Agreement”
means any other agreement or instrument pursuant to which the Borrower has
incurred Eligible Debt.

 

“Eligible
Debt Agreement Default”
means the occurrence and continuance of an event of default under the Eligible
Debt Agreements, and as a result thereof, the Eligible Debt Defaulted Party has
the right to declare all of the obligations of the Borrower under the Eligible
Debt Agreements to be due and payable prior to the stated maturity thereof.

 

“Eligible Debt
Defaulted Party” means the Eligible Debt Representative or the
percentage of Eligible Debt Holders specified in the Eligible Debt Agreements
that have the right thereunder upon the occurrence and continuance of an event
of default under such Eligible Debt Agreements (without the requirement that
any further time elapse) to declare all of the obligations of the Borrower
under such Eligible Debt Agreements to be due and payable prior to the stated
maturity thereof.

 

“Eligible Debt
Holders” means at any time the registered holders of Eligible
Debt under the Eligible Debt Agreements.

 

“Eligible Debt
Representatives” means the representatives of the Eligible Debt
Holders under the Eligible Debt Agreements.

 

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

 

5

 

such shares, warrants, options, rights or other
interests are authorized or otherwise existing on any date of determination.

 

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

 

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

 

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

 

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

 

“Existing
Collateral Trustees” has the meaning specified in the Preliminary
Statements to this Agreement.

 

“Existing
Corporate Trustee” has the meaning specified in the Preliminary
Statements to this Agreement.

 

“Existing First
Priority Secured Obligations” has the meaning specified in the
definition of  “First Priority Secured
Obligations”.

 

“Existing
Individual Trustee” has the meaning specified in the Preliminary
Statements to this Agreement.

 

“First Priority
Agreement Default” means (a) for so long as any Existing First
Priority Secured Obligations are secured by the First Priority Collateral
Documents, the “Collateral Trust Agreement Default” as defined in the First
Priority Collateral Trust Agreement or (b) during any time that an Eligible
Debt Agreement is outstanding, an Eligible Debt Agreement Default.

 

“First Priority
Charge” has the meaning specified in the
Preliminary Statements to this Agreement.

 

“First Priority
Collateral Documents” means the “Shared Collateral Documents” as
defined in the First Priority Collateral Trust Agreement and any similar
collateral documents executed in connection with the granting of security
pursuant to the Eligible Debt Agreements.

 

“First Priority
Collateral Trust Agreement” has the meaning specified in the
Preliminary Statements to this Agreement.

 

“First Priority
Collateral Trustees” means the Existing Collateral Trustees and
any collateral trustee appointed pursuant to the terms of an Eligible Debt
Agreement.

 

“First Priority
Defaulted Party” means (a) for so long as any Existing First
Priority Secured Obligations are secured by the First Priority Collateral
Documents, the 

 

6

 

“Defaulted Party” as defined in the First Priority
Collateral Trust Agreement or (b) during any time that an Eligible Debt
Agreement is outstanding, the Eligible Debt Defaulted Party.

 

“First Priority
Representatives” means at any time, collectively, (a) the
“Representatives” as defined in the First Priority Collateral Trust Agreement
and (b) the Eligible Debt Representatives, as the representative for the Eligible
Debt Holders under the Eligible Debt Agreements.

 

“First Priority
Secured Agreements” means the “Secured Agreements” as defined in
the First Priority Collateral Trust Agreement and the Eligible Debt Agreements.

 

“First Priority
Secured Holders” means the “Secured Holders” as defined in the
First Priority Collateral Trust Agreement and the Eligible Debt Holders.

 

“First Priority
Secured Obligations” means (a) the “Secured Obligations” as
defined in the First Priority Collateral Trust Agreement (the “Existing First
Priority Secured Obligations”) and (b) any obligations, whether matured or
unmatured, contingent or liquidated, of each Grantor arising out of or
evidenced by the Eligible Debt Agreements, whether for principal, interest,
expenses, premiums, indemnities, fees or other amounts, whether or not such
obligations are due and payable at such time.

 

“First Priority
Security Agreement” has the meaning specified in the Preliminary
Statements to this Agreement.

 

“Governmental Approval”
means any order, directive, decree, permit, concession, grant, franchise,
license, consent, authorization or validation of, or filing, recording or
registration of or with, any Governmental Authority pursuant to Law.

 

“Governmental Authority”
means any federal, national, state, provincial, municipal, local, territorial
or other governmental department, commission, board, bureau, agency, regulatory
authority, instrumentality or judicial or administrative body, whether domestic
or foreign.

 

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

 

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

 

“Law”
means any law, statute, treaty, constitution, regulation, rule, ordinance,
order or Governmental Approval, or other governmental restriction, requirement
or determination, of or by any Governmental Authority.

 

“Lien”
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind, or any other type of preferential arrangement
that has the practical effect of creating a security interest, in respect of
such asset.  For the purposes of this
Agreement, the Borrower or any of its Subsidiaries shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under 

 

7

 

any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.

 

“Material
Adverse Effect” means a material adverse effect on (a) the
business, consolidated results of operations, consolidated financial condition
or prospects of the Borrower and its Subsidiaries, taken as a whole, (b) the
ability of the Borrower and its Subsidiaries to perform their material obligations
under any Second Priority Secured Agreement or (c) the rights and remedies
available to any Senior Note Holder under any Senior Note Indenture Agreement.

 

“Moody’s”
means Moody’s Investors Service, Inc.

 

“Non-Pledged
Subsidiaries” means (a) as of the date hereof, each of the
direct Subsidiaries of the Borrower or the Chargor listed on Schedule II hereto
or (b) after the date hereof, in addition to the “Non-Pledged Subsidiaries” set
forth on Schedule II hereto, any newly formed or acquired direct (1) Subsidiary
of the Borrower whose aggregate assets have a fair market value not in excess
of $1,000,000 and, together with the fair market value of the assets of all
Non-Pledged Subsidiaries (other than any Subsidiary which is described in
clause (2) below), does not exceed $50,000,000 or (2) Subsidiaries of the
Borrower for which a grant or perfection of a Lien on such Subsidiary’s stock
would require approvals and consents from foreign and domestic regulators and
from lenders to, and suppliers, customers or other contractual counterparties
of, such Subsidiary.

 

“Obligation”
means, with respect to any Person, any payment, performance or other obligation
of such Person of any kind, including, without limitation, any liability of
such Person on any claim, whether or not the right of any creditor to payment
in respect of such claim is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Sections 6.01(f) and 6.01(g) of the
Senior Note Indenture.  Without limiting
the generality of the foregoing, the Obligations of the Borrower under the
Second Priority Secured Agreements and the Second Priority Collateral Documents
include the obligation to pay principal, interest, commissions, charges,
expenses, fees, attorneys’ fees and disbursements, indemnities and other
amounts payable by the Borrower under any Second Priority Secured Agreement or
Second Priority Collateral Document.

 

“Other Indenture
Debt” means Debt issued pursuant to any Other Indenture Debt
Agreement.

 

“Other Indenture
Debt Agreement” means any other agreement or instrument pursuant
to which the Borrower has incurred Debt permitted by Section 4.07 of the Senior
Note Indenture.

 

“Other Indenture
Debt Defaulted Party” means the Other Indenture Debt
Representative acting on behalf of the Second Priority Secured Holders that own
or hold more than 50% of the aggregate amount of the outstanding Debt under the
Other Indenture Debt Agreements at any given time.

 

“Other Indenture
Debt Holders” means at any time the registered holders of Other
Indenture Debt issued under any Other Indenture Debt Agreement.

 

8

 

“Other Indenture
Debt Representative” means the representative of the Other
Indenture Debt Holders under any Other Indenture Debt Agreement.

 

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

 

“Payment in Full”
means (a) the payment in full in cash of (i) all principal and interest in
respect of the First Priority Secured Obligations and (ii) all other valid
First Priority Secured Obligations that are claimed within 30 days of the last
date on which all principal and interest in respect of the First Priority
Secured Obligations shall have been paid in full and (b) the termination in
full of all Commitments in respect of the First Priority Secured
Obligations.  “Paid in Full” shall
have the correlative meaning.

 

“Person”  means an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

 

“Pledged
Subsidiaries” means a
direct Subsidiary of the Borrower listed in Schedule II, Part I to the Second
Priority Security Agreement or a direct Subsidiary of AES BVI II listed on
Schedule 1 to the Second Priority Charge, whose Equity Interests have been
pledged to the Second Priority Collateral Trustees for the benefit of the
Second Priority Secured Holders by the Borrower or AES BVI II, as applicable,
pursuant to the Second Priority Security Agreement or the Second Priority
Charge, as applicable.

 

“Remedies
Limitations” has the meaning set forth in Section 7(k) of the
Second Priority Security Agreement.

 

“Required Second
Priority Representative(s)” means the Second Priority
Representatives acting at the direction of the Required Second Priority Secured
Holders; provided, however, that amounts held at such time by the
Second Priority Collateral Trustees on behalf of a Second Priority
Representative and such Second Priority Representative’s Second Priority
Secured Holders in an account of the Second Priority Corporate Trustee established
at the request of such Second Priority Representative pursuant to Section 5.02
hereof shall be deemed to have been applied to repay the Second Priority
Secured Obligations of such Second Priority Secured Holders whether or not such
amount has been so applied.

 

“Required Second
Priority Secured Holders” means Second Priority Secured Holders
that own or hold more than 50% of the aggregate principal amount of the
outstanding Debt under the Senior Note Indenture Agreements and the Other
Indenture Debt Agreements at any given time.

 

“Second Priority Charge” has the meaning specified in the Preliminary
Statements to this Agreement.

 

“Second Priority
Collateral Account” has the meaning specified in Section 3.01.

 

9

 

“Second Priority
Collateral Documents” means this Agreement, the Second Priority
Security Agreement, the Second Priority Charge and each Successor Collateral
Agreement.

 

“Second Priority
Collateral Trust Agreement Default” means (a) in respect of the
exercise of remedies with respect to the Account Collateral, the Additional
Second Priority Collateral Trust Agreement Collateral and the Securities
Accounts (and all Collateral from time to time credited to the Deposit Accounts
and the Securities Accounts) or the exercise of remedies under Section 15 of
the Second Priority Security Agreement or Section 11 of the Second Priority
Charge, an event of default described in clauses (a), (b), (d), (f) and (g) of
Section 6.01 of the Senior Note Indenture or an event of default under the
Other Indenture Debt Agreements of the same type as described in such clauses
of Section 6.01 of the Senior Note Indenture and (b) in respect of any other
exercise of rights and remedies under the Second Priority Collateral Documents,
an event of default shall have occurred and be continuing under the Senior Note
Indenture Agreements or any of the Other Indenture Debt Agreements, and as a
result thereof, the Defaulted Party has the right to declare all of the Second
Priority Indenture Obligations of the Borrower under the Second Priority
Indenture Agreements or any Other Indenture Debt Agreements to be due and
payable prior to the stated maturity thereof.

 

“Second Priority
Collateral Trust Agreement  Default Notice” means a written notice
delivered in connection with a Second Priority Collateral Trust Agreement
Default.

 

“Second Priority
Collateral Trustees” has the meaning specified in the recital of
parties to this Agreement.

 

“Second Priority
Collateral Trustees’ Fees” means the fees and other amounts
payable to the Second Priority Collateral Trustees pursuant to Sections 6.03,
6.04 and 6.05 and amounts claimed and unpaid pursuant to Section 6.06.

 

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

 

“Second Priority
Corporate Trustee” has the meaning specified in the recital of
parties to this Agreement.

 

“Second Priority
Individual Trustee” has the meaning specified in the recital of
parties to this Agreement.

 

“Second Priority
Representatives” means at any time, collectively, the Senior
Note Trustee, as the representative hereunder for the Senior Note Holders and
the Other Indenture Debt Representative, as the representative hereunder for
the Other Indenture Debt Holders.

 

“Second Priority
Secured Agreements” means, collectively, the Senior Note
Indenture Agreements, the Other Indenture Debt Agreements and each agreement or
instrument delivered by the Grantors pursuant thereto (including, without
limitation, the Second Priority Collateral Documents).

 

10

 

“Second Priority Secured Holders”
means, at any time, the Senior Note Holders and the Other Indenture Debt
Holders.

 

“Second Priority
Secured Obligations” means at any time any obligations, whether
matured or unmatured, contingent or liquidated, of each Grantor arising out of
or evidenced by the Second Priority Secured Agreements, whether for principal,
interest, expenses, premiums, indemnities, fees or other amounts, whether or
not such obligations are due and payable at such time.

 

“Second Priority
Security Agreement” has the meaning set forth in the Preliminary
Statements to this Agreement.

 

“Senior Note
Holders” means at any time the registered holders of the Senior
Notes issued under the Senior Note Indenture.

 

“Senior Note
Indenture” has the meaning specified in the Preliminary
Statements to this Agreement.

 

“Senior Note
Indenture Agreements” has the meaning specified in the
Preliminary Statements to this Agreement.

 

“Senior Note
Indenture Defaulted Party” means the Senior Note Trustee or the
percentage of Senior Note Holders specified in the Senior Note Indenture that
have the right thereunder upon the occurrence and continuance of an Event of
Default under the Senior Note Indenture (without the requirement that any
further time elapse) to declare all of the Second Priority Secured Obligations
of the Borrower under the Senior Note Indenture to be due and payable prior to
the stated maturity thereof.

 

“Senior Note
Trustee” has the meaning specified in the Preliminary Statements
to this Agreement.

 

“Senior Notes”
has the meaning specified in the Preliminary Statements to this Agreement.

 

“S&P”
means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

 

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

 

“Successor
Collateral” means, with respect to each Grantor, any property
and assets of such Grantor (or any of its successors and assigns) as such
Grantor (or any such successor or any such assign) may, from time to time, upon
notice to the Second Priority Collateral Trustees, pursuant to the Senior Note
Indenture Agreements, the Other Indenture Debt Agreements, or otherwise, grant to
the Second Priority Collateral Trustees as additional collateral 

 

11

 

for their benefit and in trust for the equal and
ratable benefit of the Second Priority Representatives, on their behalf and on
behalf of the Second Priority Secured Holders.

 

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

 

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

 

ARTICLE
II

 

CONFIRMATION AND CREATION OF SECURITY INTERESTS

 

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

 

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

 

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

 

(iii)          all notes, certificates
of deposit, deposit accounts, checks and other instruments from time to time
delivered to or otherwise possessed by the Second Priority Collateral Trustees
for or on behalf of the Borrower in substitution for or in addition to 

 

12

 

any or all of
the then existing Additional Second Priority Collateral Trust Agreement
Collateral;

 

(iv)          all interest, income,
dividends, instruments and other property and assets from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the then existing Additional Second Priority Collateral Trust
Agreement Collateral referred to in clauses (i) through (iii) of this Section
2.01(a); and

 

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

 

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

 

(b)  The Lien created by the
Second Priority Security Agreement and the other Second Priority Collateral
Documents shall be subordinate in all respects (including the exercise of
remedies with respect to such Collateral) to the prior Lien of the First
Priority Collateral Documents in existence from time to time, in accordance
with Article IX hereof.

 

ARTICLE
III

 

SECOND PRIORITY COLLATERAL ACCOUNT

 

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

 

13

 

shall be held and applied by the Second Priority
Corporate Trustee all in accordance with the terms of this Agreement.

 

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

 

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

 

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

 

ARTICLE
IV

 

SECOND PRIORITY COLLATERAL TRUST AGREEMENT DEFAULTS; REMEDIES

 

SECTION 4.01. Second Priority Collateral Trust Agreement
Default Notice.  (a) Subject to
Article IX hereof, upon the occurrence and during the continuance of a Second
Priority Collateral Trust Agreement Default, the Defaulted Party shall have the
right to give the Second Priority Collateral Trustees a Second Priority
Collateral Trust Agreement Default Notice, and if the Defaulted Party gives the
Second Priority Collateral Trustees, with a copy to the Grantors, a Second
Priority Collateral Trust Agreement Default Notice, stating:

 

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

 

(ii)           the action requested to
be taken by the Second Priority Collateral Trustees with respect to the
Collateral and the Second Priority Collateral Documents (which action 

 

14

 

may include,
without limitation, the institution of any remedies provided by law or this
Agreement or any other Second Priority Collateral Document),

 

then the Second
Priority Collateral Trustees shall forthwith send a copy of the Collateral
Trust Agreement Default Notice to each Second Priority Representative. The
Required Second Priority Representative(s) shall provide the Second Priority
Collateral Trustees with a certificate that shall state whether or not they
favor the Second Priority Collateral Trustees taking such action.  If the Required Second Priority
Representative(s) shall not have provided the Second Priority Collateral
Trustees with such certificate within 30 Business Days of receipt of the copy
of the Second Priority Collateral Trust Agreement Default Notice, the Required Second
Priority Representative(s) shall be deemed to have not favored the taking of
such action.  If the Required Second
Priority Representative(s) shall have directed the Second Priority Collateral
Trustees to commence the action set forth in the Second Priority Collateral
Trust Agreement Default Notice then, subject to Section 4.01(b) and the
right of the Second Priority Collateral Trustees to commence such action under
the Second Priority Collateral Documents, the Second Priority Collateral
Trustees shall forthwith undertake such action.  The Second Priority Collateral Trustees shall, subject to
Sections 4.01(b), 4.08 and 6.06, follow the directions of the Required
Second Priority Representative(s) with respect to the time, method and place of
taking any action requested in a Second Priority Collateral Trust Agreement
Default Notice.  Each Second Priority
Collateral Trustee shall be entitled to assume conclusively that no Second
Priority Collateral Trust Agreement Default has occurred and is continuing
until it receives a Second Priority Collateral Trust Agreement Default Notice.

 

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

 

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

 

15

 

accordance with the written instructions of the
Required Second Priority Representative(s) which instructions shall reference
Section 6.06 hereof.

 

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

 

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

 

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

 

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

 

(c)           In
case either of the Second Priority Collateral Trustees shall have proceeded to
enforce any right, remedy or power under this Agreement or any other Second
Priority Collateral Document and the proceeding for the enforcement thereof
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to such Second Priority Collateral Trustees, then and in
every such case the Grantors, the Second Priority Collateral Trustees, the
Second Priority Representatives and Second Priority Secured Holders 

 

16

 

shall, subject to any determination in such
proceeding, severally be restored to their former positions and rights
hereunder and under such other Second Priority Collateral Document with respect
to the Second Priority Collateral Trust Estate, the Second Priority Collateral
Account and in all other respects, and thereafter all rights, remedies and
powers of such Second Priority Collateral Trustees shall continue as though no
such proceeding had been taken.

 

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

 

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

 

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

 

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

 

17

 

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

 

ARTICLE
V

 

APPLICATION OF PROCEEDS

 

SECTION 5.01. Application of Proceeds.

 

(a)           Subject
to the provisions of Article IX hereof, if, pursuant to the exercise by the
Defaulted Party of any rights and remedies set forth in any First Priority
Collateral Document or Second Priority Collateral Document, any Collateral is
sold or otherwise realized upon by the Controlling Collateral Trustees, (ii) the proceeds received by the
Second Priority Collateral Trustees in respect of such Collateral shall be
deposited in the Second Priority Collateral Account, and all moneys held by the
Second Priority Corporate Trustee in the Second Priority Collateral Account
shall, to the extent available for distribution, be distributed by the Second
Priority Corporate Trustee on each date upon which a distribution is made
(each, a “Distribution Date”) as follows:

 

18

 

FIRST,
to the payment (in such priority as the Second Priority Corporate Trustee shall
elect, but without duplication) of all reasonable legal fees and expenses and
other reasonable costs or expenses or other liabilities of any kind incurred by
the Second Priority Collateral Trustees as secured parties under any Second
Priority Collateral Document or otherwise in connection with any Second
Priority Collateral Document or this Agreement (including, without limitation,
any reasonable costs or expenses or liabilities incurred in connection with the
sale of any assets covered by any Second Priority Collateral Document, or in the
operation or maintenance of any of the assets covered by any Second Priority
Collateral Document), including the reimbursement to any Second Priority
Representative of any amounts theretofore advanced by such Second Priority
Representative for the payment of such fees, costs and expenses, except only
for any such fees, expenses, costs or liabilities incurred by any Second
Priority Collateral Trustee as a result of its gross negligence or willful
misconduct in performing or failing to perform any of its duties to the parties
hereto expressly set forth herein; provided, however, that
nothing herein is intended to relieve the Grantors of their duties to pay such
costs, fees, expenses and liabilities otherwise payable to the Second Priority
Collateral Trustees from funds outside of the Second Priority Collateral
Account, as required by this Agreement;

 

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

 

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

 

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

 

(b)           In
order to determine the ratable amount to be distributed to each of the Second
Priority Representatives pursuant to clause THIRD above on each
Distribution Date, unless otherwise directed in writing by the Required Second
Priority Representative(s), the Second Priority Corporate Trustee may rely on a certificate of an
Authorized Officer of the Borrower setting forth the Second Priority
Secured Obligations
(identified by type and amount) outstanding under each Second Priority
Secured Agreement on such
Distribution Date.  The 

 

19

 

ratable portion of
the aggregate amount available for distribution hereunder on any
Distribution Date which shall be distributed to each Second Priority
Representative on such Distribution Date shall be a fraction, (x) the numerator
of which shall be the aggregate amount of Second Priority Secured Obligations
of the Second Priority Secured Holders represented by such Second Priority
Representative on such Distribution Date and (y) the denominator of which shall
be the aggregate amount of Second Priority Secured Obligations of all the
Second Priority Secured Holders represented by the Second Priority
Representatives on such Distribution Date; provided, however,
that, for such purposes, amounts distributable to a Second Priority
Representative on a prior Distribution Date and held on behalf of such Second
Priority Representative and the Second Priority Secured Holders of such Second
Priority Representative pursuant to Section 5.02 of this Agreement shall be
deemed to have been applied to the Second Priority Secured Obligations of the
Second Priority Secured Holders represented by such Second Priority
Representative, regardless of whether such application has occurred.

 

(c)           Any
amounts to be paid to the Second Priority Representatives of the Senior Note
Holders or the Other Indenture Debt Holders pursuant to clause THIRD
above shall be applied by the Second Priority Collateral Trustees for the
ratable benefit of the Senior Note Holders or the Other Indenture Debt Holders
as follows:

 

FIRST,
paid to the Second Priority Representatives of the Senior Note Holders and the
Other Indenture Debt Holders for any amounts then owing to them under the
Senior Note Indenture Agreements or the Other Indenture Debt Agreements ratably
in accordance with the respective amounts then owing to such Second Priority
Representatives; and

 

SECOND,
ratably paid to the Senior Note Holders and the Other Indenture Debt Holders
for any amounts then owing to them under the Senior Note Indenture Agreements
and the Other Indenture Debt Agreements.

 

SECTION 5.02. Application of Withheld Amounts.  If on any Distribution Date any amounts on
deposit to the Second Priority Collateral Account are distributable pursuant to
Section 5.01 to any Second Priority Representative, and if such Second
Priority Representative shall have given notice to the Second Priority
Collateral Trustees on or prior to such Distribution Date that all or a portion
of such proceeds which are otherwise distributable to such Second Priority
Representative pursuant to Section 5.01 shall be held by the Second Priority
Collateral Trustees on behalf of such Second Priority Representative for the
benefit of the Second Priority Secured Holders of such Second Priority
Representative, then the Second Priority Collateral Trustees shall hold such
amount in a separate non-interest bearing cash collateral account of the Second
Priority Corporate Trustee for the benefit of such Second Priority
Representative and such Second Priority Secured Holders, until such time as
such Second Priority Representative shall deliver a written request for the
delivery thereof from such account to such Second Priority Representative in
accordance with Section 5.01(c).  If
thereafter the Second Priority Secured Obligations of the Second Priority
Secured Holders represented by any such Second Priority Representative shall
have been repaid in full in cash on any date, then (a) upon the written request
of the Borrower certifying as to such payment in full, and (b) after delivery
of such notice by the Second Priority Collateral Trustees to such Second
Priority Representative, the Second Priority Collateral Trustees shall not have
received a written notice of objection from 

 

20

 

such Second Priority Representative within 30 days of
such Second Priority Representative’s receipt of such notice, promptly
following such 30th day (or the earlier receipt by the Second
Priority Collateral Trustees of the written consent of such Second Priority
Representative),  any amounts held
on account for such Second Priority Representative pursuant to this Section
5.02 shall be again deposited by the Second Priority Collateral Trustees to the
Second Priority Collateral Account and thereafter distributed as provided in
Section 5.01.  If the Borrower shall
have failed to deliver to the Second Priority Collateral Trustees the
certificate provided for in clause (a) of the immediately preceding sentence,
the Second Priority Collateral Trustees may request payment instructions from
the Required Second Priority Representative(s) and the Second Priority
Collateral Trustees shall not be required to make any distributions until such
instructions are received.  The Second
Priority Corporate Trustee shall invest amounts on deposit to any such account
in such Cash Equivalents as the applicable Second Priority Representative may
direct from time to time.

 

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

 

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

 

ARTICLE
VI

 

AGREEMENTS WITH THE COLLATERAL TRUSTEES

 

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

 

21

 

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

 

(b)           If the
Borrower shall not have delivered the Payment Information to the Second
Priority Collateral Trustees at least two Business Days prior to the applicable
Distribution Date, the Second Priority Collateral Trustees shall request the
Payment Information from the Senior Note Trustee and the other Second Priority
Representatives, and if after such request the Second Priority Collateral
Trustees shall not have received the Payment Information from any of the
Borrower, the Senior Note Trustee or the other Second Priority Representatives,

 

22

 

the Second Priority Collateral Trustees shall
not be required to take any action under clause THIRD of Section 5.01(a)
until it receives such Payment Information.

 

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

 

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

 

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

 

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

 

23

 

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

 

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

 

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

 

24

 

Representatives and the Second Priority Secured
Holders the rights granted or now or hereafter intended to be granted to the
Second Priority Collateral Trustees, the Second Priority Representatives and
the Second Priority Secured Holders under any Second Priority Collateral
Document or under any other instrument executed in connection with any Second
Priority Collateral Document to which it is or may become a party, and (v) to
enable the Second Priority Collateral Trustees to exercise and enforce their
rights and remedies hereunder and under each other Second Priority Collateral
Document with respect to any Collateral; provided, however, that
this Section 6.07 shall not be construed to require any Grantor to grant any
interest in Collateral other than pursuant to this Agreement, the Second
Priority Secured Agreements or any other Second Priority Collateral Document.  Without limiting the generality of the
foregoing, each Grantor will take any such action required to be taken by it
pursuant to any Second Priority Collateral Document.

 

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

 

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

 

ARTICLE
VII

 

THE COLLATERAL TRUSTEES

 

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

 

SECTION 7.02. Exculpatory Provisions.  (a) 
The Second Priority Collateral Trustees shall not be responsible in any
manner whatsoever for the correctness of any recitals, 

 

25

 

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

 

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

 

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

 

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

 

26

 

shall be reasonably acceptable to the Grantors and
such Required Second Priority Representative(s)) to resolve the dispute.

 

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

 

(c)           The
Second Priority Collateral Trustees may rely, and shall be fully protected in
acting, upon any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent, order, bond or other paper or document which
they reasonably believe to be genuine and to have been signed or presented by
the proper party or parties or, in the case of telecopies and telexes, to have
been sent by the proper party or parties. 
In the absence of its gross negligence or willful misconduct, each
Second Priority Collateral Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon any
notices, certificates or opinions furnished to such Second Priority Collateral
Trustee that conform to the requirements of this Agreement or any other Second
Priority Collateral Document.

 

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

 

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

 

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

 

27

 

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

 

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

 

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

 

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

 

SECTION 7.07. Resignation and Removal of Second Priority
Collateral Trustees.  (a) Each
or both of the Second Priority Collateral Trustees may at any time, by giving
30 days’ prior written notice to the Grantors and the Second Priority
Representatives, resign and be discharged of their responsibilities hereby
created, such resignation to become effective upon the appointment of a
successor trustee or trustees by the Required Second Priority
Representative(s), the acceptance of such appointment by such successor trustee
or trustees and, unless a Second Priority Collateral Trust Agreement Default
has occurred and is continuing, the consent to the appointment of such
successor trustee or trustees by the Grantors. 
If a Second Priority Collateral Trust Agreement Default has occurred,
the Grantors’ consent to any such resignation shall not be required.  The Second Priority Collateral Trustees
shall be entitled to their fees and expenses accrued to the date of the
resignation becoming effective.  Either
or both of the Second Priority Collateral Trustees may be removed at any time
(with or without cause) and a successor trustee or trustees appointed by the
affirmative vote of the Required Second Priority Representative(s), subject to,
unless a Second Priority Collateral Trust Agreement Default has occurred and is
continuing, the consent of the Grantors, provided that the Second
Priority Collateral Trustees or 

 

28

 

either of them shall be entitled to their fees and
expenses accrued to the date of removal. 
If either or both of the Second Priority Collateral Trustees resigns or
is removed as provided in this Section 7.07 the consent to the appointment of a
successor trustee or trustees shall not be unreasonably withheld and shall be
deemed to have been given if the Grantors shall not have reasonably objected to
any proposed successor trustee or trustees within five Business Days of receipt
of notice of the identity thereof from the Second Priority
Representatives.  If no successor
trustee or trustees shall be appointed and approved within 30 days from the
date of the giving of the aforesaid notice of resignation or within 30 days
from the date of such vote for removal, the Second Priority Collateral
Trustees, shall, or the Required Second Priority Representative(s) may, apply
to any court of competent jurisdiction to appoint a successor trustee or
trustees to act until such time, if any, as a successor trustee or trustees
shall have been appointed as above provided. 
Any successor trustee or trustees so appointed by such court shall
immediately and without further act be superseded by any successor trustee or
trustees approved by the Required Second Priority Representative(s) as above
provided.

 

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

 

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

 

29

 

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

 

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

 

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

 

SECTION 7.10. Powers of Second Priority Individual Trustee.  The Second Priority Individual Trustee has
been joined as a party hereunder so that if, by any present or future
applicable law in any jurisdiction in which it may be necessary to perform any
act in the execution or enforcement of the trusts hereby created, the Second
Priority Corporate Trustee may be incompetent, unqualified or unable to act as
a collateral trustee, then all of the acts required to be performed in such
jurisdiction, in the execution or enforcement of the trusts hereby created,
shall and will be performed by the Second Priority Individual Trustee, acting
alone.  Notwithstanding any other term
or provision of this Agreement to the contrary, the Second Priority Corporate
Trustee alone shall have and exercise the rights and powers granted herein and
shall be solely charged with the performance of the duties herein declared on
the part of the Second Priority Collateral Trustees to be had and exercised or
to be performed without any action taken by the Second Priority Individual
Trustee; provided, however, that if the Second Priority Corporate
Trustee or the Required Second Priority Representative(s) deem it necessary or
desirable for the Second Priority Individual Trustee to act in a particular
jurisdiction, the Second Priority Individual Trustee shall have and exercise
the rights and powers granted herein (but no greater powers) and shall be
charged with the performance of the duties herein declared on the part of the
Second Priority Collateral Trustees to be had and exercised or to be performed,
but only in such particular jurisdiction.

 

SECTION 7.11. Additional Co-Trustees; Separate Trustees.  (a) 
If at any time or times it shall be necessary or prudent in order to
conform to any law of any jurisdiction in which 

 

30

 

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

 

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

 

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

 

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

 

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

 

31

 

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

 

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

 

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

 

SECTION 7.13. Ordinary Care.  The Second Priority Collateral Trustees shall be deemed to have
exercised ordinary care in the custody and preservation of the Collateral in
their possession if the Collateral is accorded treatment substantially equal to
that which the Second Priority Collateral Trustees accord their own property,
it being understood that the Second Priority Collateral Trustees shall not have
any responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Collateral, whether or not the Second Priority Collateral Trustees have or are
deemed to have 

 

32

 

knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral.

 

ARTICLE
VIII

 

RELEASE OF COLLATERAL

 

SECTION 8.01. Partial Release of Collateral.  (a) 
Notwithstanding anything to the contrary herein, the First Priority
Collateral Trustees are authorized to and shall, at the request and expense of
the Borrower and without the consent of or notice to the Second Priority
Collateral Trustees, the Second Priority Representatives or any Second Priority
Secured Holder, release any Collateral from any of the liens created by any of
the First Priority Collateral Documents to the extent permitted in accordance
with the terms of the First Priority Collateral Trust Agreement, whereupon such
Collateral shall automatically be released from the Second Priority Collateral
Estate, except to the extent that such release would have the effect of
releasing all or substantially all of the Collateral from the Second Priority
Collateral Estate.

 

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

 

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

 

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

 

If a Notice of Partial Release is delivered to the
Second Priority Collateral Trustees in accordance with the immediately
preceding sentence and (a) the Required Second Priority Representative(s),
shall not have objected in writing thereto prior to the date of the proposed
sale or other disposition of such Collateral or (b) in the case of any other
release of such Collateral, the Required Second Priority Secured Holders shall
have consented to such release pursuant to the terms of the Applicable
Agreement, the security interest in such Collateral shall automatically,
without further action, be released and the Second Priority Collateral Trustees
shall execute and deliver to the Grantors, on the date of the proposed release
(or as promptly thereafter as possible), a release or releases (including,
without limitation, Uniform Commercial Code release statements and instruments
of satisfaction, discharge and/or reconveyance) in 

 

33

 

recordable form as to the Collateral specified in such
Notice of Partial Release from the liens, security interests, conveyances and
assignments evidenced by the Second Priority Collateral Documents, which
release shall state that it is effective as of the date of such disposition; provided,
however, that any release, in one transaction or a series of related
transactions, of the lien and security interest of the Second Priority
Collateral Documents in all or substantially all of the Collateral will require
the consent of the Required Second Priority Secured Holders; provided, further,
that, if prior to the time that the Second Priority Collateral Trustees deliver
a release pursuant to this Section 8.01(b), the Second Priority Collateral
Trustees shall have received either (A) a Second Priority Collateral Trust
Agreement Default Notice that shall not have been withdrawn prior to such time
and the Required Second Priority Representative(s) shall have directed the
Second Priority Collateral Trustees either not to deliver such a release or not
to deliver releases generally or (B) a written objection from the Required
Second Priority Representative(s) stating that such release, sale or other
disposition is not permitted under the Applicable Agreement, then, in either
case, the Second Priority Collateral Trustees shall so notify the Grantors and
shall not sign any release or releases in connection with such disposition.

 

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

 

SECTION 8.02. Full Release of Collateral upon Satisfaction of
Certain Second Priority Secured Obligations.  (a)  The Second Priority Collateral Trustees shall
promptly release, in accordance with Section 8.03, all the Collateral upon the
latest of the (i) cash payment in full of all Second Priority Secured
Obligations arising under the Senior Note Indenture, the Senior Notes,  the Other Indenture Debt Agreements and each
other agreement or instrument delivered by the Grantors pursuant thereto, and
(ii) termination of the Senior Note Indenture.

 

(b)           In
furtherance of the undertaking set forth above in Section 8.02(a), the Second
Priority Collateral Trustees shall, upon the request of the Grantors
accompanied by a certificate of an Authorized Officer of each Grantor, upon
which the Second Priority Collateral Trustees may conclusively rely without
independent verification, to the effect that all Second Priority Secured
Obligations under the Second Priority Secured Agreements referred to in clause
(i) of the preceding subsection (a) have been, or will, concurrently with the
release of the Collateral be, paid in full in cash (and if such Second Priority
Secured Obligations have not 

 

34

 

previously been so paid, describing the
source(s) of funds for such repayment), deliver a notice by registered mail to
each of the Second Priority Representatives containing the following:

 

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

 

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

 

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

 

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

 

35

 

ARTICLE
IX

 

RELATIVE PRIORITIES OF LIENS IN COLLATERAL

 

SECTION 9.01.  Relative
Priorities of Security Interests and Liens.  (a) By its acceptance of the benefits hereof and of the other
Second Priority Collateral Documents, each of the Second Priority Collateral
Trustees, on behalf of themselves and each Second Priority Representative and
each Second Priority Secured Holder (i) acknowledges and agrees that each
Grantor has granted a security interest in the Collateral owned by it under the
First Priority Collateral Documents to the First Priority Collateral Trustees,
for the benefit of the First Priority Representatives and the First Priority
Secured Holders, to secure the First Priority Secured Obligations and that such
security interest is prior in all respects to the security interests in the
Collateral granted to the Second Priority Collateral Trustees, for the benefit
of the Second Priority Representatives and the Second Priority Secured Holders,
under the Second Priority Collateral Documents, (ii) agrees that neither the
Second Priority Representatives, the Second Priority Collateral Trustees nor
any Second Priority Secured Holder shall have any claim to or in respect of
Collateral that is subject to the security interests granted under the First
Priority Collateral Documents, or any proceeds of or realization on such
Collateral, on a parity with or prior to the claim of the First Priority
Secured Obligations and (iii) subject to Section 9.01(b), agrees that
notwithstanding such security interest and any rights of the Second Priority
Representatives, the Second Priority Collateral Trustees and the Second
Priority Secured Holders under the Second Priority Collateral Documents or
otherwise, so long as (1) any First Priority Secured Obligations are secured by
a Lien under the First Priority Collateral Documents and (2) the applicable
Collateral is subject to the security interests granted under the First
Priority Collateral Documents, none of the Second Priority Representatives, the
Second Priority Collateral Trustees nor any Second Priority Secured Holder
shall have any right or claim in respect of the exercise of rights and remedies
of the First Priority Collateral Trustees, First Priority Representatives and
the First Priority Secured Holders, whether under the First Priority Collateral
Documents or otherwise, in respect of the Collateral, nor shall the First
Priority Collateral Trustees, the First Priority Representatives or the First
Priority Secured Holders have any obligation regarding any such exercise or any
other obligation or duty in respect of the interests of the Second Priority
Representatives, the Second Priority Collateral Trustees or the Senior Secured
Note Holders.

 

(b)           Notwithstanding
anything to the contrary in this Agreement, if (i) no Existing First Priority
Secured Obligations are outstanding and less than $100 million of Eligible Debt
is outstanding and held by a non-Affiliate of the Borrower, (ii) the Second
Priority Collateral Trustees have provided the Controlling Collateral Trustees
with a Second Priority Collateral Trust Agreement Default Notice that has not
been withdrawn pursuant to Section 4.01(b) and (iii) the Controlling Collateral
Trustees have failed to commence the exercise of remedies with respect to or in
connection with the Collateral for a period of 120 days following receipt of
such Second Priority Collateral Trust Agreement Default Notice, the Second
Priority Collateral Trustees shall be entitled to commence the exercise of
remedies with respect to or in connection with the Collateral; provided
that if pursuant to the terms of this Section 9.01(b) the Second Priority
Collateral Trustees hold cash proceeds from the sale or other disposition of
the Collateral and until Payment in Full of all First Priority Secured
Obligations, the Second Priority 

 

36

 

Collateral Trustees shall turn over any such proceeds
to the First Priority Collateral Trustees for application as set forth in the
First Priority Collateral Documents.

 

SECTION 9.02.  Rights
in Collateral.  (a)  The
parties hereto agree that, after the date hereof and for so long as any First
Priority Secured Obligations are outstanding, in no event shall the Second
Priority Representatives, the Second Priority Collateral Trustees or any Second
Priority Secured Holder have a Lien on or security interest in any Collateral
that is not subject to the first priority lien of the First Priority Collateral
Trustees created under the First Priority Collateral Documents with respect to
such Collateral. Notwithstanding (i) anything to the contrary contained in any
Second Priority Collateral Document and irrespective of the time, order or
method of attachment or perfection of the security interests created by the
First Priority Collateral Documents or the Second Priority Collateral
Documents, (ii) anything contained in any filing or agreement to which the
First Priority Representatives, First Priority Collateral Trustees, any First
Priority Secured Holders, any Second Priority Secured Holder or any other party
hereto may be a party and (iii) the rules for determining priority under the
Uniform Commercial Code or any other law governing the relative priorities of
secured creditors, any security interest in any Collateral pursuant to the
First Priority Collateral Documents has and shall have priority over any
security interest in such Collateral pursuant to the Second Priority Collateral
Documents.

 

(b)           Subject
to Section 9.01(b), whether or not any bankruptcy proceeding or similar event
or proceeding has been commenced by or against any Grantor, (i) the Second
Priority Collateral Trustees will not (A) exercise or seek to exercise any
rights or exercise any remedies with respect to any Collateral that is subject
to the security interests granted under the First Priority Collateral
Documents, (B) institute any action or proceeding with respect to such rights
or remedies, including without limitation, any action of foreclosure, (C)
contest, protest or object to any foreclosure proceeding or action brought by
the First Priority Collateral Trustees or any other exercise by the First
Priority Collateral Trustees of any rights and remedies under any First
Priority Collateral Documents relating to the Collateral that is subject to the
security interests granted under the First Priority Collateral Documents, (D)
object to the forbearance by the First Priority Collateral Trustees to the
bringing or pursuing of any foreclosure proceeding or action or any other
exercise of any rights or remedies relating to the Collateral that is subject
to the security interests granted under the First Priority Collateral
Documents, (E) take or receive from the Grantors or any of their Subsidiaries,
directly or indirectly, in cash or other property or by set off or in any other
manner, the Collateral or any part thereof or proceeds therefrom in
satisfaction of the Second Priority Secured Obligations or (F) take or permit
any action prejudicial to or inconsistent with the priority position of the
Lien on the Collateral to secure the First Priority Secured Obligations over
the Lien on the Collateral to secure the Second Priority Secured Obligations
and (ii) the First Priority Collateral Trustees shall have the exclusive right
to enforce rights and exercise remedies with respect to the Collateral that is
subject to the security interests granted under the First Priority Collateral
Documents; provided that
this Section 9.02(b) shall not impair the Second Priority Collateral Trustees
in otherwise taking any action deemed proper by it to preserve the rights of
the Second Priority Representatives and the Second Priority Secured Holders
under the Second Priority Collateral Documents (including by way of filing
proof of claim or otherwise).

 

37

 

(c)           In
exercising rights and remedies with respect to the Collateral, the Controlling
Collateral Trustees may enforce the provisions of the First Priority Collateral
Documents and exercise remedies thereunder, all in such order and in such
manner as it may determine in the exercise of its sole and exclusive discretion
(as between the Controlling Collateral Trustees and the First Priority
Representatives and First Priority Secured Holders, on the one hand, and the
Second Priority Collateral Trustees and the Second Priority Secured Holders and
Second Priority Secured Holders, on the other hand), including, without
limitation, (i) the exercise of all rights and remedies in respect of the
Collateral and/or the First Priority Secured Obligations, (ii) the enforcement
or forbearance from enforcement of any Lien in respect of the Collateral
(subject to Section 9.01(b)), (iii) the release, with or without consideration,
of the Collateral from the Liens of the First Priority Collateral Documents, (iv)
the exercise of rights and powers of a holder of shares of stock included in
the Collateral under the First Priority Collateral Documents, (v) the
acceptance of the Collateral in full or partial satisfaction of the First
Priority Secured Obligations and (vi) the exercise of all rights and remedies
of a secured lender under the Uniform Commercial Code or any similar Law of any
applicable jurisdiction.

 

(d)           If,
after the occurrence and during the continuance of an First Priority Agreement
Default, the Controlling Collateral Trustees release their Lien in any part or
all of the Collateral in connection with (i) the sale, transfer or other
disposition thereof or (ii) the collection, or otherwise for the application,
of the proceeds thereof to the First Priority Secured Obligations, in each case
with respect to clauses (i) and (ii) in accordance with the First Priority
Collateral Documents, then, simultaneously with such release, the Lien and
security interest created pursuant to the Second Priority Collateral Documents
in such Collateral shall be automatically released, and upon any such release
the Second Priority Collateral Trustees shall, with respect to the Second
Priority Collateral Documents, execute or cause to be executed such release
documents and instruments and shall take such further actions as the
Controlling Collateral Trustees shall request. The Second Priority Collateral
Trustees, for themselves and on behalf of the Second Priority Representatives
and the Second Priority Secured Holder, hereby irrevocably constitute and
appoint the First Priority Collateral Trustees and any officer or agent of the
First Priority Collateral Trustees, with full power of substitution, as their
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of the Second Priority Collateral Trustees, for themselves
and on behalf of the Second Priority Representatives and the Second Priority
Secured Holders, and in the name of the Second Priority Collateral Trustees,
for themselves and on behalf of the Second Priority Representatives and the
Second Priority Secured Holders, or in the First Priority Collateral Trustees’
own name, from time to time in the First Priority Collateral Trustees’
discretion, for the purpose of carrying out the terms of this paragraph, to
take any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this paragraph, including, without limitation, any financing statements, endorsements,
assignments or other instruments of transfer or release.  Any action taken in accordance with the
first sentence of this Section 9.02(d) shall be effective notwithstanding the
cessation of any First Priority Agreement Default.  Notwithstanding any such release by the Second Priority
Collateral Trustees as contemplated in this Section 9.02(d), it is understood
that the Lien of the Second Priority Collateral Trustees in any proceeds
realized from such sale, transfer or other disposition shall, subject to the
terms of this Agreement and the other Second Priority Collateral Documents,
continue (unless such proceeds are applied to the payment of First Priority
Secured Obligations) 

 

38

 

and, following Payment in Full of the First
Priority Secured Obligations, any proceeds remaining from any such sale,
transfer, other disposition or collection shall, unless otherwise required by
applicable Law, be made available (and the Grantors hereby agree to take any and
all actions requested by the Required Second Priority Representative(s)
necessary to make such proceeds available) to the Second Priority Collateral
Trustees for application against the Second Priority Secured Obligations
pursuant to the terms of this Agreement.

 

SECTION 9.03.  Obligations
Unconditional.  The Second Priority
Collateral Trustees acknowledge and agree on behalf of the Second Priority
Representatives and the Second Priority Secured Holders to the relative
priority as to the Collateral and the application of the proceeds therefrom as
provided herein and acknowledge and agree that such priorities and the
application of the proceeds from the Collateral shall not be affected or
impaired in any manner whatsoever including, without limitation, on account of:

 

(a)           any lack of validity or
enforceability of any First Priority Secured Agreement or any Second Priority
Secured Agreement;

 

(b)           any change in the time,
manner or place of payment of, or in any other term of, all or any of the First
Priority Secured Obligations, the Second Priority Secured Obligations, or any
amendment or waiver or other modification, whether by course of conduct or
otherwise, of the terms of any First Priority Secured Agreement, the Senior
Note Indenture, or any other Second Priority Secured Agreement;

 

(c)           any exchange, release
or nonperfection of any security interest in any Collateral, or any release,
amendment, waiver or other modification, whether in writing or by course of
conduct or otherwise, of all or any of the First Priority Secured Obligations,
Second Priority Secured Obligations or any guarantee thereof;

 

(d)           the actual date and
time of execution delivery, recording, filing or perfection of any security
interests created in the Collateral;

 

(e)           the commencement of any
bankruptcy or similar proceeding in respect of any Grantor; or

 

(f)            any other
circumstances (except payment or discharge in full) which otherwise might
constitute a defense available to, or a discharge of, any Grantor in respect of
the First Priority Secured Obligations, the Second Priority Secured Obligations
or of the Second Priority Collateral Trustees in respect of this Agreement.

 

SECTION 9.04.  Waiver
of Claims.  To the maximum extent
permitted by law, the Second Priority Collateral Trustees, for themselves and
each Second Priority Representative and each Second Priority Secured Holder,
waive any claim they might have against the First Priority Collateral Trustees,
the First Priority Representatives or the First Priority Secured Holders with
respect to, or arising out of, any action or failure to act or any error of
judgment or negligence on the part of the First Priority Collateral Trustees,
the First Priority Representatives, the First Priority Secured Holders or their
respective directors, officers, employees or agents with respect to any
exercise of rights or remedies under the First Priority Collateral Documents or
any transaction relating to the Collateral. Neither the First Priority
Collateral Trustees, any First 

 

39

 

Priority Representative, any First Priority Secured
Holder nor any of their respective directors, officers, employees or agents
shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so, except to the extent arising out of
the gross negligence or willful misconduct of the First Priority Collateral
Trustees, any First Priority Representative, any First Priority Secured Holders
or such other Person, or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any Grantor, the Second Priority
Collateral Trustees, any Second Priority Representative, any Second Priority
Secured Holder or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof.

 

SECTION 9.05.  Agreement
by the Grantors.  (a)   Each Grantor hereby agrees that it will
not, and will not permit any of its Subsidiaries to take any action in
contravention of the provisions of this Agreement.

 

(b)           So
long as the Second Priority Secured Obligations are still outstanding and the
Second Priority Collateral Documents are still in effect, if at any time the
Collateral has been sold or otherwise disposed of (whether pursuant to the
exercise of remedies by the First Priority Collateral Trustees or otherwise)
and the First Priority Collateral Trustees hold cash proceeds remaining after
application as set forth in clause THIRD of Section 5.01(a) of the First
Priority Collateral Trust Agreement, each Grantor by its signature to this
Agreement irrevocably instructs the First Priority Collateral Trustees to turn
over any such remaining proceeds to the Second Priority Collateral Trustees for
application as set forth in the Second Priority Collateral Trust Agreement upon
the sale or disposition of the Collateral as set forth in this Section 9.05(b).

 

(c)           At any
time that there are no First Priority Secured Obligations secured by a Lien
under the First Priority Collateral Documents, if at such time the First
Priority Collateral Trustees continue to hold any certificates representing
shares of stock or instruments of indebtedness included in the Collateral or
any other item of Collateral, each Grantor shall, as of the date of this
Agreement, instruct the First Priority Collateral Trustees to turn over such
certificates, instruments and other items of Collateral directly to Second
Priority Collateral Trustees to be held by them under the Second Priority
Collateral Documents upon the occurrence of the events and circumstances set
forth in this Section 9.05.  In no event
shall the Second Priority Collateral Trustees have any liability for the First
Priority Collateral Trustees’ failure to follow the instructions or directions
of the Grantors pursuant to this Section 9.05(c).

 

SECTION 9.06.  No
Warranties, Etc.  (a)   The Second Priority Collateral Trustees
acknowledge and agree that (i) none of the First Priority Collateral Trustees,
the First Priority Representatives or the First Priority Secured Holders have
made any representation or warranty herein or in the other Second Priority
Collateral Documents with respect to the validity, legality, completeness,
collectibility or enforceability of the First Priority Secured Agreements and
(ii) the First Priority Collateral Trustees may manage the Liens of the First
Priority Secured Holders in the Collateral without regard to any rights or
interests that the Second Priority Collateral Trustees, the Second Priority
Representatives or the other Second Priority Secured Holders may have in the
Collateral.

 

(b)           Waiver
of Marshalling and Similar Rights. 
The Second Priority Collateral Trustees for themselves and on behalf of
the Second Priority Representatives and Second 

 

40

 

Priority Secured Holders agree not to assert
and hereby waive, to the fullest extent permitted by applicable Law, any right
to demand, request, plead or otherwise assert, or otherwise claim the benefit
of, any marshalling, appraisement, valuation or other similar rights a junior
secured creditor may have under applicable Law.

 

(c)           Waiver
of Requirements.  The Second
Priority Collateral Trustees hereby waive promptness, diligence, notice of
acceptance and any other notice with respect to this Agreement and any requirement
that the First Priority Collateral Trustees, the First Priority Representatives
or the First Priority Secured Holders protect, secure, perfect or insure (i)
any Lien under the First Priority Collateral Documents or otherwise, (ii) any
Collateral or (iii) any other property subject thereto or exhaust any right or
take any action against the Grantors, or any of their Subsidiaries or any other
Person or any Collateral or any other collateral.

 

(d)   No
Liability of First Priority Collateral Trustees.  This Agreement shall not create any agency relationship between
the First Priority Collateral Trustees and the Second Priority Collateral
Trustees, the Second Priority Representatives and/or the Second Priority Secured
Holders.  The First Priority Collateral
Trustees, their officers, directors, employees and agents shall not be
responsible, directly or indirectly, to the Second Priority Collateral
Trustees, the Second Priority Representatives and/or the Second Priority
Secured Holders for any action taken or omitted by the First Priority
Collateral Trustees hereunder, or under the First Priority Secured Agreements
or otherwise, nor shall they be liable or responsible for any loss, cost or
expense suffered or incurred by the Second Priority Collateral Trustees, the
Second Priority Representatives and/or the Second Priority Secured Holders,
other than any such loss, cost or expense found in a final non-appealable
judgment by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the First Priority Collateral Trustees,
their officers, directors, employees or agents.  Without limiting the generality of the foregoing, the First
Priority Collateral Trustees, their officers, directors, employees and agents
make no representation or warranty herein and shall not be deemed to have made
any representation and warranty herein: 
(i) as to the accuracy, validity, legality or enforceability of the
First Priority Secured Agreements, the Second Priority Secured Agreements or
any report, certificate, instrument or agreement delivered pursuant hereto or
thereto or (ii) as to the validity, sufficiency, perfection or value of the
Collateral.

 

SECTION 9.07.  Reinstatement
of First Priority Secured Obligations. 
The First Priority Secured Obligations owed to each First Priority
Secured Holder under the First Priority Collateral Documents shall continue to
be effective, or to be reinstated, as the case may be, as to any payment in
respect of any First Priority Secured Obligation that is rescinded or must
otherwise be returned by an First Priority Secured Holder upon the occurrence
or as a result of applicable provisions of the Bankruptcy Code, all as though
such payment has not been made.

 

SECTION 9.08.  Sharing
Arrangements.  (a)  The Second Priority Collateral Trustees for
themselves and on behalf of the Second Priority Representatives and Second
Priority Secured Holders hereby agree that the provisions of the First Priority
Collateral Documents with respect to allocations and distributions of proceeds
of the Collateral shall prevail notwithstanding any event or circumstance,
including, without limitation, in the event that, through the operation of any
bankruptcy, reorganization, insolvency or other laws or otherwise, any of the
Liens of the First Priority Secured Holders in the Collateral is avoided in 

 

41

 

whole or in part for any reason or is enforced with
respect to some, but not all, of the First Priority Secured Obligations then
outstanding.

 

(b)           The
Second Priority Collateral Trustees, the Second Priority Representatives and
the Second Priority Secured Holders agree that they shall not be entitled to
benefit from any avoidance action affecting or otherwise relating to any
distribution or allocation made in accordance with the First Priority
Collateral Documents, whether by preference or otherwise, it being understood
and agreed that the benefit of any such avoidance action otherwise allocable to
them shall instead be allocated and turned over for application in accordance
with the priorities set forth in the First Priority Collateral Documents.

 

(c)           In the
event that any payment or distribution shall be received by the Second Priority
Collateral Trustees in a manner that is inconsistent with the provisions of
Article V of the First Priority Collateral Trust Agreement, such payment or
distribution shall be held by the Second Priority Collateral Trustees for the
benefit of, and shall be paid over or delivered to, the First Priority Collateral
Trustees for application in accordance with the First Priority Collateral Trust
Agreement.

 

(d)           If the
Second Priority Collateral Trustees shall acquire by indemnification,
subrogation or otherwise (including pursuant to the Second Priority Collateral
Documents), any lien, estate, right or other interest in, or possession or
control of, any of the assets of any Grantor that would otherwise constitute
Collateral, that lien, estate, right or other interest shall be subject to the
relative priorities set forth herein.

 

SECTION 9.09.  First
Priority Collateral Trustees as Bailee. 
Subject to Section 9.06(c) hereof and Section 6.06 of the First Priority
Collateral Trust Agreement, the First Priority Collateral Trustees acknowledge
that, to the extent that the Collateral under the First Priority Collateral
Documents includes items (such as stock certificates, instruments, cash or
security entitlement) which are held in the possession of (or in the case of
cash or a security entitlement under the control of) the First Priority
Collateral Trustees, or a third party on their behalf, pursuant to the First
Priority Collateral Documents, the First Priority Collateral Trustees are also
holding such items in their possession (or under their control) as bailee of
the Second Priority Collateral Trustees solely for purposes of perfecting the
security interest of the Second Priority Collateral Trustees in such items; provided
that nothing in this Section 9.09 shall require the First Priority Collateral
Trustees to deliver any Collateral to the Second Priority Collateral Trustees
so long as the First Priority Secured Obligations are still outstanding.  Pursuant to Section 9.05(c), after Payment
in Full of the First Priority Secured Obligations, the Grantors shall instruct
the First Priority Collateral Trustees to deliver to the Second Priority
Collateral Trustees all of the aforesaid items in the possession of the First
Priority Collateral Trustees at such time.

 

ARTICLE
X

 

MISCELLANEOUS

 

SECTION 10.01. Amendments, Supplements and Waivers.  (a) 
With the written consent of the Required Second Priority
Representative(s) and the Second Priority Corporate Trustee, the Grantors may,
from time to time, enter into written agreements supplemental hereto 

 

42

 

for the purpose of adding to or waiving any provision
of this Agreement or any other Second Priority Collateral Document or changing
in any manner the rights of the Second Priority Collateral Trustees, the Second
Priority Representatives, the Second Priority Secured Holders and the Grantors
hereunder or thereunder; provided that

 

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

 

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

 

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

 

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

 

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

 

(vi)          the Second Priority
Collateral Trustees shall not enter into any such supplemental agreement unless
they shall have received a certificate of the Required Second Priority
Representative(s) to the effect that, upon receipt of the Second Priority
Corporate Trustee’s written consent, this Section 9.01(a) has been complied
with and an instruction letter requesting the Second Priority Corporate Trustee
and Second Priority Individual Trustee to execute such supplemental agreement.

 

(b)           Notwithstanding
the provisions of paragraph (a), (x) the Second Priority Collateral Trustees
and the Grantors may, at any time and from time to time, without the consent of
any Second Priority Representative or any Second Priority Secured Holder enter
into additional Second Priority Collateral Documents or one or more agreements
supplemental hereto or to any Second Priority Collateral Document, in form
satisfactory to the Second Priority Collateral Trustees,

 

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

 

43

 

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

 

(y)           the First Priority
Collateral Trustees and the Grantors may, at any time and from time to time,
without the consent of any Second Priority Representative or any Second
Priority Secured Holder enter into amendments or other written agreements
supplemental to any First Priority Collateral Document for the purpose of
adding to, or deleting from, or waiving or consenting to any departures from
any provisions of, any First Priority Collateral Document or changing in any
manner the rights of the Agent, the holders of the First Priority Secured
Obligations or the Grantors thereunder. 
Any amendment or waiver of, or any consent under, any provision of any
First Priority Collateral Document (except to the extent that such amendment,
waiver or consent, would have the effect of releasing all or substantially all
of the Collateral from the Second Priority Collateral Estate) shall apply
automatically to the comparable provision of the comparable Second Priority
Collateral Document without the consent of or notice to any Second Priority
Representative or any Second Priority Secured Holder and without any action by
any Grantor or the Second Priority Collateral Trustees; provided that
the Borrower has delivered to the Second Priority Collateral Trustees a
certificate from an Authorized Officer stating that such amendment, waiver or
consent does not have the effect of releasing all or substantially all of the
Collateral from the Second Priority Collateral Estate. The Borrower shall
promptly notify the Second Priority Collateral Trustees of any amendment or
waiver of, or any consent under, any provision of any First Priority Collateral
Document that applies automatically to the comparable provision of the
comparable Second Priority Collateral Document, which notice shall include a
copy of such amendment, waiver or consent, as applicable, provided that the
failure to give such notice shall not affect the validity of such amendment or
waiver of, or consent under, either the First Priority Collateral Documents or
the First Priority Collateral Documents; and

 

(z)            the First Priority
Collateral Trustees and the Grantors may, at any time and from time to time,
without the consent of any Second Priority Representative or any Second
Priority Secured Holder, enter into amendments or other written agreements
supplemental to any First Priority Collateral Document for the purpose of
granting to the First Priority Collateral Trustees a first priority security
interest in additional assets of the Grantors to secure the First Priority
Secured Obligations. Any such amendment or written agreements supplemental to
any First Priority Collateral Document shall apply automatically to the
comparable Second Priority Collateral Document without the consent of or notice
to any Second Priority Representative or any Second Priority Secured Holder and
without any action by any Grantor or the Second Priority Collateral Trustees,
and the Second Priority Collateral Trustee shall automatically be granted a
second priority security interest in such additional assets of the Grantors to
secure the Second Priority Secured Obligations.

 

SECTION 10.02. Additional Actions of Second Priority
Representatives.  Whether or not
there shall be a Second Priority Collateral Trust Agreement Default, the Second
Priority Collateral Trustees shall comply and shall be fully protected in
complying with any reasonable request of (a) the Required Second Priority
Representative(s), to take or refrain from 

 

44

 

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

 

SECTION 10.03. Notices. 
All notices, requests, demands and other communications provided for or
permitted hereunder shall, unless otherwise stated herein, be in writing
(including telex and telecopy communications) and shall be sent by mail (by
registered or certified mail, return receipt requested), overnight prepaid
courier, telex, telecopier or hand delivery:

 

(a)           If to the Grantors, to their
addresses specified on the signature pages hereto or in any other Second
Priority Collateral Document;

 

(b)           If to the Second Priority Corporate
Trustee, at Sixth Street and Marquette Avenue, MAC N9303-120, Minneapolis, MN
55479, Attention: Jeffery T. Rose, or at such other address as shall be
designated by it in a written notice to the Grantors and each Second Priority
Representative, with a copy to the Second Priority Individual Trustee, at Sixth
Street and Marquette Avenue, MAC N9303-120, Minneapolis, MN 55479, or at such
other address as shall be designated by him in a written notice to the Grantors
and each Second Priority Representative; provided that failure to send a
copy of any notice to the Second Priority Individual Trustee shall not render
any notice to the Second Priority Collateral Trustees ineffective; and

 

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

 

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

 

45

 

Corporate Trustee
or such Second Priority Representative, as the case may be, and, provided
further that any notice to the Second Priority Collateral Trustees from
any Grantor shall be signed by an Authorized Officer, unless otherwise
specifically set forth herein.

 

SECTION 10.04. Headings. 
Section, subsection and other headings used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.

 

SECTION 10.05. Severability.  Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.

 

SECTION 10.06. Treatment of Payee or Indorsee by Trustees.  (a) 
The Second Priority Collateral Trustees may treat the registered Second
Priority Secured Holder of any registered note, and the payee or indorsee of
any note or debenture which is not registered, as the absolute owner thereof
for all purposes hereunder and shall not be affected by any notice to the
contrary, whether such promissory note or debenture shall be past due or not.

 

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

 

SECTION 10.07. Dealings with the Grantors.  Upon any application or demand by the
Grantors to the Second Priority Collateral Trustees to take or permit any
action under any of the provisions of this Agreement, each Grantor shall
(unless otherwise waived by the Second Priority Collateral Trustees in writing)
furnish to the Second Priority Collateral Trustees a certificate signed by an
Authorized Officer stating that all conditions precedent, if any, provided for
in this Agreement relating to the proposed action have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such documents is specifically required by any provision of this
Agreement relating to such particular application or demand, no additional
certificate need be furnished.

 

SECTION 10.08. Claims. 
This Agreement is made for the benefit of the Second Priority
Representatives on behalf of the Second Priority Secured Holders, and the
Second Priority Representatives may from time to time enforce their rights as
explicit beneficiaries hereunder pursuant to the terms and conditions of this
Agreement and the other Second Priority Collateral Documents.

 

SECTION 10.09. Binding Effect.  This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and shall inure to the benefit of the Second
Priority Representatives on behalf of the Second Priority Secured Holders and
their respective successors and assigns and nothing herein or in any other
Second Priority Collateral Document is 

 

46

 

intended or shall be construed to give any other
Person any right, remedy or claim under, to or in respect of this Agreement,
any other Second Priority Collateral Document, the Collateral, the Second
Priority Collateral Account or the Second Priority Collateral Trust Estate or
any part thereof.

 

SECTION 10.10. Governing Law.  This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, except as otherwise required by
mandatory provisions of law.

 

SECTION 10.11. Effectiveness.  This Agreement shall become effective on the execution and
delivery hereof and shall remain in effect so long as the Second Priority
Collateral Trustees shall have any obligations hereunder.

 

SECTION 10.12. Reexecution of Agreement.  This Agreement shall be reexecuted at any
time and from time to time, at the request of the Required Second Priority
Representative(s), with such changes in the form hereof (including, without
limitation, changes on the cover page and adding supplemental signatures and
notary statements) as may be necessary to comply with the filing or recording
requirements of any jurisdiction where this Agreement is to be filed.

 

SECTION 10.13. Effect on Senior Note Indenture.  Nothing in this Agreement shall operate or
be deemed to prevent any amendment, modification or waiver of the Senior Note
Indenture or other Senior Note Indenture Agreement by the parties thereto in
accordance with the terms thereof.

 

SECTION 10.14. Third-Party Beneficiaries.  The First Priority Collateral Trustees, the
First Priority Representatives and the other First Priority Secured Holders are
third-party beneficiaries to this Agreement and the other Second Priority
Collateral Documents and may from time to time enforce their rights as explicit
beneficiaries hereunder pursuant to the terms and conditions of this Agreement
and the other Second Priority Collateral Documents.

 

SECTION 10.15. Counterparts.  This Agreement may be executed in separate counterparts, each of
which shall be an original and all of which taken together shall constitute one
and the same instrument.

 

47

 

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

 

	
  Second Priority
  Corporate Trustee:

  	
  WELLS FARGO BANK
  MINNESOTA, NATIONAL ASSOCIATION, not in its individual capacity, but solely
  as Second Priority Corporate Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

48

 

	
  Second Priority
  Individual Trustee:

  	
   

  	
   

  
	
   

  	
  Jeffery T. Rose, not in
  his individual

  capacity, but solely as Second Priority

  Individual Trustee

  

 

49

 

	
  Grantors:

  	
  THE AES CORPORATION,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  1001 North 19th
  Street

  
	
   

  	
  Arlington, VA 22209

  
	
   

  	
   

  
	
   

  	
  AES INTERNATIONAL
  HOLDINGS II, LTD.,

  
	
   

  	
  a British Virgin
  Islands company

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  Citco Building,
  Wickhams Cay,

  
	
   

  	
  P.O. Box 662, Road
  Town,

  
	
   

  	
  Tortola,

  
	
   

  	
  British Virgin Islands

  

 

50

 

	
   

  	
  ACKNOWLEDGED AND AGREED
  ON THE DATE HEREOF:

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK
  MINNESOTA, NATIONAL ASSOCIATION,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

51

 

Schedule I

to the Second Priority

Collateral Trust Agreement

 

FEE SCHEDULE

 

Attached.

 

52

 

Schedule II

to the Second Priority

Collateral Trust Agreement

 

 

THE AES CORPORATION
NON-PLEDGED SUBSIDIARIES

 

	
  Non-Pledged Subsidiary

  	
   

  	
  Jurisdiction
  of

  Incorporation

  
	
  AES (India) Private Limited

  	
   

  	
  India

  
	
  AES Americas, Inc.

  	
   

  	
  Delaware

  
	
  AES Andes Energy, Inc.

  	
   

  	
  Delaware

  
	
  AES Andes, Inc.

  	
   

  	
  Delaware

  
	
  AES Angel Falls, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Appalachia, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Aquila, Inc.

  	
   

  	
  Delaware

  
	
  AES Argener I, LLC

  	
   

  	
  Delaware

  
	
  AES Argener II, LLC

  	
   

  	
  Delaware

  
	
  AES Atlantic, Inc.

  	
   

  	
  Delaware

  
	
  AES Aurora, Inc.

  	
   

  	
  Delaware

  
	
  AES Baja Norte I, Inc.

  	
   

  	
  Delaware

  
	
  AES Baja Norte II, Inc.

  	
   

  	
  Delaware

  
	
  AES Big Sky, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Bolivar, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Brasil Energia, Inc.

  	
   

  	
  Delaware

  
	
  AES Brazil, Inc.

  	
   

  	
  Delaware

  
	
  AES BVI Holdings I, Inc.

  	
   

  	
  Delaware

  
	
  AES BVI Holdings II, Inc.

  	
   

  	
  Delaware

  
	
  AES Calgary, Inc.

  	
   

  	
  Delaware

  
	
  AES Canada, Inc.

  	
   

  	
  Delaware

  
	
  AES Caribbean Services, Inc.

  	
   

  	
  Delaware

  
	
  AES Cartagena Holdings BV

  	
   

  	
  Netherlands

  
	
  AES Central America Power Ventures, Ltd.

  	
   

  	
  Cayman

  
	
  AES Chesapeake, Inc.

  	
   

  	
  Delaware

  

 

53

 

	
  Non-Pledged Subsidiary

  	
   

  	
  Jurisdiction
  of

  Incorporation

  
	
  AES Colombia I, Inc.

  	
   

  	
  Delaware

  
	
  AES Communications Latin America, Inc.

  	
   

  	
  Delaware

  
	
  AES Constructors, Inc.

  	
   

  	
  Delaware

  
	
  AES Coral, Inc.

  	
   

  	
  Delaware

  
	
  AES Desert Power, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Development de Argentina S.A.

  	
   

  	
  Argentina

  
	
  AES Direct, Inc.

  	
   

  	
  Delaware

  
	
  AES Dominican Holdings, Inc.

  	
   

  	
  Delaware

  
	
  AES Drax Financing II, Inc.

  	
   

  	
  Delaware

  
	
  AES Drax Financing, Inc.

  	
   

  	
  Delaware

  
	
  AES Drax IBC Limited

  	
   

  	
  Guernsey

  
	
  AES Edelap Funding Corporation, L.L.C.

  	
   

  	
  Delaware

  
	
  AES El Dorado, Inc.

  	
   

  	
  Delaware

  
	
  AES Emma, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Endeavor, Inc.

  	
   

  	
  Delaware

  
	
  AES Energy Mexico, Inc.

  	
   

  	
  Delaware

  
	
  AES Enterprise, Inc.

  	
   

  	
  Delaware

  
	
  AES Finance and Development, Inc.

  	
   

  	
  Delaware

  
	
  AES Generation Holdings, LLC

  	
   

  	
  Delaware

  
	
  AES Georgia Gas GP, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Global Insurance Company

  	
   

  	
  Vermont

  
	
  AES Global Power Finance, Inc.

  	
   

  	
  Delaware

  
	
  AES GPH Holdings, Inc.

  	
   

  	
  Delaware

  
	
  AES Great Plains, Inc.

  	
   

  	
  Delaware

  
	
  AES Greystone Holdings, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Hoytdale, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Huntington Beach Development, Inc.

  	
   

  	
  Delaware

  
	
  AES India, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Indiana Holdings, L.L.C.

  	
   

  	
  Delaware

  
	
  AES International Holdings II, Ltd.

  	
   

  	
  British Virgin Islands

  

 

54

 

	
  Non-Pledged Subsidiary

  	
   

  	
  Jurisdiction
  of

  Incorporation

  
	
  AES Intrepid, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Intricity, Inc.

  	
   

  	
  New Jersey

  
	
  AES Japan, Inc.

  	
   

  	
  Delaware

  
	
  AES Korea, Inc.

  	
   

  	
  Delaware

  
	
  AES Lake Worth Holdings, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Long Island Holdings, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Los Mina Finance Company

  	
   

  	
  Cayman

  
	
  AES Medina Valley Cogen (No. 4), L.L.C.

  	
   

  	
  Illinois

  
	
  AES Mexico Development, S. de
  R.L. de C.V.

  	
   

  	
  Mexico

  
	
  AES Mohave Holdings, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Mongol Services, Inc.

  	
   

  	
  Delaware

  
	
  AES Native Hollow, L.L.C.

  	
   

  	
  Delaware

  
	
  AES New Hampshire Biomass, Inc.

  	
   

  	
  New Hampshire

  
	
  AES Oasis Energy, Inc.

  	
   

  	
  Delaware

  
	
  AES Oasis Finco, Inc.

  	
   

  	
  Delaware

  
	
  AES Oasis Holdco, Inc.

  	
   

  	
  Delaware

  
	
  AES Oasis Private Ltd.

  	
   

  	
  Singapore

  
	
  AES Oman Holdings, Ltd

  	
   

  	
  Cayman

  
	
  AES Orient, Inc.

  	
   

  	
  Delaware

  
	
  AES Orissa Distribution Private
  Limited

  	
   

  	
  India

  
	
  AES Pacific Procurement Company, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Pacific, Inc.

  	
   

  	
  Delaware

  
	
  AES Pakistan (Pvt) Ltd.

  	
   

  	
  Pakistan

  
	
  AES Pakistan Operations, Ltd.

  	
   

  	
  Delaware

  
	
  AES Parana Generation Holdings, Ltd.

  	
   

  	
  Cayman

  
	
  AES Parana II Limited Partnership

  	
   

  	
  Cayman

  
	
  AES Pecan Grove II, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Pecan Grove, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Petty’s Island, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Phoenix Ltd.

  	
   

  	
  Hungary

  

 

55

 

	
  Non-Pledged Subsidiary

  	
   

  	
  Jurisdiction
  of

  Incorporation

  
	
  AES PJM, Inc.

  	
   

  	
  Delaware

  
	
  AES Power, Inc.

  	
   

  	
  Delaware

  
	
  AES Puerto Rico Services, Inc.

  	
   

  	
  Delaware

  
	
  AES Pumped Storage Arkansas, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Redfish, Inc.

  	
   

  	
  Delaware

  
	
  AES Sao Paulo, Inc.

  	
   

  	
  Delaware

  
	
  AES Services, Inc.

  	
   

  	
  Delaware

  
	
  AES Silk Road Cayman Ltd

  	
   

  	
  Cayman

  
	
  AES Silk Road, Inc.

  	
   

  	
  Delaware

  
	
  AES Songas Holdings, Ltd

  	
   

  	
  Cayman

  
	
  AES South City, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Southington Holdings, Inc.

  	
   

  	
  Delaware

  
	
  AES Taiwan, Inc.

  	
   

  	
  Delaware

  
	
  AES Telecom Americas, Inc.

  	
   

  	
  Delaware

  
	
  AES Telecom Development, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Terneuzen Engineering BV

  	
   

  	
  The Netherlands

  
	
  AES Tiete Holdings, Ltd.

  	
   

  	
  Cayman

  
	
  AES Transgas, LLC

  	
   

  	
  Delaware

  
	
  AES Transpower Australia Pty Ltd.

  	
   

  	
  Australia

  
	
  AES Transpower Private Ltd.

  	
   

  	
  Singapore

  
	
  AES Transpower, Inc.

  	
   

  	
  Delaware

  
	
  AES UK Power Holdings Limited

  	
   

  	
  United Kingdom

  
	
  AES UK Power, L.L.C.

  	
   

  	
  Delaware

  
	
  AES Whitefield, Inc.

  	
   

  	
  New Hampshire

  
	
  AES-Zemplen Ltd.

  	
   

  	
  Hungary

  
	
  Cilcorp, Inc.

  	
   

  	
  Illinois

  
	
  Dominican Power Metering, Ltd.

  	
   

  	
  Cayman

  
	
  GeoUtilities, Inc.

  	
   

  	
  Delaware

  
	
  La Plata II, Inc.

  	
   

  	
  Delaware

  
	
  La Plata III, Inc.

  	
   

  	
  Delaware

  

 

56

 

	
  Non-Pledged Subsidiary

  	
   

  	
  Jurisdiction
  of

  Incorporation

  
	
  LW Generation Corporation

  	
   

  	
  Delaware

  
	
  SFS Corporation

  	
   

  	
  New Hampshire

  
	
  Star Natural Gas Company

  	
   

  	
  Delaware

  
	
  Thermo Ecotek International Holdings Inc.

  	
   

  	
  Cayman

  
	
  Thermo Fuels Company, Inc.

  	
   

  	
  California

  
	
  ThinkAES, Inc.

  	
   

  	
  Delaware

  
	
  Totem Gas Storage Company, LLC

  	
   

  	
  Colorado

  
	
  Totem Power, LLC

  	
   

  	
  Colorado

  
	
  Transmission Management Services, L.L.C.

  	
   

  	
  Delaware

  
	
  West County Generation, LLC

  	
   

  	
  Delaware

  

 

57

 

AES INTERNATIONAL HOLDINGS II, LTD.
NON-PLEDGED SUBSIDIARIES

 

	
  Non-Pledged Subsidiary

  	
   

  	
  Jurisdiction
  of

  Incorporation

  
	
  AES Argentina Operations, Ltd.

  	
   

  	
  Cayman

  
	
  AES Bandeirante, Ltd.

  	
   

  	
  Cayman

  
	
  AES Caracoles I

  	
   

  	
  Cayman

  
	
  AES Caracoles II

  	
   

  	
  Cayman

  
	
  AES Cayman Guaiba, Ltd.

  	
   

  	
  Cayman

  
	
  AES Cayman Pampas, Ltd.

  	
   

  	
  Cayman

  
	
  AES Cholita, Ltd.

  	
   

  	
  Cayman

  
	
  AES Communications, Ltd.

  	
   

  	
  Cayman

  
	
  AES Condor, Ltd.

  	
   

  	
  Cayman

  
	
  AES Costa Rica Hydroelectrica, Ltd.

  	
   

  	
  Cayman

  
	
  AES Infoenergy Ltda

  	
   

  	
  Brazil

  
	
  AES Intercon II, Ltd.

  	
   

  	
  Cayman

  
	
  AES Intercon, Ltd.

  	
   

  	
  Cayman

  
	
  AES Interenergy, Ltd.

  	
   

  	
  Cayman

  
	
  AES Inti Raymi, Ltd.

  	
   

  	
  Cayman

  
	
  AES Merida Management Services
  S. de R.L. de C.V.

  	
   

  	
  Mexico

  
	
  AES Network

  	
   

  	
  Cayman

  
	
  AES Pak Gen Holdings, Inc.

  	
   

  	
  Mauritius

  
	
  AES Pak Holdings, Ltd.

  	
   

  	
  British Virgin Islands

  
	
  AES Pakistan Holdings

  	
   

  	
  Mauritius

  
	
  AES Parana IHC, Ltd.

  	
   

  	
  Cayman

  
	
  AES Peru S.R.L.

  	
   

  	
  Peru

  
	
  AES Santa Ana, Ltd.

  	
   

  	
  Cayman

  
	
  AES Santa Branca, Ltd.

  	
   

  	
  Cayman

  
	
  AES Servicios Electricos
  Limitada de Capital Variable

  	
   

  	
  El Salvador

  
	
  AES South Point, Ltd.

  	
   

  	
  Cayman

  
	
  AES Telecomunicaciones Salvadorenas Ltda de CV

  	
   

  	
  El Salvador

  
	
  AES Transpower, Inc.

  	
   

  	
  Mauritius

  
	
  AES Yucatan S.R.L. de C.V.

  	
   

  	
  Mexico

  
	
  CCS Telecarrier

  	
   

  	
  Cayman

  
	
  Delta Capex Investments

  	
   

  	
  Cayman

  
	
  Wildwood Funding, Ltd.

  	
   

  	
  Cayman

  

 

58Exhibit
4.3

 

EXECUTION
COPY

 

SECOND
PRIORITY SECURITY AGREEMENT

 

Dated May 8, 2003

 

From

 

The Grantors
referred to herein

 

as Grantors

 

to

 

WELLS FARGO BANK
MINNESOTA, NATIONAL ASSOCIATION

 

as Second Priority
Corporate Trustee

 

and

 

Jeffery T. Rose

 

as Second Priority
Individual Trustee

 

 

TABLE OF CONTENTS

 

	
  Section

  	
   

  
	
   

  	
   

  
	
  Section 1.

  	
  Grant of Security

  
	
  Section 2.

  	
  Security for
  Obligations

  
	
  Section 3.

  	
  Grantors Remain
  Liable

  
	
  Section
  4.

  	
  Delivery
  and Control of Security Collateral

  
	
  Section
  5.

  	
  Maintaining
  the Account Collateral

  
	
  Section
  6.

  	
  Maintaining
  Letter-of-Credit Rights

  
	
  Section 7.

  	
  Representations
  and Warranties

  
	
  Section 8.

  	
  Further Assurances

  
	
  Section
  9.

  	
  Post-Closing
  Changes; Collections on Assigned Agreements, Receivables and Related
  Contracts

  
	
  Section 10.

  	
  Voting
  Rights; Dividends; Etc.

  
	
  Section 11.

  	
  As to the
  Assigned Agreements

  
	
  Section
  12.

  	
  Payments
  Under the Assigned Agreements; Letters of Credit

  
	
  Section
  13.

  	
  Transfers
  and Other Liens; Additional Shares

  
	
  Section
  14.

  	
  Second
  Priority Collateral Trustees May Perform

  
	
  Section
  15.

  	
  Remedies

  
	
  Section 16.

  	
  Indemnity and
  Expenses

  
	
  Section
  17.

  	
  Amendments;
  Waivers; Additional Grantors; Etc.

  
	
  Section
  18.

  	
  Notices,
  Etc.

  
	
  Section
  19.

  	
  Continuing
  Security Interest; Assignments under the Senior Note Indenture

  
	
  Section 20.

  	
  Release; Termination

  
	
  Section 21.

  	
  Security
  Interest Absolute

  
	
  Section 22.

  	
  Additional
  Secured Obligations

  
	
  Section 23.

  	
  Execution in
  Counterparts

  
	
  Section 24.

  	
  Limitation of
  Liability

  

 

i

 

	
  Section
  25.

  	
  Governing
  Law

  
	
  Section
  26.

  	
  Submission
  to Jurisdiction and Waiver

  
	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule I

  	
  -

  	
  Location, Chief Executive Office, Place Where
  Agreements Are Maintained, Type Of Organization, Jurisdiction Of Organization
  And Organizational Identification Number

  
	
  Schedule II

  	
  -

  	
  Pledged Equity and
  Pledged Debt

  
	
  Schedule III

  	
  -

  	
  Assigned
  Agreements

  
	
  Schedule IV

  	
  -

  	
  Changes in Name, Location, Etc.

  
	
  Schedule V

  	
  -

  	
  Account
  Collateral

  
	
  Schedule VI

  	
  -

  	
  Securities
  Accounts

  
	
  Schedule VII

  	
  -

  	
  Excluded
  Receivables

  
	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  -

  	
  Form
  of Security Agreement Supplement

  
	
  Exhibit B

  	
  -

  	
  Form of Account
  Control Agreement (Deposit Account/Securities Account)

  
	
  Exhibit C

  	
  -

  	
  Form of Consent and
  Agreement

  
	
  Exhibit D

  	
  -

  	
  Form of
  Securities Account Control Agreement

  
				

 

ii

 

SECOND
PRIORITY SECURITY AGREEMENT

 

SECOND PRIORITY SECURITY AGREEMENT dated May 8, 2003
(said agreement, as amended, amended and restated, supplemented or otherwise
modified, from time to time, being this “Agreement”),
made by The AES Corporation, a Delaware corporation (the “Borrower”), the other Persons listed on the
signature pages hereof and the Additional Grantors (as defined in
Section 17) (the Borrower, the Persons so listed and the Additional
Grantors being, collectively, the “Grantors”),
to Wells Fargo Bank Minnesota, National Association, a national banking
corporation, not in its individual capacity but solely as corporate trustee
(together with any successor corporate trustee appointed pursuant to Article
VII of the Second Priority Collateral Trust Agreement (as hereinafter defined),
the “Second Priority Corporate Trustee”),
and Jeffery T. Rose, an individual residing in the State of Minnesota, not in
his individual capacity but solely as individual trustee (together with any
successor individual trustee appointed pursuant to Article VII of the Second
Priority Collateral Trust Agreement, the “Second
Priority Individual Trustee”; and, together with the Second Priority
Corporate Trustee, the “Second Priority
Collateral Trustees”), as trustees under the Second Priority
Collateral Trust Agreement dated May 8, 2003 (said agreement, as amended,
supplemented or otherwise modified hereafter from time to time, being the “Second Priority Collateral Trust Agreement”)
among the Grantors and the Second Priority Collateral Trustees.

 

PRELIMINARY
STATEMENTS.

 

(1)                                  The
Borrower entered into an Amended and Restated Credit, Reimbursement and
Exchange Agreement dated as of December 12, 2002 (said agreement, as amended,
amended and restated, supplemented, extended, renewed, replaced, refinanced or
otherwise modified from time to time, being the “Credit Agreement”) with the subsidiary guarantors party
thereto, the financial institutions party thereto (the “Credit Agreement Parties”) and Citicorp
USA, Inc., as administrative agent (in such capacity, the “Agent”) and as collateral agent (in such
capacity, the “Credit Agreement Collateral
Agent”; and together with the Agent, the “Agents”).

 

(2)                                  In
order to induce the Credit Agreement Parties and the Agents to enter into the
Credit Agreement, (a) the Grantors granted, pursuant to the terms of a Security
Agreement dated as of December 12, 2002 (said agreement (including, without
limitation, the schedules thereto), as amended, amended and restated,
supplemented or otherwise modified from time to time, being the “First Priority Security Agreement”) made by
the Grantors to Wilmington Trust Company, a Delaware banking corporation, not
in its individual capacity but solely as corporate trustee (together with any
successor corporate trustee appointed pursuant to Article VII of the First
Priority Collateral Trust Agreement (as hereinafter defined), the “Existing Corporate Trustee”), and Bruce L.
Bisson, an individual residing in the State of Delaware, not in his individual
capacity but solely as individual trustee (together with any successor
individual trustee appointed pursuant to Article VII of the First Priority
Collateral Trust Agreement, the “Existing
Individual Trustee”; and, together with the Existing Corporate
Trustee, the “Existing Collateral Trustees”),
as trustees under the Collateral Trust Agreement dated as of December 12, 2002
(said agreement, as amended, amended and restated, supplemented or otherwise
modified from time to time, being the “First
Priority Collateral

 

 

Trust Agreement”)
and (b) the Chargor (as hereinafter defined) granted, pursuant to the terms of
a Charge and Assignment Over Shares dated as of December 12, 2002 (said
agreement (including, without limitation, the schedules thereto), as amended,
amended and restated, supplemented or otherwise modified from time to time,
being the “First Priority Charge”)
made by AES International Holdings II, Ltd. (the “Chargor”) to the Existing Collateral Trustees, as trustees
under the First Priority Collateral Trust Agreement, a continuing first
priority security interest in and to the Collateral (as hereinafter defined) to
the Existing Collateral Trustees for the ratable benefit of the Lender Parties
(as defined in the First Priority Collateral Trust Agreement) to secure the
obligations of the Borrower and the other Obligors (as defined in the Credit
Agreement) under the Credit Agreement and the Notes (as defined in the Credit
Agreement) issued pursuant thereto.

 

(3)                                  The
Borrower entered into an Indenture dated as of December 13, 2002 (said
agreement, as amended, amended and restated, supplemented or otherwise modified
from time to time, being the “Exchange Note
Indenture”) with Wells Fargo Bank Minnesota, National Association
(the “Exchange Note Trustee”) to
exchange the Borrower’s (i) 8.75% Senior Notes due 2002 and (ii) 7.375%
Remarketable or Redeemable Securities due 2013 for the 10% Senior Secured
Exchange Notes due 2005 issued on December 13, 2002 (the “Exchange Notes”, and together with the
Exchange Note Indenture (only to the extent relating to the Exchange Notes),
the “Exchange Note Agreements”).

 

(4)                                  In
order to induce the Exchange Note Trustee to enter into the Exchange Note
Indenture, the Grantors and the Chargor agreed pursuant to the First Priority
Security Agreement and the First Priority Charge, as the case may be, to grant
a continuing security interest in and to the Collateral to the Existing
Collateral Trustees for the ratable benefit of the holders of the Exchange
Notes to secure the obligations of the Borrower under the Exchange Note
Agreements.

 

(5)                                  In
order to satisfy certain other obligations of the Borrower, the Grantors and
the Chargor agreed pursuant to the First Priority Security Agreement and the
First Priority Charge, as the case may be, to grant a continuing security
interest in and to the Collateral to the Existing Collateral Trustees for the
ratable benefit of the other First Priority Secured Holders to secure the
obligations of the Borrower under the other First Priority Secured Agreements.

 

(6)                                  The
Borrower entered into an Indenture dated as of May 8, 2003 (said agreement, as
amended, amended and restated, supplemented or otherwise modified from time to
time, being the “Senior Note Indenture”)
with Wells Fargo Bank Minnesota, National Association, as indenture
trustee  (the “Senior Note Trustee”) in connection with the Borrower’s
issuance on May 8, 2003 of (i) 8.75% Second Priority Senior Secured Notes due
2013 and (ii) 9.00% Second Priority Senior Secured Notes due 2015 (the “Senior Notes”, and together with the Senior
Note Indenture, the “Senior Note Indenture
Agreements”).

 

(7)                                  In
order to induce the Senior Note Trustee to enter into the Senior Note
Indenture, the Grantors and the Chargor have agreed to grant, pursuant to the
terms of this Agreement and the Second Priority Charge, as the case may be, a
continuing security interest in and to the Collateral to the Second Priority
Collateral Trustees for the ratable benefit of the

 

2

 

holders of the Senior Notes (the “Senior
Note Holders”) to secure the obligations of the Borrower under the
Senior Note Indenture.

 

(8)                                  It
is a condition precedent to the entry into the Senior Note Indenture by the
Senior Note Trustee that the Grantors shall have granted to the Second Priority
Collateral Trustees the assignment and security interest and made the pledge
and assignment contemplated by this Agreement.

 

(9)                                  The
Second Priority Collateral Trustees have agreed, pursuant to the terms of the
Second Priority Collateral Trust Agreement, to accept the pledge and
assignment, and the grant of a security interest, under this Agreement as
security for the Second Priority Secured Obligations (as defined in the Second
Priority Collateral Trust Agreement).

 

(10)                            Each
Grantor will derive substantial direct and indirect benefit from the
transactions contemplated by the Second Priority Secured Agreements (as defined
in the Second Priority Collateral Trust Agreement).

 

(11)                            The
Borrower has the security entitlements (the “Pledged
Security Entitlements”) with respect to all the financial assets
(the “Pledged Financial Assets”)
credited from time to time to the Borrower’s securities accounts (the “Securities Accounts”) set forth and as
otherwise described in Schedule VI hereto with the Persons named therein (each
a “Securities Intermediary”).

 

(12)                            Each
Grantor is the owner of the shares of stock or other Equity Interests (the “Initial Pledged Equity”) set forth opposite
such Grantor’s name on and as otherwise described in Part I of
Schedule II hereto and issued by the Persons named therein and the
Borrower is the owner of the indebtedness (the “Initial Pledged Debt”) set forth opposite the Borrower’s name
on and as otherwise described in Part II of Schedule II hereto and
issued by the obligors named therein.

 

(13)                            The
Borrower has opened a Second Priority Collateral Account (as defined in the
Second Priority Collateral Trust Agreement) under the control of the Second
Priority Corporate Trustee and subject to the terms of this Agreement and the
other Second Priority Collateral Documents (as defined in the Second Priority
Collateral Trust Agreement).

 

(14)                            The
Borrower maintains deposit accounts (the “Deposit
Accounts”) with banks, in the name of the Borrower and subject to
the terms of this Agreement, as described in Schedule V hereto.

 

(15)                            Terms
defined in the Senior Note Indenture or the Second Priority Collateral Trust
Agreement and not otherwise defined in this Agreement are used in this
Agreement as defined in the Senior Note Indenture or the Second Priority
Collateral Trust Agreement.  Further,
unless otherwise defined in this Agreement, the Senior Note Indenture or the Second
Priority Collateral Trust Agreement, terms defined in Article 8 or 9 of the UCC
(as defined below) and/or in the Federal Book Entry Regulations (as defined
below) are used in this Agreement as such terms are defined in such Article 8
or 9 and/or the Federal Book Entry Regulations.  “UCC” means the
Uniform Commercial Code as in effect, from time to time, in the State of New
York; provided that, if perfection or the effect of perfection or
non-perfection

 

3

 

or the priority of any security interest in any Collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other than the
State of New York, “UCC” means the
Uniform Commercial Code as in effect from time to time in such other jurisdiction
for purposes of the provisions hereof relating to such perfection, effect of
perfection or non-perfection or priority.  The term “Federal Book Entry
Regulations” means (a) the federal regulations contained in Subpart
B (“Treasury/Reserve Automated Debt Entry
System (TRADES)”) governing book-entry securities consisting of U.S.
Treasury bonds, notes and bills and Subpart D (“Additional Provisions”) of 31 C.F.R. Part 357, 31 C.F.R.
§ 357.2, § 357.10 through § 357.14 and § 357.41 through
§ 357.44 and (b) to the extent substantially identical to the federal
regulations referred to in clause (a) above (as in effect from time to time),
the federal regulations governing other book-entry securities.

 

NOW, THEREFORE, in consideration of the premises and
in order to induce the Senior Note Trustee to enter into the Senior Note
Indenture, each Grantor hereby agrees with the Second Priority Collateral
Trustees for their benefit and in trust for the ratable benefit of the Second
Priority Representatives and the Second Priority Secured Holders as follows:

 

Section 1.                                            Grant
of Security.  Each Grantor,
in order to secure the Second Priority Secured Obligations, hereby assigns and
pledges to the Second Priority Collateral Trustees for their benefit and in
trust for the equitable and ratable benefit of the Second Priority
Representatives and the Second Priority Secured Holders, and hereby grants to
the Second Priority Collateral Trustees for their benefit and in trust for the
equitable and ratable benefit of the Second Priority Representatives and the
Second Priority Secured Holders, a lien on and security interest in, such
Grantor’s right, title and interest in and to the following, in each case, as
to each type of property described below, whether now owned or hereafter
acquired by such Grantor, wherever located, and whether now or hereafter
existing or arising (collectively, the “Collateral”):

 

(a)                                  in
the case of the Borrower, all accounts, chattel paper (including, without
limitation, tangible chattel paper and electronic chattel paper), instruments
(including, without limitation, promissory notes), general intangibles
(including, without limitation, payment intangibles) and other obligations of
any kind, whether or not arising out of or in connection with the sale or lease
of goods or the rendering of services and whether or not earned by performance,
and all rights now or hereafter existing in and to all supporting obligations
and in and to all security agreements, mortgages, Liens, leases, letters of
credit and other contracts securing or otherwise relating to the foregoing
property, in each case only to the extent such accounts, chattel paper,
instruments, general intangibles and other obligations are owed to the Borrower
from a Subsidiary of the Borrower (other than the Subsidiaries listed on
Schedule VII hereto) (any and all of such accounts, chattel paper, instruments,
general intangibles and other obligations, to the extent not referred to in
clause (b), (c) or (d) below, being the “Receivables”,
and any and all such supporting obligations, security agreements, mortgages,
Liens, leases, letters of credit and other contracts being the “Related Contracts”);

 

(b)                                 the
following (the “Security Collateral”):

 

4

 

(i)                                     the
Initial Pledged Equity and the certificates, if any, representing the Initial
Pledged Equity, and all dividends, distributions, return of capital, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Initial Pledged Equity and all subscription warrants, rights or options issued
thereon or with respect thereto;

 

(ii)                                  in
the case of the Borrower, the Initial Pledged Debt and the instruments, if any,
evidencing the Initial Pledged Debt, and all interest, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the Initial Pledged Debt;

 

(iii)                               all
additional shares of stock and other Equity Interests of or in any issuer of
the Initial Pledged Equity or any successor entity from time to time acquired
by such Grantor in any manner  and all
additional shares of stock or Equity Interests of or in any new direct
Subsidiary (other than a Non-Pledged Subsidiary) of such Grantor formed or
acquired by such Grantor in any manner after the date of this Agreement (such
shares and other Equity Interests, together with the Initial Pledged Equity,
being the “Pledged Equity”), and
the certificates, if any, representing such additional shares or other Equity
Interests, and all dividends, distributions, return of capital, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares or other Equity Interests and all subscription warrants, rights or
options issued thereon or with respect thereto;

 

(iv)                              all
additional indebtedness from time to time owed to the Borrower by any obligor
of the Initial Pledged Debt or any successor entity (such indebtedness,
together with the Initial Pledged Debt, being the “Pledged Debt”) and the instruments, if any, evidencing such
indebtedness, and all interest, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such indebtedness;

 

(v)                                 in
the case of the Borrower, the Securities Accounts, all Pledged Security
Entitlements with respect to all Pledged Financial Assets from time to time
credited to the Securities Accounts, and all Pledged Financial Assets, and all
dividends, distributions, return of capital, interest, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such Pledged Security
Entitlements or such Pledged Financial Assets and all subscription warrants,
rights or options issued thereon or with respect thereto; and

 

(vi)                              all
other investment property (including, without limitation, all (A) securities,
whether certificated or uncertificated, (B) security entitlements and (C)
securities accounts) in which the Borrower has now, or acquires from time to
time hereafter, any right, title or interest in any manner, and the certificates
or

 

5

 

instruments, if any, representing or evidencing such
investment property, and all dividends, distributions, return of capital,
interest, distributions, value, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such investment property and all subscription
warrants, rights or options issued thereon or with respect thereto;

 

provided, however,
that if any time after the date of this Agreement the Borrower obtains the
appropriate consents and regulatory approvals with respect to AES Oasis Finco
Inc. and AES Oasis Holdco Inc., the Equity Interests in AES Oasis Finco, Inc.
and AES Oasis Holdco, Inc. shall be pledged to the extent permissible at such
time;

 

(c)                                  in
the case of the Borrower each of the
agreements listed on Schedule III hereto (collectively, the “Assigned Agreements”), including,
without limitation, (i) all rights of the Borrower to receive moneys due
and to become due under or pursuant to the Assigned Agreements, (ii) all
rights of the Borrower to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the Assigned Agreements, (iii) claims
of the Borrower for damages arising out of or for breach of or default under
the Assigned Agreements and (iv) the right of the Borrower to terminate
the Assigned Agreements, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder (all such Collateral being the “Agreement Collateral”);

 

(d)                                 the
following (collectively, the “Account
Collateral”):

 

(i)                                     in
the case of the Borrower, the Deposit Accounts and all funds and financial
assets from time to time credited thereto (including, without limitation, all
Cash Equivalents, all interest, dividends, distributions, cash, instruments and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such funds and financial assets,
and all certificates and instruments, if any, from time to time representing or
evidencing the Deposit Accounts);

 

(ii)                                  all
promissory notes, certificates of deposit, deposit accounts, checks and other
instruments from time to time delivered to or otherwise possessed by the
Controlling Collateral Trustees for or on behalf of the Borrower, including,
without limitation, those delivered or possessed in substitution for or in
addition to any or all of the then existing Account Collateral; and

 

(iii)                               all
interest, dividends, distributions, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the then existing Account Collateral; and

 

(e)                                  all
proceeds of, collateral for, income, and other payments now or hereafter due
and payable with respect to, and supporting obligations relating to, any and
all of the Collateral (including, without limitation, proceeds, collateral and
supporting obligations that constitute property of the types described in
clauses (a) through (d) of this Section 1 and this clause (e))
and, to the extent not otherwise included, all

 

6

 

(A) payments
under insurance (whether or not the Second Priority Collateral Trustees are the
loss payee thereof), or any indemnity, warranty or guaranty, payable by reason
of loss or damage to or otherwise with respect to any of the foregoing
Collateral, (B) tort claims, including, without limitation, all commercial tort
claims and (C) cash.

 

Notwithstanding the foregoing provisions of this
Section 1 or of any other Second Priority Secured Agreement, the grant of a
security interest as provided herein shall not extend to, and the term
“Collateral” shall not include, as to each Grantor, more than 65% of the
outstanding voting stock of any CFC (the “Excluded
Assets”).

 

Section 2.                                            Security
for Obligations.  (a)  This Agreement secures the payment of all of
the Second Priority Secured Obligations of the Borrower.  Without limiting the generality of the
foregoing, this Agreement secures, as to each Grantor, the payment of all
amounts that constitute part of the Second Priority Secured Obligations and
would be owed by such Grantor to any Second Priority Secured Holder but for the
fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any Grantor.

 

(b)                                 The
Lien created by this Agreement and the other Second Priority Collateral
Documents shall be subordinate in all respects (including the exercise of
remedies with respect to such Collateral) to the prior Lien of the First
Priority Collateral Documents in existence from time to time, in accordance
with Article IX of the Second Priority Collateral Trust Agreement.

 

Section 3.                                            Grantors Remain Liable.  Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts
and agreements included in such Grantor’s Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Controlling Collateral Trustees of any of the rights hereunder or under the
Second Priority Security Agreement, as the case may be shall not release any
Grantor from any of its duties or obligations under the contracts and
agreements included in the Collateral and (c) none of the Second Priority
Collateral Trustees, any Second Priority Representative or any Second Priority
Secured Holder shall have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement or any other
Second Priority Secured Agreement, nor shall any of the Second Priority
Collateral Trustees, any Second Priority Representative or any Second Priority
Secured Holder be obligated to perform any of the obligations or duties of any
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder or thereunder.

 

Section 4.                                            Delivery
and Control of Security Collateral. 
(a)  All certificates or instruments representing or
evidencing Security Collateral shall be delivered to and held by or on behalf
of the Controlling Collateral Trustees pursuant to this Agreement and the
Second Priority Collateral Trust Agreement and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Controlling Collateral Trustees. 
Subject to the Second Priority Collateral Trust Agreement, the Second
Priority Collateral Trustees shall have the right, at any time after the
occurrence and during the continuance of a Second Priority Collateral Trust

 

7

 

Agreement Default, in their discretion and without notice to any
Grantor, to transfer to or to register in the name of the Second Priority
Collateral Trustees or any of their nominees any or all of the Security
Collateral, subject only to the revocable rights specified in Section 10,
and subject to the Remedies Limitations (as defined in Section 7(i)).  In addition, subject to the Second Priority
Collateral Trust Agreement, the Second Priority Collateral Trustees shall have
the right at any time, after the occurrence and during the continuance of a
Second Priority Collateral Trust Agreement Default, to exchange certificates or
instruments representing or evidencing Security Collateral for certificates or
instruments of smaller or larger denominations.  Also, subject to the Second Priority Collateral Trust Agreement,
the Second Priority Collateral Trustees shall have the right at any time, after
the occurrence and during the continuance of a Second Priority Collateral Trust
Agreement Default, to convert Security Collateral consisting of financial
assets credited to the Securities Accounts to Security Collateral consisting of
financial assets held directly by the Second Priority Collateral Trustees.

 

(b)                                 With
respect to any Security Collateral in which any Grantor has any right, title or
interest and that constitutes an uncertificated security, subject to the
Remedies Limitations, such Grantor will cause the issuer thereof either (i) to
register the Controlling Collateral Trustees as the registered owners of such security
or (ii) to agree in an authenticated record with such Grantor and the
Controlling Collateral Trustees that such issuer will comply with instructions
with respect to such security originated by the Controlling Collateral Trustees
without further consent of such Grantor, such authenticated record to be in
form and substance satisfactory to the Controlling Collateral Trustees.  With respect to any Security Collateral in
which any Grantor has any right, title or interest and that is not an
uncertificated security, upon the request of the Controlling Collateral
Trustees, such Grantor will notify each such issuer of Pledged Equity that such
Pledged Equity is subject to the security interest granted hereunder and the
Borrower will notify each such issuer of Pledged Debt that such Pledged Debt is
subject to the security interest granted hereunder.

 

(c)                                  Subject
to the Second Priority Collateral Trust Agreement, with respect to any Security
Collateral in which the Borrower has any right, title or interest and that
constitutes a security entitlement in which the Second Priority Collateral
Trustees are not the entitlement holders, the Borrower will cause the
securities intermediary with respect to such security entitlement either
(i) to identify in its records the Second Priority Collateral Trustees as
the entitlement holders of such security entitlement against such securities
intermediary or (ii) to agree in an authenticated record with the Borrower
and the Second Priority Collateral Trustees that such securities intermediary
will comply with entitlement orders (that is, notifications communicated to
such securities intermediary directing transfer or redemption of the financial
asset to which such Grantor has a security entitlement) originated by the
Second Priority Collateral Trustees upon the occurrence and during the
continuance of a Second Priority Collateral Trust Agreement Default, without
further consent of such Grantor, such authenticated record to be in
substantially the form of Exhibit D hereto or otherwise in form and
substance satisfactory to the Second Priority Collateral Trustees (such
agreement being a “Securities Account Control
Agreement”).

 

(d)                                 The
Borrower agrees that it will not add any securities intermediary that maintains
a securities account for the Borrower or open any new securities account with
any then existing Securities Intermediary unless (i) the Second Priority
Collateral Trustees and the

 

8

 

Required Second Priority Representatives shall have received at least
10 days’ prior written notice of such additional securities intermediary or
such new securities account and (ii) the Second Priority Collateral
Trustees shall have received, in the case of a Securities Account that is
maintained by a Securities Intermediary that is not the Second Priority
Corporate Trustee, a Securities Account Control Agreement authenticated by such
new securities intermediary and the Borrower, or a supplement to an existing
Securities Account Control Agreement with such then existing Securities
Intermediary, covering such new securities account (and, upon the receipt by
the Second Priority Collateral Trustees of such Securities Account Control
Agreement or supplement, Schedule VI hereto shall be automatically amended to
include such new Securities Account). 
The Borrower agrees that it will not terminate any Securities Account,
except that the Borrower may terminate a Securities Account, if it gives the
Second Priority Collateral Trustees and the Required Second Priority
Representatives at least 10 days’ prior written notice of such termination
(and, upon such termination, Schedule VI hereto shall be automatically
amended to delete such Securities Intermediary and Securities Account).  The Borrower will not change or add any
securities intermediary that maintains any securities account in which any of
the Collateral is credited or carried, or change or add any such securities
account, in each case without first complying with the provisions of this
Section 4 in order to continuously perfect the security interest granted
hereunder in such Collateral.

 

(e)                                  Upon
any termination by the Borrower of any Securities Account by the Borrower, or
any Securities Intermediary with respect thereto, the Borrower will immediately
transfer all funds and property held in such terminated Securities Account to
another Securities Account listed in Schedule VI hereto.

 

(f)                                    Subject
to the Second Priority Collateral Trust Agreement and upon the occurrence and
during the continuance of a Second Priority Collateral Trust Agreement Default,
the Second Priority Collateral Trustees shall have the right to originate a
Notice of Exclusive Control (as such term is defined in the applicable
Securities Account Control Agreement) with respect to any Securities Account
and thereafter shall have the sole and exclusive right to direct the
disposition of the funds and assets with respect to any such Securities
Account; provided, however that (i) the
Securities Intermediary shall have received, prior to the receipt of the Notice
of Exclusive Control from the Second Priority Collateral Trustees, a notice
from the First Priority Collateral Trustees that the First Priority Security
Interest (as defined in the applicable Securities Account Control Agreement)
has been terminated or (ii) the First Priority Collateral Trustees shall have
consented in writing to the origination of the Notice of Exclusive Control by
the Second Priority Collateral Trustees.

 

Section 5.                                            Maintaining
the Account Collateral.  So
long as any of the Second Priority Secured Obligations remain outstanding:

 

(a)                                  The
Borrower will maintain all Account Collateral only with the Second Priority
Corporate Trustee or with banks (the “Pledged Account Banks”)
that have agreed, in a record authenticated by the Borrower, the Second
Priority Collateral Trustees and the Pledged Account Banks, to, subject to the
Second Priority Collateral Trust Agreement, (i) comply with instructions
originated by the Second Priority Collateral Trustees directing the disposition
of funds in the Account Collateral without the further consent of the Borrower
upon the receipt by the applicable Pledge Account Bank of a

 

9

 

Notice of
Exclusive Control (as defined in the applicable Account Control Agreement
referred to below) and (ii) waive or subordinate in favor of the Second
Priority Collateral Trustees all claims of the Pledged Account Banks
(including, without limitation, claims by way of a security interest, lien or
right of setoff or right of recoupment but subject to such exceptions as may be
agreed) to the Account Collateral, which authenticated record shall be
substantially in the form of Exhibit B hereto, or shall otherwise be in
form and substance satisfactory to the Second Priority Collateral Trustees (the
“Account Control Agreement”).

 

(b)                                 The
Borrower will cause each Person obligated at any time to make any payment to
the Borrower for any reason (an “Obligor”)
to make such payment to a Deposit Account.

 

(c)                                  The
Borrower agrees that it will not add any bank that maintains a deposit account
for the Borrower or open any new deposit account with any then existing Pledged
Account Bank unless (i) the Second Priority Collateral Trustees and the
Required Second Priority Representatives shall have received at least 10 days’
prior written notice of such additional bank or such new deposit account and
(ii) the Second Priority Collateral Trustees shall have received, in the
case of a bank or Pledged Account Bank that is not the Second Priority
Corporate Trustee, an Account Control Agreement authenticated by such new bank
and the Borrower, or a supplement to an existing Account Control Agreement with
such then existing Pledged Account Bank, covering such new deposit account
(and, upon the receipt by the Second Priority Collateral Trustees of such
Account Control Agreement or supplement, Schedule V hereto shall be
automatically amended to include such new Deposit Account).  The Borrower agrees that it will not
terminate any bank as a Pledged Account Bank or terminate any Account
Collateral, except that the Borrower may terminate a Deposit Account, and
terminate a bank as a Pledged Account Bank with respect to a Deposit Account,
if it gives the Second Priority Collateral Trustees and the Required Second
Priority Representatives at least 10 days’ prior written notice of such
termination (and, upon such termination, Schedule V hereto shall be
automatically amended to delete such Pledged Account Bank and Deposit Account).  The Borrower will not change or add any bank
that maintains any deposit account in which any of the Account Collateral is
credited or carried, or change or add any such deposit account, in each case
without first complying with the provisions of this Section 5 in order to
continuously perfect the security interest granted hereunder in such Account
Collateral.

 

(d)                                 Upon
any termination by the Borrower of any Deposit Account by the Borrower, or any
Pledged Account Bank with respect thereto, the Borrower will immediately
(i) transfer all funds and property held in such terminated Deposit
Account to another Deposit Account listed in Schedule V hereto and
(ii) notify all Obligors that were making payments to such Deposit Account
to make all future payments to another Deposit Account listed in Schedule V
hereto, in each case so that the Second Priority Collateral Trustees shall have
a continuously perfected security interest in such Account Collateral, funds
and property.

 

10

 

(e)                                  Subject
to the Second Priority Collateral Trust Agreement and upon the occurrence and
during the continuance of a Second Priority Collateral Trust Agreement Default,
the Second Priority Collateral Trustees shall have the right to originate a
Notice of Exclusive Control (as such term is defined in the applicable Account
Control Agreement) with respect to any Deposit Account and thereafter shall
have the sole and exclusive right at such time to direct the disposition of
funds with respect to the applicable Deposit Accounts; provided, however that (i) the Pledged
Account Bank shall have received, prior to the receipt of the Notice of
Exclusive Control from the Second Priority Collateral Trustees, a notice from
the First Priority Collateral Trustees that the First Priority Security
Interest (as defined in the applicable Securities Account Control Agreement)
has been terminated or (ii) the First Priority Collateral Trustees shall have
consented in writing to the origination of the Notice of Exclusive Control by
the Second Priority Collateral Trustees.

 

Section 6.                                            Maintaining
Letter-of-Credit Rights. 
Subject to the Second Priority Collateral Trust Agreement and so long as
any of the Second Priority Secured Obligations remain outstanding, each Grantor
will maintain all letter-of-credit rights assigned to the Second Priority
Collateral Trustees so that the Second Priority Collateral Trustees have
control of the letter-of-credit rights in the manner specified in Section 9-107
of the UCC.

 

Section 7.                                            Representations
and Warranties.  Each Grantor
represents and warrants as follows:

 

(a)                                  Such
Grantor’s exact legal name, as defined in Section 9-503(a) of the UCC, is
correctly set forth in Schedule I hereto. 
Such Grantor is located (within the meaning of Section 9-307 of the UCC)
in the state or jurisdiction set forth on Schedule I hereto.  In the case of the Borrower, the Borrower
has its chief executive office and the office in which it maintains the
original copies of each Assigned Agreement and Related Contract to which the
Borrower is a party and all originals of all chattel paper that evidence
Receivables of the Borrower, in the state or jurisdiction set forth in Schedule
I hereto.  The information set forth in
Schedule I hereto with respect to such Grantor is true and accurate in all
respects.  Such Grantor has not
previously changed its name, location, chief executive office, place where it
maintains its agreements, type of organization, jurisdiction of organization or
organizational identification number from those set forth in Schedule I hereto
except as disclosed in Schedule IV hereto.

 

(b)                                 Such
Grantor is the legal and beneficial owner of the Collateral of such Grantor
free and clear of any Lien, claim, option or right of others, except for the
security interest (A) created under (i) this Agreement (ii) the
First Priority Collateral Documents and (iii) the other Second Priority
Collateral Documents or (B) permitted under (i) the Senior Note
Indenture and (ii) the other Applicable Agreements.  No effective financing statement or other
instrument similar in effect covering all or any part of such Collateral or
listing such Grantor or any trade name of such Grantor as debtor is on file in
any recording office, except such as may have been filed in favor of the First
Priority Collateral Trustees relating to the First Priority Secured Agreements
or the Second Priority Collateral Trustees relating to the Second Priority
Secured Agreements.

 

11

 

(c)                                  The
Pledged Equity pledged by such Grantor hereunder has been duly authorized and
validly issued and is fully paid and non-assessable.  With respect to the Pledged Equity that is
an uncertificated security, subject to the Remedies Limitations, such Grantor
has caused the issuer thereof either (i) to register the Controlling Collateral
Trustees as the registered owners of such security or (ii) to agree in an
authenticated record with such Grantor and the Controlling Collateral Trustees
that such issuer will comply with instructions with respect to such security
originated by the Controlling Collateral Trustees without further consent of
such Grantor.  If such Grantor is an
issuer of Pledged Equity, such Grantor confirms that it has received notice of
such security interest.  In the case of
the Borrower, the Pledged Debt pledged by the Borrower hereunder has been duly
authorized, authenticated or issued and delivered, is the legal, valid and
binding obligation of the issuers thereof, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law, is evidenced by one or
more promissory notes (which notes have been delivered to the Controlling
Collateral Trustees) and as of the date hereof is not in default.  All Security Collateral consisting of
certificated securities and instruments have been delivered to the Controlling
Collateral Trustees.

 

(d)                                 The
Initial Pledged Equity pledged by such Grantor constitutes the percentage of
the issued and outstanding Equity Interests of the issuers thereof indicated on
Schedule II hereto.  In the case of
the Borrower, the Initial Pledged Debt constitutes all of the outstanding
indebtedness owed to the Borrower by the issuers thereof and is outstanding in
the principal amount indicated on Schedule II hereto.

 

(e)                                  In
the case of the Borrower, the Assigned Agreements to which the Borrower is a
party, true and complete copies of which have been furnished to the Second
Priority Collateral Trustees, have been duly authorized, executed and delivered
by all parties thereto, have not been amended, amended and restated,
supplemented or otherwise modified, are in full force and effect and are
binding upon and enforceable against the Borrower, and to the Borrower’s
knowledge, all parties thereto in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at
law.  There exists no default as of the
date hereof under any Assigned Agreement to which the Borrower is a party by
any party thereto.  Other than the Borrower,
each party to the Assigned Agreements listed on Schedule III hereto which
requires such parties’ consent for assignment and to which the Borrower is a
party has executed and delivered to the Borrower a consent, in substantially
the form of Exhibit C hereto or otherwise in form and substance satisfactory to
the Second Priority Collateral Trustees, to the assignment of the Agreement
Collateral to the Second Priority Collateral Trustees pursuant to this
Agreement.

 

(f)                                    In
the case of the Borrower, the Borrower has no deposit accounts, other than the
Account Collateral listed on Schedule V hereto, as such Schedule V
may be amended from time to time pursuant to Section 5(d), and legal,
binding and enforceable Account Control Agreements are in effect for each
deposit account that constitutes

 

12

 

Account
Collateral (other than Account Collateral consisting of Deposit Accounts
maintained with the Second Priority Corporate Trustees), except to the extent
such Account Control Agreements are not required by Section 5(a).  The Borrower has instructed all existing
Obligors to make all payments to a Deposit Account.

 

(g)                                 In
the case of the Borrower, the Borrower has no deposit accounts which are not
the subject of a legal, binding and enforceable Account Control Agreement.

 

(h)                                 In
the case of the Borrower, the Borrower has no securities accounts, other than
the Securities Accounts listed on Schedule VI hereto, as such
Schedule VI may be amended from time to time pursuant to
Section 4(d), and legal, binding and enforceable Securities Account
Control Agreements are in effect for each securities account that constitutes
Security Collateral (other than Security Collateral maintained with the Second
Priority Corporate Trustee in the Second Priority Collateral Account), except
to the extent such Securities Account Control Agreements are not required by
Section 4(c).

 

(i)                                     In
the case of the Borrower, the Borrower has no securities accounts which are not
the subject of a legal, binding and enforceable Securities Account Control
Agreement.

 

(j)                                     All
filings and other actions (including, without limitation, actions necessary to
obtain control of Collateral as provided in Sections 9-104, 9-105, 9-106 and
9-107 of the UCC) necessary to perfect the security interest in the Collateral
of such Grantor created under this Agreement have been duly made or taken and
are in full force and effect, and this Agreement creates in favor of the Second
Priority Collateral Trustees for the benefit of the Second Priority
Representatives and the Second Priority Secured Holders a valid and, together
with such filings and other actions, perfected security interest in the
Collateral of such Grantor, securing the payment of the Second Priority Secured
Obligations.

 

(k)                                  (i)
The execution, delivery, recordation, filing or performance by such Grantor of
this Agreement, (ii) the grant by such Grantor of the Liens granted by it
pursuant to this Agreement, (iii) the perfection or maintenance of the
Liens created under this Agreement (including the second priority nature
thereof), (iv) the exercise by the Second Priority Collateral Trustees of their
voting or other rights provided for in this Agreement and (v) the exercise
by the Second Priority Collateral Trustees of their remedies in respect of the
Collateral pursuant to this Agreement and the other Second Priority Collateral
Documents, will not require any consent, approval, authorization or other order
of, or any notice to or filing with, any court, regulatory body, administrative
agency or other governmental body (other than (w) the consent of the Credit
Agreement Parties, which consent has been obtained, (x) such filings required
in order to perfect any security interest granted by this Agreement, (y) the
actions described in Section 4 with respect to the Security Collateral, which
actions have been taken and are in full force and effect and (z) any other
consent, approval, authorization, order, notice or filing, the failure of which
to make or obtain could not reasonably be expected to have a Material Adverse
Effect), and will not conflict with or constitute a breach of any of the terms
or provisions of, or a default under, the charter or by-laws of the Borrower or
any of the

 

13

 

Pledged
Subsidiaries or any agreement, indenture or other instrument to which the
Borrower or any of the Pledged Subsidiaries is a party or by which the Borrower
or any of the Pledged Subsidiaries or any of the Borrower’s or any of the Pledged
Subsidiaries’ respective property is bound, or violate or conflict with any
laws, administrative regulations or rulings or court decrees applicable to the
Borrower, any of the Pledged Subsidiaries or the Borrower’s or any of the
Pledged Subsidiaries’ respective property, except for any violation, breach,
conflict or default that could not reasonably be expected to have a Material
Adverse Effect and except that in each of the foregoing cases, (A) any
foreclosure or other exercise of remedies by the Second Priority Collateral
Trustees pursuant to this Agreement and the other Second Priority Collateral
Documents will require additional approvals and consents that have not been
obtained from foreign and domestic regulators and from lenders to, and
suppliers, customers or other contractual counterparties of one or more
Subsidiaries, and the failure to obtain such approval or consent could result
in a default under, or breach of, agreements or other legal obligations of such
Subsidiary and (B) disposition of any of the Security Collateral may be
subject to the receipt of regulatory approvals and to laws affecting the
offering and sale of securities generally (the exceptions described in the
foregoing clauses (A) and (B) are referred to as “Remedies Limitations”).

 

Section 8.                                            Further
Assurances.  (a)  Subject to the Remedies Limitations, each
Grantor agrees that from time to time, at the expense of such Grantor, such
Grantor will promptly execute and deliver, or otherwise authenticate, all
further instruments and documents, and take all further action that may be
necessary or desirable, or that the Second Priority Collateral Trustees may
request and that is within the power of such Grantor, consistent with its
currently existing contractual and other legal obligations, in order to perfect
any pledge, assignment or security interest granted or purported to be granted
by such Grantor hereunder or to enable the Second Priority Collateral Trustees
to exercise and enforce their rights and remedies hereunder and under the other
Second Priority Collateral Documents with respect to any Collateral of such
Grantor.  Without limiting the
generality of the foregoing, each Grantor will promptly with respect to
Collateral of such Grantor: 
(i) mark conspicuously each chattel paper included in Receivables,
each Related Contract and, at the request of the Second Priority Collateral
Trustees, each of its records pertaining to such Collateral with a legend, in
form and substance satisfactory to the Second Priority Collateral Trustees, indicating
that such chattel paper, Related Contract, Assigned Agreement or Collateral is
subject to the security interest granted hereby; provided, however,
that no such legend shall be required if such Collateral is delivered to the
Controlling Collateral Trustees pursuant to clause (ii) below, (ii) if any
such Collateral shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Controlling Collateral Trustees such
note or instrument or chattel paper duly indorsed or accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to the Controlling Collateral Trustees, (iii) execute or
authenticate and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Second Priority Collateral Trustees may request, in order
to perfect the security interest granted or purported to be granted by such
Grantor hereunder, (iv) deliver to the Controlling Collateral Trustees and
pledge to the Second Priority Collateral Trustees for the ratable benefit of
the Second Priority Representatives and the Second Priority Secured Holders
certificates representing Security Collateral that constitutes certificated
securities, accompanied by undated stock or bond powers executed in blank,
(v) take

 

14

 

all action necessary to ensure that the Controlling Collateral Trustees
have control of Collateral consisting of deposit accounts, investment property,
letter-of-credit rights and transferable records as provided in Sections 9-104,
9-105, 9-106 and 9-107 of the UCC, and (vi) deliver to the Second Priority
Collateral Trustees evidence that all other action that the Second Priority
Collateral Trustees may deem reasonably necessary or desirable in order to
perfect the security interest created by such Grantor under this Agreement and
the other Second Priority Collateral Documents has been taken.

 

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

 

(ii)                                  Each
Grantor ratifies its authorization for the Second Priority Collateral Trustees
to have filed such financing statements, continuation statements or amendments,
to the extent such amendments are permitted pursuant to clause (i) above, filed
prior to the date hereof.

 

(c)                                  Each
Grantor will furnish to the Second Priority Collateral Trustees (with copies to
the First Priority Collateral Trustees or the applicable agent under the
Eligible Debt Agreements) from time to time statements and schedules further
identifying and describing the Collateral of such Grantor and such other
reports in connection with such Collateral as the Second Priority Collateral
Trustees may reasonably request, all in reasonable detail.

 

Section 9.                                            Post-Closing
Changes; Collections on Assigned Agreements, Receivables and Related Contracts.  (a)  No Grantor will change its name, type of organization,
jurisdiction of organization, organizational identification number or location
from those set forth in Section 7(a) of this Agreement without first giving at
least 30 days’ prior written notice to the Second Priority Collateral Trustees
and taking all action required by the Second Priority Collateral Trustees for
the purpose of perfecting or protecting the security interest granted by this
Agreement.  The Borrower will not change
the location of the place where it keeps the originals of the Assigned
Agreements and Related Contracts
to which the Borrower is a party and all originals of all chattel paper that
evidence Receivables of the Borrower from the locations therefor specified in
Section 7(a) without first giving the Second Priority Collateral Trustees 30
days’ prior written notice of such change. 
No Grantor will become bound by a security agreement authenticated by
another Person (determined as provided in Section 9-203(d) of the UCC) without
giving the Second Priority Collateral Trustees 30 days’ prior written notice
thereof and taking all action required by the Second Priority Collateral
Trustees to ensure that the perfection of the Second Priority Collateral
Trustees’ security interest in the Collateral will be maintained.  Each Grantor will hold and preserve its
records relating to the Collateral, including, without limitation, the Assigned
Agreements and Related Contracts, and will permit

 

15

 

representatives of the Second Priority Collateral Trustees at any time
during normal business hours to inspect and make abstracts from such records
and other documents.  If the Grantor
does not have an organizational identification number and later obtains one, it
will forthwith notify the Collateral Trustees of such organizational
identification number.

 

(b)                                 Except
as otherwise provided in this subsection (b), each Grantor will continue to
collect, at its own expense, all amounts due or to become due such Grantor
under the Assigned Agreements, Receivables and Related Contracts.  In connection with such collections, such
Grantor may take (and, at the Controlling Collateral Trustees’ direction, will
take) such action as such Grantor may deem necessary or advisable to enforce
collection of the Assigned Agreements, Receivables and Related Contracts; provided, however, that,
subject to the Second Priority Collateral Trust Agreement, the Second Priority
Collateral Trustees shall have the right at any time, upon the occurrence and
during the continuance of a Second Priority Collateral Trust Agreement Default
and upon  written notice to such Grantor of its
intention to do so, to notify the Obligors under any Assigned Agreements,
Receivables and Related Contracts of the assignment of such Assigned
Agreements, Receivables and Related Contracts to the Second Priority Collateral
Trustees and to direct such Obligors  to make
payment of all amounts due or to become due to such Grantor thereunder directly
to the Second Priority Collateral Trustees and, upon such notification and at
the expense of such Grantor, to enforce collection of any such Assigned
Agreements, Receivables and Related Contracts, to adjust, settle or compromise
the amount or payment thereof, in the same manner and to the same extent as
such Grantor might have done, and to otherwise exercise all rights with respect
to such Assigned Agreements, Receivables and Related Contracts, including,
without limitation, those set forth set forth in Section 9-607 of the UCC.  After receipt by any Grantor of the notice
from the Second Priority Collateral Trustees referred to in the proviso to the
preceding sentence, (i) all amounts and proceeds (including, without
limitation, instruments) received by such Grantor in respect of the Assigned
Agreements, Receivables and Related Contracts of such Grantor shall be received
in trust for the benefit of the Second Priority Collateral Trustees hereunder,
shall be segregated from other funds of such Grantor and shall be forthwith
paid over to the Second Priority Collateral Trustees in the same form as so
received (with any necessary indorsement) to be held as cash collateral in the
Second Priority Collateral Account and either (A) released to such Grantor
so long as no Second Priority Collateral Trust Agreement Default shall have
occurred and be continuing or (B) upon the occurrence and during the
continuance of a Second Priority Collateral Trust Agreement Default, the Second
Priority Collateral Trustees shall, upon receipt of a written notice from the
Required Second Priority Representatives, apply such cash collateral as
provided in the Second Priority Collateral Trust Agreement and (ii) such
Grantor will not adjust, settle or compromise the amount or payment of any
Receivable or amount due on any Assigned Agreement or Related Contract, release
wholly or partly any Obligor thereof, or allow any credit or discount
thereon.  No Grantor will permit or
consent to the subordination of its right to payment under any of the Assigned
Agreements, Receivables and Related Contracts to any other indebtedness or
obligations of the Obligor thereof.

 

Section 10.                                      Voting
Rights; Dividends; Etc. 
(a)  So long as no Second
Priority Collateral Trust Agreement Default shall have occurred and be
continuing:

 

(i)                                     Each
Grantor shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Security Collateral of such Grantor or any part
thereof

 

16

 

for any
purpose; provided,  however, that such Grantor will not
exercise or refrain from exercising any such right if such action would have a
material adverse effect on the value of the Security Collateral or any part
thereof.

 

(ii)                                  Each
Grantor shall be entitled to receive and retain any and all dividends, interest
and other distributions paid in respect of the Security Collateral of such
Grantor if and to the extent that the payment thereof is not otherwise
prohibited by the terms of the Applicable Agreements; provided, however,
that any and all dividends, interest and other distributions paid or payable
other than in cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange for, any
Security Collateral, shall be, and shall be forthwith delivered to the
Controlling Collateral Trustees to hold as Security Collateral and shall, if
received by such Grantor, be received in trust for the benefit of the
Controlling Collateral Trustees, be segregated from the other property or funds
of such Grantor and be forthwith delivered to the Controlling Collateral
Trustees as Security Collateral in the same form as so received (with any
necessary indorsement).

 

(iii)                               The
Controlling Collateral Trustees will execute and deliver (or cause to be
executed and delivered) to each Grantor all such proxies and other instruments
as such Grantor may reasonably request for the purpose of enabling such Grantor
to exercise the voting and other rights that it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends or interest
payments that it is authorized to receive and retain pursuant to
paragraph (ii) above.

 

(b)                                 Subject
to the Second Priority Collateral Trust Agreement and upon the occurrence and
during the continuance of a Second Priority Collateral Trust Agreement Default:

 

(i)                                     All
rights of each Grantor (x) to exercise or refrain from exercising the
voting and other consensual rights that it would otherwise be entitled to
exercise pursuant to Section 10(a)(i) shall, upon notice to such Grantor
by the Second Priority Collateral Trustees, cease and (y) to receive the
dividends, interest and other distributions that it would otherwise be
authorized to receive and retain pursuant to Section 10(a)(ii) shall
automatically cease, and, subject to the Remedies Limitations, all such rights
shall thereupon become vested in the Second Priority Collateral Trustees, who
shall thereupon have the sole right to exercise or refrain from exercising such
voting and other consensual rights and to receive and hold as Collateral such
dividends, interest and other distributions and shall deposit the same into the
Second Priority Collateral Account; and

 

(ii)                                  All
dividends, interest and other distributions that are received by any Grantor
contrary to the provisions of paragraph (i) of this Section 10(b)
shall be received in trust for the benefit of the Second Priority Collateral
Trustees, shall be segregated from other funds of such Grantor and shall be
forthwith paid over to the Second Priority Collateral Trustees to be deposited
into the Second Priority Collateral Account.

 

Section 11.                                      As
to the Assigned Agreements. 
(a)  The Borrower will at its
expense:

 

17

 

(i)                                     perform
and observe all terms and provisions of the Assigned Agreements to be performed
or observed by it, maintain the Assigned Agreements to which it is a party in
full force and effect, enforce the Assigned Agreements to which it is a party
in accordance with the terms thereof and take all such action to such end as
may be requested from time to time by the Second Priority Collateral Trustees;
and

 

(ii)                                  furnish
to the Second Priority Collateral Trustees promptly upon receipt thereof copies
of all notices, requests and other documents received by the Borrower under or
pursuant to the Assigned Agreements to which it is a party, and from time to
time (A) furnish to the Second Priority Collateral Trustees such
information and reports regarding the Assigned Agreements and such other
Collateral of the Borrower as the Second Priority Collateral Trustees may
reasonably request and (B) upon request of the Second Priority Collateral
Trustees make to each other party to any Assigned Agreement to which it is a
party such demands and requests for information and reports or for action as
the Borrower is entitled to make thereunder.

 

(b)                                 The
Borrower agrees that it will not, except to the extent otherwise permitted
under the Applicable Agreements:

 

(i)                                     cancel
or terminate any Assigned Agreement to which it is a party or consent to or
accept any cancellation or termination thereof;

 

(ii)                                  amend,
amend and restate, supplement or otherwise modify any such Assigned Agreement
or give any consent, waiver or approval thereunder;

 

(iii)                               waive
any default under or breach of any such Assigned Agreement; or

 

(iv)                              take
any other action in connection with any such Assigned Agreement that would
impair the value of the interests or rights of the Borrower thereunder or that
would impair the interests or rights of any Second Priority Secured Holder.

 

Section 12.                                      Payments
Under the Assigned Agreements; Letters of Credit.  (a) The Borrower agrees, and has effectively
so instructed each other party to each Assigned Agreement to which it is a
party, that all payments due or to become due under or in connection with such
Assigned Agreement will be made directly to a Deposit Account.

 

(b)                                 Subject
to the Second Priority Collateral Trust Agreement and upon the occurrence of a
Second Priority Collateral Trust Agreement Default, each Grantor will, promptly
upon request by the Second Priority Collateral Trustees, (i) notify (and such
Grantor hereby authorizes the Second Priority Collateral Trustees to notify)
the issuer and each nominated person with respect to each of the Related
Contracts consisting of letters of credit that the proceeds thereof have been
assigned to the Second Priority Collateral Trustees hereunder and any payments
due or to become due in respect thereof are to be made directly to the Second
Priority Collateral Trustees or their designee and (ii) arrange for the
Second Priority Collateral Trustees to become the transferee beneficiaries of
letters of credit.

 

Section 13.                                      Transfers
and Other Liens; Additional Shares. 
(a)  Each Grantor agrees that it
will not (i) sell, assign or otherwise dispose of, or grant any option
with respect to,

 

18

 

any of the Collateral, other than sales, assignments and other
dispositions of Collateral, and options relating to Collateral, permitted under
the terms of the Applicable Agreements or (ii) create or suffer to exist
any Lien upon or with respect to any of the Collateral of such Grantor except
for the pledge, assignment and security interest (A) created under
(x) this Agreement, (y) the First Priority Collateral Documents
(z) the other Second Priority Collateral Documents and (B) permitted
under (x) the Senior Note Indenture or (y) any other Applicable
Agreements.

 

(b)                                 Each
Grantor agrees that it will (i) cause each issuer of the Pledged Equity pledged
by such Grantor not to issue any Equity Interests or other securities in
substitution for the Pledged Equity issued by such issuer, except to such
Grantor and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional Equity Interests or
other securities of each issuer of the Pledged Equity issued to such Grantor.

 

Section 14.                                      Second
Priority Collateral Trustees May Perform.  Subject to the Second Priority Collateral Trust Agreement, if any
Grantor fails to perform any agreement contained herein, the Second Priority
Collateral Trustees may, but without any obligation to do so and without
notice, themselves perform, or cause performance of, such agreement, and the
expenses of the Second Priority Collateral Trustees incurred in connection
therewith shall be payable by such Grantor under Section 16.

 

Section 15.                                      Remedies.  Subject to the terms of the Second Priority
Collateral Trust Agreement, if a Second Priority Collateral Trust Agreement
Default shall have occurred and be continuing:

 

(a)                                  Subject
to the Remedies Limitations, the Second Priority Collateral Trustees may with
the consent of the Required Second Priority Representatives, and shall at the
request of the Required Second Priority Representatives, exercise in respect of
the Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party upon
default under the UCC (whether or not the UCC applies to the affected
Collateral) and also may: 
(i) require each Grantor to, and each Grantor hereby agrees that it
will at its expense and upon request of the Second Priority Collateral Trustees
forthwith, assemble all or part of the Collateral as directed by the Second Priority
Collateral Trustees and make it available to the Second Priority Collateral
Trustees at a place and time to be designated by the Second Priority Collateral
Trustees that is reasonably convenient to all parties, (ii) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Second Priority
Collateral Trustees’ offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Second Priority Collateral Trustees
may deem commercially reasonable, and (iii) exercise any and all rights and
remedies of any of the Grantors under or in connection with the Collateral, or
otherwise in respect of the Collateral, including, without limitation, (A) any
and all rights of such Grantor to demand or otherwise require payment of any
amount under, or performance of any provision of, the Assigned Agreements, the
Receivables, the Related Contracts and the other Collateral, (B) withdraw, or
cause or direct the withdrawal, of all funds with respect to the Account
Collateral and (C) exercise all other rights and remedies with respect to the
Assigned Agreements, the Receivables, the Related Contracts and the other
Collateral, including, without limitation, those set forth in Section 9-607

 

19

 

of the
UCC.  Each Grantor agrees that, to the
extent notice of sale shall be required by law, at least ten days’ notice to
such Grantor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification.  The Second Priority Collateral Trustees
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given.  The Second
Priority Collateral Trustees may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.

 

(b)                                 Any
cash held by or on behalf of the Second Priority Collateral Trustees and all
cash proceeds received by or on behalf of the Second Priority Collateral
Trustees in respect of any sale of, collection from, or other realization upon
all or any part of the Collateral may, in the discretion of the Second Priority
Collateral Trustees, be held by the Second Priority Collateral Trustees as
collateral for, and/or then or at any time thereafter applied (after payment of
any amounts payable to the Second Priority Collateral Trustees pursuant to
Section 16) in whole or in part by the Second Priority Collateral Trustees
for the ratable benefit of the Second Priority Representatives and the Second
Priority Secured Holders against, all or any part of the Second Priority Secured
Obligations, in accordance with the terms of the Second Priority Collateral
Trust Agreement.

 

(c)                                  All
payments received by the Borrower under or in connection with any Assigned
Agreement or otherwise in respect of the Collateral shall be received in trust
for the benefit of the Second Priority Collateral Trustees, shall be segregated
from other funds of such Grantor and shall be forthwith paid over to the Second
Priority Collateral Trustees in the same form as so received (with any
necessary indorsement).

 

(d)                                 The
Second Priority Collateral Trustees may, without notice to the Borrower except
as required by law and at any time or from time to time, charge, set-off
and otherwise apply all or any part of the Second Priority Secured Obligations
against any funds held in the Second Priority Collateral Account or in any
other deposit account of the Borrower in accordance with clause (b) above.

 

(e)                                  If
the Second Priority Collateral Trustees shall determine to exercise their right
to sell all or any of the Security Collateral of any Grantor pursuant to this
Section 15, each Grantor agrees that, upon request of the Second Priority
Collateral Trustees and subject to the Remedies Limitations, such Grantor will,
at its own expense:

 

(i)                                     execute
and deliver, and cause each issuer of such Security Collateral contemplated to
be sold and the directors and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts and
things, as may be necessary or, in the opinion of the Second Priority
Collateral Trustees, advisable to register such Security Collateral under the
provisions of the Securities Act of 1933 (as amended from time to time, the “Securities Act”), to cause the registration statement
relating thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished and to make all amendments and
supplements thereto and to the related prospectus that, in the opinion of the
Second Priority

 

20

 

Collateral
Trustees, are necessary or advisable, all in conformity with the requirements
of the Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto;

 

(ii)                                  use
its best efforts to qualify the Security Collateral under the state securities
or “Blue Sky” laws and to obtain all necessary governmental approvals for the
sale of such Security Collateral, as requested by the Second Priority
Collateral Trustees;

 

(iii)                               cause
each such issuer of such Security Collateral to make available to its security
holders, as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act;

 

(iv)                              provide
the Second Priority Collateral Trustees with such other information and
projections as may be necessary or, in the opinion of the Second Priority
Collateral Trustees, advisable to enable the Second Priority Collateral
Trustees to effect the sale of such Security Collateral; and

 

(v)                                 do
or cause to be done all such other acts and things as may be necessary to make
such sale of such Security Collateral or any part thereof valid and binding and
in compliance with applicable law.

 

(f)                                    The
Second Priority Collateral Trustees are authorized, in connection with any sale
of the Security Collateral pursuant to this Section 16, to deliver or
otherwise disclose to any prospective purchaser of the Security
Collateral:  (i) any registration
statement or prospectus, and all supplements and amendments thereto, prepared
pursuant to subsection (e)(i) above, (ii) any information and
projections provided to it pursuant to subsection (e)(iv) above and
(iii) any other information in its possession relating to such Security
Collateral.

 

(g)                                 Each
Grantor acknowledges the impossibility of ascertaining the amount of damages
that would be suffered by the Second Priority Secured Holders by reason of the
failure by such Grantor to perform any of the covenants contained in
subsection (e) above and, consequently, agrees that, if such Grantor shall
fail to perform any of such covenants, it will pay, as liquidated damages and
not as a penalty, an amount equal to the value of the Security Collateral on
the date the Second Priority Collateral Trustees shall demand compliance with
subsection (e) above.

 

Section 16.                                      Indemnity
and Expenses.  (a)  Each Grantor agrees to indemnify, defend and
save and hold harmless the Second Priority Collateral Trustees, each Second
Priority Representative and each Second Priority Secured Holder and each of
their Affiliates and their respective officers, directors, employees, agents
and advisors (each, an “Indemnified Party”)
from and against, and shall pay on demand, any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or
resulting from this Agreement (including, without limitation, enforcement of this
Agreement) or any other Second Priority Collateral Document except to the
extent such

 

21

 

claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party’s gross negligence or willful misconduct.

 

(b)                                 Each
Grantor will upon demand pay to the Second Priority Collateral Trustees the
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees and expenses of their counsel and of any experts and agents,
that the Second Priority Collateral Trustees may incur in connection with
(i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from or other
realization upon, any of the Collateral of such Grantor, (iii) the
exercise or enforcement of any of the rights of the Second Priority Collateral
Trustees, the Second Priority Representatives or the other Second Priority
Secured Holders hereunder or (iv) the failure by such Grantor to perform
or observe any of the provisions hereof.

 

Section 17.                                      Amendments;
Waivers; Additional Grantors; Etc. 
(a)  No amendment or waiver of
any provision of this Agreement, and no consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall (i) be in
writing and signed by the Second Priority Collateral Trustees and (ii)
otherwise comply with Section 10.01 of the Second Priority Collateral Trust Agreement,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.  Notwithstanding the foregoing, amendments,
waivers and consents effected in respect of the First Priority Security Agreement
(or, in the case of any Eligible Debt Agreement, the applicable security
agreement related to such Eligible Debt Agreement) shall upon their
effectiveness apply with equal force to the comparable provisions of this
Agreement and become effective with respect thereto without the consent of or
any other action on the part of any Person; provided, however, that any such amendment, waiver
or consent effected in respect of the First Priority Security Agreement (or, in
the case of any Eligible Debt Agreement, the applicable security agreement
relating to such Eligible Debt Agreement) which has the effect of releasing all
or substantially all of the Collateral shall not automatically apply to this
Agreement.  No failure on the part of
the Second Priority Collateral Trustees, the Second Priority Representatives or
any other Second Priority Secured Holders to exercise, and no delay in
exercising any right hereunder, shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.

 

(b)                                 Upon
the execution and delivery, or authentication, by any Person of a security
agreement supplement in substantially the form of Exhibit A hereto (each a “Second Priority Security Agreement Supplement”), (i) such
Person shall be referred to as an “Additional Grantor”
and shall be and become a Grantor hereunder, and each reference in this
Agreement and the other Second Priority Secured Agreements to “Grantor” shall
also mean and be a reference to such Additional Grantor, and each reference in
this Agreement and the other Second Priority Secured Agreements to “Collateral”
shall also mean and be a reference to the Supplemental Collateral  (as defined in the Second Priority Security
Agreement Supplement) of such Additional Grantor and (ii) the supplemental
schedules I, II and IV attached to each Second Priority Security Agreement
Supplement shall be incorporated into and become a part of and supplement
Schedules I, II and IV, respectively, hereto, and the Second Priority
Collateral Trustees may attach such supplemental schedules to such Schedules;
and each reference to such

 

22

 

Schedules shall mean and be a reference to such Schedules as
supplemented pursuant to each Second Priority Security Agreement Supplement.

 

Section 18.                                      Notices,
Etc.  All notices, demands,
requests, and other communications provided for hereunder shall be in writing
(including telegraphic, telecopier or telex communication) and mailed,
telegraphed, telecopied, telexed or delivered to, in the case of any Second
Priority Representative, or the Second Priority Collateral Trustees, addressed
to each at their respective address specified in the Second Priority Collateral
Trust Agreement, in the case of the Borrower, addressed to it at its address
specified in the Senior Note Indenture and, in the case of each Grantor other
than the Borrower, addressed to it at its address set forth opposite such
Grantor’s name on the signature pages hereto or on the signature page to the
Second Priority Security Agreement Supplement pursuant to which it became a
party hereto; or, as to any party, at such other address as shall be designated
by such party in a written notice to the other parties.  All such notices and other communications
shall, when mailed, telegraphed, telecopied or telexed, be effective when
deposited in the mails, delivered to the telegraph company, telecopied or
confirmed by telex answerback, respectively, addressed as aforesaid; except
that notices and other communications to the Second Priority Collateral
Trustees shall not be effective until received by the Second Priority
Collateral Trustees.  Delivery by
telecopier of an executed counterpart of any amendment or waiver of any
provision of this Agreement or of any Second Priority Security Agreement
Supplement or Schedule hereto shall be effective as delivery of an original
executed counterpart thereof.

 

Section 19.                                      Continuing
Security Interest; Assignments under the Senior Note Indenture.  This Agreement shall create a continuing
security interest in the Collateral and shall (a) remain in full force and
effect until all of the Collateral is released, and this Agreement is
terminated, in accordance with Section 8.02 of the Second Priority Collateral
Trust Agreement, (b) be binding upon each Grantor, its successors and
assigns and (c) inure, together with the rights and remedies of the Second
Priority Collateral Trustees hereunder, to the benefit of the Second Priority
Collateral Trustees, the Second Priority Representatives on behalf of
themselves and on behalf of the Second Priority Secured Holders and their
respective successors, transferees and assigns.  Without limiting the generality of the foregoing clause (c), any
Senior Note Holder may transfer all or any portion of its rights and
obligations under the Senior Note Indenture (including, without limitation, all
or any portion of Senior Notes held by it) to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to such Senior Note Holder in the Second Priority Collateral Documents
or otherwise, in each case as provided in the Senior Note Indenture.

 

Section 20.                                      Release;
Termination.  The Second
Priority Collateral Trustees shall release all or any portion of the Collateral
solely on terms and subject to the conditions set forth in Article VIII of the
Second Priority Collateral Trust Agreement.

 

Section 21.                                      Security
Interest Absolute.  The
obligations of each Grantor under this Agreement are independent of the Second
Priority Secured Obligations or any other obligations of any other Person under
or in respect of the Second Priority Secured Agreements and the Second Priority
Collateral Documents, and a separate action or actions may be brought and
prosecuted against each Grantor to enforce this Agreement, irrespective of
whether any action is brought against such Grantor or any other Person or
whether such Grantor or any other

 

23

 

Person is joined in any such action or actions.  All rights of the Second Priority Collateral
Trustees, the Second Priority Representatives and the other Second Priority
Secured Holders and the pledge, assignment and security interest hereunder and
under the other Second Priority Collateral Documents, and all obligations of
each Grantor hereunder, shall be irrevocable, absolute and unconditional
irrespective of, and each Grantor hereby irrevocably waives (to the maximum
extent permitted by applicable law) any defenses it may now have or may
hereafter acquire in any way relating to, any or all of the following:

 

(a)                                  any
lack of validity or enforceability of any Second Priority Secured Agreement or
any other agreement or instrument relating thereto;

 

(b)                                 any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Second Priority Secured Obligations or any other Obligations of
any other Person under or in respect of the Second Priority Secured Agreements
or any other amendment or waiver of or any consent to any departure from any
Second Priority Secured Agreement, including, without limitation, any increase
in the Second Priority Secured Obligations resulting from the issuance of
additional Senior Notes by the Borrower or otherwise;

 

(c)                                  any
taking, exchange, release or non-perfection of any Collateral or any
other collateral, or any taking, release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the Second Priority Secured
Obligations;

 

(d)                                 any
manner of application of any Collateral or any other collateral, or proceeds
thereof, to all or any of the Second Priority Secured Obligations, or any
manner of sale or other disposition of any Collateral or any other collateral
for all or any of the Second Priority Secured Obligations or any other
Obligations of any other Grantor under or in respect of the Second Priority
Secured Agreements or any other assets of any Grantor or any of its
Subsidiaries;

 

(e)                                  any
change, restructuring or termination of the corporate structure or existence of
any Grantor or any of its Subsidiaries;

 

(f)                                    any
failure of any Second Priority Secured Holder to disclose to any Grantor any
information relating to the business, condition (financial or otherwise),
operations, performance, assets, nature of assets, liabilities or prospects of
any other Grantor now or hereafter known to such Second Priority Secured Holder
(each Grantor waiving any duty on the part of the Second Priority Secured
Holders to disclose such information);

 

(g)                                 the
failure of any other Person to execute this Agreement or any other Second
Priority Collateral Document, guaranty or agreement or the release (other than
as provided in Section 20) or reduction of liability of any Grantor or other
grantor or surety with respect to the Second Priority Secured Obligations; or

 

(h)                                 any
other circumstance (including, without limitation, any statute of limitations)
or any existence of or reliance on any representation by any Second Priority

 

24

 

Secured Holder
that might otherwise constitute a defense available to, or a discharge of, such
Grantor or any other Grantor or a third party grantor of a security interest.

 

This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Second
Priority Secured Obligations is rescinded or must otherwise be returned by the
Second Priority Collateral Trustees, any Second Priority Representative or any
Second Priority Secured Holder upon the insolvency, bankruptcy or
reorganization of any Grantor or otherwise, all as though such payment had not
been made.

 

Section 22.                                      Additional
Secured Obligations.  Each of
the Grantors, the Second Priority Collateral Trustees, the Second Priority
Representatives and the Second Priority Secured Holders acknowledges and agrees
that the Collateral hereunder may secure additional Obligations of the Borrower
in respect of the incurrence of new Debt (as defined in the Senior Note
Indenture) by the Borrower or the refinancing, extension, or renewal of certain
Debt of the Borrower, in each case, only as permitted by the terms and
conditions of the Senior Note Indenture. 
Upon the execution and delivery to the Second Priority Collateral
Trustees of an acknowledgement by the Persons to whom the obligations referred
to in the immediately preceding sentence are owed, in form and substance
satisfactory to the Second Priority Collateral Trustees, that (i) such Persons
acknowledge the terms and conditions of this Agreement and agree to be bound
thereby and (ii) such Persons agree to pay their ratable share of the fees and
expenses of the Second Priority Collateral Trustees and to ratably indemnify
the Second Priority Collateral Trustees, in each case, on terms and conditions
similar to those contained in the Senior Note Indenture and the Second Priority
Collateral Trust Agreement, such Persons shall become “Second Priority Secured
Holders” hereunder and shall be entitled to share ratably in the Collateral for
all purposes hereunder.

 

Section 23.                                      Execution
in Counterparts.  This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement. 
Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Agreement.

 

Section 24.                                      Limitation
of Liability.  Each Grantor,
and by its acceptance of this Agreement, the Second Priority Collateral
Trustees, the Second Priority Representatives and the Second Priority Secured
Holders, hereby confirms that it is the intention of all such Persons that this
Agreement and the Obligations of the Grantors hereunder not constitute a
fraudulent conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign,
federal or state law to the extent applicable to this Agreement and the
Obligations of the Grantors hereunder. 
To effectuate the foregoing intention, the Second Priority Collateral
Trustees, the Second Priority Representatives and the Second Priority Secured
Holders and the Grantors hereby irrevocably agree that the Obligations of the
Grantors under this Agreement at any time shall be limited to the maximum
amount as will result in the Obligations of the Grantors under this Agreement
not constituting a fraudulent transfer or conveyance.

 

Section 25.                                      Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.

 

25

 

Section 26.                                      Submission
to Jurisdiction and Waiver. 
(a)  Each Grantor hereby irrevocably
and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement and
the other Second Priority Secured Agreements to which it is or is to be a
party, or for recognition or enforcement of any judgment, and each Guarantor
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York
State court or, to the extent permitted by law, in such federal court.  Each Grantor agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law.  Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement in the courts of any jurisdiction.

 

(b)                                 Each
Grantor irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement to which it is or is to be a party in any New York
State or federal court.  Each Grantor
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such suit, action or proceeding
in any such court.

 

(c)                                  EACH
GRANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SENIOR NOTE INDENTURE OR THE
OTHER SECOND PRIORITY SECURED AGREEMENTS.

 

[SIGNATURE PAGES
IMMEDIATELY FOLLOW]

 

26

 

IN WITNESS WHEREOF, each Grantor has caused this
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.

 

	
   

  	
  THE
  AES CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  

 

Acknowledged on
the date hereof by:

 

WELLS FARGO BANK MINNESOTA,

NATIONAL ASSOCIATION,

as Second Priority Corporate Trustee

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  

 

 

JEFFERY T. ROSE,

as Second Priority Individual Trustee

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  

 

 

WELLS FARGO BANK MINNESOTA,

NATIONAL ASSOCIATION,

as Senior Note Trustee

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  

 

 

WILMINGTON TRUST COMPANY,

as Existing Corporate Trustee

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  

 

 

BRUCE L. BISSON,

as Existing Individual Trustee

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  

 

27

 

Schedule I to the Second 

Priority Security Agreement

 

LOCATION, CHIEF EXECUTIVE OFFICE, PLACE WHERE AGREEMENTS ARE

MAINTAINED, TYPE OF ORGANIZATION, JURISDICTION OF ORGANIZATION

AND ORGANIZATIONAL IDENTIFICATION NUMBER

 

	
  Grantor

  	
   

  	
  Location

  	
   

  	
  Chief

  Executive

  Office

  	
   

  	
  Place Where

  Agreements are

  Maintained

  	
   

  	
  Type of

  Organization

  	
   

  	
  Jurisdiction of

  Organization

  	
   

  	
  Organizational

  I.D. No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The AES Corporation

  	
   

  	
  Corporation Service
  Company

  2711 Centerville Road

  New Castle, Delaware 19808

  	
   

  	
  1001 North 19th Street

  Suite 2000

  Arlington,

  VA  22209

  	
   

  	
  1001 North 19th Street

  Suite 2000

  Arlington,

  VA  22209

  	
   

  	
  Corporation

  	
   

  	
  Delaware

  	
   

  	
  Federal ID #:  54-1163725

  	
   

  

 

28

 

Schedule II to the Second

Priority Security Agreement

 

PLEDGED
EQUITY AND PLEDGED DEBT

 

Part I

 

PLEDGOR: AES CORP.

 

	
  Legal Name

  	
   

  	
  Jurisdiction
  of

  Incorporation

  	
   

  	
  Types of

  Shares

  	
   

  	
  Authorized

  Shares

  	
   

  	
  Par

  Value

  	
   

  	
  Outstanding

  Shares

  	
   

  	
  Percentage

  Owned by

  AES

  	
   

  	
  Certificate

  No.

  	
   

  	
  %

  Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Alamitos Development, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Argentina, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  3

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Atlantis, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  2

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Barka Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  200

  	
   

  	
  $

  	
  0.001

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  2

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES CAESS Distribution, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES California Management Co., Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  3

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Canal Power Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Capital Funding, LLC

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  2

  	
   

  	
  65

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Cemig Holdings, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  2

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Central American Management Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Central Valley, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Chaparron I, Ltd.

  	
   

  	
  Cayman

  	
   

  	
  Ordinary

  	
   

  	
  50,000

  	
   

  	
  $

  	
  1.00

  	
   

  	
  1,000

  	
   

  	
  100

  	
   

  	
  2, 3

  	
   

  	
  65

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Columbia Power, LLC

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Connecticut Management, LLC

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Distribution East, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  2

  	
   

  	
  65

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Ecotek Holdings, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES EDC Funding II, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  2

  	
   

  	
  100

  	
   

  

 

 

	
  Legal Name

  	
   

  	
  Jurisdiction
  of

  Incorporation

  	
   

  	
  Types of

  Shares

  	
   

  	
  Authorized

  Shares

  	
   

  	
  Par

  Value

  	
   

  	
  Outstanding

  Shares

  	
   

  	
  Percentage

  Owned by

  AES

  	
   

  	
  Certificate

  No.

  	
   

  	
  %

  Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES EEO Distribution, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES El Faro Generation, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Engineering, Ltd.

  	
   

  	
  Cayman

  	
   

  	
  Ordinary

  	
   

  	
  50,000

  	
   

  	
  $

  	
  1.00

  	
   

  	
  1,000

  	
   

  	
  100

  	
   

  	
  4,5

  	
   

  	
  65

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Georgia Gas, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  65

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES GPH Holdings, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  2

  	
   

  	
  65

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES GPH, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  65

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Granbury, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  2

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Hawaii Management Company, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  4

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Honduras Generation, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES International Holdings, Ltd.

  	
   

  	
  British Virgin Islands

  	
   

  	
  Common

  	
   

  	
  50,000

  	
   

  	
  $

  	
  1.00

  	
   

  	
  50,000

  	
   

  	
  100

  	
   

  	
  2, 3

  	
   

  	
  65

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Ironwood, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  3

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Kalaeloa Venture, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Keystone, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  100

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES King Harbor, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Londonderry Holdings, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES New York Funding, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Odyssey, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Oklahoma Holdings, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Red Oak, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Rio Diamante, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Southland Funding, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Stonehaven Holding, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  3

  	
   

  	
  100

  	
   

  

 

2

 

	
  Legal Name

  	
   

  	
  Jurisdiction
  of

  Incorporation

  	
   

  	
  Types of

  Shares

  	
   

  	
  Authorized

  Shares

  	
   

  	
  Par

  Value

  	
   

  	
  Outstanding

  Shares

  	
   

  	
  Percentage

  Owned by

  AES

  	
   

  	
  Certificate

  No.

  	
   

  	
  %

  Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Teal Holding, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Texas Funding III, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  3

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AES Warrior Run Funding, L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cavanal Minerals, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common

  	
   

  	
  10

  	
   

  	
  $

  	
  1.00

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  2

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IPALCO Enterprises, Inc.

  	
   

  	
  Indiana

  	
   

  	
  Common

  	
   

  	
  290,000,000

  	
   

  	
  N/A

  	
   

  	
  89,685,177

  	
   

  	
  100

  	
   

  	
  AES-1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mountainview Holding Company, LLC

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  1

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mountainview Power Development Company LLC

  	
   

  	
  Delaware

  	
   

  	
  Units

  	
   

  	
  1,000

  	
   

  	
  N/A

  	
   

  	
  10

  	
   

  	
  100

  	
   

  	
  5

  	
   

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Riverside Canal Power Company

  	
   

  	
  California

  	
   

  	
  Common

  	
   

  	
  1,000

  	
   

  	
  No

  	
   

  	
  100

  	
   

  	
  100

  	
   

  	
  4

  	
   

  	
  100

  	
   

  

 

3

 

Part II

 

	
  Grantor

  	
   

  	
  Debt

  Issuer

  	
   

  	
  Description
  of

  Debt

  	
   

  	
  Debt

  Certificate

  No(s).

  	
   

  	
  Final
  Maturity

  	
   

  	
  Outstanding

  Principal

  Amount

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Shady Point, LLC

  	
   

  	
  Term loan, 21% interest

  	
   

  	
  N/A

  	
   

  	
  July 19, 2014

  	
   

  	
  $

  	
  40,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Electric Ltd.

  	
   

  	
  Demand

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  $

  	
  609,699

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  Global Power Holdings
  C.V.

  	
   

  	
  Revolving facility,
  Applicable Federal Rate interest

  	
   

  	
  N/A

  	
   

  	
  December 31,
  2011

  	
   

  	
  $

  	
  7,966,227 (up to
  a maximum principal amount of $200,000,000.00

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES International
  Holdings Ltd.

  	
   

  	
  Revolving facility,
  Applicable Federal Rate interest

  	
   

  	
  N/A

  	
   

  	
  December 31,
  2011

  	
   

  	
  $

  	
  109,989,406 (up
  to a maximum principal amount of $200,000,000.00

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Yucatan, S. de R.L. de C.V.

  	
   

  	
  LIBOR + 7% 

  	
   

  	
  N/A

  	
   

  	
  March 31, 2005

  	
   

  	
  $

  	
  3,734,178.25

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Distribucion
  Dominicana Ltd.

  	
   

  	
  Demand note, LIBOR
  interest

  	
   

  	
  N/A

  	
   

  	
  August 4, 2012

  	
   

  	
  $

  	
  59,304,687

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Distribucion
  Dominicana Ltd.

  	
   

  	
  Demand note, 18%
  interest

  	
   

  	
  N/A

  	
   

  	
  July 25, 2010

  	
   

  	
  $

  	
  9,712,654.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Distribucion
  Dominicana Ltd.

  	
   

  	
  Demand note, 18%
  interest

  	
   

  	
  N/A

  	
   

  	
  September 20,
  2010

  	
   

  	
  $

  	
  11,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Distribucion
  Dominicana Ltd.

  	
   

  	
  Demand note, 18%
  interest

  	
   

  	
  N/A

  	
   

  	
  October 26, 2010

  	
   

  	
  $

  	
  9,118,534.32

  	
   

  

 

4

 

	
  Grantor

  	
   

  	
  Debt

  Issuer

  	
   

  	
  Description
  of

  Debt

  	
   

  	
  Debt

  Certificate

  No(s).

  	
   

  	
  Final
  Maturity

  	
   

  	
  Outstanding

  Principal

  Amount

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Distribucion
  Dominicana Ltd.

  	
   

  	
  Demand note, 12%
  interest

  	
   

  	
  N/A

  	
   

  	
  February 8, 2011

  	
   

  	
  $

  	
  20,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Distribucion
  Dominicana Ltd.

  	
   

  	
  Demand note, 12%
  interest

  	
   

  	
  N/A

  	
   

  	
  March 12, 2011

  	
   

  	
  $

  	
  18,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Distribucion
  Dominicana Ltd.

  	
   

  	
  Demand note, 12%
  interest

  	
   

  	
  N/A

  	
   

  	
  April 25, 2011

  	
   

  	
  $

  	
  6,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Distribucion Dominicana
  Ltd.

  	
   

  	
  Demand note, 18%
  interest

  	
   

  	
  N/A

  	
   

  	
  May 30, 2011

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  AES Raccoon Creek,
  L.L.C. (now AES BV Operations, L.L.C.

  	
  )

  	
  Demand note, 6.29%
  interest

  	
   

  	
  N/A

  	
   

  	
  November 30,
  2009

  	
   

  	
  $

  	
  11,512,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  Lake Worth Generation,
  L.L.C.

  	
   

  	
  Applicable Federal Rate
  Interest

  	
   

  	
  N/A

  	
   

  	
  January 10, 2008

  	
   

  	
  $

  	
  2,796,000

  	
   

  

 

5

 

Schedule III to the Second

Priority Security Agreement

 

ASSIGNED
AGREEMENTS

 

	
  Grantor

  	
   

  	
  Assigned
  Agreement

  
	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  Tax Sharing Agreement
  dated as of June 23, 1987 (as amended, supplemented or modified through the
  date hereof) among The AES Corporation (formerly known as Applied Energy
  Services, Inc.), AES Oklahoma Management Co., Inc., AES Shady Point, Inc.,
  Combustion Engineering, Inc., and Union Bank of California N.A. (formerly
  known as Union Bank), as successor in interest to Security Pacific National
  Bank, as agent.

  
	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  Tax Sharing Agreement
  dated as of March 20, 1990 (as amended, supplemented or modified through the
  date hereof) among The AES Corporation (formerly known as Applied Energy
  Services, Inc.), AES Hawaii Management Company, Inc., AES Hawaii, Inc.
  (formerly known as AES Barbers Point, Inc.), and Union Bank of California
  N.A. (formerly known as Union Bank), as successor in interest to Security
  Pacific National Bank, as agent.

  
	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  Tax Sharing Agreement
  dated as of March 28, 2001 among The AES Corporation, IPALCO Enterprises,
  Inc., and each corporation or other entity listed therein.

  

 

 

Schedule IV to the Second

Priority Security Agreement

 

CHANGES IN NAME, LOCATION, ETC.

 

Changes
in the Grantor’s Name (including new grantor with a new name and names
associated with all predecessors in interest of the Grantor)

 

The
Borrower changed its name from “Applied Energy Services, Inc.” to “The AES
Corporation” on May 1, 1991. 

 

Changes
in the Grantor’s Location 

 

There has been no change
in the Borrower’s location.

 

Changes
in the Grantor’s Chief Executive Office

 

The
Borrower moved its chief executive office from 1925 N. Lynn Street, Arlington, VA 22209 to 1001 N. 19th Street, Arlington, VA 22209 in June of 1989.  

 

Changes
in the Place Where Agreements are Maintained

 

See change in location of
chief executive office as noted above.

 

Changes
in the Type of Organization

 

There has been no change
in the type of organization.

 

Changes
in the Jurisdiction of Organization

 

There has been no change
in the jurisdiction of the organization.

 

Changes
in the Organizational Identification Number

 

No changes.

 

 

Schedule V to the Second

Priority Security Agreement

 

ACCOUNT
COLLATERAL

 

	
  Grantor

  	
   

  	
  Name and
  Address

  of Pledged Account Bank

  	
   

  	
  Mailing
  Address of

  Pledged Account

  	
   

  	
  Account
  Number

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  Riggs
  Bank, N.A.

  808 17th Street, N.W.

  Washington, D.C.

  20006-3944

  Attn:  Douglas H. Klamforth

  	
   

  	
  Riggs
  Bank, N.A.

  808 17th Street, N.W.

  Washington, DC 20006-3944

  	
   

  	
  37000223

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  AES Corporation

  	
   

  	
  Citibank,
  N.A.

  388 Greenwich Street,

  21st Floor

  New York, N.Y.  10013

  Attn: Stuart J. Glen

  	
   

  	
  Citibank,
  N.A.

  388 Greenwich Street,

  21st Floor

  New York, NY  10013

  	
   

  	
  30530758

  38668719

  	
   

  

 

6

 

Schedule VI to the Second

Priority Security Agreement

 

SECURITIES ACCOUNTS

 

	
  Description of

  Financial Asset

  	
   

  	
  Name and Address of

  Securities Intermediary

  	
   

  	
  Mailing Address of

  Securities Account

  	
   

  	
  Account Number

  	
   

  
	
  Investment

  	
   

  	
  BlackRock
  Provident  Institutional Funds
100
  Bellevue Parkway

  Wilmington, DE 19809

  	
   

  	
  PFPC, Inc.

  P.O. Box 8950

  Wilmington, DE 19885-9628

  	
   

  	
  19011

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Investment

  	
   

  	
  Calvert
  Cash Reserves

  4550 Montgomery Avenue

  Suite 1000N

  Bethesda, MD 20814

  	
   

  	
  Calvert
  Investments

  4550 Montgomery Avenue,

  Suite 1000N
Bethesda, MD 20814

  	
   

  	
  707/6082607

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Investment  (Money Market)

  	
   

  	
  FAM
  Distributors, Inc.

  One Financial Center,

  23rd Floor

  Boston, MA 02111

  	
   

  	
  Merrill
  Lynch

  100 Jericho Quadrangle

  P.O. Box 797

  Jericho, NY 11753

  	
   

  	
  318-3249844-4

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Investment  (Securities)

  	
   

  	
  Merrill
  Lynch Pierce Smith & Fenner Incorporated

  100 Jericho Quadrangle

  2ND 242

  Jericho, NY 11753

  	
   

  	
  Merrill
  Lynch

  100 Jericho Quadrangle

  P.O. Box 787

  Jericho, NY 11753

  	
   

  	
  550-07718

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Investment

  	
   

  	
  Citigroup
  Asset  Management  
100 Stamford Place,

  6th Floor

  Stamford, CT 06902

  Attn:  Frank T. Dunn, Jr.

  	
   

  	
  Citi
  Institutional Funds

  100 Stamford Place

  Stamford, CT  06902-6740

  	
   

  	
  18782

  	
   

  

 

 

Schedule VII to the Second

Priority Security Agreement

 

EXCLUDED
RECEIVABLES

 

AES Barry Limited

AESEBA, S.A.

AES Haripur (Private)
Limited

AES Lal Pir (Private)
Limited

AES Lal Pir (UK) Limited

AES Nile Power Operations
Ltd.

AES Pak Gen Holdings,
Inc.

AES Pak Gen (Private)
Company

AES Pak Gen (UK) Limited

AES Pakistan Holdings

AES Ocean Springs, Ltd.

AES Transpower, Inc.

Indianapolis
Power & Light Company and its Subsidiaries

La Plata II, Inc.

La Plata III, Inc.

La Plata Holdings, Inc.

Medway Power Limited

 

 

Exhibit A to the Second 

Priority Security Agreement

 

FORM
OF SECOND PRIORITY SECURITY AGREEMENT SUPPLEMENT

 

[Date of Second
Priority Security Agreement Supplement]

 

Wells Fargo Bank
Minnesota, National Association,

 

as Second Priority
Corporate Trustee and

 

Jeffery T. Rose, as
Second Priority Individual Trustee

for the Second Priority Representatives and the 

Second Priority Secured Holders referred to in the

Second Priority Security Agreement referred to below

                                                

                                                

Attn:
                                       

 

The AES
Corporation

 

Ladies and Gentlemen:

 

Reference is made to (i)
the Second Priority Security Agreement dated May 8, 2003 (as amended, amended
and restated, supplemented or otherwise modified from time to time, the “Second Priority Security Agreement”) made
by the Grantors from time to time party thereto in favor of Wells Fargo Bank
Minnesota, National Association, not in its individual capacity but solely as
corporate trustee (the “Second Priority
Corporate Trustee”) and Jeffery T. Rose, not in his individual
capacity but solely as individual trustee (the “Second Priority Individual Trustee”; and, together with the
Second Priority Corporate Trustee, the “Second
Priority Collateral Trustees”) and (ii) the Second Priority
Collateral Trust Agreement dated May 8, 2003 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “Second Priority Collateral Trust Agreement”)
made by the Grantors time to time party thereto in favor of the Second Priority
Collateral Trustees, for the Second Priority Representatives and the Second
Priority Secured Holders.  Terms defined
in the Senior Note Indenture, the Second Priority Security Agreement or the
Second Priority Collateral Trust Agreement and not otherwise defined herein are
used herein as defined in the Senior Note Indenture, the Second Priority
Security Agreement or the Second Priority Collateral Trust Agreement.

 

SECTION 1.  Grant of Security.  The undersigned hereby grants to the Second
Priority Collateral Trustees, for the ratable benefit of the Second Priority
Representatives and the Second Priority Secured Holders, a security interest
in, all of its right, title and interest in and to all of the Supplemental
Collateral (as defined herein) of the undersigned, whether now owned or

 

 

hereafter acquired by the undersigned, wherever located and whether now
or hereafter existing or arising, including, without limitation, the property
and assets of the undersigned set forth on the attached supplemental schedule I
to Schedule I to the Second Priority Security Agreement.  For purposes of this Second Priority
Security Agreement Supplement, “Supplemental
Collateral” shall consist of:

 

(a)                                  the
following:

 

(i)                                            all
of its right, title and interest in and to all of the shares of stock or other
Equity Interests (the “Additional Initial
Pledged Equity”) set forth opposite the undersigned’s name on and as
otherwise described in the attached supplemental schedule I to Schedule I to
the Second Priority Security Agreement;

 

(ii)                                         the
certificates, if any, representing the Additional Initial Pledged Equity, and
all dividends, distributions, return of capital, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Additional Initial Pledged
Equity and all subscription warrants, rights or options issued thereon or with
respect thereto;

 

(iii)                                      all
additional shares of stock and other Equity Interests of or in any issuer of
the Additional Initial Pledged Equity or any successor entity from time to time
acquired by the undersigned in any manner 
and all additional shares of stock or Equity Interests of or in any new
direct Subsidiary of the undersigned formed or acquired by the undersigned in
any manner after the date of this Second Priority Security Agreement Supplement
(such shares and other Equity Interests, together with the Additional Initial
Pledged Equity, being the “Additional Pledged Equity”), and the
certificates, if any, representing such additional shares or other Equity
Interests, and all dividends, distributions, return of capital, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares or other Equity Interests and all subscription warrants, rights or
options issued thereon or with respect thereto; and

 

(b)                                 all
proceeds of, collateral for, income, and other payments now or hereafter due
and payable with respect to, and supporting obligations relating to, any and
all of the Supplemental Collateral (including, without limitation, proceeds,
collateral and supporting obligations that constitute property of the types
described in clause (a) of this Section 1 and this clause (b))
and, to the extent not otherwise included, all (A) payments under
insurance (whether or not the Second Priority Collateral Trustees are the loss
payee thereof), or any indemnity, warranty or guaranty, payable by reason of
loss or damage to or otherwise with respect to any of the foregoing
Supplemental Collateral, (B) tort claims, including, without limitation, all
commercial tort claims and (C) cash.

 

Notwithstanding the foregoing provisions of this
Section 1 or of any other Second Priority Secured Agreement, the grant of a
security interest as provided herein shall not extend

 

2

 

to, and the term “Supplemental Collateral” shall not include, as to the
undersigned, more than 65% of the outstanding voting stock of any CFC.

 

SECTION 2.  Security for Obligations.  The grant of a security interest in the
Supplemental Collateral by the undersigned under this Second Priority Security
Agreement Supplement and the Second Priority Security Agreement secures the
payment of all Obligations of the undersigned now or hereafter existing under
or in respect of the Second Priority Secured Agreements whether direct or
indirect, absolute or contingent, and whether for principal, reimbursement
obligations, interest, premiums, penalties, fees, indemnifications, contract
causes of action, costs, expenses or otherwise.  Without limiting the generality of the foregoing, this Second
Priority Security Agreement Supplement and the Second Priority Security
Agreement secures the payment of all amounts that constitute part of the Second
Priority Secured Obligations and that would be owed by the undersigned to the
Second Priority Representatives or any Second Priority Secured Holder under the
Second Priority Secured Agreements but for the fact that such Second Priority
Secured Obligations are unenforceable or not allowable due to the existence of
a bankruptcy, reorganization or similar proceeding involving the Borrower.

 

The undersigned, and by its acceptance of this Second
Priority Security Agreement Supplement, the Second Priority Collateral Trustees,
the Second Priority Representatives and the Second Priority Secured Holders,
hereby confirm that it is the intention of all such Persons that this Second
Priority Security Agreement Supplement, the Second Priority Security Agreement
and the Obligations of the undersigned hereunder and thereunder not constitute
a fraudulent conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign,
federal or state law to the extent applicable to this Second Priority Security
Agreement Supplement, the Second Priority Security Agreement and the
Obligations of the undersigned hereunder and thereunder.  To effectuate the foregoing intention, the
Second Priority Collateral Trustees, the Second Priority Representatives and
the Second Priority Secured Holders and the undersigned hereby irrevocably
agree that the Obligations of the undersigned under this Second Priority
Security Agreement Supplement and the Second Priority Security Agreement at any
time shall be limited to the maximum amount as will result in the Obligations
of the undersigned under the Second Priority Security Agreement Supplement and
the Second Priority Security Agreement not constituting a fraudulent transfer
or conveyance.

 

SECTION 3.  Supplements to Second Priority Security
Agreement Schedules.  The
undersigned has attached hereto supplemental Schedules I, II and IV to
Schedules I, II and IV, respectively, to the Second Priority Security
Agreement, and the undersigned hereby certifies, as of the date first above
written, that such supplemental schedules have been prepared by the undersigned
in substantially the form of the equivalent Schedules to the Second Priority
Security Agreement and are complete and correct.

 

SECTION 4.  Representations and Warranties.  The undersigned hereby makes each
representation and warranty set forth in Section 7 of the Second Priority
Security Agreement (as supplemented by the attached supplemental schedules) to
the same extent as each other Grantor.

 

3

 

SECTION 5.  Obligations Under the Second Priority
Security Agreement.  The undersigned
hereby agrees, as of the date first above written, to be bound as a Grantor by
all of the terms and provisions of the Second Priority Security Agreement to
the same extent as each of the other Grantors. 
The undersigned further agrees, as of the date first above written, that
each reference in the Second Priority Security Agreement to an “Additional
Grantor” or a “Grantor” shall also mean and be a reference to the undersigned.

 

SECTION 6.  Governing Law.  This Second Priority Security Agreement
Supplement shall be governed by, and construed in accordance with, the laws of
the State of New York.

 

SECTION 7.  Submission to Jurisdiction and Waiver.  (a) 
Each party hereto hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York
State court or federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Second Priority Security
Agreement Supplement, or for recognition or enforcement of any judgment, and
party hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any
such New York State court or, to the extent permitted by law, in such federal
court.  Each party hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this Second
Priority Security Agreement Supplement shall affect any right that any party
may otherwise have to bring any action or proceeding relating to this Second
Priority Security Agreement Supplement in the courts of any jurisdiction.

 

(b)                                 Each
party hereto irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Second Priority Security Agreement Supplement to which it is
or is to be a party in any New York State or federal court.  Each party hereto hereby irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such suit, action or proceeding in any such court.

 

EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS SECOND PRIORITY
SECURITY AGREEMENT SUPPLEMENT OR THE ACTIONS OF ANY OTHER PARTY HERETO IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

 

4

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
  [NAME OF ADDITIONAL
  GRANTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address for notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
					

 

5

 

Exhibit B to the Second 

Priority Security Agreement

 

FORM OF
ACCOUNT CONTROL AGREEMENT

(Deposit Account/Securities Account)

 

ACCOUNT CONTROL AGREEMENT
(this “Agreement”) dated as of
             ,
       , among The AES Corporation, a
Delaware corporation (the “Grantor”),
Wells Fargo Bank Minnesota, National Association, not in its individual
capacity but solely as corporate trustee (the “Second Priority Corporate Trustee”) and Jeffery T. Rose, not
in his individual capacity but solely as individual trustee (the “Second Priority Individual Trustee”; and,
together with the Second Priority Corporate Trustee, the “Secured Party”), and
              ,
a
                       
(“                           ”),
as securities intermediary and/or depository bank (the “Account Holder”).

 

PRELIMINARY STATEMENTS:

 

(1)                                  The
Grantor has granted the Secured Party a security interest (the “Security Interest”) in the following
accounts maintained by the Account Holder for the Grantor (each, an “Account” and collectively, the “Accounts”):

 

[Insert account numbers
and other identifying information.]

 

(2)                                  The
Grantor has also granted to Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as corporate trustee
(the “First Priority Corporate Trustee”),
and Bruce L. Bisson, an individual residing in the State of Delaware, not in
his individual capacity but solely as individual trustee (the “First Priority Individual Trustee”; and,
together with the First Priority Corporate Trustee, the “First Priority Secured Party”) a first
priority security interest (the “First
Priority Security Interest”) in the Accounts.

 

(3)                                  Terms
defined in Article 8 or 9 of the Uniform Commercial Code in effect in the State
of New York (“N.Y. Uniform Commercial Code”)
are used in this Agreement as such terms are defined in such Article 8 or 9.

 

NOW, THEREFORE, in consideration of the premises and
of the mutual agreements contained herein, the parties hereto hereby agree as
follows:

 

SECTION 1.  The Accounts.  The Grantor and Account Holder represent and
warrant to, and agrees with, the Secured Party that:

 

(a)                                  The
Account Holder maintains each Account for the Grantor, and all property
(including, without limitation, all funds and financial assets) held by the
Account Holder for the account of the Grantor are, and will continue to be,
credited to an Account in accordance with instructions given by the Grantor
(unless otherwise provided herein).

 

(b)                                 To
the extent that funds are credited to any Account, such Account is a deposit
account; and to the extent that financial assets are credited to any Account,
such Account

 

 

is a securities account.  The
Account Holder is (i) the bank with which each Account that is a deposit
account is maintained and (ii) the securities intermediary with respect to
financial assets held in any Account that is a securities account.  The Grantor is (x) the Account Holder’s
customer with respect to the Accounts and (y) the entitlement holder with
respect to financial assets credited from time to time to any Account.

 

(c)                                  Notwithstanding
any other agreement to the contrary, the Account Holder’s jurisdiction with
respect to each Account for purposes of the N.Y. Uniform Commercial Code is,
and will continue to be for so long as the Security Interest shall be in
effect, the State of New York.

 

(d)                                 The
Grantor and Account Holder do not know of any claim to or interest in any
Account or any property (including, without limitation, funds and financial
assets) credited to any Account, except for claims and interests of the parties
referred to in this Agreement.

 

SECTION 2.  Control by Secured Party.  Subject to Section 3(c) below, the Account
Holder will comply with (i) all instructions directing disposition of the
funds in any and all of the Accounts, (ii) all notifications and
entitlement orders that the Account Holder receives directing it to transfer or
redeem any financial asset in any and all of the Accounts, and (iii) all
other directions concerning any and all of the Accounts, including, without
limitation, directions to distribute to the Secured Party proceeds of any such
transfer or redemption or interest or dividends on property in any and all of
the Accounts (any such instruction, notification or direction referred to in
clause (i), (ii) or (iii) above being an “Account
Direction”), in each case of clauses (i), (ii) and (iii) above
originated by the Secured Party without further consent by the Grantor or any
other Person.

 

SECTION 3.  Grantor’s Rights in Accounts.  (a) 
Except as otherwise provided in this Section 3, the Account Holder will
comply with Account Directions concerning each Account originated by the
Grantor without further consent by the Secured Party.

 

(b)                                 Until
the Account Holder receives a notice from the Secured Party that the Secured
Party will exercise exclusive control over any Account (a “Notice of ExclusiveControl” with respect to such Account), the Account
Holder may distribute to the Grantor all interest and regular cash dividends on
property (including, without limitation, funds and financial assets) in such
Account.

 

(c)                                  If
the Account Holder receives from the Secured Party a Notice of Exclusive
Control with respect to any Account, the Account Holder will comply only with
Account Directions originated by the Secured Party and will cease:

 

(i)                                     complying
with Account Directions concerning such Account originated by the Grantor and

 

(ii)                                  distributing
to the Grantor interest and dividends on property (including, without
limitation, funds and financial assets) in such Account unless such
distribution is in accordance with Account Directions originated by the Secured
Party;

 

2

 

provided
that (i) the First Priority Secured Party shall have consented in writing to
the delivery of such Notice of Exclusive Control by the Secured Party or  (ii) prior to the delivery of the Notice of
Exclusive Control by the Secured Party, the First Priority Secured Party shall
have delivered written notice to the Account Holder that the First Priority
Security Interest has terminated.

 

SECTION 4.  Priority of Secured Party’s Security
Interest.  (a)  The
Account Holder (i) subordinates to the Security Interest and in favor of
the Secured Party any security interest, lien, or right of recoupment or setoff
that the Account Holder may have, now or in the future, against any Account or
property (including, without limitation, any funds and financial assets)
credited to any Account, and (ii) agrees that it will not exercise any right in
respect of any such security interest or lien or any such right of recoupment
or setoff until the Security Interest is terminated, except that the
Account Holder (A) will retain its prior security interest and lien on property
credited to any Account, (B) may exercise any right in respect of such security
interest or lien, and (C) may exercise any right of recoupment or setoff
against any Account, in the case of clauses (A), (B) and (C) above,  to secure or to satisfy, and only to secure
or to satisfy, payment (x) for such property, (y) for its customary fees and
expenses for the routine maintenance and operation of such Account, and (z) if
such Account is a deposit account, for the face amount of any items that have
been credited to such Account but are subsequently returned unpaid because of
uncollected or insufficient funds.

 

(b)                                 The
Account Holder will not enter into any other agreement with any Person, other
than the First Priority Secured Party, relating to Account Directions or other
directions with respect to any Account.

 

SECTION 5.  Statements, Confirmations, and Notices of
Adverse Claims.  (a)  The Account Holder will send
copies of all statements and confirmations for each Account simultaneously to
the Secured Party and the Grantor.

 

(b)                                 When
the Account Holder knows of any claim or interest in any Account or any
property (including, without limitation, funds and financial assets) credited
to any Account other than the claims and interests of the parties referred to
in this Agreement, the Account Holder will promptly notify the Secured Party
and the Grantor of such claim or interest.

 

SECTION 6.  The Account Holder’s Responsibility.  (a) 
Except for permitting a withdrawal, delivery, or payment in violation of
Section 3, the Account Holder will not be liable to the Secured Party for
complying with Account Directions or other directions concerning any Account
from the Grantor that are received by the Account Holder before the Account
Holder receives and has a reasonable opportunity to act on a Notice of
Exclusive Control.

 

(b)                                 The
Account Holder will not be liable to the Grantor or the Secured Party for
complying with a Notice of Exclusive Control or with an Account Direction or
other direction concerning any Account originated by the Secured Party, even if
the Grantor notifies the Account Holder that the Secured Party is not legally
entitled to issue the Notice of Exclusive Control or Account Direction or such
other direction unless the Account Holder takes the action after it is served
with an injunction, restraining order, or other legal process enjoining it from
doing so, issued by a court of competent jurisdiction, and had a reasonable
opportunity to act on the injunction, restraining order or other legal process.

 

3

 

(c)                                  This
Agreement does not create any obligation of the Account Holder except for those
expressly set forth in this Agreement and, in the case of any Account that is a
securities account, in Part 5 of Article 8 of the N.Y. Uniform Commercial Code
and, in the case of any Account that is a deposit account, in Article 4 of
the N.Y. Uniform Commercial Code.  In
particular, the Account Holder need not investigate whether the Secured Party
is entitled under the Secured Party’s agreements with the Grantor to give an
Account Direction or other direction concerning any Account or a Notice of
Exclusive Control.  The Account Holder
may rely on notices and communications it believes given by the appropriate
party.

 

SECTION 7.  Indemnity.  The Grantor will indemnify the Account Holder, its officers,
directors, employees and agents against claims, liabilities and expenses
arising out of this Agreement (including, without limitation, reasonable
attorney’s fees and disbursements), except to the extent the claims,
liabilities or expenses are caused by the Account Holder’s gross negligence or
willful misconduct as found by a court of competent jurisdiction in a final,
non-appealable judgment.

 

SECTION 8.  Termination; Survival.  (a)  The Secured Party may
terminate this Agreement by notice to the Account Holder and the Grantor.  If the Secured Party notifies the Account
Holder that the Security Interest has terminated, this Agreement will
immediately terminate.

 

(b)                                 The
Account Holder may terminate this Agreement on 60 days’ prior notice to the
Secured Party and the Grantor, provided
that before such termination the Account Holder and the Grantor shall make
arrangements to transfer the property (including, without limitation, all funds
and financial assets) credited to each Account to another Account Holder that
shall have executed, together with the Grantor, a control agreement in favor
of  the Secured Party in respect of such
property in substantially the form of this Agreement or otherwise in form and substance
satisfactory to the Secured Party.

 

(c)                                  Sections
6 and 7 will survive termination of this Agreement.

 

SECTION 9.  Governing Law.  This Agreement and each Account will be
governed by the law of the State of New York. 
The Account Holder and the Grantor may not change the law governing any
Account without the Secured Party’s express prior written agreement.

 

SECTION 10.  Entire Agreement.  This Agreement is the entire agreement, and
supersedes any prior agreements, and contemporaneous oral agreements, of the
parties concerning its subject matter.

 

SECTION 11.  Amendments.  No amendment of, or waiver of a right under, this Agreement will
be binding unless it is in writing and signed by the party to be charged.

 

SECTION 12.  Financial Assets.  The Account Holder agrees with the Secured
Party and the Grantor that, to the fullest extent permitted by applicable law,
all property (other than funds) credited from time to time to any Account will
be treated as financial assets under Article 8 of the N.Y. Uniform Commercial
Code.

 

4

 

SECTION 13.  Notices.  A notice or other communication to a party under this Agreement
will be in writing (except that Account Directions may be given orally), will
be sent to the party’s address set forth under its name below or to such other
address as the party may notify the other parties and will be effective on
receipt.

 

SECTION 14.  Binding Effect.  This Agreement shall become effective when
it shall have been executed by the Grantor, the Secured Party and the Account
Holder, and thereafter shall be binding upon and inure to the benefit of the
Grantor, the Secured Party and the Account Holder and their respective
successors and assigns.

 

SECTION 15.  Execution in Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a
signature page to this Agreement by telecopier shall be effective as delivery
of an original executed counterpart of this Agreement.

 

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

 

	
   

  	
  THE AES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
  1001 North 19th Street

  
	
   

  	
  Arlington, VA 22209

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK MINNESOTA,

  NATIONAL ASSOCIATION,

  
	
   

  	
  as Second Priority Corporate Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  JEFFERY T. ROSE,

  
	
   

  	
  as Second Priority Individual Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  

 

5

 

	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF ACCOUNT HOLDER]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  

 

6

 

Exhibit C to the Second

Priority
Security Agreement

 

FORM
OF CONSENT AND AGREEMENT

 

The undersigned hereby
(a) acknowledges notice of, and consents to the terms and provisions of, (i)
the Second Priority Security Agreement dated May 8, 2003 (as amended, amended
and restated, supplemented or otherwise modified from time to time, the “Second Priority Security Agreement”), and
(ii) the Second Priority Collateral Trust Agreement dated May 8, 2003 (as
amended, amended and restated, supplement or otherwise modified from time to
time, the “Second Priority Collateral Trust
Agreement”) (the terms defined in the Second Priority Security
Agreement and Second Priority Collateral Trust Agreement being used herein as
used therein), in each case from The AES Corporation (the “Grantor”) and certain other grantors from
time to time party thereto to Wells Fargo Bank Minnesota, National Association,
not in its individual capacity but solely as corporate trustee (the “Second Priority Corporate Trustee”) and
Jeffery T. Rose, not in his individual capacity but solely as individual
trustee (the “Second Priority Individual
Trustee”; and, together with the Second Priority Corporate Trustee,
the “Second Priority Collateral Trustees”),
the foregoing trustees being trustees for the Second Priority Representatives
and the Second Priority Secured Holders referred to in the Second Priority
Collateral Trust Agreement, (b) consents in all respects to the pledge and
assignment to the Collateral Trustees of all of the Grantor’s right, title and
interest in, to and under the [IDENTIFY SPECIFIC ASSIGNED AGREEMENT] (the “Assigned Agreement”) pursuant to the Second
Priority Security Agreement, (c) acknowledges that the Grantor has provided it
with notice of the right of the Senior Collateral Trustees in the exercise of
its rights and remedies under the Second Priority Security Agreement and the
other Second Priority Collateral Documents to make all demands, give all
notices, take all actions and exercise all rights of the Grantor under the
Assigned Agreement, and (d) agrees with the Senior Collateral Trustees that:

 

(1)                                  The
undersigned will make all payments to be made by it under or in connection with
the Assigned Agreement directly to a Deposit Account or otherwise in accordance
with the instructions of the Second Priority Collateral Trustees after the
occurrence and during the continuance of a Second Priority Collateral Trust
Agreement Default.

 

(2)                                  All
payments made with respect to paragraph 1 above shall be made by the
undersigned irrespective of, and without deduction for, any counterclaim,
defense, recoupment or set-off and shall be final, and the undersigned will
not seek to recover from the Second Priority Collateral Trustees, any Second
Priority Representative or any Second Priority Secured Holder for any reason
any such payment once made.

 

(3)                                  The
Second Priority Collateral Trustees or their designee shall be entitled to
exercise any and all rights and remedies of the Grantor under the Assigned
Agreement in accordance with the terms of the Second Priority Security
Agreement, and the undersigned shall comply in all respects with such exercise.

 

(4)                                  Except
as specifically provided in this Consent and Agreement, none of the Second
Priority Collateral Trustees, the Second Priority Representatives nor any
Second Priority Secured Holder shall have any liability or obligation under the
Assigned

 

 

Agreement as a result of
this Consent and Agreement, the Second Priority Security Agreement or
otherwise.

 

(5)                                  Upon
the enforcement of the Second Priority Security Agreement by the Second
Priority Collateral Trustees and the transfer of the Assigned Agreement to a
transferee, the undersigned will not unreasonably withhold its consent to the
recognition of the transferee as the counterparty to the Assigned Agreement in
the place and stead of the Grantor.

 

This Consent and Agreement shall be binding upon the
undersigned and its successors and assigns, and shall inure, together with the
rights and remedies of the Second Priority Collateral Trustees hereunder, to
the benefit of the Second Priority Collateral Trustees, the Second Priority
Representatives, on behalf of themselves and on behalf of the Second Priority
Secured Holders and their successors, transferees and assigns.  This Consent and Agreement shall be governed
by and construed in accordance with the laws of the State of New York.

 

IN WITNESS WHEREOF, the undersigned has duly executed
this Consent and Agreement as of the date set opposite its name below.

 

	
  Dated: 
                           ,
           

  	
  [NAME OF OBLIGOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  

 

2

 

Exhibit D to the Second

Priority Security Agreement

 

FORM
OF SECURITIES ACCOUNT CONTROL AGREEMENT

 

CONTROL AGREEMENT dated
as of
[                 ],
[          ], among The AES
Corporation, a Delaware corporation (the “Grantor”),
Wells Fargo Bank Minnesota, National Association, not in its individual
capacity but solely as corporate trustee (the “Second Priority Corporate Trustee”) and Jeffery T. Rose, not
in his individual capacity but solely as individual trustee (the “Second Priority Individual Trustee”; and,
together with the Second Priority Corporate Trustee, the “Secured Party”),
[                   ],
and
[                   ],
a [                   ]
(“                    ”),
as securities intermediary (the “Securities
Intermediary”).

 

PRELIMINARY STATEMENTS:

 

(1)                                  The
Grantor has granted the Secured Party a security interest (the “Security Interest”) in account no.
[                           ]
maintained by the Securities Intermediary for the Grantor (the “Account”).

 

(2)                                  The
Grantor has also granted to Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as corporate trustee
(the “First Priority Corporate Trustee”),
and Bruce L. Bisson, an individual residing in the State of Delaware, not in
his individual capacity but solely as individual trustee (the “First Priority Individual Trustee”; and,
together with the First Priority Corporate Trustee, the “First Priority Secured Party”) a first
priority security interest (the “First
Priority Security Interest”) in the Account.

 

(3)                                  Terms
defined in Article 8 or 9 of the Uniform Commercial Code in effect in the State
of New York (“N.Y. Uniform Commercial Code”)
are used in this Agreement as such terms are defined in such Article 8 or 9.

 

NOW, THEREFORE, in consideration of the premises and of
the mutual agreements contained herein, the parties hereto hereby agree as
follows:

 

SECTION 1.  The Account.  The Grantor and Securities Intermediary
represent and warrant to, and agree with, the Grantor and the Secured Party
that:

 

(a)                                  The
Securities Intermediary maintains the Account for the Grantor, and all property
held by the Securities Intermediary for the account of the Grantor is, and will
continue to be, credited to the Account.

 

(b)                                 The
Account is a securities account.  The
Securities Intermediary is the securities intermediary with respect to the
property credited from time to time to the Account.  The Grantor is the entitlement holder with respect to the
property credited from time to time to the Account.

 

 

(c)                                  The
State of New York is, and will continue to be, the Securities Intermediary’s
jurisdiction of organization for purposes of Section 8-110(e) of the UCC so
long as the Security Interest shall remain in effect.

 

(d)                                 The
Grantor and Securities Intermediary do not know of any claim to or interest in
the Account or any property credited to the Account, except for claims and
interests of the parties referred to in this Agreement.

 

SECTION 2.  Control by Secured Party.  Subject to Section 3(c), below, the
Securities Intermediary will comply with all notifications it receives
directing it to transfer or redeem any property in the Account (each an “Entitlement Order”) or other directions
concerning the Account (including, without limitation, directions to distribute
to the Secured Party proceeds of any such transfer or redemption or interest or
dividends on property in the Account) originated by the Secured Party without
further consent by the Grantor or any other person.

 

SECTION 3.  Grantor’s Rights in Account.  (a) 
Except as otherwise provided in this Section 3, the Securities
Intermediary will comply with Entitlement Orders originated by the Grantor
without further consent by the Secured Party.

 

(b)                                 Until
the Securities Intermediary receives a notice from the Secured Party that the
Secured Party will exercise exclusive control over the Account (a “Notice of Exclusive Control”), the
Securities Intermediary may distribute to the Grantor all interest and regular
cash dividends on property in the Account.

 

(c)                                  If
the Securities Intermediary receives from the Secured Party a Notice of
Exclusive Control, the Securities Intermediary will cease:

 

(i)                                     complying
with Entitlement Orders concerning the Account originated by the Grantor and

 

(ii)                                  distributing
to the Grantor interest and dividends on property in the Account unless such
distribution is in accordance with Account Directions originated by the Secured
Party;

 

provided
that (i) the First Priority Secured Party shall have consented in writing to
the delivery of such Notice of Exclusive Control by the Secured Party or (ii)
prior to the delivery of the Notice of Exclusive Control by the Secured Party,
the First Priority Secured Party shall have delivered written notice to the
Securities Intermediary that the First Priority Security Interest has terminated.

 

SECTION 4.  Priority of Secured Party’s Security
Interest.  (a)  The
Securities Intermediary subordinates in favor of the Secured Party any security
interest, lien, or right of setoff it may have, now or in the future, against
the Account or property in the Account, except that the Securities Intermediary
will retain its prior lien on property in the Account to secure payment for
property purchased for the Account and normal commissions and fees for the
Account.

 

2

 

(b)                                 The
Securities Intermediary will not agree with any Person not party to this
Agreement, other than the First Priority Secured Party, that the Securities
Intermediary will comply with Entitlement Orders originated by such Person.

 

SECTION 5.  Statements, Confirmations, and Notices of
Adverse Claims.  (a)  The
Securities Intermediary will send copies of all statements and confirmations
for the Account simultaneously to the Grantor and the Secured Party.

 

(b)                                 When
the Securities Intermediary knows of any claim or interest in the Account or
any property credited to the Account other than the claims and interests of the
parties referred to in this Agreement, the Securities Intermediary will
promptly notify the Secured Party and the Grantor of such claim or interest.

 

SECTION 6.  The Securities Intermediary’s
Responsibility. 
(a)  Except for permitting a withdrawal, delivery, or payment
in violation of Section 3, the Securities Intermediary will not be liable to
the Secured Party for complying with Entitlement Orders or other directions
concerning the Account from the Grantor that are received by the Securities
Intermediary before the Securities Intermediary receives and has a reasonable
opportunity to act on a Notice of Exclusive Control.

 

(b)                                 The
Securities Intermediary will not be liable to the Grantor or the Secured Party
for complying with a Notice of Exclusive Control or with an Entitlement Order
or other direction concerning the Account originated by the Secured Party, even
if the Grantor notifies the Securities Intermediary that the Secured Party is
not legally entitled to issue the Notice of Exclusive Control or Entitlement
Order or such other direction unless the Securities Intermediary takes the
action after it is served with an injunction, restraining order, or other legal
process enjoining it from doing so, issued by a court of competent
jurisdiction, and had a reasonable opportunity to act on the injunction,
restraining order or other legal process.

 

(c)                                  This
Agreement does not create any obligation of the Securities Intermediary except
for those expressly set forth in this Agreement and in Part 5 of Article 8 of
the N.Y. Uniform Commercial Code.  In
particular, the Securities Intermediary need not investigate whether the
Secured Party is entitled under the Secured Party’s agreements with the Grantor
to give an Entitlement Order or other direction concerning the Account or a
Notice of Exclusive Control.  The
Securities Intermediary may rely on notices and communications it believes given
by the appropriate party.

 

SECTION 7.  Indemnity.  The Grantor will indemnify the Securities Intermediary, its
officers, directors, employees and agents against claims, liabilities and
expenses arising out of this Agreement (including, without limitation,
reasonable attorney’s fees and disbursements), except to the extent the claims,
liabilities or expenses are caused by the Securities Intermediary’s gross
negligence or willful misconduct as found by a court of competent jurisdiction
in a final, non-appealable judgment.

 

SECTION 8.  Termination; Survival.  (a)  The Secured Party may
terminate this Agreement by notice to the Securities Intermediary and the
Grantor.  If the Secured Party notifies

 

3

 

the Securities Intermediary that the Security Interest has terminated,
this Agreement will immediately terminate.

 

(b)                                 The
Securities Intermediary may terminate this Agreement on 60 days’ prior notice
to the Secured Party and the Grantor, provided
that before such termination the Securities Intermediary and the Grantor shall
make arrangements to transfer the property in the Account to another securities
intermediary that shall have executed, together with the Grantor, a control
agreement in favor of the Secured Party in respect of such property in
substantially the form of this Agreement or otherwise in form and substance
satisfactory to the Secured Party.

 

(c)                                  Sections
6 and 7 will survive termination of this Agreement.

 

SECTION 9.  Governing Law.  This Agreement and the Account will be
governed by the law of the State of New York. 
The Securities Intermediary and the Grantor may not change the law
governing the Account without the Secured Party’s express prior written agreement.

 

SECTION 10.  Entire Agreement.  This Agreement is the entire agreement, and
supersedes any prior agreements, and contemporaneous oral agreements, of the
parties concerning its subject matter.

 

SECTION 11.  Amendments.  No amendment of, or waiver of a right under, this Agreement will
be binding unless it is in writing and signed by the party to be charged.

 

SECTION 12.  Financial Assets.  The Securities Intermediary agrees with the
Secured Party and the Grantor that, to the fullest extent permitted by
applicable law, all property credited from time to time to the Account will be
treated as financial assets under Article 8 of the N.Y. Uniform Commercial
Code.

 

SECTION 13.  Notices.  A notice or other communication to a party under this Agreement
will be in writing (except that Entitlement Orders may be given orally), will
be sent to the party’s address set forth under its name below or to such other
address as the party may notify the other parties and will be effective on
receipt.

 

SECTION 14.  Binding Effect.  This Agreement shall become effective when
it shall have been executed by the Grantor, the Secured Party and the
Securities Intermediary, and thereafter shall be binding upon and inure to the
benefit of the Grantor, the Secured Party and the Securities Intermediary and
their respective successors and assigns.

 

SECTION 15.  Execution in Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of a
signature page to this Agreement by telecopier shall be effective as delivery
of an original executed counterpart of this Agreement.

 

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

 

4

 

	
   

  	
  THE AES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  1001 North 19th Street

  Arlington, VA  22209

  
	
   

  	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK MINNESOTA,

  NATIONAL ASSOCIATION,

  
	
   

  	
  as Second Priority Corporate Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  JEFFERY T. ROSE,

  
	
   

  	
  as Second Priority Individual Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [NAME OF SECURITIES INTERMEDIARY]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  

 

5

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