Document:

EXHIBIT
10.1

 

EXECUTION COPY

 

SECOND AMENDED AND RESTATED CREDIT AND

REIMBURSEMENT AGREEMENT

 

dated as of

 

July 29, 2003

 

among

 

THE AES
CORPORATION,

as Borrower,

 

AES OKLAHOMA
HOLDINGS, L.L.C.,

AES HAWAII MANAGEMENT COMPANY, INC.,

AES WARRIOR RUN FUNDING, L.L.C.,

AND AES NEW YORK FUNDING, L.L.C.,

as Subsidiary Guarantors,

 

CITICORP USA,
INC.,

as Administrative Agent,

 

CITIBANK, N.A.,

as Collateral Agent,

 

CITIGROUP GLOBAL
MARKETS INC., 

as Lead Arranger and Book Runner,

 

BANC OF AMERICA
SECURITIES LLC,

as Lead Arranger and Book Runner and as Co-Syndication Agent

(Term Loan Facility),

 

DEUTSCHE BANK
SECURITIES INC.,

as Lead Arranger and Book Runner (Term Loan Facility),

 

UNION BANK OF
CALIFORNIA, N.A.,

as Co-Syndication Agent (Term Loan Facility) and as Lead Arranger and Book
Runner and as Syndication Agent

(Revolving Credit Facility),

 

LEHMAN COMMERCIAL
PAPER INC.,

as Co-Documentation Agent (Term Loan Facility),

 

UBS SECURITIES
LLC,

as Co-Documentation Agent (Term Loan Facility),

 

SOCIÉTÉ GÉNÉRALE,

as Co-Documentation Agent (Revolving Credit Facility),

 

CREDIT LYONNAIS
NEW YORK BRANCH,

as Co-Documentation Agent (Revolving Credit Facility), and

 

THE BANKS LISTED
HEREIN

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE I

  
	
   

  
	
  DEFINITIONS

  
	
   

  
	
  Section 1.01
  Definitions

  
	
  Section 1.02 Accounting Terms and
  Determinations

  
	
  Section 1.03 Types of Borrowing

  
	
  Section 1.04 Currency Equivalents
  Generally

  
	
   

  
	
  ARTICLE II

  
	
   

  
	
  THE
  CREDITS

  
	
   

  
	
  Section 2.01 Commitment to Lend

  
	
  Section 2.02 Notice of Borrowing

  
	
  Section 2.03 Revolving Letters of Credit

  
	
  Section 2.04 Evidence of Debt

  
	
  Section 2.05 Maturity of Loans

  
	
  Section 2.06 Interest Rates

  
	
  Section 2.07 Method of Electing Interest
  Rates

  
	
  Section 2.08 Commitment Fee

  
	
  Section 2.09 Termination or Reduction of
  Revolving Credit Loan Commitments

  
	
  Section 2.10 Prepayment of the Loans

  
	
  Section 2.11 General Provisions as to
  Payments

  
	
  Section 2.12 Funding Losses

  
	
  Section 2.13 Computation of Interest and
  Fees

  
	
  Section 2.14 Revolving L/C Cash Collateral
  Account

  
	
  Section 2.15 Computations of Outstandings;
  Determination of Available Amount of Alternative Currency Letters of Credit

  
	
  Section 2.16 Alternative Currency Letter
  of Credit Issuances

  
	
   

  
	
  ARTICLE III

  
	
   

  
	
  CONDITIONS

  
	
   

  
	
  Section 3.01 Closing

  
	
  Section 3.02 Extension of Credit

  
	
   

  
	
  ARTICLE IV

  
	
   

  
	
  REPRESENTATIONS AND
  WARRANTIES

  
	
   

  
	
  Section 4.01 Corporate Existence and Power

  
	
  Section 4.02 Corporate and Governmental
  Authorization and Filings; No Contravention

  

 

i

 

	
  Section 4.03 Compliance with Laws

  
	
  Section 4.04 Binding Effect

  
	
  Section 4.05 Financial Information

  
	
  Section 4.06 Litigation

  
	
  Section 4.07 Compliance with ERISA

  
	
  Section 4.08 Environmental Matters

  
	
  Section 4.09 Taxes

  
	
  Section 4.10 Material AES Entities

  
	
  Section 4.11 Not an Investment Company

  
	
  Section 4.12 Public Utility Holding
  Company Act

  
	
  Section 4.13 Full Disclosure

  
	
  Section 4.14 Collateral Documents and
  Collateral

  
	
  Section 4.15 Existing Letters of Credit

  
	
  Section 4.16 Solvency

  
	
  Section 4.17 Pledged Subsidiaries

  
	
  Section 4.18 Qualified Holding Companies
  Debt

  
	
   

  
	
  ARTICLE V

  
	
   

  
	
  COVENANTS

  
	
   

  
	
  Section 5.01 Information

  
	
  Section 5.02 Payment of Obligations

  
	
  Section 5.03 Maintenance of Property;
  Insurance

  
	
  Section 5.04 Conduct of Business and
  Maintenance of Existence

  
	
  Section 5.05 Compliance with Laws

  
	
  Section 5.06 Inspection of Property, Books
  and Records

  
	
  Section 5.07 Limitation on Debt

  
	
  Section 5.08 Use of
  Proceeds

  
	
  Section 5.09
  Restricted Payments

  
	
  Section 5.10 Negative
  Pledge

  
	
  Section 5.11
  Consolidations and Mergers

  
	
  Section 5.12
  Collateral Coverage Ratio

  
	
  Section 5.13 Cash
  Flow Coverage

  
	
  Section
  5.14 Recourse Debt to Cash Flow Ratio

  
	
  Section 5.15
  Transaction with Affiliates

  
	
  Section
  5.16 Investments in Other Persons

  
	
  Section 5.17 No
  Prepayment of Debt

  
	
  Section
  5.18 Upstreaming of Net Cash Proceeds by Subsidiaries

  
	
  Section 5.19 Sales, Etc., of Assets

  
	
  Section
  5.20 Off Balance Sheet Obligations; Derivative Obligations

  
	
  Section 5.21
  Covenant to Give Security

  
	
  Section 5.22 Further
  Assurances

  
	
   

  
	
  ARTICLE VI

  
	
   

  
	
  DEFAULTS

  

 

ii

 

	
  Section 6.01 Events of
  Default

  
	
  Section 6.02 Notice of
  Default

  
	
  Section 6.03 Cash
  Collateral

  
	
   

  
	
  ARTICLE VII

  
	
   

  
	
  THE AGENT

  
	
   

  
	
  Section
  7.01 Appointment and Authorization

  
	
  Section 7.02 Agent
  and Affiliates

  
	
  Section 7.03
  Consultation with Experts

  
	
  Section
  7.04 Liability of Agent and Collateral Agent

  
	
  Section 7.05
  Indemnification

  
	
  Section 7.06 Credit
  Decision

  
	
  Section
  7.07 Successor Agent or Collateral Agent

  
	
  Section
  7.08 Administrative Agent May File Proofs of Claim

  
	
  Section
  7.09 Agents’ Fee

  
	
  Section
  7.10 Amendment to the Security Agreement and Collateral Trust Agreement

  
	
  Section 7.11
  Delivery of Information

  
	
   

  
	
  ARTICLE VIII

  
	
   

  
	
  CHANGE IN CIRCUMSTANCES

  
	
   

  
	
  Section
  8.01 Basis for Determining Interest Rate Inadequate or Unfair

  
	
  Section
  8.02 Illegality

  
	
  Section
  8.03 Increased Cost and Reduced Return

  
	
  Section
  8.04 Taxes

  
	
  Section
  8.05 Base Rate Loans Substituted for Affected Euro-Dollar Loans

  
	
   

  
	
  ARTICLE IX

  
	
   

  
	
  SUBSIDIARY GUARANTY

  
	
   

  
	
  Section 9.01 The
  Subsidiary Guaranty

  
	
  Section
  9.02 Guaranty Absolute

  
	
  Section
  9.03 Discharge Only Upon Payment in Full, Reinstatement in Certain
  Circumstances

  
	
  Section
  9.04 Revolving L/C Cash Collateral Account

  
	
  Section
  9.05 Waiver by the Subsidiary Guarantors

  
	
  Section 9.06 Subrogation

  
	
  Section 9.07 Stay
  of Acceleration

  
	
  Section 9.08
  Limitation of Liability

  
	
  Section
  9.09 Release of Subsidiary Guarantors

  
	
  Section
  9.10 Representations and Warranties

  
	
  Section
  9.11 Covenants

  

 

iii

 

	
  ARTICLE X

  
	
   

  
	
  MISCELLANEOUS

  
	
   

  
	
  Section
  10.01 Notices

  
	
  Section 10.02 No Waivers

  
	
  Section 10.03
  Expenses; Indemnification

  
	
  Section 10.04
  Sharing of Set-offs

  
	
  Section 10.05
  Amendments and Waivers

  
	
  Section 10.06
  Successors and Assigns

  
	
  Section 10.07 No Margin
  Stock

  
	
  Section
  10.08 Governing Law; Submission to Jurisdiction

  
	
  Section 10.09
  Release of Collateral

  
	
  Section
  10.10 Counterparts; Integration; Effectiveness

  
	
  Section 10.11
  Confidentiality

  
	
  Section 10.12
  WAIVER OF JURY TRIAL

  
	
  Section
  10.13 Severability; Modification to Conform to Law

  
	
  Section 10.14 Judgment
  Currency

  
	
  Section
  10.15 Third Party Fronting Banks

  

 

iv

 

	
  Appendix I

  	
  –

  	
  Revolving Credit Loan
  Facility

  
	
   

  	
   

  	
   

  
	
  Appendix II

  	
  –

  	
  Term Loan Facility

  
	
   

  	
   

  	
   

  
	
  Appendix III

  	
  –

  	
  Existing Letters of
  Credit

  
	
   

  	
   

  	
   

  
	
  Schedule I

  	
  –

  	
  Pledged Subsidiaries

  
	
   

  	
   

  	
   

  
	
  Schedule II

  	
  –

  	
  Assigned
  Agreements

  
	
   

  	
   

  	
   

  
	
  Schedule III

  	
  –

  	
  Non-Pledged
  Subsidiaries

  
	
   

  	
   

  	
   

  
	
  Schedule IV

  	
  –

  	
  Excluded AES Entities

  
	
   

  	
   

  	
   

  
	
  Schedule 5.15

  	
  –

  	
  Existing
  Agreements with Affiliates

  
	
   

  	
   

  	
   

  
	
  Schedule V

  	
  –

  	
  Qualified
  Holding Companies

  
	
   

  	
   

  	
   

  
	
  Schedule VI

  	
  –

  	
  Existing Debt

  
	
   

  	
   

  	
   

  
	
  Exhibit A-1

  	
  –

  	
  Form of
  Revolving Credit Loan Note

  
	
   

  	
   

  	
   

  
	
  Exhibit A-2

  	
  –

  	
  Form of Term
  Loan Note

  
	
   

  	
   

  	
   

  
	
  Exhibit B-1

  	
  –

  	
  Form of Opinion
  of the General Counsel of the Borrower

  
	
   

  	
   

  	
   

  
	
  Exhibit B-2

  	
  –

  	
  Form of Opinion
  of Davis Polk & Wardwell, Special Counsel for the Borrower

  
	
   

  	
   

  	
   

  
	
  Exhibit B-3

  	
  –

  	
  Form of Opinion
  of Special Counsel for certain Subsidiaries of the Borrower

  
	
   

  	
   

  	
   

  
	
  Exhibit B-4

  	
  –

  	
  Form of Opinion
  of Morris, Nichols, Arsht & Tunnell, Delaware counsel for the Borrower

  
	
   

  	
   

  	
   

  
	
  Exhibit B-5

  	
  –

  	
  Form of Opinion
  of Maples and Calder, Cayman Islands counsel for the Borrower

  
	
   

  	
   

  	
   

  
	
  Exhibit B-6

  	
  –

  	
  Form of Opinion
  of Conyers Dill & Pearman, British Virgin Islands counsel for the
  Borrower

  
	
   

  	
   

  	
   

  
	
  Exhibit B-7

  	
  –

  	
  Form of Opinion
  of Shearman & Sterling, Special Counsel for the Agent

  
	
   

  	
   

  	
   

  
	
  Exhibit C-1

  	
  –

  	
  Form of
  Revolving Credit Loan Facility Assignment and Assumption Agreement

  

 

v

 

	
  Exhibit C-2

  	
  –

  	
  Form of Term
  Loan Facility Assignment and Assumption Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit C-3

  	
  –

  	
  Form of Third
  Party Fronting Bank Assignment and Assumption Agreement

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
  –

  	
  Form of Third
  Party Fronting Bank Agreement

  

 

vi

 

SECOND AMENDED AND
RESTATED CREDIT AND

REIMBURSEMENT AGREEMENT

 

SECOND AMENDED AND
RESTATED CREDIT AND REIMBURSEMENT AGREEMENT dated as of July 29, 2003
among THE AES CORPORATION, a Delaware corporation (the “Borrower”), the SUBSIDIARY GUARANTORS
listed herein, the BANKS listed on the signatures pages hereof, CITIGROUP
GLOBAL MARKETS INC., as Lead Arranger and Book Runner, BANC OF AMERICA
SECURITIES LLC, as Lead Arranger and Book Runner and as Co-Syndication Agent
(for the Term Loan Facility (as hereinafter defined)), DEUTSCHE BANK SECURITIES
INC, as Lead Arranger and Book Runner (for the Term Loan Facility), UNION BANK
OF CALIFORNIA, N.A., as Co-Syndication Agent (for the Term Loan Facility) and
as Lead Arranger and Book Runner and as Syndication Agent (for the Revolving
Credit Facility (as hereinafter defined)),  LEHMAN
COMMERCIAL PAPER INC.,  as
Co-Documentation Agent (Term Loan Facility), UBS SECURITIES LLC, as
Co-Documentation Agent (Term Loan Facility), SOCIÉTÉ GÉNÉRALE, as
Co-Documentation Agent (Revolving Credit Facility), CREDIT LYONNAIS NEW YORK
BRANCH, as Co-Documentation Agent (Revolving Credit Facility), CITICORP USA,
INC., as Administrative Agent for the Bank Parties (the “Agent”) and CITIBANK, N.A., as Collateral
Agent for the Bank Parties (the “Collateral
Agent”).

 

PRELIMINARY
STATEMENTS:

 

1.                                       The
Borrower is party to an Amended and Restated Credit and Reimbursement Agreement
dated as of December 12, 2002 (as amended, amended and restated,
supplemented or otherwise modified through the date hereof, the “Existing Bank Credit Agreement”) among the
subsidiary guarantors listed therein, the banks listed on the signatures pages
thereof, the revolving fronting banks and the Drax letter of credit fronting bank
listed therein, Salomon Smith Barney, Inc., as lead arranger and book runner,
Bank of America, N.A., as lead arranger and book runner and as syndication
agent (for the revolving credit facility, the Drax letter of credit facility
and the tranche A term loan facility), Union Bank of California, N.A., as lead
arranger and book runner and as syndication agent (for the tranche B term loan
facility) and Citicorp USA, Inc., as administrative agent (in such capacity,
the “Existing Agent”) and as
collateral agent for the bank parties (in such capacity, the “Existing Collateral Agent”).

 

2.                                       The
Borrower wishes to amend and restate the Existing Bank Credit Agreement by
execution of this Agreement to, among other things, extend the maturities of
the Existing Bank Credit Agreement and restructure certain other provisions of
the Existing Bank Credit Agreement.

 

NOW, THEREFORE, in
consideration of the premises and of the mutual covenants and agreements
contained herein, the parties hereto hereby agree to amend and restate the
Existing Bank Credit Agreement (and the lenders under the Existing Bank Credit
Agreement by accepting the repayment of obligations owed to such lenders
thereunder agree), and the Existing Bank Credit Agreement is hereby amended and
restated, in its entirety as follows:

 

 

ARTICLE I

 

DEFINITIONS

 

Section
1.01  Definitions.

 

The following terms, as
used herein, have the following meanings:

 

“Actionable Default” means an Event of
Default described in clauses (a), (e), (f), (g) and (h) of Section 6.01.

 

“Acquired Debt” means Debt of a Person
existing at the time the Person merges with or into any Subsidiary or becomes a
Subsidiary and not incurred in connection with, or in contemplation of, such
merger or such Person becoming a Subsidiary.

 

“Additional Collateral Trust Agreement Collateral”
means the “Additional Collateral” referred to in the Collateral Trust
Agreement.

 

“Adjusted
Free Cash Flow” means, as of
the end of any fiscal year, an amount equal to (i) the Adjusted Parent
Operating Cash Flow for such fiscal year plus
(ii) the aggregate amount of Net Cash Proceeds from Covered Asset Sales
received by the Borrower and permitted to be retained by the Borrower under the
terms of this Agreement during such fiscal year less (iii) the aggregate amount of any Investments (other
than Temporary Cash Investments) made in cash by the Borrower during such
fiscal year in accordance with the terms of this Agreement, less (iv) the aggregate principal amount
of Debt repaid or prepaid with cash by the Borrower during such fiscal year in
accordance with the terms of this Agreement, excluding (x) Debt in respect of
Revolving Credit Loans and Revolving Letters of Credit (unless the Revolving
Credit Commitments are permanently reduced in a corresponding amount in connection
with such repayment or prepayment), (y) Debt required to be repaid or prepaid
with the Net Cash Proceeds of Asset Sales in accordance with the requirements
of Section 2.10(b) and (z) repayments or prepayments of Debt financed by
incurring other Debt less (v) the
aggregate amount for such fiscal year of Corporate Charges.

 

“Adjusted London Interbank Offered Rate”
means, for any Interest Period and subject to Section 2.02(a)(iv), a rate per
annum equal to the quotient obtained (rounded upward, if necessary, to the next
higher 1/100th of 1%) by dividing (i) the applicable London Interbank
Offered Rate by (ii) 1.00 minus
the Euro-Dollar Reserve Percentage.

 

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

 

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

 

(B)                                corporate
overhead expenses.

 

2

 

“Administrative Questionnaire”  means, with respect to each Bank Party, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.

 

“Adverse Alternative Currency Letters of Credit”
has the meaning set forth in Section 2.16.

 

“AES”
means The AES Corporation, a Delaware corporation, and its successors.

 

“AES Business” shall have the meaning
set forth in Section 5.07(b)(ii).

 

“AES BVI II” means AES International
Holdings II, Ltd., a company organized under the laws of the British Virgin
Islands.

 

“AES Electric”  means Applied Energy Services Electric Limited, an
English corporation, and its successors.

 

“AES Hawaii Management” means AES
Hawaii Management Company, Inc., a Delaware corporation and a Subsidiary of the
Borrower, and its successors.

 

“AES Management Group” means (i)
individuals who are members of the board of directors or officers of the
Borrower or the president of any Material AES Entity; (ii) their respective
spouses, children, grandchildren, siblings and parents; (iii) trusts
established for the sole or principal benefit of Persons described in clauses
(i) and (ii) above; (iv) heirs, executors, administrators and personal or legal
representatives of Persons described in clauses (i) and (ii) above;
and (v) any corporation or other Person that is controlled by, and a majority
of the equity interests in which are directly owned by, Persons described in
clauses (i) and (ii) above.

 

“AES N.Y. Funding Credit Facility” means the
Loan Agreement dated as of November 30, 2001, as amended, supplemented or
otherwise modified from time to time, among AES New York, the banks party
thereto, and Citibank, N.A., as agent.

 

“AES New York” means AES New York Funding,
L.L.C., a Delaware limited liability company and a wholly-owned Subsidiary of
the Borrower, and its successors.

 

“AES Oklahoma”  means AES Oklahoma Holdings, L.L.C., a Delaware
limited liability company and a Subsidiary of the Borrower, and its successors.

 

“AES Warrior Run”  means AES Warrior Run Funding, L.L.C., a Delaware
limited liability company and a Wholly-Owned Consolidated Subsidiary of the
Borrower, and its successors.

 

“Affiliate” means (i) any Person
that directly, or indirectly through one or more intermediaries, controls the
Borrower (a “Controlling Person”),
or (ii) any Person (other than the Borrower or a Subsidiary) which is
controlled by or is under common control with a Controlling Person or (iii) as
to any Person (other than the Borrower and its Subsidiaries), any other Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.  As used herein, the term “control”

 

3

 

means possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

 

“Agent” means Citicorp USA, Inc., in
its capacity as administrative agent for the Bank Parties hereunder, and its
successors in such capacity.

 

“Alternative Currency” means
(i) any lawful currency (other than Dollars) that is freely transferable
and convertible into Dollars or (ii) with respect to any Revolving Letter
of Credit issued by a Revolving Fronting Bank, any other lawful currency (other
than Dollars) that such Revolving Fronting Bank agrees may be used as the
designated currency of such Revolving Letter of Credit; provided that such Revolving Fronting Bank
is able to provide, and continues to provide, to the Agent the information
required pursuant to Section 2.15(b) with respect to such Revolving Letter
of Credit.

 

“Alternative Currency Letter of Credit”
means any Revolving Letter of Credit having a stated amount denominated in an
Alternative Currency.

 

“Amendment No. 1 to the Collateral Trust Agreement”  means Amendment No. 1 to the Collateral
Trust Agreement dated as of the date hereof, by and among each grantor
thereunder, the Representatives (as defined in the Collateral Trust Agreement)
and the Corporate Trustee.

 

“Amendment No. 1 to the Security Agreement”  means Amendment No. 1 to the Security
Agreement dated as of the date hereof, by and among each grantor thereunder,
the Collateral Trustees and the Agent.

 

“Applicable Lending Office”  means, with respect to any Bank
Party, (i) in the case of its Base Rate Loans, its Domestic Lending Office
and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending
Office.

 

“Arranger Parties” means Citigroup Global
Markets Inc., as Lead Arranger and Book Runner, Banc of America Securities LLC,
as Lead Arranger and Book Runner and as Co-Syndication Agent (Term Loan
Facility), Deutsche Bank Securities Inc., as Lead Arranger and Book Runner
(Term Loan Facility) and Union Bank of California, N.A., as Co-Syndication
Agent (Term Loan Facility) and as Lead Arranger and Book Runner and as
Syndication Agent (Revolving Credit Facility).

 

“Asset Sale” means any sale, lease, transfer
or other disposition (including any such transaction effected by way of merger
or consolidation or by way of an Equity Issuance by a Subsidiary) by the Borrower
or any of its Subsidiaries, but excluding any transactions permitted by the
provisions of Section 5.19 (other than subsection (iv) thereof); provided that a disposition of such assets
not excluded during any fiscal year shall not constitute an Asset Sale unless
and until (and only to the extent that) the aggregate Net Cash Proceeds from
such disposition, when combined with all other such dispositions previously
made during such fiscal year, exceeds $10,000,000.

 

4

 

“Asset Sale Proceeds Basket” means at any
time of determination, (i) the aggregate amount of Net Cash Proceeds
received by the Borrower after the Effective Date and prior to such time of
determination from Covered Asset Sales that are not required to prepay the
Facilities as set forth in Section 2.10, less
(ii) the amounts referred to in clause (i) above that were applied to the
repayment of any Debt prior to such time in accordance with the provisions of
Section 5.17(viii) (other than any Debt repaid with an amount from the
Equity Basket at such time).

 

“Assigned Agreements” has the meaning set
forth in Section 4.14(d).

 

“Assignee” has the meaning set forth
in Section 10.06(c).

 

“Assignment
and Assumption” means an
assignment and assumption agreement substantially in the form of Exhibit C-1,
C-2 or C-3 hereto, as applicable.

 

“Automatic Acceleration Event”  means the occurrence, with respect
to the Borrower, of any of the Events of Default listed in clauses (g) and (h)
of Section 6.01.

 

“Available Amount” means, for any
Revolving Letter of Credit on any date of determination, the maximum aggregate
amount (which, in the case of an Alternative Currency Letter of Credit, shall
be the Dollar Equivalent on such date of determination of such amount) available
to be drawn under such Revolving Letter of Credit at any time on or after such
date, the determination of such maximum amount to assume the compliance with
and satisfaction of all conditions for drawing enumerated therein.

 

“Bank” means each lender listed on
the signature pages hereof, each Assignee which becomes a Bank pursuant to
Section 10.06(c), and their respective successors.  Without limiting the generality of the
foregoing sentence, the term “Banks” shall include the Term Loan Banks.

 

“Bank Party” means any Bank.

 

“Banks’ Ratable Share” means (i) in respect
of the Net Cash Proceeds received after the Effective Date from Covered Asset
Sales and the incurrence of any Debt permitted by Section 5.07(a)(ix) or
5.07(b)(iv) relating to a bridge financing of any Covered Asset Sale, a
percentage of the Creditors’ Portion equal to a fraction (x) the numerator
of which is the Total Bank Exposure at such time and (y) the denominator
of which is the sum of the Total Bank Exposure at such time plus the aggregate principal amount of the
Senior Secured Exchange Notes issued on or prior to the date hereof and
outstanding at such time plus
(without duplication) the aggregate principal amount of First Priority Secured
Debt, the proceeds of which were used to permanently reduce Total Bank Exposure
or the Senior Secured Exchange Notes and (ii) in connection with the
incurrence of any Debt pursuant to Section 5.07(a)(ii), 5.07(a)(vii),
5.07(a)(viii) and 5.07(b)(ii) (but only to the extent applicable pursuant to
the proviso thereof) or 5.07(b)(vi), a percentage equal to a fraction (x) the
numerator of which is the Total Bank Exposure at such time and (y) the
denominator of which is the sum of the Total Bank Exposure at such time plus the aggregate principal amount of
First Priority Secured Debt, the proceeds of which were used to permanently
reduce Total Bank Exposure.

 

5

 

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

 

“Base Rate” means, for any day, a
rate per annum equal to the higher of (i)  the rate of interest publicly
announced by Citicorp USA, Inc. from time to time as its Base Rate for such day
and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day.

 

“Base Rate Borrowing” has the meaning set forth in the definition
of “Borrowing” herein.

 

“Base Rate Loan” means a Loan which
bears interest at the Base Rate pursuant to the applicable Notice of Borrowing
or Notice of Interest Rate Election or the provisions of Section 2.07(a)
or Article 8 plus the Base
Rate Margin.

 

“Base Rate Margin” means a rate per annum
equal to 3.00%.

 

“Benefit Arrangement”  means, at any time, an employee
benefit plan within the meaning of Section 3(3) of ERISA which is not a
Plan or a Multiemployer Plan and which is maintained or otherwise contributed
to by any member of the ERISA Group.

 

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

 

“Borrowing”means a borrowing hereunder consisting of Revolving Credit
Loans made to the Borrower at the same time by the Revolving Credit Loan Banks
pursuant to Section 2.01(a).  A
Borrowing is a “Base Rate Borrowing”
if such Revolving Credit Loans are Base Rate Loans or a “Euro-Dollar Borrowing” if such Revolving
Credit Loans are Euro-Dollar Loans.

 

“BVI Cayman Pledge Agreement” means the
Pledge Agreement dated as of December 12, 2002, made by AES BVI II in
favor of the Collateral Trustees.

 

“BVI Collateral” means the “Collateral”
referred to in the BVI Cayman Pledge Agreement.

 

“Capital Commitment” means any
contractual commitment or obligation under an equity contribution or other
agreement the primary purpose of which is for the Borrower to provide to an AES
Business a portion of the capital required to finance construction projects,
the acquisition of additional assets or capital improvements being undertaken
by such AES Business.

 

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

 

6

 

“Cash Flow Coverage Ratio” means, for
any period, the ratio of (i) Adjusted Parent Operating Cash Flow for such
period to (ii) Corporate Charges for such period.

 

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

 

“Closing Date”  means the date on or after the Effective Date on which
the Agent shall have received the fees and documents specified in or pursuant
to Section 3.01.

 

“Collateral” means the Creditor Group
Collateral.

 

“Collateral Account” has the meaning as set
forth in the Collateral Trust Agreement.

 

“Collateral Agent” means Citibank N.A., in
its capacity as collateral agent for the Lender Parties under the Financing
Documents and its successors in such capacity.

 

“Collateral Coverage Ratio” means, at any
time, the ratio of (i) the Collateral Value at such time to (ii) the sum of (in
each case to the extent not collateralized by cash or Temporary Cash
Investments) (A) the aggregate principal amount of Loans then outstanding,
(B) the aggregate amount of the Unused Revolving Credit Loan Commitments
at such time, (C) the aggregate Available Amount at such time,
(D) the aggregate principal amount of Senior Secured Exchange Notes then
outstanding, (E) the “mark to market” value of all outstanding Secured
Hedge Agreements at such time in an amount up to $50,000,000, (F) the
amounts payable by the Borrower pursuant to any Secured Treasury Management
Service Agreement, (G) the aggregate amount payable by the Borrower pursuant to
the terms of the Sul Guarantee at such time in an amount up to $50,000,000, (H)
the reimbursement obligations pursuant to the Lake Worth Letter of Credit in an
amount up to $5,490,449 at such time and (I) the aggregate principal amount of
First Priority Secured Debt not described in the preceding clauses (A) through
(H) permitted by Section 5.10 (p) at such time.

 

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

 

“Collateral Trust Agreement” means the
Collateral Trust Agreement dated as of December 12, 2002 made by the
grantors thereunder in favor of the Collateral Trustees, as amended from time
to time.

 

“Collateral Trustees”  has the meaning as set forth in the
Collateral Trust Agreement.

 

“Collateral Value” means, at any time, the
aggregate book value at such time of the percentage of Equity Interests pledged
in favor of the Secured Holders (other than the Equity Interests of the
Excluded AES Entities); provided
that the book value of each Subsidiary whose Equity Interests are being pledged
shall be determined at such time (without giving effect to any accumulated
other comprehensive gain or loss) by the sum of (i) its contributed
capital less (ii) its
intercompany receivables, plus
(iii) its pre-tax retained earnings, plus (iv)
its

 

7

 

intercompany payables and
less (v) dividends paid to the
Borrower by such Subsidiary; provided
further that for purposes of
determining IPALCO’s book value, IPALCO’s contributed capital shall be
calculated on a purchase accounting basis.

 

“Conduit Lender”  means any special purpose corporation organized and
administered by any Bank for the purpose of making Loans hereunder otherwise
required to be made by such Bank and designated by such Bank in a written
instrument, subject to the consent of the Agent and the Borrower (which, in
each case, shall not be unreasonably withheld or delayed); provided that the designation by any Bank
of a Conduit Lender shall not relieve the designating Bank of any of its
obligations to fund a Loan under the Agreement if, for any reason, its Conduit
Lender fails to fund any such Loan, and the designating Bank (and not the
Conduit Lender) shall have the sole right and responsibility to deliver all
consents and waivers required or requested under this Agreement with respect to
its Conduit Lender, and provided  further that no Conduit Lender shall (a)
be entitled to receive any greater amount pursuant to Section 8.03, 8.04 or
10.03 than the designating Lender would have been entitled to receive in
respect of the extensions of credit made by such Conduit Lender or (b) be
deemed to have any Revolving Credit Commitment hereunder.

 

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

 

“Controlling
Person” has the meaning set
forth in the definition of “Affiliate” herein.

 

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

 

(A)                              interest
expense of the Borrower for such period:

 

(i)                                     including,
without limitation, interest expense attributable to (x) the accretion of
original issue discount on Debt issued at less than face value thereof and
(y) any interest added to the principal amount of Debt but;

 

(ii)                                  excluding
any interest expense to the extent that (x) the Borrower has the option or
obligation to pay or satisfy such interest expense by the issuance of Capital
Stock of the Borrower or other securities of the Borrower which would not
constitute Recourse Debt and (y) the Borrower has not paid or satisfied such
interest expense during such period with cash or by the issuance of Recourse
Debt; and

 

(B)                                rental
expense of the Borrower for such period;

 

(C)                                dividends
paid on the Borrower’s Redeemable Stock during such period; and

 

8

 

(D)                               dividends
paid on the Existing Trust Preferred Securities.

 

“Corporate Trustee” means Wilmington Trust
Company, a Delaware banking corporation, as Corporate Trustee under the
Collateral Trust Agreement and any successor in such capacity.

 

“Covered Asset Sale” means any
Asset Sale.

 

“Credit Agreement Documents” has the meaning
set forth in the Collateral Trust Agreement.

 

“Credit Party” has the meaning set forth in
Section 8.03.

 

“Creditor Group Collateral” means the
Security Agreement Collateral, the Additional Collateral Trust Agreement
Collateral and the BVI Collateral.

 

“Creditors’ Portion” means, in respect of
any Net Cash Proceeds from (i) Covered Asset Sales or (ii) Debt permitted by
Section 5.07(a)(ix) or Section 5.07(b)(iv), in each case referred to in clause
(ii) relating to a bridge financing of any Covered Asset Sale (the “Bridge Debt”), the following:

 

(x)                                   with
respect to the first $375,000,000 of Net Cash Proceeds from Covered Asset Sales
and/or Bridge Debt received after the Effective Date, 80% of such Net Cash
Proceeds from Covered Asset Sales and/or Bridge Debt;

 

(y)                                 with
respect to all other Net Cash Proceeds from Covered Asset Sales and/or Bridge
Debt received after the Effective Date (after giving effect to the Net Cash
Proceeds from Covered Asset Sales and/or Bridge Debt described in clause (x)),
(A) 60% of such Net Cash Proceeds from Covered Asset Sales and/or Bridge Debt,
at any time that the Recourse Debt to Cash Flow Ratio is greater to or equal to
5.0:1.0 or (B) 50% of such Net Cash Proceeds from Covered Asset Sales and/or
Bridge Debt, at any time that the Recourse Debt to Cash Flow Ratio is less than
5.0:1.0.

 

“Debt”  of
any Person means at any date, without duplication, (i) all Obligations of
such Person for borrowed money; (ii) all Obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments;
(iii) all Obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all Obligations of such Person as lessee which
are capitalized in accordance with generally accepted accounting principles;
(v) all Obligations (whether contingent or non-contingent) of such Person
to reimburse any bank or other Person in respect of amounts paid under a letter
of credit, surety or performance bond or similar instrument; (vi) all Debt
secured by a Lien on any asset of such Person, whether or not such Debt is otherwise
an obligation of such Person; (vii) all Debt of others Guaranteed by such
Person and (viii) all Redeemable Stock of such Person valued at the greater of
its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends.  For purposes hereof,
contingent obligations of the type described in clause (v) of this
definition with respect to letters of credit not issued hereunder shall not be
treated as “Debt” hereunder to the extent that such obligations are cash

 

9

 

collateralized or to the
extent that the issuer of any such letter of credit is entitled to draw under a
Revolving Letter of Credit issued hereunder which by its terms requires that
Revolving L/C Drawings under such letter of credit be applied only to reimburse
such issuer for amounts paid by such issuer under such letter of credit.  The obligations of the Borrower under any
Capital Commitment or under any agreement, in the form of indemnity or
contingent equity contribution agreement or otherwise, pursuant to which the
Borrower agrees to protect any Person, in whole or in part, from tax
liabilities, environmental liabilities, political risks, including currency
convertibility and transferability risk and changes in law, or construction
cost overruns shall not constitute Debt.

 

“Debt Exchange Equity Issuance” means an
Equity Issuance by the Borrower in exchange for any Debt of the Borrower
permitted by Section 5.07(a)(ii) (“Equity
Exchanged Debt”), provided
that (a) in no event shall the Equity Interests issued in respect of such
Equity Issuance be Redeemable Stock and (b) such Equity Interests shall, by
their terms, not require the payment of any cash dividend or any other cash
payment during any calendar year on or prior to the Term Loan Termination Date
that is greater than the interest payable in cash that would have been payable
on the Equity Exchanged Debt during such calendar year to any holder thereof.

 

“Default”  means
any condition or event which constitutes an Event of Default or which with the
giving of notice or lapse of time or both would, unless cured or waived, become
an Event of Default.

 

“Derivatives Obligations” of any
Person means all obligations of such Person in respect of any rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond
option, interest rate option, foreign exchange transaction, cap transaction,
floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.  For purposes of determining the aggregate
amount of Derivative Obligations on any date or the Recourse Debt to Cash Flow
Ratio on any date, the Derivative Obligations of the applicable Person in
respect of any Hedging Agreement shall be the maximum aggregate amount (after
giving effect to any netting agreements to the extent such netting agreements
are with the same Person to whom any such Derivative Obligations are owed or
with Affiliates of such Person) that the applicable Person would be required to
pay if such Hedging Agreement were terminated at such time.

 

“Direct Exposure” has the meaning set forth
in Section 2.14(c).

 

“Disclosed Matters” means
matters disclosed in any SEC Filings made prior to July 18, 2003 or in
written materials sent by or on behalf of the Borrower to all of the Bank
Parties prior to July 18, 2003.

 

“Dollar Equivalent” means, on any
date of determination with respect to any Alternative Currency Letter of
Credit, (i) in calculating the maximum aggregate amount available to be
drawn under such Alternative Currency Letter of Credit at any time on or after
such date, the amount thereof in Dollars most recently reported to the Agent
pursuant to Section 2.15 in calculating the amount of any Revolving L/C
Drawing under such Alternative

 

10

 

Currency Letter of
Credit, the aggregate amount of Dollars paid by the relevant Revolving Fronting
Bank to purchase the Alternative Currency paid by such Revolving Fronting Bank
in respect of such Revolving L/C Drawing.

 

“Dollars” has the meaning set forth in
Section 2.16.

 

“Domestic Business Day” means any day
except a Saturday, Sunday or other day on which commercial banks in New York
City are authorized by law to close.

 

“Domestic Lending Office”  means, as to each Bank Party, its
office located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank Party may hereafter designate as its Domestic
Lending Office by notice to the Borrower and the Agent.

 

“Effective Date” means the date this
Agreement becomes effective in accordance with Section 10.10.

 

“Environmental Laws”  means any and all federal, state,
local and foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and other governmental restrictions
relating to the environment, the effect of the environment on human health or
to emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including, without limitation,
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.

 

“Equity Basket” means, at any time of
determination, the aggregate amount of Net Cash Proceeds received by the
Borrower after the Effective Date and prior to such time of determination from
Equity Issuances, less the
aggregate amount of such Net Cash Proceeds that were applied to the repayment
of any Debt prior to such time in accordance with the provisions of
Section 5.17(viii).

 

“Equity Credit Preferred Securities”
means, at any date:

 

(i)                                     Debt
of the Borrower (A) that is owed to a Special Purpose Financing Subsidiary of
the Borrower; (B) that is issued in connection with the issuance by such Special
Purpose Financing Subsidiary of Trust Preferred Securities; (C) that is
subordinated in right of payment to other Debt of the Borrower of at least the
types and to at least the extent as was, on the date of issuance thereof, the
Junior Subordinated Debentures issued by AES in connection with the issuance by
AES Trust III of its $3.375 Term Convertible Securities, Series C, on
October 7, 1999 (or otherwise satisfactory to the Agent); (D) as to which,
at such date, AES has the right to defer the payment of all interest for the
period of at least 19 consecutive quarters beginning at such date and
(E) except for the Debt issued in connection with the Existing Trust
Preferred Securities, that does not mature, in whole or in part, and is not
subject to any required repayment or prepayment, any required sinking fund or
similar payment or any repayment or

 

11

 

prepayment or sinking fund or similar payment at the
option of the holder thereof, prior to the fifth anniversary of the Termination
Date; and

 

(ii)                                  Guarantees
by the Borrower of the obligations of the issuer of any Trust Preferred
Securities in respect of such Trust Preferred Securities; and

 

(iii)                               Mandatorily
convertible securities (such as those known as “DECS” (including tax deductible
DECS)) consisting of Debt of the Borrower that is subordinated in right of
payment to other Debt of the Borrower of at least the types and to at least the
extent as was, on the date of issuance thereof, the Junior Subordinated
Debentures issued by the Borrower in connection with the issuance by AES
Trust III of its $3.375 Term Convertible Securities, Series C, on
October 7, 1999, (or otherwise satisfactory to the Agent) and which is
mandatorily convertible into, or redeemable with the proceeds of, Capital Stock
of the Borrower (other than Redeemable Stock).

 

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

 

“Equity
Issuances” means, in respect
of any Person, the issuance or sale of Equity Interests of such Person other
than any such issuance to directors, officers or employees pursuant to employee
benefit plans in the ordinary course of business (including by way of exercise
of stock options).

 

“ERISA”  means
the Employee Retirement Income Security Act of 1974, as amended, or any
successor statute.

 

“ERISA Group”  means the Borrower, its Subsidiaries and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or any
of its Subsidiaries, are treated as a single employer under Section 414 of
the Internal Revenue Code.

 

“Euro-Dollar
Borrowing” has the meaning
set forth in the definition of “Borrowing” herein.

 

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

 

“Euro-Dollar Lending Office” means,
as to each Bank Party, its office, branch or affiliate located at its address
set forth in its Administrative Questionnaire (or identified in its

 

12

 

Administrative
Questionnaire as its Euro-Dollar Lending Office) or such other office, branch
or affiliate of such Bank Party as it may hereafter designate as its
Euro-Dollar Lending Office by notice to the Borrower and the Agent.

 

“Euro-Dollar Loan” means a Loan which
bears interest at the Adjusted London Interbank Offered Rate pursuant to the
applicable Notice of Borrowing or Notice of Interest Rate Election plus the Euro-Dollar Margin.

 

“Euro-Dollar Margin” means a rate per annum
equal to 4.00%.

 

“Euro-Dollar Reserve Percentage”
means for any day that percentage (expressed as a decimal) which is in effect
on such day, as prescribed by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve requirement for a
member bank of the Federal Reserve System in New York City with deposits
exceeding five billion dollars in respect of “Eurocurrency liabilities” (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Euro-Dollar Loans is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents).  The Adjusted London Interbank Offered Rate
shall be adjusted automatically on and as of the effective date of any change
in the Euro-Dollar Reserve Percentage.

 

“Event of Default” has the meaning
set forth in Section 6.01.

 

“Excess Revolving L/C Collateral” has the
meaning set forth in Section 2.14(d).

 

“Exchange Note Holders” means the holders of
the Senior Secured Exchange Notes.

 

“Excluded AES Business” means the Drax Power
Supply Business located in the United Kingdom and any AES Business located in
Brazil or Argentina.

 

“Excluded AES Entity” means any Person set
forth on Schedule IV, as such Schedule IV may be updated pursuant to Section
5.01(l)(2) whose assets consist only of any of an Excluded AES Business and
direct or indirect Investments therein.

 

“Existing
Agent” has the meaning set
forth in the first preliminary statement hereto.

 

“Existing
Bank Credit Agreement” has
the meaning set forth in the first preliminary statement hereto.

 

“Existing Collateral Agent” has the meaning
set forth in the first preliminary statement hereto.

 

“Existing Letter of Credit”  means a  “Letter of Credit”  (as defined in the Existing Bank Credit Agreement) issued
under the Existing Revolving Credit Facility that is outstanding on the
Effective Date and listed on Appendix III under the heading “Existing Revolving Letters of Credit”.

 

13

 

“Existing Trust Preferred Securities”  means (i) the $3.375 Trust
Preferred Securities, Series C issued by AES Trust III on October 7, 1999
and (ii) the $3.00 Trust Convertible Preferred Securities issued by AES
Trust VII on May 17, 2000.

 

“Extension of Credit”  means (i) a Borrowing pursuant
to Section 2.01 or (ii) the issuance of a Revolving Letter of Credit
pursuant to Section 2.03.

 

“Facilities” means the Revolving Credit Loan
Facility and the Term Loan Facility.

 

“Federal Funds Rate”  means, for any day, the rate per
annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day; provided
that (i) if such day is not a Domestic Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Domestic Business Day as so published on the next succeeding Domestic Business
Day and (ii) if no such rate is so published on such next succeeding
Domestic Business Day, the Federal Funds Rate for such day shall be the average
rate quoted to Citicorp USA, Inc. on such day on such transactions as determined
by the Agent.

 

“Financing Documents”  means this Agreement, the
Collateral Documents and the Notes.

 

“Financing Parties” means (i) the Bank
Parties hereunder and (ii) Exchange Note Holders.

 

“First Priority Secured Debt” means Debt of
the Borrower secured by a first-priority lien on the Creditor Group Collateral
(subject to the limitations set forth in Section 5.10(p)), provided that Debt owed to an Affiliate of
the Borrower shall not be First-Priority Secured Debt.

 

“Foreign Subsidiary” means a Pledged
Subsidiary or a Subsidiary of a Pledged Subsidiary (other than an Excluded AES
Entity) organized under the laws of a jurisdiction other than the United States
or any State thereof.

 

“Form 10-K” means the Borrower’s annual
report on Form 10-K for the year ended December 31, 2002, as filed with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934.

 

“Form 10-Q” means the Borrower’s quarterly
report on Form 10-Q for the quarter ended March 31, 2003, as filed with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934.

 

“GAAP” has the meaning set forth in Section
1.02.

 

“Group of Loans”  means, at any time, a group of Loans consisting of
(i) all Loans which are Base Rate Loans at such time or (ii) all
Euro-Dollar Loans having the same

 

14

 

Interest Period at such
time; provided that if a Loan of
any particular Bank is converted to or made as a Base Rate Loan pursuant to
Article 8, such Loan shall be included in the same Group or Groups of
Loans from time to time as it would have been in if it had not been so
converted or made.

 

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

 

“Guaranteed Obligations” has
the meaning set forth in Section 9.01.

 

“Hazardous Substances” means any toxic,
radioactive, caustic or otherwise hazardous substance, including petroleum, its
derivatives, by-products and other hydrocarbons, or any substance having any
constituent elements displaying any of the foregoing characteristics.

 

“Hedge Agreement” means any contract,
instrument or agreement in respect of Derivative Obligations.

 

“Hedge Bank” means any Bank Party or an
Affiliate of a Bank Party in its capacity as a party to a Secured Hedge
Agreement.

 

“Indemnitee”  has the meaning set forth in Section 10.03(b).

 

“Interest Period”  means, with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the applicable Notice
of Borrowing or on the date specified in an applicable Notice of Interest Rate
Election and ending one, two, three, six or, with the consent of all affected
Banks, nine or twelve months thereafter, as the Borrower may elect in such
notice; provided that:

 

(i)                                     any
Interest Period which would otherwise end on a day which is not a Euro-Dollar
Business Day shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Euro-Dollar Business
Day;

 

(ii)                                  any
Interest Period which begins on the last Euro-Dollar Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall, subject to clause (iii) below,
end on the last Euro-Dollar Business Day of a calendar month; and

 

15

 

(iii)                               any Interest Period that
would otherwise end after the Termination Date shall end on the Termination
Date.

 

“Intermediate
Holding Companies” has the
meaning set forth in Section 5.16(b).

 

“Internal Revenue Code”  means the Internal Revenue Code of
1986, as amended, or any successor statute.

 

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

 

“IPALCO” means Ipalco Enterprises, Inc., an
Indiana corporation.

 

“Lake Worth Letter of Credit” has the
meaning set forth in the Collateral Trust Agreement.

 

“Lender Parties” has the meaning set forth
in the Collateral Trust Agreement.

 

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

 

“Loan” means a Revolving Credit Loan
or a Term Loan, each of which may be a Base Rate Loan or a Euro-Dollar Loan and
“Loans” means Revolving Credit
Loans or Term Loans, each of which may be Base Rate Loans or Euro-Dollar Loans
or any combination of the foregoing.

 

“Loan Party” means each Obligor and AES BVI
II.

 

“London Interbank Offered Rate”  means, for any Interest Period, the
average (rounded upward, if necessary, to the next higher 1/16th of 1%) of the
respective rates per annum at which deposits in dollars are offered to each of
the Reference Banks in the London interbank market at approximately 11:00 A.M.
(London time) two business days before the first day of such Interest Period in
an amount approximately equal to the principal amount of the Euro-Dollar Loan
of such Reference Bank to which such Interest Period is to apply and for a
period of time comparable to such Interest Period.

 

“Material Adverse Effect”
means a material adverse effect on (a) the business, consolidated results of
operations, consolidated financial condition or prospects of the Borrower and
its Subsidiaries taken as a whole, (b) the ability of the Loan Parties to
perform their material obligations under any Financing Document or (c) the
rights of and remedies available to any Bank Party under any Financing Document.

 

16

 

“Material AES Entity”  means (i) any Subsidiary
Guarantor and (ii) any other Person in which the Borrower has a direct or
indirect equity Investment if such Person’s contribution to Parent Operating
Cash Flow for the four most recently completed fiscal quarters of the Borrower
constitutes 15% or more of Parent Operating Cash Flow for such period.

 

“Material Debt”  means, with respect to any Person, Debt (other than
the Loans and the Reimbursement Obligations) of such Person arising in one
transaction, in an aggregate principal amount exceeding $50,000,000.

 

“Material
Hedge Agreement” means, with
respect to any Person, a Hedge Agreement entered into by such Person in respect
of which the Derivative Obligations of such Person exceed $50,000,000.

 

“Material Obligation” means any obligation
or liability in an amount equal to or in excess of $50,000,000.

 

“Material Plan”  means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $50,000,000.

 

“Maximum
Outstanding Exposure” has
the meaning set forth in Section 2.15.

 

“Minimum CP Rating”  means (i) A-1 for
Standard & Poor’s Ratings Services; (ii) P-1 for Moody’s
Investors Service, Inc.; (iii) F-1 for Fitch IBCA, Inc. and (iv) D-1 for
Duff & Phelps Credit Rating Co.

 

“Minimum
Liquidity Level” means, as
of any date, an amount equal to (i) the aggregate amount of cash and Temporary
Cash Investments of the Borrower on such date and (ii) the aggregate amount of
the Unused Revolving Credit Loan Commitments on such date.

 

“Multiemployer Plan”  means at any time an employee
pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to
which any member of the ERISA Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.

 

“Net Cash Proceeds”:  (A) with respect to an Equity Issuance by a
Subsidiary or the incurrence of Debt (a “Covered
Transaction”), means the aggregate amount of cash received from time
to time (whether as initial consideration or through payment or disposition of
deferred consideration) by the Borrower and its Subsidiaries from such Covered
Transaction after deducting therefrom (without duplication) (i) brokerage
commissions, underwriting fees and discounts, legal fees, finder’s fees and
other similar fees and commissions, (ii) in the case of a Covered Transaction
in the form of incurrence of Debt by a Subsidiary, the amount of any Debt of
such Subsidiary that, by the terms of the agreement or instrument governing
such Debt or applicable law, is required to be repaid or prepaid and is
actually so repaid or prepaid with all or a portion of the proceeds of such
Covered Transaction and (iii) any portion of the proceeds of such Covered
Transaction required to prepay or collateralize interest or dividends payable
in respect of such Covered Transaction during one six-month period; and

 

17

 

(B)                                with
respect to any Asset Sale, means cash payments received (including any cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received (including
any cash received upon sale or disposition of such note or receivable),
excluding any other consideration received in the form of assumption by the
acquiring Person of Debt or other obligations relating to the property disposed
of in such Asset Sale or received in any other noncash form) therefrom, in each
case, net of:

 

(i)                                     all
legal, title and recording tax expenses, commissions and other customary fees
and expenses incurred (including, without limitation, consent and waiver fees
and any applicable premiums, earn-out or working interest payments or payments
in lieu or in termination thereof), and all federal, state, provincial, foreign
and local taxes payable to the relevant tax authority (x) as a direct
consequence of such Asset Sale, (y) as a result of the required repayment of
any Debt in any jurisdiction other than the jurisdiction where the property
disposed of was located or (z) as a result of any repatriation to the U.S. of
any proceeds of such Asset Sale,

 

(ii)                                  a
reasonable reserve (which reserve if required by the applicable sale agreement,
shall be deposited into a third party escrow account with an escrow agent and
shall be maintained in such account until such time as the applicable
indemnification obligation expires or the amounts on deposit are required to
make indemnification payments) for any indemnification payments (fixed and
contingent) attributable to seller’s indemnities to the purchaser undertaken by
the Borrower or any of its Subsidiaries in connection with such Asset Sale (but
excluding any payments, which by the terms of the indemnities will not, under
any circumstances, be made prior to the Termination Date); provided that any amounts in such reserve
to the extent not paid to the purchaser as an indemnification payment after the
expiration of any applicable time period set forth in the agreements in respect
of such Asset Sale shall be treated as “Net Cash Proceeds” for all purposes of
this Agreement,

 

(iii)                               all
payments made on any Debt which must by its terms or by applicable law be
repaid out of the proceeds from such Asset Sale, and

 

(iv)                              all
required distributions and other required payments made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Sale;

 

provided that for purposes of determining
Net Cash Proceeds received by a Subsidiary required to be applied pursuant to
Section 2.10, only that portion of such Net Cash Proceeds received by the
Borrower or a Qualified Holding Company whose Equity Interests have been
pledged to the Secured Holders pursuant to the Collateral Documents from such
Subsidiary in accordance with Section 5.18 shall be included.

 

“Non-Pledged Subsidiaries” means (i) as of
the Closing Date, each of the direct Subsidiaries of the Borrower or of AES BVI
II listed on Schedule III or (ii) after the Closing Date, in addition to the
“Non-Pledged Subsidiaries” set forth on Schedule III, any newly formed or
acquired direct (1) Subsidiary of the Borrower whose aggregate assets have
a fair market value not in excess of $3,000,000 and, together with the fair
market value of the assets of all

 

18

 

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.

 

“Note” means a Revolving Credit Loan
Note or, a Term Loan Note.

 

“Notice of Borrowing”  has the meaning set forth in
Section 2.02.

 

“Notice of Interest Rate Election”
has the meaning set forth in Section 2.07(a).

 

“Notice of Issuance” has the meaning
set forth in Section 2.03(d).

 

“Obligation” means, with respect to any
Person, any payment, performance or other obligation of such Person of any
kind, including, without limitation, any liability of such Person on any claim,
whether or not the right of any creditor to payment in respect of such claim is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured or unsecured, and whether or
not such claim is discharged, stayed or otherwise affected by any proceeding
referred to in Section 6.01(g) or (h). 
Without limiting the generality of the foregoing, the Obligations of the
Borrower and the Subsidiary Guarantors under the Loan Documents include
(a) the obligation to pay principal, interest, Revolving Letter of Credit
commissions, charges, expenses, fees, attorneys’ fees and disbursements,
indemnities and other amounts payable by the Borrower and such Subsidiary
Guarantor under any Financing Document and (b) the obligation of the
Borrower and such Subsidiary Guarantor to reimburse any amount in respect of
any of the foregoing that any Bank Party, in its sole discretion, may elect to
pay or advance on behalf of the Borrower and such Subsidiary Guarantor.

 

“Obligors”means the Borrower and the Subsidiary Guarantors.

 

“Off Balance Sheet Obligation” means, with
respect to any Person, any Obligation of such Person under a synthetic lease,
tax retention operating lease, off-balance sheet loan or similar off-balance sheet
financing classified as an operating lease in accordance with GAAP, if such
Obligations would give rise to a claim against such Person in a proceeding
referred to in Section 6.01(h).

 

“Other Taxes” has the meaning set forth in
Section 8.04(b).

 

“Parent”  means,
with respect to any Bank Party, any Person controlling such Bank Party.

 

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

 

(A)                              dividends
paid to the Borrower by its Subsidiaries during such period;

 

19

 

(B)                                consulting
and management fees paid to the Borrower for such period;

 

(C)                                tax
sharing payments made to the Borrower during such period;

 

(D)                               interest
and other distributions paid during such period with respect to cash and other
Temporary Cash Investments of the Borrower (other than with respect to amounts
on deposit in the Revolving L/C Cash Collateral Account); and

 

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

 

For purposes of
determining Parent Operating Cash Flow:

 

(1)                                  net
cash payments received by a Qualified Holding Company whose Equity Interests
have been pledged to the Secured Holders pursuant to the Collateral Documents
during any period which could have been (without regard for any cash held by
such Qualified Holding Company at the beginning of such period), but were not,
paid as a dividend to the Borrower during such period due to tax or other cash
management considerations may be included in Parent Operating Cash Flow for
such period; provided that any
amounts so included will not be included in Parent Operating Cash Flow if and
when paid to a Borrower in any subsequent period; and

 

(2)                                  Net
Cash Proceeds from Asset Sales, Equity Issuances or the incurrence of Debt (but
only to the extent that the Net Cash Proceeds from such incurrence of Debt are
paid to the Borrower or a Qualified Holding Company as a return of capital)
shall not be included in Parent Operating Cash Flow for any period.

 

“Participant”  has the meaning set forth in
Section 10.06(b).

 

“Payment Restriction” means any provision in
any agreement limiting the ability of any of the Borrower’s Subsidiaries to
declare or pay dividends or other distributions in respect of its Equity
Interests or repay or prepay any Debt owed to, make loans or advances to, or
otherwise transfer assets to or invest in, the Borrower or any Subsidiary of
the Borrower (whether through a covenant restricting dividends, loans, asset
transfers or investments, a financial covenant or otherwise).

 

“PBGC”  means
the Pension Benefit Guaranty Corporation or any entity succeeding to any or all
of its functions under ERISA.

 

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

 

“Plan”  means
at any time an employee pension benefit plan (other than a Multiemployer Plan)
which is covered by Title IV of ERISA or subject to the minimum funding

 

20

 

standards under
Section 412 of the Internal Revenue Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees
of any member of the ERISA Group or (ii) has at any time within the
preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.

 

“Pledged Debt” shall have the meaning specified in the
Security Agreement.

 

“Pledged
Subsidiary” means a direct
Subsidiary of the Borrower or AES BVI II listed on Schedule I hereto,
whose Equity Interests have been pledged to the Collateral Trustees for the
benefit of the Secured Holders by the Borrower or AES BVI II, as applicable,
pursuant to the Security Agreement or the BVI Cayman Pledge Agreement.

 

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

 

“PUHCA” has the meaning set forth in Section 4.12.

 

“Qualified Holding Company”  means any Wholly-Owned Consolidated
Subsidiary of the Borrower that satisfies, and all of whose direct or indirect
holding companies (other than the Borrower) are Wholly-Owned Consolidated
Subsidiaries of AES that satisfy, the following conditions:

 

(i)                                     its
direct and indirect interest in any AES Business shall be limited to the
ownership of Capital Stock or Debt obligations of a Person with a direct or
indirect interest in such AES Business;

 

(ii)                                  except
as a result of the Financing Documents (and permitted refinancings thereof), no
consensual encumbrance or restriction of any kind shall exist on its ability to
make payments, distributions, loans, advances or transfers to the Borrower;

 

(iii)                               it
shall not have outstanding any Debt other than Guarantees of Debt under, or
Liens constituting Debt under, the Financing Documents (and permitted
refinancings thereof) and Debt to the Borrower or to other Qualified Holding
Companies (other than AES BVI II);

 

(iv)                              it
shall engage in no business or other activity, shall enter into no binding
agreements and shall incur no obligations (other than agreements with, and
obligations to, the Borrower or other Qualified Holding Companies (other than
AES BVI II)) other than (A) the holding of the Capital Stock and Debt
obligations permitted under clause (i) above, including entering into
retention agreements and subordination agreements relating to such Capital
Stock and Debt, (B) the holding of cash received from its Subsidiaries and the
investment thereof in Temporary Cash Investments, (C) the payment of dividends
and other amounts to the Borrower, (D) ordinary business development 

 

21

 

activities, (E) the making (but not the entering
into binding obligations to make) of Investments in AES Businesses owned by its
Subsidiaries and (F) in the case of AES Electric, the making of Investments in
Power Supply Business owned by NIGEN Limited and Medway Power Limited or the
repayment of up to GBP10,000,000 owed to AES Barry as of the date of this
Agreement under any agreement by which it is bound as of the date of this
Agreement; and

 

(v)                                 is
listed on Schedule V hereto (as supplemented from time to time by written
notice to the Agent by the Borrower).

 

“Quarterly Payment Date”  means each March 31,
June 30, September 30 and December 31.

 

“Recourse Debt” means, on any date,
the sum of (i) Debt of the Borrower (other than Equity Credit Preferred
Securities) plus (ii) Derivative Obligations of the Borrower.

 

“Recourse Debt to Cash Flow Ratio”  means, for any period, the ratio
of:

 

(i)                                     the
sum of the Recourse Debt as of the end of such period to;

 

(ii)                                  the
Adjusted Parent Operating Cash Flow during such period.

 

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

 

“Reference Banks”  means the respective principal London offices of
Citicorp USA, Inc., Bank of America, N.A. and Union Bank of California, N.A.
and “Reference Bank” means any one of such Reference
Banks.

 

“Refunding Borrowing”  means a Borrowing which, after
application of the proceeds thereof, results in no net increase in the Total
Outstandings of any Revolving Credit Loan Bank.

 

“Register” has the meaning set forth
in Section 10.06(f).

 

“Regulation U” means
Regulation U of the Board of Governors of the Federal Reserve System, as
in effect from time to time.

 

22

 

“Reimbursement Obligations”  means at any date the obligations
then outstanding of the Borrower under Section 2.03(f) to reimburse the
Revolving Fronting Banks for Revolving L/C Drawings under Revolving Letters of
Credit.

 

“Related Fund” means with respect to any
Bank Party that is a fund that invests in bank loans, any other fund that
invests in commercial loans and is managed or advised by the same investment
advisor as such Bank party or by an Affiliate of such investment advisor.

 

“Relevant Contingent Exposure” has the
meaning set forth in Section 2.14(c).

 

“Required Banks” means, at any time, Bank
Parties owed or holding at least a majority in interest of the aggregate
principal amount (based in the case of any Revolving Letter of Credit
denominated in an Alternative Currency other than Dollars, on the Dollar
Equivalent at such time) of the sum of (a) the aggregate principal amount of
the Loans outstanding at such time, (b) the aggregate Revolving Letter of
Credit Liabilities outstanding at such time and (c) the aggregate Unused
Revolving Credit Loan Commitments at such time.

 

“Required Revolving Credit Loan Banks” means
at any time the Revolving Credit Loan Banks having at least a majority of the aggregate
Total Exposures at such time.

 

“Responsible Officer” means any duly
authorized officer of the Borrower or any of its Subsidiaries.

 

“Revolving Credit Loan” has the
meaning set forth in Section 2.01(a).

 

“Revolving Credit Loan Bank” means each Bank
having a Revolving Credit Loan Commitment.

 

“Revolving Credit Loan Commitment” means, at
any time, with respect to any Revolving Credit Loan Bank at any time, the
amount set forth opposite such Bank’s name on Appendix I hereto under the
caption “Revolving Credit Loan Commitment” or, if such Bank has entered into
one or more Assignment and Assumptions, the amount set forth for such Bank in
the Register maintained by the Agent pursuant to Section 10.06(g) as such
Bank’s “Revolving Credit Loan Commitment”, as such amount may be reduced at or
prior to such time pursuant to Sections 2.09 or 2.10.

 

“Revolving Credit Loan Facility” means, at
any time, the aggregate amount of the Revolving Credit Loan Banks’ Revolving
Credit Loan Commitments.

 

“Revolving Credit Loan Note” means a
promissory note of the Borrower to the order of any Revolving Credit Loan Bank,
in substantially the form of Exhibit A-1 hereto, evidencing the indebtedness of
the Borrower to such Bank resulting from the Revolving Credit Loans made or
deemed to have been made by such Lender.

 

“Revolving Credit Loan/Term Loan Obligations”
shall have the meaning set forth in Section 9.01(a).

 

23

 

“Revolving Credit Period”  means the period from and including
the Effective Date to but excluding the Termination Date.

 

“Revolving Fronting Bank” means (i) with
respect to each Existing Letter of Credit deemed to have been issued pursuant
to the second sentence of Section 2.03(a), each Bank listed as issuer thereof
on Appendix III hereto, as the case may be, (ii) any Revolving Credit Loan Bank
and/or (ii) any Third Party Fronting Bank which has executed and delivered to
the Agent a Third Party Fronting Bank Agreement pursuant to Section 10.15.

 

“Revolving
L/C Cash Collateral Account”  has
the meaning set forth in Section 2.14(a).

 

“Revolving L/C Drawing”  means
a drawing effected under any Revolving Letter of Credit.

 

“Revolving Letter of Credit” means a letter of credit issued by a
Revolving Fronting Bank pursuant to Section 2.03(a) and shall also include
each Existing Letter of Credit.

 

“Revolving Letter of Credit Commission Rate”  means
a rate per annum equal to 4.00%.

 

“Revolving Letter of Credit Liabilities”  means,
at any time and in respect of any Revolving Letter of Credit, the sum, without
duplication, of (i) the Available Amount of such Revolving Letter of
Credit plus (ii) the
aggregate unpaid amount of all Reimbursement Obligations in respect of previous
Revolving L/C Drawings made under such Revolving Letter of Credit.

 

“Revolving Letter of Credit Termination Date”
has the meaning set forth in Section 2.03(h)(i).

 

“SEC Filings”
means public filings made by the Borrower with the Securities and Exchange
Commission on Form 8-K, Form 10-Q or Form 10-K, and any filed amendments to any
of the foregoing.

 

“Second-Priority Secured Debt” means
(i) the Borrower’s 83⁄4% Second Priority Senior Secured Notes due 2013,
(ii) the Borrower’s 9% Second Priority Notes due 2015 and (iii) Debt
of the Borrower that is secured by a Lien on the Creditor Group Collateral that
is pari passu with the Lien
securing the Notes described in clauses (i) or (ii) (or permitted refinancings
thereof).

 

“Secured Hedge Agreement” means any Hedge
Agreement permitted under Article V that is entered into by and between the
Borrower and any Hedge Bank.

 

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

 

“Secured Obligations” has the meaning
specified in the Collateral Trust Agreement.

 

24

 

“Secured Treasury Management Service Agreements”
means any agreement between the Borrower or any of its Subsidiaries and a Bank
Party or an Affiliate of a Bank Party to provide treasury management services
to the Borrower.

 

“Security Agreement” means the Security
Agreement dated as of December 12, 2002 made by the grantors thereunder in
favor of the Collateral Trustees, as amended from time to time.

 

“Security Agreement Collateral” means the
“Collateral” referred to in the Security Agreement.

 

“Senior Secured
Exchange Notes” means the
10% Exchange Notes due December 15, 2005 issued by the Borrower pursuant
to the Senior Secured Exchange Note Indenture and any other Debt issued by the
Borrower under the Senior Secured Exchange Note Indenture.

 

“Senior Secured Exchange Note Indenture”
means that certain Indenture between the Borrower and Wells Fargo Bank
Minnesota, National Association, as Trustee to be dated as of December 13,
2002.

 

“Senior Subordinated Notes” means the 8.375%
Senior Subordinated Notes due August 2007 and the 8.50% Senior
Subordinated Notes due November 2007 issued by the Borrower pursuant to
the Senior Subordinated Notes Indentures.

 

“Senior Subordinated Notes Indentures” means
(i) that certain
indenture between the Borrower and The Bank of New York, as Trustee dated as of
July 17, 1997 and (ii) that certain indenture between the Borrower and
Wells Fargo Bank Minnesota, National Association (successor to The First
National Bank of Chicago), as Trustee dated as of October 29, 1997.

 

“Shared
Collateral Documents” means
the Security Agreement, the Collateral Trust Agreement, the BVI Cayman Pledge
Agreement and any other agreement that creates or purports to create a Lien in
favor of the Collateral Trustees for the Lender Parties.

 

“Significant AES Entity” means
(i) any Material AES Entity, (ii) AES BVI II and (iii) any other
Person (other than any Excluded AES Entity) in which the Borrower has a direct
or indirect equity Investment if (A) such Person’s contribution to Parent
Operating Cash Flow for the four most recently completed fiscal quarters of the
Borrower constitutes 10% or more of Parent Operating Cash Flow for such period,
or (B) on any date of determination, the Borrower’s direct or indirect
interest in the total assets of such Person if such Person is a Consolidated
Subsidiary or in the net assets of such Person in all other cases is at least
equal to 10% of the consolidated assets of the Borrower and its Consolidated
Subsidiaries, taken as a whole, on such date of determination.

 

“Solvent” and “Solvency” mean, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person
is greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (b) the present fair salable value
of the assets of such Person is not less than the amount that will be required
to

 

25

 

pay the probable
liability of such Person on its debts as they become absolute and matured,
(c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person’s ability to pay such debts and
liabilities as they mature and (d) such Person is not engaged in business
or a transaction, and is not about to engage in business or a transaction, for
which such Person’s property would constitute an unreasonably small
capital.  The amount of contingent
liabilities at any time shall be computed as the amount that, in the light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.

 

“Special Purpose Financing Subsidiary”
means a Consolidated Subsidiary that has no direct or indirect interest in a Power
Supply Business or other AES Business and was formed solely for the purpose of
issuing Equity Credit Preferred Securities.

 

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

 

“Subsidiary Guarantors”  means AES Oklahoma, AES Hawaii
Management, AES Warrior Run and AES New York.

 

“Subsidiary Guaranty”  has the meaning set forth in
Section 9.01.

 

“Sul Guarantee” means the Guaranty in the
Sponsor Agreement dated as of March 7, 2001 between the Borrower and
BankBoston, N.A. Nassau Branch, as agent (“BankBoston”)
for the lenders under the Sul Credit Agreement referred to below by the
Borrower to Guarantee the obligations of AES Cayman Guaiba, Ltd., a Cayman
Islands corporation (the “Sul Borrower”)
under the Credit Agreement dated
as of March 6, 2001 (the “Sul Credit
Agreement”), with BankBoston, Banc of America Securities, LLC,
Unibanco – Uniao de Bancos Brasilieros S.A. and Westdeutsche Landesbank
Girozentrale, New York Branch, and the lenders named therein (as the same may
be amended or amended and restated from time to time) in an amount of up to a
maximum aggregate amount of $50,000,000.

 

“Supermajority Banks” means, at any time,
Bank Parties owed or holding at least a 66 2/3% interest of the aggregate
principal amount (based in the case of any Revolving Letter of Credit
denominated in an Alternative Currency other than Dollars, on the Dollar
Equivalent at such time) of the sum of (a) the aggregate principal amount of
the Loans outstanding at such time, (b) the aggregate Revolving Letter of
Credit Liabilities outstanding at such time and (c) the aggregate Unused
Revolving Credit Loan Commitments at such time.

 

“Taxes” has the meaning set forth in Section
8.04(a).

 

“Temporary Cash Investment”  means any Investment (having a
maturity of not greater than 60 days from the date of issuance thereof) in
(A)(i) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof;
(ii) commercial paper rated at least the Minimum CP Rating by any two of
Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc., Fitch
IBCA, Inc. and Duff & Phelps Credit Rating Co., provided that one of such two Minimum CP Ratings is by
Standard & Poor’s 

 

26

 

Ratings Services or
Moody’s Investors Service, Inc.; (iii) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any bank or trust company which is organized or licensed under the laws of the
United States or any state thereof and has capital, surplus and undivided
profits aggregating at least $500,000,000; (iv) medium term notes, auction
rate preferred stock, asset backed securities, bonds, notes and letter of
credit supported instruments, issued by any entity organized under the laws of
the United States, or any state or municipality of the United States and rated
in any of the three highest rated categories by Standard & Poor’s Ratings
Services or Moody’s Investors Service, Inc.; (v) repurchase agreements
with respect to securities described in clause (i) above entered into with
an office of a bank or trust company meeting the criteria specified in clause
(iii) above; (vi) Euro-Dollar certificates of deposit issued by any
bank or trust company which has capital and unimpaired surplus of not less than
$500,000,000 or (vii) with respect to a Subsidiary, any category of investment
designated as permissible investments under such Subsidiary’s loan
documentation; provided that in
each case (except clause (vii)) that such Investment matures within fifteen
months from the date of acquisition thereof by the Borrower or a Subsidiary and
(B) registered investment companies that are “money market funds” within the
meaning of Rule 2a-7 under the Investment Company Act of 1940.

 

“Term Loan” has the meaning specified in
Section 2.01(b).

 

“Term Loan Bank” means each Bank having a
Term Loan.

 

“Term Borrowings” means a borrowing
consisting of simultaneous Term Loans of the same type made by the Term Loan
Banks.

 

“Term Loan Commitment” means, with respect
to each Term Loan Bank, the amount set forth opposite its name on Appendix II
hereto or, if such Bank has entered into one or more Assignment and
Assumptions, the amount set forth for such Bank in the Register maintained by
the Agent pursuant to Section 10.06(g).

 

“Term Loan Facility” means, at any
time, the aggregate amount of the Term Loan Banks’ Term Loans at such time.

 

“Term Loan Note” means a promissory note of
the Borrower to the order of any Term Loan Bank, in substantially the form of
Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such Bank
resulting from the Term Loan deemed to have been made by such Lender.

 

“Term Loan Termination Date” has the meaning
set forth in the definition of “Termination Date” herein.

 

“Termination Date”  means July 31, 2007 in the case of the Revolving
Credit Loan Facility and April 30, 2008 in the case of the Term Loan
Facility; provided, however, that if, prior to July 31,
2007, the Senior Subordinated Notes have not been refinanced to mature on a
date after April 30, 2008, or repaid in full prior to such date, then
“Termination Date” in the case of the Term Loan Facility shall mean
July 31, 2007 (the “Term Loan Termination Date”); provided further that if the Termination
Date occurs on a day that is not a Euro-Dollar Business Day, the Termination
Date shall occur on the next succeeding Euro-Dollar Business Day unless

 

27

 

such Euro-Dollar Business
Day falls in another calendar month, in which case the Termination Date shall
be the next preceding Euro-Dollar Business Day.

 

“Third Party
Fronting Bank” means (i) the
Agent, (ii) any Term Loan Bank or any Affiliate of any Term Loan Bank
(A) a majority of whose common equity is owned, directly or indirectly, by such
Term Loan Bank, (B) that owns, directly or indirectly, a majority of the
common equity of such Term Loan Bank or (C) a majority of whose common
equity is owned, directly or indirectly, by a Person that owns, directly or
indirectly, a majority of the common equity of such Term Loan Bank and any
Subsidiary of any Term Loan Bank a majority of whose common equity is owned
directly or indirectly, by such Term Loan Bank, (iii) any commercial bank
having total assets in excess of $5,000,000,000, (iv) any savings and loan
association or savings bank organized under the laws of the United States, or
any State thereof, and having a net worth in excess of $250,000,000 or
(v) any other Person approved by the Agent, that shall, in the case of any such Agent, Term Loan Bank,
Affiliate, Parent, Subsidiary or other financial institution or Person agree to
issue letters of credit hereunder with the consent of the Agent (which consent
will be deemed to have been given unless the Agent shall have notified the
Borrower to the contrary within one day of the Agent’s receipt of notice that
such Bank, Affiliate, Parent, Subsidiary or other financial institution or
Person is to be a Third Party Fronting Bank).

 

“Third Party
Fronting Bank Agreement”
means an agreement, in substantially the form of Exhibit E hereto.

 

“Total Bank Exposure” at any time means the
sum of (i) the aggregate principal amount of the Loans outstanding at such time
plus (ii) the aggregate amount of
the Revolving Letter of Credit Liabilities at such time plus (iii) the aggregate amount of the
Unused Revolving Credit Loan Commitments.

 

“Total Exposure” means at any time
with respect to each Revolving Credit Loan Bank, its Revolving Credit Loan
Commitment or, if the Revolving Credit Loan Commitments shall have terminated,
its Total Outstandings.

 

“Total Outstandings” means at any
time, as to any Revolving Credit Loan Bank, the sum of the aggregate
outstanding principal amount of such Revolving Credit Loan Bank’s Loans and its
participation in the Revolving Letter of Credit Liabilities and all
unreimbursed Revolving L/C Drawings.

 

“Trust Preferred Securities” means,
at any date:

 

(i)                                     any
Existing Trust Preferred Securities, and

 

(ii)                                  any
other equity interests in a Special Purpose Financing Subsidiary of AES (such
as those known as “TECONS”, “MIPS” or “RHINOS”): (I) that are not
(A) required to be redeemed or redeemable at the option of the holder
thereof prior to the fifth anniversary of the Termination Date or (B)
convertible into or exchangeable for (unless solely at the option of AES)
equity interests referred to in clause (A) above or Debt having a scheduled
maturity, or requiring any repayments or prepayments of principal or any
sinking fund or similar payments in respect of principal or providing for

 

28

 

any
such repayment, prepayment, sinking fund or other payment at the option of the
holder thereof prior to the fifth anniversary of the Termination Date and
(II) as to which, at such date, AES has the right to defer the payment of
all dividends and other distributions in respect thereof for the period of at
least 19 consecutive quarters beginning at such date.

 

“Unfunded Liabilities”  means, with respect to any Plan at
any time, the amount (if any) by which (i) the value of all benefit
liabilities under such Plan, determined on a plan termination basis using the
assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA,
exceeds (ii) the fair market value of all Plan assets allocable to such
liabilities under Title IV of ERISA (excluding any accrued but unpaid
contributions), all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of a member of the ERISA Group to the PBGC or any other Person under
Title IV of ERISA.

 

“United States” means the United
States of America, including the States and the District of Columbia, but
excluding its territories and possessions.

 

“Unused Revolving Credit Loan Commitments”
means, with respect to any Revolving Credit Loan Bank at any time, (a) such
Bank’s Revolving Credit Loan Commitment at such time minus (b) the sum of (i) the aggregate principal amount of
all Revolving Credit Loans outstanding at such time and owed to such Revolving
Credit Loan Bank plus (ii) such
Bank’s pro rata share of the Revolving Letter of Credit Liabilities and all
unreimbursed Revolving L/C Drawings at such time.

 

“Wholly-Owned Consolidated Subsidiary”  means
any Consolidated Subsidiary all of the shares of Capital Stock or other
ownership interests of which (except directors’ qualifying shares) are at the
time directly or indirectly owned by AES.

 

Section 1.02  Accounting Terms and Determinations.

 

Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time,
applied on a basis consistent (except for changes concurred in by the
Borrower’s independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks (“GAAP”);
provided that, if the Borrower
notifies the Agent that the Borrower wishes to amend any covenant in
Article 5 to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if the Agent
notifies the Borrower that the Required Banks wish to amend Article 5 for
such purpose), then the Borrower’s compliance with such covenant shall be
determined on the basis of generally accepted accounting principles in effect
immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Borrower and the Required
Banks.

 

29

 

Section 1.03  Types of Borrowing.

 

The term “Borrowing” denotes (a) the aggregation of Loans made (or deemed to
have been made) or to be made to the Borrower by one or more Banks pursuant to
Article 2 on the same day, all of which Loans are of the same type
(subject to Article 8) and, except in the case of Base Rate Loans, have
the same initial Interest Period or (b) if the context so requires, the
borrowing of such Loans.  Borrowings are
classified for purposes hereof by reference to the pricing of Loans comprising
such Borrowing (e.g., a “Euro-Dollar Borrowing” is a Borrowing comprised of
Euro-Dollar Loans).  It is understood
and agreed that all Borrowings will be made in Dollars.

 

Section 1.04  Currency Equivalents Generally.

 

For purposes of this Agreement, the equivalent in any
Alternative Currency of an amount in Dollars shall be determined at the rate of
exchange quoted by the Agent in New York, at 11:00 A.M. (New York time) on the
date of determination, to prime banks in New York for the spot purchase in the
New York foreign exchange market of such amount of Dollars with such
Alternative Currency.

 

ARTICLE II

 

THE CREDITS

 

Section 2.01  Commitment to Lend.

 

(a)                                  Revolving
Credit Facility.  Each Revolving
Credit Loan Bank severally agrees, on the terms and conditions set forth in
this Agreement, to make loans (each a “Revolving
Credit Loan”) to the Borrower pursuant to this Section 2.01(a)
from time to time during the Revolving Credit Period in amounts such that the
Total Outstandings of such Revolving Credit Loan Bank at any time shall not
exceed the amount of its Revolving Credit Loan Commitment at such time.  Each Borrowing under this subsection (a)
shall be in an aggregate principal amount of $5,000,000 or any larger multiple
of $1,000,000 (except for Refunding Borrowings and that any such Borrowing may
be in the aggregate amount available in accordance with Section 3.02(b))
and shall be made from the several Revolving Credit Loan Banks ratably in
proportion to their respective Revolving Credit Loan Commitments.  Within the foregoing limits, the Borrower
may borrow under this Section 2.01(a), repay, or, to the extent permitted by
Section 2.10, prepay Revolving Credit Loans and reborrow at any time
during the Revolving Credit Period.

 

(b)                                 Term
Loan Facility.  Each Term Loan Bank
severally agrees on the terms and conditions set forth in this Agreement to
make a single advance (a “Term Loan”)
to the Borrower on the Effective Date in an amount not to exceed such Term Loan
Bank’s Term Loan Commitment at such time. 
The Term Borrowing shall consist of Term Loans made simultaneously by
the Term Loan Banks ratably according to their Term Loan Commitments.

 

(c)                                  Term
Loan Facilities.  The Term Loans are
not revolving in nature, and amounts repaid or prepaid in respect thereof may
not be reborrowed.

 

30

 

Section 2.02  Notice
of Borrowing.

 

(a)                                  The
Borrower shall give the Agent notice (a “Notice
of Borrowing”) not
later than 11:00 A.M. (New York City time) on (x) the date of each Base Rate
Borrowing and (y) the third Euro-Dollar Business Day before each
Euro-Dollar Borrowing, specifying:

 

(i)                                     the
date of such Borrowing, which shall be a Domestic Business Day in the case of a
Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar
Borrowing;

 

(ii)                                  the
aggregate amount of such Borrowing;

 

(iii)                               whether
the Loans comprising such Borrowing are to bear interest initially at the Base
Rate or the Adjusted London Interbank Offered Rate; and

 

(iv)                              in
the case of a Euro-Dollar Borrowing, the duration of the initial Interest
Period applicable thereto, subject to the provisions of the definition of
“Interest Period.”

 

(b)                                 Upon
receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of
the contents thereof and of such Bank’s ratable share of such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Borrower.

 

(c)                                  Not
later than 2:00 P.M. (New York City time) on the date of each Borrowing, each
Bank shall (except as provided in subsection (d) of this Section 2.02) make
available its ratable share of such Borrowing, in Federal or other funds
immediately available in New York City, to the Agent at its address referred to
in Section 10.01.  Unless the Agent
determines that any applicable condition specified in Article 3 has not
been satisfied, the Agent will make the funds so received from the Banks
available to the Borrower requesting such Borrowing at the Agent’s aforesaid
address.

 

(d)                                 If
any Bank makes a new Loan hereunder to the Borrower on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Bank to
the Agent as provided in subsection (c) of this Section 2.02, or remitted by
the Borrower to the Agent as provided in Section 2.11, as the case may be.

 

(e)                                  Unless
the Agent shall have received notice from a Bank prior to the date of any
Borrowing that such Bank will not make available to the Agent such Bank’s share
of such Borrowing, the Agent may assume that such Bank has made such share
available to the Agent on the date of such Borrowing in accordance with
subsections (c) and (d) of this Section 2.02 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount.  If and to the
extent that such Bank shall not have so made such share available to the Agent,
such Bank and the Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Agent, at (i) in the case of the Borrower, a rate
per annum equal to the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 2.06 and (ii) in the

 

31

 

case of such Bank, the Federal Funds Rate.  If such Bank shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Bank’s Loan included in such
Borrowing for purposes of this Agreement.

 

Section 2.03  Revolving
Letters of Credit.

 

(a)                                  Issuance
of Letters of Credit.  Subject to
the terms and conditions hereof, each Revolving Fronting Bank agrees to issue
letters of credit under this Section 2.03(a) upon the Borrower’s request
and for the Borrower’s account or the account of any of the Borrower’s
Subsidiaries, from time to time during the Revolving Credit Period; provided, however,
that in no event shall (i) the aggregate Available Amount for all Revolving
Letters of Credit exceed the Revolving Credit Loan Facility at such time and
(ii) a Revolving Letter of Credit be issued with an Available Amount in excess
of the Unused Revolving Credit Commitments of the Revolving Credit Loan Banks
at such time.  In addition, and notwithstanding
any reference in any Existing Letter of Credit to the Existing Bank Credit
Agreement, on and as of the Effective Date, each Existing Letter of Credit
shall be deemed to be a Revolving Letter of Credit and to have been issued on
the Effective Date (by the Revolving Fronting Bank that issued or was deemed to
have issued such Existing Letter of Credit under the Existing Bank Credit
Agreement) pursuant to this Section 2.03(a); provided, however,
that nothing in this Section 2.03(a) shall extend, modify or otherwise
affect the existing expiry date under any such Existing Letter of Credit.  Notwithstanding the foregoing, each
Revolving Credit Loan Bank, in its separate capacity as a Revolving Fronting
Bank, shall only be obligated to issue Revolving Letters of Credit having an
aggregate face amount at any time that is equal to the Revolving Credit
Commitment of such Revolving Credit Loan Bank at such time.

 

(b)                                 Participations
in Letters of Credit.  Upon the
issuance (or deemed issuance) of each Revolving Letter of Credit by a Revolving
Fronting Bank pursuant to Section 2.03(a), such Revolving Fronting Bank
shall be deemed, without further action by any party hereto, to have sold to
each Revolving Credit Loan Bank (other than such Revolving Fronting Bank in the
case of Revolving Letters of Credit not issued by a Third Party Fronting Bank)
and each such Revolving Credit Loan Bank shall be deemed, without further
action by any party hereto, to have purchased from such Revolving Fronting Bank
a participation in such Revolving Letter of Credit and the related Revolving
Letter of Credit Liabilities in the amount required so that the participations
of the Revolving Credit Loan Banks (including such Revolving Fronting Bank’s
retained participation in the case of Revolving Letters of Credit not issued by
a Third Party Fronting Bank) therein shall be in proportion to their respective
Revolving Credit Loan Commitments.

 

(c)                                  Required
Terms.  Each Revolving Letter of
Credit issued hereunder shall:

 

(i)                                     by
its terms expire no later than five Domestic Business Days prior to the
Termination Date for the Revolving Credit Loan Facility; except that a Revolving Fronting Bank, at
it sole discretion and without recourse to the Agent or any other Bank Party,
may issue a Revolving Letter of Credit which expires after the Termination Date
for the Revolving Credit Loan Facility, provided
that five Domestic Business Days prior to the Termination Date for the
Revolving Credit Loan Facility, the Borrower shall pay to such issuing Revolving
Fronting Bank an amount in immediately available funds equal to

 

32

 

the Available Amount of such Revolving Letter of
Credit, to be held by such issuing Revolving Fronting Bank as cash collateral;

 

(ii)                                  be
in a face amount of (x) not less than $300,000 (or the equivalent thereof in an
Alternative Currency); provided
that up to five Revolving Letters of Credit may be issued with stated amounts
less than $300,000 (or the equivalent thereof in an Alternative Currency) and
(y) not more than the amount that would, after giving effect to the issuance
thereof (and the related purchase and sale of participations therein pursuant
to Section 2.03(b)) cause the Total Outstandings of any Revolving Credit
Loan Bank to equal its Revolving Credit Loan Commitment; and

 

(iii)                               be
in a form acceptable to the relevant Revolving Fronting Bank.

 

(d)                                 Notice
of Issuance.  Except in the case of
Existing Letters of Credit, the Borrower may request that a Revolving Letter of
Credit be issued by giving the Agent and the Revolving Fronting Banks for such
Revolving Letter of Credit a notice (a “Notice
of Issuance”) at
least two Domestic Business Days before such Revolving Letter of Credit is to
be issued (or such shorter period of time as shall be acceptable to the Agent
and the relevant Revolving Fronting Banks), specifying:

 

(i)                                     the
date of issuance of such Revolving Letter of Credit;

 

(ii)                                  the
expiry date of such Revolving Letter of Credit (which shall comply with the
requirements of Section 2.03(c)(i));

 

(iii)                               the
proposed terms of such Revolving Letter of Credit (or the proposed form thereof
shall be attached to such Notice of Issuance), including the face amount
thereof (which shall comply with the requirements of Section 2.03(c)(ii));

 

(iv)                              the
transaction that is to be supported or financed with such Revolving Letter of
Credit, including identification of the Power Supply Business or other AES
Business, if any, to which such transaction relates and the name of the
proposed account party for such Revolving Letter of Credit (which may be a
Borrower and any subsidiary of the Borrower); and

 

(v)                                 the
identity of the Revolving Fronting Banks for such Revolving Letter of Credit,
which shall comply with the definition of “Revolving Fronting Bank” hereunder.

 

Upon the receipt of a
Notice of Issuance, the Agent shall promptly notify each Revolving Credit Loan
Bank of the contents thereof and of the amount of such Revolving Credit Loan
Bank’s participation in such Revolving Letter of Credit and such Notice of
Issuance shall not thereafter be revocable by the Borrower.

 

(e)                                  Revolving
L/C Drawings under Revolving Letters of Credit.

 

(i)                                     Upon
receipt from the beneficiary of any Revolving Letter of Credit of demand for
payment under such Revolving Letter of Credit, the relevant Revolving

 

33

 

Fronting Bank shall determine in accordance with the
terms of such Revolving Letter of Credit whether such request for payment
should be honored.

 

(ii)                                  If
the relevant Revolving Fronting Bank determines that a demand for payment by
the beneficiary of a Revolving Letter of Credit should be honored, such
Revolving Fronting Bank shall make available to the beneficiary in accordance
with the terms of such Revolving Letter of Credit the amount of the Revolving
L/C Drawing under such Revolving Letter of Credit.  Such Revolving Fronting Bank shall thereupon promptly notify the
Borrower and the Agent of the amount of such Revolving L/C Drawing paid by
it.  Upon receipt by the Agent of such
notice from the relevant Revolving Fronting Bank, the Agent shall promptly
notify each Revolving Credit Loan Bank of the amount of each such Revolving
Credit Loan Bank’s participation therein (which, in the case of any Revolving
L/C Drawing under an Alternative Currency Letter of Credit shall be the Dollar
Equivalent thereof).

 

(f)                                    Reimbursement
and Other Payments by the Borrower.

 

(i)                                     If
any amount is drawn under any Revolving Letter of Credit issued at the request
of or for the account of the Borrower or any Subsidiary of the Borrower, the
Borrower irrevocably and unconditionally agrees to reimburse the applicable
Revolving Fronting Bank in Dollars for all amounts paid by such Revolving
Fronting Bank upon such Revolving L/C Drawing (which, in the case of any
Revolving L/C Drawing under an Alternative Currency Letter of Credit shall be
the Dollar Equivalent thereof), together with any and all reasonable charges
and expenses which any Revolving Credit Loan Bank or Revolving Fronting Bank may
pay or incur relative to such Revolving L/C Drawing and all such amounts due
from the Borrower shall bear interest, payable on the date upon which such
amounts shall be due and payable, on the amount drawn for each day from and
including the date such amount is drawn to but excluding the date such
reimbursement payment is due and payable at a rate per annum equal to the rate
applicable to Base Rate Loans for such day. 
If a Revolving Fronting Bank makes any payment under a Revolving Letter
of Credit, the Borrower shall reimburse such Revolving Fronting Bank by paying
such amount to the relevant Revolving Fronting Bank not later than 12:00 noon
(New York City time) on the day that such payment is made, if the Borrower
receives notice of such payment before 10:00 A.M. (New York City time) on such
day, or if such notice has not been received by the Borrower before such time
on such day, then not later than 12:00 noon (New York City time) on (i) the
Domestic Business Day that the Borrower receives such notice, if such notice is
received before 10:00 A.M. (New York City time) on the day of receipt, or (ii)
the next Domestic Business Day, if such notice is not received before such time
on the day of receipt; provided
that if such payment is at least $1,000,000, the Borrower may, subject to the
conditions to borrowing set forth herein, request in accordance with Section
2.02, that such payment be made with the proceeds of a Base Rate Borrowing
(which shall consist of Revolving Credit Loans) in an equivalent amount and, to
the extent so financed, the Borrower’s obligation to make such payment shall be
discharged and replaced by the resulting Base Rate Borrowing (which shall
consist of Revolving Credit Loans).  Any
overdue reimbursement payment, or overdue interest thereon, shall bear
interest, payable

 

34

 

on demand, for each day until paid at a rate per annum
equal to the sum of the rate applicable to Base Rate Loans for such day plus 2%.

 

(ii)                                  Each
payment to be made by the Borrower pursuant to this Section 2.03(f) shall
be made, in Federal or other funds immediately available, to the applicable
Revolving Fronting Bank at its address referred to in Section 10.01.

 

(iii)                               The
obligations of the Borrower to reimburse any Revolving Fronting Bank under this
Section 2.03(f) shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement,
under all circumstances whatsoever, including without limitation the following
circumstances:

 

(A)                              any
lack of validity or enforceability of any Financing Document;

 

(B)                                any
amendment or waiver of or any consent to departure from any Financing Document
(except, in the case of an effective amendment to, waiver of or consent to a departure
from any provision of this Agreement, to the extent specified herein);

 

(C)                                the
existence of any claim, set-off, defense or other right which the Borrower may
have at any time against the beneficiary of any Revolving Letter of Credit (or
any Person or entity for whom such beneficiary may be acting), the Agent, any
Revolving Fronting Bank or any Revolving Credit Loan Bank or any other Person
or entity, whether in connection with this Agreement, any other Financing
Document or any unrelated transaction;

 

(D)                               any
statement or any other document presented under any Revolving Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever;

 

(E)                                 payment
by a Revolving Fronting Bank under any Revolving Letter of Credit against
presentation of a draft or document which does not comply with the terms of
such Revolving Letter of Credit; or

 

(F)                                 to
the extent permitted under applicable law, any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.

 

(g)                                 Payments
by Revolving Credit Loan Banks with Respect to Revolving Letters of Credit.

 

(i)                                     Each
Revolving Credit Loan Bank shall make available an amount equal to its ratable share
of any Revolving L/C Drawing under a Revolving Letter of Credit, in Federal or
other funds immediately available in New York City, to the applicable Revolving
Fronting Bank by 3:00 P.M. (New York City time) on the date on which the
Borrower is required to reimburse such Revolving Fronting Bank with respect to
such Revolving L/C Drawing pursuant to Section 2.03(f)(i), together with
interest on such

 

35

 

amount for the period from and including the date of
such Revolving L/C Drawing to but excluding the date upon which such amount is
to be made available at the Federal Funds Rate on the date of such Revolving
L/C Drawing, at such Revolving Fronting Bank’s address referred to in
Section 10.01; provided that
each Revolving Credit Loan Bank’s obligation shall be reduced by its pro rata
share of any reimbursement theretofore paid by the Borrower in respect of such
Revolving L/C Drawing pursuant to Section 2.03(f)(i).  The applicable Revolving Fronting Bank shall
notify each Revolving Credit Loan Bank of the amount of such Revolving Credit
Loan Bank’s obligation (which, in the case of any payment under an Alternative
Currency Letter of Credit, shall be the Dollar Equivalent thereof) in respect
of any Revolving L/C Drawing under a Revolving Letter of Credit not later than
1:30 P.M. (New York City time) on the day such payment by such Revolving Credit
Loan Bank is due.  Each Revolving Credit
Loan Bank shall be subrogated to the rights of the applicable Revolving Fronting
Bank against the Borrower to the extent such payment due from such Revolving
Credit Loan Bank to such Revolving Fronting Bank is paid, plus interest
thereon, from and including the day such amount is due from such Revolving
Credit Loan Bank to such Revolving Fronting Bank to but excluding the day the
Borrower makes payment to such Revolving Fronting Bank pursuant to
Section 2.03(f)(i), whether before or after judgment, at a rate per annum
equal to the sum of 2% plus the
rate applicable to Base Rate Loans for such day.  In the event that, on the date of any Revolving L/C Drawing,
(x) Total Outstandings exceeds the Maximum Outstanding Exposure,
(y) the applicable Revolving Fronting Bank is not reimbursed by the
Borrower on such date for the entire amount of such Revolving L/C Drawing, and
(z) the Revolving Credit Loan Banks, pursuant to the last sentence of
subsection (iv) below, are not obligated to reimburse such Revolving Fronting
Bank for the entire amount of such Revolving L/C Drawing, the Agent shall,
solely for purposes of determining the portion of such Revolving L/C Drawing to
be reimbursed by each Revolving Credit Loan Bank, (A) allocate the respective
Revolving Credit Loan Commitments of the Revolving Credit Loan Banks to the
Revolving Letter of Credit Liabilities of each Revolving Letter of Credit on
such date on a pro rata basis (based upon (1) the proportion of the
Revolving Credit Loan Commitments to the aggregate amount of the Revolving
Letter of Credit Liabilities of all outstanding Revolving Letters of Credit and
(2) each Revolving Credit Loan Bank’s pro rata share of the Revolving Credit
Loan Commitments), (B) based on such allocation, determine the reimbursement
obligation of each Revolving Credit Loan Bank with respect to such Revolving L/C
Drawing and (C) promptly notify each Revolving Credit Loan Bank of the amount
of its reimbursement obligation with respect to such Revolving L/C Drawing.

 

(ii)                                  If
any Revolving Credit Loan Bank fails to pay any amount required pursuant to
subsection (i) of this Section 2.03(g) on the date on which such
payment is due, interest, payable on demand, shall accrue on such Revolving
Credit Loan Bank’s obligation to make such payment, for each day from and
including the date such payment becomes due to but excluding the date such
Revolving Credit Loan Bank makes such payment at a rate per annum equal to the
Federal Funds Rate.  Any payment made by
any Revolving Credit Loan Bank after 3:00 P.M. (New York City time) on any
Domestic Business Day shall be deemed for purposes of the preceding sentence to
have been made on the next succeeding Domestic Business Day.

 

36

 

(iii)                               If
the Borrower shall reimburse a Revolving Fronting Bank for any Revolving L/C
Drawing under a Revolving Letter of Credit after the Revolving Credit Loan
Banks shall have made funds available to such Revolving Fronting Bank with
respect to such Revolving L/C Drawing in accordance with subsection (i) of
this Section 2.03(g), such Revolving Fronting Bank shall promptly upon
receipt of such reimbursement distribute to each Revolving Credit Loan Bank its
pro rata share thereof, including interest, to the extent received by such
Revolving Fronting Bank.

 

(iv)                              The
several obligations of the Revolving Credit Loan Banks to the Revolving
Fronting Banks hereunder shall be absolute, irrevocable and unconditional under
any and all circumstances whatsoever and shall not be affected by any
circumstance, including, without limitation, (1) any set-off, counterclaim,
recoupment, defense or other right which any such Revolving Credit Loan Bank or
any other Person may have against the Agent, any Revolving Fronting Bank or any
other Person for any reason whatsoever; (2) the occurrence or continuance of a
Default or an Event of Default or the termination of the Revolving Credit Loan
or any Revolving Letter of Credit; (3) any adverse change in the condition
(financial or otherwise) of any Obligor or any other Person; (4) any breach of
any Financing Document by any party thereto; (5) the fact that any condition
precedent to the issuance of, or the making of any payment under, any Revolving
Letter of Credit was not in fact met; (6) any violation or asserted violation
of law by any Revolving Credit Loan Bank or any affiliate thereof; or (7) to
the extent permitted under applicable law, any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.  Each payment by each Revolving Credit Loan
Bank to a Revolving Fronting Bank for its own account shall be made without any
offset, abatement, withholding or reduction whatsoever.  If a Revolving Fronting Bank is required at
any time (whether before or after the Termination Date) to return to the
Borrower or to a trustee, receiver, liquidator, custodian or other similar
official any portion of the payments made by the Borrower to such Revolving
Fronting Bank in payment of any Reimbursement Obligation or interest thereon
upon the insolvency of the Borrower, or the commencement of any case or proceeding
under any bankruptcy, insolvency or other similar law with respect to the
Borrower, each Revolving Credit Loan Bank shall, on demand of such Revolving
Fronting Bank, forthwith return to such Revolving Fronting Bank any amounts
transferred to such Revolving Credit Loan Bank by such Revolving Fronting Bank
in respect thereof pursuant to this subsection plus
such Revolving Credit Loan Bank’s pro rata share of any interest on such
payments required to be paid to the Person recovering such payments plus interest on the amount so demanded
from the day such demand is made, if such demand is made by 2:00 P.M. (New York
City time), or from the next following Domestic Business Day, if such demand is
made after 2:00 P.M. (New York City time), to but not including the day such
amounts are returned by such Revolving Credit Loan Bank to such Revolving
Fronting Bank at a rate per annum for each day equal to (A) the Federal Funds
Rate for the day of such demand and (B) the Base Rate plus 1% for each day thereafter.  Notwithstanding the foregoing or any other
provision contained herein, in no event shall any Revolving Credit Loan Bank be
obligated to make any payment to a Revolving Fronting Bank to the extent that
such payment would cause such Bank’s pro rata share of the Total Outstandings
hereunder to exceed such Bank’s Revolving Credit Loan Commitment; provided that the foregoing shall not
affect the obligation of the Borrower (which is absolute, unconditional and

 

37

 

irrevocable) to reimburse each Revolving Fronting Bank
for the entire amount of each payment made by such Revolving Fronting Bank
under a Revolving Letter of Credit, including any amount thereof that is not
paid by any Revolving Credit Loan Bank to such Revolving Fronting Bank
(pursuant to this sentence or otherwise).

 

(h)                                 Revolving
Letter of Credit Commission; Issuance Fee.

 

(i)                                     Revolving
Letter of Credit Commission.  The
Borrower agrees to pay to the Agent a letter of credit commission with respect
to each Revolving Letter of Credit issued at its request or for its account,
computed for each day from and including the date of issuance of such Revolving
Letter of Credit through and including the last day a Revolving L/C Drawing is
available under such Revolving Letter of Credit (the “Revolving Letter of Credit Termination Date”), at the Revolving Letter of Credit
Commission Rate on the aggregate amount available for drawing under such
Revolving Letter of Credit from time to time (whether or not any conditions to
drawing can then be met), such fee to be for the account of the Revolving
Credit Loan Banks ratably in proportion to their Total Exposures.  Such fee shall be payable quarterly in
arrears on the last Domestic Business Day of each January, April, July and
October and upon the Termination Date.

 

(ii)                                  Issuance
Fee.  The Borrower shall pay to each
Revolving Fronting Bank for its own account such fees with respect to each
Revolving Letter of Credit issued by such Revolving Fronting Bank for the
account of the Borrower as shall have been agreed between the Borrower and such
Revolving Fronting Bank.

 

(iii)                               Limited
Liability of the Revolving Fronting Bank. 
As between a Revolving Fronting Bank, on the one hand, and the Borrower,
on the other, the Borrower assumes all risks of any acts or omissions of the
beneficiary and any transferee of any Revolving Letter of Credit with respect
to its use of such Revolving Letter of Credit. 
Neither a Revolving Fronting Bank nor any of its respective employees,
officers or directors shall be liable or responsible for:  (1) the use which may be made of any
Revolving Letter of Credit or for any acts or omissions of any beneficiary or
transferee in connection therewith; (2) the validity, sufficiency or
genuineness of documents, or of any endorsement(s) thereon, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (3) payment by the Revolving Fronting Bank
against presentation of documents which do not comply with the terms of any
Revolving Letter of Credit, including failure of any documents to bear any
reference or adequate reference to such Revolving Letter of Credit; or (4) any
other circumstance whatsoever in making or failing to make payment under any
Revolving Letter of Credit; provided
that the Borrower shall have a claim against the applicable Revolving Fronting
Bank, and such Revolving Fronting Bank shall be liable to the Borrower, to the
extent, but only to the extent, of any direct, as opposed to consequential or
special, damages suffered by the Borrower which are found in a final,
unappealable judgment of a court of competent jurisdiction to have been caused
by (x) such Revolving Fronting Bank’s willful misconduct or gross
negligence in determining whether documents presented under any Revolving
Letter of Credit comply with the terms thereof or (y) such Revolving
Fronting Bank’s willful failure to pay, or gross negligence resulting in a

 

38

 

failure to pay, any Revolving L/C Drawing after the
presentation to it by the beneficiary (or any transferee of the Revolving
Letter of Credit) of a draft and other required documentation strictly
complying with the terms and conditions of the Revolving Letter of Credit.  In furtherance and not in limitation of the
foregoing, a Revolving Fronting Bank may accept documents that appear on their
face to be in order, without responsibility for further investigation.

 

(iv)                              Revolving
Fronting Banks and Affiliates.  Each
Revolving Fronting Bank shall have the same rights and powers under the
Financing Documents as any other Bank and may exercise or refrain from
exercising the same as though they were not Revolving Fronting Banks (in each
case to the extent such Revolving Fronting Bank is also a Bank), and the
Revolving Fronting Banks and their respective affiliates may accept deposits
from, lend money to, and generally engage in any kind of business with the
Borrower or any Subsidiary or affiliate of the Borrower as if they were not Revolving
Fronting Banks hereunder.

 

(i)                                     Applicability
of ISP98.  Unless otherwise
expressly agreed by the Revolving Fronting Bank and the Borrower when a
Revolving Letter of Credit is issued (or deemed issued), the rules of the
“International Standby Practices 1998” published by the Institute of
International Banking Law and Practice (or such later version thereof as may be
in effect at the time issuance) shall apply to the Revolving Letter of Credit.

 

Section 2.04  Evidence
of Debt.

 

(a)                                  Each
Bank Party shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower to such Bank Party
resulting from each Loan owing to such Bank Party from time to time, including
the amounts of principal and interest payable and paid to such Bank Party from
time to time hereunder.  The Borrower
agrees that upon notice by any Bank Party to the Borrower (with a copy of such
notice to the Agent) to the effect that a promissory note or other evidence of
indebtedness is required or appropriate in order for such Bank Party to
evidence (whether for purposes of pledge, enforcement or otherwise) the Loans
owing to, or to be made by, such Bank Party, the Borrower shall promptly
execute and deliver to such Bank Party, with a copy to the Agent, a Revolving
Credit Loan Note or a Term Loan Note, as applicable, in substantially the form
of Exhibits A-1 and A-2 hereto, respectively, payable to the order of such Bank
Party in a principal amount equal to the Loans owing to, or to be made by, such
Bank Party.  All references to Notes in
the Financing Documents shall mean Notes, if any, issued hereunder.

 

(b)                                 The
Register maintained by the Agent pursuant to Section 10.06(f) shall include a
control account, and a subsidiary account for each Bank Party, in which
accounts (taken together) shall be recorded (i) the date and amount of each
Loan made hereunder (or deemed to be made hereunder), whether such Loan bears
interest at the Base Rate or the Adjusted London Interbank Offered Rate, and,
if appropriate, the Interest Period applicable thereto; (ii) the terms of each
Assignment and Assumption delivered to and accepted by it; (iii) the
amount of any principal or interest due and payable or to become due and
payable from the Borrower to each Bank Party hereunder; and (iv) the amount of
any sums received by the Agent from the Borrower hereunder and each Bank
Party’s share thereof.

 

39

 

(c)                                  Entries
made in good faith by the Agent in the Register pursuant to subsection (b)
above, and by each Bank Party in its account or accounts pursuant to subsection
(a) above, shall be prima facie
evidence of the amount of principal and interest due and payable or to become
due and payable from the Borrower to, in the case of the Register, each Bank
Party and, in the case of such account or accounts, such Bank Party, under this
Agreement, absent manifest error; provided,
however, that the failure of the
Agent or such Bank Party to make an entry, or any finding that an entry is
incorrect, in the Register or such account or accounts, shall not limit or
otherwise affect the obligations of the Borrower under this Agreement.

 

Section 2.05  Maturity
of Loans.  (a) Each Revolving Credit
Loan shall mature, and the principal amount thereof shall be due and payable
(together with interest accrued thereon), on the Termination Date in respect of
the Revolving Credit Facility and (b) each Term Loan shall mature, and the
principal amount thereof shall be due and payable (together with interest
accrued thereon), on the Term Loan Termination Date.

 

Section 2.06  Interest
Rates.

 

(a)                                  Each
Base Rate Loan shall bear interest on the outstanding principal amount thereof,
for each day from the date such Loan is made until it becomes due, at a rate per
annum equal to the Base Rate Margin plus
the Base Rate for such day.  Such
interest shall be payable quarterly in arrears on each Quarterly Payment Date.

 

(b)                                 Each
Euro-Dollar Loan shall bear interest on the outstanding principal amount
thereof, for each day during each Interest Period applicable thereto, at a rate
per annum equal to the sum of the Euro-Dollar Margin for such day plus the Adjusted London Interbank Offered
Rate applicable to such Interest Period. 
Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at intervals
of three months after the first day thereof.

 

(c)                                  Upon
the occurrence and during the continuance of an Event of Default described in
Section 6.01(a) or an Event of Default described in Section 6.01(g) or 6.01(h)
with respect to the Borrower, the Borrower shall pay interest on (X) (i) the
outstanding principal amount of each Base Rate Loan owing to each Bank Party,
payable on demand, at a rate per annum equal at all times to 2% per annum above
the rate per annum required to be paid on such Base Rate Loan pursuant to
Section 2.06(a) above and (ii) to the fullest extent permitted by law, the
amount of any interest that is not paid when due, from the date such amount
shall be due until such amount shall be paid in full, at a rate per annum equal
to 2% per annum above the rate per annum required to be paid on the Base Rate
Loans on which such interest has accrued pursuant to Section 2.06(a) above and
(Y)(i) the outstanding principal amount of each Euro-Dollar Rate Loan owing to
each Bank Party payable on demand, at a rate per annum equal at all times to a
rate per annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such day plus the Adjusted London Interbank Offered
Rate applicable to such Euro-Dollar Loan and (ii) the sum of 2% plus the Euro-Dollar Margin for such day plus the quotient obtained (rounded
upward, if necessary, to the next higher 1/100th of 1%) by dividing (x) the average
(rounded upward, if necessary, to the next higher 1/16th of 1%) of the
respective rates per annum at which one day (or, if such amount due remains
unpaid more than three Euro-Dollar Business Days, then for such other period of
time not longer than three months as the Agent may select) deposits

 

40

 

in dollars in an amount approximately equal to such overdue payment due
to each of the Reference Banks are offered to such Reference Bank in the London
interbank market for the applicable period determined as provided above by
(y) 1.00 minus the
Euro-Dollar Reserve Percentage (or, if the circumstances described in clause
(a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the
sum of 2% plus the rate
applicable to Base Rate Loans for such day)(the “Euro-Dollar Default Rate”) and (ii) to the fullest extent
permitted by law, the amount of any interest that is not paid when due, from
the date such amount shall be due until such amount shall be paid in full, at a
rate per annum equal to the Euro-Dollar Default Rate the Euro-Dollars Loans on
which such interest has accrued pursuant to Section 2.06(b) above.

 

(d)                                 The
Agent shall determine each interest rate applicable to the Loans and
Reimbursement Obligations hereunder. 
The Agent shall give prompt notice to the Borrower and the participating
Banks of each rate of interest so determined, and its determination thereof
shall be conclusive in the absence of manifest error.

 

(e)                                  Each
Reference Bank agrees to use its best efforts to furnish quotations to the
Agent as contemplated by this Section. 
If any Reference Bank does not furnish a timely quotation, the Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of
Section 8.01 shall apply.

 

(f)                                    The
yield to maturity with respect to any First Priority Secured Debt issued after
the date hereof and consisting of a term loan facility or similar bank credit
facility (taking into account upfront fees paid to the lenders under such new
First Priority Secured Debt) may be no more than 0.25% per annum greater than
the yield to maturity with respect to the Term Loans on the Closing Date (and
the Borrower agrees that the pricing of the Loans (if any) will be increased
and or additional fees will be paid to the Banks (if any) to the extent
necessary to satisfy such requirement).

 

Section 2.07  Method
of Electing Interest Rates.

 

(a)                                  The
Loans included in each Borrowing shall bear interest initially at the type of
rate specified by the Borrower in the applicable Notice of Borrowing.  Thereafter, the Borrower may from time to
time elect to change or continue the type of interest rate borne by each Group
of Loans (subject to Section 2.07(d) and the provisions of
Article 8), as follows:

 

(i)                                     if
such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to
Euro-Dollar Loans as of any Euro-Dollar Business Day;

 

(ii)                                  if
such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans
to Base Rate Loans as of any Domestic Business Day or elect to continue such
Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.13
if any such conversion is effective on any day other than the last day of an
Interest Period applicable to such Loans.

 

Each such election shall
be made by delivering a notice (a “Notice of
Interest Rate Election”)
to the Agent not later than 11:00 A.M. (New York City time) on the third
Euro-Dollar Business Day before the conversion or continuation selected in such
notice is to be

 

41

 

effective (unless the
relevant Loans are to be converted from Euro-Dollar Loans to Base Rate Loans,
in which case such notice shall be delivered to the Agent not later than 11:00
A.M. (New York City time) on the date such conversion is to be effective).  A Notice of Interest Rate Election may, if
it so specifies, apply to only a portion of the aggregate principal amount of
the relevant Group of Loans; provided
that (i) such portion is allocated ratably among the Loans comprising such
Group and (ii) the portion to which such Notice applies, and the remaining
portion to which it does not apply, are each at least $5,000,000 (unless such
portion is comprised of Base Rate Loans). 
If no such notice is timely received before the end of an Interest
Period for any Group of Euro-Dollar Loans, the Borrower shall be deemed to have
elected that such Group of Loans be converted to Base Rate Loans at the end of
such Interest Period.

 

(b)                                 Each
Notice of Interest Rate Election shall specify:

 

(i)                                     the
Group of Loans (or portion thereof) to which such notice applies;

 

(ii)                                  the
date on which the conversion or continuation selected in such notice is to be
effective, which shall comply with the applicable clause of
Section 2.07(a) above;

 

(iii)                               if
the Loans comprising such Group are to be converted, the new type of Loans and,
if the Loans resulting from such conversion are to be Euro-Dollar Loans, the
duration of the next succeeding Interest Period applicable thereto; and

 

(iv)                              if
such Loans are to be continued as Euro-Dollar Loans for an additional Interest
Period, the duration of such additional Interest Period.

 

Each Interest Period
specified in a Notice of Interest Rate Election shall comply with the
provisions of the definition of Interest Period.

 

(c)                                  Promptly
after receiving a Notice of Interest Rate Election from the Borrower pursuant
to Section 2.07(a) above, the Agent shall notify each Bank of the contents
thereof and such notice shall not thereafter be revocable by any Borrower.

 

(d)                                 A
Borrower shall not be entitled to elect to convert any Loans to, or continue
any Loans for an additional Interest Period as, Euro-Dollar Loans if
(i) the aggregate principal amount of any Group of Euro-Dollar Loans
created or continued as a result of such election would be less than $5,000,000
or (ii) a Default shall have occurred and be continuing when the Borrower
delivers notice of such election to the Agent.

 

(e)                                  If
any Loan is converted to a different type of Loan, the applicable Borrower
shall pay, on the date of such conversion, the interest accrued to such date on
the principal amount being converted.

 

Section 2.08  Commitment
Fee.

 

The Borrower shall pay to the Agent, for the account
of the Revolving Credit Loan Banks, ratably in proportion to their Revolving
Credit Loan Commitments, a commitment fee of 1⁄2 of 1% per annum on the daily
amount by which the aggregate amount of the Revolving Credit Loan Commitments
exceeds the aggregate Total Outstandings. 
Such commitment fee

 

42

 

shall accrue from and including the Effective Date to but excluding the
Termination Date (or earlier date of termination of the Revolving Credit Loan
Commitments in their entirety).  Accrued
commitment fees under this Section 2.08 shall be payable quarterly in
arrears on each March 31, June 30, September 30 and
December 31 and upon the date of termination of the Revolving Credit
Commitments in their entirety.

 

Section 2.09  Termination
or Reduction of Revolving Credit Loan Commitments.

 

(a)                                  Optional.  The Borrower may, upon at least three
Domestic Business Days’ notice to the Agent, (i) terminate the Revolving
Credit Loan Commitments in their entirety at any time, if no Revolving Credit
Loans or Revolving Letters of Credit are outstanding at such time or
(ii) ratably reduce from time to time by an aggregate amount of $5,000,000
or any larger multiple thereof, the aggregate amount of the Revolving Credit
Loan Commitments in excess of the aggregate Total Outstandings.

 

(b)                                 Mandatory.  (i)  Scheduled Termination.  The Revolving Credit Loan Commitments shall
terminate on the Termination Date, and any Revolving Credit Loans and
Reimbursement Obligations then outstanding (together with accrued interest
thereon) shall be due and payable on such date.

 

(ii)                                  Net
Cash Proceeds of Asset Sales.  On
and after the date on which all of the Term Loan Facilities have been paid in
full, in the event that the Borrower shall at any time, or from time to time,
receive any Net Cash Proceeds from Covered Asset Sales, the Revolving Credit
Loan Commitments of the Revolving Credit Loan Banks shall, unless the Required
Banks otherwise agree, be ratably reduced by such amounts and at such times as
may be required to avoid any requirement that all or any portion of such Net
Cash Proceeds be applied to repay, prepay, repurchase or defease any Debt of
the Borrower that is subordinated in right of payment to the Debt of the
Borrower under the Financing Documents.

 

(c)                                  Reductions
Permanent.  All reductions of the
Revolving Credit Loan Commitments pursuant to this Section 2.09 shall be
permanent.

 

Section 2.10  Prepayment
of the Loans.

 

(a)                                  Optional.  (i) 
Subject in the case of any Euro-Dollar Loans to Section 2.12, the
Borrower may, upon at least one Domestic Business Day’s notice to the Agent,
prepay any Loans that bear interest at the Base Rate or upon at least three Euro-Dollar
Business Days’ notice to the Agent, prepay any Euro-Dollar Loans, in each case
in whole at any time, or from time to time in part in amounts aggregating
$5,000,000 or any larger multiple of $1,000,000, by paying the principal amount
to be prepaid together with (x) accrued interest thereon to the date of
prepayment and (y) in the case of prepayments of Term Loans prior to the
first anniversary of the Effective Date, a premium equal to 1.00% of the
aggregate principal amount so prepaid.

 

(ii)                                  Upon
receipt of a notice of prepayment pursuant to this Section 2.10, the Agent
shall promptly notify each Bank of the contents thereof and of such Bank’s
ratable share of such prepayment and such notice shall not thereafter be
revocable by the Borrower.

 

43

 

(b)                                 Mandatory.  (i) 
The Borrower shall, on the date of receipt by the Borrower after the
Effective Date of (A) Net Cash Proceeds from any Covered Asset Sales,
(B) Net Cash Proceeds from the incurrence of Debt permitted by Section
5.07(a)(ix) relating to a bridge financing of any Covered Asset Sale or
(C) Net Cash Proceeds from the incurrence of Debt permitted by Section
5.07(b)(iv) relating to a bridge financing of any Covered Asset Sale, in excess
of $250,000,000 in the aggregate (“Excess Net
Cash Proceeds”), offer to prepay an aggregate principal amount of
the Term Loans in an amount equal to the Banks’ Ratable Share of such Excess
Net Cash Proceeds and the Term Loan Banks shall have the option to accept or
refuse such prepayment in accordance with the provisions set forth in Section
2.10(c).  Upon the payment in full of
the Term Loans, the Borrower shall apply such Excess Net Cash Proceeds to
prepay the Revolving Credit Loans outstanding at such time (without any
reduction of Revolving Credit Commitments).

 

(ii)                                  So
long as the Recourse Debt to Cash Flow Ratio is greater than 5.00 to 1.00, the
Borrower shall, on the date of receipt of Net Cash Proceeds from the issuance
of Debt by the Borrower pursuant to Section 5.07(a)(viii), offer to prepay the
Term Loan Facility in an aggregate amount equal to the Banks’ Ratable Share of
such Net Cash Proceeds and the Term Loan Banks shall have the option to accept
or refuse such prepayment in accordance with the provisions set forth in
Section 2.10(c).  Upon the payment in
full of the Term Loans, the Borrower shall apply such Net Cash Proceeds to
prepay the Revolving Credit Loans outstanding at such time (without any
reduction of Revolving Credit Commitments).

 

(iii)                               The
Borrower shall, on the date of receipt of Net Cash Proceeds from the issuance
of Debt by any Subsidiary of the Borrower permitted pursuant to Section
5.07(b)(ii) (but only to the extent applicable pursuant to the proviso
thereof) and Section 5.07(b)(vi), offer to prepay an aggregate principal amount
of the Term Loans in an aggregate amount equal to the Banks’ Ratable Share of
an amount equal to (x) 100%, in the case of Debt issued by IPALCO, (y) for
so long as the Term Loan Facility is outstanding, 100% in the case of Debt
issued by any Subsidiary Guarantor (excluding up to $200,000,000 of Net Cash
Proceeds from the issuance of Debt by AES Hawaii Management or its
Subsidiaries) and (z) in all other cases, an amount equal to 75% of such Net
Cash Proceeds (other than $200,000,000 of additional Debt of the Subsidiaries
of the Borrower incurred after the date hereof).  The Term Loan Banks shall have the option to accept or refuse any
prepayment pursuant to this Section 2.10(b)(iii) in accordance with the
provisions set forth in Section 2.10(c). 
So long as Net Cash Proceeds referred to in this Section 2.10(b)(iii)
are received by the Borrower, the Borrower agrees to use all reasonable efforts
to cause all such Net Cash Proceeds permitted to be distributed to be so distributed.  Upon the payment in full of the Term Loans,
the Borrower shall apply such Net Cash Proceeds to prepay the Revolving Credit
Loans outstanding at such time (without any reduction of Revolving Credit Commitments).

 

(c)                                  Term
Loan Opt-Out.  With respect to any
prepayment of the Term Loan Facility pursuant to Section 2.10(b) above, the
Borrower shall notify the Agent by 12:00 Noon (New York City time) on the date
of receipt of the applicable Net Cash Proceeds of the receipt of such Net Cash
Proceeds and its offer to prepay the Term Loans on the third Business Day

 

44

 

following receipt by the Borrower of such Net Cash Proceeds.  The Agent shall then notify each of the Term
Loan Banks of such offer.  Each Term
Loan Bank, at its option, may elect not to accept such prepayment.  Any Term Loan Bank declining such prepayment
shall give written notice to the Agent by 12:00 Noon (New York City time) on
the Business Day immediately following the date the Term Loan Banks receive
notice of such prepayment.  If a Term
Loan Bank fails to give notice by 12:00 Noon as set forth in the immediately
preceding sentence, such Term Loan Bank shall be deemed to have accepted the
offer.  Any amounts that would otherwise
have been applied to prepay such declining Term Loan Bank shall instead be
retained by the Borrower.

 

Section 2.11  General
Provisions as to Payments.

 

(a)                                  The
Borrower shall make each payment of principal of, and interest on, the Loans
and Reimbursement Obligations and of fees hereunder, not later than 12:00 Noon
(New York City time) on the date when due, in Federal or other funds
immediately available in New York City, without set-off, counterclaim or other
deduction, to the Agent at its address referred to in Section 10.01.  The Agent will promptly distribute to each
Bank Party its ratable share of each such payment received by the Agent for the
account of the Bank Parties.  Whenever
any payment of principal of, or interest on, the Base Rate Loans or Reimbursement
Obligations or of fees shall be due on a day which is not a Domestic Business
Day, the date for payment thereof shall be extended to the next succeeding
Domestic Business Day.  Whenever any
payment of principal of, or interest on, the Euro-Dollar Loans shall be due on
a day which is not a Euro-Dollar Business Day, the date for payment thereof
shall be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Euro-Dollar Business
Day.  If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.

 

(b)                                 Unless
the Agent shall have received notice from the Borrower prior to the date on
which any payment is due from the Borrower to the Bank Parties hereunder that
the Borrower will not make such payment in full, the Agent may assume that such
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank
Party on such due date an amount equal to the amount then due such Bank
Party.  If and to the extent that the
Borrower shall not have so made such payment, each Bank Party shall repay to
the Agent forthwith on demand such amount distributed to such Bank Party
together with interest thereon, for each day from the date such amount is
distributed to such Bank Party until the date such Bank Party repays such
amount to the Agent, at the Federal Funds Rate.

 

Section 2.12  Funding
Losses.

 

If the Borrower makes any payment of principal with
respect to any Euro-Dollar Loan or any Euro-Dollar Loan is converted to a Base
Rate Loan (pursuant to Article 2, 6 or 8 or otherwise) on any day other
than the last day of an Interest Period applicable thereto, or the last day of
an applicable period fixed pursuant to Section 2.06(c), or if the Borrower
fails to borrow, prepay, convert or continue any Euro-Dollar Loans after notice
has been given to any Bank Party in accordance with Section 2.02(b),
2.07(c) or 2.10(a), the Borrower shall reimburse each Bank

 

45

 

Party within 15 days after demand for any resulting loss or expense
incurred by it (or by an existing or prospective Participant in the related
Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after such payment or conversion or failure to borrow,
prepay, convert or continue; provided
that such Bank Party shall have delivered to the Borrower a certificate as to
the amount of such loss or expense, which certificate shall be conclusive in
the absence of manifest error.

 

Section 2.13  Computation
of Interest and Fees.

 

Interest based on the Base Rate hereunder shall be
computed on the basis of a year of 365 days (or 366 days in a leap year) and
paid for the actual number of days elapsed (including the first day but
excluding the last day).  All other
interest and fees shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding
the last day).

 

Section 2.14  Revolving
L/C Cash Collateral Account.

 

(a)                                  All
amounts required to be deposited as cash collateral with the Collateral Agent
pursuant to Section 2.15 or Section 6.03 shall be deposited in a cash
collateral account (the “Revolving L/C Cash
Collateral Account”)
established by the Borrower with the Collateral Agent, to be held, applied or
released for application as provided in this Section 2.14 and
Section 2.15.  To the extent that
on the Effective Date any amounts are held by the Existing Collateral Agent in
a similar cash collateral account, the Borrower shall direct the Existing
Collateral Agent to transfer such amounts to the Collateral Agent on such date.

 

(b)                                 The
Borrower hereby grants to the Collateral Agent for the ratable benefit of the
Revolving Fronting Banks and the other Lender Parties as their respective
interests appear, a security interest in the Borrower’s right, title and
interest in and to the Revolving L/C Cash Collateral Account and all funds and
financial assets from time to time credited thereto, all interest, dividends,
distributions, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such funds and financial assets, and all certificates and instruments, if
any, from time to time representing or evidencing the Revolving L/C Cash
Collateral Account and all of proceeds of any of the foregoing (the “Revolving L/C Collateral”), to secure all
of the Borrower’s Obligations hereunder and the other Credit Agreement
Documents.

 

(c)                                  If
and when any portion of the Revolving Letter of Credit Liabilities on which any
deposit of cash collateral was based (the “Relevant
Contingent Exposure”)
shall become fixed (a “Direct Exposure”) as a result of the payment by a
Revolving Fronting Bank of a draft presented under any relevant Revolving
Letter of Credit, (including any such payment under an Alternative Currency
Letter of Credit for which the relevant Revolving Fronting Bank, as a result of
fluctuations in currency exchange rates, is not reimbursed in full by the
Revolving Credit Loan Banks) the amount of such Direct Exposure (but not more
than the amount in the Revolving L/C Cash Collateral Account at the time) shall
be withdrawn by the Agent from the Revolving L/C Cash Collateral Account and
shall be paid to the relevant Revolving Fronting

 

46

 

Bank to be applied against such Direct Exposure and the Relevant
Contingent Exposure shall thereupon be reduced by such amount.

 

(d)                                 Interest
and other payments and distributions made on or with respect to the Revolving
L/C Collateral held by the Collateral Agent shall be for the account of the
Borrower and shall constitute additional Revolving L/C Collateral to be held by
the Agent; provided that the
Agent shall have no obligation to invest any Revolving L/C Collateral on behalf
of the Borrower or any other Person. 
Beyond the exercise of reasonable care in the custody thereof, the Agent
shall have no duty as to any Revolving L/C Collateral in its possession or
control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto.  The
Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Revolving L/C Collateral in its possession if
the Revolving L/C Collateral is accorded treatment substantially equal to that
which it accords its own property, and shall not be liable or responsible for
any loss or damage to any of the Revolving L/C Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any agent
or bailee selected by the Collateral Agent in good faith.  All expenses and liabilities incurred by the
Collateral Agent in connection with taking, holding and disposing of any
Revolving L/C Collateral (including customary custody and similar fees with
respect to any Revolving L/C Collateral held directly by the Agent and the
Revolving L/C Cash Collateral Account) shall be paid by the Borrower from time
to time upon demand.  Upon an Actionable
Default, the Collateral Agent shall be entitled to apply (and, at the request
of the Required Banks but subject to applicable law, shall apply) Revolving L/C
Collateral or the proceeds thereof to payment of any such expenses, liabilities
and fees.  After the termination of the
Revolving Credit Loan Commitments of the Revolving Loan Credit Loan Banks, the
termination of all Revolving Letters of Credit and the repayment in full of all
outstanding Reimbursement Obligations in respect of the Revolving Letters of
Credit, the Collateral Agent shall transfer the remaining Revolving L/C
Collateral or the proceeds thereof (the “Excess
Revolving L/C Collateral”) to the Collateral Account.  Notwithstanding any other term or provision
of this Agreement, and for the avoidance of doubt, the Revolving L/C Collateral
shall be paid first to the
relevant Revolving Fronting Bank in satisfaction of any Direct Exposures or
Relevant Contingent Exposures and no Revolving L/C Collateral shall be released
or disbursed to any party other than the relevant Revolving Fronting Bank until
the satisfaction of all Revolving Letter of Credit Liabilities and the
termination of the Revolving Credit Loan Commitments and all Revolving Letters
of Credit.

 

Section 2.15  Computations
of Outstandings; Determination of Available Amount of Alternative Currency
Letters of Credit.

 

(a)                                  Whenever
reference is made in this Agreement to the Total Outstandings on any date under
this Agreement, such reference shall refer to the Total Outstandings on such
date after giving effect to all Extensions of Credit to be made on such
date.  For purposes of calculating the
Total Outstandings on any date of determination, the aggregate Available Amount
in respect of all Alternative Currency Letters of Credit shall be deemed to
equal the amount thereof most recently reported to the Agent pursuant to
subsection (b) below.  At no time shall
the Total Outstandings under this Agreement exceed the sum of (i) the
aggregate amount of the Revolving Credit Loan Commitments, plus (ii) the amounts on deposit in
the Revolving L/C Cash Collateral Account (such sum being referred to herein as
the “Maximum Outstanding

 

47

 

Exposure”).  References to the Unused
Revolving Credit Loan Commitments shall refer to the excess, if any, of the
Revolving Credit Loan Commitments over the Total Outstandings; and references
to the unused portion of any Revolving Credit Loan Commitment shall refer to
the Unused Revolving Credit Loan Commitment of such Bank.

 

(b)                                 Each
Revolving Fronting Bank that issues an Alternative Currency Letter of Credit
shall (i) on the first Domestic Business Day of each calendar month,
deliver to the Agent a schedule listing (A) each outstanding Alternative
Currency Letter of Credit issued by such Revolving Fronting Bank, (B) the
maximum aggregate amount available to be drawn under each such Alternative
Currency Letter of Credit at any time on or after such date (denominated in the
applicable Alternative Currency, assuming the compliance with and satisfaction
of all conditions for Revolving L/C Drawing enumerated therein) and (C) the
equivalent in Dollars of such amount (as determined by such Revolving Fronting
Bank on the basis of exchange rates available to or otherwise used by such
Revolving Fronting Bank), together with the applicable exchange rate utilized
by such Revolving Fronting Bank and the source thereof (it being agreed and
understood that such applicable exchange rate may be adjusted by a reasonable
and customary volatility factor as agreed by the Borrower and such Revolving
Fronting Bank); (ii) on the date of issuance of any Alternative Currency
Letter of Credit (including, if any Alternative Currency Letters of Credit are
issued or deemed issued on the Closing Date, on the Closing Date), deliver to
the Agent a schedule listing the information described in clauses (B) and (C)
above; (iii) on the date of any increase or decrease in the Available Amount
of any Alternative Currency Letter of Credit (other than any increase or
decrease attributable solely to currency exchange rate fluctuations), deliver
to the Agent a schedule listing the information described in clauses (B) and
(C) above after giving effect to such increase or decrease (as the case may be)
and (iv) not later than one Domestic Business Day after its receipt of a
written request therefor from the Agent or any Bank, deliver to the Agent a
schedule listing the information described in clauses (A), (B) and (C)
above.  The Agent shall promptly after
its receipt thereof deliver a copy of each such schedule to the Collateral
Agent, the Borrower and the Banks.  For
all purposes under this Agreement, unless otherwise expressly set forth herein,
the Available Amount in respect of each Alternative Currency Letter of Credit
shall be deemed to equal, on any date of determination, the Dollar Equivalent
thereof as most recently reported to the Agent by the relevant Revolving
Fronting Bank pursuant to this subsection (b).

 

(c)                                  If,
on (i) the date that any schedule is delivered by a Revolving Fronting
Bank to the Agent pursuant to subsection (b) above; (ii) any date, after
giving effect to reduction in the Revolving Credit Loan Commitments or
(iii) any other date, Total Outstandings on such date (calculated pursuant
to subsection (a) and (b) above) exceeds the Maximum Outstanding Exposure, then
within two Domestic Business Days thereafter the Borrower shall be obligated to
deposit cash collateral with the Collateral Agent in the Revolving L/C Cash
Collateral Account in an amount equal to such excess to be held, applied or
released for application as provided in Section 2.14.

 

(d)                                 If
at any time the Maximum Outstanding Exposure exceeds the Total Outstandings
hereunder, the Borrower may provide a written notice to the Collateral Agent
requesting the Collateral Agent to withdraw such excess amount from the
Revolving L/C Cash Collateral Account and pay such amount to the Borrower, and,
provided that no Actionable
Default shall have occurred and be continuing, the Collateral Agent shall
promptly undertake

 

48

 

such actions in accordance with the instructions of the Borrower.  If an Actionable Default shall have occurred
and be continuing, the Collateral Agent shall not take any of the foregoing
actions and, if and when requested by the Required Banks, the amounts held in
the Revolving L/C Cash Collateral Account shall be withdrawn by the Collateral
Agent, and the proceeds thereof shall be first
applied by the Collateral Agent to repay the Total Outstandings and other due
and unpaid amounts required to be paid by the Borrower hereunder and second, held, applied or transferred as
provided in Section 2.14.

 

Section 2.16  Alternative
Currency Letter of Credit Issuances.

 

It is understood that, if Revolving Letters of Credit
are issued in an Alternative Currency, a circumstance may arise where the
United States dollars (“Dollars”)
needed to reimburse a Revolving Fronting Bank may exceed the Unused Revolving
Credit Loan Commitment of the Revolving Credit Loan Banks and the amounts on
deposit in the Revolving L/C Cash Collateral Account available for that
purpose.  This situation could occur if
an Alternative Currency exchange rate between the currency of a Revolving
Letter of Credit issuance and Dollars changes between the date of issuance of,
and the date of funding a Revolving L/C Drawing on, an Alternative Currency
Letter of Credit (or funding a deposit to the Revolving L/C Cash Collateral
Account to cover issuances in excess of the Revolving Credit Loan Commitments)
so that more Dollars are needed to purchase the Alternative Currency on the
date of funding of the Revolving L/C Drawing on an Alternative Currency Letter
of Credit (or funding a deposit to the Revolving L/C Cash Collateral Account)
than would have been needed to fund a Revolving L/C Drawing made on the
issuance date of such Revolving Letter of Credit (i.e., the currency of
issuance has appreciated against the Dollar between the date of issuance and
the date of funding or cash collateral deposit).  In such a circumstance, the Revolving Fronting Banks agree as
follows:  (a) (x) Any shortfall
under the Revolving Credit Loan Commitment to purchase participations in Revolving
L/C Drawings under Revolving Letters of Credit shall be allocated pro rata among the Revolving Fronting
Banks who have issued Alternative Currency Letters of Credit for which the
currency of issuance has appreciated against the Dollar (“Adverse Alternative Currency Letters of
Credit”); (y) the pro rata allocation
shall be based on the Dollar Equivalent of the face amount of each Adverse
Alternative Currency Letter of Credit, measured at the issuance date of each
such Adverse Alternative Currency Letter of Credit and (z) Revolving
Credit Loan Commitments shall not be used to purchase participations in Adverse
Alternative Currency Letters of Credit to the extent that use of those
Revolving Credit Loan Commitments covers any increase in the Dollar Equivalent
of an Adverse Alternative Currency Letters of Credit since the date of issuance
of the Revolving Letter of Credit if following such purchase remaining Unused
Revolving Credit Loan Commitments are insufficient to purchase participations
in the remaining outstanding Revolving Letters of Credit and (b) amounts
deposited in the Revolving L/C Cash Collateral Account shall be allocated first
to cover shortfalls to the extent existing on the last date of actual deposit
to the Revolving L/C Cash Collateral Account, or if later, the most recent date
of determination pursuant to Section 2.15(b), and second to any additional
shortfalls (allocated pro rata among such shortfalls); provided
that funds on deposit in the Revolving L/C Cash Collateral Account, if any, may
not be applied to fund a Revolving L/C Drawing on an Adverse Alternative
Currency Letter of Credit to the extent those funds have been allocated to
cover an exposure existing on the last date of deposit to the Revolving L/C
Cash Collateral Account if following the application a previously covered
exposure is left without cash collateral.

 

49

 

ARTICLE III

 

CONDITIONS

 

Section 3.01  Closing.

 

The closing hereunder shall occur when all the
following conditions have been satisfied:

 

(a)                                  The
Borrower shall have paid all accrued fees of the Agent, the Collateral Agent,
the Arranger Parties and the Banks and all accrued expenses of the Agent and
the Collateral Agent (including, without limitation, all fees and expenses of
counsel to the Agent payable pursuant to Section 10.03);

 

(b)                                 The
Agent shall have received, if requested, duly executed Notes of the Borrower
for the account of each Bank that has so requested, dated on or before the
Closing Date complying with the provisions of Section 2.04;

 

(c)                                  The
Agent shall have received (i) an opinion of the Assistant General Counsel
of the Borrower, substantially in the form of Exhibit B-1 hereto, (ii) an
opinion of Davis Polk & Wardwell, special counsel for the Borrower,
substantially in the form of Exhibit B-2 hereto, (iii) opinions of special
counsel for certain Subsidiaries of the Borrower in each of the jurisdictions
in which the Required Banks may reasonably request, substantially in the form
of Exhibit B-3 hereto, (iv) an opinion of Morris, Nichols, Arsht & Tunnell,
Delaware counsel for the Borrower, substantially in the form of Exhibit B-4
hereto, (v) an opinion of Maples and Calder, Cayman Islands counsel for
the Borrower, substantially in the form of Exhibit B-5 hereto, and (vi) an
opinion of Conyers Dill & Pearman, British Virgin Islands counsel for the
Borrower, substantially in the form of Exhibit B-6 hereto, each dated the
Closing Date (except for the opinions to be delivered pursuant to clause (iii)
above which shall be dated on or about the Closing Date) and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;

 

(d)                                 The
Agent shall have received an opinion of Shearman & Sterling, special
counsel for the Agent, substantially in the form of Exhibit B-7 hereto, dated
the Closing Date and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably request;

 

(e)                                  The
Agent shall have received evidence satisfactory to it that all the shares of
common stock of the Borrower pledged to secure the obligations of (i) AES
New York under the AES N.Y. Funding Credit Facility and (ii) the Borrower
under the Tranche C Term Loan Facility (as defined in the Existing Bank Credit
Agreement) have been released;

 

(f)                                    The
Agent shall have received evidence, satisfactory to it, in the form of pro
forma calculations, that the making of Borrowings and the issuance (or deemed
issuance) of, and Revolving L/C Drawings under, the Revolving Letters of
Credit, under this Agreement are permitted under the terms of the Debt of the
Borrower outstanding on the Closing Date;

 

(g)                                 The
Agent shall have received:

 

50

 

(A)                              Certificates
representing the Pledged Stock (as defined in the Security Agreement)
accompanied by undated stock powers executed in blank and instruments
evidencing the Pledged Debt (as defined in the Security Agreement), if any,
endorsed in blank or accompanied by undated bond powers executed in blank, to
the extent not previously delivered to the Collateral Trustees pursuant to the
terms of the Existing Bank Credit Agreement;

 

(B)                                Evidence
that the Agent is satisfied with the due grant and full perfection (or delivery
of documents to accomplish perfection) of all Collateral (as defined in the
Security Agreement);

 

(C)                                Evidence
of the completion of all other recordings and filings of or with respect to the
Security Agreement that the Agent may deem necessary or desirable in or to
perfect the Liens created thereby;

 

(D)                               Evidence
that all other action that the Agent may deem necessary or desirable in order
to perfect the first priority liens and security interests created under the
Security Agreement have been taken (including, without limitation, the consent
agreements);

 

(E)                                 Evidence
that all other action that the Agent may deem necessary or desirable in order
to perfect and protect the first priority liens and security interests created
under the BVI Cayman Pledge Agreement have been taken;

 

(F)                                 Executed
counterparts of Amendment No. 1 to the Security Agreement reflecting such
amendments as the Agent may deem necessary; and

 

(G)                                Executed
counterparts of Amendment No. 1 to the Collateral Trust Agreement reflecting
such amendments as the Agent may deem necessary.

 

(h)                                 The
Agent shall have received copies of the resolutions of the Board of Directors
(or, in the case of any limited liability companies, Board of Representatives
or the equivalent) of each Loan Party authorizing the execution, delivery and
performance by such Loan Party of the Financing Documents to which it is a
party, certified by a duly authorized officer of such Loan Party (which
certificate shall state that such resolutions are in full force and effect on
the Closing Date);

 

(i)                                     The
Agent shall have received certified copies of all approvals, authorizations or
consents of, or notices to or registrations with, any governmental body or
agency required for each Loan Party, if necessary, to enter into the Financing
Documents to which it is a party;

 

(j)                                     The
Agent shall have received a certificate of a duly authorized officer of each
Loan Party certifying the names and true signatures of the officers of such
Loan Party authorized to sign the Financing Documents to which it is a party
and the other documents to be delivered by such Loan Party hereunder;

 

51

 

(k)                                  The
Agent shall have received a certificate signed by a duly authorized officer of
the Borrower dated the Closing Date, to the effect that: (i) the
representations and warranties contained in Article 4 hereof are true and
correct on and as of the Closing Date as though made on and as of such date;
and (ii) no Default has occurred and is continuing or would result from
the issuance of the Revolving Letters of Credit requested by the Borrower to be
issued on such date and the Borrowings requested by the Borrower to be made on
such date (including, without limitation, the deemed issuance of Revolving Letters
of Credit pursuant to the second sentence of Section 2.03(a));

 

(l)                                     The
Agent shall have received a certificate signed by a duly authorized officer of
the Borrower to the effect that the
execution, delivery and performance by each Loan Party of the Financing
Documents to which it is a party are within such Loan Party’s corporate or other organizational powers, have been
duly authorized by all necessary corporate or other organizational action,
require no action by or in respect of, or filing with, any governmental body,
agency or official (other than the filing of UCC-1 financing statements and
other filings required to perfect security interests) and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation (or certificate of formation, as applicable)
or by-laws (or other organizational documents, as applicable) of such Loan Party or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries that could reasonably be
expected to result in a Material Adverse Effect or result in the creation or
imposition of any Lien on any asset of the Borrower or of AES BVI II or of any Material AES Entity or of any Pledged
Subsidiary (except for Liens created by the Financing Documents) provided that any foreclosure or other
exercise of remedies by the Collateral Trustees or the Collateral Agent will
require additional approvals and consents that have not been obtained from
foreign and domestic regulators and from lenders to, and suppliers, customers
or other contractual parties of one or more Subsidiaries and failure to obtain
such approval or consent could result in a default, or a breach of agreement or
other legal obligations of such Subsidiaries;

 

(m)                               The
Agent shall have received all documents it may reasonably request relating to
the existence of the Loan Parties, the corporate or other organizational
authority for and the validity of this Agreement and the other Financing Documents,
and any other matters relevant hereto, all in form and substance satisfactory
to the Agent; and

 

(n)                                 The
Agent shall have received evidence satisfactory to it that after giving effect
to the Loans and any Revolving Letter of Credit issuances on the Closing Date
and the application of the proceeds thereof, all amounts under the Existing
Bank Credit Agreement and the AES N.Y. Funding Credit Facility have been repaid
in full by the Borrower and that the AES N.Y. Funding Credit Facility has been
terminated.

 

The Agent shall promptly notify the Borrower and the
Banks of the Closing Date, and such notice shall be conclusive and binding on
all parties hereto.

 

Section 3.02  Extension
of Credit.

 

The obligation of each Bank to make a Loan on the
occasion of each Borrowing and the obligation of the Revolving Fronting Banks
to issue a Revolving Letter of Credit on the

 

52

 

occasion of each request therefor by the Borrower shall in each case be
subject to the satisfaction of the following conditions:

 

(a)                                  receipt
by the Agent of a Notice of Borrowing (except in the case of the deemed
issuance of Revolving Letters of Credit pursuant to the second sentence of
Section 2.03(a)) or a Notice of Issuance as required by Section 2.02 or
2.03, as the case may be;

 

(b)                                 the
fact that, immediately after such Extension of Credit, after giving effect to
all direct and indirect applications of the proceeds of such Extension of
Credit made substantially simultaneously with the extension thereof, the
aggregate Total Outstandings of any Revolving Credit Loan Bank will not exceed
its Revolving Credit Loan Commitment;

 

(c)                                  the
fact that the making of the Borrowings, the continuation of certain Loans and
the issuance of, and the Revolving L/C Drawings and the Revolving Letters of
Credit under this Agreement are permitted under the terms of the Debt of the
Borrower outstanding as of the date of the making of such Loan or the issuance
of, and the Revolving L/C Drawings under such Revolving Letter of Credit;

 

(d)                                 the
fact that, immediately before and after such Extension of Credit, no Default
shall have occurred and be continuing; and

 

(e)                                  the
fact that the representations and warranties of the Obligors contained in the
Financing Documents (except (i) in the case of a Refunding Borrowing, the
representations and warranties set forth in Section 4.05(b) and 4.06 as to any
matter which has heretofore been disclosed in writing by the Borrower to the
Bank Parties and (ii) in the case of the representations and warranties set
forth in Section 4.16 which shall be true on and as of the date hereof)
shall be true on and as of the date of such Extension of Credit.

 

Each Extension of Credit hereunder shall be deemed to
be a representation and warranty by the Borrower on the date of such Extension
of Credit as to the facts specified in clauses (b) through (e) of this Section.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower represents and warrants that:

 

Section 4.01  Corporate
Existence and Power.

 

Each Loan Party is a corporation (or limited liability
company, as applicable) duly incorporated (or formed, as applicable), validly
existing and in good standing under the laws of the jurisdiction of its
incorporation (or formation) and has all corporate or other organizational
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.

 

53

 

Section 4.02  Corporate
and Governmental Authorization and Filings; No Contravention.

 

(a)                                  The
execution, delivery and performance by each Loan Party of the Financing
Documents to which it is a party are within such Loan Party’s corporate or other organizational powers, have been
duly authorized by all necessary corporate or other organizational action,
require no action by or in respect of, or filing with, any governmental body,
agency or official (other than the filing of UCC-1 financing statements and
other filings required to perfect security interests) and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation (or certificate of formation, as applicable)
or by-laws (or other organizational documents, as applicable) of such Loan Party or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries that could reasonably be
expected to result in a Material Adverse Effect or result in the creation or imposition
of any Lien on any asset of the Borrower, AES BVI II or of any Material AES Entity or of any Pledged
Subsidiary (except for Liens created by the Financing Documents).

 

(b)                                 Upon
(i) the filing of UCC-1 financing statements pursuant to the Existing Bank
Credit Agreement with the offices of the Secretary of State of the State of
Delaware, (ii) the entry by AES BVI II of the particulars of the BVI Cayman
Pledge Agreement in its register of mortgages and charges and the submission by
AES BVI II for registration a copy of its completed register of mortgages and
charges to the Registrar of Companies in the British Virgin Islands and (iii)
certain filings required by the Collateral Documents to have been made, all
filings and other actions necessary to perfect the security interest granted by
each Loan Party in the Collateral created under the Collateral Documents have
been duly made or taken and are in full force and effect, and (w) the
Security Agreement creates in favor of the Collateral Trustees for the benefit
of the Secured Holders a valid and, together with such filings and other
actions, perfected first priority security interest in the Security Agreement
Collateral (subject to no Liens other than Liens permitted by the Financing
Documents), securing the payment of the Secured Obligations, and (x) the BVI
Cayman Pledge Agreement creates in favor of the Collateral Trustees for the
benefit of the Secured Holders a valid and, together with such other actions,
perfected first priority security interests in the BVI Collateral (subject to
no Liens other than Liens permitted by the Financing Documents), securing the
payment of the Secured Obligations and (y) the Collateral Trust Agreement
creates in favor of the Collateral Trustees for the benefit of the Secured
Holders, a valid and, together with such filings and other actions, perfected
first priority security interest in the Additional Collateral Trust Agreement
Collateral; provided that any
foreclosure or other exercise of remedies by the Collateral Trustees will
require additional approvals and consents that have not been obtained from
foreign and domestic regulators and from lenders to, and suppliers, customers
or other contractual counterparties of one or more Subsidiaries and failure to
obtain such approval or consent could result in a default, or a breach of
agreement or other legal obligations of such Subsidiaries.  The Borrower is the legal and beneficial
owner of the Security Agreement Collateral and the Additional Collateral Trust
Agreement Collateral and AES BVI II is the legal and beneficial owner of the
BVI Collateral, in each case free and clear of any Lien, except for Liens
permitted by the Financing Documents.

 

54

 

Section 4.03  Compliance
with Laws.

 

The Borrower is and each of its Subsidiaries are in
compliance with all applicable laws, ordinances, rules, regulations, and
requirements of governmental authorities (including, without limitation,
Environmental Laws and ERISA and the rules and regulations thereunder) except
for any non-compliance that could not reasonably be expected to have a Material
Adverse Effect.

 

Section 4.04  Binding
Effect.

 

This Agreement constitutes a valid and binding
agreement of each Obligor and each other Financing
Document, when executed and delivered in accordance with this Agreement,
will constitute a valid and binding obligation of each Loan Party that is a party thereto, in each case enforceable in
accordance with its terms.

 

Section 4.05  Financial
Information.

 

(a)                                  The
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2002 and the
related consolidated statements of operations and cash flows for the fiscal
year then ended, reported on by Deloitte & Touche and set forth in the
Form 10-K, a copy of which has been delivered to each of the Bank Parties,
fairly present, in conformity with generally accepted accounting principles,
the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such
fiscal year.

 

(b)                                 Except
for Disclosed Matters, since December 31, 2002 there has been no material
adverse change in the business, financial position, results of operations or
prospects of the Borrower and its Consolidated
Subsidiaries, considered as a whole.

 

Section 4.06  Litigation.

 

Except for Disclosed Matters, there is no action,
suit, investigation, litigation or proceeding pending against, or to the
knowledge of the Borrower threatened against or affecting, the Borrower or any
of its Subsidiaries before any
court or arbitrator or any governmental body, agency or official in which there
is a reasonable possibility of an adverse decision which could have a Material
Adverse Effect or which in any manner draws into question the legality,
validity or enforceability of any Financing
Document, and there shall have been no change in the status of, or in the
financial effect on the Borrower or its Subsidiaries from the actions, suits,
investigations, litigations or proceedings set forth in the Disclosed Matters
that could reasonably be expected to have a Material Adverse Effect.

 

Section 4.07  Compliance
with ERISA.

 

Each member of the ERISA Group has fulfilled its obligations under the minimum
funding standards of ERISA and the Internal Revenue Code with respect to each
Plan and is in compliance in all material respects with the currently
applicable provisions of ERISA and the Internal Revenue Code with respect to
each Plan.  No member of the ERISA Group has (a) sought a
waiver of the minimum funding standard under Section 412 of the Internal
Revenue

 

55

 

Code in respect of any Plan; (b) failed to make any contribution
or payment to any Plan or Multiemployer Plan or in respect of any Benefit
Arrangement, or made any amendment to any Plan or Benefit Arrangement, which
has resulted or could result in the imposition of a Lien or the posting of a
bond or other security under ERISA or the Internal Revenue Code or
(c) incurred any liability in excess of $100,000 under Title IV of ERISA
other than a liability to the PBGC for premiums under Section 4007 of
ERISA.

 

Section 4.08  Environmental
Matters.

 

(a)                                  In
the ordinary course of its business, each of the Borrower and its Subsidiaries conducts an ongoing
review of the effect of Environmental Laws on the business, operations and
properties of the Borrower or such Subsidiary,
in the course of which it identifies and evaluates associated liabilities and
costs (including, without limitation, any capital or operating expenditures
required for clean-up or closure of properties presently or previously owned,
any capital or operating expenditures required for investigation, to achieve or
maintain compliance with environmental protection standards imposed by
Environmental Laws or as a condition of any license, permit or contract, any
related constraints on operating activities, including any periodic or
permanent shutdown of any facility or reduction in the level of or change in
the nature of operations conducted thereat, any costs or liabilities in
connection with off-site disposal of wastes or Hazardous Substances by the
Borrower or its Subsidiaries,
and any actual or potential liabilities to third parties, including employees,
and any related costs and expenses).  On
the basis of this review, the Borrower has reasonably concluded that such
associated liabilities and costs, including the costs of compliance with
Environmental Laws, are unlikely to have a Material Adverse Effect.

 

(b)                                 There
are no facts, circumstances or conditions that are reasonably likely to result
in liabilities arising under Environmental Laws that could have a material
adverse effect on the business, financial conditions, results of operations or
prospects of the Borrower and its Consolidated
Subsidiaries, considered as a whole.

 

Section 4.09  Taxes.

 

United States Federal income tax returns of the
Borrower and its Subsidiaries and any other material tax returns filed by them
have been examined and closed (other than for the limited purposes of net
operating loss carry-forwards) through the fiscal year ended December 31,
1998, there are no ongoing or pending tax audits or examinations, and no
deficiencies or other claims for unpaid taxes are proposed in respect of any
taxes due from the Borrower, its Subsidiaries or any Material AES Entity that
could have a Material Adverse Effect. 
The Borrower, its Subsidiaries and all Material AES Entities have filed
all United States Federal income tax returns and the Borrower, its Subsidiaries
and all Material AES Entities have filed all other material tax returns which
are required to be filed by them, all such United States Federal income tax
returns and all such other material returns are true, correct and complete in
all material respects and all taxes due as indicated on such returns or
pursuant to any assessment received by the Borrower or any Subsidiary or any
Material AES Entity have been paid, other than any such taxes that are being
diligently contested in good faith through appropriate proceedings and for
which adequate reserves have been established in accordance with generally
accepted accounting principals.  The
charges, accruals and reserves on the books of the

 

56

 

Borrower, its Subsidiaries and all Material AES Entities in respect of
taxes or other governmental charges are, in the opinion of the Borrower,
adequate.

 

Section 4.10  Material
AES Entities.

 

Each Material
AES Entity is a corporation (or limited liability company, as
applicable) duly incorporated (or formed, as applicable), validly existing and
(other than any Material AES Entity
that is not incorporated under the laws of the United States or any political
subdivision thereof) in good standing under the laws of its jurisdiction of
incorporation (or jurisdiction of formation, as applicable).  Each Material
AES Entity has all corporate or other organizational powers and all
material governmental licenses, authorization, consents and approvals required
to carry on its business as proposed to be conducted and has all governmental
licenses, authorizations, consents and approvals required to have been obtained
prior to the date hereof and which are material to the operation of its
business as proposed to be conducted, except to the extent that the failure to
obtain any such license, authorization, consent or approval, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.

 

Section 4.11  Not
an Investment Company.

 

None of the Obligors
is an “investment company” within the meaning of the Investment Company Act of
1940, as amended.

 

Section 4.12  Public
Utility Holding Company Act.

 

Neither the Borrower nor any of its Subsidiaries is subject to regulation
as a “holding company” or a “subsidiary company” of a holding company or an
“affiliate” of a subsidiary or holding company or a “public utility company”
under Section 2(a) of the Public Utility Holding Company Act of 1935, as
amended (“PUHCA”), except that the
Borrower and certain of its Subsidiaries are exempt holding companies under
Section 3(a) of PUHCA by order of the Securities and Exchange Commission.

 

Section 4.13  Full
Disclosure.

 

All information heretofore furnished by the Borrower
to the Agent or any Bank Party for purposes of or in connection with any
Financing Document or any transaction contemplated hereby or thereby is, and
all such information hereafter furnished by the Borrower to the Agent or any
Bank Party will be, true and accurate in all material respects on the date as
of which such information is stated or certified in the light of the
circumstances under which such information was provided (as modified or
supplemented by other information so furnished, when taken together as a whole
and with the Disclosed Matters); provided that, with respect to projected
financial information, the Borrower represents only that such information was
prepared in good faith based on assumptions believed to be reasonable at the
time, it being recognized by the Bank Parties that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the projected
results.  The Borrower has disclosed to
the Bank Parties, in the Disclosed Matters or otherwise in writing, any and all
facts specific to the Borrower and its Subsidiaries and known as of the date
hereof to a responsible officer of the Borrower that could reasonably be
expected to

 

57

 

result in a Material Adverse Effect, which materially and adversely
affect or may affect (to the extent any Borrower can now reasonably foresee),
the business, operations or financial condition of the Borrower and its Consolidated Subsidiaries, taken as a
whole, or the ability of any Obligor to
perform its obligations under the Financing
Documents.

 

Section 4.14  Collateral
Documents and Collateral.

 

(a)                                  (i)
The execution, delivery, recordation, filing or performance by the Borrower and
AES BVI II of the Collateral Documents; (ii) the grant by the Borrower and AES
BVI II of the Liens granted by each of them pursuant to the Collateral
Documents; (iii) the perfection or maintenance of the Liens created under
the Collateral Documents (including the first priority nature thereof) and
(iv) the exercise by the Collateral Trustees of its remedies in respect of
the Collateral pursuant to the Collateral Documents, does 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 such filings required in order to perfect any security
interest granted by the Collateral Documents and other than any consent, approval,
authorization, order, notice or filing the failure of which to make or obtain
could not reasonably be expected to have a Material Adverse Effect), and does
not conflict with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Borrower, AES BVI II, or any
of the other Pledged Subsidiaries or any agreement, indenture or other
instrument to which the Borrower, AES BVI II or any of the other Pledged
Subsidiaries is a party or by which the Borrower, AES BVI II or any of the
other Pledged Subsidiaries or the Borrower’s, AES BVI II’s or the other Pledged
Subsidiaries’ respective property is bound, or violate or conflict with any
laws, administrative regulations or rulings or court decrees applicable to the
Borrower, AES BVI II, any of the other Pledged Subsidiaries or the Borrower’s,
AES BVI II’s or the other Pledged Subsidiaries’ respective property except for
any violation, breach, conflict or default that could not reasonably be
expected to have a Material Adverse Effect and except that in each of the
foregoing cases any foreclosure or other exercise of remedies by the Collateral
Trustees will require additional approvals and consents that have not been
obtained from foreign and domestic regulators and from lenders to, and
suppliers, customers or other contractual counterparties of, one or more
Subsidiaries and failure to obtain such approval or consent could result in a
default under, or a breach of, agreements or other legal obligations of such
Subsidiaries.

 

(b)                                 Each
of the representations and warranties of the Borrower and AES BVI II contained
in the Collateral Documents is true and correct.

 

(c)                                  Set
forth on Schedule I hereto is a complete and accurate list of all Pledged
Subsidiaries as of the date hereof, showing as of the date hereof (as to each
such Pledged Subsidiary) its legal name, its jurisdiction of incorporation, the
type and number of shares of each class of its Equity Interests authorized, and
the type and number outstanding, on the date hereof and the percentage of each
such class of its Equity Interests owned (directly or indirectly) by the Borrower and the certificate
number corresponding to each such Equity Interest.  All of the outstanding Equity Interests pledged to the Collateral
Trustees for the benefit of the Secured Holders pursuant to the Security
Agreement and the BVI Cayman Pledge Agreement in each Pledged Subsidiary have
been validly issued, are fully paid and non-

 

58

 

 

assessable and are owned by the
Borrower or AES BVI II, as applicable, free and clear of all Liens,
except those created under the Financing Documents.

 

(d)                                 Set
forth on Schedule II hereto is a complete and accurate list of all assigned
agreements of the Borrower and
its Subsidiaries (the “Assigned Agreements”),
showing as of the date hereof the parties, subject matter and term
thereof.  Each such Assigned Agreement
has been duly authorized, executed and delivered by all parties thereto, has
not been amended or otherwise modified (except as otherwise permitted pursuant
to the Security Agreement), is in full force and effect (except as otherwise
permitted pursuant to the Security Agreement) and is valid and binding upon and
enforceable against all parties thereto, except as the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting creditors’
rights generally and by equitable principles of general applicability and, as
of the Closing Date, there exists no default under any Assigned Agreement by
any party thereto.

 

Section 4.15  Existing
Letters of Credit.

 

Appendix III hereto identifies each Existing Letter of
Credit outstanding as of the date hereof and as of the Effective Date.

 

Section 4.16  Solvency.

 

Each of AES BVI II, AES New York, AES Oklahoma, AES
Hawaii and AES Warrior Run is, individually, and together with its
Subsidiaries, taken as a whole, Solvent as of the date hereof.

 

Section 4.17  Pledged
Subsidiaries.

 

Other than the Non-Pledged Subsidiaries, the Pledged
Subsidiaries listed on Schedule I hereto most recently delivered to the Bank
Parties in accordance with Section 5.01(l), are, as of the date set forth on
such Schedule, all of the direct Subsidiaries of the Borrower and all of the
direct Subsidiaries of AES BVI II.

 

Section 4.18  Qualified
Holding Companies Debt.

 

None of the Qualified Holding Companies is an obligor
or a contingent obligor on any of the Debt permitted by Section 5.07(b)(iii) or
a contingent obligor on any of the Debt permitted by Section 5.07(a)(ii), other
than Debt permitted by the definition of “Qualified Holding Company”.

 

ARTICLE V

 

COVENANTS

 

The Borrower agrees that, so long as any Loan or any
other Obligation of any Loan Party under any Financing Document shall remain
unpaid or any Revolving Credit Loan Bank has any Revolving Credit Loan
Commitment hereunder or any amount payable under any Note remains unpaid or any
Revolving Letter of Credit or any Reimbursement Obligation remains outstanding:

 

59

 

Section 5.01  Information.

 

The Borrower will deliver to each of the Bank Parties
(it being understood that, (x) with respect to clause (c) below, such
information shall only be delivered to the Bank Parties that on or prior to the
date of delivery have previously requested such information and (y) delivery to
the Agent and the posting by the Agent of each of the following items on an
electronic website, in accordance with Section 7.11, shall constitute delivery
to each of the Bank Parties, and the Agent hereby agrees to post on an
electronic website or otherwise distribute to the Bank Parties (subject to
clause (x) above) any such item delivered by the Borrower to the Agent):

 

(a)                                  as
soon as available and in any event within 120 days after the end of each fiscal
year of the Borrower, a consolidated and consolidating balance sheet of each
Obligor as of the end of such fiscal year, an unconsolidated balance sheet of
the Borrower as of the end of such fiscal year, the related consolidated,
consolidating and unconsolidated (as applicable) statements of operations for
such fiscal year and the related consolidated and unconsolidated statements of
cash flows for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, said consolidated financial
statements to be reported on, in a manner acceptable to the Securities and
Exchange Commission, by Deloitte & Touche or other independent public
accountants of nationally recognized standing and such consolidating and unconsolidated
financial statements to be certified as to fairness of presentation, generally
accepted accounting principles (other than failure to consolidate) and
consistency by the chief executive officer, president, chief financial officer
or chief accounting officer of the Borrower;

 

(b)                                 as
soon as available and in any event within 60 days after the end of each of the
first three quarters of each fiscal year of the Borrower, a consolidated
balance sheet of each Obligor as of the end of such quarter and an
unconsolidated balance sheet of the Borrower as of the end of such fiscal
quarter and the related consolidated and unconsolidated statements of
operations for such quarter and for the portion of such Obligor’s fiscal year
ended at the end of such quarter and the related consolidated and
unconsolidated statements of cash flows for the portion of such Obligor’s
fiscal year ended at the end of such quarter, setting forth in the case of such
consolidated statements of operations and cash flows, in comparative form the
figures for the corresponding quarter and the corresponding portion of such
Obligor’s previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief executive officer, president, chief
financial officer or chief accounting officer of the Borrower;

 

(c)                                  upon
request by any such Bank Party made at least 30 days prior to the date that the
relevant financial statements are required to be delivered pursuant to clause
(a) or (b) above (it being understood that upon the first such request,
subsequent requests shall automatically be deemed to have been made for as long
as such requesting Bank Party continues to be a Bank Party hereunder), (1) as
soon as available and in any event no later than the date on which financial
statements are required to be delivered pursuant to clause (a) and (b) above,
forecasts prepared by management of the Borrower, in form satisfactory to the
Agent, of cash flow statements on a monthly basis for the fiscal year following
such fiscal year and on an annual basis for each fiscal year thereafter until
the Termination Date and (2) as soon as available and in any event no later
than the date financial statements are required to be delivered

 

60

 

pursuant to clause (a) and (b) above, a statement of the monthly cash
flows to the Borrower of each Subsidiary of the Borrower for each of the twelve
months ending prior to the date of such financial statements;

 

(d)                                 simultaneously
with the delivery of each set of financial statements referred to in clauses
(a) and (b) above, a certificate of the chief executive officer, president,
chief financial officer or chief accounting officer of the Borrower
(i) setting forth in reasonable detail the calculations required to
establish whether the Borrower was in compliance with the requirements of
Sections 5.07, 5.09, 5.11, 5.12, 5.13, 5.14 and 5.16 on the date of such
financial statements; (ii) stating to the knowledge of the Borrower
whether any Default exists on the date of such certificate and, if any Default
then exists, setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto and
(iii) accompanied by a schedule setting forth in reasonable detail a
description, including, where applicable, the expected and maximum dollar
amounts thereof, of all material contingent liabilities not disclosed in such
financial statements;

 

(e)                                  simultaneously
with the delivery of each set of financial statements referred to in clause (a)
above, a statement of the firm of independent public accountants which reported
on such statements (i) whether anything has come to their attention as a
result of their audit (which was not directed primarily toward obtaining
knowledge of noncompliance) to cause them to believe that the Borrower has
failed to comply with the terms, covenants, provisions or conditions as they
relate to accounting of financial matters addressed in Sections 5.07 to 5.18,
inclusive, and (ii) confirming the calculations set forth in the officer’s
certificate delivered simultaneously therewith pursuant to clause (d) above;

 

(f)                                    within
five days after any officer of the Borrower obtains knowledge of any Default,
if such Default is then continuing, a certificate of the chief executive
officer, president, executive vice-president or chief financial officer of the
Borrower setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;

 

(g)                                 promptly
upon the mailing thereof to the shareholders of the Borrower generally, copies
of all financial statements, reports and proxy statements so mailed;

 

(h)                                 promptly
upon the filing thereof, copies of all registration statements (other than the
exhibits thereto and any registration statements on Form S-8 or its
equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents)
which the Borrower shall have filed with the Securities and Exchange
Commission;

 

(i)                                     if
and when any member of the ERISA Group (i) gives or is required to give
notice to the PBGC of any “reportable event” (as defined in Section 4043
of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or
partial withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been terminated, a
copy of such notice; (iii) receives notice from the PBGC under Title IV

 

61

 

of ERISA of an intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or appoint a trustee
to administer any Plan, a copy of such notice; (iv) applies for a waiver of the
minimum funding standard under Section 412 of the Internal Revenue Code, a
copy of such application; (v) gives notice of intent to terminate any Plan
under Section 4041(c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii)
fails to make any payment or contribution to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the chief
executive officer, president, chief financial officer or chief accounting
officer of the Borrower setting forth details as to such occurrence and the
action, if any, which the Borrower or the applicable member of the ERISA Group
is required or proposes to take;

 

(j)                                     by
12:00 Noon (New York City time) on the day of receipt by the Borrower or any
Subsidiary of the Borrower of Net Cash Proceeds from any Asset Sale, issuance
of Debt, a certificate of the chief executive officer, president, chief
financial officer or chief accounting officer of the Borrower setting forth (i)
a description of the transaction giving rise to such Net Cash Proceeds, (ii)
the amount of Net Cash Proceeds anticipated to be received on such date or each
of such dates (together with a schedule detailing the calculations necessary to
determine the amount of Net Cash Proceeds), (iii) the amount of such Net Cash
Proceeds that is anticipated to prepay the Term Loans and (iv) in the case of
the receipt by a Subsidiary of any such Net Cash Proceeds, in the event that
such Subsidiary is unable to transfer such Net Cash Proceeds to the Borrower or
a Qualified Holding Company whose Equity Interests have been pledged to the
Secured Holders pursuant to the Collateral Documents, such certificate shall
also set forth a reasonably detailed explanation of the circumstances
preventing such Subsidiary from transferring such Net Cash Proceeds to the
Borrower or a Qualified Holding Company whose Equity Interests have been
pledged to the Secured Holders pursuant to the Collateral Documents;

 

(k)                                  promptly
after receipt by the Borrower or any Subsidiary of the Borrower, a copy of each
complaint, order, citation, notice or other written communication from any
Person with respect to the existence or alleged existence of a material
violation of any applicable Environmental Law or the incurrence of any liability,
obligation, loss, damage, cost, expense, fine, penalty or sanction or the
requirement to commence any remedial action resulting from or in connection
with any air emission, water discharge, noise emission, Hazardous Substance or
any other environmental, health or safety matter at, upon, under or within any
of the properties now or previously owned, leased or operated by the Borrower,
any of its Subsidiaries or any Material AES Entity, or due to the operations or
activities of the Borrower, any Subsidiary of the Borrower, any Material AES
Entity or any other Person on or in connection with any such property or any
part thereof,

 

(l)                                     simultaneously
with the delivery of each set of financial statements referred to in clause (a)
and (b) above, (1) a revised Schedule I showing as of the last day of such
quarter all of the direct Subsidiaries of the Borrower and AES BVI II (other
than Non-Pledged Subsidiaries) and (2) a revised Schedule IV showing as of the
last day of such quarter all the Subsidiaries of the Borrower whose assets
consist only of any of the Excluded AES Business and direct or indirect
Investments therein, and

 

62

 

(m)                               promptly
upon request thereof, deliver to the Agent and the Collateral Trustees (A) a
list setting forth, for each Secured Agreement, (i) the aggregate
principal amount outstanding thereunder, (ii) the accrued and unpaid interest
thereunder, (iii) the accrued and unpaid fees (if any) thereunder,
(iv) the names of the Representatives (as defined in the Collateral Trust
Agreement) and of the Secured Holders (to the extent known to the Borrower)
thereunder, and all other unpaid amounts thereunder known to the Borrower,
owing to each such Representative, for its own account and on behalf of such
Secured Holders and (v) such other information regarding the Representatives,
such Secured Holders and the Secured Agreements as the Agent may reasonably
request and (B) the Payment Information (as defined in the Collateral Trust
Agreement).

 

(n)                                 from
time to time such additional information regarding the financial position or
business of the Borrower and its Subsidiaries as the Agent, at the request of
any Bank Party, may reasonably request.

 

Section 5.02  Payment
of Obligations.

 

The Borrower will pay and discharge all its material
obligations and liabilities and will cause each Subsidiary Guarantor (other
than AES Warrior Run) and IPALCO (in each case, for so long as each Person is a
Subsidiary of the Borrower) to pay and discharge all its Material Obligations,
in each case, including, without limitation, tax liabilities, except where the
same may be contested in good faith by appropriate proceedings, and will
maintain, and will cause each Subsidiary of the Borrower to maintain, in
accordance with generally accepted accounting principles, appropriate reserves
for the accrual of any of the same.

 

Section 5.03  Maintenance
of Property; Insurance.

 

(a)                                  The
Borrower will keep, and will cause each of its Subsidiaries to keep, all
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.

 

(b)                                 The
Borrower will, and will cause each of its Subsidiaries to, maintain (either in
the name of the Borrower or in such Subsidiary’s own name) with financially
sound and responsible insurance companies, insurance of such types, in at least
such amounts and against at least such risks (and with such risk retention) as
are usually insured against in similar circumstances in the same general area
by companies of established repute engaged in the same or a similar business;
and will furnish to each Bank Party upon request information presented in
reasonable detail as to the insurance so carried.

 

Section 5.04  Conduct
of Business and Maintenance of Existence.

 

The Borrower (a) will continue, and will cause each of
AES BVI II, the Material AES Entities and the Pledged Subsidiaries to continue,
to engage in business of the same general type as now conducted by the Borrower
and its Subsidiaries; (b) will continue, and will cause AES BVI II, each
Material AES Entity and each Pledged Subsidiary to continue, to operate their
respective businesses on a basis substantially consistent with the policies and
standards of the Borrower, AES BVI II or such Material AES Entity or such
Pledged Subsidiary as in effect on the date hereof and (c) will preserve, renew
and keep in full force and effect, and will cause AES

 

63

 

BVI II, each Material AES Entity and each Pledged Subsidiary to preserve,
renew and keep in full force and effect their respective corporate existence
and their respective rights, privileges and franchises necessary or desirable
in the normal conduct of business; provided
that nothing in this Section 5.04 shall prohibit (i) the merger of a
Subsidiary into the Borrower or the merger or consolidation of a Subsidiary
with or into another Person if the Person surviving such consolidation or
merger is a Subsidiary and if, in each case, after giving effect thereto (x) no
Default shall have occurred and be continuing, (y) neither the Borrower or any
Subsidiary Guarantor shall be liable for any Debt of such Subsidiary except to
the extent it was liable for such Debt prior to giving effect to such merger
and (z) the transaction is otherwise permitted by Section 5.11, (ii) any
asset disposition by the Borrower or any of its Subsidiaries permitted by
Section 5.19 and (iii) the termination of the corporate existence of
any Subsidiary (other than a Subsidiary Guarantor) if the Borrower in good
faith determines that such termination is in the best interest of the Borrower
and is not materially disadvantageous to the Bank Parties.

 

Section 5.05  Compliance
with Laws.

 

The Borrower will comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) (a) except for such non-compliance as would result
solely in the payment of monetary compensation by the Borrower or such
Subsidiary in an amount not to exceed $15,000,000 in the aggregate and (b)
except where the necessity of compliance therewith is contested in good faith
by appropriate proceedings (and the pendency of such proceedings themselves
shall not have a material adverse effect on the Borrower and its Subsidiaries,
taken as a whole).

 

Section 5.06  Inspection
of Property, Books and Records.

 

The Borrower will keep, and will cause each of its
Subsidiaries to keep, proper books of record and account in which full, true
and correct entries shall be made of all dealings and transactions in relation
to its business and activities; and will permit, and will cause each Significant
AES Entity to permit, representatives of any Bank Party at such Bank Party’s
expense to visit and inspect any of their respective properties, to examine and
make abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be desired.

 

Section 5.07  Limitation
on Debt.

 

The Borrower shall not, and shall not permit any
Subsidiary of the Borrower to, incur, assume, create or suffer to exist any
Debt, except for:

 

(a)                                  in
the case of the Borrower:

 

(i)                                     Debt
under the Financing Documents;

 

(ii)                                  Debt
existing on the date hereof and set forth on Schedule VI;

 

64

 

(iii)                               Debt
representing a refinancing, replacement or refunding of Debt permitted by
Section 5.07(a)(i), (ii), (iii), (vii), (viii) and (x); provided that:

 

(A)                              (x)
the aggregate principal amount of such Debt outstanding or available will not
exceed the principal amount outstanding or available at the time of such
refinancing, replacement or refunding (plus fees and expenses, including any
premium and defeasance costs relating to such refinancing, replacement or
refunding), (y) the final maturity of such Debt is later than the Term Loan
Termination Date (other than Debt that can be settled in the
Borrower’s Capital Stock (other than Redeemable Stock); provided that such Debt may only be
settled in cash prior to the Term Loan Termination Date up to an aggregate
principal amount not to exceed $400,000,000 and not before the third
anniversary of the Effective Date; provided
further that the Debt being refinanced, replaced or refunded has a
final maturity date on or prior to the Term Loan Termination Date) and
(z) such Debt shall not contain any Payment Restriction more restrictive than
the Payment Restrictions contained in the Debt being refinanced, replaced or
refunded; and

 

(B)                                no
obligor shall be liable for any such Debt except to the extent that it was
liable for the Debt so refinanced, replaced or refunded.

 

(iv)                              Debt
owing by the Borrower to a Consolidated Subsidiary of the Borrower so long as
such Debt is subordinated on terms reasonably satisfactory to the Agent to the
Debt of the Borrower under the Financing Documents;

 

(v)                                 any
Lien permitted by Section 5.10 that constitutes Debt not otherwise permitted by
this Section;

 

(vi)                              Letters
of credit, surety bonds, Guarantees and performance bonds supporting obligations
of Subsidiaries so long as, after giving effect to such letters of credit,
surety bonds, Guarantees and performance bonds (and the Investments represented
thereby), the Borrower would be in compliance with Section 5.16;

 

(vii)                           other
Debt, in the aggregate, not to exceed at any one time outstanding $225,000,000
so long as (x) the final maturity of such Debt shall in no event be on or prior
to the Term Loan Termination Date and (y) such Debt shall not have any
scheduled amortization on or prior to the Term Loan Termination Date.

 

(viii)                        other Debt
so long as (x) immediately before and after giving effect to the incurrence and
application of the proceeds thereof no Default shall have occurred and be
continuing, (y) the Net Cash Proceeds from the incurrence of such Debt shall be
applied as set forth in Section 2.10(b) to the extent so required and (z) the
final maturity of such Debt shall in no event be on or prior to the Term Loan
Termination Date;

 

65

 

(ix)                                Debt
incurred as a bridge financing for a proposed Asset Sale, provided that (x) the only direct or
contingent obligor in respect of such Debt is the holder of the asset that is
the subject of such Asset Sale, (y) the interest rate applicable to such
Debt does not exceed the then applicable market interest rate and (z) the Net
Cash Proceeds from the incurrence of such Debt shall be applied as set forth in
Section 2.10(b); and

 

(x)                                   Debt
incurred to refinance, replace or refund any of the obligations arising in
respect of the Existing Trust Preferred Securities, provided that (x) the only direct or contingent obligor
in respect of such Debt is the Borrower and (y) the final maturity of such
Debt shall be later than the Term Loan Termination Date.

 

(b)                                 in
the case of the Borrower’s Subsidiaries:

 

(i)                                     Guarantees
of Debt of the Borrower under the Financing Documents, the Senior Secured
Exchange Notes and Debt permitted by clause (a)(iii), (a)(vii) or (a)(viii)
above, the proceeds of which are applied to permanently reduce Total Bank
Exposure or prepay the Senior Secured Exchange Notes (it being understood that
if, after the date hereof, any Subsidiary Guarantees the Debt of the Borrower
under the Financing Documents, such Subsidiary may also Guarantee the Senior Secured
Exchange Notes and the Debt permitted by clause (a)(iii), (a)(vii) or (a)(viii)
above, the proceeds of which are applied to permanently reduce Total Bank
Exposure or prepay the Senior Secured Exchange Notes);

 

(ii)                                  Debt
incurred by a Subsidiary:

 

(x)                                   (1)
to finance the acquisition, development, construction, operation, maintenance
(including modifications and upgrades to comply with applicable laws and
regulations) or working capital requirements (including letters of credit or
guarantees to fund debt service reserve accounts or similar accounts or for the
benefit of power purchase agreements or commodity hedging counterparties) of a
Power Supply Business or other business owned, operated or managed (including
on a joint basis with others), directly or indirectly, by the Borrower (an “AES Business”)
or (2) to finance the acquisition of “greenfields” and the construction,
operation, maintenance or working capital requirements (including modifications
and upgrades to comply with applicable laws and regulations) or working capital
requirements (including letters of credit or guarantees to fund debt service
reserve accounts or similar accounts or for the benefit of power purchase
agreements or commodity hedging counterparties) necessary to develop and construct
such “greenfields” and to operate them as an AES Business or (3) that
constitutes Acquired Debt; and

 

(y)                                 that
is not also the Debt of any other Subsidiary with an interest in any other AES
Business (except for Debt incurred or assumed by Intermediate Holding Companies
which, at the time such Debt was incurred or assumed, in the

 

66

 

aggregate, contributed
less than 50% of the Parent Operating Cash Flow for the immediately preceding
four fiscal quarters and except that Excluded AES Entities can guarantee, or be
co-obligors with respect to, Debt of other Excluded AES Entities);

 

provided,
however, that to the extent that
the Debt incurred pursuant to this Section 5.07(b)(ii) is not used for the
purposes set forth in clauses (x)(1), (x)(2) or (x)(3) above, unless such Debt
is permitted by another provision hereunder, the portion of Net Cash Proceeds
of such Debt not used for such purposes shall be received by the Borrower or a
Qualified Holding Company whose Equity Interests have been pledged to the
Secured Holders pursuant to the Collateral Documents and such Net Cash Proceeds
shall be applied to prepay the Debt hereunder pursuant to and in the amounts
and order of priority set forth in Section 2.10(b);

 

(iii)          Debt existing on the date hereof;

 

(iv)          Debt incurred by a Subsidiary as a
bridge financing for a proposed Asset Sale, provided
that (x) the only direct or contingent obligor in respect of such Debt is the
holder of the asset that is the subject of such Asset Sale, (y) the interest
rate applicable to such Debt does not exceed the then applicable market
interest rate and (z) the Net Cash Proceeds from the incurrence of such
Debt shall be applied as set forth in Section 2.10(b);

 

(v)           Debt owing to the Borrower or a
Consolidated Subsidiary of the Borrower; provided
that Debt owed to the Borrower shall constitute Pledged Debt (to the
extent such Debtor is required to pledge such Debt pursuant to the Collateral
Documents) and delivered to the Collateral Trustees pursuant to the terms of
the Security Agreement; provided  further that any such Debt is permitted
under Section 5.16;

 

(vi)          Debt incurred by a Subsidiary, the Net
Cash Proceeds of which are received by the Borrower or a Qualified Holding
Company whose Equity Interests have been pledged to the Secured Holders
pursuant to the Collateral Documents and (x) in the case of Debt incurred by
IPALCO, an amount equal to the Bank’s Ratable Share of 100% of such Net Cash
Proceeds, (y) in the case of Debt issued by any Subsidiary Guarantor (excluding
up to $200,000,000 of Net Cash Proceeds from the issuance of Debt by AES Hawaii
Management or its Subsidiaries, 100% of such Net Cash Proceeds, and (z) in the
case of any other Subsidiary, an amount equal to the Banks’ Ratable share of
75% of such Net Cash Proceeds (other than $200,000,000 of additional Debt of
the Subsidiaries incurred after the date hereof) shall be applied to prepay the
Debt hereunder pursuant to and in the amount and order of priority set forth in
Section 2.10(b);

 

(vii)         Debt representing a refinancing,
replacement or refunding of Debt permitted by clauses (b)(ii), (b)(iii),
(b)(iv), (b)(vi) and (b)(viii); provided
that:

 

67

 

(A)          (x) the aggregate principal amount of
such Debt outstanding or available will not exceed the principal amount
outstanding or available at the time of such refinancing, replacement or
refunding (plus fees and expenses, including any premium and defeasance costs)
relating to such refinancing, replacement or refunding and (y) the Payment
Restrictions in such Debt (1) shall be no more restrictive than the Payment
Restrictions contained in the Debt being refinanced, replaced or refunded or
(2) in the opinion of the Borrower, are consistent with customary market terms
for a financing of its nature and do not adversely affect the ability of the
Borrower to meet its payment Obligations under the Financing Documents;

 

(B)           after giving effect to the issuance
of such Debt, no Default shall have occurred and be continuing under Section
5.16(b); and

 

(C)           if any Debt being refinanced,
replaced or refunded is subordinated to the Debt of any Subsidiary Guarantor,
such Debt shall be subordinated at least to the same extent;

 

(viii)        any Lien permitted by Section 5.10
that constitutes Debt not otherwise permitted by this Section 5.07; and

 

(ix)           Guarantees by Excluded AES Entities
of Debt and other Obligations of other Excluded AES Entities.

 

Notwithstanding any of
the foregoing in this Section 5.07(b), in no event shall Qualified Holding
Companies incur any Debt other than Debt permitted by the definition of
“Qualified Holding Company.”

 

Section 5.08  Use
of Proceeds.

 

The proceeds of the Loans
made, the Revolving Letters of Credit issued (or deemed issued) under this
Agreement will be used by the Borrower for working capital and other general
corporate purposes.  None of such
proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any “margin stock”
within the meaning of Regulation U.

 

Section 5.09  Restricted
Payments.

 

(a)           The Borrower will not declare or pay
any dividends, purchase, redeem, retire, defease or otherwise acquire for value
any of its Equity Interests now or hereafter outstanding, return any capital to
its stockholders as such, make any distribution of assets, Equity Interests,
obligations or securities to its stockholders, or permit any of its
Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for
value any Equity Interests in the Borrower, except the Borrower may declare and
pay cash dividends to the holders of the Existing Trust Preferred Securities
and refinance, replace or refund any of the Obligations arising in respect of
the Existing Trust Preferred Securities as provided in Section 5.07(a)(x).

 

68

 

(b)           Notwithstanding Section 5.09(a)
above, so long as any Revolving Credit Loan or Term Loan remains outstanding,
no Subsidiary Guarantor will, without the prior written consent of the Required
Banks, if, and for so long as, an Actionable Default shall have occurred and be
continuing, (i) declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account of any
shares of any class of capital stock of such Subsidiary Guarantor (other than
stock splits and dividends payable solely in equity securities of such
Subsidiary Guarantor), or purchase, redeem or otherwise acquire for value (or permit
any of its Subsidiaries to do so), any shares of any class of capital stock of
such Subsidiary Guarantor or any warrants, rights or options to acquire any
such shares, now or hereafter outstanding or (ii) make any Investment in or
otherwise advance any funds to the Borrower, or, any Subsidiary of the
Borrower; and

 

Section 5.10  Negative
Pledge.

 

Neither the Borrower nor
any Subsidiary of the Borrower will create, assume or suffer to exist any Lien
on any asset now owned or hereafter acquired by it, except:

 

(a)           Liens created under the Financing
Documents;

 

(b)           Liens existing on the date of this
Agreement securing Debt outstanding on the date of this Agreement;

 

(c)           any Lien existing on any asset of any
Person at the time such Person becomes a Subsidiary of the Borrower and not
created in contemplation of such event;

 

(d)           any Lien on any asset securing Debt
incurred or assumed for the purpose of financing all or any part of the cost of
acquiring such asset; provided
that such Lien attaches to such asset concurrently with or within 90 days after
the acquisition thereof;

 

(e)           any Lien on any asset of any Person
existing at the time such Person is merged or consolidated with or into the
Borrower or a Subsidiary of the Borrower and not created in contemplation of
such event; provided that such
Lien shall not attach to any asset held by the Borrower or any Subsidiary of
the Borrower immediately prior to such merger or consolidation;

 

(f)            any Lien existing on any asset prior
to the acquisition thereof by the Borrower or a Subsidiary of the Borrower and
not created in contemplation of such acquisition;

 

(g)           any Lien arising out of the
refinancing, extension, renewal or refunding of any Debt secured by any Lien
permitted by any of the foregoing clauses or clause (o) of this Section; provided that such Debt is not increased
and is not secured by any additional assets (other than, in the case of Debt
permitted under Section 5.07(b)(vii), Liens on assets of any Subsidiary
permitted under such Section 5.07(b)(vii) and Section 5.16(b) to be obligated
on such Debt);

 

(h)           Liens arising in the ordinary course
of its business which do not secure obligations in an aggregate amount in
excess of $25,000,000 and do not in the aggregate

 

69

 

materially detract from
the value of its assets or materially impair the use thereof in the operation
of its business;

 

(i)            Liens in connection with worker’s
compensation, social security obligations, taxes, assessments, statutory
obligations or other similar charges, good faith deposits in connection with
tenders, contracts or leases to which the Borrower or any of its Subsidiaries
is a party or other deposits required to be made in the ordinary course of
business and not in connection with borrowing money or obtaining advances or
credit; provided in each case
that the obligation or liability arises in the ordinary course of business and
if overdue is being contested in good faith by appropriate proceedings;

 

(j)            inchoate materialmen’s, mechanics’,
workmen’s, repairmen’s, employees’, carriers’, warehousemen’s, or other like
Liens arising in the ordinary course of business of the Borrower or its
Subsidiaries;

 

(k)           with respect to real property,
easements, rights of way, reservations and other minor defects or
irregularities in title which do not materially impair the use thereof for the
purposes for which it is held by the Borrower or its Subsidiaries;

 

(l)            Liens securing any future interest
or dividends payable in respect of any Debt permitted to be issued under
Section 5.07 for one six month period with respect to such Debt on cash or
Temporary Cash Investments which constituted a portion of the cash proceeds to
the Borrower or a Subsidiary of the Borrower from the issuance of such Debt;

 

(m)          Liens on cash and Temporary Cash
Investments securing Derivatives Obligations of the Subsidiaries permitted by
Section 5.20(c);

 

(n)           Liens on cash and Temporary Cash
Investments that secure contingent obligations to reimburse any bank or other
Person for amounts paid under Guarantees, surety or performance bond or similar
instrument that supports obligations to make Investments in Subsidiaries
permitted to be made under Section 5.16;

 

(o)           Liens securing Debt of Subsidiaries
(other than Subsidiary Guarantors) permitted by Section 5.07(b)(ii), (vi),
(vii) or (viii) or utility obligations or other customer, supplier or
contractor obligations associated with AES Businesses that are limited to the
assets and revenues of the related AES Businesses and the Capital Stock or
other assets (including contract rights) of Subsidiaries of the Borrower having
a direct or indirect interest in such AES Businesses;

 

(p)           Liens on the Creditor Group
Collateral securing the Debt of the Borrower permitted by Section 5.07(a); provided that the aggregate principal
amount (or accreted value, if applicable) of First-Priority Secured Debt and
Second-Priority Secured Debt does not exceed $3.375 billion; provided further that, subject to the
first proviso above, Liens on the Creditor Group Collateral securing
First Priority Secured Debt of the Borrower shall only secure First Priority
Secured Debt incurred after the Effective Date (other than Debt incurred
pursuant to the Financing Documents and Debt under Hedging Agreements up to an
aggregate principal amount not to exceed $50,000,000) up to an aggregate
principal amount equal to $90,000,000 plus
the sum of all amounts applied from time to time to (x) permanently prepay
Loans pursuant to

 

70

 

Section 2.10 hereunder or
permanently reduce Unused Revolving Credit Loan Commitments hereunder (without
duplication) or (y) repay or prepay the Senior Secured Exchange Notes; provided, further,
that upon the sale or other disposition of the Capital Stock of IPALCO or any
Subsidiary Guarantor or of all or substantially all of the assets of IPALCO or
any Subsidiary Guarantor, the basket set forth in the immediately preceding
proviso shall be reduced, solely in respect of Debt incurred on or after the
date of such sale or disposition, by an amount equal to the aggregate
Collateral Value of the Capital Stock or assets which are the subject of such
sale or disposition;

 

(q)           Liens securing Debt permitted by
Section 5.07(a)(ix) or Section 5.07(b)(iv), provided
that such Debt is secured solely by the asset that is the subject of the
proposed Asset Sale related to such Debt;

 

(r)            Liens on the assets of, or
Investments in, any Excluded AES Entity securing Debt or other obligations of
any Excluded AES Entity permitted to be incurred hereunder;

 

(s)           Liens on cash set aside at the time
of the issuance of Debt permitted to be incurred pursuant to Section 5.07 or
Temporary Cash Investments purchased with such cash, in either case to the
extent that such cash or Temporary Cash Investments pre-fund the repayment or
redemption of such Debt and are held in a third party escrow account with an
escrow agent on terms and conditions reasonably satisfactory to the Agent to be
applied for such purpose; and

 

(t)            Liens on cash and Temporary Cash
Investments that secure letters of credit up to an aggregate principal amount
not to exceed $200,000,000; provided
that at the time such Lien is created, no Default or Event of Default has
occurred or is continuing.

 

Section 5.11  Consolidations and Mergers.

 

The Borrower will not
merge into or consolidate with any Person or permit any Person to merge into
it, or permit any of its Subsidiaries to do so, except that:

 

(i)            any Subsidiary of the Borrower may
merge into or consolidate with any other Subsidiary, provided that, in the case of any such merger or
consolidation, the Person formed by such merger or consolidation shall be a
wholly owned Subsidiary of the Borrower and any third-party consents or waivers
necessary for such merger or consolidation shall have been obtained, provided further that, (A), in the case of
any such merger or consolidation to which a Pledged Subsidiary is a party, the
Person formed by such merger or consolidation shall be a “Pledged Subsidiary”
and (B) in the case of any such merger or consolidation to which a Subsidiary
Guarantor is a party, the Person formed by such merger or consolidation shall
be a Subsidiary Guarantor; and

 

(ii)           in connection with any sale or other
disposition permitted under Section 5.19 (other than clause (ii) thereof),
any Subsidiary of the Borrower may merge into or consolidate with any other
Person or permit any other Person to merge into or consolidate with it; and

 

(iii)          the Borrower may merge with another
Person;

 

71

 

provided, however, that in each case, such merger
or consolidation is otherwise in compliance with this Agreement and immediately
before and after giving effect thereto, no Default shall have occurred and be
continuing and, in the case of any merger to which the Borrower is a party, the
Borrower is the Person surviving such merger.

 

Notwithstanding any of
the foregoing in clauses (i) and (ii) of this Section 5.11, the Borrower will
not permit any Subsidiary of the Borrower with any direct or indirect interest
in (x) a Power Supply Business to consolidate or merge with, any other
Person with a direct or indirect interest in any other Power Supply Business or
any unrelated business or (y) any unrelated business to consolidate or merge
with, any other Person with a direct or indirect interest in any Power Supply
Business, subject to the proviso set forth in Section 5.16(b) so that
any transaction permitted by such proviso shall also be permitted by
this Section 5.11.

 

Section 5.12  Collateral Coverage Ratio.

 

The Collateral Coverage
Ratio at any date shall not be less than 3.00:1.0.

 

Section 5.13  Cash
Flow Coverage.

 

The Borrower will
maintain at the end of each fiscal quarter of the Borrower, a Cash Flow
Coverage Ratio of not less than the ratio set forth below for each period set
forth below:

 

	
  Four 

  Fiscal Quarters

  Ending

  	
   

  	
  Minimum
  Cash Flow

  Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2003

  	
   

  	
  1.20

  	
   

  
	
  December 31,
  2003

  	
   

  	
  1.20

  	
   

  
	
  March 31,
  2004

  	
   

  	
  1.20

  	
   

  
	
  June 30,
  2004

  	
   

  	
  1.20

  	
   

  
	
  September 30,
  2004

  	
   

  	
  1.25

  	
   

  
	
  December 31,
  2004

  	
   

  	
  1.25

  	
   

  
	
  March 31,
  2005

  	
   

  	
  1.30

  	
   

  
	
  June 30,
  2005

  	
   

  	
  1.35

  	
   

  
	
  September 30,
  2005

  	
   

  	
  1.35

  	
   

  
	
  December 31,
  2005

  	
   

  	
  1.40

  	
   

  
	
  March 31,
  2006

  	
   

  	
  1.40

  	
   

  
	
  June 30,
  2006

  	
   

  	
  1.40

  	
   

  
	
  September 30,
  2006

  	
   

  	
  1.40

  	
   

  
	
  December 31,
  2006

  	
   

  	
  1.40

  	
   

  
	
  March 31,
  2007

  	
   

  	
  1.40

  	
   

  
	
  June 30,
  2007

  	
   

  	
  1.45

  	
   

  
	
  September 30,
  2007

  	
   

  	
  1.45

  	
   

  
	
  December 31,
  2007

  	
   

  	
  1.50

  	
   

  
	
  March 31,
  2008

  	
   

  	
  1.50

  	
   

  

 

72

 

Section 5.14  Recourse Debt to Cash Flow Ratio.

 

The Borrower will
maintain at the end of each fiscal quarter of the Borrower, a Recourse Debt to
Cash Flow Ratio of not more than the ratio set forth below for each period set
forth below:

 

	
  Four

  Fiscal Quarter Ending

  	
   

  	
  Maximum
  Recourse

  Debt to Cash Flow Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2003

  	
   

  	
  8.5

  	
   

  
	
  December 31,
  2003

  	
   

  	
  8.5

  	
   

  
	
  March 31,
  2004

  	
   

  	
  8.5

  	
   

  
	
  June 30,
  2004

  	
   

  	
  8.5

  	
   

  
	
  September 30,
  2004

  	
   

  	
  8.5

  	
   

  
	
  December 31,
  2004

  	
   

  	
  8.5

  	
   

  
	
  March 31,
  2005

  	
   

  	
  8.35

  	
   

  
	
  June 30,
  2005

  	
   

  	
  8.25

  	
   

  
	
  September 30,
  2005

  	
   

  	
  8.15

  	
   

  
	
  December 31,
  2005

  	
   

  	
  8.00

  	
   

  
	
  March 31,
  2006

  	
   

  	
  7.90

  	
   

  
	
  June 30,
  2006

  	
   

  	
  7.85

  	
   

  
	
  September 30,
  2006

  	
   

  	
  7.80

  	
   

  
	
  December 31,
  2006

  	
   

  	
  7.75

  	
   

  
	
  March 31,
  2007

  	
   

  	
  7.70

  	
   

  
	
  June 30,
  2007

  	
   

  	
  7.65

  	
   

  
	
  September 30,
  2007

  	
   

  	
  7.60

  	
   

  
	
  December 31,
  2007

  	
   

  	
  7.55

  	
   

  
	
  March 31,
  2008

  	
   

  	
  7.50

  	
   

  

 

Section 5.15  Transaction with Affiliates.

 

Except pursuant to
agreements existing on the date hereof and listed on Schedule II attached
hereto, the Borrower will not, and will not permit any Subsidiary of the
Borrower to, directly or indirectly, in any transaction involving aggregate
consideration in excess of $1,000,000, pay any funds to or for the account of,
make any investment (whether by acquisition of stock or indebtedness, by loan,
advance, transfer of property, guarantee or other agreement to pay, purchase or
service, directly or indirectly, any Debt, or otherwise) in, lease, sell,
transfer or otherwise dispose of any assets, tangible or intangible, to, or
participate in, or effect any transaction in connection with any joint
enterprise or other joint arrangement with, any Affiliate; provided, however,
that the foregoing provisions of this Section shall not prohibit
(a) the Borrower or any Subsidiary of the Borrower from making sales to or
purchases from any Affiliate and, in connection therewith, extending credit or
making payments, or from making payments for services rendered by any
Affiliate, if such sales or purchases are made or such services are rendered in
the ordinary course of business and on terms and conditions at least as
favorable to the Borrower or such Subsidiary as the terms and conditions which
would apply in a similar transaction with a Person not an Affiliate; (b) the
Borrower or any Subsidiary of the Borrower from making payments of principal,
interest and premium on any Debt of the

 

73

 

Borrower or such
Subsidiary held by an Affiliate if the terms of such Debt are substantially as
favorable to the Borrower or such Subsidiary as the terms which could have been
obtained at the time of the creation of such Debt from a lender which was not
an Affiliate and (c) the Borrower or any Subsidiary of the Borrower from
participating in, or effecting any transaction in connection with, any joint
enterprise or other joint arrangement with any Affiliate if the Borrower or
such Subsidiary participates in the ordinary course of its business and on a
basis no less advantageous than the basis on which such Affiliate
participates.  The provisions of this
Section 5.15 shall not apply to (x) transactions between the Borrower
or any of its Subsidiaries, on the one hand, and any officer, director or
employee of the Borrower or any of its Subsidiaries, on the other hand, that
are approved by the Board of Directors of the Borrower or any committee of the
Board of Directors consisting of the Borrower’s independent directors and (y) the
payment of reasonable and customary regular fees to directors of the Borrower
or a Subsidiary of the Borrower.

 

Section 5.16  Investments in Other Persons.

 

(a)           The Borrower shall not make or hold,
or permit any of its Subsidiaries to make or hold, any Investment in any
Person, except:

 

(i)            (A) Investments by the Borrower and
its Subsidiaries in their Subsidiaries outstanding on the date hereof, (B)
additional equity Investments in Obligors and (C) additional Investments
in Obligors consisting of intercompany Debt provided
that any Debt owing to the Borrower shall (x) constitute Pledged Debt and be
delivered to the Collateral Trustees pursuant to the terms of the Security
Agreement and (y) be subordinated in all respects to the Obligations of the
Obligors under the Financing Documents;

 

(ii)           loans and advances to employees in
the ordinary course of the business of the Borrower and its Subsidiaries as
presently conducted in an aggregate principal amount not to exceed $10,000,000
at any time outstanding;

 

(iii)          Investments by the Borrower and its
Subsidiaries in Temporary Cash Investments;

 

(iv)          Investments existing on the date
hereof and Investments in Subsidiaries resulting from drawings under, or
renewals or extensions of, letters of credit, surety bonds, Guarantees or
performance bonds supporting obligations of Subsidiaries issued and outstanding
on the Closing Date (including renewals and extensions thereof) and Investments
in Subsidiaries to cash collateralize obligations supported by such letters of
credit, bonds or Guarantees if they expire or are cancelled undrawn;

 

(v)           Investments by the Borrower and its
Subsidiaries in any non-cash proceeds received by the Borrower or such
Subsidiary in connection with any transaction permitted by the provisions of Section
5.19;

 

(vi)          Investments by the Borrower and its
Subsidiaries in any of their Debt in the form of any payments, redemption or
repurchase of such Debt not prohibited by this Agreement;

 

74

 

(vii)         Investments by an Excluded AES Entity
in another Excluded AES Entity or in another Person, the assets of which shall
not consist of Debt or Equity Interests of the Borrower or any of its
Subsidiaries, other than Debt of the Borrower or any of its Subsidiaries with a
fair market value (together with the fair market value of Debt of the Borrower
or any of its Subsidiaries received by the Borrower or any Subsidiary as
non-cash proceeds in any transaction permitted by the provisions of Section
5.19) not in excess of $15,000,000 in the aggregate;

 

(viii)        Investments by the Borrower and its
Subsidiaries in their Subsidiaries or in Excluded AES Entities resulting from
the creation, dissolution, restructuring or reorganization of the holdings of
the Borrower, any Subsidiary or Excluded AES Entity permitted by Section
5.16(b) that does not result in the net increase in the amount invested by the
Borrower and its Subsidiaries in their Subsidiaries or in Excluded AES Entities
and does not result in a Default;

 

(ix)           Investments received in connection
with the bankruptcy or reorganization of, or settlement of delinquent accounts
and disputes with, or as a result of a default by, customers or suppliers to,
or co-investors in, an AES Business (including, without limitation, pursuant to
the Borrower’s existing settlement agreement with PSEG pursuant to which the
Borrower will acquire the minority interests currently held by PSEG in certain
AES Businesses located in Argentina in exchange for a $30,000,000 settlement
payment, of which $15,000,000 has been paid prior to the date hereof);

 

(x)            Investments by the Borrower and its
Subsidiaries not otherwise permitted under this Section 5.16; provided that, with respect to each
Investment made pursuant to this clause (x):

 

(A)          Investments by the Borrower in
Excluded AES Entities after the Effective Date shall not exceed $200,000,000; provided that at any time that the
Recourse Debt to Cash Flow Ratio is less than 4.00 to 1.00 there shall be no
limitation on Investments in Excluded AES Entities;

 

(B)           such Investment shall be in property
and assets which are part of, or in lines of business which are, substantially
the same lines of business as, or ancillary to, one or more of the principal
businesses of the Borrower and its Subsidiaries in the ordinary course; and

 

(C)           (1) immediately before and
immediately after giving pro forma effect to any such purchase or
other acquisition, no Event of Default shall have occurred and be continuing
and (2) immediately after giving effect to such purchase or other acquisition,
the Borrower and its Subsidiaries shall be in pro forma compliance with
all of the covenants set forth in Sections 5.12, 5.13 and 5.14, such compliance
to be determined on the basis of the financial information most recently
delivered to the Agent and the Bank Parties as though such Investment had been
consummated as of the first day of the fiscal period covered thereby;

 

75

 

(xi)           (A) Investments by any Subsidiary
with funds or other property received by such Subsidiary from the Borrower or a
Subsidiary as a result of an Investment otherwise permitted hereby and (B)
Investments by any Subsidiary (other than a Qualified Holding Company) with
funds or other property generated by its operations (including by way of
financings permitted hereby) or by the operations (including by way of
financings permitted hereby) of its Subsidiaries in any other Subsidiary which
either is a direct or indirect Subsidiary of such investing Subsidiary or a
direct or indirect parent company of such investing Subsidiary and the proceeds
of such Investment shall be applied by the Subsidiary receiving such Investment
solely for funding the operation, maintenance (including modifications and
upgrades to comply with applicable laws and regulations), on-going construction
or working capital requirements which are necessary for the operation of the
business of such Subsidiary or for such Subsidiary to satisfy its contractual
and legal obligations;

 

(xii)          Investments by any Subsidiary of the
Borrower consisting of loans made to any Person which directly or indirectly
holds the Equity Interests of such Subsidiary;

 

(xiii)         Investments of up to $31,000,000 in AES
Andres, B.V. (“Andres”) made,
directly or indirectly, with the proceeds of Debt incurred by Dominican Power
Partners, LDC (“Los Mina”)
pursuant to Section 5.07(b)(ii) to be used by Andres to finance completion of
natural gas facilities that will provide fuel to Los Mina when it converts to
natural gas as a fuel supply; and

 

(xiv)        Investments in Subsidiaries resulting
from drawings under, or renewals or extensions of, Guarantees supporting
obligations of Subsidiaries under any Secured Treasury Management Service
Agreement (including renewals and extensions thereof) and Investments in
Subsidiaries to cash collateralize obligations supported by such Guarantees if
they expire or are cancelled undrawn.

 

(b)           Notwithstanding any of the foregoing
in clause (a) above, the Borrower will not permit any Subsidiary of the
Borrower with any direct or indirect interest in (i) a Power Supply
Business to make any Investment in, or consolidate or merge with, any other
Person with a direct or indirect interest in any other Power Supply Business or
any unrelated business or (ii) any unrelated business to make any
Investment in, or to consolidate or merge with, any other Person with a direct
or indirect interest in any Power Supply Business; provided that (x) Investments permitted by Section
5.16(a)(ii), (iii), (v), (vi), (vii), (viii), (ix), (xii) and (xiv) shall be
permitted notwithstanding the foregoing and (y) a Subsidiary of the Borrower
(each, an “Intermediate Holding Company”)  may
serve as a holding company for any or all of the Borrower’s direct and indirect
interests in a Power Supply Business or an unrelated business, so long as:

 

(1)           each such Intermediate Holding
Company’s direct and indirect interest in any Power Supply Business or
unrelated business shall be limited to the ownership of Capital Stock or Debt
obligations of a Person with a direct or indirect interest in such Power Supply
Business or unrelated business;

 

76

 

(2)           no Lien shall exist upon any asset of
any Intermediate Holding Company (other than Liens on the Capital Stock of, or
loan to, the Borrower or a Subsidiary of an Intermediate Holding Company
securing Debt of such Intermediate Holding Company or such Subsidiary and Liens
securing Debt permitted by Sections 5.07(b)(i), (b)(ii), (b)(iii),
(b)(iv), (b)(vi), (b)(vii) and (b)(viii)); and

 

(3)           no Intermediate Holding Company shall
incur, assume, create or suffer to exist any Debt (including any Guarantee of
Debt) other than Debt owing to the Borrower, any Qualified Holding Company or
any Subsidiary of such Intermediate Holding Company and Debt permitted by
Sections 5.07(b)(i), (ii), (iii), (iv), (vi), (vii) or (viii).

 

Section 5.17  No
Prepayment of Debt.

 

Neither the Borrower nor
any Subsidiary shall, directly or indirectly, prepay, redeem, purchase, defease
or otherwise satisfy prior to the scheduled maturity thereof in any manner, or
make any payment in violation of any subordination terms of, any Debt of the
Borrower and its Subsidiaries, except (i) the prepayment of the Loans in
accordance with this Agreement, the required payments of the Senior Secured
Exchange Notes in accordance with the Senior Secured Exchange Note Indenture
and any required prepayments of Debt permitted to be incurred pursuant to
Section 5.07(a)(viii); (ii) the refinancing or acquisition of Debt to the
extent permitted hereunder; (iii) regularly scheduled or required repayments or
redemptions of Debt; (iv) Investments in Temporary Cash Investments; (v)
the exchange of Debt for an Equity Issuance by the Borrower pursuant to a Debt
Exchange Equity Issuance; (vi) the repayment or prepayment of Debt permitted by
Section 5.07(b)(v); (vii) regularly scheduled or required repayments or
redemptions of the Existing Trust Preferred Securities; (viii) any repayment of
Debt with the Equity Basket or the Asset Sale Proceeds Basket at such time;
(ix) the prepayment, redemption, purchase, defeasance or other satisfaction
prior to the scheduled maturity thereof by any Excluded AES Entity of its
outstanding Debt; (x) the refinancing, replacement or refunding of the Existing
Trust Preferred Securities permitted by Section 5.07(a)(x); (xi) prepayments by
a Subsidiary of its outstanding Debt that reduce or eliminate Payment
Restrictions applicable to such Subsidiary or make it more likely that such
Subsidiary will be able to transfer amounts to the Borrower or a Qualified
Holding Company whose Equity Interests have been pledged to the Secured Holders
pursuant to the Collateral Documents; (xii) the prepayment of the Senior
Secured Exchange Notes and (xiii) the prepayment, repayment, redemption,
purchase defeasance or other satisfaction prior to the maturity thereof of any
other Debt (including, without limitation, the Existing Trust Preferred
Securities) in an aggregate amount not to exceed $600,000,000; provided that so long as the Borrower
maintains a Minimum Liquidity Level of $600,000,000, such amount shall increase
to $800,000,000; provided  further that if the Borrower maintains a
Minimum Liquidity Level of $600,000,000 and so long as the Recourse Debt to
Cash Flow Ratio is less than 5.0:1.0, such amount shall increase to
$1,050,000,000.

 

Section 5.18  Upstreaming of Net Cash Proceeds by
Subsidiaries.

 

The Borrower shall cause
any of its Subsidiaries who have received Net Cash Proceeds from (i) any Asset
Sale, (ii) the incurrence or sale of any Debt permitted by Section 5.07(b)(vii)
or (iii) any Equity Issuance to transfer such Net Cash Proceeds to the
Borrower; provided that such
transfer shall not be required to be made if such transfer would violate any

 

77

 

applicable contracts or
would violate applicable law or if applicable law would require minority
shareholder approval (it being understood that the Borrower shall use
reasonable efforts to obtain such minority shareholder approval), a valuation
or a discretionary order or would, in the Borrower’s good faith determination
or the good faith determination of a majority of the board of directors of such
Subsidiary, involve a reasonable likelihood of there being a breach of fiduciary
duties by the directors of such Subsidiary. 
In connection with managing transfers of Net Cash Proceeds pursuant to
this Section 5.18, (a) the Borrower may cause Net Cash Proceeds to be
transferred to Qualified Holding Companies whose Equity Interests have been
pledged to the Secured Holders pursuant to the Collateral Documents if the
Borrower nonetheless makes the related mandatory prepayment that would
otherwise be required by Section 2.10(b) using funds not otherwise required to
be made the basis of any mandatory prepayment and (b) if the Net Cash Proceeds
are less than $10,000,000, the Borrower shall not be required to cause such Net
Cash Proceeds effectively to be transferred directly or indirectly to the
Borrower and applied pursuant to Section 2.10(b) until the aggregate Net Cash
Proceeds not so applied equal or exceed $10,000,000.  In connection with managing transfers of Net Cash Proceeds
pursuant to this Section 5.18 and making loans, investments and other advances
to Subsidiaries, the Borrower may cause Net Cash Proceeds to be transferred
among Subsidiaries as permitted by Section 5.16, rather than transferred to the
Borrower, in lieu of loans, investments or other advances the Borrower would
otherwise be permitted to make as permitted by Section 5.16 and would make; provided that amounts that otherwise would
be paid to the Borrower or a Qualified Holding Company whose Equity Interests
have been pledged to the Secured Holders pursuant to the Collateral Documents
shall be treated as an Investment and such Investment must be permitted by
Section 5.16.

 

Section 5.19  Sales, Etc., of Assets.

 

The Borrower will not
sell, lease, transfer or otherwise dispose of, or permit any of its
Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or
grant any option or other right to purchase, lease or otherwise acquire any
assets, except:

 

(i)            sales of assets in the ordinary
course of its business and the granting of any option or other right to
purchase, lease or otherwise acquire assets in the ordinary course of its
business;

 

(ii)           in a transaction permitted by
Section 5.11;

 

(iii)          sales, transfers or other dispositions
of assets among the Borrower and its Subsidiaries; provided, however,
that (a) in respect of sales, transfers or other dispositions by the Borrower
to its Subsidiaries, the Borrower shall not sell, lease, transfer or otherwise
dispose of any assets (other than Excluded AES Entities) to any Excluded AES
Entity, and (b) in respect of sales, transfers or other dispositions by Subsidiaries
to other Subsidiaries, (1) with respect to Excluded AES Entities, only Excluded
AES Entities may sell, transfer or otherwise dispose of assets to another
Excluded AES Entity and (2) with respect to other Subsidiaries, such sales,
transfers or other dispositions are either permitted by Section 5.16 or the
transferring Subsidiary has received fair value for such sales, transfers or
dispositions; and

 

78

 

(iv)          sales, transfers or other dispositions
of assets so long as (i) the consideration received by the Borrower and its
Subsidiaries for such asset shall have been determined on the basis of
arms-length negotiations with a non-Affiliate, (ii) except for sales of assets
or Equity Interests of, or other Investments in, Excluded AES Entities or AES
Bolivia Telecommunications S.A., no less than 90% of the purchase price for
such asset shall be paid to the Borrower and its Subsidiaries solely in cash or
securities or other obligations that can be readily converted to cash so long
as such securities or other obligations are converted to cash on the closing
date of such sale, transfer or other disposition; provided that (A) not less
than 80% of the purchase price shall consist of cash in the case of the sale of
the Power Supply Businesses known as “Meghnaghat”, “Haripur”, and “Kelanitissa”
and (B) in the case of a sale, transfer or other disposition of a Power Supply
Business in development or under construction, the applicable amount of the
purchase price required to be received in cash shall be reduced dollar for
dollar by the amount that such sale reduces any Capital Commitment of the
Borrower and (iii) any non-cash proceeds received by the Borrower or AES BVI II
from the sale of such assets shall not consist of Debt or Equity Interests of
the Borrower or any of its Subsidiaries (other than Debt of the Borrower or any
of its Subsidiaries with a fair market value (together with the fair market
value of the Debt of the Borrower or any of its Subsidiaries comprising the
assets of any Person in which an Excluded AES Entity has made an Investment
pursuant to Section 5.16(a)(vii) not in excess of $15,000,000 in the aggregate)
and shall be pledged to the Collateral Trustees as Security Agreement
Collateral under the Security Agreement;

 

(v)           Liens permitted by the Financing
Documents;

 

(vi)          the sale of Equity Interests in a
project in development or under construction the proceeds from which shall be
used to fund the cost of development or construction of such project;

 

(vii)         (1) a disposition resulting from the
bona fide exercise by governmental authority of its claimed or actual power of
eminent domain; (2) any cash payments otherwise permitted under this Agreement;
(3) any sale, transfer, conveyance, lease or other disposition of an asset in
the ordinary course of business and consistent with past practice pursuant to
the terms of any power sales agreement or steam sales agreement or other
agreement or contract related to the output or product of, or services rendered
by, a Power Supply Business as to which a Subsidiary is the supplying party;
(4) any disposition of any Equity Interest in a Power Supply Business pursuant
to the terms of a joint venture agreement, shareholders agreement or similar
arrangement existing as of the date hereof that requires one shareholder to
transfer its interest to another upon terms and in circumstances customary for
the industry (provided that any
cash received in connection with such disposition shall be treated as Net Cash
Proceeds from a Covered Asset Sale); or (5) any disposition of assets subject
to a Lien permitted hereby that is transferred to the lienholder or its
designee in satisfaction or settlement of the lienholder’s claim or a
realization upon a security interest permitted under this Agreement;

 

79

 

(viii)        any disposition in connection with
directors’ qualifying shares or investments by foreign nationals mandated by
applicable law;

 

(ix)           any sale of shares of Redeemable
Stock of a Subsidiary to the extent such shares constitute Debt permitted by
Section 5.07;

 

(x)            a sale-leaseback transaction
involving substantially all of the assets of a Power Supply Business where a
Subsidiary sells the Power Supply Business to a Person in exchange for the
assumption by that Person of the Debt financing the Power Supply Business and
the Subsidiary leases the Power Supply Business from such Person; provided that such sale, assumption and
lease are consummated in each case on a no less than fair market value basis;

 

(xi)           dispositions of contract rights,
development rights and resource data made in connection with the initial
development of an AES Business and prior to the commencement of commercial
operation of such AES Business for reasonably equivalent value; and

 

(xii)          transactions made in order to enhance
the repatriation of cash from a Subsidiary where such Subsidiary is organized
under the laws of any jurisdiction other than the United States or any state
thereof to the extent that such cash is received or held by a Person subject in
respect of such cash to the tax laws of a jurisdiction other than the United
States or any state thereof or in order to increase the after-tax amounts
thereof available for immediate distribution (provided
that if any asset that is the subject of such transaction is subject to a Lien
in favor of the Secured Holders immediately prior to such transaction then such
asset shall be subject to a Lien in favor of the Secured Holders immediately
after such transaction).

 

provided
that in the case of sales of assets pursuant to clause (iv) above, the Borrower
shall apply the Net Cash Proceeds from such sale to offer to prepay the Term
Loans pursuant to Section 2.10(b), as specified therein.

 

Section 5.20  Off
Balance Sheet Obligations; Derivative Obligations.

 

(a)           The
Borrower shall not have, incur or undertake, or permit any of its Subsidiaries
to have, incur or undertake any Off Balance Sheet Obligations, other than Off
Balance Sheet Obligations existing on the date hereof.

 

(b)           The
Borrower shall not enter into any Hedging Agreement, except for Hedging
Agreements entered into to hedge against fluctuations in interest rates or
foreign exchange rates incurred in the ordinary course of business and
consistent with prudent business practice.

 

(c)           The
Borrower shall not permit its Subsidiaries to enter into any Hedging
Agreements, except Hedging Agreements entered into to hedge against
fluctuations in interest rates, foreign exchange, and commodity prices incurred
in the ordinary course of business and consistent with prudent business
practice.

 

80

 

Section 5.21  Covenant
to Give Security.

 

(a)           Upon
(x) the formation or acquisition of any new direct Subsidiary by the Borrower
or AES BVI II having a fair market value in excess of $3,000,000 or (y) the
Investment by the Borrower and its Subsidiaries in any direct Subsidiary of the
Borrower or AES BVI II that was not a “Pledged Subsidiary” on the Closing Date
such that aggregate assets of such Subsidiary have a fair market value in
excess of $3,000,000, then in each case at the Borrower’s expense:

 

(i)            within 10 days after (A) such
formation or acquisition and (B) such Investment, furnish to the Agent a
description of such Subsidiary, in each case in detail satisfactory to the
Agent,

 

(ii)           within 15 days after such formation
or acquisition of any new Subsidiary or such Investment in any direct
Subsidiary of the Borrower or AES BVI II that was not a “Pledged Subsidiary” on
the Closing Date, duly execute and deliver security agreement supplements (if
necessary) as specified by, and in form and substance satisfactory to the
Agent, securing payment of all of the Obligations of the Borrower under the
Financing Documents; provided
that if such new Subsidiary is a CFC, only 65% of such Equity Interests shall
be pledged in favor of the Secured Holders,

 

(iii)          within 30 days after such formation or
acquisition, take, and cause each Loan Party to take, whatever action
(including, without limitation, the recording of mortgages, the filing of
Uniform Commercial Code financing statements, the giving of notices and the
endorsement of notices on title documents) may be necessary or advisable in the
opinion of the Agent to vest in the Collateral Trustees (or in any
representative of the Collateral Trustees designated by it) valid and
subsisting Liens on the properties purported to be subject to the pledges,
security agreement supplements, and security agreements delivered pursuant to
this Section 5.21, enforceable against all third parties in accordance
with their terms, and

 

(iv)          at any time and from time to time,
promptly execute and deliver any and all further instruments and documents and
take all such other action as the Agent may deem necessary or desirable in
obtaining the full benefits of, or in perfecting and preserving the Liens of,
such pledges, assignments, security agreement supplements and security
agreements.

 

provided,
however that Section 5.21(a)(y) shall not be applicable to
Subsidiaries for which a grant or perfection of a Lien on such Subsidiary’s
stock would require approvals and consents from foreign and domestic
regulations and from lenders to, and suppliers, customers or other contractual
counterparties of, such Subsidiary.

 

(b)           Other
than with respect to the Non-Pledged Subsidiaries, the Secured Holders shall
have valid, perfected first priority Lien on (i) 65% of the Equity Interests of
each direct Subsidiary of the Borrower that is (A) organized under the laws of
a jurisdiction other than the United States or any state thereof, or (B) a
limited liability company organized under the laws of the United States or any
state thereof the direct or  indirect
Subsidiary of which is

 

81

 

organized under the laws of a jurisdiction other than the United States
or any state  thereof,
(ii) 100% of the Equity Interests of each direct Subsidiary of the
Borrower that is organized under the laws of the United States or any state
thereof other than those Subsidiaries described by clause (i)(B) above and
(iii) 65% of the Equity Interests of each direct Subsidiary of AES BVI II.

 

Section 5.22  Further
Assurances.

 

(a)           Promptly
upon request by the Agent, or any Bank Party through the Agent, correct, and
cause each of the other Loan Parties promptly to correct, any material defect
or error that may be discovered in any Financing Document or in the execution,
acknowledgment, filing or recordation thereof that affect the validity or
enforceability thereof, and

 

(b)           Promptly
upon request by the Agent, or any Bank Party through the Agent, do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register any and all such further acts, pledge agreements, assignments,
financing statements and continuations thereof, termination statements, notices
of assignment, transfers, certificates, assurances and other instruments as the
Agent, or any Bank Party through the Agent, may reasonably require from time to
time in order to (A) carry out more effectively the purposes of the
Financing Documents, (B) to the fullest extent permitted by applicable
law, subject to the Borrower’s properties, assets, rights or interests to the
Liens now or hereafter intended to be covered by any of the Collateral Documents,
(C) perfect and maintain the validity, effectiveness and priority of any
of the Collateral Documents and any of the Liens intended to be created
thereunder and (D) assure, convey, grant, assign, transfer, preserve,
protect and confirm more effectively unto the Secured Holders the rights
granted or now or hereafter intended to be granted to the Secured Holders under
any Financing Document or under any other instrument executed in connection
with any Financing Document to which any Loan Party is or is to be a party.

 

ARTICLE VI

 

DEFAULTS

 

Section 6.01  Events
of Default.

 

If one or more of the following events (“Events of Default”) shall have occurred and be continuing:

 

(a)           any
Loan Party shall fail to pay when due any principal of any Loan or any
Reimbursement Obligation, or shall fail to pay within three days of the date
when due any interest, fees or other amounts payable under any Financing
Document;

 

(b)           the
Borrower shall fail to observe or perform any covenant contained in Sections
5.07 to 5.19, inclusive, or except in accordance with the terms hereof, the
Subsidiary Guaranty in Article 9 shall cease to be in full force and
effect;

 

82

 

(c)           any
Loan Party shall fail to observe or perform any covenant or agreement contained
in any Financing Document (other than those covered by clause (a) or (b) above)
for 20 days after written notice thereof has been given to the Borrower by the
Agent at the request of any Bank Party;

 

(d)           any
representation, warranty, certification or statement made by any Loan Party in
any Financing Document or in any certificate, financial statement or other
document delivered pursuant to any Financing Document shall prove to have been
incorrect in any material respect when made (or deemed made);

 

(e)           the
Borrower shall fail to make any payment in respect of any Material Debt or
Material Hedge Agreement when due or within any applicable grace period;

 

(f)            any
event or condition shall occur which (i) results in the acceleration of
the maturity of any Material Debt of the Borrower or the early termination of a
Material Hedge Agreement of the Borrower by the Borrower’s counterparty or the
acceleration of any Material Debt or the early termination by the counterparty
of such Subsidiary or Subsidiaries of any Material Hedge Agreement of any
(x) Subsidiary of the Borrower that contributed 15% or more to Parent
Operating Cash Flow for the four most recently completed fiscal quarters of the
Borrower or (y) Subsidiaries of the Borrower that in the aggregate
contributed 15% or more to Parent Operating Cash Flow for the four most
recently completed fiscal quarters of the Borrower (in the case of clauses (x)
and (y) above, together with any Person in which such Subsidiary or
Subsidiaries have a direct or indirect equity Investment); (ii) results in
the termination of any commitment to provide financing in an amount in excess
of $50,000,000 to the Borrower or any Material AES Entity or (iii) in the
case of the Borrower, enables (or, with the giving of notice or lapse of time
or both, would enable) the holder of any Material Debt or counterparty to any
Material Hedge Agreement of the Borrower or any Person acting on such holder’s
or counterparty’s behalf to, in the case of any Material Debt, accelerate the maturity
thereof or, in the case of any Material Hedge Agreement, to terminate such
Material Hedge Agreement; provided
that the ability of any Person to demand payment under a Guarantee by the
Borrower of Material Debt or a Material Hedge Agreement of any Subsidiary shall
not constitute an Event of Default under this clause (f) unless either (x) the
demand for payment arises as a result of a default by the Borrower under such
Guarantee or (y) such Person has demanded payment from the Borrower and the
Borrower has not made such payment within 15 Business Days following such
demand (or such longer grace period as is allowed under such Guarantee);

 

(g)           the
Borrower or any Significant AES Entity shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the benefit
of creditors, or shall fail generally to pay its debts as they become due, or
shall take any corporate action to authorize any of the foregoing;

 

83

 

(h)           an
involuntary case or other proceeding shall be commenced against the Borrower or
any Significant AES Entity seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Significant AES Entity
under the federal bankruptcy laws as now or hereafter in effect;

 

(i)            any
member of the ERISA Group shall fail to pay when due an amount or amounts
aggregating in excess of $15,000,000 which it shall have become liable to pay
under Title IV of ERISA; or notice of intent to terminate a Material Plan shall
be filed under Title IV of ERISA by any member of the ERISA Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of
Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer
Plans which could cause one or more members of the ERISA Group to incur a
current payment obligation in excess of $15,000,000;

 

(j)            a
judgment or order for the payment of money in excess of $25,000,000 shall be
rendered against the Borrower or (x) any Subsidiary of the Borrower that
contributed 10% or more to Parent Operating Cash Flow for the four most
recently completed fiscal quarters of the Borrower or (y) more than one
Subsidiary of the Borrower and such Subsidiaries in the aggregate contributed
15% or more to Parent Operating Cash Flow for the four most recently completed
fiscal quarters of the Borrower (in the case of clauses (x) and (y) above,
together with any Person in which such Subsidiary or Subsidiaries have a direct
or indirect equity Investment), and such judgment or order shall continue
unsatisfied and unstayed for a period of 10 days;

 

(k)           any
person or group of persons (within the meaning of Section 13 or 14 of the
Securities Exchange Act of 1934, as amended) other than a member of the AES
Management Group shall have acquired beneficial ownership (within the meaning
of Rule 13d-3 promulgated by the Securities and Exchange Commission under
said Act) of 32.5% or more of the outstanding shares of common stock of the
Borrower; during any period of twelve consecutive calendar months, individuals
who were directors of the Borrower on the first day of such period (or who were
appointed or nominated for election as directors of the Borrower by at least a
majority of the individuals who were directors on the first day of such period)
shall cease to constitute a majority of the board of directors of the Borrower;
or

 

(l)            any
Collateral Document after delivery thereof pursuant to Section 3.01 shall
for any reason (other than pursuant to the terms thereof) cease to create a
valid and perfected first priority lien on and security interest in a material
portion of the Collateral purported to be covered thereby,

 

84

 

then, and in every such
event, the Agent shall (i) if requested by the Required Banks, by notice
to the Borrower terminate the Revolving Credit Loan Commitments and they shall
thereupon terminate and (ii) if requested by the Required Banks, by notice
to the Borrower declare the Notes, all interest thereon, and all other amounts
payable under this Agreement and the other Financing Documents to be, and the
Notes, all such interest thereon and all such other amounts shall thereupon
become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any Automatic
Acceleration Event, without any notice to the Borrower or any other act by the
Agent or the Banks, the Revolving Credit Loan Commitments shall thereupon
terminate and the Notes, all interest thereon, and all other amounts payable
under this Agreement and the other Financing Documents shall become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.

 

Section 6.02  Notice
of Default.

 

The Agent shall give notice to the Borrower under
Section 6.01(c) promptly upon being requested to do so by any Bank Party
and shall thereupon notify all the Banks thereof.

 

Section 6.03  Cash
Collateral.

 

If any Automatic Acceleration Event shall occur or the
Loans of the Bank Parties shall have otherwise been accelerated or the
Revolving Credit Loan Commitments have been terminated pursuant to Section 6.01,
then without any request or the taking of any other action by the Agent or any
of the Bank Parties, the Borrower shall be obligated forthwith to pay to the
Collateral Agent an amount in immediately available funds equal to the then
aggregate amount available for Revolving L/C Drawings (regardless of whether
any conditions to any such Revolving L/C Drawings can then be met) under all
Revolving Letters of Credit at the time outstanding, to be held by the
Collateral Agent as cash collateral as provided in Section 2.14 and
Section 2.15, in the case of all Revolving Letters of Credit.

 

ARTICLE VII

 

THE AGENT

 

Section 7.01  Appointment
and Authorization.

 

Each Bank Party (on behalf of itself and its
Affiliates as potential Hedge Banks) irrevocably appoints and authorizes the
Agent and the Collateral Agent to take such action as agent on its behalf and
to exercise such powers and discretion under this Agreement and the other
Financing Documents as are delegated to the Agent or the Collateral Agent, as
the case may be, by the terms hereof and thereof, together with all such powers
and discretion as are reasonably incidental thereto.  As to any matters not expressly provided for by the Financing
Documents (including, without limitation, enforcement or collection of the
Notes), neither the Agent nor the Collateral Agent shall be required to
exercise any discretion or to take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Banks, and such instructions
shall be binding upon all Bank Parties and all the holders of Notes; provided, however,
that neither the

 

85

 

Agent nor the Collateral Agent shall be required to take any action
that exposes such agent to personal liability or that is contrary to this
Agreement or applicable law.  Without
limiting any of the foregoing in this Section 7.01, the Agent shall not be
required to take any action with respect to any Default, except as expressly
provided in Article 6.  Each of the
Collateral Agent and the Agent agrees to give each Bank Party prompt notice of
each notice given to it by the Borrower pursuant to the terms of this
Agreement.

 

Section 7.02  Agent
and Affiliates.

 

Citicorp USA, Inc. and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
Equity Interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with each of the Loan
Parties and their respective Affiliates as though Citicorp USA, Inc. were not
the Agent hereunder and without notice to or consent of the Bank Parties.  The Bank Parties acknowledge that, pursuant
to such activities, Citicorp USA, Inc. or its Affiliates may receive
information regarding any Loan Party or its Affiliates (including information
that may be subject to confidentiality obligations in favor of such Loan Party
or such Affiliate) and acknowledge that the Agent shall not be under any
obligation to provide such information to them.  With respect to its Loans or any Revolving Letters of Credit,
Citicorp USA, Inc. shall have the same rights and powers under this Agreement or
any other Financing Document as any other Bank Party and may exercise such
rights and powers as though it were not the Agent, and the terms “Bank” and
“Banks” include Citicorp USA, Inc. in its individual capacity.

 

Section 7.03  Consultation
with Experts.

 

The Agent and the Collateral Agent may execute any of
their respective duties under this Agreement or any other Financing Document
(including for purposes of holding or enforcing any Lien on the Collateral (or
any portion thereof) granted under the Collateral Documents or of exercising
any rights and remedies thereunder) by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel, independent
public accountants and other consultants or experts concerning all matters
pertaining to such duties.  Neither the
Agent nor the Collateral Agent shall be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects in the absence of
gross negligence or willful misconduct.

 

Section 7.04  Liability
of Agent and Collateral Agent.

 

Neither the Agent, the Collateral Agent nor any of
their Affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
with this Agreement or any other Financing Document (a) with the consent
or at the request of the Required Banks or (b) in the absence of its own
gross negligence or willful misconduct. 
Neither the Agent, the Collateral Agent nor any of their Affiliates nor
any of their respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made by any Loan Party in
connection with the Financing Documents or any Extension of Credit hereunder,
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Agent or the Collateral Agent under or in
connection with this Agreement or any other Financing Document; (ii) the
performance or observance of any of the covenants or 

 

86

 

agreements of any Loan Party; (iii) the perfection or priority of any
Lien or security interest created or purported to be created under the
Collateral Documents; (iv) the satisfaction of any condition specified in
Article 3, except receipt of items required to be delivered to the Agent
or (v) the validity, effectiveness, genuineness, enforceability or sufficiency
of the Financing Documents or any other instrument or writing furnished in connection
therewith.  Neither the Agent nor the
Collateral Agent shall incur any liability by acting in reliance upon any
notice, consent, certificate, statement or other writing (which may be a bank
wire, telex, facsimile transmission or similar writing) believed by it to be
genuine or to be signed by the proper party or parties.

 

Section 7.05  Indemnification.

 

Each Bank Party shall, ratably (determined as provided
below) indemnify the Agent, the Collateral Agent, each Revolving Fronting Bank,
each of their respective Affiliates and the respective directors, officers,
agents and employees of any of them (to the extent not reimbursed by the
Obligors) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees’ gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with the Financing Documents or any action taken
or omitted by such indemnitees thereunder. 
For purposes of this Section 7.05, the Bank Party’s ratable share of any
amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of Loans outstanding at such time and owing to the
respective Bank Party; (b) the aggregate Revolving Letter of Credit Liabilities
outstanding at such time and owing to the respective Bank Party and (c) their
respective Unused Revolving Credit Loan Commitments outstanding at such time.

 

Section 7.06  Credit
Decision.

 

Each Bank Party acknowledges that it has, independently
and without reliance upon the Agent, the Collateral Agent, any Revolving
Fronting Bank, or any other Bank or any Arranger Party, and based on the
financial statements referred to in Section 4.05 and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. 
Each Bank Party also acknowledges that it will, independently and
without reliance upon the Agent, the Collateral Agent, or any other Bank Party,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking any
action under this Agreement.

 

Section 7.07  Successor
Agent or Collateral Agent.

 

The Agent or the Collateral Agent may resign at any
time by giving notice thereof to the Bank Parties and the Borrower.  Upon any such resignation, the Required
Banks shall have the right to appoint a successor Agent or a successor
Collateral Agent.  If no successor Agent
or successor Collateral Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30  days after the
retiring Agent or Collateral Agent gives notice of resignation, then the
retiring Agent or Collateral Agent (as the case may be), on behalf of the Bank
Parties, shall appoint a successor Agent or a successor Collateral Agent (as
applicable), which shall be a commercial bank organized or licensed under the
laws of the United

 

87

 

States and having a combined capital and surplus of at least
$250,000,000.  Upon the acceptance of
its appointment as Agent or Collateral Agent (as the case may be) hereunder by
a successor Agent or a successor Collateral Agent, upon the execution and filing
or recording of such financing statements, or amendment, thereto, and such
other instruments or notices, as may be necessary or desirable, or as the
Required Lenders may request with respect to the Security Agreement and the BVI
Cayman Pledge Agreement in order to continue the perfection of the Liens
granted or purported to be granted by the Collateral Documents, such successor
Agent or Collateral Agent (as applicable) shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent or Collateral Agent
(as the case may be), and the retiring Agent or Collateral Agent shall be
discharged from its duties and obligations hereunder.  If within 45 days after written notice is given of the retiring
Agent’s or Collateral Agent’s (as the case may be) resignation under this
Section 7.07 no successor Agent or Collateral Agent (as the case may be) shall
have been appointed and shall have accepted such appointment, then on such 45th
day (i) the retiring Agent’s or Collateral Agent’s (as the case may be)
resignation shall become effective, (ii) the retiring Agent or Collateral Agent
(as the case may be) shall thereupon be discharged from its duties and
obligations under the Financing Documents and (iii) the Required Banks shall
thereafter perform all duties of the retiring Agent or Collateral Agent (as the
case may be) until such time, if any, as the Required Banks appoint a successor
Agent or a successor Collateral Agent as provided above.  After any retiring Agent’s or Collateral
Agent’s (as the case may be) resignation hereunder as Agent or Collateral Agent
(as the case may be) the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent or
Collateral Agent (as the case may be).

 

Section 7.08  Administrative
Agent May File Proofs of Claim.

 

In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to any Obligor, the Agent
(irrespective of whether the principal of any Loan or Revolving Letter of
Credit Liabilities shall then be due and payable as herein expressed or by
declaration or otherwise and irrespective of whether the Agent shall have made
any demand on the Borrower) shall be entitled and empowered, by intervention in
such proceeding or otherwise:

 

(a)           to
file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the Loans, the Revolving Letter of Credit Liabilities
and all other Obligations that are owing and unpaid and to file such other
documents as may be necessary or advisable in order to have the claims of the
Bank Parties and the Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Bank Parties and the
Agent and their respective agents and counsel and all other amounts due the
Bank Parties and the Agent and the Collateral Agent under this Agreement)
allowed in such judicial proceeding;

 

(b)           to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same; and

 

(c)           any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Bank Party to make such payments to the Agent and, in the event that the Agent
shall consent to the making of such payments directly to the Bank Parties, to
pay to the Agent any amount due for the reasonable

 

88

 

compensation, expenses, disbursements and advances of the Agent, the
Collateral Agent and their respective agents and counsel, and any other amounts
due the Agent under this Agreement.

 

Nothing contained herein shall be deemed to authorize
the Agent to authorize or consent to or accept or adopt on behalf of any Bank
Party any plan of reorganization, arrangement, adjustment or composition
affecting the Obligations or the rights of any Bank Party or to authorize the
Agent to vote in respect of the claim of any Bank Party in any such proceeding.

 

Section 7.09  Agents’
Fee.

 

The Borrower shall pay to the Agent and the Collateral
Agent for their own account fees in the amounts and at the times previously
agreed upon between the Borrower, the Agent and the Collateral Agent.

 

Section 7.10  Amendment
to the Security Agreement and Collateral Trust Agreement

 

(a) Each Bank hereby authorizes the Agent, as the
Required Representative (as defined in the Collateral Trust Agreement) to (i)
enter into Amendment No. 1 to the Security Agreement for the purpose of
updating the description of the Collateral therein to eliminate the grant of a
security interest by the grantors thereunder in Deposit Accounts (as defined in
the Security Agreement) and Securities Accounts (as defined in the Security
Agreement) and (ii) authorize the Collateral Trustees to execute Amendment No.
1 to the Security Agreement, Amendment No. 1 to the Collateral Trust Agreement
and any other related agreements and documents.

 

(b)           Each
Bank, by its signature hereto, consents to the execution and delivery of
Amendment No. 1 to the Collateral Trust Agreement for the purpose of amending
the definition of “Secured Obligations” and “Other Debt Agreement” therein.

 

Section 7.11  Delivery
of Information

 

(a)           The
Borrower hereby agrees that it will provide to the Agent all information,
documents and other materials that it is obligated to furnish to the Agent
pursuant to this Agreement, including, without limitation, all notices,
requests, financial statements, financial and other reports, certificates and
other information materials, but excluding any such communication that (i)
relates to a request for a new, or a conversion of an existing, Borrowing or
other Extension of Credit (including any election of an interest rate or
Interest Period relating thereto), (ii) relates to the payment of any principal
or other amount due under this Agreement prior to the scheduled date therefor,
(iii) provides notice of any default or Event of Default under this Agreement
or (iv) is required to be delivered pursuant to Sections 3.01 or 3.02 to
satisfy any condition precedent to the effectiveness of this Agreement and/or
any Borrowing or other Extension of Credit hereunder (all such non-excluded
communications being referred to herein collectively as “Communications”), by transmitting the
Communications in an electronic/soft medium in a format acceptable to the Agent
to oploanswebadmin@citigroup.com.  In addition, the Borrower agrees to continue
to provide the Communications to the Agent in the manner specified in this
Agreement but only to the extent requested by the Agent.

 

89

 

(b)           The
Borrower further agrees that the Agent may make the Communications available to
the other Bank Parties by posting the Communications on Intralinks or a
substantially similar electronic transmission systems.  (the “Platform”).

 

THE
PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”.  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY
OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND
EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE
COMMUNICATIONS.  NO WARRANTY OF ANY
KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE
AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM.  IN NO EVENT SHALL THE AGENT OR ANY OF ITS
AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY
TO THE BORROWER, ANY BANK PARTY OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY
KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR
OTHERWISE) ARISING OUT OF THE BORROWER’S OR THE AGENT’S TRANSMISSION OF
COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY
AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT
JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.

 

(c)           The
Agent agrees that the receipt of the Communications by the Agent at its e-mail
address set forth in clause (a) above shall constitute effective delivery of
the Communications to the Agent for purposes of the Financing Documents.  Each
Bank Party agrees that notice to it (as provided in the next sentence)
specifying that the Communications have been posted to the Platform shall
constitute effective delivery of the Communications to such Bank Party for
purposes of the Financing Documents. 
Each Bank Party agrees to notify the Agent in writing (including by
electronic communication) from time to time of such Bank Party’s e-mail address
to which the foregoing notice may be sent by electronic transmission and that
the foregoing notice may be sent to such e-mail address.  Nothing herein shall prejudice the
right of the Agent or any Bank Party to give any notice or other communication
pursuant to any Financing Document in any other manner specified in such
Financing Document.

 

90

 

ARTICLE VIII

 

CHANGE IN CIRCUMSTANCES

 

Section 8.01  Basis
for Determining Interest Rate Inadequate or Unfair.

 

If on or prior to the first day of any Interest Period
for any Euro-Dollar Borrowing:

 

(a)           the Agent is advised by the Reference
Banks that deposits in Dollars (in the applicable amounts) are not being
offered to the Reference Banks in the relevant market for such Interest Period,
or

 

(b)           the Required Banks advise the Agent
that the Adjusted London Interbank Offered Rate as determined by the Agent will
not adequately and fairly reflect the cost to such Banks of funding their
Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give
notice thereof to the Borrower and the Bank Parties, whereupon until the Agent
notifies the Borrower that the circumstances giving rise to such suspension no
longer exist, (i) the obligations of the Bank Parties to make Euro-Dollar
Loans, or to continue or convert outstanding Loans as or into Euro-Dollar
Loans, shall be suspended and (ii) each outstanding Euro-Dollar Loan shall
be converted into a Base Rate Loan on the last day of the then current Interest
Period applicable thereto.  Unless the
Borrower notifies the Agent at least two Domestic Business Days before the date
of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, such Borrowing shall
instead be made as a Base Rate Borrowing.

 

Section 8.02  Illegality.

 

If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Bank Party (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank Party (or its Euro-Dollar Lending Office) to make,
maintain or fund its Euro-Dollar Loans to the Borrower and such Bank Party
shall so notify the Agent, the Agent shall forthwith give notice thereof to the
other Bank Parties and the Borrower, whereupon until such Bank Party notifies
the Borrower and the Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank Party to make
Euro-Dollar Loans to the Borrower, or to convert outstanding Loans into Euro-Dollar
Loans or continue outstanding Loans as Euro-Dollar Loans, shall be
suspended.  Before giving any notice to
the Agent pursuant to this Section 8.02, such Bank Party shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need
for giving such notice and will not, in the judgment of such Bank Party, be
otherwise disadvantageous to such Bank Party. 
If such notice is given, each Euro-Dollar Loan of such Bank Party then
outstanding shall be converted to a Base Rate Loan either (a) on the last
day of the then current Interest Period applicable to such Euro-Dollar Loan

 

91

 

if such Bank Party may lawfully continue to maintain and fund such Loan
as a Euro-Dollar Loan to such day or (b) immediately if such Bank Party
shall determine that it may not lawfully continue to maintain and fund such
Loan as a Euro-Dollar Loan to such day. 
Interest and principal on any such Base Rate Loan shall be payable on
the same dates as, and on a pro rata basis with, the interest and principal
payable on the related Euro-Dollar Loans of the other Bank Parties.

 

Section 8.03  Increased Cost and Reduced Return.

 

(a)           If
on or after the date hereof, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) or any Revolving Fronting Bank 
(any Bank (or its Applicable Lending Office) and any Revolving Fronting
Bank being referred to in this Section 8.03 as a “Credit Party”) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall impose, modify or deem applicable any
reserve (including, without limitation, any such requirement imposed by the
Board of Governors of the Federal Reserve System, but excluding with respect to
any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar
Reserve Percentage), special deposit, insurance assessment or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Credit Party or shall impose on any Credit Party or on the
London interbank market any other condition affecting its Euro-Dollar Loans,
its Note or Notes, the Revolving Letters of Credit, or its obligation to make
Euro-Dollar Loans or to issue Revolving Letters of Credit or to participate
therein and the result of any of the foregoing is to increase the cost to such
Credit Party of making or maintaining any Euro-Dollar Loan or issuing any
Revolving Letter of Credit or participating therein, or to reduce the amount of
any sum received or receivable by such Credit Party under this Agreement or
under its Note or Notes with respect thereto, by an amount deemed by such
Credit Party to be material, then, within 15 days after demand by such Credit
Party (with a copy to the Agent), the Borrower shall pay to such Credit Party
such additional amount or amounts as will compensate such Credit Party for such
increased cost or reduction.

 

(b)           If
any Credit Party shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Credit Party (or its Parent) as a consequence of such Credit Party’s
obligations hereunder to a level below that which such Credit Party (or its
Parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Credit Party to be material, then from time to time,
within 15 days after demand by such Credit Party (with a copy to the Agent), the
Borrower shall pay to such Credit Party such additional amount or amounts as
will compensate such Credit Party (or its Parent) for such reduction.

 

92

 

(c)           Each
Credit Party will promptly notify the Borrower and the Agent of any event of
which it has knowledge, occurring after the date hereof, which will entitle
such Credit Party to compensation pursuant to this Section 8.03(c) and
will designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Credit Party, be otherwise disadvantageous to such Credit
Party.  A certificate of any Credit
Party claiming compensation under this Section 8.03(c) and setting forth
the additional amount or amounts to be paid to it hereunder shall be conclusive
in the absence of manifest error.  In
determining such amount, such Bank Party may use any reasonable averaging and
attribution methods.

 

Section 8.04  Taxes.

 

(a)           Any
and all payments by the Borrower and any other Loan Party to or for the account
of any Bank Party (which for purposes of this Section 8.04, shall include a
Third Party Fronting Bank and its Assignees), the Agent or the Collateral Agent
hereunder or under any other Financing Document shall be made free and clear of
and without deduction for any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Bank Party, the Agent and the
Collateral Agent, taxes imposed on its income (including branch profit taxes),
franchise and similar taxes and other taxes imposed on it that, in any such
case, would not have been imposed but for a material connection between such
Bank Party, the Agent or the Collateral Agent (as the case may be) and the
jurisdiction imposing such taxes (other than a material connection arising by
reason of this Agreement or any other Financing Document or the receipt of
payments made hereunder or thereunder or the exercise of any rights by a Bank
Party, the Agent or the Collateral Agent (as the case may be) hereunder or
thereunder) (all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as “Taxes”).  If the Borrower or any
other Loan Party shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under any other Financing Document to
any Bank Party, the Agent or the Collateral Agent (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 8.04) such Bank Party, the Agent or the Collateral Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made; (ii) the Borrower shall make such deductions;
(iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law and
(iv) the Borrower shall furnish to the Agent, at its address referred to
in Section 10.01, the original or a certified copy of a receipt or other
satisfactory documentation evidencing payment thereof.

 

(b)           In
addition, the Borrower agrees to pay any present or future stamp or documentary
taxes and any other excise or property taxes, or charges or similar levies
which arise from any payment made by it hereunder or under any Note or from the
execution or delivery of, or otherwise with respect to, this Agreement or any
other Financing Document (hereinafter referred to as “Other Taxes”).

 

(c)           The
Borrower agrees to indemnify each Bank Party, the Agent and the Collateral
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this

 

93

 

Section 8.04) paid by such Bank Party, the Agent or the Collateral
Agent (as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto.  This indemnification shall be made within 15 days from the date
such Bank Party, the Agent or the Collateral Agent (as the case may be) makes
demand therefor.

 

(d)           Each Bank Party that is
organized under the laws of a jurisdiction outside the United States shall, on
or prior to the date of its execution and delivery of this Agreement in the
case of a Bank Party listed on the signature pages hereof or on or prior to the
date on which it becomes a Bank Party in the case of each other Bank Party and
in the case any Bank Party changes jurisdiction of its Applicable Lending
Office and from time to time thereafter as requested in writing by the Borrower
(but only so long thereafter as such Bank Party remains lawfully able to do
so), shall deliver to the Borrower and the Agent such certificates, documents
or other evidence, as required by the Code or Treasury Regulations issued
pursuant thereto, including Internal Revenue Service Form W-8BEN, Form W-8
IMY or Form W-8ECI and any other certificate or statement of exemption
specified by the Borrower and required by Treasury Regulation
Section 1.1441-4(a) or Section 1.1441-6(c) or any subsequent version
thereof, properly completed and duly executed by such Bank Party establishing
that any payment under this Agreement or any other Financing Documents is
(i) not subject to withholding under the Code because such payment is
effectively connected with the conduct by such Bank Party of a trade or
business in the United States, or (ii) fully or partially exempt from
United States tax under a provision of an applicable tax treaty, or (iii) not
subject to withholding under the portfolio interest exception under Section
881(c) of the Code (and, if such Bank Party delivers a Form W-8BEN claiming the
benefits of exemption from United States withholding tax under Section 881(c),
a certificate representing that such Bank Party is not a “bank” for purposes of
Section 881(c) of the Code, is not a 10-percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code). 
Unless the Borrower and the Agent have received forms or other documents
reasonably satisfactory to them indicating that payments hereunder are not
subject to United States withholding tax or are subject to such tax at a rate
reduced by an applicable tax treaty, the Borrower or the Agent shall withhold
taxes from such payments at the applicable statutory rate in the case of
payments to or for any Bank Party organized under the laws of a jurisdiction
outside the United States.  If a Bank
Party is unable to deliver one of these forms or if the forms provided by a
Bank Party at the time such Bank Party first becomes a party to this Agreement
or at the time a Bank Party changes its Applicable Lending Office (other than
at the request of the Borrower) or designates a Conduit Lender that indicates a
United States interest withholding tax rate in excess of zero, withholding tax
at such rate shall be considered excluded from Taxes unless and until such Bank
Party provides the appropriate forms certifying that a lesser rate applies,
whereupon withholding tax at such lesser rate only shall be considered excluded
from Taxes for periods governed by such appropriate forms; provided, however,
that (i) that should a Bank Party, which is otherwise exempt from or subject to
a reduced rate of withholding tax, becomes subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower shall take such
steps as such Bank Party shall reasonably request to assist such Bank Party to
recover such Taxes and (ii) if at the effective date of a transfer pursuant to
which a Bank Party becomes a party to this Agreement, the Bank Party assignor
was entitled to payments under Section 8.04(a) in respect of United States
withholding tax with respect to interest paid at such date, then, to such
extent, the term Taxes shall include (in addition to withholding taxes that may
be imposed in the future or

 

94

 

other amounts otherwise includable in Taxes) United States withholding
tax, if any, applicable with respect to the Bank Party assignee on such date.

 

(e)           If
the Borrower is required to pay additional amounts to or for the account of any
Bank Party pursuant to this Section 8.04, then such Bank Party shall use
reasonable effort (consistent with internal policy and regulatory restrictions)
to change the jurisdiction of its Applicable Lending Office so as to eliminate
or reduce any such additional payment which may thereafter accrue if such
change, in the judgment of such Bank Party, is not otherwise disadvantageous to
such Bank Party.

 

(f)            Each
Bank Party, the Agent and the Collateral Agent agrees that it will promptly
(within 30 days) after receiving notice thereof from any taxing authority,
notify the Borrower of the assertion of any liability by such taxing authority
with respect to Taxes or Other Taxes; provided
that the failure to give such notice shall not relieve the Borrower of its
obligations under this Section 8.04 except
to the extent that the Borrower has been prejudiced by such failure and except
that the Borrower shall not be liable for penalties, interest or expenses
accruing after such 30 day period until such time as it receives the notice
contemplated above, after which time it shall be liable for interest, penalties
and expenses accruing after such receipt.

 

(g)           If
any Bank Party, the Agent or the Collateral Agent shall receive a credit or
refund from a taxing authority (as a result of any error in the imposition of
Taxes or Other Taxes by such taxing authority) with respect to and actually
resulting from an amount of such Taxes or Other Taxes paid by the Borrower
pursuant to subsection (a) or (c) above, such Bank Party, the Agent or the
Collateral Agent shall promptly pay to the Borrower the amount so received
(without interest thereon, whether or not received).

 

(h)           Without
prejudice to the survival of any other agreement contained herein, the
agreements, covenants and obligations contained in this Section 8.04 shall
survive the payment in full of the principal of and interest on all Loans,
Notes and other advances made hereunder.

 

Section 8.05  Base
Rate Loans Substituted for Affected Euro-Dollar Loans.

 

If (a) the obligation of any Bank Party to make,
or to continue or to convert outstanding Loans as or to, Euro-Dollar Loans to
the Borrower has been suspended pursuant to Section 8.02 or (b) any
Bank Party has demanded compensation under Section 8.03 or 8.04 with
respect to its Euro-Dollar Loans to the Borrower and the Borrower shall, by at
least five Euro-Dollar Business Days’ prior notice to such Bank Party through
the Agent, have elected that the provisions of this Section 8.05 shall
apply to such Bank Party, then, unless and until such Bank Party notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist, all Loans to the Borrower which would otherwise
be made by such Bank Party as (or continued or converted to) Euro-Dollar Loans
shall be made instead as Base Rate Loans (on which interest and principal shall
be payable contemporaneously with the related Euro-Dollar Loans of the other
Bank Parties).  If such Bank Party
notifies the Borrower that the circumstances giving rise to such suspension or
demand for compensation no longer exist, the principal amount of each such Base
Rate Loan shall be converted into a Euro-Dollar

 

95

 

Loan on the first day of the next succeeding Interest Period applicable
to the related Euro-Dollar Loans of the other Bank Parties.

 

ARTICLE IX

 

SUBSIDIARY GUARANTY

 

Section 9.01  The
Subsidiary Guaranty.

 

Subject in each case to the provisions of Section
9.08, each of the Subsidiary Guarantors hereby, jointly and severally,
unconditionally guarantees as primary obligor and not merely as surety, the
full and punctual payment as and when the same shall become due and payable
(whether at stated maturity, upon acceleration or otherwise) of the principal
and interest on each Revolving Credit Loan Note and Term Loan Note issued by
the Borrower under this Agreement, the full and punctual payment of each
Reimbursement Obligation in respect of the Revolving Letters of Credit under
this Agreement and the full and punctual payment of all amounts payable by the
Borrower under this Agreement in respect of the Revolving Credit Loan Facility
and the Term Loans (the “Revolving Credit
Loan/Term Loan Obligations”) (the guaranty referred to above is
referred to as the “Subsidiary Guaranty”).  Upon failure by the Borrower to pay
punctually any such amount, the Subsidiary Guarantors shall forthwith on demand
pay the amount not so paid at the place and in the manner specified in the
Agreement.  The Revolving Credit
Loan/Term Loan Obligations of the Borrower guaranteed by the Subsidiary
Guarantors are referred to as the “Guaranteed
Obligations”.  Without
limiting the generality of the foregoing, each Subsidiary Guarantor’s liability
hereunder shall extend to all amounts which constitute part of the obligations
guaranteed by it hereunder and would be owed by the Borrower hereunder but for
the fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Borrower.

 

Section 9.02  Guaranty
Absolute.

 

Each Subsidiary Guarantor, jointly and severally
guarantees that, subject to Section 9.08, the Guaranteed Obligations will be
paid strictly in accordance with the terms of this Agreement, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Banks and the Agent with
respect thereto.  The respective
obligations of each of the Subsidiary Guarantors under the Subsidiary Guaranty
are independent of the Revolving Credit Loan/Term Loan Obligations.  The obligations of each Subsidiary Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:

 

(i)            any extension, renewal, settlement,
compromise, waiver or release in respect of any Obligation of any other Loan
Party under any Financing Document, by operation of law or otherwise;

 

(ii)           any lack of validity or
enforceability of any Financing Document or any other agreement or instrument
relating thereto;

 

96

 

(iii)          any change in the time, manner or
place of payment of, or in any other term of, all or any of the Guaranteed
Obligations or any other obligations of the Borrower under the Financing
Documents, or any other amendment or waiver of or any consent to departure from
any Financing Document, including, without limitation, any increase in the
Guaranteed Obligations resulting from the extension of additional credit to the
Borrower or otherwise;

 

(iv)          any taking, exchange, release, impairment,
invalidity or nonperfection of any Collateral;

 

(v)           any manner of application of the
Collateral or proceeds thereof, to all or any of the Guaranteed Obligations, or
any manner of sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other Obligations of the Loan Parties under the
Financing Documents, or any other property or assets of the Loan Parties or any
of their Subsidiaries;

 

(vi)          any failure by the Agent, the
Collateral Agent or any other Lender Party to disclose to any Loan Party any
information relating to the financial condition, operations, properties or
prospects of any other Loan Party now or hereafter known to the Agent, the
Collateral Agent or such Lender Party, as the case may be (such Subsidiary
Guarantor waiving any duty on the part of the Agent, the Collateral Agent or
the Lender Parties to disclose such information);

 

(vii)         any change in the corporate existence,
structure or ownership of any Loan Party, or any insolvency, bankruptcy, reorganization
or other similar proceeding affecting any other Loan Party or its assets or any
resulting release or discharge of any obligation of any other Loan Party
contained in any Financing Document;

 

(viii)        the existence of any claim, set-off or
other rights which such Subsidiary Guarantor may have at any time against any
other Loan Party, the Agent, the Collateral Agent, any Bank Party or any other
Person, whether in connection herewith or with any unrelated transactions; provided that nothing herein shall prevent
the assertion of any such claim by separate suit or compulsory counterclaim;

 

(ix)           any invalidity or unenforceability
relating to or against any other Loan Party for any reason of any Financing
Document, or any provision of applicable law or regulation purporting to
prohibit the payment by any other Obligor of the principal of or interest on
any Note or any other amount payable by it under any Financing Document; or

 

(x)            any other act or omission to act or
delay of any kind by any Obligor, the Agent, the Collateral Agent, any Bank
Party or any other Person or any other circumstance whatsoever which might, but
for the provisions of this paragraph, constitute a legal or equitable discharge
of or defense to a Subsidiary Guarantor’s obligations hereunder.

 

97

 

Section 9.03  Discharge Only Upon Payment in Full,
Reinstatement in Certain Circumstances.

 

Each Subsidiary
Guarantor’s obligations hereunder shall remain in full force and effect until
the Revolving Credit Loan/Term Loan Obligations have been paid in full and the
Revolving Credit Loan Commitments have been terminated.  If at any time the payment of principal of
or interest on any Note or any other amount payable by the Borrower, in respect
of the Revolving Credit Loan Facility and the Term Loans under any Financing
Document is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy or reorganization of the Borrower or otherwise, the
applicable Subsidiary Guarantor’s obligations hereunder with respect to such
payment shall be reinstated at such time as though such payment had been due
but not made at such time.

 

Section 9.04  Revolving L/C Cash Collateral Account.

 

(a)           Each Subsidiary Guarantor further
agrees that if the Borrower shall fail to deposit in the Revolving L/C Cash
Collateral Account any amount required to be deposited therein pursuant to this
Agreement, the Subsidiary Guarantors shall deposit such amount in a subaccount
of the Revolving L/C Cash Collateral Account as collateral security for each
Subsidiary Guarantor’s potential obligations hereunder.  If the Subsidiary Guarantors shall fail to
furnish such funds, the Agent shall be authorized to debit any accounts the Subsidiary
Guarantors maintain with the Agent in such amount.  Cash deposited in such subaccount of the Revolving L/C Cash
Collateral Account pursuant to this Section 9.04 shall be returned to the
Subsidiary Guarantors depositing the same to the extent that funds deposited by
the Borrower in the Revolving L/C Cash Collateral Account would have been
required to be returned to the Borrower.

 

(b)           Each Subsidiary Guarantor hereby
pledges and grants to the Agent, for the benefit of the Banks and the Agent, a
continuing lien on and security interest in all right, title and interest of
such Subsidiary Guarantor with respect to any funds held in the Revolving L/C
Cash Collateral Account from time to time, and all proceeds thereof, as
security for the payment of the Guaranteed Obligations.

 

(c)           The Agent may, at any time or from
time to time after the funds are deposited in the Revolving L/C Cash Collateral
Account, apply funds then held in the Revolving L/C Cash Collateral Account to
the payment of any of the Guaranteed Obligations.

 

(d)           Neither the Subsidiary Guarantors nor
any person or entity claiming on behalf of or through the Subsidiary Guarantors
shall have any right to withdraw any of the funds held in the Revolving L/C
Cash Collateral Account.

 

(e)           Each Subsidiary Guarantor agrees that
it will not (i) sell or otherwise dispose of any interest in the Revolving L/C
Cash Collateral Account or any funds held therein or (ii) create or permit to
exist any lien, security interest or other charge or encumbrance upon or with
respect to the Revolving L/C Cash Collateral Account or any funds held therein,
except as contemplated by the terms of this Section 9.04.

 

98

 

Section 9.05  Waiver by the Subsidiary Guarantors.

 

Each Subsidiary Guarantor
irrevocably waives promptness, diligence, notice of acceptance, presentment,
protest and any other notice with respect to any of its Guaranteed Obligations
and this Subsidiary Guaranty and waives any requirement that the Agent, the
Collateral Agent or any Bank Party protect, secure, perfect or insure any
security interest or Lien on the Collateral or exhaust any action against the
Borrower against the Borrower or any other Person or entity or any Collateral.

 

Section 9.06  Subrogation.

 

Upon making any payment
with respect to the Borrower under this Article 9, the applicable
Subsidiary Guarantor shall be subrogated to the rights of the payee against the
Borrower with respect to such payment; provided
that no Subsidiary Guarantor shall enforce any payment by way of subrogation
until all amounts of principal of and interest on the Notes and all other
amounts payable by the Borrower under any Financing Document shall have been
paid in full.

 

Section 9.07  Stay
of Acceleration.

 

In the event that
acceleration of the time for payment of any amount payable by the Borrower
under any Financing Document is stayed upon insolvency, bankruptcy or
reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of this Agreement shall nonetheless be payable by
the applicable Subsidiary Guarantor hereunder forthwith on demand by the Agent
made at the request of the requisite proportion of the Bank Parties specified
in Article 6 of this Agreement.

 

Section 9.08  Limitation of Liability.

 

The obligations of each
Subsidiary Guarantor under this Article 9 shall be limited to an aggregate
amount equal to the largest amount that would not render its obligations under
this Article 9 subject to avoidance under Section 548 of the
Bankruptcy Code or any comparable provisions of any applicable state law
(including, without limitation, the provisions of the Uniform Fraudulent
Transfer Act and the Uniform Fraudulent Conveyance Act, to the extent
incorporated in applicable state law).

 

Section 9.09  Release of Subsidiary Guarantors.

 

(a)           Upon any Asset Sale of all of the
Capital Stock of a Subsidiary Guarantor in accordance with the terms of the
Financing Documents and the application of the Net Cash Proceeds from such
Asset Sale to prepay the Debt hereunder pursuant to and in the amount and order
of priority set forth in Section 2.10(b), such Subsidiary Guarantor shall be
released from all of its Obligations under this Article 9 and shall not be a
“Subsidiary Guarantor” for any purpose under the Financing Documents.

 

(b)           On and as of the Closing Date, AES
EDC Funding II, L.L.C. and AES Southland Funding, L.L.C. shall be released from
all of their Obligations under the Existing

 

99

 

Bank Credit Agreement and shall not be a “Subsidiary Guarantor” for any
purpose under the Financing Documents, including, without limitation, under
this Article 9.

 

Section 9.10  Representations and Warranties.

 

Each Subsidiary
Guarantor, as to itself, hereby makes the representations and warranties set
forth in Section 4.01, 4.02(a) and 4.04.

 

Section 9.11  Covenants.

 

Each Subsidiary Guarantor
hereby agrees to comply with the covenant set forth in Section 5.09(b).

 

ARTICLE X

 

MISCELLANEOUS

 

Section 10.01  Notices.

 

All notices, requests and
other communications to any party hereunder shall be in writing (including bank
wire, telex, facsimile transmission or similar writing) and shall be given to
such party:  (a) in the case of the
Borrower, any Revolving Fronting Bank, the Agent or the Collateral Agent, at its
address or telex or facsimile transmission number set forth on the signature
pages hereof; (b) in the case of any Bank, at its address or telex or
facsimile transmission number set forth in its Administrative Questionnaire or
(c) in the case of any other party, at such other address or telex or facsimile
transmission number as such party may hereafter specify for the purpose by
notice to the Agent, the Collateral Agent, the Revolving Fronting Banks and the
Borrower.  Each such notice, request or
other communication shall be effective (x) if given by telex, when such
telex is transmitted to the telex number specified in or pursuant to this
Section 10.01 and the appropriate answerback is received; (y) if
given by mail, 72 hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (z) if given by any
other means, when delivered at the address specified in or pursuant to this
Section 10.01; provided that
notices to the Agent, the Collateral Agent or a Revolving Fronting Bank under
Article 2 or Article 8 shall not be effective until received.

 

Section 10.02  No
Waivers.

 

No failure or delay by
the Agent, the Collateral Agent or any Bank Party in exercising any right,
power or privilege hereunder or under any other Financing Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  The rights
and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.

 

100

 

Section 10.03  Expenses; Indemnification.

 

(a)           The Borrower shall pay (i) all
out-of-pocket expenses of the Agent and the Collateral Agent, including,
without limitation, (A) reasonable fees and disbursements of outside
counsel for the Agent and the Collateral Agent in connection with the
preparation and administration of this Agreement and the other Financing Documents,
any waiver or consent hereunder or any amendment hereof or any Default or
alleged Default hereunder, (B) the reasonable fees and disbursements of
the Collateral Trustees and their outside counsel and (ii) if an Event of
Default occurs, all out-of-pocket expenses incurred by the Agent, the
Collateral Agent, each Revolving Fronting Bank and each Bank, including
(without duplication) the fees and disbursements of outside counsel and the
allocated cost of inside counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency, workout, restructuring and other
enforcement proceedings resulting therefrom.

 

(b)           The Borrower agrees to indemnify the
Agent, the Collateral Agent and each Bank Party, their respective Affiliates
and the respective directors, officers, agents and employees of the foregoing
(each, an “Indemnitee”) and hold each Indemnitee harmless
from and against any and all liabilities, losses, damages, costs and expenses
of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of the Financing Documents or any actual
or proposed use of proceeds of Loans or the issuance or deemed issuance of any
Revolving Letter of Credit hereunder; provided
that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee’s
own gross negligence or willful misconduct as determined by a court of
competent jurisdiction.

 

Section 10.04  Sharing
of Set-offs.

 

Each Bank Party agrees
that if it shall, by exercising any right of set-off or counterclaim or
otherwise (including, without limitation, through the application of any
proceeds of the Creditor Group Collateral and the Excess Revolving L/C
Collateral, receive payment of a proportion of the aggregate amount due and
payable to such Bank Party hereunder which is greater than the proportion
received by any other Bank Party (A) on account of Obligations due and
payable to such Bank Party hereunder and under the Notes at such time in excess
of its ratable share (according to the proportion of (i) the amount of such
Obligations due and payable to such Bank Party at such time to (ii) the
aggregate amount of Obligations due and payable to all Bank Parties hereunder
and under the Notes at such time) of payments on account of the Obligations due
and payable to all the Bank Parties hereunder and under the Notes at such time
obtained by all the Bank Parties at such time or (B) on account of Obligations
owing (but not due and payable) to such Bank Party hereunder and under the
Notes at such time in excess of its ratable share (according to the proportion
of (i) the amount of such Obligations owing (but not due and payable) to such
Bank Party at such time to (ii) the aggregate amount of Obligations owing (but
not due and payable) to all Bank Parties hereunder and under the Notes at such
time) of payments on account of the Obligations owing (but not due and payable)
to all Bank Parties hereunder and under the Notes at such time obtained by all
of the Bank Parties at such time, such Bank Party shall forthwith purchase from
the other Bank Parties such participations in the

 

101

 

Obligations due and payable or owing to them, as the case may be, as
shall be necessary to cause such purchasing Bank Party to share the excess
payment ratably with each of them; provided
that nothing in this Section 10.04 shall impair the right of any Bank
Party to exercise any right of set-off or counterclaim it may have and to apply
the amount subject to such exercise to the payment of indebtedness of the
Borrower owing to it.  The Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Note or in any Revolving Letter of
Credit Liability, whether or not acquired pursuant to the foregoing arrangements,
may exercise rights of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.

 

Section 10.05  Amendments and Waivers.

 

Any provision of this
Agreement or any other Financing Document may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the Borrower and
the Required Banks (and, if the rights or duties of the Agent or the Collateral
Agent are affected thereby, by the Agent or the Collateral Agent); provided that (a) no such amendment or
waiver shall, unless signed by all the Bank Parties, (i) waive any of the
conditions specified in Section 3.01 or 3.02 (with respect to the Extensions of
Credit made or deemed to be made on the Closing Date); (ii) change the number
of Bank Parties or the percentage of (x) the Unused Revolving Credit Loan
Commitments, (y) the aggregate unpaid principal amount of the Loans or (z) the
aggregate Revolving Letter of Credit Liabilities that, in each case, shall be
required for the Bank Parties or any of them to take any action hereunder;
(iii) release all or substantially all of the Collateral in any transaction or
series of related transactions; (iv) amend Section 10.04 or this Section 10.05;
(v) postpone the date fixed for any payment of principal of or interest on any
Loan or Reimbursement Obligation or any fees hereunder or (vi) postpone the
final maturity of the Loans, (b) no such amendment or waiver shall, unless
signed by the Required Banks and each Bank Party if such Bank Party is directly
adversely affected by such amendment or waiver, (i) in the case of any
Revolving Credit Loan Bank, increase the Revolving Credit Loan Commitment of such
Revolving Credit Loan Bank; (ii) reduce the principal of, or interest on,
the Notes held by such Bank Party or Loans outstanding to such Bank Party or
any fees or other amounts payable to such Bank Party; (iii) reduce or
limit the Obligations of any Subsidiary Guarantor under Article 9 or release
any Subsidiary Guarantor (other than in connection with a sale or disposition
permitted hereunder) or otherwise limit such Subsidiary Guarantor’s liability
with respect to the Obligations owing to the Agent, the Collateral Agent and
the Bank Parties, (iv) reduce the principal of or rate of interest on any Loan
or Reimbursement Obligation or any fees hereunder or (v) change (x) the order
of application in the prepayment of Loans among the Facilities or any reduction
in the Revolving Credit Loan Commitments from the application thereof set forth
in the applicable provisions of Sections 2.09 and 2.10 in any manner that
materially affects the Bank Parties under such Facilities or (y) the right of
any Bank Party to pro rata
sharing of payments pursuant to the terms hereof (except as otherwise
specifically provided in clause (d)(i) below), (c) no such amendment or waiver
shall, unless signed by the Required Revolving Credit Loan Banks, amend, waive
or delete the provisions of Section 3.02(d) or Section 3.02(e) and (d) no such
amendment or waiver shall, unless signed by the Supermajority Banks (i) change
the pro rata application of Net
Cash Proceeds from Asset Sales among the Bank Parties, on the one hand, and the
other Financing Parties, on the other hand, set forth in Section 2.10(b)(i) by
amending the definition of “Banks’ Ratable Share” or

 

102

 

otherwise or (ii) amend the definition of “Secured Holders” or “Secured
Obligations” in the Collateral Trust Agreement or amend Sections 5.01, 8.01,
8.02 or 9.01 of the Collateral Trust Agreement; provided  further
that no such amendment or waiver shall, unless signed by the Revolving Fronting
Banks affect the rights and obligations of the Revolving Fronting Banks under
this Agreement and provided further that
no such amendment or waiver shall (x) release all or substantially all of
the Creditor Group Collateral or (y) change the pro rata application of Net Cash Proceeds from Asset Sales
among the Financing Parties set forth in Section 2.10(b)(i) by amending the
definition of “Banks’ Ratable Share” or otherwise unless the Agent shall have
received evidence satisfactory to it from the trustee under the Senior Secured
Exchange Note Indenture that it has received the consent of those Exchange Note
Holders holding a majority of the principal outstanding amount of the Senior
Secured Exchange Notes.

 

Notwithstanding anything
of the foregoing, no amendment or waiver shall be required to release any
Subsidiary Guarantor which is sold pursuant to the terms and conditions of the
Financing Documents so long as the Borrower shall, on the date of receipt by
the Borrower of the Net Cash Proceeds from such sale, prepay the Loans pursuant
to, and in the order of priority set forth in Section 2.10(b), as specified
therein.

 

Section 10.06  Successors and Assigns.

 

(a)           The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except neither the Borrower nor any
Subsidiary Guarantor may assign or otherwise transfer any of its rights and
obligations under this Agreement without the prior written consent of all of
the Bank Parties (other than in the case of Subsidiary Guarantors in connection
with any transaction permitted by the Financing Documents).

 

(b)           Any Bank other than a Conduit Lender
may, without notice to or consent of the Borrower and Agent, at any time grant
to one or more banks or other institutions (each, a “Participant”)
participating interests in its Unused Revolving Credit Loan Commitment or any
or all of its Loans or participating interests in its Revolving Letter of
Credit Liabilities.  In the event of any
such grant by a Bank of a participating interest to a Participant, whether or
not upon notice to the Borrower, the Revolving Fronting Banks and the Agent,
such Bank shall remain responsible for the performance of its obligations
hereunder, and the Borrower, the Revolving Fronting Banks and the Agent shall continue
to deal solely and directly with such Bank in connection with such Bank’s
rights and obligations under this Agreement. 
Any agreement pursuant to which any Bank may grant such a participating
interest shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the Borrower hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provision of this Agreement or any other Financing Document; provided that such participation agreement
may provide that such Bank will not agree to any modification, amendment or
waiver of this Agreement described in clauses (a) (i), (iv) through (vi)
and clause (b) of Section 10.05 without the consent of the Participant.  The Borrower agrees that each Participant
shall, to the extent provided in its participation agreement, be entitled to
the benefits of Article 8 with respect to its participating interest.  An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).

 

103

 

(c)           Any Bank Party other than a Conduit Lender
may at any time assign to one or more banks or other institutions (each, an “Assignee”) all, or a proportionate part of all, in each case in an amount
not less than $1,000,000 (or such lesser amount as may be agreed to by the
Borrower and the Agent) (except in the case of an assignment which will result
in a group of Banks which are managed by the same Bank Party holding a
Revolving Credit Loan Commitment or Term Loan Commitment (as the case may be)
of not less than $1,000,000), of its rights and obligations under this
Agreement and the other Financing Documents, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption in
substantially the form of Exhibit C-1 or Exhibit C-2 hereto, as the case may
be, executed by such Assignee and such transferor Bank Party, with (and subject
to) the subscribed consent of the Agent, the Borrower (which shall not be
unreasonably withheld or delayed but which shall not be required if
(1) an Event of Default shall have occurred and is continuing, (2) in the
case of assignments with respect to the Term Loan Facility, (3) in the
case of assignments by a Bank Party to a Related Fund of such Bank Party and
(4) in the case of assignments with respect to the Revolving Credit Facility, if
the proposed Assignee has a senior unsecured debt rating of “BBB” or higher by
Standard & Poor’s Rating Services or “Baa2” or higher by Moody’s Investor
Service, Inc.), and, in the case of assignments with respect to the Revolving
Credit Loan Facility, each Revolving Credit Loan Bank (such consent not to be
unreasonably withheld or delayed); provided
that if an Assignee is an Affiliate of such transferor Bank Party, no such
consent shall be required; and provided,
further that under no
circumstances may the Borrower or any of its Affiliates be an “Assignee”
hereunder.  Upon execution and delivery
of such instrument and payment by such Assignee to such transferor Bank Party
of an amount equal to the purchase price agreed between such transferor Bank
Party and such Assignee, such Assignee shall be a Bank Party party to this
Agreement and shall have all the rights and obligations of a Bank Party as set
forth in such instrument of assumption, and the transferor Bank Party shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required.  Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank Party, the Agent and the
Borrower shall make appropriate arrangements so that, if required, new Notes
are issued to the Assignee.  In
connection with any such assignment, the transferor Bank Party or Assignee
shall pay to the Agent an administrative fee for processing such assignment in
the amount of $3,500.  If the Assignee
is not incorporated under the laws of the United States of America or a state
thereof, it shall deliver to the Borrower and the Agent certification as to
exemption from, or reduction in, deduction or withholding of any United States
federal income taxes as required by Section 8.04.  Notwithstanding the foregoing, any Conduit
Lender may assign at any time to its designating Bank hereunder without the
consent of the Borrower or the Agent any or all of the Loans it may have funded
hereunder and pursuant to its designation agreement and without regard to the
limitations set forth in the first sentence of this Section 10.06(c).

 

(d)           Any Bank Party may at any time assign
all or any portion of its rights under this Agreement and the other Financing
Documents to a Federal Reserve Bank.  No
such assignment shall release the transferor Bank Party from its obligations
hereunder.  In the case of any Bank
Party that is a fund that invests in bank loans, such Bank Party may, without
the consent of the Borrower or the Agent, assign or pledge all or any portion
of its rights under this Agreement, including the Loans and Notes or any other
instrument evidencing its rights as a Bank Party under this Agreement, to any
holder of, trustee for, or any other representative of holders of, obligations
owed or securities issued, by such fund, as security for such obligations or

 

104

 

securities; provided that
unless and until such holder, trustee or representative actually becomes a Bank
Party in compliance with the other provisions of this Section 10.06, (i) no
such pledge shall release the pledging Bank Party from any of its obligations
under the Financing Documents and (ii) such holder, trustee or
representative shall not be entitled to exercise any of the rights of a Bank
Party under the Financing Documents even though such trustee may have acquired
ownership rights with respect to the pledged interest through foreclosure or
otherwise.

 

(e)           Each of the Borrower, the Agent and
each Bank hereby confirms that it will not institute against a Conduit Lender
or join any other Person in instituting against a Conduit Lender any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding
under any state bankruptcy or similar law, for one year and one day after the
payment in full of the latest maturing commercial paper note issued by such
Conduit Lender; provided, however, that each Bank designating any
Conduit Lender hereby agrees to indemnify, save and hold harmless each other
party hereto for any loss, cost, damage or expense arising out of its inability
to institute such a proceeding against such Conduit Lender during such period
of forbearance.

 

(f)            The Agent shall maintain at its
address referred to in Section 10.01, a copy of each Assignment and
Assumption delivered to and accepted by it and a register for the recordation
of the names and addresses of the Bank Parties, the Revolving Credit Loan
Commitments of, the amount of the Revolving Letter of Credit issued by, the
principal amount of the Reimbursement Obligations owing to, and the principal
amount of the Loans owing to, each Bank Party from time to time (the “Register”).  The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Bank Parties may treat each Person whose name is
recorded in the Register as a Bank Party hereunder for all purposes of this
Agreement.  The Register shall be
available for inspection by the Borrower or any Bank Party at any reasonable
time and from time to time upon reasonable prior notice.

 

(g)           Any Third Party Fronting Bank may at
any time assign to one or more banks or other institutions (each, an “Assignee”) meeting the definition of a “Third Party Fronting Bank”
contained herein, all of its rights and obligations under this Agreement and
the other Financing Documents, and such Assignee shall assume such rights and
obligations, pursuant to an Assignment and Assumption in substantially the form
of Exhibit C-3 hereto executed by such Assignee and such transferor Third Party
Fronting Bank, with (and subject to) the subscribed consent of the Agent and
the Borrower (which shall not be unreasonably withheld or delayed); provided that under no circumstances may
the Borrower or any of its Affiliates be an “Assignee” hereunder.  Upon execution and delivery of such
instrument and a Third Party Fronting Bank Agreement and payment by such
Assignee to such transferor Third Party Fronting Bank of an amount equal to the
purchase price agreed between such transferor Third Party Fronting Bank and
such Assignee, such Assignee shall be a Revolving Fronting Bank party to this
Agreement and shall have all the rights and obligations of a Revolving Fronting
Bank as set forth in such instrument of assumption, and the transferor Third
Party Fronting Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required.  In connection with any such
assignment, the transferor Third Party Fronting Bank or Assignee shall pay to
the Agent an administrative fee for processing such assignment in the amount of
$3,500.  If the Assignee is not
incorporated under

 

105

 

the laws of the United States of America or a state thereof, it shall
deliver to the Borrower and the Agent certification as to exemption from, or
reduction in, deduction or withholding of any United States federal income
taxes as required by Section 8.04.

 

Section 10.07  No
Margin Stock.

 

Each of the Bank Parties
represents to the Agent and each of the other Bank Parties that it in good
faith is not relying upon any “margin stock” (as defined in Regulation U)
as collateral in the extension or maintenance of the credit provided for in
this Agreement.

 

Section 10.08  Governing Law; Submission to Jurisdiction.

 

This Agreement and the
other Financing Documents shall be governed by and construed in accordance with
the laws of the State of New York.  The
Borrower hereby submits to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York and of any New York State
court sitting in New York City for purposes of all legal proceedings arising
out of or relating to this Agreement and the other Financing Documents or the
transactions contemplated hereby.  The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.

 

Section 10.09  Release of Collateral.

 

Upon the sale, lease,
transfer or other disposition of any item of Collateral of any Obligor
(including, without limitation, as result of the sale, in accordance with the
terms of the Financing Documents, of any Obligor that owns such Collateral) in
accordance with the terms of the Financing Documents, the Agent will, at the
Borrower’s expense, execute and deliver to such Obligor such documents as such
Obligor may reasonably request to evidence the release of such item of
Collateral from the assignment and security interest granted under the
Collateral Documents in accordance with the terms of the Financing Documents.

 

Section 10.10  Counterparts; Integration; Effectiveness.

 

This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument.  This Agreement and the
other Financing Documents constitute the entire agreement and understanding
among the parties hereto and supersede any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.  This Agreement shall become effective upon
receipt by the Agent of counterparts hereof signed by each of the parties
hereto (or, in the case of any such party as to which an executed counterpart
shall not have been received, receipt by the Agent in form satisfactory to it
of telegraphic, telex, facsimile transmission or other written confirmation
from such party of execution of a counterpart hereof by such party).

 

106

 

Section 10.11  Confidentiality.

 

The Agent and each Bank
Party agrees to keep confidential all non-public information provided to it by
the Borrower pursuant to this Agreement that is designated by the Borrower as
confidential; provided that
nothing herein shall prevent the Agent or any Bank Party from disclosing any
such information (a) to the Agent, any other Bank Party or any affiliate of any
Bank Party; (b) to any (i) actual or prospective transferee or (ii) Derivatives
Obligations counterparty (or such contractual counterparty’s professional
advisor), in each case that agrees to comply with the provisions of this
Section 10.11; (c) to its employees, directors, agents, attorneys, accountants
and other professional advisors or those of any of its affiliates; (d) upon the
request or demand of any governmental authority; (e) in response to any order
of any court or other governmental authority or as may otherwise be required
pursuant to any requirement of law; (f) if required to do so in connection with
any litigation or similar proceeding; (g) that has been publicly disclosed;
(h) to the National Association of Insurance Commissioners or any similar
organization or any nationally recognized rating agency that requires access to
information about a Bank Party’s investment portfolio in connection with
ratings issued with respect to such Bank Party; (i) to any direct or
indirect contractual counterparty in any swap, hedge or similar agreement (or
to any such contractual counterparty’s professional advisor), so long as such
contractual counterparty (or such professional advisor) agrees to be bound by
the provisions of this Section 10.11; or, in connection with the exercise of
any remedy hereunder or under any other Financing Documents.  Notwithstanding any other provision in this
Agreement, the Borrower, the Agent, each Third Party Fronting Bank and each
Bank Party hereby agree that each of the Borrower, the Agent, each Third Party
Fronting Bank and each Bank Party (and each of the officers, directors,
employees, accountants, attorneys and other advisors of the Agent, each Third
Party Fronting Bank and each Bank Party) may disclose to any and all persons,
without limitation of any kind, the U.S. tax treatment and U.S. tax structure
of the transaction and all materials of any kind (including opinions and other
tax analyses) that are provided to each of them  relating to such U.S. tax treatment and U.S. tax structure.

 

Section 10.12  WAIVER
OF JURY TRIAL.

 

EACH OF THE BORROWER, THE
AGENT, THE COLLATERAL AGENT AND THE BANK PARTIES HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

 

Section 10.13  Severability; Modification to Conform to
Law.

 

It is the intention of
the parties that this Agreement be enforceable to the fullest extent
permissible under applicable law, but that the unenforceability (or
modification to conform to such law) of any provision or provisions hereof
shall not render unenforceable, or impair, the remainder hereof.  If any provision of this Agreement shall be
held invalid or unenforceable in whole or in part in any jurisdiction, this
Agreement shall, as to such jurisdiction, be deemed amended to modify or
delete, as necessary, the offending provision or provisions and to alter the
bounds thereof in order to render it or them valid and enforceable to

 

107

 

the maximum extent permitted by applicable law, without in any manner
affecting the validity or enforceability of such provision or provisions in any
other jurisdiction or the remaining provisions hereof in any jurisdiction.

 

Section 10.14  Judgment
Currency.

 

If for the purposes of
enforcing the obligations of the Borrower hereunder it is necessary to convert
a sum due from such Person in Dollars into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the Agent, the Collateral Agent and the Bank Parties could purchase
Dollars with such currency at or about 11:00 A.M. (New York City time) on the
Domestic Business Day preceding that on which final judgment is given.  The obligations in respect of any sum due to
the Agent, the Collateral Agent and the Bank Parties hereunder shall,
notwithstanding any adjudication expressed in a currency other than Dollars, be
discharged only to the extent that on the Domestic Business Day following
receipt by the Agent, the Collateral Agent and the Bank Parties of any sum
adjudged to be so due in such other currency the Agent, the Collateral Agent
and the Bank Parties may in accordance with normal banking procedures purchase
Dollars with such other currency; if the amount of Dollars so purchased is less
than the sum originally due to the Agent, the Collateral Agent and the Bank
Parties in Dollars, the Borrower agrees, to the fullest extent that it may
effectively do so, as a separate obligation and notwithstanding any such
adjudication, to indemnify the Agent, the Collateral Agent and the Bank Parties
against such loss, and if the amount of Dollars so purchased exceeds the sum
originally due to the Agent, the Collateral Agent and the Bank Parties, it
shall remit such excess to the Borrower.

 

Section 10.15  Third Party Fronting Banks.

 

Each Third Party Fronting
Bank shall execute and deliver to the Agent a Third Party Fronting Bank
Agreement in substantially the form of Exhibit D hereto prior to issuing any
letters of credit at the request or for the benefit of the Borrower.  Upon execution and delivery by a Third Party
Fronting Bank to the Agent of a Third Party Fronting Bank Agreement, such Third
Party Fronting Bank shall become a party to this Agreement and shall have all
the rights and obligations of a Revolving Fronting Bank as set forth
herein.  If the Third Party Fronting
Bank is not incorporated under the laws of the United States of America or a
state thereof, it shall deliver to the Borrower and the Agent certification as
to exemption from, or reduction in, deduction or withholding of any United
States federal income taxes as required by Section 8.04.

 

[SIGNATURE PAGES
IMMEDIATELY FOLLOW]

 

108

 

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

 

THE AES CORPORATION,

as Borrower

 

	
  By

  	
   

  	
   

  
	
  Title:

  	
   

  
	
  Address:

  	
  1001 North 19th Street

  
	
   

  	
  Arlington, VA 22209

  
	
   

  	
   

  
	
  Fax:

  	
  (703) 528-4510

  
				

 

109

 

SUBSIDIARY
GUARANTORS:

 

AES HAWAII MANAGEMENT
COMPANY, INC.,

as Subsidiary Guarantor

 

	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Fax:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AES NEW YORK FUNDING,
  L.L.C.,

  	
   

  
	
  as Subsidiary Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Fax:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AES OKLAHOMA HOLDINGS,
  L.L.C.,

  	
   

  
	
  as Subsidiary Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Fax:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AES WARRIOR RUN
  FUNDING, L.L.C.,

  	
   

  
	
  as Subsidiary Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
  Fax:

  	
   

  
					

 

110

 

	
  BANKS:

  
	
   

  
	
   

  	
   

  
	
  [Please Type or Print Name of Bank]

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
			

 

111

 

	
  AGENTS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CITICORP USA, INC.,

  	
   

  
	
  as Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
  Address:

  	
  388 Greenwich Street,
  21st Floor

  
	
   

  	
  New York, NY 10013

  
	
   

  	
   

  	
   

  
	
  Fax:

  	
  (212) 816-8098

  	
   

  
	
  Attention:

  	
  Stuart Glen

  	
   

  
	
  Email:

  	
  oploanswebadmin@citigroup.com

  
	
   

  	
   

  	
   

  
	
  CITIBANK N.A.,

  	
   

  
	
  as Collateral Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
  Address:

  	
  388 Greenwich Street,
  21st Floor

  
	
   

  	
  New York, NY 10013

  
	
   

  	
   

  	
   

  
	
  Fax:

  	
  (212) 816-8098

  
	
  Attention:

  	
  Stuart Glen

  
						

 

112

 

EXHIBIT
A-1 to the

Second
Amended and Restated Credit

and
Reimbursement Agreement

 

FORM
OF REVOLVING CREDIT LOAN NOTE

 

	
  New York, New York

  	
   

  	
                          ,
  2003

  

 

For value received, The
AES Corporation, a Delaware corporation (the “Borrower”),
promises to pay to
                        
(the “Bank”) or its registered
assigns, for the account of its Applicable Lending Office (as defined in the
Credit and Reimbursement Agreement referred to below), the unpaid principal
amount of each Revolving Credit Loan (as defined in the Credit and
Reimbursement Agreement referred to below) made by the Bank to the Borrower
pursuant to the Credit and Reimbursement Agreement referred to below on the
dates and in the amounts specified in the Credit and Reimbursement
Agreement.  The Borrower promises to pay
interest on the unpaid principal amount of each such Loan on the dates and at
the rate or rates provided for in the Credit and Reimbursement Agreement.  All such payments of principal and interest
shall be made in lawful money of the United States in Federal or other same day
funds at the place of payment specified in the Credit and Reimbursement
Agreement.

 

All Revolving Credit
Loans made by the Bank, the respective types thereof and all repayments of the
principal thereof shall be recorded by the Bank and, if the Bank so elects in
connection with any transfer or enforcement hereof, appropriate notations to
evidence the foregoing information with respect to each such Loan then
outstanding may be endorsed by the Bank on the schedule attached hereto, or on
a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to
make (or any error in making) any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Credit and
Reimbursement Agreement.

 

This Revolving Credit
Loan Note is one of the Notes referred to in the Second Amended and Restated
Credit and Reimbursement Agreement dated as of July 29, 2003 (as amended,
amended and restated, supplemented or otherwise modified from time to time, the
“Credit and Reimbursement Agreement”)
among the Borrower, the Subsidiary Guarantors party thereto, the Bank and
certain other banks party thereto, Citicorp USA, Inc., as the Agent for the
Bank Parties and Citibank, N.A. as the Collateral Agent for the Bank
Parties.  Terms defined in the Credit
and Reimbursement Agreement are used herein with the same meanings.  Reference is made to the Credit and
Reimbursement Agreement for provisions for the guarantee hereof in certain
circumstances, the prepayment hereof and the acceleration of the maturity
hereof.

 

This Revolving Credit
Loan Note is assignable to one or more Persons as provided in the Credit and
Reimbursement Agreement and the Borrower agrees to issue from time to time
replacement Notes in the form hereof to facilitate such assignments.

 

113

 

The Obligations of the
Borrower under this Revolving Credit Loan Note and the other Financing
Documents, and the Obligations of the other Loan Parties under the Financing
Documents, are secured by the Creditor Group Collateral as provided in the
Financing Documents.  The Obligations of
the Borrower under this Revolving Credit Loan Note are also guaranteed by the
Subsidiary Guarantors, as provided in the Subsidiary Guaranty in Article IX of
the Credit and Reimbursement Agreement.

 

This Revolving Credit
Loan Note shall be governed by, and construed in accordance with, the laws of
the State of New York.

 

	
   

  	
  THE AES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

114

 

LOANS
AND PAYMENTS OF PRINCIPAL

 

	
  Date

  	
   

  	
  Amount of

  Loan

  	
   

  	
  Type of
  Loan

  	
   

  	
  Amount of

  Principal

  Repaid

  	
   

  	
  Notation

  Made By

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

115

 

 

EXHIBIT
A-2 to the

Second
Amended and Restated Credit

and
Reimbursement Agreement

 

FORM
OF TERM LOAN NOTE

 

	
  New York, New York

  	
   

  	
                 ,
  2003

  

 

For value received, THE
AES CORPORATION, a Delaware corporation (the “Borrower”),
promises to pay to
                                               
(the “Bank”) or its registered
assigns, for the account of its Applicable Lending Office (as defined in the
Credit and Reimbursement Agreement referred to below), the unpaid principal
amount of the Term Loan (as defined in the Credit and Reimbursement Agreement
referred to below) made by the Bank to the Borrower pursuant to the Credit and
Reimbursement Agreement referred to below on the dates and in the amounts
specified in the Credit and Reimbursement Agreement.  The Borrower promises to pay interest on the unpaid principal
amount of the Term Loan on the dates and at the rate or rates provided for in
the Credit and Reimbursement Agreement. 
All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other same day funds at the place of
payment specified in the Credit and Reimbursement Agreement.

 

This Term Loan Note is
one of the Notes referred to in the Second Amended and Restated Credit and
Reimbursement Agreement dated as of July 29, 2003 (as amended, amended and
restated, supplemented or otherwise modified from time to time, the “Credit and Reimbursement Agreement”) among
the Borrower, the Subsidiary Guarantors party thereto, the Bank and certain
other banks party thereto, Citicorp USA, Inc., as the Agent for the Bank
Parties and Citibank, N.A., as the Collateral Agent for the Bank Parties.  Terms defined in the Credit and
Reimbursement Agreement are used herein with the same meanings.  Reference is made to the Credit and Reimbursement
Agreement for provisions for the guarantee hereof in certain circumstances, the
prepayment hereof and the acceleration of the maturity hereof.

 

This Term Loan Note is
assignable to one or more Persons as provided in the Credit and Reimbursement
Agreement and the Borrower agrees to issue from time to time replacement Notes
in the form hereof to facilitate such assignments.

 

The Obligations of the
Borrower under this Term Loan Note and the other Financing Documents, and the
Obligations of the other Loan Parties under the Financing Documents, are
secured by the Creditor Group Collateral as provided in the Financing
Documents.  The Obligations of the
Borrower under this Term Loan Note are guaranteed by the Subsidiary Guarantors,
as provided in the Subsidiary Guaranty in Article IX of the Credit and
Reimbursement Agreement.

 

116

 

This Term Loan Note shall
be governed by, and construed in accordance with, the laws of the State of New
York.

 

	
   

  	
  THE AES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

117

 

APPENDIX
I to the

Second
Amended and Restated

Credit
and Reimbursement Agreement

 

REVOLVING
CREDIT LOAN FACILITY

 

	
  Name of Revolving Credit Loan
  Bank

  	
   

  	
  Revolving Credit Loan Commitments ($)

  	
   

  
	
  Citicorp
  USA, Inc.

  	
   

  	
  $

  	
  34,000,000.00

  	
   

  
	
  Bank
  of America, N.A.

  	
   

  	
  $

  	
  34,000,000.00

  	
   

  
	
  Deutsche
  Bank Trust Company Americas

  	
   

  	
  $

  	
  34,000,000.00

  	
   

  
	
  Lehman
  Commercial Paper, Inc.

  	
   

  	
  $

  	
  34,000,000.00

  	
   

  
	
  UBS
  AG, Stamford Branch

  	
   

  	
  $

  	
  34,000,000.00

  	
   

  
	
  Union
  Bank of California, N.A.

  	
   

  	
  $

  	
  34,000,000.00

  	
   

  
	
  Credit
  Lyonnais New York Branch

  	
   

  	
  $

  	
  23,000,000.00

  	
   

  
	
  Société Générale – New York Branch

  	
   

  	
  $

  	
  23,000,000.00

  	
   

  

 

118

 

APPENDIX
II to the

Second
Amended and Restated

Credit
and Reimbursement Agreement

 

TERM
LOAN FACILITY

 

	
  Name of Term Loan Bank

  	
   

  	
  Term Loan Commitments ($)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Citicorp
  USA, Inc.

  	
   

  	
  $

  	
  700,000,000.00

  	
   

  
					

 

119

 

APPENDIX
III to the

Second
Amended and Restated

Credit
and Reimbursement Agreement

 

EXISTING
REVOLVING LETTERS OF CREDIT

 

	
  Beneficiary

  	
   

  	
  Letter of

  Credit

  Number

  	
   

  	
  Local

  Expiry

  	
   

  	
  Type of Letter

  of Credit

  	
   

  	
  Name of
Issuing Bank

  	
   

  	
  US Dollar Amount

  	
   

  
	
  ANZ Banking Group,
  London

  	
   

  	
  3039084

  	
   

  	
  03/24/04

  	
   

  	
  Financial

  	
   

  	
  Bank of America, N.A.

  	
   

  	
  $

  	
  900,000.00

  	
   

  
	
  PPL Energy Plus, LLC

  	
   

  	
  S234687

  	
   

  	
  04/30/04

  	
   

  	
  Performance

  	
   

  	
  Union Bank of
  California, N.A.

  	
   

  	
  $

  	
  100,000.00

  	
   

  
	
  WAPDA  (690,519,000.00 PKR)

  	
   

  	
  30034738

  	
   

  	
  01/28/04

  	
   

  	
  Performance

  	
   

  	
  Citibank, N.A.

  	
   

  	
  $

  	
  11,504,046.54

  	
   

  
	
  The Potomac Edison
  Company

  	
   

  	
  30035330

  	
   

  	
  06/15/04

  	
   

  	
  Performance

  	
   

  	
  Citibank, N.A.

  	
   

  	
  $

  	
  577,500.00

  	
   

  
	
  PSEG Energy Resources
  & Trade LLC

  	
   

  	
  S234688

  	
   

  	
  01/18/05

  	
   

  	
  Performance

  	
   

  	
  Union Bank of
  California, N.A.

  	
   

  	
  $

  	
  4,800,000.00

  	
   

  
	
  Barclays Bank PLC  (4,195,249.85 GBP)

  	
   

  	
  30035501

  	
   

  	
  04/15/04

  	
   

  	
  Financial, Performance

  	
   

  	
  Citibank, N.A.

  	
   

  	
  $

  	
  6,934,402.86

  	
   

  
	
  J. Aron & Company

  	
   

  	
  S234702

  	
   

  	
  01/15/04

  	
   

  	
  Performance

  	
   

  	
  Union Bank of
  California, N.A.

  	
   

  	
  $

  	
  3,000,000.00

  	
   

  
	
  WAPDA  (713,900,000.00 PKR)

  	
   

  	
  30034234

  	
   

  	
  11/06/03

  	
   

  	
  Performance

  	
   

  	
  Citibank, N.A.

  	
   

  	
  $

  	
  11,893,574.00

  	
   

  
	
  ANZ Banking Group,
  London

  	
   

  	
  S233716

  	
   

  	
  03/24/04

  	
   

  	
  Performance

  	
   

  	
  Union Bank of
  California, N.A.

  	
   

  	
  $

  	
  1,320,000.00

  	
   

  
	
  Coral Energy Holding
  L.P.

  	
   

  	
  S234734

  	
   

  	
  01/31/05

  	
   

  	
  Performance

  	
   

  	
  Union Bank of
  California, N.A.

  	
   

  	
  $

  	
  1,000,000.00

  	
   

  
	
  Consolidated Edison
  Company

  	
   

  	
  S234814

  	
   

  	
  10/31/03

  	
   

  	
  Performance

  	
   

  	
  Union Bank of
  California, N.A.

  	
   

  	
  $

  	
  1,053,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total
  Face Amount of Revolving Letters of Credit Outstanding

  	
   

  	
  $

  	
  43,082,523.40

  	
   

  

 

120

 

EXHIBIT
B-7 to the

Second
Amended and Restated

Credit
and Reimbursement Agreement

 

FORM
OF OPINION OF SHEARMAN & STERLING

 

July 29, 2003

 

To the Banks, BankBoston,
N.A., Nassau Branch,

the Agent referred to below and the Collateral Agent,

referred to below

 

c/o Citicorp USA, Inc.

388 Greenwich Street, 21st
Floor

New York, NY  10013

 

The AES
Corporation

 

Ladies and Gentlemen:

 

We have acted as special
New York counsel to Citicorp USA, Inc., individually and as Administrative
Agent for the Bank Parties and to Citibank, N.A., individually and as
Collateral Agent for the Bank Parties, in connection with the preparation,
negotiation, execution and delivery of the Second Amended and Restated Credit
and Reimbursement Agreement dated as of July 29, 2003 (the “Credit and
Reimbursement Agreement”) among The AES Corporation, a Delaware corporation
(the “Borrower”), the Subsidiary Guarantors party thereto, the Banks
party thereto (the “Banks”), Citicorp USA, Inc., as Administrative Agent
(the “Agent”) for the Bank Parties and Citibank, N.A., as Collateral
Agent (the “Collateral Agent”) for the Bank Parties.  Unless otherwise defined herein, terms
defined in the Credit and Reimbursement Agreement are used herein as therein
defined.  This opinion is being delivered
to you pursuant to Section 3.01(d) of the Credit and Reimbursement Agreement.

 

In that connection, we
have examined (a) the Existing Bank Credit Agreement, (b) a counterpart of
the Credit and Reimbursement Agreement executed by each of the Loan Parties
(including without limitation, the Subsidiary Guaranty in Article IX thereto),
(c) the Notes executed by the Borrower and delivered on the date hereof (the “Closing
Date Notes”), (d) Amendment No. 1 to the Security Agreement executed
by the Borrower and delivered on the date hereof (the “Security Agreement
Amendment”), (e) the Security Agreement and (f) to the extent relevant to
our opinions expressed below, the other documents delivered by the Loan Parties
pursuant to Section 3.01 of the Credit and Reimbursement Agreement, including
(A) the opinion of Vincent Mathis, Assistant General Counsel of the Borrower,
(B) the opinion of Davis, Polk & Wardwell, special New York counsel for the
Borrower (the “New York Opinion”), (C) the opinions of local counsel for
the Borrower as to certain Subsidiaries of the Borrower, (D) the opinion of
Conyers Dill & Pearman, special British Virgin Islands counsel for the
Borrower, (E) the opinion of Maples & Calder, special Cayman Islands
counsel for the Borrower, (F) the

 

121

 

opinion of Morris, Nichols, Arsht & Tunnell, special Delaware
counsel for the Borrower (the “Delaware Opinion”) and (G) all
certificates, resolutions and other similar corporate documents furnished by
the Loan Parties.  The documents listed
in items (b) through (f) are referred to herein as the “Transaction
Documents”.

 

In our examination of the
Transaction Documents and the other Financing Documents, we have assumed,
without independent investigation (a) the due execution and delivery of the
Transaction Documents (other than the Closing Date Notes) and the other
Financing Documents by all parties thereto and of the Closing Date Notes by the
Borrower, (b) the genuineness of all signatures, (c) the authenticity of
the originals of the documents submitted to us and (d) the conformity to
originals of any documents submitted to us as copies.

 

In addition, we have
assumed, without independent investigation, that (i) each of the Loan Parties
is duly organized and validly existing under the laws of the jurisdiction of
its organization and has full power and authority (corporate and otherwise) to
execute, deliver and perform each of the Transaction Documents to which it is a
party and (ii) the execution, delivery and performance by each of the Loan
Parties of each of the Transaction Documents to which it is a party has been
duly authorized by all necessary corporate or other organizational action and
does not (A) contravene the certificate of incorporation (or certificate of
formation, as applicable), charter, bylaws, memorandum and articles of
association (or other organizational documents, as applicable) or other
constituent documents of such party, (B) conflict with, constitute a default
under or result in the breach of any agreement, judgment, injunction, order,
decree, document or instrument binding on such Loan Party or (C) violate or
require any governmental or regulatory authorization or other action under any
provision of law, rule or regulation applicable to the Loan Parties other than
New York law or United States Federal law applicable to borrowers or pledgors
generally.  We have also assumed that
the Credit and Reimbursement Agreement is the legal, valid and binding
obligation of each Bank Party, enforceable against such Bank Party, as the case
may be, in accordance with its terms.

 

Based upon the foregoing
examination and assumptions and upon such other investigation as we have deemed
necessary and subject to the qualifications set forth below, we are of the
following opinions:

 

1.  Each of the Credit and Reimbursement
Agreement and the Closing Date Notes is the legal, valid and binding obligation
of each Loan Party party thereto, enforceable against each such Loan Party in
accordance with its terms.

 

2.  The Security Agreement as amended by the
Security Agreement Amendment is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms, and,
to the extent that the Borrower has rights in the “Collateral” referred to in
the Security Agreement (as to which we express no opinion), continues to create
a valid security interest enforceable against the Borrower with respect to such
Security Agreement Collateral as security for the payment of the Secured
Obligations (as defined in the Collateral Trust Agreement).  We express no opinion as to matters of
perfection or priority of such security interest, and refer you to

 

122

 

the New York Opinion and
the Delaware Opinion with regard to such matters to the extent covered therein.

 

Our
opinions above are subject to the following qualifications:

 

(i)  Our opinions above are subject to the effect
of any applicable bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or similar
law affecting creditors’ rights generally.

 

(ii)  Our opinions above are also subject to the
effect of general principles of equity, including, without limitation, concepts
of materiality, reasonableness, good faith and fair dealing (regardless of
whether considered in a proceeding in equity or at law).  Further, pursuant to such equitable
principles, any provisions of the Transaction Documents which provide that the
grant of a security interest shall not be affected by changes in or amendments
to the Transaction Documents might be enforceable only to the extent that such
changes or amendments were not so material as to constitute a new contract
among the parties.

 

(iii)  We express no opinion as to the creation of
any security interest in Collateral that is excluded from Article 9 of the New
York Uniform Commercial Code under § 9-109(c) and (d) thereof.

 

(iv)  We express no opinion as to enforceability
of indemnification provisions in the Transaction Documents to the extent that
enforcement thereof is contrary to public policy regarding the exculpation of
criminal violations, intentional harm and acts of gross negligence or
recklessness.

 

(v)  Our opinion in paragraph 2 above is also
subject to the effect of applicable law that may limit the enforceability or
render ineffective certain of the provisions of the Security Agreement,
although the inclusion of such provisions does not affect the validity of the
Security Agreement as a whole, and there exist legally adequate remedies for a
realization of the principle benefits afforded thereby.

 

(vi)  Our opinions expressed above are limited to
the law of the State of New York and the Federal law of the United States, and
we do not express any opinion herein concerning any other law.  Without limiting the generality of the
foregoing, we express no opinion as to the effect of the law of any
jurisdiction other than the State of New York wherein any Bank Party may be
located or wherein enforcement of the Credit and Reimbursement Agreement or any
other Transaction Document may be sought that limits the rates of interest
legally chargeable or collectible.

 

A copy of this opinion
letter may be delivered by any of you to any Person that becomes a Bank Party
in accordance with the provisions of the Credit and Reimbursement Agreement.
Any such Bank Party may rely on the opinions expressed above as if this opinion
letter were addressed and delivered to such Bank Party on the date hereof.

 

123

 

This opinion letter
speaks only as of the date hereof.  We
expressly disclaim any responsibility to advise you or any other Bank Party who
is permitted to rely on any opinion expressed herein as specified in the next
preceding paragraph of any development or circumstance of any kind including
any change of law or fact that may occur after the date of this opinion letter
even though such development may affect the legal analysis, a legal conclusion
or any other matter set forth in or relating to this opinion letter.  Accordingly, any Bank Party relying on this
opinion letter at any time should seek advice of its counsel as to the proper
application of this opinion letter at such time.

 

Very truly yours,

 

124

 

EXHIBIT
C-1 to the

Second
Amended and Restated Credit

and
Reimbursement Agreement

 

FORM
OF REVOLVING CREDIT LOAN FACILITY ASSIGNMENT AND

ASSUMPTION AGREEMENT

 

AGREEMENT dated as of
                        ,
200     among [ASSIGNOR] (the “Assignor”), [ASSIGNEE] (the “Assignee”),
each Revolving Credit Loan Bank and, as required pursuant to the terms of the
Credit Agreement (as defined below), THE AES CORPORATION (the “Borrower”), and CITICORP USA, Inc., as
Administrative Agent (the “Agent”).

 

W
I T N E S S E T H

 

WHEREAS, this Assignment
and Assumption Agreement (the “Agreement”)
relates to the Second Amended and Restated Credit and Reimbursement Agreement
(the “Credit and Reimbursement Agreement”)
dated as of July 29, 2003 among the Borrower, the Subsidiary Guarantors
party thereto, the Banks party thereto, the Agent and Citibank, N.A., as
Collateral Agent; and

 

WHEREAS, the Assignor
proposes to assign to the Assignee all of the rights of the Assignor under the
Credit and Reimbursement Agreement in respect of a portion of its Revolving
Credit Loan Commitment thereunder in an amount equal to
$                            
(the “Assigned Amount”), together
with a corresponding portion of its outstanding Revolving Credit Loans and
participating interests in outstanding Letter of Credit Liabilities, and the
Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;

 

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

 

1.   Definitions.  All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit and
Reimbursement Agreement.

 

2.   Assignment.  The Assignor hereby assigns and sells to the
Assignee all or a proportionate part of all of the rights of the Assignor under
the Credit and Reimbursement Agreement and the other Financing Documents to the
extent of the Assigned Amount, in each case in an amount not less than
$1,000,000 (or such lesser amount as may be agreed to by the Borrower and the
Agent) (except in the case of an assignment which will result in a group of
Banks which are managed by the Assignor holding a Revolving Credit Loan
Commitment of not less than $1,000,000), and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the Assignor
under the Credit and Reimbursement Agreement and the other Financing Documents
to the extent of the Assigned Amount, including the purchase from the Assignor
of the corresponding portion of the principal amount of the Revolving Credit
Loans made by the Assignor outstanding at the date hereof and the

 

125

 

corresponding portion of participating interests purchased by the
Assignor in Letter of Credit Liabilities outstanding on the date hereof.  Upon the execution and delivery hereof by
the Assignor, the Assignee, each Revolving Credit Loan Bank and, as required
pursuant to the terms of the Credit Agreement, the Borrower and the Agent, and
the payment of the amounts specified in Section 3 hereof required to be paid on
the date hereof, (i) the Assignee shall, as of the date hereof, succeed to the
rights and be obligated to perform the obligations of a Bank Party under the
Credit and Reimbursement Agreement with a Revolving Credit Loan Commitment in
an amount equal to the Assigned Amount and (ii) the Revolving Credit Loan
Commitment of the Assignor shall, as of the date hereof, be reduced by a like
amount and the Assignor shall be released from its obligations under the Credit
and Reimbursement Agreement to the extent such obligations have been assumed by
the Assignee.

 

3.   Payments.  As consideration for the assignment and sale contemplated in
Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in
lawful money of the United States of America the amount heretofore agreed
between them.(1)  It is understood that
commitment fees and/or letter of credit commissions accrued to the date hereof
are for the account of the Assignor, and each of the Assignor and the Assignee
hereby agrees that if it receives any amount under the Credit and Reimbursement
Agreement which is for the account of the other party hereto, it shall receive
the same for the account of such other party to the extent of such other
party’s interest therein and shall promptly pay the same to such other party.

 

(1)                                  Amount
should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee.  It may be preferable in an appropriate case
to specify these amounts generically or by formula rather than as a fixed sum.

 

4.   Consent of the Revolving Credit Loan
Banks, the Borrower and the Agent. 
This Agreement is conditioned upon the consent of each Revolving Credit
Loan Bank and, as required pursuant to the terms of the Credit Agreement, the
Borrower and the Agent.  The execution
of this Agreement by each Revolving Credit Loan Bank and, as required pursuant
to the terms of the Credit Agreement, the Borrower and the Agent is evidence of
this consent.

 

5.   Non-Reliance on Assignor.  The Assignor makes no representation or
warranty in connection with, and shall have no responsibility with respect to,
the solvency, financial condition, or statements of any Obligor, or the
validity and enforceability of the Obligations of any Obligor in respect of the
Credit and Reimbursement Agreement or any other Financing Document.  The Assignee acknowledges that it has,
independently and without reliance on the Assignor, any other Bank Party, any
Revolving Credit Loan Bank or the Agent, and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Borrower.

 

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

 

7.   Counterparts.  This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.

 

126

 

IN WITNESS WHEREOF, the
parties have caused this Assignment and Assumption Agreement to be executed and
delivered by their duly authorized officers as of the date first above written.

 

	
   

  	
  [ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [EACH
  REVOLVING CREDIT LOAN

  BANK]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [CITICORP USA, Inc., as
  Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:](2)

  
	
   

  	
   

  
	
   

  	
  [THE AES CORPORATION,
  as Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:](2)

  
						

 

(2)           As required pursuant
to the terms of the Credit Agreement.

 

127

 

EXHIBIT
C-2 to the

Second
Amended and Restated Credit

and
Reimbursement Agreement

 

FORM
OF TERM LOAN FACILITY ASSIGNMENT AND ASSUMPTION AGREEMENT

 

AGREEMENT dated as of
                             
      , 200      among
[ASSIGNOR] (the “Assignor”),
[ASSIGNEE] (the “Assignee”) and
CITICORP USA, Inc., as Administrative Agent (the “Agent”).

 

W
I T N E S S E T H

 

WHEREAS, this Assignment
and Assumption Agreement (the “Agreement”)
relates to the Second Amended and Restated Credit and Reimbursement Agreement
(the “Credit and Reimbursement Agreement”)
dated as of July 29, 2003 among The AES Corporation (the “Borrower”), the Subsidiary Guarantors party
thereto, the Banks party thereto, the Agent and Citibank, N.A., as Collateral
Agent; and

 

WHEREAS, the Assignor
proposes to assign to the Assignee all of the rights of the Assignor under
Credit and Reimbursement Agreement in respect of all or a portion of its
outstanding Term Loan in an amount equal to
$                         
(the “Assigned Amount”) and the
Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;

 

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

 

1.   Definitions.  All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit and
Reimbursement Agreement.

 

2.   Assignment.  The Assignor hereby assigns and sells to the
Assignee all or a proportionate part of all of the rights of the Assignor under
the Credit and Reimbursement Agreement and the other Financing Documents to the
extent of the Assigned Amount, in each case in an amount not less than
$1,000,000 (or such lesser amount as may be agreed to by the Borrower and the
Agent) (except in the case of an assignment which will result in a group of
Banks which are managed by the Assignor holding a Term Loan Commitment of not
less than $1,000,000), and the Assignee hereby accepts such assignment from the
Assignor and assumes all of the obligations of the Assignor under the Credit
and Reimbursement Agreement and the other Financing Documents to the extent of
the Assigned Amount, including the purchase from the Assignor of the
corresponding portion of the Term Loan. 
Upon the execution and delivery hereof by the Assignor, the Assignee and
the Agent, and the payment of the amounts specified in Section 3 hereof
required to be paid on the date hereof, (i) the Assignee shall, as of the date

 

128

 

hereof, succeed to the rights and be obligated to perform the
obligations of a Bank Party under the Credit and Reimbursement Agreement with a
Term Loan in an amount equal to the Assigned Amount, and (ii) the Assignor
shall be released from its obligations under the Credit and Reimbursement
Agreement to the extent such obligations have been assumed by the Assignee.

 

3.   Payments.  As consideration for the assignment and sale contemplated in
Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in
lawful money of the United States of America the amount heretofore agreed
between them.(1)  It is understood that
commitment fees and/or letter of credit commissions accrued to the date hereof
are for the account of the Assignor, and each of the Assignor and the Assignee
hereby agrees that if it receives any amount under the Credit and Reimbursement
Agreement which is for the account of the other party hereto, it shall receive
the same for the account of such other party to the extent of such other
party’s interest therein and shall promptly pay the same to such other party.

 

4.   Consent of the Agent.  This Agreement is conditioned upon the
consent of the Agent.  The execution of
this Agreement by the Agent is evidence of this consent.

 

5.   Non-Reliance on Assignor.  The Assignor makes no representation or
warranty in connection with, and shall have no responsibility with respect to,
the solvency, financial condition, or statements of any Obligor, or the
validity and enforceability of the Obligations of any Obligor in respect of the
Credit and Reimbursement Agreement or any other Financing Document.  The Assignee acknowledges that it has,
independently and without reliance on the Assignor, any other Bank Party and
the Agent, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and will continue to be responsible for making its own independent
appraisal of the business, affairs and financial condition of the Borrower.

 

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

 

7.   Counterparts.  This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.

 

[SIGNATURE PAGES
IMMEDIATELY FOLLOW]

 

 

(1)                                  Amount
should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee.  It may be preferable in an appropriate case
to specify these amounts generically or by formula rather than as a fixed sum.

 

129

 

IN WITNESS WHEREOF, the
parties have caused this Assignment and Assumption Agreement to be executed and
delivered by their duly authorized officers as of the date first above written.

 

	
   

  	
  [ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  [ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  CITICORP USA, Inc., as
  Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  
							

 

130

 

EXHIBIT
D to the

Second
Amended and Restated

Credit
and Reimbursement Agreement

 

FORM
OF THIRD PARTY FRONTING BANK AGREEMENT

 

                     
      , 200    

 

Citicorp USA, Inc., as
Agent

388 Greenwich Street, 21st
Floor

New York, New York 10013

 

Attention:  Stuart Glen

 

Ladies and Gentlemen:

 

Reference is hereby made
to the Second Amended and Restated Credit and Reimbursement Agreement dated as
of July 29, 2003 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the “Credit Agreement”) among The AES Corporation, a Delaware
corporation (the “Borrower”),
the Subsidiary Guarantors party thereto, the Banks party thereto, Citibank,
N.A., as Collateral Agent and Citicorp USA, Inc., as Agent.  The capitalized terms defined in the Credit
Agreement and not otherwise defined herein are used herein as therein defined.

 

Section 1.  Obligations Under the Credit Agreement.  The undersigned hereby agrees, as of the
date first above written, to be bound as a Revolving Fronting Bank by all of
the terms and conditions of the Credit Agreement to the same extent as each of
the other Revolving Fronting Banks thereunder and agrees to issue letters of
credit in an aggregate Available Amount not to exceed
$[                   ]
at any time outstanding pursuant to and in accordance with Section 2.03 of the
Credit Agreement.  The undersigned
further agrees, as of the date first above written, that each reference in the
Credit Agreement to a “Revolving Fronting Bank” shall also mean and be a
reference to the undersigned, and each reference in any other Financing
Document to a “Lender Party”
shall also mean and be a reference to the undersigned in its capacity as
Revolving Fronting Bank.

 

Section 2.  Representations and Warranties.  The undersigned hereby represents and
warrants that it meets the definition of a “Third Party Fronting Bank”, as
defined in the Credit Agreement.

 

Section 3.  Delivery by Telecopier.  Delivery of an executed counterpart of a
signature page to this Third Party Fronting Bank Agreement by telecopier shall
be effective as delivery of an original executed counterpart of this Third
Party Fronting Bank Agreement.

 

Section 4.  Non-Reliance.  The undersigned acknowledges that it
has, independently and without reliance on any Revolving Fronting Bank, any
other Bank Party and

 

131

 

the Agent, and based on
such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and will continue to
be responsible for making its own independent appraisal of the business,
affairs and financial condition of the Borrower.

 

Section 5.  Governing Law; Jurisdiction; Waiver of
Jury Trial, Etc.  This Third Party
Fronting Bank Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [NAME OF THIRD PARTY
  FRONTING BANK]

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Acknowledged on the date
hereof by:

 

CITICORP USA, INC., as
Agent

 

	
  By

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  

 

132Exhibit 10.2

 

THE AES CORPORATION

 

as the Company

 

and

 

AES HAWAII MANAGEMENT COMPANY, INC. 

 

AES NEW YORK FUNDING, L.L.C. 

 

AES OKLAHOMA HOLDINGS, L.L.C.

 

AES WARRIOR RUN FUNDING, L.L.C.

 

as Subsidiary Guarantors party hereto

 

and

 

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

 

as Trustee

 

 

FIRST SUPPLEMENTAL INDENTURE

 

 

Dated as of July 29, 2003

 

 

to

 

 

SENIOR INDENTURE

 

 

Dated as of December 13, 2002

 

 

10% Senior Secured Notes Due 2005

 

 

FIRST
SUPPLEMENTAL INDENTURE dated as of July 29, 2003 (the “First Supplemental Indenture”)
among THE AES CORPORATION, a Delaware corporation (the “Company”), AES HAWAII
MANAGEMENT COMPANY, INC., a Delaware corporation and a subsidiary of the
Company and its successors, AES NEW YORK FUNDING, L.L.C., a Delaware limited
liability company and a subsidiary of the Company and its successors, AES
OKLAHOMA HOLDINGS, L.L.C., a Delaware limited liability company and a
subsidiary of the Company and its successors and AES WARRIOR RUN FUNDING,
L.L.C., a Delaware limited liability company and a subsidiary of the Company
and its successors, as Subsidiary Gurantors party hereto (the “Subsidiary
Guarantors”) and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as trustee (the “Trustee”).

 

WHEREAS, the
Company entered into a Senior Indenture dated as of December 13, 2002 (as
amended or supplemented from time to time, hereinafter called the “Indenture”), between the Company and the
Trustee providing for the issuance from time to time of up to such Principal
amount or amounts as may from time to time be authorized of the Company’s 10%
Senior Secured Notes due 2005 (the “Notes”) in accordance with the terms of the
Indenture; and

 

WHEREAS,
Section 9.01 of the Indenture provides that the Indenture may be amended by the
Company and the Trustee without notice to or the consent of any Holder to make
certain changes; and

 

WHEREAS,
Section 4.08(a) of the Indenture provides that if any of the Company’s
Subsidiaries shall Guarantee any indebtedness under the Senior Secured Credit
Facilities, then such Subsidiary shall, contemporaneously with the granting of
such Guarantee, Guarantee the Company’s Obligations under the Indenture equally
and ratably with (or prior to) the Senior Secured Credit Facilities so Guaranteed,
so long as the Senior Secured Credit Facilities shall be so Guaranteed; and

 

WHEREAS, all
conditions and requirements necessary to make this First Supplemental Indenture
a valid and binding instrument in accordance with its terms and the terms of
the Indenture have been satisfied;

 

NOW,
THEREFORE, in consideration of the premises and of the mutual covenants herein
contained, the Company, the Subsidiary Guarantors and the Trustee hereby
covenant and agree as follows:

 

SECTION 1.  Defined Terms.  For all purposes of this First Supplemental Indenture,
except as otherwise expressly provided or unless the context otherwise
requires, all capitalized terms defined herein and in the Indenture shall have
the meanings assigned to them herein. 
All capitalized terms not defined herein shall

 

2

 

have the meanings assigned to
them in the Indenture.  Unless otherwise
expressly specified, all references to a “Section” herein refer to a section of this
First Supplemental Indenture.

 

SECTION 2.  Amendment of Section 1.01 of Indenture.  Section 1.01 of the Indenture is
hereby amended by adding the following definitions:

 

“Guaranteed
Obligations” has the meaning set forth in Section 12.01.

 

“Subsidiary
Guarantors” means AES Hawaii Management Company, Inc., AES New York
Funding, L.L.C., AES Oklahoma Holdings, L.L.C. and AES Warrior Run Funding,
L.L.C.

 

“Subsidiary
Guaranty” has the meaning set forth in Section 12.01.

 

SECTION
3.  Addition of Article 12: Subsidiary Guaranty.  In accordance with Section 4.08 of the
Indenture, the following Article is hereby added to the Indenture:

 

ARTICLE 12

subsidiary guaranty

 

Section 12.01.  The Subsidiary Guaranty.  Subject in each case to the
provisions of Section 12.07, each of the Subsidiary Guarantors hereby, jointly
and severally, unconditionally guarantees as primary obligor and not merely as
surety, the Company’s Obligations under the Indenture equally and ratably with
such Subsidiary Guarantor’s Guarantee of the Company’s Obligations under the
Senior Secured Credit Facilities (the guaranty referred to above is referred to
as the “Subsidiary
Guaranty”).  Upon failure by
the Company to pay punctually any such amount, the Subsidiary Guarantors shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in the Indenture.  The
Obligations of the Company under the Indenture guaranteed by the Subsidiary
Guarantors are referred to as the “Guaranteed Obligations”.  Without limiting the generality of the
foregoing, each Subsidiary Guarantor’s liability hereunder shall extend to all
amounts which constitute part of the Obligations guaranteed by it hereunder and
would be owed by the Company hereunder but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Company.

 

Section 12.02.  Guaranty Absolute.  Each Subsidiary Guarantor, jointly and severally
guarantees that, subject to Section 12.07, the Guaranteed Obligations will be
paid strictly in accordance with the terms of this Indenture.  The respective obligations of each of the
Subsidiary Guarantors under the

 

3

 

Subsidiary Guaranty are
independent of the Indenture Obligations. 
The obligations of each Subsidiary Guarantor hereunder shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:

 

(i)            any extension,
renewal, settlement, compromise, waiver or release in respect of any Obligation
of the Company or the other Subsidiary Guarantors under the Indenture or any
Note, by operation of law or otherwise;

 

(ii)           any lack of
validity or enforceability of the Indenture;

 

(iii)          any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Guaranteed Obligations or any other obligations of the Company under the
Indenture, or any other amendment of or supplement to or waiver of or any
consent to departure from the Indenture, including, without limitation, any
increase in the Guaranteed Obligations resulting from the extension of
additional credit to the Company or otherwise;

 

(iv)          any taking,
exchange, release, impairment, invalidity or nonperfection of any Collateral;

 

(v)           any manner of
application of the Collateral or proceeds thereof, to all or any of the
Guaranteed Obligations, or any manner of sale or other disposition of any
Collateral for all or any of the Guaranteed Obligations or any other
Obligations of the Company or the other Subsidiary Guarantors under the
Indenture, or any other property or assets of the Company or the other
Subsidiary Guarantors or any of their Subsidiaries;

 

(vi)          any failure by the
Collateral Agent or the Trustee to disclose to the Company or the other
Subsidiary Guarantors any information relating to the financial condition,
operations, properties or prospects of the Company or the other Subsidiary
Guarantors now or hereafter known to the Collateral Agent or the Trustee, as
the case may be (such other Subsidiary Guarantors waiving any duty on the part
of the Collateral Agent or the Trustee to disclose such information);

 

(vii)         any change in the
corporate existence, structure or ownership of the Company or the other
Subsidiary Guarantors, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting the Company or the other Subsidiary Guarantors or
their assets

 

4

 

or any
resulting release or discharge of any Obligation of the Company or the other
Subsidiary Guarantors contained in the Indenture or any Note;

 

(viii)        the existence of any
claim, set-off or other rights which any of the other Subsidiary Guarantors may
have at any time against the Company, the Collateral Agent, the Trustee or any
other Person, whether in connection herewith or with any unrelated
transactions; provided that nothing herein shall prevent the assertion of
any such claim by separate suit or compulsory counterclaim;

 

(ix)           any invalidity or
unenforceability relating to or against the Company or the other Subsidiary
Guarantors for any reason of the Indenture or any Note, or any provision of
applicable law or regulation purporting to prohibit the payment by the Company
or the other Subsidiary Guarantors of the principal of or interest on any Note
or any other amount payable by them under the Indenture; or

 

(x)            any other act or
omission to act or delay of any kind by the Company, the other Subsidiary
Guarantors, the Collateral Agent, the Trustee or any other Person or any other
circumstance whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of or defense to another Subsidiary
Guarantor’s obligations hereunder.

 

Section 12.03.  Discharge Only Upon Payment in Full,
Reinstatement in Certain Circumstances. 
Subject to Section 12.08, each Subsidiary Guarantor’s
obligations hereunder shall remain in full force and effect until the
Guaranteed Obligations have been paid in full. 
If at any time the payment of principal of or interest on any Note or
any other amount payable by the Company under the Indenture is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, the applicable Subsidiary
Guarantor’s obligations hereunder with respect to such payment shall be
reinstated at such time as though such payment had been due but not made at
such time.

 

Section 12.04.  Waiver by the Subsidiary Guarantors.  Each Subsidiary Guarantor irrevocably
waives promptness, diligence, notice of acceptance, presentment, protest and
any other notice with respect to any of its Guaranteed Obligations and this
Subsidiary Guaranty and waives any requirement that at any time any action be
taken by any Person against the Company or any other Person.

 

Section 12.05.  Subrogation.  Upon making any payment with respect to the Company
under this Article, the applicable Subsidiary Guarantor shall be subrogated to
the rights of the payee against the Company with respect to such

 

5

 

payment; provided that no Subsidiary
Guarantor shall enforce any payment by way of subrogation until all amounts of
principal of and interest on the Notes and all other amounts payable by the
Company under the Indenture shall have been paid in full.

 

Section 12.06.  Stay of Acceleration.  In the event that acceleration of
the time for payment of any amount payable by the Company under the Indenture
or the Notes is stayed upon insolvency, bankruptcy or reorganization of the
Company, all such amounts otherwise subject to acceleration under the terms of
the Indenture shall nonetheless be payable by the applicable Subsidiary
Guarantor hereunder forthwith on demand by the Trustee or the Holders.

 

Section 12.07.  Limitation of Liability.  The obligations of each
Subsidiary Guarantor under this Article shall be limited to an aggregate amount
equal to the largest amount that would not render its obligations under this
Article subject to avoidance under Section 548 of the Bankruptcy Code or any
comparable provisions of any applicable state law (including, without
limitation, the provisions of the Uniform Fraudulent Transfer Act and the
Uniform Fraudulent Conveyance Act, to the extent incorporated in applicable
state law).

 

Section 12.08.  Release of Subsidiary Guarantors.  The Subsidiary Guaranty of a
Subsidiary Guarantor will terminate upon

 

(1)           a sale or other
disposition (including by way of consolidation or merger) of the Subsidiary
Guarantor or the sale or disposition of all or substantially all the assets of
the Subsidiary Guarantor (in each case other than to the Company or a
Subsidiary) otherwise permitted by the Indenture,

 

(2)           the cessation of the
circumstances requiring the Subsidiary Guaranty, or

 

(3)           defeasance or
discharge of the Notes, as provided in Section 8.05.

 

Upon delivery
by the Company to the Trustee of an Officer’s Certificate and an Opinion of
Counsel to the foregoing effect, the Trustee will execute any documents
reasonably required in order to evidence the release of the Subsidiary
Guarantor from its obligations under its Subsidiary Guaranty.

 

Section
12.09.  Execution and Delivery of Subsidiary
Guaranty.  The execution by
each Subsidiary Guarantor of this First Supplemental Indenture evidences the
Guaranteed Obligations of such Subsidiary Guarantor, whether or not the person
signing as an officer of the Subsidiary Guarantor still holds that

 

6

 

office at the time of
authentication of any Note.  The
delivery of any Note by the Trustee after authentication constitutes due
delivery of the Guaranteed Obligations set forth in the Indenture on behalf of
each Subsidiary Guarantor.

 

SECTION 4.  Consent to Amendments to Security Agreement
and Collateral Trust Agreement.  The
Trustee hereby consents to the execution by the Collateral Trustees of (i)
Amendment No. 1 dated as of July 29, 2003 (the “Security Amendment”) to the Security Agreement in the form
attached hereto as Exhibit A and (ii) Amendment No. 1 dated as of July 29, 2003
(the “Collateral Trust Amendment”)
to Collateral Trust Agreement in the form attached hereto as Exhibit B,
including the release of the Liens created by the Collateral Documents on less
than all or substantially all of the Collateral as contemplated therein.

 

SECTION 5.  Effectiveness.  This First Supplemental Indenture shall become
effective on the date hereof when the following conditions are met:

 

(a)           The Trustee shall have received, and
shall be fully protected in relying upon, in accordance with the terms of the
Indenture, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to Article 9 of the Indenture is
authorized or permitted by the Indenture, stating that all requisite consents
have been obtained or that no consents are required and stating that this First
Supplemental Indenture constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
subject to customary exceptions; and

 

(b)           The Company and the Trustee shall
have received duly executed counterparts hereof signed by the parties hereto.

 

SECTION 6.  Ratification.  The Indenture, as supplemented by this First
Supplemental Indenture, is in all respects ratified and confirmed. This First
Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent provided herein and therein.

 

SECTION 7.  Governing Law.  The laws of the State of New York shall govern this
First Supplemental Indenture.

 

SECTION 8.  Counterparts.  This First Supplemental Indenture may be executed in
any number of counterparts each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.

 

7

 

IN WITNESS
WHEREOF, the parties hereto have caused this First Supplemental Indenture to be
duly executed and attested, on the date or dates indicated in the
acknowledgments and as of the day and year first above written.

 

	
   

  	
  THE AES CORPORATION, as the

  Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AES HAWAII MANAGEMENT

  COMPANY, INC., as Subsidiary

  Guarantor party hereto

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AES NEW YORK FUNDING, L.L.C., as

  Subsidiary Guarantor party hereto

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  

 

8

 

	
   

  	
  AES OKLAHOMA HOLDINGS, L.L.C.,

  as Subsidiary Guarantor party hereto

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AES WARRIOR RUN FUNDING,

  L.L.C., as Subsidiary Guarantor party

  hereto

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK MINNESOTA,

  NATIONAL ASSOCIATION, as

  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  

 

9

 

THE AES CORPORATION

 

Officers’ Certificate

 

Pursuant to
Sections 10.02 and 10.03 of the Senior Indenture dated as of December 13, 2002,
as may be amended or supplemented from time to time (the “Indenture”) between The AES
Corporation, a Delaware corporation (the “Company”) and Wells Fargo Bank Minnesota,
National Association (the “Trustee”) under which the Company’s 10%
Senior Secured Notes Due 2005 were issued, each of the undersigned hereby
certifies as follows:

 

1.             I have read the covenants,
conditions and definitions of the Indenture concerning the authorization,
execution and delivery of the First Supplemental Indenture thereto dated as of
July 29, 2003 (the “First Supplemental Indenture”) between the
Company, the Subsidiary Guarantors party thereto and the Trustee.

 

2.             I have examined originals or
copies, certified or otherwise identified to my satisfaction, of corporate
records and other documents and instruments as I have deemed necessary or
advisable for the purpose of rendering this certificate.

 

3.             In my opinion, I have made such
examination as is necessary to enable me to express an informed opinion as to
whether or not the conditions concerning the authorization, execution and
delivery of the First Supplemental Indenture have been complied with.

 

4.             In my opinion, all conditions
precedent and covenants provided for in the Indenture, which relate to the
execution and delivery of the First Supplemental Indenture have been complied
with.

 

5.             The officer executing the First
Supplemental Indenture is authorized to execute and deliver the First
Supplemental Indenture.

 

Capitalized
terms not otherwise defined herein have the definitions given to them in the
Indenture.

 

10

 

IN WITNESS
WHEREOF, the undersigned have signed this certificate as of the 29th day of
July, 2003.

 

 

	
   

  	
  THE AES
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE AES
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

11

 

[DAVIS POLK LETTERHEAD]

 

July 29, 2003

 

 

Wells Fargo Bank Minnesota,
National Association,

as Trustee

Sixth Street and Marquette
Avenue

MAC N9303-120

Minneapolis, MN 55479

 

Ladies and Gentlemen:

 

We have acted
as counsel for The AES Corporation, a Delaware corporation (the “Company”)
in connection with the First Supplemental Indenture dated as of July 29, 2003
(the “First
Supplemental Indenture”) among the Company, the Subsidiary
Guarantors party thereto and the Trustee. 
Terms used but not otherwise defined herein have the meaning specified
in the First Supplemental Indenture.

 

We have
examined originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.  We have assumed the
genuineness of all signatures, the conformity to authentic original documents
of all documents submitted to us as copies and the authenticity of all
documents submitted to us as originals.

 

Based upon the
foregoing, we are of the opinion that:

 

1.             The execution of the First
Supplemental Indenture is permitted by the Indenture and all conditions
precedent under the Indenture relating thereto have been complied with.

 

2.             The First Supplemental Indenture,
when executed and delivered by the parties thereto, will constitute a valid and
binding obligation of each of the Company and Subsidiary Guarantors,
enforceable in accordance with its terms.

 

12

 

Our opinions
set forth above are subject to applicable bankruptcy, insolvency and similar
laws affecting creditors’ rights generally and to general principles of
equity.  We express no opinion as to the
effect of Section 548 of the United States Bankruptcy Code or any similar
provisions of State law.  We have not
considered, and express no opinion with respect to, the U.S. federal or state
income tax consequences to any Holder, and have assumed for purposes of this
opinion that such consequences, if any, will not adversely affect the interest
of the Holders of any Notes in any material respect.

 

We are members
of the Bar of the State of New York and the foregoing opinion is limited to the
laws of the State of New York and the federal laws of the United States of
America.

 

This opinion
is rendered solely to you in connection with the above matter.  This opinion may not be relied upon by you
for any other purpose or relied upon by any other person without our prior
written consent.

 

 

Very truly
yours,

 

13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}]]