FOURTH AMENDED AND RESTATED CREDIT AND REIMBURSEMENT AGREEMENT

Exhibit 10.1

EXECUTION COPY

FOURTH AMENDED AND RESTATED CREDIT AND

REIMBURSEMENT AGREEMENT

dated as of

July 29, 2008

among

THE AES CORPORATION,

as Borrower,

AES OKLAHOMA HOLDINGS, LLC

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

(Initial Term Loan Facility),

DEUTSCHE BANK SECURITIES INC.,

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

UNION BANK OF CALIFORNIA, N.A.,

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

Agent

(Revolving Credit Loan Facility),

LEHMAN COMMERCIAL PAPER INC.,

as Co-Documentation Agent (Initial Term Loan Facility),

UBS SECURITIES LLC,

as Co-Documentation Agent (Initial Term Loan Facility),

SOCIÉTÉ GÉNÉRALE,

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

CREDIT LYONNAIS NEW YORK BRANCH,

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

THE BANKS LISTED HEREIN

TABLE OF CONTENTS

 

 

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FOURTH AMENDED AND RESTATED CREDIT AND

REIMBURSEMENT AGREEMENT

FOURTH AMENDED AND RESTATED CREDIT AND REIMBURSEMENT AGREEMENT dated as of July 29, 2008 (this “ Agreement ”) among THE AES CORPORATION, a Delaware corporation (the “ Borrower ”), the SUBSIDIARY GUARANTORS listed herein, the BANKS listed on the signature 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 Initial Term Loan Facility (as hereinafter defined)), DEUTSCHE BANK SECURITIES INC, as Lead Arranger and Book Runner (for the Initial Term Loan Facility), UNION BANK OF CALIFORNIA, N.A., as Co-Syndication Agent (for the Initial Term Loan Facility) and as Lead Arranger and Book Runner and as Syndication Agent (for the Revolving Credit Loan Facility (as hereinafter defined)), LEHMAN COMMERCIAL PAPER INC., as Co-Documentation Agent (Initial Term Loan Facility), UBS SECURITIES LLC, as Co-Documentation Agent (Initial Term Loan Facility), SOCIÉTÉ GÉNÉRALE, as Co-Documentation Agent (Revolving Credit Loan Facility), CREDIT LYONNAIS NEW YORK BRANCH, as Co-Documentation Agent (Revolving Credit Loan 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 a Third Amended and Restated Credit and Reimbursement Agreement dated as of March 17, 2004 (as amended, amended and restated, supplemented or otherwise modified up to the date hereof, the “ Existing Bank Credit Agreement ”) among the subsidiary guarantors listed therein, the banks listed on the signatures pages thereof, 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 Loan 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 Loan Facility), Credit Lyonnaise New York Branch, as Co-Documentation Agent (Revolving Credit Loan Facility), Citicorp USA, Inc., as Administrative Agent for the Bank Parties and Citibank, N.A., as Collateral Agent for the bank parties.

2. The Borrower wishes to amend and restate the Existing Bank Credit Agreement to, among other things, restructure certain 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 Existing Bank Credit Agreement is hereby amended and restated, in its entirety as follows:

AES Fourth Amended and Restated Credit Agreement

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), (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.

“ Additional Term Loan Bank ” means any Eligible Assignee who agrees, in accordance with the provisions of Section 2.17, to commit to one of the Term Loan Facilities existing at the time of the request for a Commitment Increase.

“ 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 / 100 ^th 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 in cash 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 (including rental expense of the Borrower).

“ 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).

 

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“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 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 Sonel ” means AES-SONEL S.A., a société anonyme organised and existing under the laws of Cameroon.

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

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

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

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

“ 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

 

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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. 2 to the Collateral Trust Agreement ” means Amendment No. 2 to the Collateral Trust Agreement dated as of the Effective Date, by and among each grantor thereunder, the Representatives (as defined in the Collateral Trust Agreement) and the Corporate Trustee.

“ Amendment and Restatement Effective Date ” means the date that Amendment No. 13 to the Existing Bank Credit Agreement, dated as of July 29, 2008, becomes effective in accordance with Section 2 thereof.

“ 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.

“ Applicable Revolving Margin ” means, on any date, the percentage set forth in the table below based on the ratings assigned to the Facilities on such date by Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services:

 

If the Facilities are rated by only one such rating agency, the rating of such rating agency shall be used in determining the Applicable Revolving Margin. If the Facilities are rated by both such rating agencies and (x) the ratings differential is one level, the lower rating will apply or (y) the ratings differential is two levels or more, the midpoint rating will apply; provided that if there is no midpoint rating, the lower of the two intermediate ratings surrounding the midpoint will apply. If the Facilities are not rated by either of such rating agencies, the Facilities shall be deemed to be rated one level higher than (i) in the case of Moody’s Investors Service Inc., the Borrower’s corporate family rating and (ii) in the case of Standard & Poor’s Rating Services, the Borrower’s corporate credit rating and, in each case, the rules of the preceding two sentences shall apply to such deemed ratings. If the Facilities are not rated (or deemed rated in accordance with the preceding sentence) by either or such rating agencies, the Applicable Revolving Margin shall be 2.50%.

 

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“ 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 (Initial Term Loan Facility), Deutsche Bank Securities Inc., as Lead Arranger and Book Runner (Initial Term Loan Facility) and Union Bank of California, N.A., as Co-Syndication Agent (Initial Term Loan Facility) and as Lead Arranger and Book Runner and as Syndication Agent (Revolving Credit Loan 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 5.18 (other than sales of assets or Equity Interests of, or other Investments in, IPALCO or any of its Subsidiaries or any Subsidiary Guarantor or Subsidiary thereof permitted by subsection (iv) thereof); provided that a disposition of such assets not excluded during any fiscal year shall not constitute an Asset Sale unless and until (and only to the extent that) the aggregate Net Cash Proceeds from such disposition, when combined with all other such dispositions previously made during such fiscal year, exceeds $10,000,000.

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

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

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

“ Assumption Agreement ” has the meaning set forth in Section 2.17(d).

“ 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), each Incremental Term Loan Bank 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, in respect of any Net Cash Proceeds, 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 First Priority Secured Debt, the proceeds of which were used to permanently reduce Total Bank Exposure.

 

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“ 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 (i) in respect of the Revolving Credit Loans, a rate per annum equal to the Applicable Revolving Margin less 1.00%, (ii) in respect of the Initial Term Loans, a rate per annum equal to 0.75% (subject to the provisions of Section 2.06(f) hereof), and (iii) in respect of the Incremental Term Loan Facility, a rate per annum to be agreed to by the Borrower, the Agent and the Incremental Term Loan Banks.

“ 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 (i) 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) or (ii) a borrowing hereunder consisting of Incremental Term Loans made to the Borrower at the same time by the Incremental Term Loan Banks pursuant to Section 2.17. A Borrowing is a “ Base Rate Borrowing ” if such Loans are Base Rate Loans or a “ Euro-Dollar Borrowing ” if such Loans are Euro-Dollar Loans.

“ Bridge Debt ” means any Debt incurred pursuant to Section 5.07(b)(iv) relating to a bridge financing of any Asset Sale.

“ Business Day ” means either (i) a Domestic Business Day or (ii) a Euro-Dollar Business Day, as applicable.

“ 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.

 

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“ Cameroon Business ” means any AES Business located in the Republic of Cameroon, including, without limitation, AES Sonel.

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

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

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

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

“ Closing Date ” means March 17, 2004, the date on which the Agent 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 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 by Amendment No. 1 dated as of July 29, 2003 and as further 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

 

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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.

“ Commitment Increase ” has the meaning set forth in Section 2.17(a).

“ Communications ” has the meaning set forth in Section 7.11(a).

“ 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 (i) 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 (ii) 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 in cash by the Borrower during such period and regardless of whether any such amount was accrued during such period:

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

(A) 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

(B) 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;

 

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(ii) regularly scheduled dividend (including cumulative payments made as a result of any deferral) payments paid on the Borrower’s Redeemable Stock during such period;

(iii) regularly scheduled dividend (including cumulative payments made as a result of any deferral) payments paid on Trust Preferred Securities during such period; and

(iv) regularly scheduled dividend (including cumulative payments made as a result of any deferral) payments paid on the Borrower’s preferred stock or Hybrid Securities during such period.

“ 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 Transaction ” has the meaning set forth in the definition of “ Net Cash Proceeds ” herein.

“ 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, (i) 60% of such Net Cash Proceeds at any time that the Recourse Debt to Cash Flow Ratio is greater than or equal to 5.0:1.0 or (ii) 50% of such Net Cash Proceeds 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 collateralized or to the extent that the issuer of any such letter of credit is entitled to draw under a

 

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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. For the avoidance of doubt, Qualified Equity-Linked or Hybrid Securities shall not be considered Debt for any purpose of this Agreement (other than for purposes of the definition of Material Debt and Section 6.01 hereof).

“ 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, credit derivative transaction, 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; provided that Derivatives Obligations shall not include any obligations of such Person in relation to an equity forward contract, equity or equity index swap or equity or equity index option pertaining, linked or indexed to the common stock of such Person or any affiliate thereof. 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 Hedge 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 Hedge 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 March 15, 2004 or in written materials sent by or on behalf of the Borrower to all of the Bank Parties prior to March 15, 2004.

“ 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 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.

 

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“ 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 March 17, 2004, the date the Existing Bank Credit Agreement became effective in accordance with Section 10.10 of the Existing Bank Credit Agreement.

“ Eligible Assignee ” means any commercial bank or financial institution (including, without limitation, any fund that regularly invests in loans similar to the Term Loans) as approved (which approval shall be required only so long as no Event of Default has occurred and is continuing at the time of an assignment) by the Borrower (such approval not to be unreasonably withheld or delayed); provided , however , that neither any Loan Party nor any Subsidiary of a Loan Party shall qualify as an Eligible Assignee under this definition.

“ 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 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 Existing 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); and (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

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

 

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(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; provided that Equity Interest shall not include Trust Preferred Securities (other than the Existing Trust Preferred Securities) or any debt security that constitutes Debt and is convertible into, or exchangeable for, Equity Interests.

“ 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 Default Rate ” has the meaning set forth in Section 2.06(c).

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

 

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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 (i) in respect of the Revolving Credit Loans, a rate per annum equal to the Applicable Revolving Margin, (ii) in respect of the Initial Term Loans, a rate per annum equal to 1.75% (subject to the provisions of Section 2.06(f) hereof) and (iii) in respect of the Incremental Term Loan Facility, a rate per annum to be agreed to by the Borrower, the Agent and the Incremental Term Loan Banks.

“ 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 any AES Business located in Brazil or Argentina; provided that the Borrower may by written notice to the Agent make an election not to treat one or more AES Businesses in Brazil or Argentina as an “Excluded AES Business”. Once the Borrower elects not to treat an AES Business as an “Excluded AES Business” it may not thereafter change or revoke such election with respect to such AES Business without the consent of the Required Banks.

“ 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 the Excluded AES Businesses and direct or indirect Investments therein.

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

“ Existing Letter of Credit ” means a “ Letter of Credit ” (as defined in the Former Bank Credit Agreement) issued under the Former Bank Credit Agreement that was

 

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outstanding on the Effective Date and listed on Appendix III under the heading “ Existing Revolving Letters of Credit ”.

“ 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 Section 2.17 or (ii) the issuance of a Revolving Letter of Credit pursuant to Section 2.03.

“ Facilities ” means the Revolving Credit Loan Facility, the Initial Term Loan Facility and any Incremental Term Loan Facility made available to the Borrower pursuant to Section 2.17.

“ Federal Funds Rate ” means, for any day, the rate per annum (rounded upward, if necessary, to the nearest  ¹ / 100 ^th 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, 2003, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934.

“ Form 10-Q ” means the Borrower’s quarterly report on Form 10-Q for the quarter ended September 30, 2003, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934.

 

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“ Former Bank Credit Agreement ” means the “Existing Bank Credit Agreement” as defined in the Existing Bank Credit Agreement.

“ 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 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.

“ Hybrid Securities ” means, with respect to any Person, any securities of such Person that, at the time of issuance, received at least two of the following treatments: (a) “intermediate equity content” or better equity treatment from Standard & Poor’s Rating Services, (b) “Basket C Equity Credit” or better equity treatment from Moody’s Investors Service, Inc. and (c) “Class C- Moderate Equity Content” or better equity treatment from Fitch Ratings; provided that to the extent any such category of a rating agency is no longer in existence, the applicable references in this definition shall be deemed to be a reference to the nearest equivalent category of such rating agency.

“ Increase Commitment Date ” has the meaning set forth in Section 2.17(b).

 

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“ Increase Date ” has the meaning set forth in Section 2.17(a).

“ Incremental Term Loan ” means each term loan made by an Incremental Term Loan Bank under the Incremental Term Loan Facility in accordance with the terms of Section 2.17.

“ Incremental Term Loan Bank ” means each Bank (including any Additional Term Loan Bank) having an Incremental Term Loan.

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

“ Incremental Term Loan Commitment ” means, with respect to each Incremental Term Loan Bank, the amount set forth for such Bank in respect of the Incremental Term Loan Facility in the Register maintained by the Agent pursuant to Section 10.06(f).

“ Incremental Term Loan Facility ” has the meaning set forth in Section 2.17(a).

“ Incremental Term Loan Note ” means a promissory note of the Borrower to the order of any Incremental Term Loan Bank, in substantially the form of Exhibit A-2 hereto (with such modifications as the Borrower and the Agent may agree are necessary to evidence the terms of the Incremental Term Loan Facility), evidencing the indebtedness of the Borrower to such Bank resulting from the Incremental Term Loan deemed to have been made by such Lender.

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

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

“ Initial Term Loan ” means each “Term Loan” under the Existing Bank Credit Agreement continued as an Initial Term Loan hereunder in accordance with the terms of Section 2.01(b) and each Initial Term Loan made as a result of a Commitment Increase in accordance with the terms of Section 2.17.

“ Initial Term Loan Bank ” means each Bank (including any Additional Term Loan Bank) having an Initial Term Loan.

“ Initial Term Loan Commitment ” means, with respect to each Initial 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 or Assumption Agreements or is an Additional Term Loan Bank, the amount set forth for such Bank in respect of the Initial Term Loan Facility in the Register maintained by the Agent pursuant to Section 10.06(f).

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

“ Initial Term Loan Note ” means a promissory note of the Borrower to the order of any Initial Term Loan Bank, in substantially the form of Exhibit A-2 hereto, evidencing the

 

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indebtedness of the Borrower to such Bank resulting from the Initial Term Loan deemed to have been made by such Lender.

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

“ 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

(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.

“ IPALCO Asset Sale ” has the meaning set forth in Section 2.09(b)(ii).

“ 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.

 

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“ 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 / 16 ^th 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 (i) the business, consolidated results of operations, consolidated financial condition or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Loan Parties to perform their material obligations under any Financing Document or (iii) the rights of and remedies available to any Bank Party under any Financing Document.

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

“ Material Debt ” means, with respect to any Person, Debt (other than the Loans and the Reimbursement Obligations) of such Person arising in one 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(a).

“ 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.

 

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“ Minimum Ratings Condition ” means, at any time of determination, that the Facilities are rated at least Ba1 from Moody’s Investors Service, Inc. and the corporate credit rating of the Borrower is at least BB- from Standard & Poor’s Ratings Services, in each case without any negative outlook.

“ 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

(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

 

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(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 5.17 shall be included.

“ Non-Consenting Bank ” has the meaning set forth in Section 10.16.

“ 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 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 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,

 

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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 Guarantor’s under the Loan Documents include (i) 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 (ii) 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 Guarantor’s.

“ 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) as calculated below:

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

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

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

(iv) interest and other distributions paid to the Borrower 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);

(v) cash payments made to the Borrower in respect of foreign exchange Hedge Agreements or other foreign exchange activities entered into by the Borrower on behalf of any of its Subsidiaries; and

(vi) other cash payments made to the Borrower by its Subsidiaries other than (A) returns of invested capital; (B) payments of the principal of Debt of any such Subsidiary to the Borrower and (C) 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.

 

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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 the 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.

“ Permitted Business ” means, with respect to any Person, (i) a line of business which is substantially the same line of business as one or more of the principal businesses of such Person and its Subsidiaries, (ii) a line of business which is complementary or ancillary to, one or more of the principal businesses of such Person and its Subsidiaries, (iii) any energy business, (iv) any infrastructure business, (v) any power business, (vi) any public utility business, (vii) the ownership, extraction, processing, transportation, distribution and sales of fossil fuels and derivatives thereof, (viii) any line of business relating or in connection with, climate solutions, carbon offsets, biofuels or battery storage and (ix) any business ancillary, complementary or related to any of the business described in clauses (i) through (viii), including without limitation trading activities.

“ Permitted Credit Derivative Transaction ” means any credit derivative transaction referencing a government, governmental agency or quasi-governmental agency, sovereign or sovereign agency or a super- or multi-national agency or any debt obligation issued by any such entity, in each case to the extent such transaction is not entered into for speculative purposes.

 

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

“ Plan ” means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.

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

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

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

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

“ Qualified Equity-Linked or Hybrid Securities ” means preferred stock, mandatorily convertible debt securities and Hybrid Securities, in each case, that does not constitute Redeemable Stock.

“ 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

 

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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 activities, (E) the making (but not the entering into binding obligations to make) of Investments in AES Businesses owned by its Subsidiaries, (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 Effective Date under any agreement by which it is bound as of the Effective Date and (G) entering into foreign exchange Hedge Agreements (otherwise permitted under Section 5.19) in respect of dividends received or expected to be received from Subsidiaries of such Qualified Holding Company, in a notional amount not to exceed $100,000,000 outstanding at any time for each Qualified Holding Company and for a term of no more than six months from the date the relevant Hedge Agreement is entered into; 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 and Qualified Equity-Linked or Hybrid Securities) plus (ii) Derivative Obligations of the Borrower plus (iii) Off Balance Sheet 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 or Hybrid Securities of any Person that by its terms or otherwise is (i) required to be redeemed prior to the date that is 180 days following the Termination Date (other than a redemption solely in the form of Capital Stock that does not constitute Redeemable Stock), (ii) redeemable at the option of the holder of such class or series of Capital Stock or Hybrid Securities at any time prior to the date that is 180 days following the Termination Date or (iii) convertible into or exchangeable for (unless solely at the option of such person) Capital Stock or Hybrid Securities referred to in

 

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clause (i) or (ii) above or Debt having a scheduled maturity prior to the date that is 180 days following the Termination Date; provided that any Capital Stock or Hybrid Securities 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 or Hybrid Securities upon the occurrence of an “asset sale” or a “change of control” occurring prior to the date that is 180 days following the Termination Date shall not constitute Redeemable Stock if such Capital Stock or Hybrid Securities specifically provides that such person will not repurchase or redeem any such Capital Stock or Hybrid Securities 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.

“ 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 (i) the aggregate principal amount of the Loans outstanding at such time, (ii) the aggregate Revolving Letter of Credit Liabilities outstanding at such time and (iii) 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.

“ Restricted Payment ” has the meaning set forth in Section 5.09(a).

 

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“ Revolving Credit Assumption Agreement ” has the meaning set forth in Section 2.18(d)(ii).

“ Revolving Credit Increase Date ” has the meaning set forth in Section 2.18(a).

“ 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(f) 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 Commitment Increase ” has the meaning set forth in Section 2.18(a).

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

“ Revolving Credit Loan Increase Commitment Date ” has the meaning set forth in Section 2.18(b).

“ 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.

“ 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) each Revolving Credit Loan Bank listed on Schedule VII hereto and (iii) any other Revolving Credit Loan Bank and/or any Third Party Fronting Bank which has executed and delivered to the Agent a Revolving Fronting Bank Agreement pursuant to Section 10.15, in each case, unless such Bank has been released from its obligation as a Revolving Fronting Bank pursuant to Section 10.15(b).

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

 

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

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

“ 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 the Applicable Revolving Margin.

“ 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 8  ³ / 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 (i) is entered into by and between the Borrower and any Hedge Bank and (ii) specifies by its terms that it is secured by the Collateral.

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

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

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

 

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“ 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 by Amendment No. 1 dated as of July 29, 2003 and as further 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 (i) 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, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) 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 (iv) such Person is not engaged in business or a transaction, and is not about to engage in business or a

 

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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 (1) for purposes of Section 5.09(a)(v), was formed solely for the purpose of acquiring Equity Interests in the Borrower and obtaining financing (including the issuance of securities) the proceeds of which were intended to be used to acquire Equity Interests in the Borrower or (2) for any other purpose hereunder, was formed solely for the purpose of issuing Trust 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 Guarantee 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 (i) the aggregate principal amount of the Loans outstanding at such time, (ii) the aggregate Revolving Letter of Credit Liabilities outstanding at such time and (iii) 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 Ratings Services or Moody’s Investors Service, Inc.; (iii) time deposits with, including

 

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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 ” means each Initial Term Loan and each Incremental Term Loan.

“ Term Loan Bank ” means each Initial Term Loan Bank and each Incremental Term Loan Bank.

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

“ Term Loan Commitments ” means the Initial Term Loan Commitments of the Initial Term Loan Banks at such time and the Incremental Term Loan Commitments of the Incremental Term Loan Banks at such time.

“ Term Loan Facilities ” means the Initial Term Loan Facility and the Incremental Term Loan Facility.

“ Term Loan Notes ” means the Initial Term Loan Notes and the Incremental Term Loan Notes.

“ Termination Date ” means (i) June 23, 2010 in the case of the Revolving Credit Loan Facility, (ii) August 10, 2011, in the case of the Initial Term Loan Facility (the “Initial Term Loan Termination Date” ) and (iii) the date agreed to by the Borrower, the Agent and the Incremental Term Loan Banks in the case of any Incremental Term Loan Facility (the “ Incremental Term Loan Termination Date ”); provided that the Incremental Term Loan Termination Date shall not occur prior to the Initial Term Loan Termination Date; provided , in each case, that if the Termination Date occurs on a day that is not a Euro-Dollar Business Day, the Termination Date shall occur on the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day.

“ 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

 

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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).

“ 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.

“ Total Term Loan Commitments ” means at any time in respect of a Term Loan Bank the sum of such Term Loan Bank’s Initial Term Loan Commitment at such time plus such Term Loan Bank’s Incremental Term Loan Commitment at such time.

“ 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 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,

 

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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.

“ Unrestricted Cash ” means all cash or cash equivalents of the Borrower and its Subsidiaries that would not appear as “restricted” on the consolidated balance sheet of the Borrower or any of its Subsidiaries; provided that Unrestricted Cash shall not include cash or cash equivalents of a Subsidiary that is not an Obligor to the extent such Subsidiary is not permitted (by law, contract or otherwise) from distributing such cash or cash equivalents to the Borrower.

“ Unused Revolving Credit Loan Commitments ” means, with respect to any Revolving Credit Loan Bank at any time, (i) such Bank’s Revolving Credit Loan Commitment at such time minus (ii) the sum of (A) the aggregate principal amount of all Revolving Credit Loans outstanding at such time and owed to such Revolving Credit Loan Bank plus (B) 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 and shares owned by foreign nationals mandated by applicable law) 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

 

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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.

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 Loan Facility . (i) Each Revolving Credit Loan Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans (each a “ Revolving Credit Loan ”) in Dollars 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.

(ii) Any “Revolving Credit Loans” outstanding under the Existing Bank Credit Agreement on the Amendment and Restatement Effective Date shall be continued as Revolving Credit Loans hereunder. As of the Amendment and Restatement Effective Date, the aggregate amount of outstanding Revolving Credit Loans is $263,257,731.61.

 

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(b) Initial Term Loan Facility . Subject to the terms and conditions set forth herein, on the Amendment and Restatement Effective Date any “Term Loan” outstanding under the Existing Bank Credit Agreement shall be continued as an Initial Term Loan hereunder. As of the Amendment and Restatement Effective Date, the aggregate amount of outstanding Initial Term Loans is $200 million.

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

Section 2.02 Notice of Borrowing .

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

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

(ii) the aggregate amount of such Borrowing;

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

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

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

(c) Not later than 2:00 P.M. (New York City time) on the date of each Borrowing, each Bank shall (except as provided in subsection (d) of this Section 2.02) make available its ratable share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 10.01. Unless the Agent 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.

 

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

Section 2.03 Revolving Letters of Credit .

(a) Issuance of Letters of Credit . Subject to the terms and conditions hereof, each Revolving Fronting Bank agrees to issue letters of credit under this Section 2.03(a) upon the Borrower’s request and for the Borrower 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 Former Bank Credit Agreement, on and as of the Effective Date, (x) 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 Former Bank Credit Agreement) pursuant to this Section 2.03(a), (y) participations in such Existing Letters of Credit held by the Revolving Credit Loan Banks under the Former Bank Credit Agreement shall be deemed to be cancelled and (z) the Revolving Credit Loan Banks under this Agreement shall be deemed to hold participations in such Existing Letters of Credit in the amount required so that the participations of such Revolving Credit Loan Banks shall be in proportion to their respective Revolving Credit Loan Commitments; 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, (x) each Revolving Credit Loan Bank that is a Revolving Fronting Bank, in its separate capacity as a Revolving Fronting Bank, shall only be obligated to issue at any time Revolving Letters of Credit having an aggregate face amount at any time that is equal to the unused Revolving Credit Loan Commitment of such Revolving Credit Loan Bank at such time and (y) each other 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 such Revolving Fronting Bank’s commitment at such time as set forth in the relevant Revolving Fronting Bank Agreement. Any “Revolving Letters of Credit” outstanding under the Existing Bank Credit Agreement on the Amendment and Restatement Effective Date shall remain outstanding as Revolving Letters of Credit hereunder.

 

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(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 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));

 

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(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 the 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 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

 

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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 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;

 

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(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 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

 

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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.

(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

 

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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 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 (A) on the last Domestic Business Day of each January, April, July and October occurring on or before October 31, 2005, (B) on each March 31, June 30, September 30 and December 31 commencing with December 31, 2005 and (C) 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;

 

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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 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

 

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(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.

(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 Loan Facility, (b) each Initial Term Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the Initial Term Loan Termination Date and (c) each Incremental Term Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon) on the Incremental Term Loan Termination Date in respect of such Incremental Term Loan Facility.

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 applicable to such Loan 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 applicable to such Loan 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

 

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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 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 applicable to such Loan plus the Adjusted London Interbank Offered Rate applicable to such Euro-Dollar Loan and (ii) the sum of 2% plus the Euro-Dollar Margin applicable to such Loan plus the quotient obtained (rounded upward, if necessary, to the next higher  ¹ / 100 ^th of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher  ¹ / 16 ^th of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Reference Banks are offered to such Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the relevant rate applicable to Base Rate Loans) (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 for the Euro-Dollar 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 Effective Date 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 Initial Term Loans on the Closing Date (and the Borrower agrees that the pricing of the Initial Term 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).

 

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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 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 of Loans 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 Loans consisting of all 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.

 

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(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 the Borrower.

(d) The 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 Loans consisting of all 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 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 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 .

(x) Other than in the case of an Asset Sale involving the sale of assets or Equity Interests of, or other Investments in, IPALCO or any of its Subsidiaries (an “IPALCO Asset Sale ”), 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

 

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Proceeds from 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.

(y) In the case of an IPALCO Asset Sale, following the application of the Net Cash Proceeds thereof to repay Term Loans in accordance with Section 2.10(b)(i) or if the Term Loan Facilities have been paid in full, the Revolving Credit Loan Commitments of the Revolving Credit Loan Banks shall, (A) unless the Supermajority Banks otherwise agree or the Minimum Ratings Condition is met at such time (after giving effect to such IPALCO Asset Sale), be ratably reduced by an amount equal to the Banks’ Ratable Share of such remaining Net Cash Proceeds (concurrently with the prepayment of outstanding Revolving Credit Loans in accordance with Section 2.10(b)(i)) and (B) after giving effect to any reduction in clause (A), 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 Initial Term Loans prior to July 29, 2004, 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.

(b) Mandatory . (i) The Borrower shall, on the third Business Day following the receipt by the Borrower after the Effective Date of (A) Net Cash Proceeds from any Asset Sales or (B) Net Cash Proceeds from the incurrence of any Bridge Debt, offer to prepay, on a pro rata basis, an aggregate principal amount of the Term Loans in an 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

 

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any reduction of Revolving Credit Loan Commitments, except as set forth in Section 2.09(b)(ii)).

(ii) The Borrower shall, on the third Business Day following 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) (but only to the extent the Debt was incurred by IPALCO or a Subsidiary Guarantor), offer to prepay an aggregate principal amount of the Term Loans in an aggregate amount equal to the Banks’ Ratable Share of such Net Cash Proceeds (other than $200,000,000 of additional Debt of IPALCO and the Subsidiary Guarantors incurred after the Effective Date). The Term Loan Banks shall have the option to accept or refuse any prepayment pursuant to this Section 2.10(b)(ii) 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)(ii) 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 Loan Commitments).

(c) Term Loan Opt-Out . With respect to any prepayment of a 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 or before the third Business Day after the Borrower is in 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 fourth Business Day following receipt of such notice by the Agent. 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 third 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

 

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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 the 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 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.

 

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(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 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

 

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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 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

 

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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 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

 

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( 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.

Section 2.17 Increase in Term Loan Commitments .

(a) The Borrower may, at any time and from time to time prior to the later of (x) the Initial Term Loan Termination Date and (y) any Incremental Term Loan Termination Date, by notice to the Agent, request the addition of one or more new term loan facilities (each, an “ Incremental Term Loan Facility ”) or one or more increases in the Commitments under a Term Loan Facility existing at the time of such request (each, a “ Commitment Increase ”) in an aggregate amount up to $500,000,000 plus the sum of all amounts applied from time to time after the Effective Date to permanently prepay Term Loans pursuant to Section 2.10 hereof or to permanently reduce Revolving Credit Loan Commitments pursuant to Section 2.09 hereof less the aggregate amount of Revolving Credit Loan Commitment Increases pursuant to Section 2.18, to be effective as of a date that is at least 90 days prior to the scheduled Termination Date then in effect (each, an “ Increase Date ”) as specified in the related notice to the Agent; provided , however , that (i) in no event shall the aggregate amount of such Commitment Increases exceed $700,000,000 less the aggregate amount of Revolving Credit Loan Commitment Increases pursuant to Section 2.18, (ii) on the date of any request by the Borrower for a Commitment Increase and on the related Increase Date, the applicable conditions set forth in Section 3.02 and in clause (d) of this Section 2.17 shall be satisfied and (iii) if the request is for an Incremental Term Loan Facility, such Incremental Term Loan Facility shall contain such other terms as may be agreed by the Borrower, the Agent and the Incremental Term Loan Banks, provided that (A) the final scheduled maturity date of the Incremental Term Loan Facility shall in no event be

 

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prior to the Initial Term Loan Termination Date and (B) no Bank shall have any obligation to participate in any Incremental Term Loan Facility or any Commitment Increase.

(b) The Agent shall promptly notify the Initial Term Loan Banks of any request by the Borrower for a Commitment Increase, which notice shall include (i) the proposed amount of such requested Commitment Increase, (ii) the proposed Increase Date and (iii) the date by which Initial Term Loan Banks wishing to participate in the Commitment Increase must commit to an increase in the amount of their respective Commitments (the “ Increase Commitment Date ”). Each Initial Term Loan Bank that is willing to participate in the requested Commitment Increase shall, in its sole discretion, give written notice to the Agent on or prior to the applicable Increase Commitment Date of the amount by which it is willing either to increase its Initial Term Loan Commitment or commit to the Incremental Term Loan Facility. If the Initial Term Loan Banks notify the Agent that they are willing to participate in a Commitment Increase by an aggregate amount that exceeds the amount of the requested Commitment Increase, the requested Commitment Increase shall be allocated among the Initial Term Loan Banks willing to participate therein in such amounts as are agreed between the Borrower and the Agent.

(c) Promptly following the applicable Increase Commitment Date, the Agent shall notify the Borrower as to the amount, if any, by which the Initial Term Loan Banks are willing to participate in the requested Commitment Increase. If the aggregate amount by which the Initial Term Loan Banks are willing to participate in the requested Commitment Increase on any such Increase Date is less than the requested Commitment Increase, then the Borrower may extend offers to one or more Eligible Assignees to participate in any portion of the requested Commitment Increase that has not been committed to by the Initial Term Loan Banks as of the applicable Increase Commitment Date; provided , however , that the Initial Term Loan Commitment or Incremental Term Loan Commitment, as the case may be, of each such Eligible Assignee shall be in an amount equal to at least $1,000,000.

(d) On the applicable Increase Date, each Eligible Assignee that accepts an offer to participate in a requested Commitment Increase in accordance with Section 2.17(c) shall become a Bank party to this Agreement as of the applicable Increase Date and the Initial Term Loan Commitment or the Incremental Term Loan Commitment, as the case may be, of each Initial Term Loan Bank participating in such Commitment Increase shall be so increased by such amount (or by the amount allocated to such Initial Term Loan Bank pursuant to the last sentence of Section 2.17(b)) as of such Commitment Increase Date; provided , however , that the Agent shall have received on or before the applicable Increase Date the following, each dated such date:

(i) (A) certified copies of resolutions of the Board of Directors (or a committee thereof) of the Loan Parties approving the applicable Commitment Increase and the corresponding modifications to this Agreement and (B) an opinion of counsel for each of the Loan Parties (which may be an opinion of in-house counsel), each in form and substance reasonably satisfactory to the Agent;

(ii) an assumption agreement from each Eligible Assignee, if any, in form and substance satisfactory to the Borrower and the Agent (each an “ Assumption Agreement ”), duly executed by such Eligible Assignee, the Agent and the Borrower; and

 

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(iii) confirmation from each Initial Term Loan Bank of the increase in the amount of its Initial Term Loan Commitment or Incremental Term Loan Commitment, as the case may be, in a writing satisfactory to the Borrower and the Agent.

On the applicable Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence of this Section 2.17(d) and the conditions set forth in Section 3.02, (x) the Agent shall notify the Initial Term Loan Banks and the Additional Term Loan Banks participating in such Commitment Increase and the Borrower, on or before 11:00 A.M. (New York City time), by telecopier or telex, of the occurrence of the applicable Commitment Increase to be effected on the related Increase Date, (y) each Initial Term Loan Bank participating in such Commitment Increase and each Additional Term Loan Bank participating in such Commitment Increase shall make a single advance to the Borrower in an amount equal to its agreed commitment in respect of the Commitment Increase; provided that after taking into account such advance, the aggregate principal amount of the Term Loans of each such participating Term Loan Bank shall not exceed such Term Loan Bank’s Total Term Loan Commitments and (z) the Agent shall record in the Register maintained by the Agent pursuant to Section 10.06(f) the relevant information with respect to each Initial Term Loan Bank and each Additional Term Loan Bank participating in such Commitment Increase on such date.

Section 2.18 Increase in Revolving Credit Loan Commitments .

(a) The Borrower may, at any time and from time to time prior to the Termination Date of the Revolving Credit Loan Facility, by notice to the Agent, request one or more increases in the Commitments under the Revolving Credit Loan Facility existing at the time of such request (each, a “ Revolving Credit Loan Commitment Increase ”) in an aggregate amount up to $500,000,000 plus the sum of all amounts applied from time to time after the Effective Date to permanently reduce Revolving Credit Loan Commitments pursuant to Section 2.09 hereof or to permanently repay Term Loans pursuant to Section 2.10 hereof less the aggregate amount of Incremental Term Loan Facilities and Commitment Increases pursuant to Section 2.17, to be effective as of a date that is at least 90 days prior to the scheduled Termination Date then in effect (each, a “ Revolving Credit Increase Date ”) as specified in the related notice to the Agent; provided , however , that (i) in no event shall the aggregate amount of such Revolving Credit Loan Commitment Increases exceed $700,000,000 less the aggregate amount of Incremental Term Loan Facilities and Commitment Increases pursuant to Section 2.17 and (ii) on the date of any request by the Borrower for a Revolving Credit Loan Commitment Increase and on the related Revolving Credit Increase Date, the applicable conditions set forth in Section 3.02 and in clause (d) of this Section 2.18 shall be satisfied, provided that no Bank shall have any obligation to participate in any Revolving Credit Loan Commitment Increase.

(b) The Agent shall promptly notify the Revolving Credit Loan Banks of any request by the Borrower for a Revolving Credit Loan Commitment Increase, which notice shall include (i) the proposed amount of such requested Revolving Credit Loan Commitment Increase, (ii) the proposed Revolving Credit Increase Date and (iii) the date by which Revolving Credit Loan Banks wishing to participate in the Revolving Credit Loan Commitment Increase must commit to an increase in the amount of their respective

 

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Revolving Credit Loan Commitments (the “ Revolving Credit Loan Increase Commitment Date ”). Each Revolving Credit Loan Bank that desires to participate in the requested Revolving Credit Loan Commitment Increase shall, in its sole discretion, give written notice to the Agent on or prior to the applicable Revolving Credit Loan Increase Commitment Date of the amount by which it desires to increase its Revolving Credit Loan Commitment.

(c) The Borrower may extend offers to one or more Eligible Assignees to participate in any portion of the requested Revolving Credit Loan Commitment Increase; provided , however , that the Revolving Credit Loan Commitment of each such Eligible Assignee shall be in an amount equal to at least $1,000,000. Promptly following the applicable Revolving Credit Loan Increase Commitment Date, the Agent shall notify the Borrower as to the amount, if any, by which the Revolving Credit Loan Banks and any Eligible Assignees are willing to participate in the requested Revolving Credit Loan Commitment Increase. In all cases (including if the aggregate amount by which the Revolving Credit Loan Banks and any Eligible Assignees are willing to participate in the requested Revolving Credit Loan Commitment Increase on any such Revolving Credit Increase Date exceeds the amount of the requested Revolving Credit Loan Commitment Increase), the requested Revolving Credit Loan Commitment Increase shall be allocated among the Revolving Credit Loan Banks and any Eligible Assignees willing to participate therein in such amounts as are agreed between the Borrower and the Agent.

(d) On the applicable Revolving Credit Increase Date, each Eligible Assignee that accepts an offer to participate in a requested Revolving Credit Loan Commitment Increase in accordance with Section 2.18(c) shall become a Bank party to this Agreement as of the applicable Revolving Credit Increase Date and the Revolving Credit Loan Commitment of each Revolving Credit Loan Bank participating in such Revolving Credit Loan Commitment Increase shall be increased by the amount allocated to such Revolving Credit Loan Bank pursuant to the last sentence of Section 2.18(c)) as of such Revolving Credit Increase Date; provided , however , that the Agent shall have received on or before the applicable Revolving Credit Increase Date the following, each dated such date:

(i) (A) certified copies of resolutions of the Board of Directors (or a committee thereof) of the Loan Parties approving the applicable Revolving Credit Loan Commitment Increase and the corresponding modifications to this Agreement and (B) an opinion of counsel for each of the Loan Parties (which may be an opinion of in-house counsel), each in form and substance reasonably satisfactory to the Agent;

(ii) an assumption agreement from each Eligible Assignee, if any, in form and substance satisfactory to the Borrower and the Agent (each a “ Revolving Credit Assumption Agreement ”), duly executed by such Eligible Assignee, the Agent and the Borrower; and

(iii) confirmation from each Revolving Credit Loan Bank of the increase in the amount of its Revolving Credit Loan Commitment in a writing satisfactory to the Borrower and the Agent.

 

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On the applicable Revolving Credit Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence of this Section 2.18(d) and the conditions set forth in Section 3.02, (x) the Agent shall notify the existing Revolving Credit Loan Banks and any new Revolving Credit Loan Banks participating in such Revolving Credit Loan Commitment Increase and the Borrower, on or before 11:00 A.M. (New York City time), by telecopier or telex, of the occurrence of the applicable Revolving Credit Loan Commitment Increase to be effected on the related Revolving Credit Increase Date and (y) the Agent shall record in the Register maintained by the Agent pursuant to Section 10.06(f) the relevant information with respect to each existing Revolving Credit Loan Bank and each new Revolving Credit Loan Bank participating in such Revolving Credit Loan Commitment Increase on such date.

ARTICLE III

CONDITIONS

Section 3.01 Closing .

The closing under the Existing Bank Credit Agreement occurred on March 17, 2004 when all the following conditions had 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

 

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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, 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;

(f) The Agent shall have received executed counterparts of Amendment No. 2 to the Collateral Trust Agreement reflecting such amendments as the Agent may deem necessary.

(g) 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);

(h) 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;

(i) 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;

(j) 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));

(k) 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

 

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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; and

(l) 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.

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 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

 

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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.

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) 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

 

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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.

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 most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries and the related consolidated statements of operations and cash flows, in each case reported on by Ernst & Young or other independent public accountants of nationally recognized standing and set forth in the Annual Report on Form 10-K most recently filed by the Borrower with the Securities and Exchange Commission, 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, 2003 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.

 

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Section 4.06 Litigation .

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

Section 4.07 Compliance with ERISA .

Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the currently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (a) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan; (b) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (c) incurred any liability in excess of $100,000 under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.

Section 4.08 Environmental Matters .

(a) In the ordinary course of its business, each of the Borrower and its Subsidiaries conducts an ongoing review of the effect of Environmental Laws on the business, operations and properties of the Borrower or such Subsidiary, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required for investigation, to achieve or maintain 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

 

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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, 1999 there are no ongoing or pending tax audits or examinations, and no deficiencies or other claims for unpaid taxes are proposed in respect of any taxes due from the Borrower, its Subsidiaries or any Material AES Entity that could have a Material Adverse Effect. The Borrower, its Subsidiaries and all Material AES Entities have filed all United States Federal income tax returns and the Borrower, its Subsidiaries and all Material AES Entities have filed all other material tax returns which are required to be filed by them, all such United States Federal income tax returns and all such other material returns are true, correct and complete in all material respects and all taxes due as indicated on such returns or pursuant to any assessment received by the Borrower or any Subsidiary or any Material AES Entity have been paid, other than any such taxes that are being diligently contested in good faith through appropriate proceedings and for which adequate reserves have been established in accordance with generally accepted accounting principals. The charges, accruals and reserves on the books of the Borrower, its Subsidiaries and all Material AES Entities in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate.

Section 4.10 Material AES Entities .

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

 

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Utility Holding Company Act of 1935, as amended (“ PUHCA ”), except that the Borrower and certain of its Subsidiaries are exempt holding companies under Section 3(a) of PUHCA by order of the Securities and Exchange Commission.

Section 4.13 Full Disclosure .

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

 

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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 end of the most recently ended quarter for which financial statements have been delivered pursuant to Section 5.01(a) or (b) showing as of such date (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 such date 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-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 Effective Date 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 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.

 

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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:

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 (i) within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower 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 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, and a statement of cash flow distributions to the Borrower by project for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year and (ii) within 180 days after the end of the fiscal year of the Borrower, a consolidated balance sheet of each Subsidiary Guarantor as of the end of such fiscal year and the related consolidated statements of operations for such fiscal year and the related consolidated statements of cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year and said consolidated financial statements, in each case with respect to clauses (i) and (ii), to

 

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be reported on, in a manner acceptable to the Securities and Exchange Commission, by Ernst & Young or other independent public accountants of nationally recognized standing and such 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 (i) 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 the Borrower 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 the Borrower’s fiscal year ended at the end of such quarter and the related consolidated and unconsolidated (as applicable) statements of cash flows for the portion of the Borrower’s fiscal year ended at the end of such quarter, and a statement of cash flow distributions to the Borrower by project for such fiscal quarter and for the period of the Borrower’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 the Borrower’s previous fiscal year and (ii) within 90 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of each Subsidiary Guarantor as of the end of such quarter and the related consolidated statements of operations for such quarter and for the portion of such Subsidiary Guarantor’s fiscal year ended at the end of such quarter and the related consolidated statements of cash flows for the portion of each Subsidiary Guarantor’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 each Subsidiary Guarantor’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) above, forecasts prepared by management of the Borrower, in form satisfactory to the Agent, of cash flow statements on a monthly basis for the fiscal year following such fiscal year and on an annual basis for each fiscal year thereafter until the Termination Date and (2) as soon as available and in any event no later than the date financial statements are required to be delivered pursuant to clause (a) and (b) above, a statement of the monthly cash flows to the Borrower of each Subsidiary of the Borrower for each of the twelve months ending prior to the date of such financial statements;

 

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(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, 5.10(p), 5.11, 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 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 5.17, inclusive;

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

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

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

(i) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any “reportable event” (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue

 

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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 third Business Day after receipt by the Borrower or any Subsidiary of the Borrower of Net Cash Proceeds from any Asset Sale, any issuance of Bridge Debt or any 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) (but only to the extent the Debt was incurred by IPALCO or a Subsidiary Guarantor), 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, initial notice or other material 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 material liability, obligation, loss, damage, cost, expense, fine, penalty or sanction or the requirement to commence any material remedial action resulting from or in connection with any material air emission, water discharge, noise emission, Hazardous Substance or any other material 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

 

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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;

(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); and

(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 a Permitted Business; (b) will continue, and will cause AES BVI II, each Material AES Entity and each Pledged

 

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Subsidiary to continue, to operate their respective businesses on a basis substantially consistent with the policies and standards of the Borrower, AES BVI II or such Material AES Entity or such Pledged Subsidiary as in effect on the date hereof and (c) will preserve, renew and keep in full force and effect, and will cause AES BVI II, each Material AES Entity and each Pledged Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in 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 5.18 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:

 

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(a) in the case of the Borrower:

(i) Debt under the Financing Documents;

(ii) Debt existing on the Effective Date and set forth on Schedule VI;

(iii) Debt representing a refinancing, replacement or refunding of Debt permitted by Section 5.07(a)(i), (ii), (iii), (vii) and (ix); 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 Initial 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 Initial Term Loan Termination Date up to an aggregate principal amount not to exceed $400,000,000 and not before July 29, 2006; provided further that the Debt being refinanced, replaced or refunded has a final maturity date on or prior to the Initial Term Loan Termination Date) (z) (1) such Debt shall not contain any Payment Restriction more restrictive than the Payment Restrictions contained in the Debt being refinanced, replaced or refunded or (2) in the opinion of the Borrower, such Payment Restrictions are consistent with customary market terms for a financing of its nature and do not adversely affect the ability of the Borrower to meet its payment Obligations under the Financing Documents; and

(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, unless such liability in respect of such Debt would otherwise be permitted by Section 5.07(b);

(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 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) if such Debt is secured by a Lien on the

 

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Creditor Group Collateral on a first-lien basis, the final scheduled maturity of such Debt shall in no event be on or prior to the Initial Term Loan Termination Date and (z) if such Debt is secured by a Lien on the Creditor Group Collateral on a first-lien basis, such Debt shall not have any scheduled amortization on or prior to the Initial Term Loan Termination Date in an aggregate amount in excess of 10% of the initial amount of such Debt;

(viii) Debt incurred as a bridge financing for a proposed sale, transfer or other disposition of assets pursuant to Section 5.18(iv) with respect to assets acquired after June 23, 2005; provided that (w) the only direct or contingent obligor in respect of such Debt is the holder of the assets that are the subject of such sale, transfer or other disposition, (x) the interest rate applicable to such Debt does not exceed the then applicable market interest rate, (y) such Debt is repaid with the proceeds of such sale, transfer or other disposition upon consummation thereof and (z) such Debt was incurred in connection with the acquisition by the Borrower of the assets that are the subject of such sale, transfer or other disposition;

(ix) 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 scheduled maturity of such Debt shall be later than the Initial Term Loan Termination Date; and

(x) Debt in an aggregate principal amount not to exceed $500,000,000 at any one time outstanding, so long as immediately before and after giving effect to the incurrence and application of the proceeds thereof no Default shall have occurred and be continuing; and

(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) or (a)(vii) 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 Effective Date, 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) or (a)(vii) 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

 

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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 (1) Debt incurred or assumed by Intermediate Holding Companies which, at the time such Debt was incurred or assumed, in the aggregate, contributed less than 50% of the Parent Operating Cash Flow for the immediately preceding four fiscal quarters, (2) Debt incurred or assumed by Subsidiaries of the Borrower (other than Intermediate Holding Companies), which, at the time such Debt was incurred or assumed, in the aggregate, contributed less than 15% of the Parent Operating Cash Flow for the immediately preceding four fiscal quarters and are projected by the Borrower at the time such Debt is incurred or assumed to contribute less than 15% of the Parent Operating Cash Flow for the immediately succeeding four fiscal quarters and (3) in the case of any Cameroon Business or any Subsidiary of the Borrower (other than any Subsidiary Guarantor) that has a direct or indirect interest in any Cameroon Business, Debt of any other Cameroon Business or any Subsidiary of the Borrower (other than any Subsidiary Guarantor) that has a direct or indirect interest in any Cameroon Business); provided 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 Effective Date;

 

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(iv) Debt incurred by a Subsidiary as a bridge financing for a proposed sale, transfer or other disposition of assets pursuant to Section 5.18(iv); provided that (w) the only direct or contingent obligor in respect of such Debt is the holder of the assets that are the subject of such sale, transfer or other disposition, (x) the interest rate applicable to such Debt does not exceed the then applicable market interest rate, (y) such Debt is repaid with the proceeds of such sale, transfer or other disposition upon consummation thereof and (z) in the case of a bridge financing for a proposed Asset Sale, 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, in the case of Debt incurred by IPALCO or any Subsidiary Guarantor, an amount equal to the Banks’ Ratable Share of 100% of such Net Cash Proceeds (other than $200,000,000 of additional Debt of IPALCO and the Subsidiary Guarantors incurred after the Effective Date), 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)(vii); 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 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