UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

         For Quarterly Period Ended March 31, 2002

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

         For The Transition Period From                       to

                         Commission file number 1-14756.

                               AMEREN CORPORATION
             (Exact name of registrant as specified in its charter)

                     Missouri                                  43-1723446
         (State or other jurisdiction of                    (I.R.S. Employer
         incorporation or organization)                     Identification No.)


                 1901 Chouteau Avenue, St. Louis, Missouri 63103
              (Address of principal executive offices and Zip Code)


                         Registrant's telephone number,
                       including area code: (314) 621-3222


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.


                        Yes      X    .       No            .
                           -----------          ------------


  Shares outstanding of each of registrant's classes of common stock as of
    May 10, 2002: Common Stock, $.01 par value - 144,347,116





                               AMEREN CORPORATION

                                      INDEX

                                                                         Page
                                                                         ----
PART I       Financial Information

   ITEM 1.   Financial Statements

             Consolidated Balance Sheet
             at March 31, 2002 and December 31, 2001                      2

             Consolidated Statement of Income
             for the three months ended March 31, 2002 and 2001           3

             Consolidated Statement of Cash Flows
             for the three months ended March 31, 2002 and 2001           4

             Consolidated Statement of Common Stockholders' Equity
             for the three months ended March 31, 2002 and 2001           5

             Notes to Consolidated Financial Statements                   6

   ITEM 2.   Management's Discussion and Analysis of
             Financial Condition and Results of Operations               12

   ITEM 3.   Quantitative and Qualitative Disclosures
             About Market Risk                                           19

PART II      Other Information

   ITEM 1.   Legal Proceedings                                           22

   ITEM 6.   Exhibits and Reports on Form 8-K                            22

SIGNATURE                                                                24

PART I. FINANCIAL INFORMATION
ITEM 1.  Financial Statements


                               AMEREN CORPORATION
                           CONSOLIDATED BALANCE SHEET
                     (In Millions, Except Per Share Amounts)

                                                        March 31,  December 31,
                                                           2002         2001
                                                         ----------   ---------
                                                         (Unaudited)
                                                               
ASSETS:
Property and plant, at original cost:
   Electric                                                   $13,770   $13,664
   Gas                                                            537       532
   Other                                                          106       105
                                                              -------   -------
                                                               14,413    14,301
   Less accumulated depreciation and amortization               6,628     6,535
                                                              -------   -------
                                                                7,785     7,766
Construction work in progress:
   Nuclear fuel in process                                        102        97
   Other                                                          591       564
                                                              -------   -------
         Total property and plant, net                          8,478     8,427
                                                              -------   -------
Investments and other assets:
   Investments                                                     39        39
   Nuclear decommissioning trust fund                             188       187
   Other                                                          150       114
                                                              -------   -------
         Total investments and other assets                       377       340
                                                              -------   -------
Current assets:
   Cash and cash equivalents                                       60        67
   Accounts receivable - trade (less allowance for doubtful
         accounts of $11 and $9, respectively)                    386       389
   Other accounts and notes receivable                             48        71
   Materials and supplies, at average cost -
      Fossil fuel                                                 121       159
      Other                                                       137       136
   Other                                                           32        41
                                                              -------   -------
         Total current assets                                     784       863
                                                              -------   -------
Regulatory assets:
   Deferred income taxes                                          604       604
   Other                                                          162       167
                                                              -------   -------
         Total regulatory assets                                  766       771
                                                              -------   -------
Total Assets                                                  $10,405   $10,401
                                                              =======   =======
CAPITAL AND LIABILITIES:
Capitalization:
   Common stock, $.01 par value, 400.0 shares authorized -
     shares outstanding of 144.2 and 138.0, respectively      $     1   $     1
   Other paid-in capital, principally premium on
     common stock                                               1,804     1,614
   Retained earnings                                            1,701     1,733
   Accumulated other comprehensive income                           -         5
   Other                                                          (10)       (4)
                                                             --------   --------
     Total common stockholders' equity                          3,496     3,349
                                                             --------   -------
   Preferred stock not subject to mandatory redemption            235       235
   Long-term debt                                               3,281     2,835
                                                              --------  -------
      Total capitalization                                      7,012     6,419
                                                              --------  -------
Minority interest in consolidated subsidiaries                      4         4
Current liabilities:
   Current maturity of long-term debt                             137       139
   Short-term debt                                                105       641
   Accounts and wages payable                                     174       392
   Accumulated deferred income taxes                               55        58
   Taxes accrued                                                  201       132
   Other                                                          247       219
                                                              --------  -------
      Total current liabilities                                   919     1,581
                                                              --------  -------
Accumulated deferred income taxes                               1,560     1,563
Accumulated deferred investment tax credits                       156       158
Regulatory liabilities                                            172       172
Other deferred credits and liabilities                            582       504
                                                              --------  -------
Total Capital and Liabilities                                 $10,405   $10,401
                                                              ========  =======
See Notes to Consolidated Financial Statements.




                               AMEREN CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME
                                    UNAUDITED
                     (In Millions, Except Per Share Amounts)

                                                            Three Months Ended
                                                                 March 31,
                                                            ------------------
                                                              2002       2001
                                                                  


OPERATING REVENUES:
   Electric                                                $   984    $   836
   Gas                                                         125        186
   Other                                                         6          3
                                                           -------    -------
      Total operating revenues                               1,115      1,025

OPERATING EXPENSES:
   Operations
      Fuel and purchased power                                 440        303
      Gas                                                       85        137
      Other                                                    182        166
                                                           -------    -------
                                                               707        606
   Maintenance                                                  84         88
   Depreciation and amortization                               107         99
   Income taxes                                                 38         49
   Other taxes                                                  68         67
                                                           -------    -------
      Total operating expenses                               1,004        909
                                                           -------    -------

OPERATING INCOME                                               111        116

OTHER INCOME AND (DEDUCTIONS):
   Allowance for equity funds used during construction .         2          2
   Miscellaneous, net                                           (1)        (2)
                                                           -------    -------
      Total other income and (deductions)                        1          -

INCOME BEFORE INTEREST CHARGES
   AND PREFERRED DIVIDENDS                                     112        116

INTEREST CHARGES AND PREFERRED DIVIDENDS:
   Interest                                                     52         50
   Allowance for borrowed funds used during construction        (2)        (2)
   Preferred dividends of subsidiaries                           3          3
                                                           -------    -------
      Net interest charges and preferred dividends              53         51
                                                           -------    -------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
      ACCOUNTING PRINCIPLE                                      59         65

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
      PRINCIPLE, NET OF INCOME TAXES                             -         (7)
                                                           -------    -------
NET INCOME                                                 $    59    $    58
                                                           =======    =======

EARNINGS PER COMMON SHARE - BASIC AND DILUTED:
    Income before cumulative effect of change
         in accounting principle                           $  0.42    $  0.48
    Cumulative effect of change in accounting
         principle, net of income taxes                          -      (0.05)
                                                           -------    -------
    Earnings per Common Share - Basic and Diluted          $  0.42    $  0.43
                                                           =======    =======

AVERAGE COMMON SHARES OUTSTANDING                            139.7      137.2

See Notes to Consolidated Financial Statements.



                                       3




                               AMEREN CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                    UNAUDITED
                                  (In Millions)

                                                            Three Months Ended
                                                                  March 31,
                                                            ------------------
                                                                2002      2001
                                                                 

Cash Flows From Operating:
   Net income                                                  $  59    $  58
   Adjustments to reconcile net income to net cash
       provided by operating activities:
         Cumulative effect of change in accounting principle       -        7
         Depreciation and amortization                           104       96
         Amortization of nuclear fuel                              7        9
         Allowance for funds used during construction             (4)      (4)
         Deferred income taxes, net                               (3)      (7)
         Deferred investment tax credits, net                     (2)      (2)
           Changes in assets and liabilities:
               Receivables, net                                   26       86
               Materials and supplies                             37       23
               Accounts and wages payable                       (218)    (212)
               Taxes accrued                                      69       77
               Other, net                                         35       56
                                                               -----    -----
Net cash provided by operating activities                        110      187

Cash Flows From Investing:
   Construction expenditures                                    (159)    (204)
   Allowance for funds used during construction                    4        4
   Nuclear fuel expenditures                                      (5)      (8)
                                                               -----    -----
Net cash used in investing activities                           (160)    (208)

Cash Flows From Financing:
   Dividends on common stock                                     (91)     (87)
   Capital issuance costs                                        (20)       -
   Redemptions:
      Nuclear fuel lease                                           -      (35)
      Short-term debt                                           (536)       -
      Long-term debt                                              (4)      (5)
   Issuances:
      Common stock                                               246        -
      Nuclear fuel lease                                           3        2
      Short-term debt                                              -       70
      Long-term debt                                             445       42
                                                               -----    -----
Net cash provided by (used in) financing activities               43      (13)
                                                               -----    -----

Net change in cash and cash equivalents                           (7)     (34)
Cash and cash equivalents at beginning of year                    67      126
                                                               -----    -----
Cash and cash equivalents at end of period                     $  60    $  92
                                                               =====    =====

Cash paid during the periods:
   Interest (net of amount capitalized)                        $  27    $  31
   Income taxes, net                                           $   4    $   1

See Notes to Consolidated Financial Statements.


                                       4






                      AMEREN CORPORATION
           CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
                           UNAUDITED
                         (In Millions)


                                                            Three Months Ended
                                                                  March 31,
                                                            ------------------
                                                              2002       2001
                                                                 
Common stock                                               $     1     $    1

Other paid-in capital
   Beginning balance                                         1,614      1,581
   Shares issued (less issuance costs of $9)                   237         -
   Stock purchase contract                                     (46)        -
   Employee stock awards                                        (1)        -
                                                           --------   --------

                                                             1,804      1,581

Retained earnings
   Beginning balance                                         1,733      1,614
   Net income                                                   59         58
   Dividends                                                   (91)       (87)
                                                           --------   --------
                                                             1,701      1,585

Accumulated other comprehensive income
   Beginning balance                                             5          -
   Change in current period                                     (5)        (4)
                                                           --------   --------
                                                                 -         (4)

Other
   Beginning balance                                            (4)         -
   Unamortized restricted stock compensation                    (7)        (5)
   Compensation amortized and mark-to-market adjustments         1          -
                                                           --------    --------
                                                               (10)        (5)

Total common stockholders' equity                          $ 3,496    $ 3,158
                                                           ========   ========


Comprehensive income, net of taxes
   Net income                                              $    59    $    58
   Unrealized net gain/(loss) on derivative
     hedging instruments                                        (5)         7
   Cumulative effect of accounting change                        -        (11)
                                                           --------   --------
                                                           $    54    $    54
                                                           ========   ========

See Notes to Consolidated Financial Statements.



                                       5



AMEREN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2002


NOTE 1 - Summary of Significant Accounting Policies

Basis of Presentation

     Our financial  statements  reflect all  adjustments  (which include normal,
recurring adjustments) necessary, in our opinion, for a fair presentation of the
interim  results.  These  statements  should  be read in  conjunction  with  the
financial statements and the notes thereto included in our 2001 Annual Report on
Form 10-K.

     When we  refer  to  Ameren,  our,  we or us,  we are  referring  to  Ameren
Corporation on a consolidated basis. In certain circumstances,  our subsidiaries
are  specifically  referenced  in order to  distinguish  among  their  different
business  activities.  All dollar  amounts  are in  millions,  unless  otherwise
indicated.

Earnings Per Share

     There was no  difference  between the basic and diluted  earnings per share
amounts  for the  three-month  periods  ended  March  31,  2002  and  2001.  The
reconciling  item in each of the periods was  comprised of assumed  stock option
conversions,  which  increased the number of shares  outstanding  in the diluted
earnings  per share  calculation  by 351,794  shares for the three  months ended
March 31, 2002 compared to 331,361 shares in the first quarter of 2001.

Accounting Changes

     In January 2001,  we adopted  Statement of Financial  Accounting  Standards
(SFAS) No. 133, "Accounting for Derivative  Instruments and Hedging Activities."
The impact of that adoption resulted in a cumulative effect charge of $7 million
after taxes to the income  statement,  and a cumulative effect adjustment of $11
million after taxes to  Accumulated  Other  Comprehensive  Income  (OCI),  which
reduced common stockholders' equity.

     On January 1, 2002, we adopted SFAS No. 141,  "Business  Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS 141 requires business
combinations to be accounted for under the purchase method of accounting,  which
requires  one  party  in the  transaction  to be  identified  as  the  acquiring
enterprise  and for that party to allocate the purchase  price to the assets and
liabilities  of the acquired  enterprise  based on fair market  value.  SFAS 142
requires  goodwill  and  indefinite  lived  intangible  assets  recorded  in the
financial statements to be tested for impairment at least annually,  rather than
amortized over a fixed period,  with  impairment  losses  recorded in the income
statement.  SFAS  141 and SFAS 142 did not  have  any  effect  on our  financial
position,  results of operations or liquidity  upon  adoption.  SFAS No. 141 and
SFAS No. 142 will be utilized for our acquisition of CILCORP Inc. and AES Medina
Valley (No. 4), L.L.C. See Note 6 - "Subsequent Event."

     In July 2001, SFAS No. 143,  "Accounting for Asset Retirement  Obligations"
was issued.  SFAS 143 requires an entity to record a liability and corresponding
asset  representing the present value of legal  obligations  associated with the
retirement of tangible,  long-lived assets.  SFAS 143 is effective for Ameren on
January 1, 2003.  At this time,  we are  assessing the impact of SFAS 143 on our
financial position, results of operations and liquidity upon adoption.  However,
as a result of this new standard we expect significant increases to our reported
assets  and  liabilities  as a result of  ongoing  collection  through  rates of

                                       6




obligations  associated with Callaway Nuclear Plant  decommissioning costs which
are being  further  recovered in the rates of our  regulated  subsidiary,  Union
Electric Company, known as AmerenUE.

     On January 1, 2002 we adopted SFAS No. 144,  "Accounting for the Impairment
or Disposal of Long-Lived  Assets." SFAS 144 addresses the financial  accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." SFAS 144 retains the guidance  related to calculating
and  recording  impairment  losses,  but adds  guidance  on the  accounting  for
discontinued  operations,  previously accounted for under Accounting  Principles
Board  Opinion  No.  30.  SFAS  144 did not  have any  effect  on our  financial
position, results of operations or liquidity upon adoption.


NOTE 2 - Rate and Regulatory Matters

Missouri Electric

     From July 1, 1995 through June 30, 2001, our subsidiary, AmerenUE, operated
under  experimental  alternative  regulation plans in Missouri that provided for
the  sharing of  earnings  with  customers  if our  regulatory  return on equity
exceeded  defined  threshold  levels.  At  March  31,  2002,  we had an  accrual
representing  the estimated  credit that we expect to pay our Missouri  electric
customers  of $40 million for the plan year ended June 30,  2001.  In 2002,  the
Missouri  Public  Service  Commission  (MoPSC) Staff and the Missouri  Office of
Public  Counsel  (OPC)  Staff  filed  testimony  with the MoPSC on this  matter.
Combined,  the MoPSC Staff and OPC Staff  recommend that the credit to customers
for the plan year ended June 30, 2001, should approximate $80 million. The MoPSC
is not  bound by their  recommendations.  To date,  a  procedural  schedule  and
hearing  dates on this matter have not been  established  by the MoPSC.  At this
time,  we  continue to believe  that our  accrual is  adequate  in all  material
respects.

     Following  expiration of the  experimental  alternative  regulation plan on
June 30,  2001,  the MoPSC  Staff  filed an excess  earnings  complaint  against
AmerenUE.  Based upon a January  2002 MoPSC order,  on March 1, 2002,  the MoPSC
Staff filed a recommendation  that AmerenUE reduce its annual Missouri  electric
revenues by $246 million to $285 million.  The MoPSC Staff's  recommendation  is
based on a return to traditional cost of service ratemaking,  a return on equity
ranging from 8.91% to 9.91%,  a reduction in Ameren's  depreciation  rates,  and
other  cost of  service  adjustments.  The  MoPSC is not  bound  by the  Staff's
recommendation.

     On May 10, 2002, AmerenUE filed rebuttal testimony in response to the MoPSC
Staff's  recommendation.  In its  testimony,  AmerenUE  stated  that a return to
traditional cost of service ratemaking would result in an increase in its annual
Missouri electric revenues by approximately $150 million. AmerenUE's position is
based  on a  12.5%  return  on  equity,  higher  depreciation  rates  and  other
adjustments.   However,   a  key  component  of  AmerenUE's   testimony  is  its
recommendation  that a new  alternative  rate  regulation plan (Alt Reg Plan) be
adopted by the  MoPSC.  In  AmerenUE's  filing,  we  included a new Alt Reg Plan
proposal. Key provisions of the Alt Reg Plan include the following:

     o    A three-year  plan from July 1, 2002 through June 30, 2005 which would
          require AmerenUE to share earnings over certain  regulatory  return on
          equity (ROE)  thresholds  for the 12 months ending July 1 through June
          30;
     o    The proposed  earnings  sharing grid would require AmerenUE to provide
          sharing credits of $17 million if AmerenUE's regulatory ROE is between
          10.5% and  12.5%.  Additional  credits of 55% of  AmerenUE's  earnings
          between a regulatory  ROE of 12.5% and 15% would be  provided,  90% of
          earnings  between  a  regulatory  ROE of 15% and 16%,  and 100% of any
          earnings above 16%.
     o    An immediate  one-time credit to customers bills of $15 million;
     o    An annualized  $15 million  permanent rate  reduction,  retroactive to
          April 1, 2002;
     o    An immediate funding of $5 million to a low-income customer assistance
          program and $5 million to an economic development program;
     o    A commitment of $1.5 billion to $1.75 billion in energy infrastructure
          investment from January 1, 2002 through June 30, 2005.

                                       7


     Hearings for this case are  scheduled  to commence in mid-July  2002 and be
completed in early  August  2002. A final  decision on this matter may not occur
until  the  fourth  quarter  of  2002.  In the  interim,  we  plan  to  continue
negotiations  with all  pertinent  parties  with the intent to continue  with an
incentive regulation plan. We cannot predict the outcome of the MoPSC's decision
in this matter or its impact on our financial statements,  results of operations
or liquidity. However, the impact could be material.

     In order to  satisfy  AmerenUE's  regulatory  load  requirements  for 2001,
AmerenUE  purchased,  through a competitive  bidding  process,  under a one year
contract  450  megawatts  of  capacity  and energy from  AmerenEnergy  Marketing
Company (Marketing  Company),  at market-based  rates. For 2002, AmerenUE again,
through a  competitive  bidding  process,  entered into a one year contract with
Marketing Company for the purchase of 200 megawatts of capacity and energy.  For
the four summer months of 2002,  AmerenUE also entered into  contracts  with two
other power suppliers for an aggregate 200 megawatts of additional  capacity and
energy.

     In May 2001,  the MoPSC filed a pleading with the  Securities  and Exchange
Commission  (SEC) relating to AmerenUE's  agreement to purchase 450 megawatts of
capacity  and energy from  Marketing  Company  during  2001 (the 2001  Marketing
Company - AmerenUE agreement).  The pleading requested an investigation into the
contractual  relationship  between AmerenUE,  Marketing Company and AmerenEnergy
Generating Company  (Generating  Company),  in the context of the 2001 Marketing
Company  -  AmerenUE  agreement  and  requested  that  the SEC  find  that  such
relationship  violates  a  provision  of  PUHCA  which  requires  state  utility
commission approval of power sales contracts between an electric utility company
and an affiliated  electric wholesale  generator,  like Generating  Company.  We
believe that the MoPSC's  approval of the power sales  agreement  under PUHCA is
not required because  Generating  Company is not a party to the agreement.  As a
remedy,  the MoPSC proposes that the SEC require  AmerenUE to contract  directly
with  Generating  Company and submit such contract to the MoPSC for review.  The
SEC has not responded to this matter to date. On May 9, 2002,  the MoPSC filed a
similar  pleading with the SEC relating to AmerenUE's  agreement to purchase 200
megawatts of capacity and energy from  Marketing  Company  during 2002.  At this
time,  management  is unable to predict  the outcome of these  pleadings  or the
ultimate  impact on our future  financial  position,  results of  operations  or
liquidity.

Illinois

     In December  1997,  the Governor of Illinois  signed the  Electric  Service
Customer  Choice and Rate Relief Law of 1997 (the  Illinois  Law)  providing for
electric  utility  restructuring  in  Illinois.   This  legislation   introduced
competition  into the retail  supply of electric  energy in  Illinois.  Illinois
residential  customers  were  offered  choice  in  suppliers  on  May  1,  2002.
Industrial  and  commercial  customers  were already  offered  this choice.  The
offering of choice to our  industrial  and  commercial  customers  has not had a
material  adverse  effect on our  business  and we do not expect the offering of
choice to our  residential  customers to have a material  adverse  effect on our
business either.

     In addition,  the Illinois  Law contains a provision  freezing  residential
electric rates through  January 1, 2005.  Legislation has been introduced in the
Illinois House of  Representatives  and Senate that would extend the rate freeze
to December 31, 2006. At this time, we cannot predict  whether that  legislation
will ultimately be passed.

Federal - Midwest ISO and Alliance RTO

     In December 1999, the Federal Energy  Regulatory  Commission  (FERC) issued
Order 2000 requiring all utilities, subject to FERC jurisdiction, to state their
intentions  for joining a regional  transmission  organization  (RTO).  RTOs are
independent organizations that will functionally control the transmission assets
of utilities in order to improve the wholesale power market. Since January 2001,
we, along with several other utilities, have been seeking approval from the FERC
to  participate  in an RTO known as the Alliance RTO. We had  previously  been a
member of the Midwest  Independent  System Operator (MISO) and recorded a pretax
charge to earnings in 2000 of $25 million ($15 million  after taxes) for an exit
fee and other  costs  when we left  that  organization.  We felt the  for-profit
Alliance RTO business  model was superior to the  not-for-profit  MISO  business
model and provided us with a more equitable return on our transmission assets.

                                       8


     In late 2001,  the FERC issued an order that  rejected the formation of the
Alliance RTO and ordered the Alliance RTO  companies and the MISO to discuss how
the Alliance RTO business model could be accommodated  within the MISO. On April
25,  2002,  after the Alliance  RTO and MISO failed to reach an  agreement,  and
after a series of filings by the two  parties  with the FERC,  the FERC issued a
declaratory  order  setting forth the division of  responsibilities  between the
MISO and National Grid (the managing member of the  transmission  company formed
by the  Alliance  companies)  and  approved  the  rate  design  and the  revenue
distribution  methodology proposed by the Alliance companies.  However, the FERC
denied a request by the Alliance companies and National Grid to purchase certain
services from the MISO at incremental cost rather than MISO's full tariff rates.
The FERC also  ordered  the MISO to return  the exit fee paid by Ameren to leave
the MISO, provided Ameren returns to the MISO and agrees to pay its proportional
share of the startup and ongoing operational expenses of the MISO. Moreover, the
FERC  required  the  Alliance  companies  to select  the RTO in which  they will
participate  within  thirty  days of the order.  At this time,  we  continue  to
evaluate our  alternatives and are in the process of determining the impact that
the  FERC's  April 2002  ruling  will have on our  future  financial  condition,
results of operations or liquidity.


NOTE 3 - Derivative Financial Instruments

     We utilize derivatives  principally to manage the risk of changes in market
prices  for  natural  gas,  fuel,   electricity  and  emission  credits.   Price
fluctuations in natural gas, fuel and electricity cause:

     o    an unrealized  appreciation or depreciation of our firm commitments to
          purchase  or sell  when  purchase  or  sales  prices  under  the  firm
          commitment are compared with current commodity prices;
     o    market values of fuel and natural gas  inventories or purchased  power
          to differ from the cost of those commodities in inventory or under the
          firm commitment; and
     o    actual cash outlays for the purchase of these commodities,  in certain
          circumstances, to differ from anticipated cash outlays.

     The  derivatives  that we use to hedge  these  risks are  dictated  by risk
management  policies and include forward contracts,  futures contracts,  options
and swaps. We continually  assess our supply and delivery  commitment  positions
against  forward  market  prices and internal  forecasts  of forward  prices and
modify our  exposure to market,  credit and  operational  risk by entering  into
various offsetting transactions. In general, we believe these transactions serve
to reduce price risk for Ameren.

     As of March 31, 2002, we recorded the fair value of derivative financial
instrument assets of $28 million in Other Assets and the fair value of
derivative financial instrument liabilities of $33 million in Other Deferred
Credits and Liabilities.

Cash Flow Hedges

     Ameren  routinely  enters into  forward  purchase and sales  contracts  for
electricity  based  on  forecasted  levels  of  economic   generation  and  load
requirements.  The relative balance between load and economic  generation varies
throughout the year. The contracts  typically cover a period of twelve months or
less.  The  purpose  of these  contracts  is to  hedge  against  possible  price
fluctuations  in the spot market for the period covered under the contracts.  We
formally  document all  relationships  between  hedging  instruments  and hedged
items,  as well as our risk  management  objective and strategy for  undertaking
various hedge transactions.

     For the three  months  ended  March 31,  2002,  the pretax net gain,  which
represented the impact of discontinued cash flow hedges, the ineffective portion
of cash flow hedges, as well as the reversal of amounts  previously  recorded in
OCI due to transactions  going to delivery or settlement,  was  approximately $1
million.

     As of March 31,  2002,  the  entire  net loss on power  forward  derivative
instruments of approximately $9 million,  or approximately $5 million after tax,
accumulated  in OCI is expected  to be  recognized  in earnings  during the next
twelve months upon delivery of the commodity being hedged.

                                       9



     As of March 31, 2002, a gain of approximately $6 million,  or approximately
$3 million after tax,  associated with interest rate swaps for debt to be issued
was in OCI and will be amortized over the life of the debt ultimately  issued or
will be recognized  immediately to the income statement in interest expense if a
determination is made that debt will not be issued.

     We also  hold a call  option  for coal  with a  supplier.  This  option  to
purchase  coal expires  October 15, 2003.  The entire gain of  approximately  $5
million,  or approximately $3 million after tax,  accumulated in OCI is expected
to be recognized in earnings prior to that date.

Other Derivatives

     We enter into option transactions to manage our positions in sulfur dioxide
(SO2) allowances, coal, heating oil, and electricity. Most of these transactions
are  treated as  non-hedge  transactions  under SFAS 133.  The net change in the
market  value of S02 options is recorded  as  Electric  Revenues,  while the net
change in the market  value of coal,  heating oil,  and  electricity  options is
recorded as Fuel and Purchased Power in the income statement.  The net change in
the market values of S02 options, coal, heating oil, and electricity options was
immaterial as of March 31, 2002.


NOTE 4 - Debt and Equity Financings

     In January 2002, Ameren  Corporation issued $100 million of 5.70% notes due
February 1, 2007.  The net proceeds were used to reduce  short-term  borrowings.
Interest  is  payable  semi-annually  on  February  1 and August 1 of each year,
beginning  August 1,  2002.  In March  2002,  Ameren  Corporation  entered  into
interest rate swaps  effectively  converting the interest rate  associated  with
these notes to three month LIBOR plus 43 basis points.

     In March  2002,  Ameren  Corporation  issued  $345  million  of  adjustable
conversion-rate  equity  security  units and 5.75 million shares of common stock
(5,000,000  shares at  $39.50  per share and  750,000  shares,  pursuant  to the
exercise of an option granted to the  underwriters,  at $38.865 per share).  The
$25 adjustable conversion-rate equity security units each consisted of an Ameren
Corporation  senior unsecured note with a principal amount of $25 and a contract
to  purchase,  for $25, a fraction of a share of Ameren  common stock on May 15,
2005.  The  senior   unsecured  notes  will  mature  on  May  15,  2007.   Total
distributions  on the equity  security units will be at an annual rate of 9.75%,
consisting of quarterly  interest  payments on the senior unsecured notes at the
initial  annual rate of 5.2% and  adjustment  payments  under the stock purchase
contracts  at the annual rate of 4.55%.  The stock  purchase  contracts  require
holders to purchase  between 8.7 million and 7.4 million shares of Ameren common
stock on May 15,  2005 at the market  price at that  time,  subject to a minimum
share  price of $39.50  and a maximum of $46.61.  The stock  purchase  contracts
include a pledge  of the  senior  unsecured  notes as  collateral  for the stock
purchase obligation. The interest rate on the outstanding senior unsecured notes
is subject to being reset by a remarketing  agent for quarterly  payments  after
May 15, 2005 until maturity. We recorded the net present value of the contracted
stock purchase  payments of $46 million as an increase in Other Deferred Credits
and  Liabilities  and a  decrease  in  Other  Paid-in  Capital  to  reflect  our
obligation.  We used  the  net  proceeds  from  these  offerings  to  repay  our
short-term indebtedness and for general corporate purposes.

                                       10


NOTE 5 - Segment Information



  Segment information for the three-month periods ended March 31, 2002 and
  2001 was as follows:

--------------------------------------------------------------------------------
                                         Utility            Intercompany
                                        Operations   Other    Revenues    Total
--------------------------------------------------------------------------------
  Three months ended March 31, 2002:
                                                             

Revenues                                    $1,236   $   69    $(190)    $1,115
Net Income                                      58        1       -          59
--------------------------------------------------------------------------------

  Three months ended March 31, 2001:

Revenues                                    $1,153   $   74    $(202)    $1,025
Net Income                                      54        4       -          58
--------------------------------------------------------------------------------




NOTE 6 - Subsequent Event

     On April 28, 2002, we entered into an agreement with The AES Corporation to
purchase  all of the  outstanding  stock of CILCORP  Inc.  CILCORP is the parent
company of Peoria-based Central Illinois Light Company, which operates as CILCO.
We also agreed to acquire AES Medina  Valley (No. 4),  L.L.C.  which  indirectly
owns a 40 megawatt,  gas-fired  electric  generation  plant.  The total purchase
price is  approximately  $1.4  billion,  subject to  adjustment  for  changes in
CILCORP's working capital, and includes the assumption of CILCORP and AES Medina
Valley  debt at closing,  estimated  at  approximately  $900  million,  with the
balance  of the  purchase  price in cash.  We  currently  expect  to  finance  a
significant  portion of the cash  component  of the purchase  price  through the
issuance of new common equity.

     The purchase  will  include  CILCORP's  regulated  natural gas and electric
businesses  in Illinois  serving  approximately  200,000 and 205,000  customers,
respectively,  of which approximately  150,000 are combination  electric and gas
customers.  In addition,  the purchase includes approximately 1,200 megawatts of
largely  coal-fired  generating  capacity  most  of  which  is  expected  to  be
nonregulated by closing.

     Upon completion of the acquisition,  expected within 12 months,  CILCO will
become  an  Ameren  subsidiary,  but will  remain a  separate  utility  company,
operating  as  AmerenCILCO.  The  transaction  is subject to the approval of the
Illinois Commerce  Commission,  the SEC, the FERC, the expiration of the waiting
period under the Hart-Scott-Rodino Act and other customary closing conditions.

     For the period  ended  December  31,  2001,  CILCORP  had  revenues of $815
million,  operating  income of $126  million,  and net  income  from  continuing
operations of $28 million,  and as of December 31, 2001 had total assets of $1.8
billion.

                                       11



ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

OVERVIEW

     Ameren Corporation is a holding company registered under the Public Utility
Holding Company Act of 1935 (PUHCA).  Our principal  business is the generation,
transmission  and  distribution of electricity,  and the distribution of natural
gas to  residential,  commercial,  industrial and wholesale users in the central
United States. Our primary subsidiaries are as follows:

o    Union Electric  Company,  which operates a regulated  electric  generation,
     transmission  and  distribution  business,  and  a  regulated  natural  gas
     distribution business in Missouri and Illinois as AmerenUE.
o    Central  Illinois  Public  Service  Company,  which  operates  a  regulated
     electric and natural gas transmission and distribution business in Illinois
     as AmerenCIPS.
o    AmerenEnergy  Resources  Company  (Resources  Company),  which  consists of
     nonregulated  operations.   Subsidiaries  include  AmerenEnergy  Generating
     Company  (Generating  Company)  that  operates  our  nonregulated  electric
     generation  in  Missouri  and  Illinois,   AmerenEnergy  Marketing  Company
     (Marketing  Company),  which markets  power for periods over one year,  and
     AmerenEnergy  Fuels and Services  Company,  which procures fuel and manages
     the related risks for our affiliated companies.
o    AmerenEnergy,  Inc.  (AmerenEnergy)  which serves as a power  marketing and
     risk  management  agent for our affiliated  companies for  transactions  of
     primarily less than one year.
o    Electric Energy, Inc. (EEI), which owns and/or operates electric generation
     and transmission  facilities in Illinois.  We have a 60% ownership interest
     in EEI and consolidate it for financial reporting purposes.
o    Ameren Services  Company,  which provides shared support services to us and
     our subsidiaries.

     You should read the following discussion and analysis in conjunction with:
o    The  financial  statements  and related  notes  included in this  Quarterly
     Report on Form 10-Q.
o    Management's  Discussion and Analysis of Financial Condition and Results of
     Operations  that is  incorporated  by reference  from our Annual  Report to
     Stockholders  in our  Annual  Report  on Form  10-K  for the  period  ended
     December 31, 2001.
o    The audited financial statements and related notes that are incorporated by
     reference in our Annual  Report on Form 10-K for the period ended  December
     31, 2001.

     When we  refer  to  Ameren,  our,  we or us,  we are  referring  to  Ameren
Corporation on a consolidated basis. In certain circumstances,  our subsidiaries
are  specifically  referenced  in order to  distinguish  among  their  different
business  activities.  All dollar  amounts  are in  millions,  unless  otherwise
indicated.

     Our results of  operations  and  financial  position  are  impacted by many
factors,  including  both  controllable  and  uncontrollable  factors.  Weather,
economic  conditions,  and the  actions  of key  customers  or  competitors  can
significantly impact the demand for our services.  Our results are also impacted
by seasonal  fluctuations  caused by winter heating and summer  cooling  demand.
With  approximately  80% of our revenues  subject to regulation by various state
and federal agencies,  decisions by regulators can have a material impact on the
price we charge for our services.  We principally  utilize coal, natural gas and
nuclear fuel in our operations.  The prices for these  commodities can fluctuate
significantly  due to the world  economic and  political  environment,  weather,
production  levels  and  many  other  factors.  We do  not  have  fuel  recovery
mechanisms in Missouri and Illinois, but do have gas cost recovery mechanisms in
each state.  We employ  various risk  management  strategies  in order to try to
reduce our exposure to commodity risks and other risks inherent in our business.
The reliability of our power plant, and  transmission and distribution  systems,
and the level of operating and administrative  costs, and capital investment are
key  factors  that we seek to  control  in  order to  optimize  our  results  of
operations, cash flows and financial position.

                                       12


RESULTS OF OPERATIONS

     Our net  income  increased  2% to $59  million or 42 cents per share in the
first  quarter  of 2002  from $58  million  or 43 cents  per  share in the first
quarter  of 2001.  In the first  quarter  of 2001,  we  recorded  a charge of $7
million,  or five cents per share, due to the adoption of Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative  Instruments and
Hedging  Activities."  See  Accounting  Matters.  As  a  result,  income  before
cumulative effect of change in accounting principle in the first quarter of 2002
was $59 million, or 42 cents per share,  compared to $65 million or 48 cents per
share in the first quarter of 2001. Income before cumulative effect of change in
accounting  principle  decreased  in the first  quarter of 2002 versus the prior
year primarily due to the extremely mild winter weather in our service territory
and higher operating expenses. According to National Weather Service data, there
were approximately 15% fewer heating degree days in our service territory in the
first quarter of 2002 as compared to 2001 and normal  weather  conditions.  As a
result,  weather-sensitive residential electric kilowatt-hour sales decreased by
5%,  commercial  electric  kilowatt-hour  sales  decreased  by 2% and gas  sales
decreased  by 5% in the first  quarter of 2002  compared to 2001.  In  addition,
industrial  electric  kilowatt-hour sales decreased 6% due to the continued soft
economy.

     Despite the warmer winter weather,  total electric  revenues  increased 18%
for the first quarter of 2002, compared to the year-ago period, primarily due to
higher  interchange  sales.  However,  we realized  lower margins on these sales
compared to the prior year, due to lower  wholesale  electricity  prices.  These
lower  margins and higher  operating  expenses in the first quarter of 2002 were
partially  offset by  internal  growth and lower  estimated  credits to Missouri
electric customers.

Recent Developments

     On April 28, 2002, we entered into an agreement with The AES Corporation to
purchase  all of the  outstanding  stock of CILCORP  Inc.  CILCORP is the parent
company of Peoria-based Central Illinois Light Company, which operates as CILCO.
We also agreed to acquire AES Medina  Valley (No. 4),  L.L.C.  which  indirectly
owns a 40 megawatt,  gas-fired  electric  generation  plant.  The total purchase
price is  approximately  $1.4  billion,  subject to  adjustment  for  changes in
CILCORP's working capital, and includes the assumption of CILCORP and AES Medina
Valley  debt at closing,  estimated  at  approximately  $900  million,  with the
balance  of the  purchase  price in cash.  We  currently  expect  to  finance  a
significant  portion of the cash  component  of the purchase  price  through the
issuance of new common equity.

     The purchase  will  include  CILCORP's  regulated  natural gas and electric
businesses  in Illinois  serving  approximately  200,000 and 205,000  customers,
respectively,  of which approximately  150,000 are combination  electric and gas
customers.  In addition,  the purchase includes approximately 1,200 megawatts of
largely  coal-fired  generating  capacity  most  of  which  is  expected  to  be
nonregulated by closing.

     Upon completion of the acquisition,  expected within 12 months,  CILCO will
become  an  Ameren  subsidiary,  but will  remain a  separate  utility  company,
operating  as  AmerenCILCO.  The  transaction  is subject to the approval of the
Illinois Commerce  Commission,  the SEC, the FERC, the expiration of the waiting
period under the Hart-Scott-Rodino Act and other customary closing conditions.

     For the period  ended  December  31,  2001,  CILCORP  had  revenues of $815
million,  operating  income of $126  million,  and net  income  from  continuing
operations of $28 million,  and as of December 31, 2001 had total assets of $1.8
billion.  Synergies from the  acquisition  are expected to make the  transaction
accretive to earnings  per share in the first full year of  operation  after the
transaction  is  consummated.

     As a  result  of the  continuing  uncertainty  associated  with  AmerenUE's
pending  Missouri  electric rate case, and the CILCORP  transaction  and related
assumption of debt,  credit rating  agencies  placed Ameren  Corporation's  debt
under review for possible downgrade or negative credit watch.  Standard & Poor's
placed the ratings of AmerenUE and AmerenCIPS  debt on negative credit watch and
placed the  ratings of  Generating  Company's  debt on  positive  credit  watch.
However,  Standard & Poor's stated they expect the corporate  credit  ratings of
Ameren  and  its  subsidiaries  to be  in  the  "A"  rating  category  following
completion of the acquisition. Moody's Investor Service stated they envisioned a
one notch  downgrade of Ameren's  issuer,  senior  unsecured debt and commercial
paper ratings.  Currently,  Ameren's corporate credit rating is A+ at Standard &
Poor's and A2 at Moody's. If the ratings of AmerenUE's first mortgage bonds fall
below investment  grade,  lenders under AmerenUE's $300 million revolving credit

                                       13



facility may elect not to make advances  and/or declare  outstanding  borrowings
due and  payable.  In  addition,  a decrease in Ameren's  ratings may reduce our
access to  capital  and/or  increase  the  costs of  borrowings  resulting  in a
negative impact on earnings.

Electric Operations

     The following table  represents the favorable  (unfavorable)  variation for
the three  months  ended  March 31,  2002  from the  comparable  period in 2001:
--------------------------------------------------------------------------------
                                                           Three Months
--------------------------------------------------------------------------------
Operating Revenues:
 Credit to customers                                          $  15
 Effect of abnormal  weather  (estimate)                        (16)
 Growth and other (estimate)                                     27
 Interchange sales                                              122
                                                              ------
                                                              $ 148
Fuel and Purchased Power:
 Fuel:
 Generation                                                   $   2
 Price                                                            1
 Purchased power                                               (133)
 EEI                                                             (7)
                                                              ------
                                                               (137)
                                                              ------
Change in electric margin                                     $  11
                                                              ------


     Electric  margins  increased  $11 million in the first three months of 2002
compared to the year-ago  quarter.  Revenues were favorably  impacted in 2002 by
the  lack  of  estimated  credits  to  Missouri  electric  customers  due to the
expiration of AmerenUE's  incentive rate plan (see Note 2 - "Regulatory Matters"
to the  consolidated  financial  statements).  We  also  experienced  growth  in
electric  revenues due to the expansion of our  weather-normalized  native load,
sales of S02 allowances and a 148% increase in interchange sales. However, these
increased  interchange revenues were more than offset by the related increase in
purchased power, resulting in lower margins than 2001. The increases in revenues
were also partially  offset by decreases in  weather-sensitive  residential  and
commercial sales caused by the milder winter weather referenced above, and lower
industrial  sales  resulting  from the  continued  soft  economy in our  service
territory.

Gas Operations

     Our gas revenues  decreased  $61 million,  and our gas costs  decreased $52
million, in first quarter 2002 as compared to the year-ago quarter primarily due
to reduced sales of 5% caused by the milder winter weather and lower natural gas
prices.  As a result,  our gas  margins  decreased  by $9  million  in the first
quarter of 2002 as compared to the same period a year ago.

Other Operating Expenses

     Other operating expenses increased $16 million in the first quarter of 2002
compared to the year-ago period,  primarily due to higher employee benefit costs
related to the  investment  performance  of pension  plan assets and  increasing
healthcare costs.

     Maintenance  expenses  decreased  $4 million  in the first  quarter of 2002
compared to the year-ago  period,  primarily  due to decreased  coal power plant
maintenance,  partially  offset by higher  tree-trimming  expenses,  which  were
accelerated, in part, to take advantage of mild weather.

     Depreciation  and amortization  expenses  increased $8 million in the first
quarter of 2002 compared to the year-ago period, primarily due to an increase in
depreciable  property  related  to the  investment  in our coal  and  combustion
turbine electric generating plants.

                                       14


Taxes

     Income tax  expense  decreased  $11  million in the first  quarter of 2002,
compared to the year-ago period,  primarily due to a lower pretax income coupled
with a lower effective tax rate.

Interest

     Interest expense increased $2 million in the first quarter of 2002 compared
to the year-ago period primarily due to AmerenCIPS'  issuance of $150 million of
6.625% notes in June 2001,  and our  issuance of $150  million of floating  rate
notes in December  2001,  $100  million of 5.70% notes in January  2002 and $345
million  of equity  security  units in March 2002 (in total $6  million).  These
increases were partially offset by lower interest rates on AmerenCIPS'  variable
rate  environmental  debt  obligations,   as  well  as  lower  interest  expense
associated  with a decreased  balance  under  AmerenUE's  nuclear fuel lease and
commercial paper (in total $4 million).

Rate and Regulatory Matters

Missouri Electric

     From July 1, 1995 through June 30, 2001, our subsidiary, AmerenUE, operated
under  experimental  alternative  regulation plans in Missouri that provided for
the  sharing of  earnings  with  customers  if our  regulatory  return on equity
exceeded  defined  threshold  levels.  At  March  31,  2002,  we had an  accrual
representing  the estimated  credit that we expect to pay our Missouri  electric
customers  of $40 million for the plan year ended June 30,  2001.  In 2002,  the
Missouri  Public  Service  Commission  (MoPSC) Staff and the Missouri  Office of
Public  Counsel  (OPC)  Staff  filed  testimony  with the MoPSC on this  matter.
Combined,  the MoPSC Staff and OPC Staff  recommend that the credit to customers
for the plan year ended June 30, 2001, should approximate $80 million. The MoPSC
is not  bound by their  recommendations.  To date,  a  procedural  schedule  and
hearing  dates on this matter have not been  established  by the MoPSC.  At this
time,  we  continue to believe  that our  accrual is  adequate  in all  material
respects.

     Following  expiration of the  experimental  alternative  regulation plan on
June 30,  2001,  the MoPSC  Staff  filed an excess  earnings  complaint  against
AmerenUE.  Based upon a January  2002 MoPSC order,  on March 1, 2002,  the MoPSC
Staff filed a recommendation  that AmerenUE reduce its annual Missouri  electric
revenues by $246 million to $285 million.  The MoPSC Staff's  recommendation  is
based on a return to traditional cost of service ratemaking,  a return on equity
ranging from 8.91% to 9.91%,  a reduction in Ameren's  depreciation  rates,  and
other  cost of  service  adjustments.  The  MoPSC is not  bound  by the  Staff's
recommendation.

     On May 10, 2002, AmerenUE filed rebuttal testimony in response to the MoPSC
Staff's  recommendation.  In its  testimony,  AmerenUE  stated  that a return to
traditional cost of service ratemaking would result in an increase in its annual
Missouri electric revenues by approximately $150 million. AmerenUE's position is
based  on a  12.5%  return  on  equity,  higher  depreciation  rates  and  other
adjustments.   However,   a  key  component  of  AmerenUE's   testimony  is  its
recommendation  that a new  alternative  rate  regulation plan (Alt Reg Plan) be
adopted by the  MoPSC.  In  AmerenUE's  filing,  we  included a new Alt Reg Plan
proposal. Key provisions of the Alt Reg Plan include the following:

     o    A three-year  plan from July 1, 2002 through June 30, 2005 which would
          require AmerenUE to share earnings over certain  regulatory  return on
          equity (ROE)  thresholds  for the 12 months ending July 1 through June
          30;
     o    The proposed  earnings  sharing grid would require AmerenUE to provide
          sharing credits of $17 million if AmerenUE's regulatory ROE is between
          10.5% and  12.5%.  Additional  credits of 55% of  AmerenUE's  earnings
          between a regulatory  ROE of 12.5% and 15% would be  provided,  90% of
          earnings  between  a  regulatory  ROE of 15% and 16%,  and 100% of any
          earnings above 16%.
     o    An immediate one-time credit to customers bills of $15 million;
     o    An annualized  $15 million  permanent rate  reduction,  retroactive to
          April 1, 2002;
     o    An immediate funding of $5 million to a low-income customer assistance
          program and $5 million to an economic development program;
     o    A commitment of $1.5 billion to $1.75 billion in energy infrastructure
          investment from January 1, 2002 through June 30, 2005.


                                       15


     Hearings for this case are  scheduled  to commence in mid-July  2002 and be
completed in early  August  2002. A final  decision on this matter may not occur
until  the  fourth  quarter  of  2002.  In the  interim,  we  plan  to  continue
negotiations  with all  pertinent  parties  with the intent to continue  with an
incentive regulation plan. We cannot predict the outcome of the MoPSC's decision
in this matter or its impact on our financial statements,  results of operations
or liquidity. However, the impact could be material.


LIQUIDITY AND CAPITAL RESOURCES

Operating

     Our cash flows  provided by operating  activities  decreased $76 million to
$111  million in the first  quarter of 2002,  compared to the  year-ago  period,
primarily  due to  changes  in working  capital  requirements.

     The tariff-based gross margins of our utility operating  companies continue
to be our principal  source of cash from operating  activities.  Our diversified
retail  customer mix of  residential,  commercial and  industrial  classes and a
commodity  mix of gas and  electric  service  provide a  reasonably  predictable
source of cash  flows.  We plan to utilize  short-term  debt to  support  normal
operations and other temporary capital requirements. Ameren is authorized by the
SEC under PUHCA to have up to an aggregate $2.8 billion of short-term  unsecured
debt instruments  outstanding at any one time.  Short-term borrowings consist of
commercial  paper  (maturities  generally  within 1 to 45 days) and bank  loans.
Ameren has bank credit  agreements,  expiring at various  dates between 2002 and
2003, that support  commercial  paper programs  totaling $830 million,  of which
$400 million is for the use by us and our  subsidiaries,  and the remaining $430
million is for the use of our regulated  subsidiaries.  At March 31, 2002,  $762
million of such  borrowing  capacity  was  available,  of which $430 million was
available for the use of our regulated subsidiaries.  We expect to replace these
bank  credit  agreements  prior to their  maturity.  At March 31,  2002,  we had
committed bank lines of credit aggregating $25 million, all of which were unused
and  available at such date.  These lines make  available  interim  financing at
various rates of interest based on LIBOR,  the bank  certificate of deposit rate
or other  options.  The lines of credit are renewable  annually at various dates
throughout the year.

     AmerenUE  also has a lease  agreement  that  provides for the  financing of
nuclear fuel. At March 31, 2002, the maximum amount that could be financed under
the  agreement  was $120  million.  At March 31, 2002,  $67 million was financed
under the lease.

     Our short-term  financial  agreements  include customary default provisions
that  could  impact  the  continued  availability  of  credit  or  result in the
acceleration of repayment. These events include bankruptcy,  defaults in payment
of other  indebtedness,  certain  judgments  that are not  paid or  insured,  or
failure  to meet or  maintain  covenants.  At March  31,  2002,  Ameren  and its
subsidiaries were in compliance with these provisions.

Investing

     Our net cash used in  investing  activities  was $160  million in the first
quarter of 2002  compared to $208 million in the first  quarter of 2001.  In the
first quarter of 2002,  construction  expenditures were $37 million (2001 - $100
million) in our unregulated operations, primarily related to the construction of
combustion  turbine  generating units, and $122 million (2001 - $104 million) in
our  regulated  operations,  primarily  related to various  upgrades at our coal
power plants and further  construction of combustion  turbine  generating units.
Regulated  capital  expenditures  are expected to  approximate  $600 million and
nonregulated  capital  expenditures  are expected to approximate $200 million in
2002.

Financing

     Our cash flows provided by financing  activities totaled $42 million in the
first quarter of 2002,  compared to a use of $13 million in the year-ago period.
Our  principal  financing  activities  for the period  included  the issuance of
long-term debt, equity security units and common stock,  partially offset by the
redemption of short-term debt and the payment of dividends.

                                       16


     In January 2002, Ameren  Corporation issued $100 million of 5.70% notes due
February 1, 2007.  The net proceeds were used to reduce  short-term  borrowings.
Interest  is  payable  semi-annually  on  February  1 and August 1 of each year,
beginning  August 1,  2002.  In March  2002,  Ameren  Corporation  entered  into
interest rate swaps  effectively  converting the interest rate  associated  with
these notes to three month LIBOR plus 43 basis points.

     In March  2002,  Ameren  Corporation  issued  $345  million  of  adjustable
conversion-rate  equity  security  units and 5.75 million shares of common stock
(5,000,000  shares at  $39.50  per share and  750,000  shares,  pursuant  to the
exercise of an option granted to the  underwriters,  at $38.865 per share).  The
$25 adjustable conversion-rate equity security units each consisted of an Ameren
Corporation  senior unsecured note with a principal amount of $25 and a contract
to  purchase,  for $25, a fraction of a share of Ameren  common stock on May 15,
2005.  The  senior   unsecured  notes  will  mature  on  May  15,  2007.   Total
distributions  on the equity  security units will be at an annual rate of 9.75%,
consisting of quarterly  interest  payments on the senior unsecured notes at the
initial  annual rate of 5.2% and  adjustment  payments  under the stock purchase
contracts  at the annual rate of 4.55%.  The stock  purchase  contracts  require
holders to purchase  between 8.7 million and 7.4 million shares of Ameren common
stock on May 15,  2005 at the market  price at that  time,  subject to a minimum
share  price of $39.50  and a maximum of $46.61.  The stock  purchase  contracts
include a pledge  of the  senior  unsecured  notes as  collateral  for the stock
purchase obligation. The interest rate on the outstanding senior unsecured notes
is subject to being reset by a remarketing  agent for quarterly  payments  after
May 15, 2005 until maturity. We recorded the net present value of the contracted
stock purchase  payments of $46 million as an increase in Other Deferred Credits
and  Liabilities  and a  decrease  in  Other  Paid-in  Capital  to  reflect  our
obligation.  We used  the  net  proceeds  from  these  offerings  to  repay  our
short-term indebtedness and for general corporate purposes.

     In May 2002, AmerenUE filed a shelf registration  statement with the SEC on
Form S-3 that upon its  effectiveness  will allow the offering from time to time
of up to $750  million of various  forms of long-term  debt and trust  preferred
securities  to  refinance  existing  debt and for  general  corporate  purposes,
including  the repayment of  short-term  debt  incurred to finance  construction
expenditures and other working capital needs. This registration has not yet been
declared effective by the SEC. In addition,  Generating Company expects to issue
in 2002 up to approximately $275 million of additional long-term debt to finance
recent generating capacity additions.

     On April 23, 2002, our Board of Directors declared a quarterly common stock
dividend  of 63.5  cents  per  share  that  will be  paid  on June  28,  2002 to
shareholders of record on June 10, 2002.

     In the  ordinary  course of business,  we evaluate  several  strategies  to
enhance our financial position,  earnings,  and liquidity.  These strategies may
include potential acquisitions,  divestitures,  opportunities to reduce costs or
increase  revenues,  and  other  strategic  initiatives  in  order  to  increase
shareholder  value. We are unable to predict which, if any, of these initiatives
will be executed, as well as the impact these initiatives may have on our future
financial position, results of operations or liquidity.


Electric Industry Restructuring

Illinois

     See Note 2 - "Rate and Regulatory Matters" to the consolidated financial
     statements.


Federal - Midwest ISO and Alliance RTO

     See Note 2 - "Rate and Regulatory Matters" to the consolidated financial
     statements.



                                       17



ACCOUNTING MATTERS

Critical Accounting Policies

     Preparation  of  the  financial   statements  and  related  disclosures  in
compliance  with  generally   accepted   accounting   principles   requires  the
application of appropriate  technical accounting rules and guidance,  as well as
the use of estimates.  Our  application  of these  policies  involves  judgments
regarding many factors, which, in and of themselves, could materially impact the
financial  statements  and  disclosures.  A future change in the  assumptions or
judgments applied in determining the following matters, among others, could have
a material  impact on future  financial  results.  In the table  below,  we have
outlined  those  accounting   policies  that  we  believe  are  most  difficult,
subjective or complex:



Accounting Policy                                  Judgments/Uncertainties
                                                   Affecting Application
                                               

Regulatory Mechanisms & Cost Recovery
                                                   o   Regulatory environment, external regulatory
   We defer costs as regulatory assets in              decisions and requirements
   accordance with SFAS 71 and make investments    o   Anticipated future regulatory decisions and
   that we assume we will be able to collect in        their impact
   future rates.                                   o   Impact of deregulation and competition on
                                                       ratemaking process and ability to recover costs
Nuclear Plant Decommissioning Costs

    In our rates and earnings we assume the        o   Estimates of future decommissioning costs
    Department of Energy will develop a            o   Availability of facilities for waste disposal
    permanent storage site for spent nuclear       o   Approved methods for waste disposal and
    fuel, the Callaway plant will have a useful        decommissioning
    life of 40 years and estimated costs to        o   Useful lives of nuclear power plants
    dismantle the plant are accurate.  See Note
    12 to our financial statements for the year
    ended December 31, 2001.

Environmental Costs
                                                   o   Extent of contamination
   We accrue for all known environmental           o   Responsible party determination
   contamination where remediation can be          o   Approved methods for cleanup
   reasonably estimated, but some of our           o   Present and future legislation and governmental
   operations have existed for over 100 years          regulations and standards
   and previous contamination may be unknown to    o   Results of ongoing research and development
   us.                                                 regarding environmental impacts

Unbilled Revenue

   At the end of each period, we estimate,         o   Projecting customer energy usage
   based on expected usage, the amount of          o   Estimating impacts of weather and other usage-
   revenue to record for services that have            affecting factors for the unbilled period
   been provided to customers, but not billed.
   This period can be up to one month.

Benefit Plan Accounting

    Based on actuarial calculations, we accrue     o   Future rate of return on pension and other plan
    costs of providing future employee benefits        assets
    in accordance with SFAS 87, 106 and 112.       o   Interest rates used in valuing benefit obligation
    See Note 9 to our financial statements for     o   Healthcare cost trend rates
    the year ended December 31, 2001.


                                       18


Derivative Financial Instruments

   We record all derivatives at their fair         o   Market conditions in the energy industry, especially
   market value in accordance with SFAS 133.           the effects of price volatility on contractual
   The identification and classification of a          commodity commitments
   derivative, and the fair value of such          o   Regulatory and political environments and
   derivative must be determined. See Note 3           requirements
   to our financial statements for the year        o   Fair value estimations on longer term contracts
   ended December 31, 2001.



Impact of Future Accounting Pronouncements

   See Note 1 - "Summary of Significant Accounting Policies" to the consolidated
   financial statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk  represents the risk of changes in value of a physical asset or
a financial instrument, derivative or non-derivative,  caused by fluctuations in
market variables (e.g.,  interest rates, etc.). The following  discussion of our
risk management  activities includes  "forward-looking"  statements that involve
risks and  uncertainties.  Actual  results  could differ  materially  from those
projected  in the  "forward-looking"  statements.  We  handle  market  risks  in
accordance with  established  policies,  which may include entering into various
derivative  transactions.  In the normal course of business,  we also face risks
that are  either  non-financial  or  non-quantifiable.  Such  risks  principally
include  business,  legal,  and operational  risk and are not represented in the
following analysis.

     Our risk management objective is to optimize our physical generating assets
within prudent risk parameters.  Our risk management  policies are set by a Risk
Management  Steering  Committee,  which  is  comprised  of  senior-level  Ameren
officers.

Interest Rate Risk

     We are exposed to market risk through changes in interest rates  associated
with the  issuance  of both  long-term  and  short-term  variable-rate  debt and
fixed-rate debt, commercial paper,  auction-rate long-term debt and auction-rate
preferred  stock. We manage our interest rate exposure by controlling the amount
of these  instruments we hold within our total  capitalization  portfolio and by
monitoring the effects of market changes in interest rates.

     Utilizing  our debt  outstanding  at March  31,  2002,  if  interest  rates
increased by 1%, our annual interest  expense would increase by approximately $9
million and net income would  decrease by  approximately  $5 million.  The model
does not consider the effects of the reduced level of potential overall economic
activity that would exist in such an environment.  In the event of a significant
change in  interest  rates,  management  would  likely  take  actions to further
mitigate our exposure to this market risk.  However,  due to the  uncertainty of
the  specific  actions  that  would be taken and  their  possible  effects,  the
sensitivity analysis assumes no change in our financial structure.

Fuel Price Risk

     Over 95% of the  required  2002 supply of coal for our coal plants has been
acquired at fixed prices.  As such, we have minimal coal price risk for 2002. In
addition, approximately 70% of our coal requirements through 2006 are covered by
contracts.

Fair Value of Contracts

     We utilize derivatives principally to manage the risk of changes in market
prices for natural gas, fuel, electricity and emission credits. Price
fluctuations in natural gas, fuel and electricity cause:

     o    an unrealized  appreciation or depreciation of our firm commitments to
          purchase  or sell  when  purchase  or  sales  prices  under  the  firm
          commitment are compared with current commodity prices;

                                       19


     o    market values of fuel and natural gas  inventories or purchased  power
          to differ from the cost of those  commodities in inventory  under firm
          commitment; and
     o    actual cash  outlays for the purchase of these  commodities  to differ
          from anticipated cash outlays.

     The  derivatives  that we use to hedge  these  risks are  dictated  by risk
management  policies and include forward contracts,  futures contracts,  options
and swaps. We continually  assess our supply and delivery  commitment  positions
against forward market prices and internally  forecast forward prices and modify
our exposure to market,  credit and  operational  risk by entering  into various
offsetting  transactions.  In general,  these  transactions  serve to reduce our
price risk.



     The following summarizes changes in the fair value of all contracts marked
to market during the first quarter of 2002:
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------
                                                                                             
Fair value of contracts at January 1, 2002                                                       $ (1)
   Contracts at January 1, 2002 which were realized or otherwise settled during first
     quarter of 2002                                                                                -
   Changes in fair values attributable to changes in valuation techniques and assumptions           -
   Fair value of new contracts entered into during first quarter 2002                               1
   Other changes in fair value                                                                     (5)
-----------------------------------------------------------------------------------------------------------
Fair value of contracts outstanding at March 31, 2002                                            $ (5)
-----------------------------------------------------------------------------------------------------------

     Fair value of contracts as of March 31, 2002 were as follows:
------------------------------------- ------------- ------------- ------------- ---------------------------
                                        Maturity                                Maturity in
                                       less than      Maturity      Maturity    excess of 5    Total fair
Sources of fair value                    1 year      1-3 years     4-5 years       years       value (a)
-----------------------------------------------------------------------------------------------------------
Prices actively quoted                    $  -          $ (2)        $  -          $  -         $  (2)
Prices provided by other external
   sources (b)                              (3)            -            -             -            (3)
Prices based on models and other
   valuation methods (c)                    (2)            3           (1)            -             -
-----------------------------------------------------------------------------------------------------------
Total                                     $ (5)         $  1         $ (1)         $  -         $  (5)
-----------------------------------------------------------------------------------------------------------
(a)   Contracts of approximately 40% were with non-investment-grade rated counterparties.
(b)   Principally power forward hedges valued based on NYMEX prices for over-the-counter contracts.
(c)   Principally coal and SO2 options valued based on a Black-Scholes model that includes information from
      external sources and our estimates.



SAFE HARBOR STATEMENT

     Statements made in this report which are not based on historical facts, are
"forward-looking"  and, accordingly,  involve risks and uncertainties that could
cause actual results to differ  materially from those  discussed.  Although such
"forward-looking"  statements  have  been  made in good  faith  and are based on
reasonable assumptions,  there is no assurance that the expected results will be
achieved.  These statements include (without limitation) statements as to future
expectations,  beliefs, plans, strategies,  objectives,  events,  conditions and
financial  performance.  In connection with the "Safe Harbor"  provisions of the
Private  Securities  Litigation  Reform  Act  of  1995,  we are  providing  this
cautionary  statement  to identify  important  factors  that could cause  actual
results to differ materially from those anticipated.  The following factors,  in
addition to those discussed elsewhere in this report and in the Annual Report on
Form 10-K for the year ended  December 31, 2001,  and in  subsequent  securities
filings,  could cause results to differ materially from management  expectations
as suggested by such "forward-looking" statements:

o    the effects of the pending  AmerenUE  excess  earnings  complaint  case and
     other regulatory actions, including changes in regulatory policy
o    changes in laws and other  governmental  actions,  including  monetary  and
     fiscal policies;
o    the impact on us of current  regulations  related  to the  opportunity  for
     customers to choose alternative energy suppliers in Illinois;
o    the  effects of  increased  competition  in the future due to,  among other
     things,  deregulation  of certain aspects of our business at both the state
     and federal levels;

                                       20



o    the  effects of  participation  in a FERC  approved  Regional  Transmission
     Organization  (RTO),  including  activities  associated  with  the  Midwest
     Independent System Operator and the Alliance RTO;
o    availability  and  future  market  prices  for  fuel and  purchased  power,
     electricity, and natural gas, including the use of financial and derivative
     instruments and volatility of changes in market prices;
o    average rates for electricity in the Midwest;
o    business and economic conditions;
o    the impact of the adoption of new accounting standards;
o    interest rates and the availability of capital;
o    actions of rating agencies and the effects of such actions;
o    weather conditions;
o    generation plant construction,installation, and performance;
o    the  effects  of  strategic   initiatives,   including   acquisitions   and
     divestitures;
o    operation of nuclear power facilities and decommissioning costs;
o    the impact of current environmental regulations on utilities and generating
     companies and the  expectation  that more  stringent  requirements  will be
     introduced over time,  which could  potentially  have a negative  financial
     effect;
o    future wages and employee benefits costs;
o    competition from other generating  facilities including new facilities that
     may be developed in the future;
o    delays in receipt of regulatory approvals for the acquisition of CILCORP or
     unexpected adverse conditions or terms of those approvals;
o    difficulties in integrating CILCO with Ameren's other businesses;
o    changes in the coal markets,  environmental  laws or  regulations  or other
     factors  adversely  impacting  synergy  assumptions in connection  with the
     CILCORP acquisition;
o    disruptions of the capital  markets or other events making  Ameren's access
     to necessary capital more difficult or costly;
o    cost and availability of transmission  capacity for the energy generated by
     our  generating  facilities  or  required to satisfy  energy  sales made by
     Ameren; and
o    legal and administrative proceedings.

                                       21




                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     Reference is made to Item 1.  Business-Rates and Regulation - Environmental
Matters in Part I of our Form 10-K for the year ended  December  31,  2001 for a
discussion of the February 2002 Illinois  Supreme Court  decision which affirmed
the Illinois Appellate Court's decision  upholding the $3.2 million  plaintiffs'
verdict  against  our  subsidiary,  Central  Illinois  Public  Service  Company,
operating as AmerenCIPS,  in the lawsuit styled as Zachary Donaldson,  et al. v.
Central Illinois Public Service Company, et al. This lawsuit, which was filed in
December 1995, alleged that, as a result of exposure to carcinogens contained in
coal  tar  at  AmerenCIPS'  former  Taylorville  manufactured  gas  plant  site,
plaintiffs'  children had suffered from a rare form of childhood cancer known as
"neuroblastoma." On April 1, 2002, the Illinois Supreme Court denied AmerenCIPS'
petition for a rehearing  of its  February  2002  decision.  This action  leaves
AmerenCIPS  with no further  appeals and finalizes the $3.2 million  plaintiffs'
verdict. This amount was fully accrued.

     Reference is made to Item 3. Legal  Proceedings  in Part I of our Form 10-K
for the year ended  December 31, 2001 for a  discussion  of a number of lawsuits
that name our subsidiaries, AmerenCIPS and AmerenUE and us (which we refer to as
the Ameren  companies),  along with numerous other parties,  as defendants  that
have been filed by plaintiffs  claiming  varying degrees of injury from asbestos
exposure.  With respect to nine of those  lawsuits,  the Ameren  companies  have
reached settlements with the plaintiffs for monetary amounts not material to the
Ameren  companies and in three cases, the Ameren companies have been voluntarily
dismissed.

     Twenty-two  additional lawsuits claiming injury from asbestos exposure have
been filed against the Ameren  companies  since year-end 2001.  These  lawsuits,
like the  previous  cases,  were mostly  filed in the  Circuit  Court of Madison
County,  Illinois,  involve a large number of total defendants (over one hundred
in many  cases) and seek  unspecified  damages in excess of $50,000,  which,  if
proved, typically would be shared among the named defendants.  Currently, thirty
asbestos-related  lawsuits are pending against the Ameren companies.  We believe
that the final disposition of these proceedings will not have a material adverse
effect on our financial position, results of operations or liquidity.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

        (a)(i) Exhibits.

                2.1  - Stock purchase agreement, dated as of April 28, 2002,
                       by  and   between  The  AES   Corporation   and  Ameren
                       Corporation.

                2.2  - Membership Interest Purchase Agreement, dated as of
                       April 28, 2002, by and between The AES Corporation and
                       Ameren Corporation.

        (a)(ii) Exhibits Incorporated by Reference.

                10.1 - Power Sales Agreement between AmerenEnergy Marketing
                       Company and Union Electric Company d/b/a AmerenUE dated
                       March 20, 2002 (March 31, 2002 AmerenEnergy Generating
                       Company Form 10-Q, Exhibit 10.1).

        (b)    Reports  on Form  8-K.  Ameren  filed a report  on Form 8-K dated
               January 7, 2002  incorporating  a press  release  relating to the
               earnings  complaint  case filed by the  Missouri  Public  Service
               Commission  Staff against  AmerenUE and  announcing a revision to
               the 2001  earnings  estimate.  Ameren also filed a report on Form
               8-K  dated  February  14,  2002  incorporating  (i)  consolidated
               financial  statements  as of December 31, 2001 and 2000,  and for


                                       22


               each of the three years in the period  ended  December  31, 2001,
               and the report thereon of independent  accountants,  and (ii) the
               related   Management's   Discussion  and  Analysis  of  Financial
               Condition and Results of Operations.

        Note:  Reports of Union Electric Company on Forms 8-K, 10-Q and 10-K are
               on file with the SEC under File Number 1-2967.

               Reports of Central  Illinois Public Service Company on Forms 8-K,
               10-Q and Form  10-K are on file with the SEC  under  File  Number
               1-3672.

               Information  regarding  AmerenEnergy  Generating Company on Forms
               8-K,  10-Q and 10-K are on file  with the SEC under  File  Number
               333-56594.


                                       23




                                    SIGNATURE

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
     Registrant  has duly  caused  this report to be signed on its behalf by the
     undersigned thereunto duly authorized.

                                            AMEREN CORPORATION
                                             (Registrant)


                                            By     /s/   Martin J. Lyons
                                               ---------------------------------
                                                         Martin J. Lyons
                                                           Controller
                                                  (Principal Accounting Officer)

Date:   May 15, 2002




                                       24



                                                                EXHIBIT 2.1

                            STOCK PURCHASE AGREEMENT


                                 by and between


                               THE AES CORPORATION


                                       and


                               AMEREN CORPORATION


                           Dated as of April 28, 2002






                                                 TABLE OF CONTENTS


ARTICLE I PURCHASE AND SALE OF SHARES.........................................1
         Section 1.1 Sale and Transfer of Shares..............................1
         Section 1.2 The Purchase Price.......................................1
         Section 1.3 Additional Purchase Price Adjustment.....................4
ARTICLE II THE CLOSING........................................................4
         Section 2.1 Closing..................................................4
         Section 2.2 Deliveries by the Seller.................................4
         Section 2.3 Deliveries by the Purchaser..............................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER......................5
         Section 3.1 Organization and Qualification...........................5
         Section 3.2 Subsidiaries; Capitalization.............................6
         Section 3.3 Authority; Non-Contravention; Statutory Approvals;
                     Compliance...............................................7
         Section 3.4 Company SEC Reports; Financial Statements................9
         Section 3.5 Absence of Certain Changes or Events; Absence
                     of Undisclosed Liabilities..............................10
         Section 3.6 Litigation..............................................10
         Section 3.7 Tax Matters.............................................10
         Section 3.8 Employee Benefits; ERISA................................11
         Section 3.9 Labor and Employee Relations............................13
         Section 3.10 Environmental Protection...............................14
         Section 3.11 Regulation as a Utility................................15
         Section 3.12 Insurance..............................................15
         Section 3.13 Real Property..........................................15
         Section 3.14 Affiliate Contracts....................................16
         Section 3.15 Brokers or Finders.....................................16
         Section 3.16 Contracts..............................................16
         Section 3.17 Regulatory Proceedings.................................17
         Section 3.18 Limitation on Representations and Warranties...........17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...................17
         Section 4.1 Organization and Qualification..........................17
         Section 4.2 Authority; Non-Contravention; Statutory Approvals;
                     Compliance..............................................18
         Section 4.3 Purchaser SEC Reports; Financial Statements.............19
         Section 4.4 Litigation..............................................20
         Section 4.5 Investigation by the Purchaser; the Seller's
                     Liability...............................................20
         Section 4.6 Acquisition of Shares for Investment; Ability
                     to Evaluate and Bear Risk...............................21
         Section 4.7 Financing...............................................21
         Section 4.8 Brokers or Finders......................................21

                                       i


ARTICLE V CONDUCT OF BUSINESS PENDING THE CLOSING............................22
         Section 5.1 Covenants of the Seller.................................22
         Section 5.2 No Solicitation and Confidentiality.....................25
ARTICLE VI ADDITIONAL AGREEMENTS.............................................26
         Section 6.1 Access to Company Information...........................26
         Section 6.2 Regulatory Matters......................................26
         Section 6.3 Consents................................................28
         Section 6.4 Directors' and Officers' Indemnification................28
         Section 6.5 Public Announcements....................................29
         Section 6.6 Workforce Matters.......................................29
         Section 6.7 Tax Matters.............................................30
         Section 6.8 Financial Information...................................38
         Section 6.9 Termination of Affiliate Contracts......................38
         Section 6.10 Local Presence; Charitable Giving......................38
         Section 6.11 Seller's Name..........................................39
         Section 6.12 Cooperation............................................39
         Section 6.13 Further Assurances.....................................39
ARTICLE VII CONDITIONS.......................................................39
         Section 7.1 Conditions to Each Party's Obligation to Effect
                     the Closing.............................................39
         Section 7.2 Conditions to Obligation of the Purchaser to
                     Effect the Closing......................................40
         Section 7.3 Conditions to Obligation of the Seller to
                     Effect the Closing......................................41
ARTICLE VIII TERMINATION.....................................................42
         Section 8.1 Termination.............................................42
         Section 8.2 Effect of Termination...................................43
ARTICLE IX GENERAL PROVISIONS................................................43
         Section 9.1 Survival of Obligations.................................43
         Section 9.2 Amendment and Modification..............................43
         Section 9.3 Extension; Waiver.......................................43
         Section 9.4 Expenses................................................43
         Section 9.5 Notices.................................................44
         Section 9.6 Entire Agreement; No Third Party Beneficiaries..........45
         Section 9.7 Severability............................................45
         Section 9.8 Governing Law...........................................45
         Section 9.9 Venue...................................................45
         Section 9.10 Waiver of Jury Trial and Certain Damages...............45
         Section 9.11 Specific Performance...................................46
         Section 9.12 Assignment.............................................46
         Section 9.13 Interpretation.........................................46
         Section 9.14 Counterparts; Effect...................................46


                                       ii



INDEX OF DEFINED TERMS

Term                                                                       Page
----                                                                       ----
4.50% Series Preferred........................................................7
4.64% Series Preferred........................................................7
5.85% Series Class A Preferred................................................7
Action   ....................................................................29
Affected Employee............................................................30
Affiliate Contracts..........................................................16
Agreement.....................................................................1
Assumed Obligations...........................................................2
Audit    ....................................................................12
Base Working Capital..........................................................2
CapEx Adjustment Amount......................................................23
CILCO ....................................................................... 1
CILCO Class A Preferred Stock.................................................7
CILCO Preference Stock........................................................7
CILCO Preferred Stock.........................................................7
CILCORP Inc...................................................................1
Closing ..................................................................... 4
Closing Date..................................................................4
COBRA .......................................................................30
Code     .....................................................................5
Common Stock..................................................................1
Company ......................................................................1
Company Financial Statements.................................................10
Company Material Adverse Effect...............................................6
Company Plans................................................................12
Company Properties...........................................................16
Company SEC Reports...........................................................5
Company Subsidiary............................................................7
Confidentiality Agreement....................................................27
Encumbrances..................................................................6
Environmental Laws...........................................................15
ERISA    ....................................................................12
ERISA Affiliate..............................................................12
Estimated Purchase Price......................................................3
Exchange Act.................................................................10
FCC      .....................................................................9
FERC     .....................................................................9
Final Order..................................................................40

                                      iii


Term                                                                       Page
----                                                                       ----
Final Purchase Price..........................................................3
Flexible Auction Rate Series Class A Preferred................................7
GAAP     ....................................................................10
Governmental Authority........................................................9
Hazardous Substances.........................................................16
HSR Act......................................................................27
IBEW Local 51................................................................30
ICC      .....................................................................4
Indemnified Parties..........................................................28
Indemnified Party............................................................28
Initial Termination Date.....................................................42
Material Contracts...........................................................17
Objection Letter..............................................................3
PBGC     ....................................................................13
Permits ......................................................................9
Person   ....................................................................15
Proposed Acquisition Transaction.............................................26
Proposed Final Purchase Price Statement.......................................3
PUHCA ........................................................................7
Purchaser.....................................................................1
Purchaser Disclosure Schedule................................................18
Purchaser Material Adverse Effect............................................18
Purchaser Required Consents..................................................19
Purchaser Required Statutory Approvals.......................................19
Purchaser SEC Reports........................................................18
Purchaser Subsidiary.........................................................18
Representatives..............................................................26
Restraints...................................................................40
SEC      .....................................................................9
Securities Act...............................................................10
Seller   .....................................................................1
Seller Disclosure Schedule....................................................5
Seller Required Consents......................................................8
Seller Required Statutory Approvals...........................................9
Shares   .....................................................................1
Straddle Period..............................................................31
Subsidiary....................................................................6
Tax      ....................................................................11
Tax Benefit..................................................................33
Tax Indemnitee...............................................................37

                                       iv


Term                                                                       Page
----                                                                       ----
Tax Indemnitor...............................................................37
Tax Return...................................................................12
Termination Date.............................................................42
Title IV Company Plan........................................................13
Transaction Price.............................................................2
Trigger Date..................................................................4
Undesignated Series Class A Preferred.........................................7
Undesignated Series Preferred.................................................7
Violation.....................................................................8
WARN Act ....................................................................30
Working Capital...............................................................2


                                       v




                            STOCK PURCHASE AGREEMENT

     THIS  STOCK  PURCHASE   AGREEMENT,   dated  as  of  April  28,  2002  (this
"Agreement"),  is entered  into by and between The AES  Corporation,  a Delaware
corporation (the "Seller"), and Ameren Corporation,  a Missouri corporation (the
"Purchaser").

                              W I T N E S S E T H :

     WHEREAS,  the Seller  owns all of the issued and  outstanding  shares  (the
"Shares") of common stock,  without par value (the "Common  Stock"),  of CILCORP
Inc. (the "Company"),  an Illinois corporation and the parent company of Central
Illinois Light Company, an Illinois corporation ("CILCO"); and

     WHEREAS,  each of the Boards of Directors of the  Purchaser  and the Seller
has approved the acquisition of the Company by the Purchaser,  which acquisition
is to be effected by the  purchase of all the Shares by the  Purchaser  upon the
terms and subject to the conditions set forth herein.

     NOW, THEREFORE,  in consideration of the premises and the  representations,
warranties,  covenants and  agreements  contained  herein,  the parties  hereto,
intending to be legally bound hereby, agree as follows:

                                   ARTICLE I
                           PURCHASE AND SALE OF SHARES

     Section  1.1  Sale  and  Transfer  of  Shares.  Subject  to the  terms  and
conditions  of this  Agreement,  at the Closing (as defined  below),  the Seller
agrees to sell, convey, assign,  transfer and deliver to the Purchaser,  and the
Purchaser  agrees to purchase  and accept from the Seller,  all of the  Seller's
rights,  title  and  interest  in and to the  Shares.  Subject  to the terms and
conditions of this Agreement, the Purchaser agrees to deliver to the Seller, and
the Seller agrees to accept,  the Purchase  Price (as defined  below),  in cash,
without deduction or setoff of any kind (other than any transfer Taxes described
in Section 6.7(m)),  which delivery will be made by wire transfer in immediately
available  funds to the bank account or accounts  designated  by the Seller,  in
writing, prior to the Closing.

     Section 1.2 The Purchase Price.

          (a)  Subject  to the  terms  and  conditions  of  this  Agreement,  in
consideration  of the  aforesaid  sale,  conveyance,  assignment,  transfer  and
delivery to the Purchaser of the Shares,  the Purchaser  shall pay to the Seller
in cash the sum of (v)  $1,340,000,000  (the "Transaction  Price");  (w) less an
amount equal to Assumed  Obligations  (as defined  below);  (x) increased by the
amount,  if any, by which Working  Capital (as defined  below) as of the Closing
Date exceeds the Base Working Capital (as defined  below),  (y) decreased by the



amount, if any, by which Working Capital as of the Closing Date is less than the
Base Working  Capital,  and (z) increased by the amount of the CapEx  Adjustment
Amount (as defined in Section 5.1(e)) under Section  5.1(e)(i) of this Agreement
or  decreased  by the  amount  of the  CapEx  Adjustment  Amount  under  Section
5.1(e)(ii) of this Agreement (the net of such amounts (v) through (z) being, the
"Purchase Price").  An example of the Purchase Price calculation is set forth in
Section 1.2(a) of the Seller Disclosure Schedule (as defined below).

          (b) The term "Assumed  Obligations"  as used herein shall mean amounts
required  to be included on the  consolidated  balance  sheets of the Company in
accordance  with GAAP (as  defined in Section  3.4) as of the  Closing  Date for
long-term  indebtedness  (including current portion),  short-term  indebtedness,
capital  lease  obligations,  preferred  stock  of  subsidiaries  and any  other
obligation  for borrowed  money.  Assumed  Obligations  shall be determined on a
basis consistent with past practice and consistent with the items outstanding as
of  December  31,  2001 set forth on  Section  1.2(a) of the  Seller  Disclosure
Schedule but including any other outstanding  obligation  meeting the definition
of the preceding sentence at the applicable date set forth herein.

          (c) The term  "Working  Capital"  as used  herein  shall mean  current
assets  less  current  liabilities  (not  counting  in current  liabilities  any
short-term  indebtedness  or current  maturity  of  long-term  debt  included in
Assumed  Obligations)  of the Company as of the applicable date set forth herein
determined in accordance with GAAP on a basis  consistent with past practice and
consistent  with the  calculation  on Section  1.2(a) of the  Seller  Disclosure
Schedule,  provided, however, that for the purposes of this definition,  current
liabilities  as of any date shall not  include  any Income  Taxes  payable,  and
current assets shall not include receivables from any Income Tax assets. "Income
Taxes" shall mean any federal,  state,  local, or foreign Tax (as defined below)
determined by reference to net income,  net worth, or any Tax imposed in lieu of
such a Tax. All  intercompany  (between the Company and its  Subsidiaries on one
hand,  and the  Seller and its  Subsidiaries,  other  than the  Company  and its
Subsidiaries, on the other hand) payables and all intercompany receivables shall
be paid  down to  zero  prior  to the  date  the  Estimated  Purchase  Price  is
calculated and shall be zero as of the Closing Date.

          (d) The term "Base  Working  Capital" as used herein  means the amount
shown on Section 1.2(a) of the Seller Disclosure  Schedule.  The Working Capital
as of the  Closing  Date shall be  calculated  in the same manner as the Working
Capital was  calculated  as set out on Section  1.2(a) of the Seller  Disclosure
Schedule.

          (e) At the  Closing,  the  Purchaser  shall  pay to the  Seller a cash
amount  (the  "Estimated  Purchase  Price")  consisting  of the  sum of (i)  the
Transaction Price, (ii) less the estimated Assumed Obligations,  (iii) increased
by the amount,  if any, by which the estimated  Working Capital exceeds the Base
Working  Capital,  (iv)  decreased  by the amount,  if any,  by which  estimated
Working  Capital is less than the Base  Working  Capital  and (v)  increased  or
decreased by the CapEx  Adjustment  Amount,  all determined in good faith by the
Seller  on the basis  hereinabove  set forth  using the  unaudited  consolidated
balance sheets of the Company as of the last day of the month which precedes the
month of the Closing Date by no more than 45 days.  The Seller shall  provide to
the  Purchaser  a written  calculation  in  reasonable  detail of the  Estimated
Purchase Price on or prior to the fifth business day preceding the Closing Date.

                                       2


          (f) As  promptly  as  practical,  but in no event more than sixty (60)
days after the  Closing,  the  Purchaser  shall cause the Company to prepare and
deliver to the Seller and the Purchaser a draft of a statement  prepared in good
faith setting forth the relevant  calculations  resulting in the final  Purchase
Price (the "Proposed  Final Purchase Price  Statement")  which shall show, as of
the Closing Date, the actual Assumed Obligations and variance,  if any, from the
Base Working  Capital.  During the thirty (30) day period following the delivery
by the Company of the Proposed Final Purchase  Price  Statement,  the Seller and
its auditors may review such  statement and the working  papers of the Company's
auditors  relating to the Proposed Final Purchase Price Statement and shall have
such access to the Purchaser's and the Company's  personnel as may be reasonably
necessary  to permit the Seller and its  auditors to review in detail the manner
in which the Proposed Final Purchase Price Statement was prepared. The Purchaser
shall and shall cause the Company, as well as their advisors,  to cooperate with
the  Seller  and  the  Seller's  auditors  in  facilitating  such  review.  Upon
completion  of such review,  the Seller shall give any comments or objections it
has with respect to the Proposed Final Purchase Price Statement to the Purchaser
and the Company in writing  within  such thirty (30) day period (the  "Objection
Letter").  The  Purchaser  and the Seller shall attempt in good faith to resolve
any differences and issues as set forth in the Objection Letter. If no Objection
Letter is  delivered  or the  matters set forth in the  Objection  Letter are so
resolved,  then the Proposed Final Purchase Price Statement, as adjusted for any
changes as are agreed upon by the Seller and the  Purchaser,  shall be final and
binding  upon the  Seller  and the  Purchaser  and  shall  constitute  the final
Purchase Price (the "Final Purchase Price"). If the matters raised by the Seller
in the Objection  Letter cannot be resolved between the Purchaser and the Seller
within  ten (10)  days of the date of the  Objection  Letter,  the  question  or
questions  in  dispute  shall  then be  promptly  submitted  to any  "big  five"
accounting firm mutually  agreeable to the Seller and the Purchaser  (other than
the Seller's auditors,  the Purchaser's auditors and Arthur Andersen LLP), or if
such  accounting  firm cannot or refuses to serve in such  capacity,  a mutually
acceptable firm of independent  public accountants of recognized  standing,  the
decision of which as to such question or questions in dispute shall be final and
binding upon the Seller and the Purchaser and the  determination of the purchase
price pursuant  thereto shall be considered to be the Final Purchase Price.  The
accounting  firm shall be instructed to resolve solely the question or questions
in dispute within twenty (20) days of submission.

          (g) In the  event  the  Final  Purchase  Price  is  greater  than  the
Estimated  Purchase  Price  paid  at the  Closing  by the  Purchaser,  then  the
Purchaser shall promptly (within five (5) business days of the  determination of
the Final  Purchase  Price) pay to the Seller an amount equal to the  difference
between the Final Purchase Price and the Estimated  Purchase Price. In the event
the Final Purchase  Price is less than the Estimated  Purchase Price paid at the
Closing  by the  Purchaser,  then the Seller  shall  promptly  (within  five (5)
business  days of the  determination  of the Final  Purchase  Price)  pay to the
Purchaser an amount equal to the difference between the Estimated Purchase Price
and the Final Purchase Price.

          (h) The fees of the Company's auditors incurred in connection with the
preparation of the Proposed Final Purchase Price Statement shall be borne by the
Purchaser,  and the fees of the Seller's  auditors  incurred in connection  with

                                       3


their review of the Proposed Final Purchase  Price  Statement  shall be borne by
the Seller.  The fees of any independent  accounting firm appointed  pursuant to
this Section shall be borne equally by the Seller and the Purchaser.

     Section 1.3 Additional Purchase Price Adjustment.  In the event the Closing
occurs after the Trigger Date (as defined below),  then the Purchase Price shall
be increased by $33,699 per day from the Trigger Date through the Closing  Date;
provided,  however,  no amount  shall be due and payable  under this Section 1.3
with respect to any day that is more than 365 days following the Trigger Date or
if this Agreement is terminated  under Section 8.1 hereof.  For purposes of this
Agreement,  the "Trigger Date" shall be the later of (i) December 31, 2002, (ii)
the date on which Seller is capable  (without further action by any third party)
of  completing  performance  in all  material  respects  of its  agreements  and
covenants  contained in or  contemplated by this Agreement which are required to
be performed by it at or prior to the Closing and (iii) the date which is ninety
(90) days following the date on which the Illinois Commerce  Commission  ("ICC")
grants its approval of the transaction contemplated by this Agreement.

                                   ARTICLE II
                                   THE CLOSING

     Section  2.1  Closing.  The  consummation  of the sale and  transfer of the
Shares by the Seller to the Purchaser  (the  "Closing")  shall take place at the
offices of Skadden,  Arps, Slate,  Meagher & Flom LLP, 1440 New York Avenue, NW,
Washington,  DC 20005 at 10:00 a.m.,  local  time,  on the second  business  day
immediately  following the date on which the last of the conditions set forth in
Article VII hereof is fulfilled or waived (except for those  conditions which by
their nature can only be fulfilled at the Closing),  or at such other time, date
and place as the Seller and the  Purchaser  shall  mutually  agree (the "Closing
Date").

     Section 2.2  Deliveries  by the Seller.  At the  Closing,  the Seller shall
deliver to the Purchaser:

          (a) A certificate or certificates  representing  the Shares,  duly and
validly  endorsed in favor of the Purchaser or  accompanied  by a separate stock
power duly and validly  executed by the Seller and otherwise  sufficient to vest
in the Purchaser good title to the Shares;

          (b) The  resignations  of the members of the Board of Directors of the
Company and each Company Subsidiary (as hereinafter defined);

          (c) The stock books,  stock ledgers,  minute books,  corporate seal or
their  functional  equivalent  of  the  Company  and  each  Company  Subsidiary;
provided, that any of the foregoing items shall be deemed to have been delivered
pursuant  to this  Section  2.2(c)  if such  item has been  delivered  to, or is
otherwise located at, the offices of the Company;

          (d) A certificate of the Seller's non-foreign status for purposes of
Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code"); and

                                       4


          (e) Any other  documents,  instruments  and  writings  required  to be
delivered by the Seller to the Purchaser pursuant to this Agreement.

     Section 2.3  Deliveries  by the  Purchaser.  At the Closing,  the Purchaser
shall deliver to the Seller:

          (a) The Estimated  Purchase Price, in cash, which will be made by wire
transfer  in  immediately  available  funds  to the  bank  account  or  accounts
designated by the Seller, in writing, prior to the Closing; and

          (b) Any other  documents,  instruments  and  writings  required  to be
delivered by the Purchaser to the Seller pursuant to this Agreement.

                                  ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

     The Seller  represents  and  warrants to the  Purchaser  that except as set
forth in the reports,  schedules,  registration  statements and definitive proxy
statements and all amendments thereto filed publicly not earlier than January 1,
2001 and not later  than the close of  business  on the day prior to the date of
this Agreement  with the SEC by the Company or any Company  Subsidiary (or their
predecessors) pursuant to the requirements of the Securities Act or the Exchange
Act (each as defined in Section 3.4) (as such  documents  have since the time of
their  filing been  amended  publicly  not earlier  than January 1, 2001 and not
later than the close of business on the day prior to the date of this Agreement,
the  "Company SEC  Reports")  or as set forth in the  schedule  delivered by the
Seller on the date hereof (the "Seller Disclosure Schedule"):

     Section 3.1  Organization  and  Qualification.  The Seller is a corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of  Delaware.  The  Company  and each  Company  Subsidiary  (as defined in
Section 3.2) is a corporation or other entity duly organized,  validly  existing
and in good standing  under the laws of its  jurisdiction  of  incorporation  or
organization,  has all requisite  power and authority to own,  lease and operate
its assets and properties to the extent owned,  leased and operated and to carry
on its business as it is now being  conducted and is duly  qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or  the  ownership  or  leasing  of  its  assets  and   properties   makes  such
qualification necessary other than in such jurisdictions where the failure to be
so  qualified  or in good  standing  would not have a Company  Material  Adverse
Effect (as defined below). As used in this Agreement, the term "Company Material
Adverse Effect" shall mean any material adverse effect on the business,  assets,
financial  condition  or results of  operations  of the  Company and the Company
Subsidiaries,  taken  as a whole;  provided,  however,  that  the term  "Company
Material  Adverse  Effect"  shall not  include  effects  that result from or are
consequences  of (i) any such effect  resulting from any change in law, rule, or
regulation of any  Governmental  Authority  (as defined in Section  3.3(c)) that
applies  generally  to  similarly   situated  Persons  (as  defined  in  Section
3.10(a)(ii)), (ii) changes or developments in international, national, regional,
state or local wholesale or retail markets for electric power or fuel or related

                                       5


products,  including  those due to  actions  by  competitors,  (iii)  changes or
developments  in national,  regional,  state or local electric  transmission  or
distribution  systems,  (iv) changes or  developments in financial or securities
markets or the  economy  in  general  or  effects  of weather or  meteorological
events, (v) events or changes that are consequences of terrorist activity,  acts
of war or acts of  public  enemies  (other  than any such  event or  consequence
affecting  only the Company or a Company  Subsidiary)  or (vi) the  negotiation,
announcement,   execution,   delivery,   consummation  or  anticipation  of  the
transactions  contemplated by, or in compliance with, this Agreement. As used in
this Agreement,  the term "knowledge" (i) when referring to the knowledge of the
Seller shall mean the actual  knowledge  of an executive  officer of the Seller,
and (ii) when  referring to the knowledge of the Company or CILCO shall mean the
actual  knowledge  after  reasonable due inquiry of an executive  officer of the
Company or CILCO, as the case may be.

     Section 3.2 Subsidiaries; Capitalization.

          (a)  Section  3.2 of the  Seller  Disclosure  Schedule  sets  forth  a
complete  list, as of the date hereof,  of all of the Company  Subsidiaries  and
their respective  jurisdictions  of  incorporation  or organization.  All of the
issued and outstanding  shares of capital stock of each Company  Subsidiary have
been duly authorized and are validly issued,  fully paid and nonassessable,  and
are owned,  directly or indirectly,  by the Company free and clear of any liens,
claims,  security  interests  and other  encumbrances  of any nature  whatsoever
("Encumbrances").  As used in this Agreement,  the term "Subsidiary" of a Person
shall mean any  corporation or other entity  (including  partnerships  and other
business  associations  and joint  ventures) of which at least a majority of the
voting  power  represented  by the  outstanding  capital  stock or other  voting
securities or interests  having  voting power under  ordinary  circumstances  to
elect directors or similar members of the governing body of such  corporation or
entity  (or, if there are no such  voting  interests,  50% or more of the equity
interests in such corporation or entity) shall at the time be held,  directly or
indirectly,  by  such  Person.  The  term  "Company  Subsidiary"  shall  mean  a
Subsidiary  of the Company.  The Company is an exempt  "public  utility  holding
company"  (as defined in the Public  Utility  Holding  Company  Act of 1935,  as
amended  ("PUHCA")).  CILCO is a public  utility  company  within the meaning of
Section  2(a)(5) of PUHCA.  With the  exception  of the  Company  and CILCO,  no
Company  Subsidiary is a "holding  company" or a "public utility company" within
the meaning of Sections 2(a)(7) and 2(a)(5) of PUHCA, respectively.

          (b) The  authorized  capital  stock of the Company  consists of 10,000
shares of Common Stock, of which 1,000 Shares are issued and outstanding.  As of
the date hereof,  all Shares have been duly  authorized and are validly  issued,
fully  paid and  nonassessable  and free of  preemptive  rights,  and are owned,
directly or indirectly, by the Seller free and clear of any Encumbrances, except
for any  Encumbrances  created  by this  Agreement,  and there  are no  options,
warrants, calls, rights, commitments or agreements of any character to which the
Seller  is a party or by  which it is bound  obligating  the  Seller  to  issue,
deliver or sell,  pledge,  grant a security  interest or encumber or cause to be
issued,  delivered or sold,  pledged or encumbered or a security  interest to be
granted on, any shares of capital stock of the Company or obligating  the Seller

                                       6


to grant, extend or enter into any such option, warrant, call, right, commitment
or agreement.

          (c) The  authorized  capital  stock of CILCO  consists  as of the date
hereof of 20,000,000  shares of common stock, no par value;  1,500,000 shares of
preferred stock, par value $100 per share ("CILCO Preferred Stock"),  consisting
of 111,264  shares of 4.50 percent Series CILCO  Preferred  Stock ("4.50% Series
Preferred"),  79,940 shares of 4.64 percent Series CILCO Preferred Stock ("4.64%
Series Preferred"),  and 1,308,796 shares of Undesignated Series CILCO Preferred
Stock ("Undesignated  Series Preferred");  3,500,000 shares of Class A preferred
stock,  no par value  ("CILCO Class A Preferred  Stock"),  consisting of 220,000
shares of 5.85 percent Series CILCO Class A Preferred Stock ("5.85% Series Class
A  Preferred"),  250,000  shares of Flexible  Auction  Rate Series CILCO Class A
Preferred  Stock  ("Flexible  Auction  Rate  Series  Class  A  Preferred"),  and
3,030,000   shares  of  Undesignated   Series  CILCO  Class  A  Preferred  Stock
("Undesignated Series Class A Preferred");  and 2,000,000 shares of Undesignated
Series CILCO Preference  Stock, no par value ("CILCO  Preference  Stock").  With
respect to the capital  stock of CILCO,  (i)  13,563,871  shares of CILCO Common
Stock are issued and outstanding, all of which are owned by the Company free and
clear of any  Encumbrances  and (ii) 111,264  shares of 4.50% Series  Preferred,
79,940  shares of 4.64%  Series  Preferred,  no shares  of  Undesignated  Series
Preferred,  220,000  shares  of 5.85%  Class A Series  Preferred,  no  shares of
Flexible Auction Rate Series Class A Preferred, no shares of Undesignated Series
Class A  Preferred  and no  shares of CILCO  Preference  Stock  are  issued  and
outstanding. All of the issued and outstanding shares of CILCO capital stock are
validly issued,  fully paid,  nonassessable and free of preemptive rights. There
are no options,  warrants,  calls,  rights,  commitments  or  agreements  of any
character to which the Company or any Company  Subsidiary is a party or by which
it is bound obligating the Company or any Company  Subsidiary to issue,  deliver
or sell, or cause to be issued,  delivered or sold, additional shares of capital
stock of the  Company or any Company  Subsidiary  or  obligating  the Company to
grant, extend or enter into any such option, warrant, call, right, commitment or
agreement.

     Section 3.3 Authority; Non-Contravention;  Statutory Approvals; Compliance.

          (a)  Authority.  The  Seller  has all  requisite  corporate  power and
authority  to enter  into this  Agreement  and,  subject  to the  receipt of the
applicable Seller Required  Statutory  Approvals (as defined in Section 3.3(c)),
to consummate the transactions  contemplated  hereby. The execution and delivery
of this  Agreement  and  the  consummation  by the  Seller  of the  transactions
contemplated  hereby have been duly authorized by all necessary corporate action
on the part of the  Seller.  No vote of, or consent by, the holders of any class
or series of stock issued by the Seller is necessary to authorize  the execution
and delivery by the Seller of this  Agreement or the  consummation  by it of the
transactions  contemplated  hereby.  This  Agreement  has been duly executed and
delivered  by the Seller and,  assuming  the due  authorization,  execution  and
delivery hereof by the Purchaser,  constitutes the valid and binding  obligation
of the Seller  enforceable  against it in accordance with its terms,  subject to
bankruptcy,  insolvency,  fraudulent  transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

                                       7


          (b) Non-Contravention. The execution and delivery of this Agreement by
the Seller  does not,  and the  consummation  of the  transactions  contemplated
hereby will not, violate or result in a breach of any provision of, constitute a
default (with or without  notice or lapse of time or both) under,  result in the
termination or modification of,  accelerate the performance  required by, result
in a right of termination, cancellation or acceleration of any obligation or the
loss of a benefit under, or result in the creation of any  Encumbrance  upon any
of the properties or assets of the Company or any Company  Subsidiary  (any such
violation, breach, default, right of termination, modification,  cancellation or
acceleration,  loss or  creation,  is referred to herein as a  "Violation"  with
respect to the Seller and the  Company and such term when used in Article IV has
a correlative  meaning with respect to the Purchaser) pursuant to any provisions
of (i) the articles of incorporation,  by-laws or similar governing documents of
the Seller, the Company or any Company Subsidiary, (ii) subject to obtaining the
Seller  Required  Statutory  Approvals,  any  statute,  law,  ordinance,   rule,
regulation,  judgment, decree, order, injunction, writ, permit or license of any
Governmental  Authority (as defined in Section 3.3(c)) applicable to the Seller,
the Company or any Company  Subsidiary or any of their respective  properties or
assets,  or (iii)  subject to obtaining  the  third-party  consents set forth in
Section  3.3(b)(iii)  of the Seller  Disclosure  Schedule (the "Seller  Required
Consents"),  any  note,  bond,  mortgage,  indenture,  deed of  trust,  license,
franchise, permit, concession,  contract, lease or other instrument,  obligation
or  agreement  of any kind to which  the  Seller,  the  Company  or any  Company
Subsidiary is a party or by which they or any of their respective  properties or
assets may be bound or affected,  except in the case of clause (ii) or (iii) for
any such  Violation  which would not have a Company  Material  Adverse Effect or
prevent,   materially  delay  or  materially  impair  the  Seller's  ability  to
consummate the transactions contemplated by this Agreement.

          (c) Statutory Approvals. Except for (i) the filings by the Seller, the
Company  and/or the  Purchaser,  as  applicable,  required under the HSR Act (as
defined in Section 6.2(a)), (ii) the applicable requirements of the Exchange Act
and the rules and regulations promulgated thereunder,  (iii) any filings with or
approvals from (v) the Federal Energy  Regulatory  Commission (the "FERC"),  (w)
the Securities and Exchange Commission (the "SEC") under PUHCA, (x) the ICC, (y)
the  Federal   Communications   Commission  (the  "FCC"),   and  (z)  the  other
Governmental  Authorities  set forth on Section 3.3(c) of the Seller  Disclosure
Schedule  (the filings and  approvals  referred to in clauses (i) through  (iii)
collectively  referred  to as the "Seller  Required  Statutory  Approvals"),  no
declaration, filing or registration with, or notice to or authorization, consent
or approval of, any court,  federal,  state,  local or foreign  governmental  or
regulatory   body   (including   a  national   securities   exchange   or  other
self-regulatory  body)  or  authority  (each,  a  "Governmental  Authority")  is
necessary for the execution and delivery of this  Agreement by the Seller or the
consummation by the Seller of the transactions contemplated hereby, except those
which the  failure  to obtain  would not  result in a Company  Material  Adverse
Effect or would not prevent,  materially delay or materially impair the Seller's
ability to consummate the transactions  contemplated by this Agreement (it being
understood that references in this Agreement to "obtaining" such Seller Required
Statutory   Approvals   shall  mean   making  such   declarations,   filings  or
registrations;  giving such notices; obtaining such authorizations,  consents or
approvals;  and having such waiting  periods  expire as are necessary to avoid a
violation of law).

                                       8


          (d) Compliance. To the knowledge of the Seller or the Company, neither
the  Company  nor  any  Company   Subsidiary   is  in  violation  of,  is  under
investigation  with respect to any  violation of, or has been given notice of or
been charged with any violation of, any law, statute,  order, rule,  regulation,
ordinance  or  judgment  of any  Governmental  Authority,  except  for  possible
violations  which would not have a Company  Material Adverse Effect or would not
prevent,  materially  delay or  materially  impair the  ability of the Seller to
consummate the transactions  contemplated by this Agreement. To the knowledge of
the Seller and the  Company,  the Company and each Company  Subsidiary  have all
material permits,  licenses,  franchises and other governmental  authorizations,
consents and  approvals  (collectively,  "Permits")  necessary to conduct  their
businesses as presently  conducted  except those that the absence of which would
not have a Company  Material  Adverse  Effect or would not  prevent,  materially
delay  or  materially  impair  the  ability  of the  Seller  to  consummate  the
transactions contemplated by this Agreement.  Except as would not have a Company
Material  Adverse  Effect,  (i) each  Permit  is in full  force  and  effect  in
accordance with its terms,  (ii) there is no outstanding  written notice,  or to
the knowledge of the Seller or the Company, any other notice of revocation,  and
there are no  proceedings  pending  or, to the  knowledge  of the  Seller or the
Company, threatened that seek the revocation, cancellation or termination of any
Permit. Neither the Company nor any Company Subsidiary is in breach or violation
of or in default in the  performance  or observance of any term or provision of,
and no event has occurred which,  with lapse of time or action by a third party,
could result in a default by the Company or any Company  Subsidiary  under,  (i)
their  respective  articles of  incorporation  or by-laws or (ii) any  contract,
commitment,  agreement,  indenture, mortgage, loan agreement, note, lease, bond,
license,  approval or other  instrument to which it is a party or by which it is
bound or to which any of its  property is subject,  except in the case of clause
(ii) for  possible  violations,  breaches  or  defaults  which  would not have a
Company  Material  Adverse  Effect or would  not  prevent,  materially  delay or
materially  impair  the  ability of the Seller to  consummate  the  transactions
contemplated by this Agreement.

     Section 3.4 Company SEC Reports; Financial Statements. The filings required
to be made by the Company and the Company  Subsidiaries under the Securities Act
of 1933, as amended (the  "Securities  Act") and the Securities  Exchange Act of
1934,  as  amended  (the  "Exchange  Act"),  PUHCA,  the  Federal  Power Act and
applicable state municipal, local and other laws, including franchise and public
utility laws and regulations, have been filed with the SEC, the FERC, the ICC or
any other applicable  Governmental  Authority, as the case may be, and complied,
as of their  respective  dates,  in all material  respects  with all  applicable
requirements  of  the  appropriate   statutes  and  the  rules  and  regulations
thereunder.  As of their  respective  dates,  the  Company  SEC  Reports did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated  therein or necessary to make the statements  therein,  in
light of the  circumstances  under  which they were made,  not  misleading.  The
audited  consolidated  financial  statements  and  unaudited  interim  financial
statements  of the  Company  and  CILCO  included  in the  Company  SEC  Reports
(collectively,  the  "Company  Financial  Statements")  have  been  prepared  in
accordance with United States generally accepted accounting  principles ("GAAP")
applied on a  consistent  basis  during the  period  involved  (except as may be
stated in the notes  thereto)  and fairly  present  the  consolidated  financial

                                       9



position and the consolidated  results of operations and cash flows (and changes
in financial position, if any) of the Company and the Company Subsidiaries as of
the  time  and for the  period  referred  to  therein,  subject,  in the case of
unaudited interim financial statements, to normal, recurring audit adjustments.

     Section 3.5 Absence of Certain  Changes or Events;  Absence of  Undisclosed
Liabilities.

          (a) Since  December 31, 2001 through the date hereof,  the Company and
each of the  Company  Subsidiaries  has  conducted  its  businesses  only in the
ordinary course of business consistent with past practice and there has not been
any  development  or combination  of  developments  affecting the Company or any
Company Subsidiary, of which the Seller or the Company has knowledge, that would
have a Company Material Adverse Effect.

          (b) Neither the  Company nor any of the Company  Subsidiaries  has any
liabilities or obligations (whether absolute,  accrued, contingent or otherwise)
of any nature,  except  those  which (i) are accrued or reserved  against in the
most recent audited financial statements or reflected in the notes thereto, (ii)
were  incurred in the  ordinary  course of business and would not have a Company
Material Adverse Effect, (iii) have been discharged or paid in full prior to the
date  hereof,  or (iv) are of a  nature  not  required  to be  reflected  in the
consolidated  financial statements of the Company and its Subsidiaries  prepared
in accordance with GAAP consistently applied.

     Section 3.6 Litigation.  There are no claims, suits, actions or proceedings
before any court, governmental department,  commission,  agency, instrumentality
or authority or any arbitrator pending or, to the knowledge of the Seller or the
Company, threatened against, relating to or affecting the Company or any Company
Subsidiary  which would have a Company Material Adverse Effect or would prevent,
materially delay or materially impair the Purchaser's  ability to consummate the
transactions  contemplated by this Agreement.  There are no judgments,  decrees,
injunctions, rules or orders of any court, governmental department,  commission,
agency, instrumentality or authority or any arbitrator applicable to the Company
or any Company Subsidiary except for such that would not have a Company Material
Adverse  Effect or would  prevent,  materially  delay or  materially  impair the
Purchaser's  ability  to  consummate  the  transactions   contemplated  by  this
Agreement.

     Section 3.7 Tax Matters.

          (a) (i) Each of the Seller,  the Company and each  Company  Subsidiary
has  timely  filed  (or has had filed on its  behalf)  with  appropriate  taxing
authorities  all  material  Tax  Returns  required  to be filed by it,  such Tax
Returns are correct,  complete and  accurate in all material  respects,  and all
Taxes shown as due on such Tax Returns  have been paid;  (ii) all  material  Tax
withholding and deposit  requirements  imposed on or with respect to the Seller,
the Company and each Company Subsidiary  (including any withholding with respect
to wages or other amounts paid to employees) have been satisfied in full;  (iii)
there are no outstanding requests, agreements, consents or waivers to extend the
statutory  period of  limitations  applicable to the assessment or collection of
any  material  Taxes or  deficiencies  against  the  Seller,  the Company or any

                                       10


Company Subsidiary;  (iv) no federal,  state, local, or foreign Audits for which
the  Seller,  the  Company,  or any  Company  Subsidiary  has  received  written
notification are presently pending with regard to any material Taxes or material
Tax  Returns  filed by or on behalf of the  Seller,  the  Company or any Company
Subsidiary; (v) neither the Company nor any Company Subsidiary is a party to any
agreement providing for the allocation or sharing of Taxes; and (vi) none of the
Seller,  the  Company  or  any  Company  Subsidiary  has  been a  member  of any
affiliated  group filing a consolidated  federal income Tax Return (other than a
group the common parent of which is the Seller or the Company).

          (b) As used in this  Agreement:  (i) the term "Tax" means all federal,
state,   local  and  foreign  income,   profits,   franchise,   gross  receipts,
environmental,  customs duty, capital stock,  severance,  stamp, payroll, sales,
employment,  unemployment,   disability,  use,  property,  withholding,  excise,
production, value added, occupancy and other taxes, duties or assessments of any
nature whatsoever,  together with all interest,  penalties and additions imposed
with respect  thereto;  (ii) the term "Tax Return" means all returns and reports
(including   elections,   declarations,   disclosures,   schedules,   estimates,
information returns, and amended returns and reports) required to be supplied to
a Tax authority  relating to Taxes;  and (iii) the term "Audit" means any audit,
assessment  of  Taxes,  reassessment  of  Taxes,  or  other  examination  by any
Governmental  Authority or any judicial or administrative  proceedings or appeal
of such proceedings.

     Section 3.8 Employee Benefits; ERISA.

          (a) Company Plans.  Section 3.8(a) of the Seller  Disclosure  Schedule
contains a true and complete list of each deferred  compensation  and each bonus
or other incentive compensation,  stock purchase,  stock option and other equity
compensation  plan,  program,  agreement  or  arrangement;   each  severance  or
termination pay, medical,  surgical,  hospitalization,  life insurance and other
"welfare"  plan,  fund or program  (within  the  meaning of Section  3(1) of the
Employee  Retirement  Income Security Act of 1974, as amended  ("ERISA"));  each
profit-sharing, stock bonus or other "pension" plan, fund or program (within the
meaning   of   Section   3(2)   of   ERISA);   each   employment,   termination,
change-of-control, or severance agreement; and each other employee benefit plan,
fund,  program,  agreement  or  arrangement,  in each case,  that is  sponsored,
maintained or contributed to or required to be contributed to by the Company,  a
Company  Subsidiary,  or by any trade or business,  whether or not incorporated,
that  together  with the  Company,  or a Company  Subsidiary,  would be deemed a
"single  employer" within the meaning of Section 414(b),  (c), (m) or (o) of the
Code (an "ERISA Affiliate"), or to which the Company, a Company Subsidiary or an
ERISA Affiliate is a party in each case for the benefit of any current or former
employee,  officer  or  director  of the  Company or a Company  Subsidiary  (the
"Company Plans").

          (b)  Deliveries.  With  respect to each Company  Plan,  the Seller has
heretofore delivered or made available to the Purchaser true and complete copies
of, as applicable,  (i) the Company Plan and any amendments thereto; (ii) if the
Company Plan is funded  through a trust or any third party  funding  vehicle,  a
copy of the  trust  or other  funding  agreement;  and  (iii)  the  most  recent

                                       11


determination  letter received from the Internal Revenue Service with respect to
each Company Plan  intended to qualify  under  Section 401 of the Code,  and the
most recent letter of  recognition of exemption with respect to any Company Plan
or related trust that is intended to meet the requirements of Section  501(c)(9)
of the Code;  (iv) the most  recent  summary  plan  description  and  subsequent
summaries of material modifications;  (v) the most recently filed Form 5500; and
(vi) the most recently prepared actuarial valuation report.

          (c)  Absence of  Liability.  No material  liability  under Title IV of
ERISA has arisen with respect to the Company,  a Company Subsidiary or any ERISA
Affiliate  that has not been satisfied in full and which would cause the Company
or any Company Subsidiary to incur any material liability, and, to the knowledge
of the Seller or the Company,  no condition exists that presents a material risk
to the Company or any Company Subsidiary of incurring any such liability,  other
than  liability  for  premiums  due the  Pension  Benefit  Guaranty  Corporation
("PBGC") (which premiums have been paid when due).

          (d) Funding. No Company Plan subject to Title IV of ERISA (a "Title IV
Company  Plan"),  Section 302 of ERISA or Section 412 of the Code,  or any trust
established  thereunder and no other plan subject to Title IV of ERISA,  Section
302 of ERISA or Section  412 of the Code  maintained  or  contributed  to by any
ERISA Affiliate has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code),  whether or not waived, as of
the last day of the most  recent  fiscal  year of such plan  ended  prior to the
Closing Date which deficiency could cause the Company or any Company  Subsidiary
to incur any material  liability.  All  contributions or payments required to be
made by the Company,  any Company Subsidiary or any ERISA Affiliate with respect
to any Company Plan have been timely made.  The  aggregate  accumulated  benefit
obligations  of each  Title IV  Company  Plan (as of the most  recent  actuarial
valuation  date) do not exceed the fair market  value of the assets of such plan
(as of the date of such valuation).

          (e)  Multiemployer  Plan. No Title IV Company Plan is a "multiemployer
plan," as defined in Section  4001(a)(3)  of ERISA,  nor is any Title IV Company
Plan a plan described in Section 4063(a) of ERISA.

          (f)  No   Violations.   Each  Company  Plan  has  been   operated  and
administered  in  all  material  respects  in  accordance  with  its  terms  and
applicable   law,   including  but  not  limited  to  ERISA  and  the  Code.  No
investigation,  audit or dispute  relating to any Company Plan is pending or, to
the knowledge of the Seller and the Company,  threatened before any governmental
agency.  None of the Seller, the Company,  the Company  Subsidiaries nor, to the
knowledge of the Seller or the Company, any other "disqualified  person" (within
the  meaning of Section  4975 of the Code) or "party in  interest"  (within  the
meaning of Section  3(14) of ERISA) has taken or omitted to take any action with
respect to any Company  Plan which  would  subject any such plan (or its related
trust),  the  Company or any  Company  Subsidiary  or any  officer,  director or
employee of any of the foregoing to any penalty or tax under  Section  502(i) of
ERISA or Section 4975 of the Code or material  liability for breach of fiduciary

                                       12



responsibility  under ERISA.  Neither the Company nor any Company Subsidiary has
agreed to indemnify any other party for any  liabilities  or expenses which have
been or may in the future be incurred by or  asserted  against  such person with
respect to any Company Plan, which indemnification would have a Company Material
Adverse Effect.

          (g)  Section  401(a)  Qualification;   Exemption.  Each  Company  Plan
intended to be  "qualified"  within the meaning of Section 401(a) of the Code is
so  qualified  except  where the  failure  to be so  qualified  would not have a
Company Material Adverse Effect and has received a determination letter from the
Internal Revenue Service to the effect that it is so qualified. To the knowledge
of the Seller and the Company,  nothing has occurred  since the issuance of such
letter which would affect such Company Plan's  qualification.  Each Company Plan
or related trust intended to meet the  requirements of Section  501(c)(9) of the
Code  meets  such  requirements  and has  received  a letter of  recognition  of
exemption from the Internal Revenue Service to that effect.  To the knowledge of
the Seller and the  Company,  nothing has  occurred  since the  issuance of such
letter which could affect such Company Plan's or related trust's exemption under
Section 501(a) of the Code by reason of Section 501(c)(9) of the Code.

          (h)  Post-Employment  Benefits.  No  Company  Plan  provides  medical,
surgical,  hospitalization,  death or similar benefits  (whether or not insured)
for employees or former  employees of the Company or any Company  Subsidiary for
periods   extending  beyond  their  respective  dates  of  retirement  or  other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death  benefits  under any  "pension  plan," or (iii)  benefits the full cost of
which is borne by the current or former employee (or his beneficiary).

          (i)  Deductibility.  No amounts  payable  under the Company Plans will
fail to be deductible  for federal income tax purposes by virtue of Section 280G
of the Code.

          (j) Effect of Change of Control. The consummation of the
transactions  contemplated  by this  Agreement  will  not,  either  alone  or in
combination  with  another  related  event,  (i)  entitle  any current or former
employee,  officer or  director of the Company to  severance  pay,  unemployment
compensation  or any  other  payment,  except  as  expressly  provided  in  this
Agreement,  or (ii)  accelerate the time of payment or vesting,  or increase the
amount of compensation due any such employee, officer or director.

          (k) Claims. There are no pending or, to the knowledge of the Seller or
the  Company,  threatened  claims by or on behalf of any  Company  Plan,  by any
current or former employee,  officer or director or beneficiary  thereof covered
under any such Company Plan, or otherwise involving any such Company Plan (other
than routine  claims for  benefits),  and neither the Seller nor the Company has
knowledge of facts which would form a reasonable basis for any such claim.

     Section  3.9 Labor and  Employee  Relations.  Neither  the  Company nor the
Company  Subsidiaries are party to any collective  bargaining agreement or other
labor  agreement with any union or labor  organization.  Except to the extent as
would not have a Company Material Adverse Effect,  as of the date hereof,  there

                                       13


is no strike, lockout, slowdown or work stoppage pending or, to the knowledge of
the Seller or the Company,  threatened against the Company or any of the Company
Subsidiaries.

     Section 3.10 Environmental Protection.

          (a) To the  knowledge  of the Seller or the  Company,  the Company and
each Company  Subsidiary  are in compliance  with all  applicable  Environmental
Laws,  including,   but  not  limited  to,  possessing  all  permits  and  other
governmental  authorizations  required  for their  operations  under  applicable
Environmental  Laws, except for such noncompliance that would not have a Company
Material Adverse Effect.

               (i) To the  knowledge of the Seller or the  Company,  there is no
     pending or threatened written claim, lawsuit, or administrative  proceeding
     against  the  Company or any  Company  Subsidiary  under or pursuant to any
     Environmental  Law that  would  have a  Company  Material  Adverse  Effect.
     Neither  the  Company  nor  any  Company   Subsidiary  is  subject  to  any
     administrative  or judicial  consent order or decree in connection with any
     Environmental Laws or the release of Hazardous Substances that is having or
     would have a Company Material  Adverse Effect.  Neither the Company nor any
     Company  Subsidiary has received written notice from any Person,  including
     but not limited to any Governmental Authority, alleging that the Company or
     any Company  Subsidiary is in violation or  potentially in violation of any
     applicable   Environmental  Law  or  otherwise  may  be  liable  under  any
     applicable  Environmental  Law, which  violation or liability is unresolved
     and which would have a Company  Material  Adverse  Effect.  As used in this
     Agreement,  the term "Person" shall mean any natural  person,  corporation,
     general or limited partnership,  limited liability company,  joint venture,
     trust, association or entity of any kind.

               (ii) To the knowledge of the Seller or the Company,  with respect
     to the real property  that was formerly or is currently  owned or leased by
     the  Company  or any  Company  Subsidiary,  there  have  been no  spills or
     discharges  of  Hazardous  Substances  on or  underneath  any of such  real
     property that would result in a Company Material Adverse Effect.

               (iii)Notwithstanding  anything  else  to  the  contrary  in  this
     Agreement,  including, without limitation,  Sections 3.10(a)(i) and (ii) of
     this Agreement,  the Seller expressly makes no representation  and warranty
     with respect to compliance by the Company and the Company Subsidiaries with
     Environmental  Laws relating to the construction of new, or modification of
     existing,  sources of air  emissions,  except  that,  the  Company  and the
     Company  Subsidiaries  are not subject to any  judicial  or  administrative
     proceeding  or the  subject  of any state or  Federal  information  request
     relating to the  construction of new, or modification of existing,  sources

                                       14


     of air emissions,  other than such  proceedings or information  requests as
     would not have a Company Material Adverse Effect.

          (b) For purposes of this Agreement:

               (i) "Environmental Laws" shall mean all foreign,  federal,  state
     and local laws, regulations,  rules and ordinances relating to pollution or
     protection of the environment, including, without limitation, laws relating
     to  releases  or  threatened  releases  of  Hazardous  Substances  into the
     environment  (including,  without  limitation,  ambient air, surface water,
     groundwater,  land, surface and subsurface  strata).  Such laws include the
     common law to the extent that it relates to injuries  caused by the release
     or presence of Hazardous Substances.

               (ii) "Hazardous  Substances" shall mean any chemicals,  materials
     or  substances  defined as or  included  in the  definition  of  "hazardous
     substances",   "hazardous  wastes",   "hazardous   materials",   "hazardous
     constituents",   "restricted  hazardous  materials",  "extremely  hazardous
     substances",  "toxic  substances",  "contaminants",   "pollutants",  "toxic
     pollutants",  or words of similar  meaning and regulatory  effect under any
     applicable Environmental Law including,  without limitation,  petroleum and
     asbestos.

          (c) The  representations and warranties set forth in this Section 3.10
are  the  sole  and  exclusive   representations   and  warranties  relating  to
environmental matters made by the Seller in this Agreement.

     Section  3.11  Regulation  as a  Utility.  CILCO is  regulated  as a public
utility by the FERC and in the State of Illinois and in no other  state.  Except
as set forth in the  preceding  sentence,  as of the date  hereof,  neither  the
Company  nor any  "subsidiary  company"  or  "affiliate"  (as each  such term is
defined  in  PUHCA) of the  Company  (other  than  CILCO  and  Central  Illinois
Generation, Inc.) is subject to regulation as a public utility or public service
company (or similar  designation) by the FERC or any  municipality,  locality or
state in the United States or any foreign country.

     Section 3.12 Insurance. Each of the Company and the Company Subsidiaries is
insured and has been continuously insured since January 1, 1997 with financially
responsible or nationally  recognized  insurers in such amounts and against such
types of risks as is  customary  and  appropriate  in its  industry or otherwise
deemed reasonable by the Seller.  The Seller has not received any written notice
of  cancellation  or  termination  with respect to any  insurance  policy of the
Company or the Company  Subsidiaries except as would not have a Company Material
Adverse Effect.

     Section  3.13 Real  Property.  Except as would not have a Company  Material
Adverse Effect: (a) the Company or a Company Subsidiary has good and valid title
to, or a valid  leasehold  interest  in,  all of the real  property  used by the

                                       15


Company or the Company  Subsidiaries  or otherwise  reflected in the Company SEC
Reports or financial statements  (collectively,  the "Company  Properties"),  in
each case  free and clear of any  Encumbrances  and (b) the  Company  Properties
(taking into account, without limitation,  all Encumbrances related thereto, all
zoning and other restrictions  applicable thereto and the condition thereof) are
suitable and adequate for the conduct of the  businesses  of the Company and the
Company Subsidiaries as currently conducted.

     Section 3.14  Affiliate  Contracts.  Section 3.14 of the Seller  Disclosure
Schedule  contains a true and complete list of each  agreement or contract as of
the date hereof between (i) the Company and its  Subsidiaries,  on one hand, and
(ii) the  Seller and any  affiliate  thereof  (other  than the  Company  and its
Subsidiaries) on the other (collectively, the "Affiliate Contracts").

     Section  3.15  Brokers or  Finders.  Neither the Seller nor the Company has
entered  into  any  agreement  or  arrangement   entitling  any  agent,  broker,
investment banker,  financial advisor or other firm or Person to any broker's or
finder's fee or any other  commission or similar fee in  connection  with any of
the  transactions  contemplated by this Agreement,  except Lehman Brothers Inc.,
whose  fees and  expenses  will be paid by the  Seller  in  accordance  with the
Seller's agreements with such firm.

     Section 3.16      Contracts.

          (a)  Section  3.16(a) of the  Seller  Disclosure  Schedule  contains a
complete  and correct  list of all  contracts  relating  to the  business of the
Company and the Company Subsidiaries as of the date hereof which (i) have a term
in excess of one year and (ii) provide for aggregate  consideration in an amount
in excess of $10 million (the "Material Contracts"). There are no defaults under
any  Material  Contracts  which  have or would have a Company  Material  Adverse
Effect. As of the date hereof, the Seller has not received any written notice of
cancellation  relating to a Material Contract and has no knowledge of facts that
a Material  Contract is likely to be  cancelled,  except for such  cancellations
which would not have a Company Material Adverse Effect.  The Seller has provided
or made available to the Purchaser  true,  correct and complete  copies by their
terms of all Material  Contracts,  including all  amendments  thereto except for
such  contracts that by their terms  prohibit  disclosure to third parties.  The
Seller shall cause CILCO to arrange and maintain an adequate  supply for meeting
CILCO's native electric load and off-system retail sales load.

          (b) Each Material  Contract is a valid and binding agreement and is in
full force and effect  except to the extent such contract has expired by its own
terms  without  penalty,  and  enforceable  by the Company or any of the Company
Subsidiaries  in  accordance  with its terms,  and none of the  Company  and the
Company  Subsidiaries  or, to the  knowledge of the Seller or the  Company,  any
other  party  thereto  is in  default  or  breach  under  the  terms of any such
contracts  and,  to the  knowledge  of the  Seller or the  Company,  no event or
circumstance  has  occurred  that,  with notice or lapse of time or both,  would
constitute any event of default thereunder,  other than in each case defaults or
breaches that would not have a Company Material Adverse Effect.


                                       16



     Section  3.17  Regulatory  Proceedings.  Neither the Company nor any of the
Company  Subsidiaries  all or part of whose rates or services are regulated by a
Governmental  Authority  (a) has rates  that  have  been or are being  collected
subject  to  refund  (other  than  purchase  gas  adjustment  provisions,   fuel
adjustment  clauses and purchase  fuel  adjustment  provisions),  pending  final
resolution of any rate proceeding pending before a Governmental  Authority or on
appeal  to the  courts,  or (b) is a  party  to any  rate  proceeding  before  a
Governmental Authority that in each case would result in orders having a Company
Material Adverse Effect.

     Section 3.18 Limitation on Representations  and Warranties.  Except for the
representations and warranties contained in this Article III, neither the Seller
nor any  other  Person  or entity  acting  on  behalf  of the  Seller  makes any
representation  or warranty,  express or implied,  concerning  the Shares or the
business,  finances,  operations,  assets,  liabilities,  prospects or any other
aspect of the Company and the Company Subsidiaries.

                                   ARTICLE IV
                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     The  Purchaser  represents  and  warrants  to the Seller that except as set
forth in the reports,  schedules,  registration  statements and definitive proxy
statements and all amendments thereto filed publicly not earlier than January 1,
2001 and not later  than the close of  business  on the day prior to the date of
this  Agreement  with the SEC by the Purchaser or any Purchaser  Subsidiary  (or
their  predecessors)  pursuant to the  requirements of the Securities Act or the
Exchange Act (as such documents have since the time of their filing been amended
publicly  not  earlier  than  January  1, 2001 and not  later  than the close of
business  on the day prior to the date of this  Agreement,  the  "Purchaser  SEC
Reports") or in the schedule  delivered by the Purchaser on the date hereof (the
"Purchaser Disclosure Schedule"):

     Section 4.1 Organization and  Qualification.  The Purchaser and each of the
Purchaser  Subsidiaries (as defined below) is a corporation or other entity duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of its
jurisdiction  of  incorporation  or  organization,  has all requisite  power and
authority  to own,  lease and  operate its assets and  properties  to the extent
owned,  leased  and  operated  and to carry on its  business  as it is now being
conducted  and is duly  qualified  and in good  standing  to do business in each
jurisdiction  in which the nature of its business or the ownership or leasing of
its assets and properties makes such qualification  necessary other than in such
jurisdictions where the failure to be so qualified or in good standing would not
have a  Purchaser  Material  Adverse  Effect  (as  defined  below)  or  prevent,
materially delay or materially impair the Purchaser's  ability to consummate the
transactions contemplated by this Agreement. As used in this Agreement, the term
"Purchaser  Material  Adverse Effect" shall mean any material  adverse effect on
the  business,  assets,  financial  condition  or results of  operations  of the
Purchaser and the Purchaser Subsidiaries,  taken as a whole; provided,  however,
that the term "Purchaser Material Adverse Effect" shall not include effects that
result from or are consequences of (i) any such effect resulting from any change
in law, rule, or regulation of any Governmental Authority (as defined in Section
3.3(c)) that applies  generally  to  similarly  situated  Persons (as defined in

                                       17


Section 3.10(a)(ii)),  (ii) changes or developments in international,  national,
regional,  state or local wholesale or retail markets for electric power or fuel
or  related  products,  including  those due to actions  by  competitors,  (iii)
changes  or  developments  in  national,   regional,  state  or  local  electric
transmission or distribution  systems, (iv) changes or developments in financial
or  securities  markets  or the  economy  in  general  or  effects of weather or
meteorological  events, (v) events or changes that are consequences of terrorist
activity,  acts of war or acts of public  enemies  (other than any such event or
consequence  affecting only the Purchaser or a Purchaser Subsidiary) or (vi) the
negotiation,  announcement, execution, delivery, consummation or anticipation of
the transactions  contemplated  by, or in compliance  with, this Agreement.  The
term "Purchaser Subsidiary" shall mean a Subsidiary of the Purchaser.

     Section 4.2 Authority; Non-Contravention;  Statutory Approvals; Compliance.

          (a)  Authority.  The Purchaser has all requisite  corporate  power and
authority  to enter  into this  Agreement  and,  subject  to the  receipt of the
applicable  Purchaser  Required  Statutory  Approvals  (as  defined  in  Section
4.2(c)), to consummate the transactions  contemplated  hereby. The execution and
delivery  of  this  Agreement  and  the  consummation  by the  Purchaser  of the
transactions  contemplated  hereby have been duly  authorized  by all  necessary
corporate  action on the part of the  Purchaser.  No vote of, or consent by, the
holders of any class or series of stock issued by the  Purchaser is necessary to
authorize the  execution and delivery by the Purchaser of this  Agreement or the
consummation by it of the transactions  contemplated  hereby. This Agreement has
been  duly  executed  and  delivered  by the  Purchaser  and,  assuming  the due
authorization,  execution  and delivery  hereof by the Seller,  constitutes  the
valid  and  binding  obligation  of  the  Purchaser  enforceable  against  it in
accordance  with  its  terms,  subject  to  bankruptcy,  insolvency,  fraudulent
transfer,  reorganization,  moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.

          (b) Non-Contravention. The execution and delivery of this Agreement by
the Purchaser does not, and the  consummation of the  transactions  contemplated
hereby will not,  result in a Violation  pursuant to any  provisions  of (i) the
certificate  of  incorporation,  by-laws or similar  governing  documents of the
Purchaser or any of the  Purchaser  Subsidiaries,  (ii) subject to obtaining the
Purchaser Required  Statutory  Approvals,  any statute,  law,  ordinance,  rule,
regulation,  judgment, decree, order, injunction, writ, permit or license of any
Governmental  Authority  applicable  to the  Purchaser  or any of the  Purchaser
Subsidiaries or any of their respective  properties or assets,  or (iii) subject
to obtaining the  third-party  consents set forth in Section  4.2(b)(iii) of the
Purchaser Disclosure Schedule (the "Purchaser Required Consents"),  any material
note, bond, mortgage,  indenture,  deed of trust,  license,  franchise,  permit,
concession, contract, lease or other instrument,  obligation or agreement of any
kind to which the Purchaser or any of the Purchaser  Subsidiaries  is a party or
by which they or any of their  respective  properties  or assets may be bound or
affected,  except  in the case of clause  (ii) or (iii)  for any such  Violation
which would not prevent,  materially delay or materially  impair the Purchaser's
ability to consummate the transactions contemplated by this Agreement.

                                       18



          (c) Statutory Approvals. Except for (i) the filings by the Seller, the
Company  and/or the  Purchaser,  as  applicable,  required under the HSR Act (as
defined  below),  (ii) the applicable  requirements  of the Exchange Act and the
rules and  regulations  promulgated  thereunder,  and (iii) any filings  with or
approvals from (v) the FERC,  (w) the SEC under PUHCA,  (x) the ICC, (y) the FCC
and (z) the other  Governmental  Authorities  set forth on Section 4.2(c) of the
Purchaser  Disclosure Schedule (the filings and approvals referred to in clauses
(i) through (iii) collectively  referred to as the "Purchaser Required Statutory
Approvals"),  no  declaration,  filing  or  registration  with,  or notice to or
authorization,  consent or approval of, any Governmental  Authority is necessary
for the  execution  and  delivery  of this  Agreement  by the  Purchaser  or the
consummation by the Purchaser of the transactions  contemplated  hereby,  except
those  which the  failure  to  obtain  would not  prevent,  materially  delay or
materially  impair  the  Purchaser's  ability  to  consummate  the  transactions
contemplated  by this  Agreement (it being  understood  that  references in this
Agreement to "obtaining" such Purchaser Required Statutory  Approvals shall mean
making  such  declarations,  filings  or  registrations;  giving  such  notices;
obtaining such  authorizations,  consents or approvals;  and having such waiting
periods expire as are necessary to avoid a violation of law).

          (d)  Compliance.  Neither  the  Purchaser  nor  any of  the  Purchaser
Subsidiaries  is under  investigation  with respect to any  violation of, or has
been given notice of or been charged with any  violation  of, any law,  statute,
order, rule,  regulation,  ordinance or judgment of any Governmental  Authority,
except for  possible  violations  which would not prevent,  materially  delay or
materially  impair  the  Purchaser's  ability  to  consummate  the  transactions
contemplated  by this  Agreement.  The Purchaser and the Purchaser  Subsidiaries
have all permits,  licenses,  franchises and other governmental  authorizations,
consents  and  approvals  necessary  to conduct  their  businesses  as presently
conducted  except those that the absence of which would not prevent,  materially
delay  or  materially   impair  the   Purchaser's   ability  to  consummate  the
transactions  contemplated by this  Agreement.  Neither the Purchaser nor any of
the  Purchaser  Subsidiaries  is in breach or  violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party,  could result in a default
by  the  Purchaser  or any  Purchaser  Subsidiary  under  (i)  their  respective
certificates  of  incorporation  or  by-laws or (ii) any  contract,  commitment,
agreement,  indenture,  mortgage,  loan agreement,  note, lease, bond,  license,
approval or other instrument to which they are a party or by which the Purchaser
or any  Purchaser  Subsidiary  is  bound or to which  any of their  property  is
subject,  except for possible  violations,  breaches or defaults which would not
prevent,  materially  delay or  materially  impair  the  Purchaser's  ability to
consummate the transactions contemplated by this Agreement.

     Section  4.3  Purchaser  SEC  Reports;  Financial  Statements.  The filings
required to be made by the Purchaser  under the  Securities Act and the Exchange
Act have been filed with the SEC and complied,  as of their respective dates, in
all  material  respects  with all  applicable  requirements  of the  appropriate
statutes and the rules and regulations thereunder. As of their respective dates,
none of the Purchaser SEC Reports  contained any untrue  statement of a material
fact or  omitted  to state a  material  fact  required  to be stated  therein or
necessary to make the statements  therein,  in light of the circumstances  under

                                       19



which  they were  made,  not  misleading.  The  audited  consolidated  financial
statements and unaudited interim financial  statements of the Purchaser included
in the Purchaser SEC Reports have been prepared in accordance  with GAAP applied
on a consistent basis during the period involved (except as may be stated in the
notes thereto) and fairly present the  consolidated  financial  position and the
consolidated  results of  operations  and cash flows (and  changes in  financial
position, if any) of the Purchaser as of the time and for the period referred to
therein,  subject,  in the case of unaudited  interim financial  statements,  to
normal, recurring audit adjustments.

     Section 4.4 Litigation.  There are no claims, suits, actions or proceedings
by any court, governmental department,  commission,  agency,  instrumentality or
authority or any  arbitrator,  pending or, to the  knowledge  of the  Purchaser,
threatened  against,  relating to or affecting  the  Purchaser or any  Purchaser
Subsidiaries  which would  prevent,  materially  delay or materially  impair the
Purchaser's  ability  to  consummate  the  transactions   contemplated  by  this
Agreement. There are no judgments, decrees, injunctions,  rules or orders of any
court, governmental department, commission, agency, instrumentality or authority
or any  arbitrator  applicable to the  Purchaser or any  Purchaser  Subsidiaries
except for such that would not prevent,  materially  delay or materially  impair
the  Purchaser's  ability to consummate the  transactions  contemplated  by this
Agreement.

     Section 4.5  Investigation by the Purchaser;  the Seller's  Liability.  The
Purchaser has conducted its own independent  investigation,  review and analysis
of  the  business,  operations,  assets,  liabilities,  results  of  operations,
financial condition,  software,  technology and prospects of the Company and the
Company Subsidiaries,  which investigation,  review and analysis was done by the
Purchaser  and  its  affiliates   and,  to  the  extent  the  Purchaser   deemed
appropriate, by the Purchaser's representatives. The Purchaser acknowledges that
it and its representatives  have been provided adequate access to the personnel,
properties, premises and records of the Company and the Company Subsidiaries for
such purpose. In entering into this Agreement,  the Purchaser  acknowledges that
it has relied solely upon the aforementioned investigation,  review and analysis
and not on any  factual  representations  of the  Seller or its  representatives
(except the specific  representations  and warranties of the Seller set forth in
Article III of this Agreement), and the Purchaser:

          (a)  acknowledges  that none of the  Seller  or any of its  directors,
officers,  shareholders,  employees,  affiliates,  controlling Persons,  agents,
advisors or  representatives  makes or has made any  representation or warranty,
either  express or implied,  as to the  accuracy or  completeness  of any of the
information   (including   materials  furnished  in  the  Company's  data  room,
presentations by the Company's  management,  financial projections or otherwise)
provided  or  made  available  to  the  Purchaser  or its  directors,  officers,
employees, affiliates, controlling Persons, agents or representatives, and

          (b) agrees,  to the fullest extent  permitted by law, that none of the
Seller,  the  Company,  the  Company  Subsidiaries  or any of  their  respective
directors, officers, employees,  shareholders,  affiliates, controlling Persons,
agents,  advisors or representatives  shall have any liability or responsibility
whatsoever to the Purchaser or its directors,  officers, employees,  affiliates,

                                       20



controlling  Persons,  agents  or  representatives  on any basis  (including  in
contract or tort,  under federal or state  securities  laws or otherwise)  based
upon any information  provided or made available,  or statements made (including
materials  furnished in the Company's data room,  presentations by the Company's
management,  financial  projections  or  otherwise)  to  the  Purchaser  or  its
directors,  officers,  employees,  affiliates,  controlling  Persons,  advisors,
agents or representatives (or any omissions therefrom),  including in respect of
the  specific  representations  and  warranties  of the Seller set forth in this
Agreement,  except that the foregoing  limitations shall not apply to the Seller
insofar as the Seller  makes the specific  representations  and  warranties  set
forth in Article III of this  Agreement,  but always subject to the  limitations
and restrictions contained in Article IX.

     Section 4.6 Acquisition of Shares for  Investment;  Ability to Evaluate and
Bear Risk.

          (a) The Purchaser is an "accredited  investor" as such term is defined
in Regulation D promulgated under the Securities Act. The Purchaser is acquiring
the Shares for investment and not with a view toward,  or for sale in connection
with, any distribution  thereof,  nor with any present intention of distributing
or selling the  Shares.  The  Purchaser  agrees that the Shares may not be sold,
transferred,  offered for sale,  pledged,  hypothecated or otherwise disposed of
without   registration  under  the  Securities  Act  and  any  applicable  state
securities laws,  except pursuant to an exemption from such  registration  under
such Act and such laws.

          (b) The  Purchaser  is able to bear the  economic  risk of holding the
Shares for an indefinite  period,  and has knowledge and experience in financial
and  business  matters  such that it is capable of  evaluating  the risks of the
investment in the Shares.

          (c) The Purchaser acknowledges that the By-Laws of the Company contain
certain  provisions  relating to the separateness of the Company from its parent
company, including,  without limitation,  certain provisions in Articles III and
VII thereof.

     Section 4.7 Financing. The Purchaser will have as of the Closing sufficient
cash in immediately available funds to pay the Estimated Purchase Price pursuant
to Article I hereof and to consummate the transactions contemplated hereby.

     Section 4.8  Brokers or Finders.  The  Purchaser  has not entered  into any
agreement  or  arrangement  entitling  any  agent,  broker,  investment  banker,
financial advisor or other firm or Person to any broker's or finder's fee or any
other  commission  or similar  fee in  connection  with any of the  transactions
contemplated  by this  Agreement,  except  Goldman,  Sachs & Co., whose fees and
expenses  will be paid by the  Purchaser  in  accordance  with  the  Purchaser's
agreement with such firm.


                                       21


                                   ARTICLE V
                     CONDUCT OF BUSINESS PENDING THE CLOSING

     Section 5.1 Covenants of the Seller. After the date hereof and prior to the
Closing or earlier termination of this Agreement, the Seller agrees that, except
as set forth in Section 5.1 of the Seller Disclosure  Schedule and except (i) as
contemplated  in or  permitted  by this  Agreement,  (ii) as provided for in the
annual budgets or capital  budgets (copies of which, in their current form, have
been made  available  to the  Purchaser  and  included in the Seller  Disclosure
Schedules) for the Company and each Company Subsidiary, (iii) in connection with
necessary  repairs due to  breakdown  or  casualty,  or other  actions  taken in
response to a business emergency or other unforeseen  operational matters,  (iv)
as required by law, rule or regulation, or (v) to the extent the Purchaser shall
otherwise  consent,  which decision regarding consent shall be made promptly and
which consent shall not be unreasonably withheld, conditioned or delayed:

          (a) the business of the Company and each Company  Subsidiary  shall be
conducted in the ordinary and usual course in  substantially  the same manner as
heretofore  conducted and, to the extent consistent  therewith,  the Company and
each Company Subsidiary shall use its respective commercially reasonable efforts
to preserve its business organization intact and maintain its existing relations
and  goodwill  with  customers,   suppliers,  creditors,  lessors  and  business
associates;

          (b) the Company  shall not,  nor shall the  Company  permit any of the
Company  Subsidiaries  to, (i) amend their articles of  incorporation or by-laws
other than amendments  which are ministerial in nature or otherwise  immaterial;
(ii) split,  combine or reclassify  their  outstanding  shares of capital stock;
(iii) declare,  set aside or pay any dividend payable in cash, stock or property
in respect of any capital stock other than (A) dividends  paid to the Company or
its wholly-owned  Subsidiaries,  (B) dividends  required to be paid on any CILCO
Preferred  Stock,  CILCO Class A Preferred  Stock or CILCO  Preference  Stock in
accordance  with the terms  thereof,  or (C) dividends in respect of earnings of
the Company for the period between December 31, 2001 and the Closing Date to the
extent permitted by applicable loan agreements and indentures of the Company; or
(iv) repurchase,  redeem or otherwise acquire any shares of its capital stock or
any securities convertible into or exchangeable or exercisable for any shares of
its capital stock, other than redemptions, purchases or acquisitions required by
the  respective  terms of any series of CILCO  Preferred  Stock or CILCO Class A
Preferred Stock;

          (c) neither the Company nor any Company  Subsidiary shall issue, sell,
or dispose of any shares of, or securities  convertible  into or exchangeable or
exercisable for, or options,  warrants, calls, commitments or rights of any kind
to acquire,  any shares of its capital stock of any class or any other  property
or assets;

          (d) neither the  Company  nor any Company  Subsidiary  shall incur any
indebtedness  except for indebtedness that is incurred in the ordinary and usual
course of business and complies with the  restrictions  of Section 5.1(d) of the
Seller Disclosure Schedule;


                                       22


          (e) the Company shall not make in the aggregate  more than 110% of its
capital expenditures  budgeted for the year 2002 and the year 2003 in accordance
with  and at the  approximate  times as  provided  in the  capital  expenditures
budgets for those  years  provided  in Section  5.1(e) of the Seller  Disclosure
Schedule  and shall  use best  efforts  to meet the  milestones  related  to the
selective  catalytic  reduction  technology  at the times and in the  manner set
forth in Section  5.1(e) of the Seller  Disclosure  Schedule;  (i) to the extent
that the Company does not make  expenditures  up to the amounts and by the dates
set forth in Section 5.1(e) of the Seller  Disclosure  Schedule,  the difference
shall be  referred  to as the "CapEx  Adjustment  Amount"  for  purposes of this
Agreement  and shall  result in  reduction  in  Purchase  Price for  purposes of
Section  1.2(a);  and (ii) to the extent the  Company,  with the  consent of the
Purchaser,  accelerates the scheduled capital  expenditures related to selective
catalytic reduction  technology or incurs capital  expenditures related to plant
outages  that  were  unforeseen  and such  expenditures  are  considered  by the
Purchaser to be advisable or appropriate,  the CapEx Adjustment  Amount shall be
reduced by such  accelerated  amount and shall result in an increase in Purchase
Price for purposes of Section 1.2(a);

          (f) neither the  Company  nor any  Company  Subsidiary  shall make any
acquisition of, or investment in, assets or stock of any other Person or entity,
other  than in the  ordinary  and  usual  course of  business  and not to exceed
singularly  or in  the  aggregate  $10  million  in  any  calendar  year  and no
acquisition or investment  shall be of any public utility company (as defined in
PUHCA)  or in a  business  or any  interest  in a  business  which  would not be
retainable by the Purchaser under PUHCA following the Closing;

          (g) neither the Company nor any Company  Subsidiary shall sell, lease,
license,  encumber or otherwise dispose of any of its assets,  other than in the
ordinary and usual course of business, and in an amount not to exceed singularly
or in the aggregate $10 million in any calendar year;

          (h) neither the Company nor any Company  Subsidiary  shall  terminate,
establish,  adopt,  enter  into,  make any new  grants or awards of  stock-based
compensation or other benefits under,  amend or otherwise  materially modify any
Company Plan or increase the salary,  wage,  bonus or other  compensation of any
directors,  officers or employees  except (i) for grants or awards to directors,
officers and employees under existing  Company Plans in such amounts and on such
terms as are consistent with past practice,  (ii) in the normal and usual course
of business (which shall include normal periodic performance reviews and related
plans  and the  provision  of  individual  Company  Plans  consistent  with past
practice for newly  hired,  appointed or promoted  officers and  employees),  or
(iii) for actions  necessary to satisfy existing  contractual  obligations under
Company Plans existing as of the date hereof or to comply with applicable law;

          (i) the Company and each Company  Subsidiary shall maintain  insurance
with financially  responsible or nationally  recognized insurers in such amounts
and  against  such  risks  and  losses  as are  consistent  with  the  insurance
maintained  by the Company and each  Company  Subsidiary,  respectively,  in the
ordinary and usual course of business;


                                       23


          (j) the  Company  shall not,  nor shall it permit  any of the  Company
Subsidiaries  to,  change  any  material  financial  or Tax  accounting  method,
policies,  practices or election,  except as required by GAAP or SEC  accounting
regulations or guidelines or applicable law;

          (k) the Seller and the Company  shall  promptly  provide the Purchaser
with  copies of all  filings  made by the  Seller,  the  Company or any  Company
Subsidiary with, and inform the Purchaser of any  communications  received from,
any  state  or  federal  court,   administrative  agency,  commission  or  other
Governmental  Authority in connection  with this Agreement and the  transactions
contemplated hereby;

          (l) the  Seller,  the Company and each  Company  Subsidiary  shall use
their  respective  best  efforts to promptly  obtain all of the Seller  Required
Consents and the Seller Required Statutory Approvals.  The Seller shall promptly
notify the  Purchaser of any failure or  prospective  failure to obtain any such
consents or approvals and, if requested by the  Purchaser,  shall provide copies
of all of the  Seller  Required  Consents  and  the  Seller  Required  Statutory
Approvals obtained by the Seller, the Company and each Company Subsidiary to the
Purchaser;

          (m) the  Company  shall not,  nor shall it permit  any of the  Company
Subsidiaries to, enter into any material agreement or arrangement with any other
person that, directly or indirectly, controls or is under common control with or
is controlled by the Seller,  or any of its respective  subsidiaries on terms to
the Company or the Company Subsidiaries  materially less favorable than could be
reasonably expected to have been obtained with an unaffiliated third party on an
arm's-length basis;

          (n) the Company shall not, nor shall it permit any Company  Subsidiary
to,  take any action  that would  likely  jeopardize  the  exclusion  from gross
income,  for  purposes  of  federal  income  taxation,  of the  interest  on the
outstanding  revenue  bonds issued for the benefit of the Company or any Company
Subsidiary,  which  qualify on the date hereof under Code ss.  142(a) as "exempt
facility  bonds" or as  tax-exempt  industrial  development  bonds under Section
103(b)(4) of the Code;

          (o) the Company shall,  and shall cause the Company  Subsidiaries  to,
use commercially  reasonable efforts to maintain in effect or renew all existing
material governmental franchises or Permits pursuant to which the Company or any
of the Company Subsidiaries operate;

          (p) the Company shall,  or shall cause CILCO to, provide the Purchaser
with  information  reasonably  requested  by the  Purchaser  from  time  to time
regarding the contracts  entered into,  progress of work on,  material  problems
encountered with,  projected completion date of, expected operational levels of,
or any other relevant  information  requested,  with respect to the installation
and  operation of the  selective  catalytic  reduction  technology  described in
Section 5.1(e) of the Seller's Disclosure Schedule;


                                       24


          (q) the Company shall not, nor shall it permit any Company  Subsidiary
to, (i) engage in any sale, transfer,  trading, sale of options,  calls or other
derivatives,  or  disposition  of  emission  allowances  for  sulfur  dioxide or
nitrogen oxide which has the result of reducing available emission allowances of
the Company and the Company Subsidiaries,  except as required by law, (ii) enter
into or commit to any new or  material  amendment  to any fuel  supply  contract
except for those spot and short-term  coal purchases made in the ordinary course
of  business  which are less than six (6) months in term or (iii) enter into any
new or material amendment to any power purchase or gas supply  transactions with
a term greater than six months;

          (r) the Seller  shall not, nor shall it permit any  Subsidiary  of the
Seller to, directly or indirectly, solicit for employment by such persons any of
the  current  officers,  managers  or  employees  of the  Company or any Company
Subsidiary  except for those persons  specified on Section  5.1(r) of the Seller
Disclosure Schedule; provided that the Seller and the Subsidiaries of the Seller
shall not be prohibited  from  employing any such person who contacts the Seller
or any  Subsidiary of the Seller on his or her own initiative or who responds to
a general solicitation through the use of media advertisements,  the Internet or
professional search firms;

          (s) the Company shall not, nor shall it permit any Company  Subsidiary
to,  enter into any  agreement  with any party  involving  power line carrier or
other communications technology involving CILCO's utility assets.

     Section 5.2 No Solicitation and Confidentiality.

          (a) From the date hereof through the Closing,  none of the parties nor
their  representatives  (including,  without  limitation,   investment  bankers,
attorneys and accountants) shall,  directly or indirectly,  enter into, solicit,
initiate or continue  any  discussions  or  negotiations  with,  or encourage or
respond to any inquiries or proposals  by, or  participate  in any  negotiations
with,  or provide any  information  to, or otherwise  cooperate in any other way
with,  any  person or other  entity or  group,  concerning  any sale of all or a
portion of the Company,  or of any shares of capital stock of the Company or any
Company  Subsidiary or any merger,  consolidation,  liquidation,  dissolution or
similar  transaction  involving the Company or any Company Subsidiary (each such
transaction  being referred to herein as a "Proposed  Acquisition  Transaction")
other than with (i) the Purchaser and its  representatives,  or (ii) as required
by law.  Neither  the Seller nor the  Company  shall,  directly  or  indirectly,
through any officer,  director,  employee,  representative,  agent or otherwise,
solicit,  initiate or encourage the submission of any proposal or offer from any
person (including, without limitation, a "person" as defined in Section 13(d)(3)
of the Exchange Act) or entity relating to any Proposed Acquisition Transaction.
The  Seller  and  the  Company  represent  that  they  are not  now  engaged  in
discussions or negotiations with any party other than the Purchaser with respect
to any of the foregoing.

          (b) Notification. The Seller and the Company shall promptly notify the
Purchaser if any  discussions or  negotiations  are sought to be initiated,  any

                                       25


inquiry or proposal is made, or any information is requested with respect to any
Proposed Acquisition Transaction and notify the Purchaser of the identity of the
prospective  purchaser or soliciting party and any other information relating to
such  inquiry or  proposal  known to the  Seller,  the  Company  or any  Company
Subsidiary.

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

     Section 6.1 Access to Company  Information.  Upon  reasonable  notice,  the
Seller shall, and shall cause the Company and each Company Subsidiary to, afford
to the officers, directors, employees, accountants, counsel, investment bankers,
financial advisors and other representatives  (collectively,  "Representatives")
of the Purchaser reasonable access,  during normal business hours throughout the
period  prior to the  Closing  Date,  to all of the  Company's  and the  Company
Subsidiaries' properties, books, contracts,  commitments and records and, during
such  period,  the Seller  shall,  and shall cause the Company and each  Company
Subsidiary to, furnish  promptly to the Purchaser and its  Representatives,  (i)
access to each  report,  schedule  and other  document  filed or received by the
Company,  each Company  Subsidiary  pursuant to the  requirements  of federal or
state  securities laws or filed with or sent to any federal or state  regulatory
agency or commission and (ii) access to all information  concerning the Company,
each Company Subsidiary and its respective directors and officers and such other
matters as may be reasonably  requested by the Purchaser or its  Representatives
in  connection  with  any  filings,   applications  or  approvals   required  or
contemplated  by  this  Agreement  or  for  any  other  reason  related  to  the
transactions  contemplated by this Agreement.  The Purchaser agrees to indemnify
and hold the Seller, the Company and the Company Subsidiaries  harmless from any
and all claims and liabilities, including costs and expenses for loss, injury to
or death of any  Representative  of the  Purchaser,  and any loss,  damage to or
destruction  of any  property  owned by the  Seller,  the Company or the Company
Subsidiaries or others  (including  claims or liabilities for loss of use of any
property) resulting directly or indirectly from the action or inaction of any of
the  Representatives  of the  Purchaser  during  any  visit to the  business  or
property sites of the Company or the Company  Subsidiaries  prior to the Closing
Date,  whether pursuant to this Section 6.1 or otherwise.  None of the Purchaser
nor any of its  Representatives  shall  conduct  any  environmental  testing  or
sampling on any of the business or property  sites of the Company or the Company
Subsidiaries  prior to the Closing Date.  Each party shall,  and shall cause its
Subsidiaries and Representatives to, hold in strict confidence all documents and
information  concerning  the  other  furnished  to it  in  connection  with  the
transactions   contemplated   by  this   Agreement   in   accordance   with  the
Confidentiality  Agreement, dated November 15, 2001, as amended, entered into by
and between the Seller and the Purchaser (the "Confidentiality Agreement").

     Section 6.2 Regulatory Matters.

          (a) HSR Filings.  Each party hereto shall,  as soon as  practicable as
mutually agreed by the parties, file or cause to be filed with the Federal Trade
Commission and the Department of Justice any notifications  required to be filed

                                       26



under the Hart-Scott-Rodino  Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the rules and regulations promulgated thereunder with respect to
the transactions contemplated hereby. Such parties shall use all best efforts to
respond on a timely  basis to any requests for  additional  information  made by
either of such agencies.

          (b) Other Regulatory Approvals.  Each party hereto shall cooperate and
use best  efforts  to  prepare  and file as soon as  practicable  all  necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other  documents,  and to use best efforts to obtain all necessary  permits,
consents, approvals and authorizations of all Governmental Authorities necessary
or advisable to obtain the Seller Required Statutory Approvals and the Purchaser
Required Statutory Approvals.  The parties further agree to use best efforts (i)
to take any act,  make any  undertaking  or receive  any  clearance  or approval
required by any Governmental Authority or applicable law and (ii) to satisfy any
conditions imposed by any Governmental Authority in all Final Orders (as defined
in and for purposes of Section 7.1(b)). Each of the parties shall (i) respond as
promptly  as  practicable  to  any  inquiries  or  requests  received  from  any
Governmental Authority for additional information or documentation, and (ii) not
enter into any agreement with any  Governmental  Authority not to consummate the
transactions  contemplated by this  Agreement,  except with the prior consent of
the other party hereto  (which shall not be  unreasonably  withheld or delayed).
Each of the parties shall make best efforts to avoid or eliminate each and every
impediment under any antitrust,  competition,  or trade or energy regulation law
(including  the  Federal  Power Act,  as  amended,  and the  FERC's  regulations
thereunder) that may be asserted by any  Governmental  Authority with respect to
the transactions  contemplated  hereby so as to enable the Closing Date to occur
as soon as reasonably  possible.  The steps  involved in the preceding  sentence
shall include proposing,  negotiating,  committing to and effecting,  by consent
decree, hold separate order or otherwise,  the sale,  divestiture or disposition
of such assets or businesses of the Purchaser or its affiliates (including their
respective Subsidiaries) or agreeing to such limitations on its or their conduct
or actions as may be required in order to obtain the Seller  Required  Statutory
Approvals and the Purchaser Required  Statutory  Approvals as soon as reasonably
possible,  to  avoid  the  entry  of,  or to  effect  the  dissolution  of,  any
injunction,   temporary  restraining  order  or  other  order  in  any  suit  or
proceeding,  which would otherwise have the effect of preventing or delaying the
Closing Date, and defending through litigation on the merits, including appeals,
any claim asserted in any court by any party.

          (c)  Exception.  Notwithstanding  anything to the  contrary in Section
6.2,  neither  party shall be  required  to take any  actions  that would have a
Company  Material Adverse Effect or a Purchaser  Material  Adverse Effect,  and,
further,  any  terms or  conditions  imposed  by the  FERC,  the  Federal  Trade
Commission or the Antitrust  Division of the United States Department of Justice
relating  to  market  power,  including  but  not  limited  to,  divestiture  of
generation or transmission improvements, shall not constitute a Company Material
Adverse Effect or a Purchaser Material Adverse Effect.

          (d) Responsibilities.  The Seller and the Purchaser agree that (i) the
Purchaser shall have primary responsibility for the preparation and filing

                                       27



of any  applications  with or  notifications to the FERC, the FTC and/or the DOJ
and the SEC under PUHCA and (ii) the Seller and the  Purchaser  shall have joint
responsibility  for the  preparation  and  filing  of any  applications  with or
notifications  to the ICC. Each party shall have the right to review and approve
in  advance  drafts  of all such  necessary  applications,  notices,  petitions,
filings and other documents made or prepared in connection with the transactions
contemplated  by  this  Agreement,  which  approval  shall  not be  unreasonably
withheld or delayed.

     Section 6.3 Consents.  The Seller and the Purchaser agree to use reasonable
best efforts to obtain the Seller Required  Consents and the Purchaser  Required
Consents,  respectively, and to cooperate with each other in connection with the
foregoing.

     Section 6.4 Directors' and Officers' Indemnification.

          (a)  Indemnification.  From and after the Closing Date,  the Purchaser
shall cause the Company,  to the fullest extent  permitted under applicable law,
to indemnify  and hold  harmless  (and  advance  funds in respect of each of the
foregoing) each present and former employee,  agent,  director or officer of the
Company and the Company  Subsidiaries (each,  together with such person's heirs,
executors  or  administrators,  an  "Indemnified  Party" and  collectively,  the
"Indemnified  Parties")  against  any  costs or  expenses  (including  advancing
attorneys'  fees and expenses in advance of the final  disposition of any claim,
suit,  proceeding  or  investigation  to each  Indemnified  Party to the fullest
extent permitted by law), judgments, fines, losses, claims, damages, liabilities
and amounts  paid in  settlement  in  connection  with any actual or  threatened
claim,  action,  suit,  proceeding or  investigation,  whether civil,  criminal,
administrative or investigative (an "Action"), arising out of, relating to or in
connection with any action or omission by such  Indemnified  Party in his or her
capacity as an employee, agent, director or officer occurring or alleged to have
occurred  whether before or after the Closing Date  (including acts or omissions
in  connection  with such  person's  service as an  officer,  director  or other
fiduciary in any entity if such service was at the request or for the benefit of
the  Company  or any of the  Company  Subsidiaries)  or  this  Agreement  or the
transactions contemplated hereby. In the event of any such Action, the Purchaser
shall cooperate with the Indemnified Party in the defense of any such Action.

          (b) Survival of Indemnification.  To the fullest extent not prohibited
by law,  from and after the  Closing  Date,  all rights to  indemnification  now
existing  in favor of the  Company  Indemnified  Parties  with  respect to their
activities as such prior to or on the Closing Date, as provided in the Company's
and each Company  Subsidiary's  respective  articles of incorporation,  by-laws,
other  organizational  documents or indemnification  agreements in effect on the
date of such activities or otherwise in effect on the date hereof, shall survive
the Closing and shall continue in full force and effect for a period of not less
than six years from the Closing Date,  provided  that, in the event any claim or
claims are  asserted  or made within such  six-year  period,  all such rights to
indemnification  in respect of any claim or claims  shall  continue  until final
disposition of such claim or claims.


                                       28



          (c)  Insurance.  For a period of six years after the Closing Date, the
Purchaser  shall or the Purchaser  shall cause the Company to maintain in effect
policies of directors'  and officers'  liability  insurance  equivalent to those
maintained  by the Seller on behalf of the Company prior to the Closing Date for
the benefit of those persons who are currently covered by such policies on terms
no less favorable than the terms of such current insurance  coverage;  provided,
however, that the Purchaser will not be required to expend in any year an amount
in excess of 200% of the annual aggregate  premiums currently paid by the Seller
or the Company, as the case may be, for such insurance;  provided, further, that
if the annual  premiums  of such  insurance  coverage  exceed such  amount,  the
Purchaser  shall  cause the  Company to obtain a policy  with the best  coverage
available, in the reasonable judgment of the board of directors of the Purchaser
for a cost not exceeding such amount.

          (d) Successors. In the event that, after the Closing Date, the Company
or  the  Purchaser  or  any  of  their  respective  successors  or  assigns  (i)
consolidates with or merges into any other Person or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or a substantial  portion of its properties and assets to any
Person or entity,  then and in either such case, proper provisions shall be made
so that the successors and assigns of the Company or the Purchaser,  as the case
may be, shall assume the obligations set forth in this Section 6.4.

          (e) Benefit. The provisions of this Section 6.4 are intended to be for
the benefit of, and shall be enforceable by, each Company Indemnified Party, his
or her heirs, executors or administrators and his or her other representatives.

     Section  6.5 Public  Announcements.  Except as may be required by law or by
obligations  pursuant to any  listing  agreement  with or rules of any  national
securities  exchange,  the Seller and the Purchaser shall use reasonable efforts
to consult  with each other  prior to issuing any press  releases  or  otherwise
making public  announcements with respect to this Agreement and the transactions
contemplated  hereby and the parties shall consult with each other regarding any
press releases initially announcing the execution of this Agreement.

     Section 6.6 Workforce Matters.

          (a) If any employee of the Company or any Company  Subsidiary  who was
an  employee  immediately  prior to the  Closing  (an  "Affected  Employee")  is
discharged by the Company or any Company  Subsidiary as of or after the Closing,
then the Purchaser shall be responsible for any and all severance costs for such
Affected  Employee,  including  payments owing under those agreements,  plans or
arrangements  listed in Section 3.8(a) of the Seller  Disclosure  Schedule.  The
Purchaser shall be responsible for providing any continuation  coverage required
under the  Consolidated  Omnibus Budget  Reconciliation  Act of 1985, as amended
("COBRA") in respect of Affected  Employees who experience or have experienced a
qualifying event (within the meaning of COBRA) prior to, on or after the Closing
Date including,  without  limitation,  all other employees of the Company or any
Company  Subsidiary  who experience  such a qualifying  event before the Closing

                                       29



Date but who do not provide notice of the qualifying event until on or after the
Closing Date. The Purchaser  shall be  responsible  and assume all liability for
all  notices  or  payments  due to  any  Affected  Employees  under  the  Worker
Adjustment  and  Retraining   Notification   Act  and  regulations   promulgated
thereunder  (the "WARN  Act") or to any  employee  of the Company or any Company
Subsidiary who becomes entitled to receive notice as required under the WARN Act
on account of the aggregation of "employment losses" in accordance with the WARN
Act, and all notices,  payments,  fines or assessments  due to any  Governmental
Authority,  pursuant to any  applicable  foreign,  federal,  state or local law,
common  law,  statute,  rule  or  regulation  with  respect  to the  employment,
discharge or layoff of employees by the Company or any Company  Subsidiary after
the Closing Date, including the WARN Act, and any comparable state or local law.

          (b)  Following the Closing,  the Purchaser  shall cause CILCO to honor
its collective  bargaining  agreement  with Local Union 51 of the  International
Brotherhood of Electrical  Workers ("IBEW Local 51") in effect immediately prior
to the Closing,  as well as the Letter  Agreement  dated as of February 11, 2001
between CILCO and IBEW Local 51.

        Section 6.7       Tax Matters.

          (a) Tax Returns.

               (i) The  Seller  shall file or cause to be filed when due all Tax
     Returns that are required to be filed by or with respect to the Company and
     each Company  Subsidiary  for taxable years or periods  ending on or before
     the Closing  Date.  The Seller shall  include the income of the Company and
     each  Company  Subsidiary   (including  any  deferred  intercompany  income
     triggered under Treasury  Regulation  Section 1.1502-13 or its predecessors
     and any excess loss  account  taken into income under  Treasury  Regulation
     Section 1.1502-19) on the AES consolidated U.S. federal Tax Returns for all
     periods ending on or before the Closing Date.

               (ii) The  Purchaser  shall file or cause to be filed when due all
     Tax Returns that are required to be filed by or with respect to the Company
     and each Company  Subsidiary  for taxable years or periods ending after the
     Closing Date.

               (iii)  Any Tax  Return  required  to be  filed  by the  Purchaser
     relating to any taxable  year or period that  includes  but does not end on
     the Closing Date (a "Straddle Period") shall be prepared in accordance with
     past practice (to the extent  permitted under applicable law) and submitted
     (with copies of any relevant schedules, work papers and other documentation
     then  available)  to the Seller  for the  Seller's  approval  not less than
     forty-five (45) days prior to the due date  (including  extensions) for the
     filing of such Tax Return.  The Seller's approval shall not be unreasonably
     withheld.

                                       30



               (iv) Upon the written  request of the Purchaser  setting forth in
     detail the  computation  of the amount  owed,  the Seller  shall pay to the
     Purchaser,  no  later  than  two (2)  days  prior  to the due  date for the
     applicable Tax Return, the Taxes for which the Seller is liable pursuant to
     Section  6.7(b) and that are payable with any Tax Return to be filed by the
     Purchaser with respect to any Straddle Period.

               (v) Within thirty (30) days after the Closing Date (and from time
     to time  thereafter if the Seller  reasonably  requests),  the Seller shall
     provide to the Purchaser a list of the specific Tax  information  materials
     required to enable  Seller to prepare and file all Tax Returns  required to
     be prepared and filed by Seller pursuant to Section 6.7(a)(i). Within sixty
     (60) days after  receiving  any such list,  the  Purchaser  shall cause the
     Company and each Company  Subsidiary to prepare and provide to the Seller a
     package  containing the Tax  information  materials  identified in any such
     list.  The  Purchaser  shall prepare such package in good faith in a manner
     substantially consistent with the Seller's past practice.

          (b) Liability for Taxes.

               (i) The Seller  shall be liable for all Taxes with respect to Tax
     Returns  described in Section  6.7(a)(i),  for all Taxes apportioned to the
     Seller under  Section  6.7(b)(iii),  and for 50% of the Taxes  described in
     Section  6.7(m).  Notwithstanding  the  foregoing,  the Seller shall not be
     liable  for Taxes  that are not  Income  Taxes  ("Non-Income  Taxes")  with
     respect  to  Tax  Returns  described  in  Section  6.7(a)(i)  and  for  all
     Non-Income Taxes apportioned to the Seller under Section 6.7(b)(iii) to the
     extent that Non-Income Taxes reduce Working Capital.

               (ii) The Purchaser  shall be liable for all Taxes with respect to
     Tax Returns described in Section  6.7(a)(ii),  for all Taxes apportioned to
     the Purchaser under Section 6.7(b)(iii),  for 50% of the Taxes described in
     Section 6.7(m) and for Non-Income Taxes to the extent that Non-Income Taxes
     reduce Working Capital.

               (iii) For purposes of this Section 6.7,  where it is necessary to
     apportion  between the Seller and the  Purchaser  the Tax  liability  of an
     entity  for  a  Straddle  Period  (which  is  not  treated  under  Treasury
     Regulation Section  1.1502-76(b) or similar provisions of state,  local, or
     other  law as  closing  on the  Closing  Date),  such  liability  shall  be
     apportioned  between  the period  deemed to end at the close of the Closing
     Date,  and the period deemed to begin at the beginning of the day following
     the Closing  Date on the basis of an interim  closing of the books,  except
     that Taxes (such as real property  Taxes) imposed on a periodic basis shall
     be allocated on a daily basis.

                                       31



               (iv) In determining the Seller's  liability for Taxes pursuant to
     this  Agreement,  the Seller shall be credited with the amount of estimated
     Taxes and any Taxes under the United States Federal Unemployment Tax Act or
     the United States Federal  Insurance  Contributions Act that are paid by or
     on behalf of the Company or any Company Subsidiary prior to the Closing. To
     the extent  that the  Seller's  liability  for Taxes for a taxable  year or
     period  is less  than the  amount of such  Taxes  previously  paid by or on
     behalf of the Company or any Company  Subsidiary  with  respect to all or a
     portion of such taxable year or period,  the Purchaser shall pay the Seller
     the  difference  within two (2) days of filing the Tax Return  relating  to
     such Taxes. To the extent that Non-Income  Taxes paid by the Company or any
     Company Subsidiary with respect to any pre-Closing period are less than the
     amount of such Non-Income Taxes that reduce Working Capital,  the Purchaser
     shall pay the Seller the difference  within two (2) days of filing each Tax
     Return relating to such Non-Income Taxes.

          (c) Refunds.

               (i) Any Tax refund  (including  any interest in respect  thereof)
     received by the Purchaser, the Company, or any Company Subsidiary,  and any
     amounts  credited  against  Taxes to which  the  Purchaser  or a  Purchaser
     Subsidiary  (including  the  Company,  or any Company  Subsidiary)  becomes
     entitled  (including  by way of any amended Tax Returns but  excluding  Tax
     Returns from a carryback  filing),  that relate to any taxable  period,  or
     portion thereof of the Company or a Company  Subsidiary ending on or before
     the Closing Date, shall be for the account of the Seller, and the Purchaser
     shall pay over to the  Seller  any such  refund  or the  amount of any such
     credit within fifteen (15) days after receipt of such refund or utilization
     of such credit. Any Tax refund from a carryback filing not prohibited under
     Section 6.7(e)(iii) shall be for the account of the Purchaser.

               (ii) The  Purchaser  shall pay the  Seller  interest  at the rate
     prescribed under Section  6621(a)(1) of the Code,  compounded daily, on any
     amount not paid when due under this  Section  6.7(c).  For purposes of this
     Section  6.7(c),  where it is  necessary  to  apportion  a refund or credit
     between the Purchaser and the Seller for a Straddle Period,  such refund or
     credit shall be  apportioned  between the period deemed to end at the close
     of the Closing Date and the period  deemed to begin at the beginning of the
     day  following  the Closing Date on the basis of an interim  closing of the
     books of the Company and any Company Subsidiary, except that Taxes (such as
     real property  Taxes)  imposed on a periodic  basis shall be allocated on a
     daily basis.

               (iii) The Purchaser shall cooperate,  and shall cause the Company
     and any Company  Subsidiary  to cooperate,  in  obtaining,  at the Seller's
     expense,

                                       32


any Tax refund (other than a refund based on a carryback  from a taxable year or
period beginning after the Closing Date) that the Seller reasonably  believes is
available based on substantial  authority,  including through filing appropriate
forms with the applicable Tax authority.

          (d) Certain Post-Closing Settlement Payments.

               (i) If the examination of any federal,  state, local or other Tax
     Return of the Seller for any taxable period ending on or before the Closing
     Date shall result (by  settlement  or  otherwise)  in any  adjustment  that
     permits the Purchaser,  the Company,  or any Company Subsidiary to increase
     deductions,  losses  or tax  credits  or  decrease  the  income,  gains  or
     recapture of tax credits which would  otherwise (but for such  adjustments)
     have been reported or taken into account  (including by way of any increase
     in basis) by the Purchaser,  the Company, or any Company Subsidiary for one
     or more  periods  beginning  and ending  within  ten (10)  years  after the
     Closing  Date,  the Seller shall notify the  Purchaser  and provide it with
     adequate  information  so that  the  Purchaser  can  reflect  on  its,  the
     Company's,   or  Company   Subsidiary's   Tax  Returns  such  increases  in
     deductions,  losses  or tax  credits  or  decreases  in  income,  gains  or
     recapture of tax credits.  The  Purchaser  shall pay to the Seller,  within
     thirty (30) days of the filing of the Tax  Returns for the taxable  year in
     which  the Tax  Benefit  was  realized,  the  amount of any  resulting  Tax
     Benefit.  "Tax  Benefit"  shall  mean the amount of any  refund,  credit or
     reduction  in  otherwise  required  Tax  payments,  including  any interest
     payable thereon, actually realized, provided, that, for these purposes, Tax
     items  shall  be  taken  into  account  in  accordance  with  the  ordering
     principles  of the Code or  other  applicable  law.  For  purposes  of this
     Section  6.7(d)(i),  estimated  Tax payments  shall not be  considered  Tax
     Returns and Tax Benefits shall be based on Tax Returns as filed.

               (ii) If the examination of any federal, state, local or other Tax
     Return of the  Purchaser,  the Company,  or any Company  Subsidiary for any
     taxable period ending after the Closing Date shall result (by settlement or
     otherwise)  in  any   adjustment   that  permits  the  Seller  to  increase
     deductions,  losses  or tax  credits  or  decrease  the  income,  gains  or
     recapture of tax credits which would  otherwise (but for such  adjustments)
     have been reported or taken into account  (including by way of any increase
     in basis) by the  Seller  for one or more  periods  ending on or before the
     Closing  Date,  the  Purchaser  shall notify the Seller and provide it with
     adequate information so that the Seller can reflect on its Tax Returns such
     increases  in  deductions,  losses or tax credits or  decreases  in income,
     gains or recapture of tax credits.  The Seller shall pay to the  Purchaser,
     within thirty (30) days of the receipt of such  information,  fifty percent
     (50%) of the amount of any resulting Tax Benefits.

          (e) Post-Closing Actions that Affect the Seller's Liability for Taxes.

                                       33



               (i) The Purchaser  shall not take, or cause or permit the Company
     or any Company Subsidiary (or any of their affiliates) to take, any action,
     with respect to the taxable year or period of the  Purchaser,  the Company,
     any Company  Subsidiary,  or affiliate,  as applicable,  which includes the
     Closing Date, which would be reasonably  likely to increase the Seller's or
     any of its affiliates'  liability for Taxes (including any liability of the
     Seller to indemnify  the Purchaser  for Taxes  pursuant to this  Agreement)
     including,  for  example,  any action that would be  reasonably  likely to,
     result in, or change the  character  of, any income or gain that the Seller
     or any Seller affiliate must report on any Tax Return.

               (ii) None of the  Purchaser  or any  affiliate  of the  Purchaser
     shall  (or  shall  cause  or  permit  the  Company  or any  of the  Company
     Subsidiaries to) amend,  refile or otherwise modify any Tax Return relating
     in whole or in part to the Company or any of the Company  Subsidiaries with
     respect to any taxable year or period  ending on or before the Closing Date
     (or with respect to any Straddle  Period) without the prior written consent
     of the Seller,  which consent may be withheld in the sole discretion of the
     Seller;  provided,  that the  Seller's  consent  shall not be required  for
     modifications that relate exclusively to the post-Closing Date portion of a
     Straddle  Period and that would not be  reasonably  likely to increase  the
     Seller's liability for Taxes under Section 6.7(i) of this Agreement.

               (iii) Except to the extent otherwise required by law, none of the
     Purchaser or any affiliate of the Purchaser shall (or shall cause or permit
     the Company or any of the Company  Subsidiaries to) carry back for federal,
     state,  local or foreign tax  purposes to any  taxable  period,  or portion
     thereof, of the Company or any of the Company Subsidiaries or the Seller or
     any affiliate of the Seller  ending on or before,  or which  includes,  the
     Closing Date any operating losses,  net operating  losses,  capital losses,
     tax credits or similar  items arising in,  resulting  from, or generated in
     connection  with a taxable year of the  Purchaser  or any  affiliate of the
     Purchaser, or portion thereof, ending after the Closing Date.

          (f) Tax  Payments.  The  Purchaser  agrees  that,  pursuant to any Tax
sharing,  Tax allocation,  or Tax indemnity agreements between the Seller or any
Seller  affiliate on the one hand, and the Company or any Company  Subsidiary on
the other  hand,  the  Company or any  Company  Subsidiary  may make tax sharing
payments  to the  Seller on any date or dates up to and  including  the  Closing
Date.  Any payment made  pursuant to this  Section  6.7(f) shall comply with the
terms of the agreement to which it relates (other than terms  requiring  payment
on a specified date or dates).  Payments to the Seller  pursuant to this Section
6.7(f)  shall  reduce the cash  component  of Working  Capital as of the Closing
Date.

          (g) Assistance and  Cooperation.  After the Closing Date,  each of the
Seller and the Purchaser shall, and shall cause their respective  affiliates to,
execute any forms  necessary to filing a Tax Return and provide  information  to

                                       34



the other party  regarding  the Company or any Company  Subsidiary in connection
with (i) the other  party  preparing  any Tax  Returns  that such other party is
responsible for preparing and filing, and (ii) the other party preparing for any
audits of, or disputes with any Tax authority regarding,  any Tax Returns of the
Company or any Company Subsidiary.  In connection therewith,  the Seller and the
Purchaser shall not dispose of any Tax work papers, books or records relating to
the Company or any Company  Subsidiary  during the six-year period following the
Closing Date, and  thereafter  shall give the other parties  reasonable  written
notice before disposing of such items.

          (h) Section 338 Elections.  Neither the Seller nor the Purchaser shall
make  or file  any  election  under  Section  338 of the  Code  (or any  similar
provision of the law of any state or other taxing  jurisdiction) with respect to
the  Company or any  Company  Subsidiary  in  connection  with the  transactions
contemplated  by this  Agreement.  For  purposes  of all Tax  Returns  and other
applicable  filings,  the  Purchaser  and the Seller shall each report the stock
purchase as a purchase and sale, respectively, of the Shares.

          (i) Indemnification by the Seller. Notwithstanding any other provision
of this Agreement other than Section 6.7(b)(iv),  the Seller shall indemnify the
Purchaser from and against and in respect of:

               (i) any liability for Taxes imposed on the Company or any Company
     Subsidiary  as members of the  "affiliated  group"  (within  the meaning of
     Section  1504(a) of the Code) of which the Seller  (or any  predecessor  or
     successor)  is the common  parent that  arises  under  Treasury  Regulation
     Section 1.1502-6(a) or any comparable provision of foreign,  state or local
     law;

               (ii) any  liability  for  Taxes  imposed  on the  Company  or any
     Company  Subsidiary  for any taxable  year or period that ends on or before
     the Closing Date and, with respect to any Straddle  Period,  the portion of
     such  Straddle  Period  deemed  to end on and  include  the  Closing  Date;
     provided,  that any  indemnification  for Non-Income Tax liabilities  under
     this Section  6.7(i)(ii) shall apply only to the extent such Non-Income Tax
     liabilities  exceed the amount by which  Non-Income  Taxes  reduce  Working
     Capital;

               (iii) any liability for Taxes for which the Seller is responsible
     under Section 6.7(m); and

               (iv) and for  payments  made to satisfy the  indemnity to MACTEC,
     Inc.  under the  agreement  described  in Section  3.7(a)(v)  of the Seller
     Disclosure  Schedule;  provided that any  indemnification  for such MACTEC,
     Inc.  payments  that are  accrued  as  Non-Income  Taxes  for  purposes  of
     determining  Working  Capital  shall  apply  only to the  extent  that such
     payments  exceed  the  amount  by which  Non-Income  Taxes  reduce  Working
     Capital;  provided,  further that any payments  received from MACTEC,  Inc.
     under the agreement described in Section 3.7(a)(v) of the Seller Disclosure
     Schedule shall be for the Seller's account.

                                       35



Any  indemnification  under this Section 6.7(i) shall give effect to any related
Tax Benefit and be net of any reserves and amounts recovered from third parties,
including amounts recovered through utility rate increases.  The indemnification
pursuant to this Section  6.7(i) shall be the sole and  exclusive  remedy of the
Purchaser  against  the  Seller  with  respect  to any  liability  for  Taxes in
connection with this Agreement.

          (j)  Indemnification  by  the  Purchaser.  Notwithstanding  any  other
provision of this  Agreement,  the Purchaser shall indemnify the Seller from and
against and in respect of:

               (i) any  liability for Taxes imposed on any of the Company or any
     Company  Subsidiary  for any taxable  year or period that begins  after the
     Closing Date and, with respect to any Straddle Period,  the portion of such
     Straddle Period beginning the day after the Closing Date; and

               (ii)  any   liability  for  Taxes  for  which  the  Purchaser  is
     responsible under Section 6.7(m).

Any  indemnification  under this Section 6.7(j) shall give effect to any related
Tax Benefit and be net of any reserves and amounts recovered from third parties,
including amounts recovered through utility rate increases.  The indemnification
pursuant to this Section  6.7(j) shall be the sole and  exclusive  remedy of the
Seller  against  the  Purchaser  with  respect  to any  liability  for  Taxes in
connection with this Agreement.

          (k) Contests.

               (i) Notice.  After the Closing Date, the Seller and the Purchaser
     each shall  notify the other party in writing  within  fifteen (15) days of
     the commencement of any Tax audit or administrative or judicial  proceeding
     affecting the Taxes of any of the Company or any Company  Subsidiary  that,
     if determined adversely to the taxpayer ( the "Tax Indemnitee") or fter the
     lapse of time would be grounds for  indemnification  under this Section 6.7
     by the other  party  (the "Tax  Indemnitor").  Such  notice  shall  contain
     factual  information  describing  any asserted Tax  liability in reasonable
     detail and shall include  copies of any notice or other  document  received
     from any Tax  authority in respect of any such asserted Tax  liability.  If
     either the Seller or the  Purchaser  fails to give the other  party  prompt
     notice of an asserted Tax liability as required under this Agreement,  then
     (A) if the Tax Indemnitor is precluded by the failure to give prompt notice
     from contesting the asserted Tax liability in any judicial forum, then such
     party shall not have any  obligation  to indemnify  the other party for any
     Losses  arising  out of  such  asserted  Tax  liability  and (B) if the Tax
     Indemnitor  is not so precluded  from  contesting,  if such failure to give
     prompt notice results in a detriment to the Tax Indemnitor, then any amount
     which the Tax  Indemnitor  is  otherwise  required to pay  pursuant to this
     Section 6.7 with respect to such  liability  shall be reduced by the amount
     of such detriment.

                                       36


               (ii)  Control  of  Contests  Involving   Pre-Closing  Periods  or
     Straddle  Periods.  In the case of an audit or  administrative  or judicial
     proceeding  involving  any  asserted  liability  for Taxes  relating to any
     taxable  years or  periods  ending on or  before  the  Closing  Date or any
     Straddle Period of the Company or any Company Subsidiary,  the Seller shall
     have the right,  at its  expense,  to control  the conduct of such audit or
     proceeding; provided, however, that (i) the Seller shall keep the Purchaser
     reasonably  informed with respect to the status of such audit or proceeding
     and provide the Purchaser  with copies of all written  correspondence  with
     respect to such  audit or  proceeding  in a timely  manner and (ii) if such
     audit or proceeding  would be  reasonably  expected to result in a material
     increase in Tax  liability  of the Company or any  Company  Subsidiary  for
     which the  Purchaser  would be  liable  under  this  Section  6.7,  (A) the
     Purchaser may participate in the conduct of such audit or proceeding at its
     own  expense  and (B) the  Seller  shall  not  settle  any  such  audit  or
     proceeding  without the consent of  Purchaser,  which  consent shall not be
     unreasonably withheld.

                    (iii) Control of Contests Involving Post-Closing Periods. In
     the case of an audit or administrative or judicial proceeding involving any
     asserted  liability  for Taxes  relating  to any  taxable  years or periods
     beginning  after the Closing Date, the Purchaser  shall have the right,  at
     its expense, to control the conduct of such audit or proceeding;  provided,
     however,  that if such audit or proceeding would be reasonably  expected to
     result in a  material  increase  in Tax  liability  of the  Company  or any
     Company  Subsidiary for which the Seller would be liable under this Section
     6.7,  (A) the  Seller  may  participate  in the  conduct  of such  audit or
     proceeding  at its own expense and (B) the  Purchaser  shall not settle any
     such audit or proceeding  without the consent of the Seller,  which consent
     shall not be unreasonably withheld.

          (l) Termination Tax Sharing Agreements. On or before the Closing Date,
the  Seller  shall  cause all Tax  sharing,  Tax  allocation,  or Tax  indemnity
agreements  between the Seller or any Seller  affiliate on the one hand, and the
Company or any Company  Subsidiary on the other hand, to be terminated as of the
Closing Date (or an earlier date) and the agreements will have no further effect
for any taxable year (current, future, or past).

          (m)  Transfer  Taxes.  Notwithstanding  any  other  provision  of this
Agreement to the  contrary,  the  Purchaser and the Seller shall each pay 50% of
(i) all transfer  (including real property  transfer and  documentary  transfer)
Taxes  and  fees  imposed  with  respect  to the  sale and  transfer  of  Shares
contemplated  hereby and (ii) all sales,  use, gains  (including state and local
transfer gains), excise and other transfer or similar Taxes imposed with respect
to the sale and transfer of Shares contemplated hereby. The Seller shall execute
and deliver to the Purchaser at the Closing any  certificates or other documents
as the Purchaser may  reasonably  request to perfect any exemption from any such
transfer, documentary, sales, use, gains, excise or other Taxes, or to otherwise
comply  with any  applicable  reporting  requirements  with  respect to any such
Taxes.

                                       37



          (n)  Retention of Tax  Attributes.  The Seller may elect to retain the
Tax attributes of the Company or any Company Subsidiary, including net operating
losses and capital loss  carryovers of such  entities,  to the extent  permitted
under the Code,  Treasury  Regulations,  other  pronouncements  of the  Internal
Revenue Service, or other applicable law. At the Seller's request, the Purchaser
will,  and will cause any  Purchaser  Subsidiary,  the Company,  and any Company
Subsidiary  to,  take any actions  necessary  to effect  such  elections  of the
Seller.

          (o) Treatment of Purchase Price.  The Seller,  the Purchaser and their
respective  Subsidiaries  shall treat the Final  Purchase  Price as the purchase
price  for the  sale,  conveyance,  assignment,  transfer  and  delivery  to the
Purchaser of the Shares in preparing and filing their Tax Returns and shall take
no position inconsistent therewith in any proceeding before any taxing authority
or otherwise unless otherwise required pursuant to a final resolution of any Tax
for a taxable year that, under applicable law, is not subject to further appeal,
review or modification through proceedings or otherwise.

     Section 6.8 Financial Information.

          (a) After the Closing,  upon reasonable  written notice, the Purchaser
and the Seller  shall  furnish or cause to be  furnished to each other and their
respective  accountants,  counsel  and  other  representatives,   during  normal
business hours, such information (including records pertinent to the Company) as
is reasonably necessary for financial reporting and accounting matters.

          (b) The  Purchaser  shall  retain all of the books and  records of the
Company  and the  Company  Subsidiaries  after the  Closing  Date for so long as
required by law. After the end of such period, before disposing of such books or
records,  the Purchaser  shall give notice to such effect to the Seller and give
the Seller an  opportunity to remove and retain all or any part of such books or
records as the Seller may select.

     Section 6.9  Termination  of  Affiliate  Contracts.  Except as set forth on
Section 6.9 of the Seller Disclosure Schedule and except as agreed to in writing
by the  Seller  and  the  Purchaser,  all  Affiliate  Contracts,  including  any
agreements  or  understandings  (written or oral) with  respect  thereto,  shall
terminate  simultaneously  with  the  Closing  without  any  further  action  or
liability on the part of the parties thereto.  Notwithstanding the foregoing, in
the absence of a written  agreement,  the provision of any services  (similar to
those  contemplated  by the preceding  sentence) by the Seller to the Company or
any  Company  Subsidiary  from and  after the  Closing,  which  services  may be
provided by the Seller in its sole discretion, shall be for the convenience, and
at the expense, of the Purchaser, upon mutually agreed terms.

     Section 6.10 Local Presence; Charitable Giving.

          (a) After the Closing, the Purchaser shall cause the Company and CILCO
to maintain for a period of at least three (3) years  following  the Closing (i)
CILCO's  corporate  headquarters in Peoria,  Illinois or other significant local

                                       38


presence,  and (ii) the name of CILCO; provided that CILCO may be referred to as
"AmerenCILCO" or as an "Ameren Company".

          (b) After the Closing, the Purchaser shall cause the Company and CILCO
to maintain,  for a period of at least three (3) years following the Closing,  a
commitment to local social responsibility,  community involvement and charitable
giving at its current levels in accordance with its current practices.

     Section 6.11 Seller's Name. The Purchaser shall not acquire,  nor shall the
Company  and its  Subsidiaries  retain,  any  rights  to the name  "AES" (or any
derivation  thereof) or any trademark,  trade name or symbol related thereto. As
soon as reasonably  practicable  after the Closing but not later than sixty (60)
days after the  Closing  Date,  the  Purchaser  shall  cause the Company and its
Subsidiaries  to remove  the name  "AES"  (or any  derivation  thereof)  and all
trademarks,  trade names or symbols  related  thereto  from the  properties  and
assets of the Company and its Subsidiaries.

     Section 6.12 Cooperation. The Seller shall, and shall cause the Company and
each  Company  Subsidiary  to,  cooperate  with  the  Purchaser  in  integration
opportunities and in planning for the integration of the Company and the Company
Subsidiaries   into  the  Purchaser's   corporate  family  and  systems  and  in
preparation for Closing and the period thereafter.

     Section 6.13 Further Assurances. Each party shall, and shall cause its
Subsidiaries to, execute such further documents or instruments and take such
further actions as may reasonably be requested by the other party in order to
consummate the transaction in accordance with the terms hereof.

                                  ARTICLE VII
                                   CONDITIONS

     Section 7.1  Conditions  to Each Party's  Obligation to Effect the Closing.
The respective  obligations of each party to effect the Closing shall be subject
to the satisfaction on or prior to the Closing Date of the following conditions,
except,  to the extent  permitted by applicable law, that such conditions may be
waived in writing  pursuant  to Section  9.3 by the joint  action of the parties
hereto:

          (a) No Injunction.  No temporary  restraining  order or preliminary or
permanent  injunction  or other order by any  federal or state court  preventing
consummation of the transactions  contemplated hereby shall have been issued and
be continuing in effect, and the transactions contemplated hereby shall not have
been  prohibited  under  any  applicable  federal  or  state  law or  regulation
(collectively,  "Restraints"); provided, however, that each of the parties shall
have used all reasonable efforts to prevent the entry of any such Restraints and
to appeal as promptly as possible any such Restraints that may be entered.

          (b) Statutory  Approvals.  The Seller Required Statutory Approvals and
the Purchaser Required Statutory  Approvals shall have been obtained at or prior

                                       39


to the Closing Date by a Final Order.  A "Final  Order" shall mean action by the
relevant regulatory authority which has not been reversed, stayed, enjoined, set
aside,  annulled  or  suspended,  with  respect  to  which  any  waiting  period
prescribed  by  law  before  the  transactions   contemplated   thereby  may  be
consummated  has expired  (but without the  requirement  for  expiration  of any
applicable  rehearing or appeal  period),  and as to which all conditions to the
consummation of such  transactions  prescribed by law,  regulation or order have
been satisfied.

          (c) HSR Act. All  applicable  waiting  periods under the HSR Act shall
have expired or been terminated.

     Section  7.2  Conditions  to  Obligation  of the  Purchaser  to Effect  the
Closing.  The obligation of the Purchaser to effect the Closing shall be further
subject to the  satisfaction,  on or prior to the Closing Date, of the following
conditions,  except as may be waived by the  Purchaser  in writing  pursuant  to
Section 9.3:

          (a)  Performance of  Obligations  of the Seller.  The Seller will have
performed in all material respects its agreements and covenants  contained in or
contemplated  by this  Agreement  which are required to be performed by it at or
prior to the Closing.

          (b) Representations and Warranties. The representations and warranties
of the Seller set forth in this  Agreement  shall be true and correct (i) on and
as of the date  hereof  and  (ii) on and as of the  Closing  Date  with the same
effect as though such  representations and warranties had been made on and as of
the Closing Date (except for representations and warranties that expressly speak
only as of a specific  date or time  which  need only be true and  correct as of
such date or time)  except in each of cases  (i) and (ii) for such  failures  of
representations  or warranties to be true and correct  (without giving effect to
any materiality  qualification or standard contained in any such representations
and warranties) which would not result in a Company Material Adverse Effect.

          (c)  Closing  Certificates.   The  Purchaser  shall  have  received  a
certificate signed by the Seller, dated the Closing Date, to the effect that the
conditions  set forth in Section  7.2(a) and Section  7.2(b) have been satisfied
and to the further effect that, as of the respective dates of reports filed with
the SEC by the Company and Company  Subsidiaries  under the  Securities  Act and
Exchange Act since January 1, 2001, and as of the Closing Date, such reports did
not contain any untrue  statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements  therein,
in light of the  circumstances  under which they were made,  not  misleading and
that as of the Closing Date there has not been any development or combination of
developments  affecting  the  Company or any  Company  Subsidiary,  of which the
Seller or the Company has knowledge,  that would have a Company Material Adverse
Effect.

          (d) Seller  Required  Consents.  The  Seller  Required  Consents,  the
failure of which to obtain would have a Company Material  Adverse Effect,  shall
have been obtained.

                                       40


          (e)  Regulatory  Approvals.  The  Final  Orders  of  any  Governmental
Authority having authority over the transactions  contemplated by this Agreement
shall have been received and shall not impose terms or conditions  (which are in
addition to terms and conditions due to existing  laws,  rules or  regulations),
which  would have a Company  Material  Adverse  Effect or a  Purchaser  Material
Adverse Effect,  provided,  however, that any terms or conditions imposed by the
FERC,  the Federal  Trade  Commission  or the  Antitrust  Division of the United
States Department of Justice relating to market power, including but not limited
to, divestiture of generation or transmission improvements,  will not constitute
a Company Material Adverse Effect or a Purchaser Material Adverse Effect.

     Section 7.3  Conditions  to Obligation of the Seller to Effect the Closing.
The  obligation of the Seller to effect the Closing shall be further  subject to
the satisfaction,  on or prior to the Closing Date, of the following conditions,
except as may be waived by the Seller in writing pursuant to Section 9.3:

          (a) Performance of Obligations of the Purchaser. The Purchaser (and/or
its appropriate  Subsidiaries)  will have performed in all material respects its
agreements and covenants  contained in or  contemplated  by this Agreement which
are required to be performed by it at or prior to the Closing Date.

          (b) Representations and Warranties. The representations and warranties
of the  Purchaser set forth in this  Agreement  shall be true and correct (i) on
and as of the date hereof and (ii) on and as of the  Closing  Date with the same
effect as though such  representations and warranties had been made on and as of
the Closing Date (except for representations and warranties that expressly speak
only as of a specific  date or time  which  need only be true and  correct as of
such date or time)  except in each of cases  (i) and (ii) for such  failures  of
representations  or warranties to be true and correct  (without giving effect to
any materiality  qualification or standard contained in any such representations
and warranties)  which would not prevent,  materially delay or materially impair
the  Purchaser's  ability to consummate  the  transaction  contemplated  by this
Agreement.

          (c) Closing Certificates. The Seller shall have received a certificate
signed  by the  Purchaser,  dated  the  Closing  Date,  to the  effect  that the
conditions  set forth in Section  7.3(a) and Section  7.3(b) have been satisfied
and to the further effect that, as of the respective dates of reports filed with
the SEC by the Purchaser under the Securities Act and Exchange Act since January
1, 2001,  and as of the Closing  Date,  such  reports did not contain any untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein or necessary  to make the  statements  therein,  in light of the
circumstances under which they were made, not misleading.

          (d) Purchaser Required Consents.  The Purchaser Required Consents, the
failure of which to obtain would prevent,  materially delay or materially impair
the  Purchaser's  ability to consummate the  transactions  contemplated  by this
Agreement, shall have been obtained.

                                       41


                                  ARTICLE VIII
                                   TERMINATION

     Section 8.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date (the "Termination Date"):

          (a) by mutual written consent of the Seller and the Purchaser;

          (b) by the  Purchaser  or the  Seller,  if any state or  federal  law,
order,  rule or  regulation  is  adopted  or issued,  which has the  effect,  as
supported  by the  written  opinion  of  outside  counsel  for  such  party,  of
prohibiting  the  Closing,  or by any party  hereto  if any  court of  competent
jurisdiction  in the  United  States or any state  shall  have  issued an order,
judgment or decree permanently  restraining,  enjoining or otherwise prohibiting
the  Closing,  and such order,  judgment or decree  shall have become  final and
nonappealable;

          (c) by the  Purchaser  or the Seller,  by written  notice to the other
party,  if the Closing Date shall not have  occurred on or before March 27, 2003
(the "Initial Termination Date"); provided, however, that the right to terminate
the  Agreement  under this  Section  8.1(c)  shall not be available to any party
whose  failure  to  fulfill  any  obligation  under  this  Agreement  shall have
proximately contributed to the failure of the Closing Date to occur on or before
such date; and provided,  further,  that if on the Initial  Termination Date the
conditions  to the Closing set forth in Sections  7.1(b),  7.1(c)  and/or 7.2(e)
shall not have been  fulfilled but all other  conditions to the Closing shall be
fulfilled or shall be capable of being fulfilled,  then the Initial  Termination
Date shall be extended for a twelve-month period;

          (d) by the Purchaser,  by written notice to the Seller, if there shall
have been a material  breach of any  representation  or warranty,  or a material
breach of any  covenant or  agreement of the Seller  hereunder,  which  breaches
would result in a Company  Material  Adverse  Effect,  and such breach shall not
have been remedied within thirty (30) days after receipt by the Seller of notice
in  writing  from the  Purchaser,  specifying  the  nature  of such  breach  and
requesting that it be remedied or the Purchaser shall not have received adequate
assurance  of a cure of such  breach  within  such thirty (30) day period or the
Seller  shall not have made a capital  contribution  to the Company in an amount
equal to the expected damages from such breach;

          (e) by the Seller, by written notice to the Purchaser,  if there shall
have been a material  breach of any  representation  or warranty,  or a material
breach of any covenant or agreement of the Purchaser  hereunder,  which breaches
would prevent,  materially delay or materially impair the Purchaser's ability to
consummate the  transactions  contemplated  by this  Agreement,  and such breach
shall not have been  remedied  within  thirty  (30) days  after  receipt  by the
Purchaser  of notice in writing from the Seller,  specifying  the nature of such
breach and requesting  that it be remedied or the Seller shall not have received
adequate  assurance of a cure of such breach within such thirty (30) day period;
or

          (f) by the Purchaser,  by written notice to the Seller,  to the extent
the  Purchaser  is not in  breach of this  Agreement,  if the  condition  to the
Purchaser's  obligation to effect the Closing contained in Section 7.2(e) cannot
be met in spite of the Purchaser's use of its best efforts to obtain such Seller
Required  Regulatory  Approvals and  Purchaser  Required  Regulatory  Approvals,
including seeking to exhaust any rehearing or refiling opportunities relating to
such approvals.

                                       42



     Section  8.2 Effect of  Termination.  In the event of  termination  of this
Agreement by either the Seller or the Purchaser  pursuant to Section 8.1,  there
shall be no liability on the part of either the Seller or the Purchaser or their
respective officers or directors hereunder, except (a) that nothing herein shall
relieve any party from liability for any breach of any representation, warranty,
covenant or agreement of such party  contained  in this  Agreement  and (b) that
Sections 8.2, 9.2, 9.4, 9.6, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13, and the agreement
contained in the last sentence of Section 6.1 shall survive the termination.

                                   ARTICLE IX
                               GENERAL PROVISIONS

     Section  9.1  Survival of  Obligations.  All  representations,  warranties,
covenants, obligations and agreements of the parties contained in this Agreement
or in any instrument, certificate, opinion or other writing provided for herein,
shall not survive the Closing;  provided,  however,  that the representation and
warranty of the Seller  contained  in Section  3.2(b),  the  representation  and
warranty of the Purchaser  contained in Section  4.6(c) and the covenants of the
Seller and the  Purchaser  contained in Sections  6.4,  6.5, 6.6, 6.7, 6.8, 6.9,
6.10,  6.11 and the second sentence of Section 6.1 shall survive the Closing and
provided further,  that the prohibition on solicitation for employment contained
in  Section  5.1(r)  shall  continue  in full  force  and  effect  for 12 months
following the Closing Date.

     Section 9.2  Amendment  and  Modification.  This  Agreement may be amended,
modified  and  supplemented  in any  and all  respects,  but  only by a  written
instrument  signed by each of the parties  hereto  expressly  stating  that such
instrument is intended to amend, modify or supplement this Agreement.

     Section 9.3  Extension;  Waiver.  At any time prior to the Closing  Date, a
party  hereto  may  (a)  extend  the  time  for  the  performance  of any of the
obligations or other acts of the other party hereto,  (b) waive any inaccuracies
in the  representations  and  warranties  contained  herein  or in any  document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions  contained  herein,  to the extent  permitted by applicable  law. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an  instrument  in  writing  signed on behalf of such
party.  The failure of any party to this  Agreement  to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.

     Section 9.4 Expenses.  All costs and expenses  incurred in connection  with
this  Agreement and the  transactions  contemplated  hereby shall be paid by the
party incurring such expenses except that the fee payable in connection with the
filing  required by the HSR Act shall be shared  one-half by Seller and one-half
by Purchaser. Notwithstanding the foregoing, in any action or proceeding brought

                                       43



to enforce any provisions of this  Agreement,  or where any provision  hereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable  attorneys'  fees and  disbursements  in  addition  to its  costs and
expenses and any other available remedy.

     Section 9.5 Notices. All notices and other  communications  hereunder shall
be in writing and shall be deemed given (a) when delivered personally,  (b) when
sent by reputable  overnight  courier service,  or (c) when telecopied (which is
confirmed by copy sent within one business day by a reputable  overnight courier
service) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):

               (i)  If to the Seller, to

                    The AES Corporation
                    1001 N. 19th Street
                    Arlington, VA  22209
                    Attn:  General Counsel
                    Telecopy:       (703) 528-4510
                    Telephone:      (703) 522-1315

                    with a copy to

                    Skadden, Arps, Slate, Meagher & Flom LLP
                    1440 New York Avenue, N.W.
                    Washington, D.C.  20005
                    Attn:  Pankaj K. Sinha, Esq.
                    Telecopy:       (202) 393-5760
                    Telephone:      (202) 371-7000

                    and

               (ii) if to the Purchaser, to

                    Ameren Corporation
                    One Ameren Plaza
                    1901 Chouteau Avenue
                    St. Louis, MO  63103
                    Attn:  Steven R. Sullivan, Esq.
                    Vice President/General Counsel and Secretary
                    Telecopy:       (314) 554-4014
                    Telephone:      (314) 554-2098

                    with a copy to:


                                       44


                    Jones, Day, Reavis & Pogue
                    77 West Wacker Drive
                    Chicago, Illinois  60601-1692
                    Attn:  William J. Harmon, Esq.
                    Telecopy:       (312) 782-8585
                    Telephone:      (312) 782-3939

     Section 9.6 Entire Agreement; No Third Party Beneficiaries. This Agreement,
the  Confidentiality  Agreement,  the Side  Agreement  Relating  To  CILCO/ENRON
Contract of even date herewith among the Seller,  the Company and the Purchaser,
and the  Membership  Interest  Purchase  Agreement  between  the  Seller and the
Purchaser  of even  date  herewith  (a)  constitute  the  entire  agreement  and
supersede all prior agreements and understandings,  both written and oral, among
the parties  with respect to the subject  matter  hereof and thereof and (b) are
not  intended to confer,  and shall not confer,  upon any Person  other than the
parties  hereto and  thereto  and  Company  Indemnified  Parties as set forth in
Section 6.4 any remedies, claims of liability or reimbursement, causes of action
or any other rights whatsoever.

     Section 9.7  Severability.  Any term or provision of this Agreement that is
held by a court of competent jurisdiction or other authority to be invalid, void
or  unenforceable  in any  situation  in any  jurisdiction  shall not affect the
validity or  enforceability  of the remaining terms and provisions hereof or the
validity or  enforceability  of the  offending  term or  provision  in any other
situation  or in any other  jurisdiction.  If the final  judgment  of a court of
competent  jurisdiction or other  authority  declares that any term or provision
hereof is  invalid,  void or  unenforceable,  the  parties  agree that the court
making such  determination  shall have the power to reduce the scope,  duration,
area or  applicability  of the term or provision,  to delete  specific  words or
phrases, or to replace any invalid, void or unenforceable term or provision with
a term or  provision  that is valid and  enforceable  and that comes  closest to
expressing the intention of the invalid or unenforceable term or provision.

     Section  9.8  Governing  Law.  This  Agreement  shall  be  governed  by and
construed in accordance  with the laws of the State of Delaware  without  giving
effect to the principles of conflicts of law thereof.

     Section 9.9 Venue. Each of the parties hereto (a) consents to submit itself
to the  personal  jurisdiction  of any  federal  court  located  in the State of
Delaware or any Delaware state court in the event any dispute arises out of this
Agreement,  (b) agrees that it shall not attempt to deny or defeat such personal
jurisdiction  by motion or other  request  for leave from any such court and (c)
agrees  that it shall not bring any action  relating  to this  Agreement  in any
court other than a federal or state court sitting in the State of Delaware.

     Section 9.10 Waiver of Jury Trial and Certain  Damages.  Each party to this
Agreement  waives,  to the fullest extent  permitted by applicable  law, (a) any
right  it may  have  to a  trial  by  jury in  respect  of any  action,  suit or
proceeding arising out of or relating to this Agreement and (b) any right it may

                                       45


have to receive  damages  from any other party based on any theory of  liability
for any special,  indirect,  consequential  (including lost profits) or punitive
damages.

     Section  9.11  Specific   Performance.   The  parties   hereto  agree  that
irreparable  damage  would  occur in the  event  any of the  provisions  of this
Agreement were not to be performed in accordance  with the terms hereof and that
the parties  shall be entitled to specific  performance  of the terms  hereof in
addition to any other remedies at law or in equity.

     Section  9.12  Assignment.  Neither this  Agreement  nor any of the rights,
interests  or  obligations  hereunder  shall be  assigned  by any  party  hereto
(whether by operation of law or otherwise)  without the prior written consent of
the other party; provided, however, that the Seller may transfer the Shares to a
wholly  owned  Subsidiary  of the  Seller as long as such  Subsidiary  agrees in
writing  to be  bound by the  applicable  terms  of this  Agreement  and no such
assignment shall relieve the Seller from its obligations hereunder.

     Section 9.13 Interpretation.  When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement,  respectively,
unless otherwise indicated. The table of contents and headings contained in this
Agreement  are for  reference  purposes only and shall not affect in any way the
meaning or  interpretation  of this  Agreement.  Whenever  the words  "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without  limitation." Any item or other matter referenced
or disclosed in one section of the Seller  Disclosure  Schedule or the Purchaser
Disclosure Schedule, as the case may be, shall be deemed to have been referenced
or disclosed in all sections of such Disclosure Schedule where such reference or
disclosure  is  required.  In the event an  ambiguity  or  question of intent or
interpretation  arises,  this Agreement shall be construed as if drafted jointly
by the parties  and no  presumption  or burden of proof shall arise  favoring or
disfavoring  any party by virtue of the  authorship  of any  provisions  of this
Agreement.

     Section  9.14  Counterparts;  Effect.  This  Agreement  may be executed and
delivered  (including via facsimile) in one or more counterparts,  each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement.

                                       46




     IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be signed by their  respective  officers  thereunto duly authorized as of the
date first written above.


                                        THE AES CORPORATION



                                        By: /s/Lenny M. Lee
                                           ----------------------
                                        Name:  Lenny M. Lee
                                        Title: Vice President


                                        AMEREN CORPORATION



                                        By: /s/Steven R. Sullivan
                                           -----------------------
                                        Name:  Steven R. Sullivan
                                        Title: Vice President & General Counsel




                                       47




                                                                EXHIBIT 2.2






                     MEMBERSHIP INTEREST PURCHASE AGREEMENT


                                 by and between


                              THE AES CORPORATION,


                                       and


                               AMEREN CORPORATION


                           Dated as of April 28, 2002




                                TABLE OF CONTENTS


ARTICLE I PURCHASE AND SALE OF UNITS..........................................1
         Section 1.1 Sale and Transfer of Units...............................1
         Section 1.2 The Purchase Price.......................................1

ARTICLE II THE CLOSING........................................................4
         Section 2.1 Closing..................................................4
         Section 2.2 Deliveries by the Seller.................................4
         Section 2.3 Deliveries by the Purchaser..............................5

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER......................5
         Section 3.1 Organization and Qualification...........................5
         Section 3.2 Subsidiaries; Capitalization.............................6
         Section 3.3 Authority; Non-Contravention; Statutory
                     Approvals; Compliance....................................6
         Section 3.4 Financial Statements.....................................8
         Section 3.5 Absence of Certain Changes or Events; Absence
                     of Undisclosed Liabilities...............................8
         Section 3.6 Litigation...............................................9
         Section 3.7 Tax Matters..............................................9
         Section 3.8 Employee Benefits; ERISA................................10
         Section 3.9 Labor and Employee Relations............................12
         Section 3.10 Environmental Protection...............................12
         Section 3.11 Regulation as an EWG...................................13
         Section 3.12 Insurance..............................................13
         Section 3.13 Real Property..........................................14
         Section 3.14 Affiliate Contracts....................................14
         Section 3.15 Brokers or Finders.....................................14
         Section 3.16 Contracts..............................................14
         Section 3.17 Regulatory Proceedings.................................15
         Section 3.18 Limitation on Representations and Warranties...........15

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...................15
         Section 4.1 Organization and Qualification..........................15
         Section 4.2 Authority; Non-Contravention; Statutory Approvals;
                     Compliance..............................................16
         Section 4.3 Purchaser SEC Reports; Financial Statements.............17
         Section 4.4 Litigation..............................................18
         Section 4.5 Investigation by the Purchaser; the Seller's Liability..18
         Section 4.6 Acquisition of Units for Investment; Ability to
                     Evaluate and Bear Risk..................................19
         Section 4.7 Financing...............................................19
         Section 4.8 Brokers or Finders......................................19

ARTICLE V CONDUCT OF BUSINESS PENDING THE CLOSING............................19
         Section 5.1 Covenants of the Seller.................................19

                                       i


         Section 5.2 No Solicitation and Confidentiality.....................22

ARTICLE VI ADDITIONAL AGREEMENTS.............................................22
         Section 6.1 Access to Company Information...........................22
         Section 6.2 Regulatory Matters......................................23
         Section 6.3 Consents................................................24
         Section 6.4 Managers' and Officers' Indemnification.................24
         Section 6.5 Public Announcements....................................25
         Section 6.6 Workforce Matters.......................................26
         Section 6.7 Tax Matters.............................................26
         Section 6.8 Financial Information...................................34
         Section 6.9 Termination of Affiliate Contracts......................34
         Section 6.10 Seller's Name..........................................34
         Section 6.11 Further Assurances.....................................34

ARTICLE VII CONDITIONS.......................................................35
         Section 7.1 Conditions to Each Party's Obligation to Effect
                     the Closing.............................................35
         Section 7.2 Conditions to Obligation of the Purchaser to Effect
                     the Closing.............................................35
         Section 7.3 Conditions to Obligation of the Seller to Effect
                     the Closing.............................................36

ARTICLE VIII TERMINATION.....................................................37
         Section 8.1 Termination.............................................37
         Section 8.2 Effect of Termination...................................38

ARTICLE IX GENERAL PROVISIONS................................................38
         Section 9.1 Survival of Obligations.................................38
         Section 9.2 Amendment and Modification..............................39
         Section 9.3 Extension; Waiver.......................................39
         Section 9.4 Expenses................................................39
         Section 9.5 Notices.................................................39
         Section 9.6 Entire Agreement; No Third Party Beneficiaries..........40
         Section 9.7 Severability............................................41
         Section 9.8 Governing Law...........................................41
         Section 9.9 Venue...................................................41
         Section 9.10 Waiver of Jury Trial and Certain Damages...............41
         Section 9.11 Specific Performance...................................41
         Section 9.12 Assignment.............................................41
         Section 9.13 Interpretation.........................................42
         Section 9.14 Counterparts; Effect...................................42

                                       ii




                             INDEX OF DEFINED TERMS

Term                                                                       Page
----                                                                       ----

Action.......................................................................26
ADSP.........................................................................32
Affected Employee............................................................27
Affiliate Contracts..........................................................14
Agreement.....................................................................1
AGUB.........................................................................32
Allocation...................................................................32
Assumed Obligations...........................................................2
Audit........................................................................10
Available Amount..............................................................2
Base Working Capital..........................................................2
Closing.......................................................................4
Closing Date..................................................................4
COBRA........................................................................27
Code..........................................................................4
Collateral Account Agreement..................................................2
Company.......................................................................1
Company Financial Statements..................................................8
Company Material Adverse Effect...............................................5
Company Plan Schedule........................................................10
Company Plans................................................................10
Company Properties...........................................................14
Company Subsidiary............................................................6
Confidentiality Agreement....................................................24
DOJ..........................................................................24
Encumbrances..................................................................6
Environmental Laws...........................................................13
ERISA........................................................................10
ERISA Affiliate..............................................................10
Estimated Purchase Price......................................................3
Exchange Act..................................................................7
FERC..........................................................................7
Final Order..................................................................37
Final Purchase Price..........................................................3
FTC..........................................................................24
GAAP..........................................................................8
Governmental Authority........................................................7
Hazardous Substances.........................................................13
HSR Act......................................................................24
ICC...........................................................................7
Income Taxes..................................................................2

                                      iii


Indemnified Parties..........................................................25
Indemnified Party............................................................25
Initial Termination Date.....................................................39
Material Contracts...........................................................15
Medina........................................................................1
Membership Interest...........................................................1
Non-Income Taxes.............................................................28
Objection Letter..............................................................3
Operations....................................................................1
PBGC.........................................................................11
Person.......................................................................13
Proposed Acquisition Transaction.............................................23
Proposed Final Purchase Price Statement.......................................3
PUHCA.........................................................................6
Purchase Price................................................................2
Purchaser.....................................................................1
Purchaser Disclosure Schedule................................................16
Purchaser Material Adverse Effect............................................16
Purchaser Required Consents..................................................17
Purchaser Required Statutory Approvals.......................................17
Purchaser SEC Reports........................................................16
Purchaser Subsidiary.........................................................16
Representatives..............................................................23
Restraints...................................................................37
Restricted Amount.............................................................2
Section 338(h)(10) Election..................................................32
Seller........................................................................1
Seller Disclosure Schedule....................................................5
Seller Required Consents......................................................7
Seller Required Statutory Approvals...........................................7
Straddle Period..............................................................28
Subsidiary....................................................................6
Subsidiary Schedule...........................................................6
Tax..........................................................................10
Tax Benefit..................................................................30
Tax Indemnitee...............................................................34
Tax Indemnitor...............................................................34
Tax Return...................................................................10
Termination Date.............................................................39
Title IV Company Plan........................................................11
Transaction Price.............................................................2
Units.........................................................................1
Violation.....................................................................7

                                       iv


WARN Act.....................................................................27
Working Capital...............................................................2





                     MEMBERSHIP INTEREST PURCHASE AGREEMENT

     THIS MEMBERSHIP  INTEREST  PURCHASE  AGREEMENT,  dated as of April 28, 2002
(this  "Agreement"),  is entered  into by and  between  The AES  Corporation,  a
Delaware  corporation  (the  "Seller"),  and  Ameren  Corporation,   a  Missouri
corporation (the "Purchaser").

                              W I T N E S S E T H :

     WHEREAS,  the  Seller  owns all of the issued  and  outstanding  units (the
"Units") of the membership  interest (the "Membership  Interests") of AES Medina
Valley (No. 4), L.L.C.,  an Illinois limited  liability company (the "Company"),
which is the parent  company of AES Medina Valley (No. 2),  L.L.C.,  an Illinois
limited  liability  company,  which in turn is the parent  company of AES Medina
Valley Cogen, L.L.C., an Illinois limited liability company ("Medina"),  and the
Company  is the  parent  company of AES Medina  Valley  Operations,  L.L.C.,  an
Illinois limited liability company ("Operations"); and

     WHEREAS,  each of the Boards of Directors of the  Purchaser  and the Seller
has approved the acquisition of the Company by the Purchaser,  which acquisition
is to be effected by the  purchase  of all the Units by the  Purchaser  upon the
terms and subject to the conditions set forth herein.

     NOW, THEREFORE,  in consideration of the premises and the  representations,
warranties,  covenants and  agreements  contained  herein,  the parties  hereto,
intending to be legally bound hereby, agree as follows:

                                   ARTICLE I
                           PURCHASE AND SALE OF UNITS

     Section 1.1 Sale and Transfer of Units. Subject to the terms and conditions
of this Agreement, at the Closing (as defined below), the Seller agrees to sell,
convey, assign, transfer and deliver to the Purchaser,  and the Purchaser agrees
to purchase and accept from the Seller,  all of the Seller's  rights,  title and
interest  in and to the  Units.  Subject  to the  terms and  conditions  of this
Agreement,  the Purchaser agrees to deliver to the Seller, and the Seller agrees
to accept,  the Purchase Price (as defined below), in cash, without deduction or
setoff of any kind (other than any transfer Taxes described in Section  6.7(m)),
which delivery will be made by wire transfer in immediately  available  funds to
the bank account or accounts designated by the Seller prior to the Closing.

     Section 1.2 The Purchase Price.

          (a)  Subject  to the  terms  and  conditions  of  this  Agreement,  in
consideration  of the  aforesaid  sale,  conveyance,  assignment,  transfer  and
delivery to the Purchaser of the Units, the Purchaser shall pay to the Seller in
cash the sum of (w) $60,000,000  (the "Transaction  Price");  (x) less an amount



equal to Assumed Obligations (as defined below); (y) increased by the amount, if
any, by which Working  Capital (as defined below) as of the Closing Date exceeds
the Base Working Capital (as defined below) and (z) decreased by the amount,  if
any, which Working  Capital as of the Closing Date is less than the Base Working
Capital (the net of such amounts (w) through (z) being,  the "Purchase  Price").
An example of the Purchase Price  calculation is set forth in  Section 1.2(a) of
the Seller Disclosure Schedule (as defined below).

          (b) The term "Assumed  Obligations"  as used herein shall mean amounts
required  to be included on the  consolidated  balance  sheets of the Company in
accordance  with GAAP (as  defined in Section  3.4) as of the  Closing  Date for
long-term  indebtedness  (including current portion),  short-term  indebtedness,
capital  lease  obligations,  preferred  stock  of  subsidiaries  and any  other
obligation for borrowed money less any Restricted  Amounts.  Assumed Obligations
shall be determined on a basis consistent with past practice and consistent with
the items  outstanding  as of December 31, 2001,  set forth on Section 1.2(a) of
the Seller Disclosure  Schedule but including any other  outstanding  obligation
meeting the  definition of the  preceding  sentence at the  applicable  date set
forth herein.

          (c) The term  "Working  Capital"  as used  herein  shall mean  current
assets  less  current  liabilities  (not  counting  in current  liabilities  any
short-term  indebtedness  or current  maturity  of  long-term  debt  included in
Assumed  Obligations)  of the Company as of the applicable date set forth herein
determined in accordance with GAAP plus any Available Amount.  "Working Capital"
shall be determined on a basis consistent with past practice and consistent with
the calculation on Section 1.2(a) of the Seller Disclosure  Schedule,  provided,
however, that for the purposes of this definition, current liabilities as of any
date shall not include any Income Taxes  payable,  and current  assets shall not
include  receivables  from any Income Tax assets.  "Income  Taxes"shall mean any
federal, state, local, or foreign Tax (as defined below) determined by reference
to net income, net worth, or any Tax imposed in lieu of such a Tax.

          (d) The term "Base  Working  Capital" as used herein  means the amount
shown on Section 1.2(a) of the Seller Disclosure  Schedule.  The Working Capital
as of the  Closing  Date shall be  calculated  in the same manner as the Working
Capital was  calculated  as set out on Section  1.2(a) of the Seller  Disclosure
Schedule.

          (e) The term "Restricted  Amount" as used herein means any monies held
in  the  following  accounts  maintained  pursuant  to  the  Collateral  Account
Agreement dated as of June 1, 2001 (the "Collateral Account Agreement"),  by and
among  Medina,  Landesbank  Hessen-Thuringen  Girozentrale,  New York  Branch as
Collateral  Agent,  and The Bank of New York as Depositary  Agent and Securities
Intermediary:  Debt Service  Reserve and Related  Payments  Account,  Prepayment
Account,  Debt Service  Reserve  Account,  Loss  Proceeds  Account,  and Project
Document Claims Account.

          (f) The term  "Available  Amount" as used herein means any monies held
in  the  following  accounts  maintained  pursuant  to  the  Collateral  Account
Agreement:  Punch List Account,  Project Revenues Collection Account,  Operating
Account,  Major Maintenance Reserve Account,  Distribution  Account, and Payment
Account.

                                       2


          (g) At the  Closing,  the  Purchaser  shall  pay to the  Seller a cash
amount  (the  "Estimated  Purchase  Price")  consisting  of the  sum of  (i) the
Transaction Price, (ii) less the estimated Assumed Obligations,  (iii) increased
by the amount,  if any, by which the estimated  Working Capital exceeds the Base
Working Capital and (iv) decreased by the amount, if any, by which the estimated
Working  Capital is less than the Base Working  Capital,  all determined in good
faith by the  Seller on the basis  hereinabove  set  forth  using the  unaudited
consolidated balance sheets of the Company as of the last day of the month which
precedes the month of the Closing Date by no more than 45 days. The Seller shall
provide to the  Purchaser  a written  calculation  in  reasonable  detail of the
Estimated  Purchase  Price on or prior to the fifth  business day  preceding the
Closing Date.

          (h) As  promptly  as  practical,  but in no event more than sixty (60)
days after the  Closing,  the  Purchaser  shall cause the Company to prepare and
deliver to the Seller and the Purchaser a draft of a statement  prepared in good
faith setting forth the relevant  calculations  resulting in the final  Purchase
Price (the "Proposed  Final Purchase Price  Statement")  which shall show, as of
the Closing Date, the actual Assumed Obligations and variance,  if any, from the
Base Working  Capital.  During the thirty (30) day period following the delivery
by the Company of the Proposed Final Purchase  Price  Statement,  the Seller and
its auditors may review such  statement and the working  papers of the Company's
auditors  relating to the Proposed Final Purchase Price Statement and shall have
such access to the Purchaser's and the Company's  personnel as may be reasonably
necessary  to permit the Seller and its  auditors to review in detail the manner
in which the Proposed Final Purchase Price Statement was prepared. The Purchaser
shall and shall cause the Company, as well as their advisors,  to cooperate with
the  Seller  and  the  Seller's  auditors  in  facilitating  such  review.  Upon
completion  of such review,  the Seller shall give any comments or objections it
has with respect to the Proposed Final Purchase Price Statement to the Purchaser
and the Company in writing  within  such thirty (30) day period (the  "Objection
Letter").  The  Purchaser  and the Seller shall attempt in good faith to resolve
any differences and issues as set forth in the Objection Letter. If no Objection
Letter is  delivered  or the  matters set forth in the  Objection  Letter are so
resolved,  then the Proposed Final Purchase Price Statement, as adjusted for any
changes as are agreed upon by the Seller and the  Purchaser,  shall be final and
binding  upon the  Seller  and the  Purchaser  and  shall  constitute  the final
Purchase Price (the "Final Purchase Price"). If the matters raised by the Seller
in the Objection  Letter cannot be resolved between the Purchaser and the Seller
within  ten (10)  days of the date of the  Objection  Letter,  the  question  or
questions  in  dispute  shall  then be  promptly  submitted  to any  "big  five"
accounting firm mutually  agreeable to the Seller and the Purchaser  (other than
the Seller's auditors,  the Purchaser's auditors and Arthur Andersen LLP), or if
such  accounting  firm cannot or refuses to serve in such  capacity,  a mutually
acceptable firm of independent  public accountants of recognized  standing,  the
decision of which as to such question or questions in dispute shall be final and
binding upon the Seller and the Purchaser and the  determination of the purchase
price pursuant  thereto shall be considered to be the Final Purchase Price.  The
accounting  firm shall be instructed to resolve solely the question or questions
in dispute within twenty (20) days of submission.

          (i) In the  event  the  Final  Purchase  Price  is  greater  than  the
Estimated  Purchase  Price  paid  at the  Closing  by the  Purchaser,  then  the
Purchaser shall promptly (within five (5) business days of the  determination of
the Final  Purchase  Price) pay to the Seller an amount equal to the  difference
between the Final Purchase Price and the Estimated  Purchase Price. In the event

                                       3



the Final Purchase  Price is less than the Estimated  Purchase Price paid at the
Closing  by the  Purchaser,  then the Seller  shall  promptly  (within  five (5)
business  days of the  determination  of the Final  Purchase  Price)  pay to the
Purchaser an amount equal to the difference between the Estimated Purchase Price
and the Final Purchase Price.

          (j) The fees of the Company's auditors incurred in connection with the
preparation of the Proposed Final Purchase Price Statement shall be borne by the
Purchaser,  and the fees of the Seller's  auditors  incurred in connection  with
their review of the Proposed Final Purchase  Price  Statement  shall be borne by
the Seller.  The fees of any independent  accounting firm appointed  pursuant to
this Section 1.2 shall be borne equally by the Seller and the Purchaser.

                                   ARTICLE II
                                   THE CLOSING

     Section 2.1 Closing. The consummation of the sale and transfer of the Units
by the Seller to the Purchaser (the  "Closing")  shall take place at the offices
of  Skadden,  Arps,  Slate,  Meagher  & Flom  LLP,  1440  New York  Avenue,  NW,
Washington,  DC 20005 at 10:00 a.m.,  local  time,  on the second  business  day
immediately  following the date on which the last of the conditions set forth in
Article VII hereof is fulfilled or waived (except for those  conditions which by
their nature can only be  fulfilled at the Closing) or at such other time,  date
and place as the Seller and the  Purchaser  shall  mutually  agree (the "Closing
Date").

     Section 2.2  Deliveries  by the Seller.  At the  Closing,  the Seller shall
deliver to the Purchaser:

          (a) An  assignment  of the  Membership  Interests,  duly  and  validly
executed by the Seller and otherwise  sufficient  to vest in the Purchaser  good
title to the Units;

          (b) The  resignations  of the  members of the Board of Managers of the
Company and each Company Subsidiary (as hereinafter defined);

          (c) The limited liability company books, Unit ledgers and minute books
of the Company and each Company  Subsidiary;  provided that any of the foregoing
items shall be deemed to have been delivered  pursuant to this Section 2.2(c) if
such item has been delivered to, or is otherwise  located at, the offices of the
Company;

          (d) A certificate of the Seller's  non-foreign  status for purposes of
Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code"); and

          (e) Any other  documents,  instruments  and  writings  required  to be
delivered by the Seller to the Purchaser pursuant to this Agreement.

                                       4



     Section 2.3  Deliveries  by the  Purchaser.  At the Closing,  the Purchaser
shall deliver to the Seller:

          (a) The Estimated  Purchase Price, in cash, which will be made by wire
transfer  in  immediately  available  funds  to the  bank  account  or  accounts
designated by the Seller, in writing prior to the Closing; and

          (b) Any other  documents,  instruments  and  writings  required  to be
delivered by the Purchaser to the Seller pursuant to this Agreement.

                                  ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

     The Seller  represents  and  warrants to the  Purchaser  that except as set
forth in the  schedule  delivered  by the Seller on the date hereof (the "Seller
Disclosure Schedule"):

     Section 3.1  Organization  and  Qualification.  The Seller is a corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of  Delaware.  The  Company  and each  Company  Subsidiary  (as defined in
Section 3.2) is a limited  liability company duly organized and validly existing
under the laws of Illinois,  has all requisite power and authority to own, lease
and operate its assets and  properties to the extent owned,  leased and operated
and to carry on its business as it is now being  conducted and is duly qualified
and in good standing to do business in each  jurisdiction in which the nature of
its business or the ownership or leasing of its assets and properties makes such
qualification necessary other than in such jurisdictions where the failure to be
so  qualified  or in good  standing  would not have a Company  Material  Adverse
Effect (as defined below). As used in this Agreement, the term "Company Material
Adverse Effect" shall mean any material adverse effect on the business,  assets,
financial  condition  or results of  operations  of the  Company and the Company
Subsidiaries,  taken  as a whole;  provided,  however,  that  the term  "Company
Material  Adverse  Effect"  shall not  include  effects  that result from or are
consequences  of (i) any such effect  resulting from any change in law, rule, or
regulation of any  Governmental  Authority  (as defined in Section  3.3(c)) that
applies  generally  to  similarly   situated  Persons  (as  defined  in  Section
3.10(a)(ii)), (ii) changes or developments in international, national, regional,
state or local wholesale or retail markets for electric power or fuel or related
products,  including  those due to  actions  by  competitors,  (iii)  changes or
developments  in national,  regional,  state or local electric  transmission  or
distribution  systems,  (iv) changes or  developments in financial or securities
markets or the  economy  in  general  or  effects  of weather or  meteorological
events, (v) events or changes that are consequences of terrorist activity,  acts
of war or acts of  public  enemies  (other  than any such  event or  consequence
affecting  only the Company or a Company  Subsidiary)  or (vi) the  negotiation,
announcement,   execution,   delivery,   consummation  or  anticipation  of  the
transactions  contemplated by, or in compliance with, this Agreement. As used in
this Agreement,  the term "knowledge" (i) when referring to the knowledge of the
Seller shall mean the actual  knowledge  of an executive  officer of the Seller,
and (ii) when  referring to the  knowledge of the Company  shall mean the actual
knowledge after reasonable due inquiry of an executive officer of the Company or
a Company Subsidiary, as applicable.

                                      5


     Section 3.2 Subsidiaries; Capitalization.

          (a) Section 3.2(a) of the Seller Disclosure  Schedule (the "Subsidiary
Schedule")  sets forth a complete  list,  as of the date  hereof,  of all of the
Company Subsidiaries and their respective jurisdictions of organization.  All of
the issued and  outstanding  units of the  membership  interest of each  Company
Subsidiary  have been duly  authorized  and are validly  issued,  fully paid and
nonassessable,  and are owned,  directly or indirectly,  by the Company free and
clear of any liens,  claims,  security  interests and other  encumbrances of any
nature  whatsoever  ("Encumbrances").  As  used  in  this  Agreement,  the  term
"Subsidiary" of a Person shall mean any  corporation or other entity  (including
partnerships  and other business  associations  and joint  ventures) of which at
least a majority of the voting  power  represented  by the  outstanding  capital
stock or other voting securities or interests having voting power under ordinary
circumstances to elect managers or similar members of the governing body of such
corporation or entity (or, if there are no such voting interests, 50% or more of
the equity  interests in such  corporation or entity) shall at the time be held,
directly or indirectly, by such Person. The term "Company Subsidiary" shall mean
a Subsidiary of the Company. Neither the Company nor any Company Subsidiary is a
"holding  company" or a "public utility  company" within the meaning of Sections
2(a)(7)  and  2(a)(5) of the Public  Utility  Holding  Company  Act of 1935,  as
amended ("PUHCA"), respectively.

          (b) All Units have been duly authorized and are validly issued,  fully
paid and  nonassessable  and free of  preemptive  rights.  There are no options,
warrants, calls, rights, commitments or agreements of any character to which the
Seller, the Company or any Company Subsidiary is a party or by which it is bound
obligating the Seller, the Company or any Company  Subsidiary to issue,  deliver
or sell, pledge, grant a security interest on or encumber or cause to be issued,
delivered or sold,  pledged or encumbered  or a security  interest to be granted
on,  any  units  of the  membership  interest  of  the  Company  or any  Company
Subsidiary  or  obligating  the Company or the Seller to grant,  extend or enter
into any such option, warrant, call, right, commitment or agreement.

     Section 3.3 Authority; Non-Contravention; Statutory Approvals; Compliance.

          (a)  Authority.  The  Seller  has all  requisite  corporate  power and
authority  to enter  into this  Agreement  and,  subject  to the  receipt of the
applicable Seller Required  Statutory  Approvals (as defined in Section 3.3(c)),
to consummate the transactions  contemplated  hereby. The execution and delivery
of this  Agreement  and  the  consummation  by the  Seller  of the  transactions
contemplated  hereby have been duly authorized by all necessary corporate action
on the part of the  Seller.  No vote of, or consent by, the holders of any class
or series of stock issued by the Seller is necessary to authorize  the execution
and delivery by the Seller of this  Agreement or the  consummation  by it of the
transactions  contemplated  hereby.  This  Agreement  has been duly executed and
delivered  by the Seller and,  assuming  the due  authorization,  execution  and
delivery hereof by the Purchaser,  constitutes the valid and binding  obligation
of the Seller  enforceable  against it in accordance with its terms,  subject to
bankruptcy,  insolvency,  fraudulent  transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.

                                       6



          (b) Non-Contravention. The execution and delivery of this Agreement by
the Seller  does not,  and the  consummation  of the  transactions  contemplated
hereby will not, violate or result in a breach of any provision of, constitute a
default (with or without  notice or lapse of time or both) under,  result in the
termination or modification of,  accelerate the performance  required by, result
in a right of termination, cancellation or acceleration of any obligation or the
loss of a benefit under, or result in the creation of any  Encumbrance  upon any
of the properties or assets of the Company or any Company  Subsidiary  (any such
violation, breach, default, right of termination, modification,  cancellation or
acceleration,  loss or  creation,  is referred to herein as a  "Violation"  with
respect to the Seller and the  Company and such term when used in Article IV has
a correlative  meaning with respect to the Purchaser) pursuant to any provisions
of (i) the articles of incorporation,  by-laws or similar governing documents of
the Seller,  the  Operating  Agreement  of the Company or the limited  liability
company agreement or operating agreement of any Company Subsidiary, (ii) subject
to  obtaining  the  Seller  Required  Statutory  Approvals,  any  statute,  law,
ordinance, rule, regulation,  judgment, decree, order, injunction,  writ, permit
or  license  of  any  Governmental  Authority  (as  defined  in  Section 3.3(c))
applicable to the Seller,  the Company or any Company Subsidiary or any of their
respective  properties or assets,  or (iii) subject to obtaining the third-party
consents set forth in Section 3.3(b)(iii) of the Seller Disclosure Schedule (the
"Seller Required Consents"), any note, bond, mortgage, indenture, deed of trust,
pledge,  license,  franchise,  permit,  concession,  contract,  lease  or  other
instrument, obligation or agreement of any kind to which the Seller, the Company
or any Company Subsidiary is a party or by which they or any of their respective
properties or assets may be bound or affected, except in the case of clause (ii)
or (iii) for any such Violation which would not have a Company  Material Adverse
Effect or prevent, materially delay or materially impair the Seller's ability to
consummate the transactions contemplated by this Agreement.

          (c) Statutory Approvals. Except for (i) the filings by the Seller, the
Company  and/or the  Purchaser,  as  applicable,  required under the HSR Act (as
defined in Section 6.2(a)),  (ii) the applicable  requirements of the Securities
Exchange  Act of 1934,  as  amended  (the  "Exchange  Act")  and the  rules  and
regulations  promulgated  thereunder,  (iii) any filings with or approvals  from
(w)-the  Federal Energy  Regulatory  Commission (the "FERC"),  (x) the  Illinois
Commerce Commission (the "ICC"), (y) the Federal Communications  Commission, and
(z) the other Governmental Authorities set forth on Section 3.3(c) of the Seller
Disclosure  Schedule  (the  filings  and  approvals  referred  to in clauses (i)
through  (iii)  collectively  referred  to as  the  "Seller  Required  Statutory
Approvals"),  no  declaration,  filing  or  registration  with,  or notice to or
authorization,  consent or  approval  of, any court,  federal,  state,  local or
foreign  governmental  or  regulatory  body  (including  a  national  securities
exchange or other  self-regulatory  body) or authority  (each,  a  "Governmental
Authority") is necessary for the execution and delivery of this Agreement by the
Seller  or the  consummation  by the  Seller  of the  transactions  contemplated
hereby,  except  those which the failure to obtain would not result in a Company
Material  Adverse  Effect or would not prevent,  materially  delay or materially
impair the Seller's ability to consummate the transactions  contemplated by this
Agreement (it being  understood that references in this Agreement to "obtaining"
such Seller Required  Statutory  Approvals shall mean making such  declarations,
filings or registrations;  giving such notices;  obtaining such  authorizations,
consents or approvals;  and having such waiting  periods expire as are necessary
to avoid a violation of law).

                                       7


          (d) Compliance. To the knowledge of the Seller or the Company, neither
the  Company  nor  any  Company   Subsidiary   is  in  violation  of,  is  under
investigation  with respect to any  violation of, or has been given notice of or
been charged with any violation of, any law, statute,  order, rule,  regulation,
ordinance  or  judgment  of any  Governmental  Authority,  except  for  possible
violations  which would not have a Company  Material Adverse Effect or would not
prevent,  materially  delay or  materially  impair the  ability of the Seller to
consummate the transactions  contemplated by this Agreement. To the knowledge of
the Seller and the  Company,  the Company and each Company  Subsidiary  have all
material permits,  licenses,  franchises and other governmental  authorizations,
consents and  approvals  (collectively,  "Permits")  necessary to conduct  their
businesses as presently  conducted  except those that the absence of which would
not have a Company  Material  Adverse  Effect or would not  prevent,  materially
delay  or  materially  impair  the  ability  of the  Seller  to  consummate  the
transactions contemplated by this Agreement.  Except as would not have a Company
Material  Adverse  Effect,  (i) each  Permit  is in full  force  and  effect  in
accordance  with its terms,  (ii) there is no  outstanding  written  nor, to the
knowledge of the Seller or the  Company,  any other  notice of  revocation,  and
there are no  proceedings  pending  or, to the  knowledge  of the  Seller or the
Company,  threatened  that seek  revocation,  cancellation or termination of any
Permit. Neither the Company nor any Company Subsidiary is in breach or violation
of or in default in the  performance  or observance of any term or provision of,
and no event has occurred which,  with lapse of time or action by a third party,
could result in a default by the Company or any Company  Subsidiary  under,  (i)
their respective operating agreements or limited liability company agreements or
(ii) to the knowledge of the Seller and the Company,  any contract,  commitment,
agreement,  indenture,  mortgage,  loan agreement,  note, lease, bond,  license,
approval or other  instrument  to which it is a party or by which it is bound or
to which any of its  property is subject,  except in the case of clause (ii) for
possible  violations,  breaches  or  defaults  which  would  not have a  Company
Material  Adverse  Effect or would not prevent,  materially  delay or materially
impair the ability of the Seller to consummate the transactions  contemplated by
this Agreement.

     Section  3.4  Financial  Statements.  The  audited  consolidated  financial
statements  and  unaudited  interim  financial  statements  of the Company  (the
"Company  Financial  Statements")  have been prepared in accordance  with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis during the period involved  (except as may be stated in the notes thereto)
and fairly  present the  consolidated  financial  position and the  consolidated
results of operations and cash flows (and changes in financial position, if any)
of the Company and the  Company  Subsidiaries  as of the time and for the period
referred  to  therein,  subject,  in the  case of  unaudited  interim  financial
statements, to normal, recurring audit adjustments.

     Section 3.5 Absence of Certain  Changes or Events;  Absence of  Undisclosed
Liabilities.

          (a) Since  December 31, 2001 through the date hereof,  the Company and
each of the  Company  Subsidiaries  has  conducted  its  businesses  only in the
ordinary course of business consistent with past practice and there has not been
any  development  or combination  of  developments  affecting the Company or any
Company  Subsidiary,  of which the Seller and the  Company has  knowledge,  that
would have a Company Material Adverse Effect.

                                       8



          (b) Neither the  Company nor any of the Company  Subsidiaries  has any
liabilities or obligations (whether absolute,  accrued, contingent or otherwise)
of any nature,  except those which  (i) are  accrued or reserved  against in the
Company  Financial  Statements  or  reflected  in the notes  thereto,  (ii) were
incurred  in the  ordinary  course  of  business  and  would  not have a Company
Material Adverse Effect, (iii) have been discharged or paid in full prior to the
date  hereof,  or (iv) are of a  nature  not  required  to be  reflected  in the
consolidated  financial  statements of the Company and the Company  Subsidiaries
prepared in accordance with GAAP consistently applied.

     Section 3.6 Litigation.  There are no claims, suits, actions or proceedings
before any court, governmental department,  commission,  agency, instrumentality
or authority or any arbitrator pending or, to the knowledge of the Seller or the
Company, threatened against, relating to or affecting the Company or any Company
Subsidiary  which would have a Company Material Adverse Effect or would prevent,
materially delay or materially impair the Purchaser's  ability to consummate the
transactions  contemplated by this Agreement.  There are no judgments,  decrees,
injunctions, rules or orders of any court, governmental department,  commission,
agency, instrumentality or authority or any arbitrator applicable to the Company
or any Company Subsidiary except for such that would not have a Company Material
Adverse Effect or would not prevent,  materially delay or materially  impair the
Purchaser's  ability  to  consummate  the  transactions   contemplated  by  this
Agreement.

     Section 3.7 Tax Matters.

          (a) (i) The Company and each Company  Subsidiary  has timely filed (or
has had filed on its behalf) with  appropriate  taxing  authorities all material
Tax Returns  required to be filed by it, such Tax Returns are correct,  complete
and  accurate in all material  respects,  and all Taxes shown as due on such Tax
Returns  have  been  paid;   (ii) all   material  Tax  withholding  and  deposit
requirements  imposed  on or  with  respect  to the  Company  and  each  Company
Subsidiary  (including  any  withholding  with respect to wages or other amounts
paid to  employees)  have  been  satisfied  in full  in all  material  respects;
(iii) there  are no  outstanding  requests,  agreements,  consents or waivers to
extend the  statutory  period of  limitations  applicable  to the  assessment or
collection  of any  material  Taxes or  deficiencies  against the Company or any
Company  Subsidiary;  (iv) no federal,  state, local, or foreign Audit for which
the Company,  or any Company  Subsidiary has received  written  notification are
presently  pending  with regard to any  material  Taxes or material  Tax Returns
filed by or on behalf of the  Seller,  the  Company or any  Company  Subsidiary;
(v) neither  the Company nor any Company  Subsidiary is a party to any agreement
providing for the allocation or sharing of Taxes;  and  (vi) neither the Company
nor any Company  Subsidiary has been a member of any  affiliated  group filing a
consolidated  federal income Tax Return (other than a group the common parent of
which is the Seller and the Company).

          (b) As used in this  Agreement:  (i) the term "Tax" means all federal,
state,   local  and  foreign  income,   profits,   franchise,   gross  receipts,
environmental,  customs duty, capital stock,  severance,  stamp, payroll, sales,
employment,  unemployment,   disability,  use,  property,  withholding,  excise,
production, value added, occupancy and other taxes, duties or assessments of any
nature whatsoever,  together with all interest,  penalties and additions imposed
with respect  thereto;  (ii) the term "Tax Return" means all returns and reports
(including   elections,   declarations,   disclosures,   schedules,   estimates,

                                       9



information returns, and amended returns and reports) required to be supplied to
a Tax authority  relating to Taxes;  and (iii) the term "Audit" means any audit,
assessment  of  Taxes,  reassessment  of  Taxes,  or  other  examination  by any
Governmental  Authority or any judicial or administrative  proceedings or appeal
of such proceedings.

               (c) The Company has elected  under  federal  income tax law to be
taxed as a  corporation  for  federal  income  tax  purposes  and has  filed the
appropriate documentation with all applicable Governmental Authorities.

     Section 3.8 Employee Benefits; ERISA.

          (a) Company Plans.  Section 3.8(a) of the Seller  Disclosure  Schedule
(the "Company Plan Schedule") contains a true and complete list of each deferred
compensation  and each bonus or other  incentive  compensation,  stock purchase,
stock  option  and  other  equity  compensation  plan,  program,   agreement  or
arrangement;   each   severance   or   termination   pay,   medical,   surgical,
hospitalization,  life  insurance  and other  "welfare"  plan,  fund or  program
(within the meaning of Section 3(1) of the Employee  Retirement  Income Security
Act of 1974, as amended ("ERISA"));  each  profit-sharing,  stock bonus or other
"pension"  plan,  fund or program (within the meaning of Section 3(2) of ERISA);
each employment, termination, change-of-control or severance agreement; and each
other employee benefit plan, fund,  program,  agreement or arrangement,  in each
case,  that  is  sponsored,  maintained  or  contributed  to or  required  to be
contributed  to by  the  Company,  a  Company  Subsidiary,  or by any  trade  or
business,  whether or not  incorporated,  that together  with the Company,  or a
Company  Subsidiary,  would be deemed a "single  employer" within the meaning of
Section 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate"),  or to which
the Company,  a Company Subsidiary or an ERISA Affiliate is a party in each case
for the  benefit of any current or former  employee,  officer or director of the
Company or a Company Subsidiary (the "Company Plans").

          (b)  Deliveries.  With  respect to each Company  Plan,  the Seller has
heretofore delivered or made available to the Purchaser true and complete copies
of, as applicable,  (i) the Company Plan and any amendments thereto; (ii) if the
Company Plan is funded  through a trust or any third party  funding  vehicle,  a
copy of the  trust  or  other  funding  agreement;  and  (iii) the  most  recent
determination  letter received from the Internal Revenue Service with respect to
each Company Plan intended to qualify under Section 401 of the Code and the most
recent letter of  recognition  of exemption  with respect to any Company Plan or
related trust that is intended to meet the requirements of Section  501(c)(9) of
the Code; (iv) the most recent summary plan description and subsequent summaries
of material  modifications;  (v) the most recently filed Form 5500; and (vi) the
most recently prepared actuarial valuation report.

          (c)  Absence of  Liability.  No material  liability  under Title IV of
ERISA has arisen with respect to the Company,  a Company Subsidiary or any ERISA
Affiliate  that has not been satisfied in full and which would cause the Company
or any Company Subsidiary to incur any material liability, and, to the knowledge
of the Seller or the Company,  no condition exists that presents a material risk
to the Company or any Company Subsidiary of incurring any such liability,  other
than  liability  for  premiums  due the  Pension  Benefit  Guaranty  Corporation
("PBGC") (which premiums have been paid when due).

                                       10



          (d) Funding. No Company Plan subject to Title IV of ERISA (a "Title IV
Company  Plan"),  Section 302 of ERISA or Section 412 of the Code,  or any trust
established  thereunder and no other plan subject to Title IV of ERISA,  Section
302 of ERISA or Section  412 of the Code  maintained  or  contributed  to by any
ERISA Affiliate has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code),  whether or not waived, as of
the last day of the most  recent  fiscal  year of such plan  ended  prior to the
Closing Date which deficiency could cause the Company or any Company  Subsidiary
to incur any material  liability.  All  contributions or payments required to be
made by the Company,  any Company Subsidiary or any ERISA Affiliate with respect
to any Company Plan have been timely made.  The  aggregate  accumulated  benefit
obligations of Title IV Company Plan (as of the most recent actuarial  valuation
date) do not exceed the fair market  value of the assets of such plan (as of the
date of such valuation).

          (e)  Multiemployer  Plan. No Title IV Company Plan is a "multiemployer
plan," as defined in Section  4001(a)(3)  of ERISA,  nor is any Title IV Company
Plan a plan described in Section 4063(a) of ERISA.

          (f)  No   Violations.   Each  Company  Plan  has  been   operated  and
administered  in  all  material  respects  in  accordance  with  its  terms  and
applicable   law,   including  but  not  limited  to  ERISA  and  the  Code.  No
investigation,  audit or dispute  relating to any Company Plan is pending or, to
the knowledge of the Seller and the Company,  threatened before any governmental
agency.  None of the Seller, the Company,  the Company  Subsidiaries nor, to the
knowledge of the Seller or the Company, any other "disqualified  person" (within
the  meaning of Section  4975 of the Code) or "party in  interest"  (within  the
meaning of Section  3(14) of ERISA) has taken or omitted to take any action with
respect to any Company  Plan which  would  subject any such plan (or its related
trust),  the  Company or any  Company  Subsidiary  or any  officer,  director or
employee of any of the foregoing to any penalty or tax under  Section  502(i) of
ERISA or Section 4975 of the Code or material  liability for breach of fiduciary
responsibility  under ERISA.  Neither the Company nor any Company Subsidiary has
agreed to indemnify any other party for any  liabilities  or expenses which have
been or may in the future be incurred by or  asserted  against  such person with
respect to any Company Plan, which indemnification would have a Company Material
Adverse Effect.

          (g)  Section  401(a)  Qualification;   Exemption.  Each  Company  Plan
intended to be  "qualified"  within the meaning of Section 401(a) of the Code is
so  qualified  except  where the  failure  to be so  qualified  would not have a
Company Material Adverse Effect and has received a determination letter from the
Internal Revenue Service to the effect that it is so qualified. To the knowledge
of the Seller and the Company,  nothing has occurred  since the issuance of such
letter which would affect such Company Plan's  qualification.  Each Company Plan
or related trust intended to meet the  requirements of Section  501(c)(9) of the
Code  meets  such  requirements  and has  received  a letter of  recognition  of
exemption from the Internal Revenue Service to that effect.  To the knowledge of
the Seller and the  Company,  nothing has  occurred  since the  issuance of such
letter which could affect such Company Plan's or related trust's exemption under
Section 501(a) of the Code by reason of Section 501(c)(9) of the Code.

          (h)  Post-Employment  Benefits.  No  Company  Plan  provides  medical,
surgical,  hospitalization,  death or similar benefits  (whether or not insured)

                                       11


for employees or former  employees of the Company or any Company  Subsidiary for
periods   extending  beyond  their  respective  dates  of  retirement  or  other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death  benefits  under any  "pension  plan," or (iii)  benefits the full cost of
which is borne by the current or former employee (or his beneficiary).

          (i) Deductibility. No amounts payable under the Company Plan will fail
to be  deductible  for federal  income tax purposes by virtue of Section 280G of
the Code.

          (j) Effect of Change of Control.  The consummation of the transactions
contemplated  by this  Agreement will not,  either alone or in combination  with
another related event,  (i) entitle any current or former  employee,  officer or
limited liability company manager of the Company to severance pay,  unemployment
compensation  or any  other  payment,  except  as  expressly  provided  in  this
Agreement,  or (ii)  accelerate the time of payment or vesting,  or increase the
amount of  compensation  due any such  employee,  officer or  limited  liability
company manager.

          (k) Claims.  There are no pending or, to the  knowledge  of the Seller
and the Company,  threatened  claims by or on behalf of any Company Plan, by any
current or former  employee,  officer or limited  liability  company  manager or
beneficiary  thereof covered under any such Company Plan, or otherwise involving
any such Company Plan (other than routine claims for benefits),  and neither the
Seller nor the Company  has  knowledge  of facts  which would form a  reasonable
basis for any such claim.

     Section  3.9 Labor and  Employee  Relations.  Neither  the  Company nor the
Company  Subsidiaries are party to any collective  bargaining agreement or other
labor  agreement with any union or labor  organization.  Except to the extent as
would not have a Company Material Adverse Effect,  as of the date hereof,  there
is no strike, lockout, slowdown or work stoppage pending or, to the knowledge of
the Seller or the Company,  threatened against the Company or any of the Company
Subsidiaries.

     Section 3.10 Environmental Protection.

          (a) (i) To the knowledge of the Seller or the Company, the Company and
each Company  Subsidiary  are in compliance  with all  applicable  Environmental
Laws,  including,   but  not  limited  to,  possessing  all  permits  and  other
governmental  authorizations  required  for their  operations  under  applicable
Environmental  Laws, except for such noncompliance that would not have a Company
Material Adverse Effect.

               (ii) To the  knowledge of the Seller or the Company,  there is no
     pending or threatened written claim, lawsuit, or administrative  proceeding
     against  the  Company or any  Company  Subsidiary  under or pursuant to any
     Environmental  Law that  would  have a  Company  Material  Adverse  Effect.
     Neither  the  Company  nor  any  Company   Subsidiary  is  subject  to  any
     administrative  or judicial  consent order or decree in connection with any
     Environmental Laws or the release of Hazardous Substances that is having or
     would have a Company Material  Adverse Effect.  Neither the Company nor any
     Company  Subsidiary has received written notice from any Person,  including

                                       12



     but not limited to any Governmental Authority, alleging that the Company or
     any Company  Subsidiary is in violation or  potentially in violation of any
     applicable   Environmental  Law  or  otherwise  may  be  liable  under  any
     applicable  Environmental  Law, which  violation or liability is unresolved
     and which would have a Company  Material  Adverse  Effect.  As used in this
     Agreement,  the term "Person" shall mean any natural  person,  corporation,
     general or limited partnership,  limited liability company,  joint venture,
     trust, association or entity of any kind.

               (iii) To the knowledge of the Seller or the Company, with respect
     to the real property  that was formerly or is currently  owned or leased by
     the  Company  or any  Company  Subsidiary,  there  have  been no  spills or
     discharges  of  Hazardous  Substances  on or  underneath  any of such  real
     property that would result in a Company Material Adverse Effect.

          (b) For purposes of this Agreement:

               (i) "Environmental Laws" shall mean all foreign,  federal,  state
     and local laws, regulations,  rules and ordinances relating to pollution or
     protection of the environment, including, without limitation, laws relating
     to  releases  or  threatened  releases  of  Hazardous  Substances  into the
     environment  (including,  without  limitation,  ambient air, surface water,
     groundwater,  land, surface and subsurface  strata).  Such laws include the
     common law to the extent that it relates to injuries  caused by the release
     or presence of Hazardous Substances.

               (ii) "Hazardous  Substances" shall mean any chemicals,  materials
     or  substances  defined as or  included  in the  definition  of  "hazardous
     substances",   "hazardous  wastes",   "hazardous   materials",   "hazardous
     constituents",   "restricted  hazardous  materials",  "extremely  hazardous
     substances",  "toxic  substances",  "contaminants",   "pollutants",  "toxic
     pollutants",  or words of similar  meaning and regulatory  effect under any
     applicable Environmental Law including,  without limitation,  petroleum and
     asbestos.

          (c) The  representations and warranties set forth in this Section 3.10
are  the  sole  and  exclusive   representations   and  warranties  relating  to
environmental matters made by the Company or the Seller in this Agreement.

     Section 3.11 Regulation as an EWG. Medina is an exempt wholesale  generator
regulated  by the FERC.  Neither  the Company  nor any  "subsidiary  company" or
"affiliate"  (as each such term is defined in PUHCA) of the Company  (other than
Central Illinois Light Company and Central Illinois Generation, Inc.) is subject
to  regulation  as a public  utility  or  public  service  company  (or  similar
designation)  by the FERC or any  municipality,  locality or state in the United
States or any foreign country.

     Section 3.12 Insurance. Each of the Company and the Company Subsidiaries is
insured  and has been  continuously  insured  since  their  respective  dates of


                                       13



organization with financially  responsible or nationally  recognized insurers in
such amounts and against such types of risks as is customary and  appropriate in
its industry or otherwise  deemed  reasonable  by the Seller except as would not
have a Company Material Adverse Effect.  The Seller has not received any written
notice of  cancellation or termination  with respect to any insurance  policy of
the  Company  or the  Company  Subsidiaries  except  as would not have a Company
Material Adverse Effect.

     Section  3.13 Real  Property.  Except as would not have a Company  Material
Adverse Effect: (a) the Company and the Company Subsidiaries have good and valid
title to, or a valid leasehold  interest in all of the real property used by the
Company or the Company Subsidiaries,  respectively  (collectively,  the "Company
Properties"),  in each  case  free and  clear of any  Encumbrances  and  (b) the
Company Properties (taking into account,  without  limitation,  all Encumbrances
related thereto,  all zoning and other  restrictions  applicable thereto and the
condition  thereof) are suitable and adequate for the conduct of the  businesses
of the Company and the Company Subsidiaries as currently conducted.

     Section 3.14  Affiliate  Contracts.  Section 3.14 of the Seller  Disclosure
Schedule  contains a true and complete list of each  agreement or contract as of
the date hereof between (i) the Company and its  Subsidiaries,  on one hand, and
(ii) the  Seller and any  affiliate  thereof  (other  than the  Company  and its
Subsidiaries) on the other (collectively, the "Affiliate Contracts").

     Section  3.15  Brokers or  Finders.  Neither the Seller nor the Company has
entered  into  any  agreement  or  arrangement   entitling  any  agent,  broker,
investment banker,  financial advisor or other firm or Person to any broker's or
finder's fee or any other  commission or similar fee in  connection  with any of
the  transactions  contemplated by this Agreement,  except Lehman Brothers Inc.,
whose  fees and  expenses  will be paid by the  Seller  in  accordance  with the
Seller's agreements with such firm.

     Section 3.16 Contracts.

          (a)  Section  3.16(a) of the  Seller  Disclosure  Schedule  contains a
complete  and correct  list of all  contracts  relating  to the  business of the
Company and the Company Subsidiaries as of the date hereof which (i) have a term
in excess of one year and (ii) provide for aggregate  consideration in an amount
in excess of $2 million (the "Material Contracts").  There are no defaults under
any  Material  Contracts  which  have or would have a Company  Material  Adverse
Effect. As of the date hereof, the Seller has not received any written notice of
cancellation  relating to a Material Contract and has no knowledge of facts that
a Material  Contract is likely to be  cancelled,  except for such  cancellations
which would not have a Company Material Adverse Effect.  The Seller has provided
or made  available to the  Purchaser  true,  correct and complete  copies of all
Material  Contracts,  including all amendments thereto except for such contracts
that by their terms prohibit disclosure to third parties.

          (b) Each Material  Contract is a valid and binding agreement and is in
full force and effect  except to the extent such contract has expired by its own
terms  without  penalty,  and  enforceable  by the Company or any of the Company
Subsidiaries  in  accordance  with its terms,  and none of the  Company  and the
Company  Subsidiaries  or, to the  knowledge of the Seller or the  Company,  any
other  party  thereto  is in  default  or  breach  under  the  terms of any such

                                       14



contracts  and,  to the  knowledge  of the  Seller or the  Company,  no event or
circumstance  has  occurred  that,  with notice or lapse of time or both,  would
constitute any event of default  thereunder  other than in each case defaults or
breaches that would not have a Company Material Adverse Effect.

     Section  3.17  Regulatory  Proceedings.  Neither the Company nor any of the
Company  Subsidiaries  all or part of whose rates or services are regulated by a
Governmental  Authority  (a) has rates  that  have  been or are being  collected
subject to refund  pending a final  resolution  of any rate  proceeding  pending
before a Governmental Authority or on appeal to the courts, or (b) is a party to
any rate  proceeding  before a  Governmental  Authority  that in each case would
result in orders having a Company Material Adverse Effect.

     Section 3.18 Limitation on Representations  and Warranties.  Except for the
representations and warranties contained in this Article III, neither the Seller
nor any  other  Person  or entity  acting  on  behalf  of the  Seller  makes any
representation  or  warranty,  express or implied,  concerning  the Units or the
business,  finances,  operations,  assets,  liabilities,  prospects or any other
aspect of the Company and the Company Subsidiaries.

                                   ARTICLE IV
                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     The  Purchaser  represents  and  warrants  to the Seller that except as set
forth in the reports,  schedules,  registration  statements and definitive proxy
and all  amendments  thereto filed publicly not earlier than January 1, 2001 and
not  later  than the  close  of  business  on the day  prior to the date of this
Agreement  with the SEC by the Purchaser or any Purchaser  Subsidiary  (or their
predecessors) pursuant to the requirements of the Securities Act or the Exchange
Act (as such documents have since the time of their filing been amended publicly
not earlier than January 1, 2001 and not later than the close of business on the
day prior to the date of this Agreement,  the "Purchaser SEC Reports") or in the
schedule  delivered  by  the  Purchaser  on  the  date  hereof  (the  "Purchaser
Disclosure Schedule"):

     Section 4.1 Organization and  Qualification.  The Purchaser and each of the
Purchaser  Subsidiaries (as defined below) is a corporation or other entity duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of its
jurisdiction  of  incorporation  or  organization,  has all requisite  power and
authority  to own,  lease and  operate its assets and  properties  to the extent
owned,  leased  and  operated  and to carry on its  business  as it is now being
conducted  and is duly  qualified  and in good  standing  to do business in each
jurisdiction  in which the nature of its business or the ownership or leasing of
its assets and properties makes such qualification  necessary other than in such
jurisdictions where the failure to be so qualified or in good standing would not
have a  Purchaser  Material  Adverse  Effect  (as  defined  below)  or  prevent,
materially delay or materially impair the Purchaser's  ability to consummate the
transactions contemplated by this Agreement. As used in this Agreement, the term
"Purchaser  Material  Adverse Effect" shall mean any material  adverse effect on
the  business,  assets,  financial  condition  or results of  operations  of the
Purchaser and the Purchaser Subsidiaries,  taken as a whole; provided,  however,
that the term "Purchaser Material Adverse Effect" shall not include effects that
result from or are consequences of (i) any such effect resulting from any change
in law, rule or regulation of any Governmental  Authority (as defined in Section
3.3(c)),  that applies  generally to similarly  situated  Persons (as defined in

                                       15



Section 3.10(a)(ii)),  (ii) changes or developments in international,  national,
regional,  state or local wholesale or retail markets for electric power or fuel
or  related  products,  including  those due to actions  by  competitors,  (iii)
changes  or  developments  in  national,   regional,  state  or  local  electric
transmission or distribution  systems, (iv) changes or developments in financial
or  securities  markets  or the  economy  in  general  or  effects of weather or
meteorological  events, (v) events or changes that are consequences of terrorist
activity,  acts of war or acts of public  enemies  (other than any such event or
consequence  affecting only the Purchaser or a Purchaser Subsidiary) or (vi) the
negotiation,  announcement, execution, delivery, consummation or anticipation of
the transactions  contemplated  by, or in compliance  with, this Agreement.  The
term "Purchaser Subsidiary" shall mean a Subsidiary of the Purchaser.

     Section 4.2 Authority; Non-Contravention; Statutory Approvals; Compliance.

          (a)  Authority.  The Purchaser has all requisite  corporate  power and
authority  to enter  into this  Agreement  and,  subject  to the  receipt of the
applicable  Purchaser  Required  Statutory  Approvals  (as  defined  in  Section
4.2(c)), to consummate the transactions  contemplated  hereby. The execution and
delivery  of  this  Agreement  and  the  consummation  by the  Purchaser  of the
transactions  contemplated  hereby have been duly  authorized  by all  necessary
corporate  action on the part of the  Purchaser.  No vote of, or consent by, the
holders of any class or series of stock issued by the  Purchaser is necessary to
authorize the  execution and delivery by the Purchaser of this  Agreement or the
consummation by it of the transactions  contemplated  hereby. This Agreement has
been  duly  executed  and  delivered  by the  Purchaser  and,  assuming  the due
authorization,  execution  and delivery  hereof by the Seller,  constitutes  the
valid  and  binding  obligation  of  the  Purchaser  enforceable  against  it in
accordance  with  its  terms,  subject  to  bankruptcy,  insolvency,  fraudulent
transfer,  reorganization,  moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.

          (b) Non-Contravention. The execution and delivery of this Agreement by
the Purchaser does not, and the  consummation of the  transactions  contemplated
hereby will not,  result in a Violation  pursuant to any  provisions  of (i) the
certificate  of  incorporation,  by-laws or similar  governing  documents of the
Purchaser or any of the Purchaser  Subsidiaries,  (ii) subject  to obtaining the
Purchaser Required  Statutory  Approvals,  any statute,  law,  ordinance,  rule,
regulation,  judgment, decree, order, injunction, writ, permit or license of any
Governmental  Authority  applicable  to the  Purchaser  or any of the  Purchaser
Subsidiaries or any of their respective  properties or assets,  or (iii) subject
to obtaining the  third-party  consents set forth in Section  4.2(b)(iii) of the
Purchaser Disclosure Schedule (the "Purchaser Required Consents"),  any material
note, bond, mortgage,  indenture,  deed of trust,  license,  franchise,  permit,
concession, contract, lease or other instrument,  obligation or agreement of any
kind to which the Purchaser or any of the Purchaser  Subsidiaries  is a party or
by which they or any of their  respective  properties  or assets may be bound or
affected,  except  in the case of clause  (ii) or (iii)  for any such  Violation
which would not prevent,  materially delay or materially  impair the Purchaser's
ability to consummate the transactions contemplated by this Agreement.

          (c) Statutory Approvals. Except for (i) the filings by the Seller, the
Company,  and/or the Purchaser,  as  applicable,  required under the HSR Act (as
defined  below),  (ii) the applicable  requirements  of the Exchange Act and the
rules and  regulations  promulgated  thereunder,  and (iii) any filings  with or

                                       16



approvals from (x) the FERC, (y) the Federal  Communications  Commission and (z)
the other Governmental  Authorities set forth on Section 4.2(c) of the Purchaser
Disclosure  Schedule  (the  filings  and  approvals  referred  to in clauses (i)
through (iii)  collectively  referred to as the  "Purchaser  Required  Statutory
Approvals"),  no  declaration,  filing  or  registration  with,  or notice to or
authorization,  consent or approval of, any Governmental  Authority is necessary
for the  execution  and  delivery  of this  Agreement  by the  Purchaser  or the
consummation by the Purchaser of the transactions  contemplated  hereby,  except
those  which the  failure  to  obtain  would not  prevent,  materially  delay or
materially  impair  the  Purchaser's  ability  to  consummate  the  transactions
contemplated  by this  Agreement (it being  understood  that  references in this
Agreement to "obtaining" such Purchaser Required Statutory  Approvals shall mean
making  such  declarations,  filings  or  registrations;  giving  such  notices;
obtaining such  authorizations,  consents or approvals;  and having such waiting
periods expire as are necessary to avoid a violation of law).

          (d)  Compliance.  Neither  the  Purchaser  nor  any of  the  Purchaser
Subsidiaries  is under  investigation  with respect to any  violation of, or has
been given notice of or been charged with any  violation  of, any law,  statute,
order, rule,  regulation,  ordinance or judgment of any Governmental  Authority,
except for  possible  violations  which would not prevent,  materially  delay or
materially  impair  the  Purchaser's  ability  to  consummate  the  transactions
contemplated  by this  Agreement.  The Purchaser and the Purchaser  Subsidiaries
have all permits,  licenses,  franchises and other governmental  authorizations,
consents  and  approvals  necessary  to conduct  their  businesses  as presently
conducted  except those that the absence of which would not prevent,  materially
delay  or  materially   impair  the   Purchaser's   ability  to  consummate  the
transactions  contemplated by this  Agreement.  Neither the Purchaser nor any of
the  Purchaser  Subsidiaries  is in breach or  violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party,  could result in a default
by  the  Purchaser  or any  Purchaser  Subsidiary  under  (i)  their  respective
certificates  of  incorporation  or  by-laws or (ii) any  contract,  commitment,
agreement,  indenture,  mortgage,  loan agreement,  note, lease, bond,  license,
approval or other instrument to which they are a party or by which the Purchaser
or any  Purchaser  Subsidiary  is  bound or to which  any of their  property  is
subject,  except for possible  violations,  breaches or defaults which would not
prevent,  materially  delay or  materially  impair  the  Purchaser's  ability to
consummate the transactions contemplated by this Agreement.

     Section  4.3  Purchaser  SEC  Reports;  Financial  Statements.  The filings
required to be made by the Purchaser  under the  Securities Act and the Exchange
Act have been filed with the SEC and complied,  as of their respective dates, in
all  material  respects  with all  applicable  requirements  of the  appropriate
statutes and the rules and regulations thereunder. As of their respective dates,
none of the Purchaser SEC Reports  contained any untrue  statement of a material
fact or  omitted  to state a  material  fact  required  to be stated  therein or
necessary to make the statements  therein,  in light of the circumstances  under
which  they were  made,  not  misleading.  The  audited  consolidated  financial
statements and unaudited interim financial  statements of the Purchaser included
in the Purchaser SEC Reports have been prepared in accordance  with GAAP applied
on a consistent basis during the period involved (except as may be stated in the
notes thereto) and fairly present the  consolidated  financial  position and the
consolidated  results of  operations  and cash flows (and  changes in  financial
position, if any) of the Purchaser as of the time and for the period referred to

                                       17



therein,  subject,  in the case of unaudited  interim financial  statements,  to
normal, recurring audit adjustments.

     Section 4.4 Litigation.  There are no claims, suits, actions or proceedings
by any court, governmental department,  commission,  agency,  instrumentality or
authority or any  arbitrator,  pending or, to the  knowledge  of the  Purchaser,
threatened  against,  relating to or affecting  the  Purchaser or any  Purchaser
Subsidiaries  which would  prevent,  materially  delay or materially  impair the
Purchaser's  ability  to  consummate  the  transactions   contemplated  by  this
Agreement. There are no judgments, decrees, injunctions,  rules or orders of any
court, governmental department, commission, agency, instrumentality or authority
or any  arbitrator  applicable to the  Purchaser or any  Purchaser  Subsidiaries
except for such that would not prevent,  materially  delay or materially  impair
the  Purchaser's  ability to consummate the  transactions  contemplated  by this
Agreement.

     Section 4.5  Investigation by the Purchaser;  the Seller's  Liability.  The
Purchaser has conducted its own independent  investigation,  review and analysis
of  the  business,  operations,  assets,  liabilities,  results  of  operations,
financial condition,  software,  technology and prospects of the Company and the
Company Subsidiaries, which investigation,  review and analysis were done by the
Purchaser  and  its  affiliates   and,  to  the  extent  the  Purchaser   deemed
appropriate, by the Purchaser's representatives. The Purchaser acknowledges that
it and its representatives  have been provided adequate access to the personnel,
properties, premises and records of the Company and the Company Subsidiaries for
such purpose. In entering into this Agreement,  the Purchaser  acknowledges that
it has relied solely upon the aforementioned investigation,  review and analysis
and not on any  factual  representations  of the  Seller or its  representatives
(except the specific  representations  and warranties of the Seller set forth in
Article III of this Agreement), and the Purchaser:

          (a)  acknowledges  that none of the Seller,  the Company,  the Company
Subsidiaries  or  any  of  their  respective  directors,   managers,   officers,
shareholders,  employees,  affiliates,  controlling Persons, agents, advisors or
representatives makes or has made any representation or warranty, either express
or  implied,  as to the  accuracy  or  completeness  of  any of the  information
(including materials furnished in the Company's data room,  presentations by the
Company's  management,  financial  projections  or  otherwise)  provided or made
available to the Purchaser or its directors,  officers,  employees,  affiliates,
controlling Persons, agents or representatives, and

          (b) agrees,  to the fullest extent  permitted by law, that none of the
Seller,  the  Company,  the  Company  Subsidiaries  or any of  their  respective
directors, managers, officers, employees, shareholders,  affiliates, controlling
Persons,  agents,  advisors  or  representatives  shall  have any  liability  or
responsibility   whatsoever  to  the  Purchaser  or  its  directors,   officers,
employees,  affiliates,  controlling  Persons,  agents or representatives on any
basis  (including in contract or tort, under federal or state securities laws or
otherwise) based upon any information provided or made available,  or statements
made (including materials furnished in the Company's data room, presentations by
the Company's  management,  financial projections or otherwise) to the Purchaser
or  its  directors,  officers,  employees,   affiliates,   controlling  Persons,
advisors,  agents or representatives (or any omissions therefrom),  including in
respect of the specific  representations  and warranties of the Seller set forth
in this Agreement,  except that the foregoing limitations shall not apply to the
Seller insofar as the Seller makes the specific  representations  and warranties

                                       18



set  forth  in  Article  III  of  this  Agreement,  but  always  subject  to the
limitations and restrictions contained in Article IX.

     Section 4.6  Acquisition of Units for  Investment;  Ability to Evaluate and
Bear Risk.

          (a) The Purchaser is an "accredited  investor" as such term is defined
in Regulation D promulgated under the Securities Act. The Purchaser is acquiring
the Units for investment  and not with a view toward,  or for sale in connection
with, any distribution  thereof,  nor with any present intention of distributing
or  selling  the Units.  The  Purchaser  agrees  that the Units may not be sold,
transferred,  offered for sale,  pledged,  hypothecated or otherwise disposed of
without   registration  under  the  Securities  Act  and  any  applicable  state
securities laws,  except pursuant to an exemption from such  registration  under
such Act and such laws.

          (b) The  Purchaser  is able to bear the  economic  risk of holding the
Units for an indefinite  period,  and has knowledge and  experience in financial
and  business  matters  such that it is capable of  evaluating  the risks of the
investment in the Units.

     Section  4.7  Financing.  The  Purchaser  will  have  as  of  the  Closing,
sufficient  cash in immediately  available  funds to pay the Estimated  Purchase
Price  pursuant  to  Article I   hereof  and  to  consummate  the   transactions
contemplated hereby.

     Section 4.8  Brokers or Finders.  The  Purchaser  has not entered  into any
agreement  or  arrangement  entitling  any  agent,  broker,  investment  banker,
financial advisor or other firm or Person to any broker's or finder's fee or any
other  commission  or similar  fee in  connection  with any of the  transactions
contemplated  by this  Agreement,  except  Goldman,  Sachs & Co., whose fees and
expenses  will be paid by the  Purchaser  in  accordance  with  the  Purchaser's
agreement with such firm.

                                   ARTICLE V
                     CONDUCT OF BUSINESS PENDING THE CLOSING

     Section 5.1 Covenants of the Seller. After the date hereof and prior to the
Closing or earlier termination of this Agreement, the Seller agrees that, except
as set forth in Section 5.1 of the Seller Disclosure  Schedule and except (i) as
contemplated  in or permitted  by this  Agreement,  (ii) as  provided for in the
annual budgets or capital  budgets (copies of which, in their current form, have
been made  available  to the  Purchaser  and  included in the Seller  Disclosure
Schedule) for the Company and each Company Subsidiary,  (iii) in connection with
necessary  repairs due to  breakdown  or  casualty,  or other  actions  taken in
response  to a  business  emergency  or other  unforeseen  operational  matters,
(iv) as required by law, rule or regulation,  or (v) to the extent the Purchaser
shall  otherwise  consent,  which  decision  regarding  consent  shall  be  made
promptly, and which consent shall not be unreasonably  withheld,  conditioned or
delayed:

          (a) the business of the Company and each Company  Subsidiary  shall be
conducted in the ordinary and usual course in  substantially  the same manner as
heretofore  conducted and, to the extent consistent  therewith,  the Company and
each Company Subsidiary shall use its respective commercially reasonable efforts
to preserve its business organization intact and maintain its existing relations

                                       19



and  goodwill  with  customers,   suppliers,  creditors,  lessors  and  business
associates;

          (b) the Company  shall not,  nor shall the  Company  permit any of the
Company  Subsidiaries  to,  (i) amend  their  operating  agreements  or  limited
liability  company  agreements  other than  amendments  which are ministerial in
nature  or  otherwise  immaterial;   (ii) split,  combine  or  reclassify  their
outstanding Units of Membership  Interests;  (iii) declare, set aside or pay any
distribution  payable in cash,  stock or  property in respect of any Units other
than (A) distributions  paid to the Company or its wholly-owned  Subsidiaries or
(B) dividends in respect of earnings of the Company for the period between March
31, 2002 and the  Closing  Date not in excess of 100% of the net income for such
period;  or (iv)  repurchase,  redeem or  otherwise  acquire any of its Units of
Membership  Interests or any  securities  convertible  into or  exchangeable  or
exercisable for any of its Units of Membership Interests;

          (c) neither the Company nor any Company  Subsidiary shall issue, sell,
or dispose of any Units of, or securities  convertible  into or  exchangeable or
exercisable for, or options,  warrants, calls, commitments or rights of any kind
to  acquire,  any Units of its  Membership  Interests  or any other  property or
assets;

          (d) neither the  Company  nor any Company  Subsidiary  shall incur any
indebtedness  except for indebtedness that is incurred in the ordinary and usual
course of business and complies with the  restrictions  of Section 5.1(d) of the
Seller Disclosure Schedule;

          (e)  neither  the  Company  nor any  Company  Subsidiary  shall  repay
principal on existing  indebtedness  except in accordance with the  amortization
schedule of such debt;

          (f) neither the  Company  nor any  Company  Subsidiary  shall make any
acquisition of, or investment in, assets or stock of any other Person or entity,
other  than in the  ordinary  and  usual  course of  business  and not to exceed
singularly  or in  the  aggregate  $2  million  in  any  calendar  year  and  no
acquisition or investment  shall be of any public utility company (as defined in
PUHCA)  or in a  business  or any  interest  in a  business  which  would not be
retainable by the Purchaser under PUHCA following the Closing;

          (g) neither the Company nor any Company  Subsidiary shall sell, lease,
license,  encumber or otherwise dispose of any of its assets,  other than in the
ordinary and usual course of business, and in an amount not to exceed singularly
or in the aggregate $2 million in any calendar year;

          (h) neither the Company nor any Company  Subsidiary  shall  terminate,
establish,  adopt,  enter  into,  make any new  grants or  awards of  unit-based
compensation or other benefits under,  amend or otherwise  materially modify any
Company Plan or increase the salary,  wage,  bonus or other  compensation of any
managers,  officers or  employees  except (i) for grants or awards to  managers,
officers and  employees  under any existing  Company Plan in such amounts and on
such terms as are consistent  with past  practice,  (ii) in the normal and usual
course of business (which shall include normal periodic  performance reviews and
related plans and the provision of any individual  Company Plan  consistent with

                                       20



past practice for newly hired, appointed or promoted officers and employees), or
(iii) for actions  necessary to satisfy existing  contractual  obligations under
any Company  Plan  existing  as of the date hereof or to comply with  applicable
law;

          (i) the Company and each Company  Subsidiary shall maintain  insurance
with financially  responsible or nationally  recognized insurers in such amounts
and  against  such  risks  and  losses  as are  consistent  with  the  insurance
maintained  by the Company and each  Company  Subsidiary,  respectively,  in the
ordinary and usual course of business;

          (j) the  Company  shall not,  nor shall it permit  any of the  Company
Subsidiaries  to,  change  any  material  financial  or Tax  accounting  method,
policies,  practices or election,  except as required by GAAP or SEC  accounting
regulations or guidelines or applicable law;

          (k) the Seller and the Company  shall  promptly  provide the Purchaser
with  copies of all  filings  made by the  Seller,  the  Company or any  Company
Subsidiary with, and inform the Purchaser of any  communications  received from,
any  state  or  federal  court,   administrative  agency,  commission  or  other
Governmental  Authority in connection  with this Agreement and the  transactions
contemplated hereby;

          (l) the  Seller,  the Company and each  Company  Subsidiary  shall use
their  respective  best  efforts to promptly  obtain all of the Seller  Required
Consents and the Seller Required Statutory Approvals.  The Seller shall promptly
notify the  Purchaser of any failure or  prospective  failure to obtain any such
consents or approvals and, if requested by the  Purchaser,  shall provide copies
of all of the  Seller  Required  Consents  and  the  Seller  Required  Statutory
Approvals obtained by the Seller, the Company and each Company Subsidiary to the
Purchaser;

          (m) the  Company  shall not,  nor shall it permit  any of the  Company
Subsidiaries to, enter into any material agreement or arrangement with any other
person that, directly or indirectly, controls or is under common control with or
is controlled by the Seller,  or any of its respective  subsidiaries on terms to
the Company or the Company Subsidiaries  materially less favorable than could be
reasonably expected to have been obtained with an unaffiliated third party on an
arm's-length basis;

          (n) the Company shall,  and shall cause the Company  Subsidiaries  to,
use commercially  reasonable efforts to maintain in effect or renew all existing
material   Permits  pursuant  to  which  the  Company  or  any  of  the  Company
Subsidiaries operate;

          (o) the Seller  shall not, nor shall it permit any  Subsidiary  of the
Seller to, directly or indirectly, solicit for employment by such persons any of
the  current  officers,  managers  or  employees  of the  Company or any Company
Subsidiary  except for those persons  specified on Section  5.1(o) of the Seller
Disclosure Schedule; provided that the Seller and the Subsidiaries of the Seller
shall not be prohibited  from  employing any such person who contacts the Seller
or any  Subsidiary of the Seller on his or her own initiative or who responds to
a general solicitation through the use of media advertisements,  the Internet or
professional search firms; and


                                       21



          (p) the Company shall not, nor shall it permit any Company  Subsidiary
to,  transfer or assign any contracts to which the Company or any of the Company
Subsidiaries  is a party,  to any of the  Company's  affiliates  (other than the
Company Subsidiaries) or to CILCORP Inc., or any of its Subsidiaries.

     Section 5.2 No Solicitation and Confidentiality.

          (a) From the date hereof through the Closing,  none of the parties nor
their  representatives  (including,  without  limitation,   investment  bankers,
attorneys and accountants) shall,  directly or indirectly,  enter into, solicit,
initiate or continue  any  discussions  or  negotiations  with,  or encourage or
respond to any inquiries or proposals  by, or  participate  in any  negotiations
with,  or provide any  information  to, or otherwise  cooperate in any other way
with,  any  person or other  entity or  group,  concerning  any sale of all or a
portion of the Company, or of any membership units of the Company or any Company
Subsidiary or any merger,  consolidation,  liquidation,  dissolution  or similar
transaction   involving  the  Company  or  any  Company  Subsidiary  (each  such
transaction  being referred to herein as a "Proposed  Acquisition  Transaction")
other than with (i) the Purchaser and its  representatives,  or (ii) as required
by law.  Neither  the Seller nor the  Company  shall,  directly  or  indirectly,
through any officer,  director,  employee,  representative,  agent or otherwise,
solicit,  initiate or encourage the submission of any proposal or offer from any
person (including, without limitation, a "person" as defined in Section 13(d)(3)
of the Exchange Act) or entity relating to any Proposed Acquisition Transaction.
The  Seller  and  the  Company  represent  that  they  are not  now  engaged  in
discussions or negotiations with any party other than the Purchaser with respect
to any of the foregoing.

          (b) Notification. The Seller and the Company shall promptly notify the
Purchaser if any  discussions or  negotiations  are sought to be initiated,  any
inquiry or proposal is made, or any information is requested with respect to any
Proposed Acquisition Transaction and notify the Purchaser of the identity of the
prospective  purchaser or soliciting party and any other information relating to
such  inquiry or  proposal  known to the  Seller,  the  Company  or any  Company
Subsidiary.

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

     Section 6.1 Access to Company  Information.  Upon  reasonable  notice,  the
Seller shall, and shall cause the Company and each Company Subsidiary to, afford
to  the  officers,  directors,   managers,  employees,   accountants,   counsel,
investment bankers, financial advisors and other representatives  (collectively,
"Representatives")  of the Purchaser  reasonable access,  during normal business
hours  throughout  the period prior to the Closing Date, to all of the Company's
and the Company  Subsidiaries'  properties,  books,  contracts,  commitments and
records and, during such period,  the Seller shall,  and shall cause the Company
and each  Company  Subsidiary  to,  furnish  promptly to the  Purchaser  and its
Representatives, (i) access to each report, schedule and other document filed or
received by the Company, each Company Subsidiary pursuant to the requirements of
federal or state  securities  laws or filed with or sent to any federal or state
regulatory  agency or commission and (ii) access to all  information  concerning
the Company,  each Company  Subsidiary and its respective  managers and officers
and such other  matters as may be  reasonably  requested by the Purchaser or its

                                       22



Representatives  in  connection  with any  filings,  applications  or  approvals
required or  contemplated  by this  Agreement or for any other reason related to
the  transactions  contemplated  by this  Agreement.  The  Purchaser  agrees  to
indemnify and hold the Seller, the Company and the Company Subsidiaries harmless
from any and all claims and liabilities,  including costs and expenses for loss,
injury to or death of any Representative of the Purchaser,  and any loss, damage
to or  destruction  of any  property  owned by the  Seller,  the  Company or the
Company  Subsidiaries or others (including claims or liabilities for loss of use
of any property) resulting directly or indirectly from the action or inaction of
any of the  Representatives of the Purchaser during any visit to the business or
property sites of the Company or the Company  Subsidiaries  prior to the Closing
Date,  whether pursuant to this Section 6.1 or otherwise.  None of the Purchaser
nor any of its  Representatives  shall  conduct  any  environmental  testing  or
sampling on any of the business or property  sites of the Company or the Company
Subsidiaries  prior to the Closing Date.  Each party shall,  and shall cause its
Subsidiaries and Representatives to, hold in strict confidence all documents and
information  concerning  the  other  furnished  to it  in  connection  with  the
transactions   contemplated   by  this   Agreement   in   accordance   with  the
Confidentiality  Agreement, dated November 15, 2001, as amended, entered into by
and between the Seller and the Purchaser (the "Confidentiality Agreement").

     Section 6.2 Regulatory Matters.

          (a) HSR Filings.  Each party hereto shall,  as soon as  practicable as
mutually agreed by the parties, file or cause to be filed with the Federal Trade
Commission   (the  "FTC")  and  the   Department  of  Justice  (the  "DOJ")  any
notifications  required  to  be  filed  under  the  Hart-Scott-Rodino  Antitrust
Improvements  Act of 1976,  as  amended  (the  "HSR  Act"),  and the  rules  and
regulations promulgated thereunder with respect to the transactions contemplated
hereby.  Such parties shall use all best efforts to respond on a timely basis to
any requests for additional information made by either of such agencies.

          (b) Other Regulatory Approvals.  Each party hereto shall cooperate and
use best  efforts  to  prepare  and file as soon as  practicable  all  necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other  documents,  and to use best efforts to obtain all necessary  permits,
consents, approvals and authorizations of all Governmental Authorities necessary
or advisable to obtain the Seller Required Statutory Approvals and the Purchaser
Required Statutory Approvals.  The parties further agree to use best efforts (i)
to take any act,  make any  undertaking  or receive  any  clearance  or approval
required by any Governmental Authority or applicable law and (ii) to satisfy any
conditions imposed by any Governmental Authority in all Final Orders (as defined
in and for purposes of Section 7.1(b)). Each of the parties shall (i) respond as
promptly  as  practicable  to  any  inquiries  or  requests  received  from  any
Governmental Authority for additional information or documentation, and (ii) not
enter into any agreement with any  Governmental  Authority not to consummate the
transactions  contemplated by this  Agreement,  except with the prior consent of
the other party hereto  (which shall not be  unreasonably  withheld or delayed).
Each of the parties shall make best efforts to avoid or eliminate each and every
impediment under any antitrust,  competition,  or trade or energy regulation law
(including  the  Federal  Power Act,  as  amended,  and the  FERC's  regulations
thereunder) that may be asserted by any  Governmental  Authority with respect to
the transactions  contemplated  hereby so as to enable the Closing Date to occur
as soon as reasonably  possible.  The steps  involved in the preceding  sentence

                                       23


shall include proposing,  negotiating,  committing to and effecting,  by consent
decree, hold separate order or otherwise,  the sale,  divestiture or disposition
of such assets or businesses of the Purchaser or its affiliates (including their
respective Subsidiaries) or agreeing to such limitations on its or their conduct
or actions as may be required in order to obtain the Seller  Required  Statutory
Approvals and the Purchaser Required  Statutory  Approvals as soon as reasonably
possible,  to  avoid  the  entry  of,  or to  effect  the  dissolution  of,  any
injunction,   temporary  restraining  order  or  other  order  in  any  suit  or
proceeding,  which would otherwise have the effect of preventing or delaying the
Closing Date, and defending through litigation on the merits, including appeals,
any claim asserted in any court by any party.

          (c)  Exception.  Notwithstanding  anything to the  contrary in Section
6.2,  neither  party shall be  required  to take any  actions  that would have a
Company  Material Adverse Effect or a Purchaser  Material  Adverse Effect,  and,
further,  any terms or conditions  imposed by the FERC, the FTC or the Antitrust
Division of the DOJ  relating  to market  power,  including  but not limited to,
divestiture of generation or transmission  improvements,  shall not constitute a
Company Material Adverse Effect or a Purchaser Material Adverse Effect.

          (d) Responsibilities.  The Seller and the Purchaser agree that (i) the
Purchaser  shall have primary  responsibility  for the preparation and filing of
any  applications  with or notifications to the FERC, the FTC and/or the DOJ and
the SEC under  PUHCA and (ii) the  Seller  and the  Purchaser  shall  have joint
responsibility  for the  preparation  and  filing  of any  applications  with or
notifications  to the ICC. Each party shall have the right to review and approve
in  advance  drafts  of all such  necessary  applications,  notices,  petitions,
filings and other documents made or prepared in connection with the transactions
contemplated  by  this  Agreement,  which  approval  shall  not be  unreasonably
withheld or delayed.

     Section 6.3 Consents.  The Seller and the Purchaser agree to use reasonable
best efforts to obtain the Seller Required  Consents and the Purchaser  Required
Consents,  respectively, and to cooperate with each other in connection with the
foregoing.

     Section 6.4 Managers' and Officers' Indemnification.

          (a)  Indemnification.  From and after the Closing Date,  the Purchaser
shall cause the Company,  to the fullest extent  permitted under applicable law,
to indemnify  and hold  harmless  (and  advance  funds in respect of each of the
foregoing) each present and former  employee,  agent,  manager or officer of the
Company and the Company  Subsidiaries (each,  together with such person's heirs,
executors  or  administrators,  an  "Indemnified  Party" and  collectively,  the
"Indemnified  Parties")  against  any  costs or  expenses  (including  advancing
attorneys'  fees and expenses in advance of the final  disposition of any claim,
suit,  proceeding  or  investigation  to each  Indemnified  Party to the fullest
extent permitted by law), judgments, fines, losses, claims, damages, liabilities
and amounts  paid in  settlement  in  connection  with any actual or  threatened
claim,  action,  suit,  proceeding or  investigation,  whether civil,  criminal,
administrative or investigative (an "Action"), arising out of, relating to or in
connection with any action or omission by such  Indemnified  Party in his or her
capacity as an employee,  agent, manager or officer occurring or alleged to have
occurred  whether before or after the Closing Date  (including acts or omissions
in  connection  with such  person's  service  as an  officer,  manager  or other
fiduciary in any entity if such service was at the request or for the benefit of

                                       24



the  Company  or any of the  Company  Subsidiaries)  or  this  Agreement  or the
transactions contemplated hereby. In the event of any such Action, the Purchaser
shall cooperate with the Indemnified Party in the defense of any such Action.

          (b) Survival of Indemnification.  To the fullest extent not prohibited
by law,  from and after the  Closing  Date,  all rights to  indemnification  now
existing  in favor of the  Company  Indemnified  Parties  with  respect to their
activities as such prior to or on the Closing Date, as provided in the Company's
and each Company  Subsidiary's  respective  articles of incorporation,  by-laws,
other  organizational  documents or indemnification  agreements in effect on the
date of such activities or otherwise in effect on the date hereof, shall survive
the Closing and shall continue in full force and effect for a period of not less
than six years from the Closing Date,  provided  that, in the event any claim or
claims are  asserted  or made within such  six-year  period,  all such rights to
indemnification  in respect of any claim or claims  shall  continue  until final
disposition of such claim or claims.

          (c)  Insurance.  For a period of six years after the Closing Date, the
Purchaser  shall or the Purchaser  shall cause the Company to maintain in effect
policies of directors'  and officers'  liability  insurance  equivalent to those
maintained  by the Seller on behalf of the Company prior to the Closing Date for
the benefit of those persons who are currently covered by such policies on terms
no less favorable than the terms of such current insurance  coverage;  provided,
however, that the Purchaser will not be required to expend in any year an amount
in excess of 200% of the annual aggregate  premiums currently paid by the Seller
or the Company, as the case may be, for such insurance;  provided, further, that
if the annual  premiums  of such  insurance  coverage  exceed such  amount,  the
Purchaser  shall  cause the  Company to obtain a policy  with the best  coverage
available, in the reasonable judgment of the board of directors of the Purchaser
for a cost not exceeding such amount.

          (d) Successors. In the event that, after the Closing Date, the Company
or  the  Purchaser  or  any  of  their  respective  successors  or  assigns  (i)
consolidates with or merges into any other Person or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or a substantial  portion of its properties and assets to any
Person or entity,  then and in either such case, proper provisions shall be made
so that the successors and assigns of the Company or the Purchaser,  as the case
may be, shall assume the obligations set forth in this Section 6.4.

          (e) Benefit. The provisions of this Section 6.4 are intended to be for
the benefit of, and shall be enforceable by, each Company Indemnified Party, his
or her heirs, executors or administrators and his or her other representatives.

     Section  6.5 Public  Announcements.  Except as may be required by law or by
obligations  pursuant to any  listing  agreement  with or rules of any  national
securities  exchange,  the Seller and the Purchaser shall use reasonable efforts
to consult  with each other  prior to issuing any press  releases  or  otherwise
making public  announcements with respect to this Agreement and the transactions
contemplated  hereby and the parties shall consult with each other regarding any
press releases initially announcing the execution of this Agreement.


                                       25



     Section  6.6  Workforce  Matters.  If any  employee  of the  Company or any
Company  Subsidiary  who was an  employee  immediately  prior to the Closing (an
"Affected  Employee") is discharged by the Company or any Company  Subsidiary as
of or after the Closing, then the Purchaser shall be responsible for any and all
severance costs for such Affected Employee, including payments owing under those
agreements,  plans or  arrangements  listed  in  Section  3.8(a)  of the  Seller
Disclosure  Schedule.  The  Purchaser  shall be  responsible  for  providing any
continuation   coverage   required   under  the   Consolidated   Omnibus  Budget
Reconciliation  Act of  1985,  as  amended  ("COBRA")  in  respect  of  Affected
Employees  who  experience or have  experienced  a qualifying  event (within the
meaning of COBRA)  prior to, on or after the  Closing  Date  including,  without
limitation,  all other  employees of the Company or any Company  Subsidiary  who
experience  such a  qualifying  event  before  the  Closing  Date but who do not
provide notice of the  qualifying  event until on or after the Closing Date. The
Purchaser  shall be  responsible  and assume all  liability  for all  notices or
payments  due  to  any  Affected  Employees  under  the  Worker  Adjustment  and
Retraining  Notification Act and regulations  promulgated  thereunder (the "WARN
Act") or to any  employee of the Company or any Company  Subsidiary  who becomes
entitled  to  receive  notice as  required  under the WARN Act on account of the
aggregation  of  "employment  losses" in  accordance  with the WARN Act, and all
notices,  payments,  fines or  assessments  due to any  Governmental  Authority,
pursuant to any applicable  foreign,  federal,  state or local law,  common law,
statute, rule or regulation with respect to the employment,  discharge or layoff
of employees by the Company or any Company  Subsidiary  after the Closing  Date,
including the WARN Act, and any comparable state or local law.

     Section 6.7 Tax Matters.

          (a) Tax Returns.

               (i)  The Seller  shall file or cause to be filed when due all Tax
     Returns that are required to be filed by or with respect to the Company and
     each Company  Subsidiary  for taxable years or periods  ending on or before
     the Closing  Date.  The Seller shall  include the income of the Company and
     each  Company  Subsidiary   (including  any  deferred  intercompany  income
     triggered under Treasury  Regulation  Section 1.1502-13 or its predecessors
     and any excess loss  account  taken into income under  Treasury  Regulation
     Section 1.1502-19) on the AES Consolidated U.S. federal Tax Returns for all
     periods ending on or before the Closing Date.

               (ii) The  Purchaser  shall file or cause to be filed when due all
     Tax Returns that are required to be filed by or with respect to the Company
     and each Company  Subsidiary  for taxable years or periods ending after the
     Closing Date.

               (iii)Any  Tax  Return  required  to be  filed  by  the  Purchaser
     relating to any taxable  year or period that  includes  but does not end on
     the Closing Date (a "Straddle Period") shall be prepared in accordance with
     past practice (to the extent  permitted under applicable law) and submitted
     (with copies of any relevant schedules, work papers and other documentation
     then  available)  to the Seller  for the  Seller's  approval  not less than

                                       26



     forty-five (45) days prior to the due date  (including  extensions) for the
     filing of such Tax Return.  The Seller's approval shall not be unreasonably
     withheld.

               (iv) Upon the written  request of the Purchaser  setting forth in
     detail the  computation  of the amount  owed,  the Seller  shall pay to the
     Purchaser,  no  later  than  two (2)  days  prior  to the due  date for the
     applicable Tax Return, the Taxes for which the Seller is liable pursuant to
     Section  6.7(b) and that are payable with any Tax Return to be filed by the
     Purchaser with respect to any Straddle Period.

               (v)  Within  thirty  (30) days after the  Closing  Date (and from
     time to time  thereafter  if the Seller  reasonably  requests),  the Seller
     shall  provide to the  Purchaser  a list of the  specific  Tax  information
     materials required to enable the Seller to prepare and file all Tax Returns
     required  to be  prepared  and  filed by the  Seller  pursuant  to  Section
     6.7(a)(i).  Within sixty (60) days after  receiving any list, the Purchaser
     shall cause the Company and each Company  Subsidiary to prepare and provide
     to the Seller a package containing the Tax information materials identified
     in any list.  The  Purchaser  shall prepare such package in good faith in a
     manner substantially consistent with the Seller's past practice.

          (b) Liability for Taxes.

               (i)  The Seller shall be liable for all Taxes with respect to Tax
     Returns  described in Section  6.7(a)(i),  for all Taxes apportioned to the
     Seller under  Section  6.7(b)(iii),  and for 50% of the Taxes  described in
     Section  6.7(m).  Notwithstanding  the  foregoing,  the Seller shall not be
     liable for Taxes other than Income Taxes ("Non-Income  Taxes") with respect
     to Tax Returns described in Section 6.7(a)(i) and for all Taxes apportioned
     to the Seller under Section 6.7(b)(iii) to the extent that Non-Income Taxes
     reduce Working Capital.

               (ii) The Purchaser  shall be liable for all Taxes with respect to
     Tax Returns described in Section  6.7(a)(ii),  for all Taxes apportioned to
     the Purchaser under Section 6.7(b)(iii),  for 50% of the Taxes described in
     Section 6.7(m) and for Non-Income Taxes to the extent that Non-Income Taxes
     reduce Working Capital.

               (iii) For purposes of this Section 6.7,  where it is necessary to
     apportion  between the Seller and the  Purchaser  the Tax  liability  of an
     entity  for  a  Straddle  Period  (which  is  not  treated  under  Treasury
     Regulation Section  1.1502-76(b) or similar provisions of state,  local, or
     other  law as  closing  on the  Closing  Date),  such  liability  shall  be
     apportioned  between  the period  deemed to end at the close of the Closing
     Date,  and the period deemed to begin at the beginning of the day following
     the Closing  Date on the basis of an interim  closing of the books,  except
     that Taxes (such as real property  Taxes) imposed on a periodic basis shall
     be allocated or a daily basis.


                                       27



               (iv) In determining the Seller's  liability for Taxes pursuant to
     this  Agreement,  the Seller shall be credited with the amount of estimated
     Taxes and any Taxes under the United States Federal Unemployment Tax Act or
     the United States Federal  Insurance  Contributions Act that are paid by or
     on behalf of the Company or any Company Subsidiary prior to the Closing. To
     the extent  that the  Seller's  liability  for Taxes for a taxable  year or
     period  is less  than the  amount of such  Taxes  previously  paid by or on
     behalf of the Company or any Company  Subsidiary  with  respect to all or a
     portion of such taxable year or period,  the Purchaser shall pay the Seller
     the  difference  within two (2) days of filing the Tax Return  relating  to
     such Taxes. To the extent that Non-Income  Taxes paid by the Company or any
     Company Subsidiary with respect to any pre-Closing period are less than the
     amount of such Non-Income Taxes that reduce Working Capital,  the Purchaser
     shall pay the Seller the difference  within two (2) days of filing each Tax
     Return relating to such Non-Income Taxes.

          (c) Refunds.

               (i) Any Tax refund  (including  any interest in respect  thereof)
     received by the Purchaser, the Company, or any Company Subsidiary,  and any
     amounts  credited  against  Taxes to which  the  Purchaser  or a  Purchaser
     Subsidiary  (including  the  Company,  or any Company  Subsidiary)  becomes
     entitled  (including  by way of any amended Tax Returns but  excluding  Tax
     Returns from a carryback  filing),  that relate to any taxable  period,  or
     portion thereof of the Company or a Company  Subsidiary ending on or before
     the Closing Date, shall be for the account of the Seller, and the Purchaser
     shall pay over to the  Seller  any such  refund  or the  amount of any such
     credit within fifteen (15) days after receipt of such refund or utilization
     of such credit. Any Tax refund from a carryback filing not prohibited under
     Section 6.7(e)(iii) shall be for the account of the Purchaser.

               (ii) The  Purchaser  shall pay the  Seller  interest  at the rate
     prescribed under Section  6621(a)(1) of the Code,  compounded daily, on any
     amount not paid when due under this  Section  6.7(c).  For purposes of this
     Section  6.7(c),  where it is  necessary  to  apportion  a refund or credit
     between the Purchaser and the Seller for a Straddle Period,  such refund or
     credit shall be  apportioned  between the period deemed to end at the close
     of the Closing Date and the period  deemed to begin at the beginning of the
     day  following  the Closing Date on the basis of an interim  closing of the
     books of the Company and any Company Subsidiary, except that Taxes (such as
     real property  Taxes)  imposed on a periodic  basis shall be allocated on a
     daily basis.

               (iii)The Purchaser shall  cooperate,  and shall cause the Company
     and any Company  Subsidiary  to cooperate,  in  obtaining,  at the Seller's
     expense,  any Tax refund  (other than a refund based on a carryback  from a
     taxable year or period  beginning  after the Closing  Date) that the Seller
     reasonably believes is available based on substantial authority,  including
     through filing appropriate forms with the applicable Tax authority.


                                       28



          (d) Certain Post-Closing Settlement Payments.

               (i)  If the examination of any federal, state, local or other Tax
     Return of the Seller for any taxable period ending on or before the Closing
     Date shall result (by  settlement  or  otherwise)  in any  adjustment  that
     permits the Purchaser,  the Company,  or any Company Subsidiary to increase
     deductions,  losses  or tax  credits  or  decrease  the  income,  gains  or
     recapture of tax credits which would  otherwise (but for such  adjustments)
     have been reported or taken into account  (including by way of any increase
     in basis) by the Purchaser,  the Company, or any Company Subsidiary for one
     or more  periods  beginning  and ending  within  ten (10)  years  after the
     Closing  Date,  the Seller shall notify the  Purchaser  and provide it with
     adequate  information  so that  the  Purchaser  can  reflect  on  its,  the
     Company's,   or  Company   Subsidiary's   Tax  Returns  such  increases  in
     deductions,  losses  or tax  credits  or  decreases  in  income,  gains  or
     recapture of tax credits.  The  Purchaser  shall pay to the Seller,  within
     thirty (30) days of the filing of the Tax  Returns for the taxable  year in
     which  the Tax  Benefit  was  realized,  the  amount of any  resulting  Tax
     Benefit.  "Tax  Benefit"  shall  mean the amount of any  refund,  credit or
     reduction  in  otherwise  required  Tax  payments,  including  any interest
     payable thereon, actually realized, provided, that, for these purposes, Tax
     items  shall  be  taken  into  account  in  accordance  with  the  ordering
     principles  of the Code or  other  applicable  law.  For  purposes  of this
     Section  6.7(d)(i),  estimated  Tax payments  shall not be  considered  Tax
     Returns and Tax Benefits shall be based on Tax Returns as filed.

               (ii) If the examination of any federal, state, local or other Tax
     Return of the  Purchaser,  the Company,  or any Company  Subsidiary for any
     taxable period ending after the Closing Date shall result (by settlement or
     otherwise)  in  any   adjustment   that  permits  the  Seller  to  increase
     deductions,  losses  or tax  credits  or  decrease  the  income,  gains  or
     recapture of tax credits which would  otherwise (but for such  adjustments)
     have been reported or taken into account  (including by way of any increase
     in basis) by the  Seller  for one or more  periods  ending on or before the
     Closing  Date,  the  Purchaser  shall notify the Seller and provide it with
     adequate information so that the Seller can reflect on its Tax Returns such
     increases  in  deductions,  losses or tax credits or  decreases  in income,
     gains or recapture of tax credits.  The Seller shall pay to the  Purchaser,
     within thirty (30) days of the receipt of such  information,  fifty percent
     (50%) of the amount of any resulting Tax Benefits.

          (e) Post-Closing Actions that Affect the Seller's Liability for Taxes.

               (i) The Purchaser  shall not take, or cause or permit the Company
     or any Company Subsidiary (or any of their affiliates) to take, any action,
     with respect to the taxable year or period of the  Purchaser,  the Company,
     any Company  Subsidiary,  or affiliate,  as applicable,  which includes the
     Closing Date, which would be reasonably  likely to increase the Seller's or
     any of its affiliates'  liability for Taxes (including any liability of the
     Seller to indemnify  the Purchaser  for Taxes  pursuant to this  Agreement)
     including,  for  example,  any action that would be  reasonably  likely to,

                                       29



     result in, or change the  character  of, any income or gain that the Seller
     or any Seller affiliate must report on any Tax Return.

               (ii) None of the  Purchaser  or any  affiliate  of the  Purchaser
     shall  (or  shall  cause  or  permit  the  Company  or any  of the  Company
     Subsidiaries to) amend,  refile or otherwise modify any Tax Return relating
     in whole or in part to the Company or any of the Company  Subsidiaries with
     respect to any taxable year or period  ending on or before the Closing Date
     (or with respect to any Straddle  Period) without the prior written consent
     of the Seller,  which consent may be withheld in the sole discretion of the
     Seller;  provided,  that the  Seller's  consent  shall not be required  for
     modifications that relate exclusively to the post-Closing Date portion of a
     Straddle  Period and that would not be  reasonably  likely to increase  the
     Seller's liability for Taxes under Section 6.7(i) of this Agreement.

               (iii) Except to the extent otherwise required by law, none of the
     Purchaser or any affiliate of the Purchaser shall (or shall cause or permit
     the Company or any of the Company  Subsidiaries to) carry back for federal,
     state,  local or foreign tax  purposes to any  taxable  period,  or portion
     thereof, of the Company or any of the Company Subsidiaries or the Seller or
     any affiliate of the Seller  ending on or before,  or which  includes,  the
     Closing Date any operating losses,  net operating  losses,  capital losses,
     tax credits or similar  items arising in,  resulting  from, or generated in
     connection  with a taxable year of the  Purchaser  or any  affiliate of the
     Purchaser, or portion thereof, ending after the Closing Date.

          (f) Tax  Payments.  The  Purchaser  agrees  that,  pursuant to any Tax
sharing,  Tax allocation,  or Tax indemnity agreements between the Seller or any
Seller  affiliate on the one hand and the Company or any Company  Subsidiary  on
the other  hand,  the  Company or any  Company  Subsidiary  may make tax sharing
payments  to the  Seller on any date or dates up to and  including  the  Closing
Date.  Any payment made  pursuant to this  Section  6.7(f) shall comply with the
terms of the agreement to which it relates (other than terms  requiring  payment
on a specified date or dates).  Payments to the Seller  pursuant to this Section
6.7(f)  shall  reduce the cash  component  of Working  Capital as of the Closing
Date.

          (g) Assistance and  Cooperation.  After the Closing Date,  each of the
Seller and the Purchaser shall, and shall cause their respective  affiliates to,
execute any forms  necessary to filing a Tax Return and provide  information  to
the other party  regarding  the Company or any Company  Subsidiary in connection
with (i) the other  party  preparing  any Tax  Returns  that such other party is
responsible  for preparing and filing and (ii) the other party preparing for any
audits of, or disputes with any Tax authority regarding,  any Tax Returns of the
Company or any Company Subsidiary.  In connection therewith,  the Seller and the
Purchaser shall not dispose of any Tax work papers, books or records relating to
the Company or any Company  Subsidiary  during the six-year period following the
Closing Date, and  thereafter  shall give the other parties  reasonable  written
notice before disposing of such items.

          (h) Section 338  Elections.  The  Purchaser  agrees that if the Seller
notifies the  Purchaser in writing,  on or prior to the 120th day  following the

                                       30



Closing Date, of its intention to make an election  under Section  338(h)(10) of
the Code,  and any  corresponding  elections  under  state and local  law,  with
respect to the purchase and sale of Units hereunder (such elections collectively
the "Section 338(h)(10) Election"),  the Purchaser shall join with the Seller in
timely making such joint Section  338(h)(10)  Election.  If the Seller elects to
make a Section 338(h)(10) Election, prior to the 120th day following the Closing
Date, the Seller shall  (i) determine  the aggregate  deemed sale price ("ADSP")
(within the meaning of Treasury Regulations Section 1.338-4T) of the Company and
the  adjusted   grossed-up  basis  ("AGUB")  (within  the  meaning  of  Treasury
Regulations  Section  1.338-5T)  of  the  Company's  assets  for  Tax  purposes;
(ii) determine the proper allocation ("Allocation") (in accordance with Treasury
Regulations Section 1.338-6T and 1.338-7T) of the ADSP and AGUB among the assets
of the Company for Tax purposes;  and (iii) deliver the Allocation to Purchaser.
If the Purchaser  notifies the Seller in writing of a disagreement  with respect
to an  Allocation,  the Seller and the Purchaser  shall attempt to resolve their
differences  within thirty (30) days of the Seller's receipt of such notice from
the  Purchaser.  If no  agreement  can be reached  within sixty (60) days of the
Seller's  receipt of such notice from  Purchaser,  the Seller and the  Purchaser
shall agree to an Allocation based on an appraisal of the assets performed by an
accounting  firm  with  national  standing  agreed  upon by the  Seller  and the
Purchaser.  In the absence of a notice from the Purchaser,  or in the event that
the  Seller  and the  Purchaser  agree  to an  Allocation,  the  Seller  and the
Purchaser  shall (i) be bound by such Allocation for purposes of determining any
Taxes, (ii) prepare and file their Tax Returns consistent with such Allocations,
and (iii) take no position  inconsistent with such Allocation on any Tax Return,
in any  proceeding  before  any  Taxing  authority  or  otherwise.  If a Section
338(h)(10)  Election  is not made,  for  purposes  of all Tax  Returns and other
applicable  filings,  the Seller and the  Purchaser  will each  report the Units
purchase as a sale and purchase, respectively, of the Units.

          (i) Indemnification by the Seller. Notwithstanding any other provision
of this Agreement other than Section 6.7(b)(iv),  the Seller shall indemnify the
Purchaser from and against and in respect of:

               (i) any liability for Taxes imposed on the Company or any Company
     Subsidiary  as members of the  "affiliated  group"  (within  the meaning of
     Section  1504(a) of the Code) of which the Seller  (or any  predecessor  or
     successor)  is the common  parent that  arises  under  Treasury  Regulation
     Section 1.1502-6(a) or any comparable provision of foreign,  state or local
     law;

               (ii) any  liability  for  Taxes  imposed  on the  Company  or any
     Company  Subsidiary  for any taxable  year or period that ends on or before
     the Closing Date and, with respect to any Straddle  Period,  the portion of
     such  Straddle  Period  deemed  to end on and  include  the  Closing  Date;
     provided,  that any  indemnification  for Non-Income Tax liabilities  under
     this Section  6.7(i)(ii) shall apply only to the extent such Non-Income Tax
     liabilities  exceed the amount by which  Non-Income  Taxes  reduce  Working
     Capital; and

               (iii) any liability for Taxes for which the Seller is responsible
     under Section 6.7(m).


                                       31



Any  indemnification  under this Section 6.7(i) shall give effect to any related
Tax Benefit and be net of any reserves and amounts recovered from third parties,
including amounts recovered through utility rate increases.  The indemnification
pursuant to this Section  6.7(i) shall be the sole and  exclusive  remedy of the
Purchaser  against  the  Seller  with  respect  to any  liability  for  Taxes in
connection with this Agreement.

          (j)  Indemnification  by  the  Purchaser.  Notwithstanding  any  other
provision of this  Agreement,  the Purchaser shall indemnify the Seller from and
against and in respect of:

               (i) any  liability for Taxes imposed on any of the Company or any
     Company  Subsidiary  for any taxable  year or period that begins  after the
     Closing Date and, with respect to any Straddle Period,  the portion of such
     Straddle Period beginning the day after the Closing Date; and

               (ii)  any   liability  for  Taxes  for  which  the  Purchaser  is
     responsible under Section 6.7(m).

Any  indemnification  under this Section 6.7(j) shall give effect to any related
Tax Benefit and be net of any reserves and amounts recovered from third parties,
including amounts recovered through utility rate increases.  The indemnification
pursuant to this Section  6.7(j) shall be the sole and  exclusive  remedy of the
Seller  against  the  Purchaser  with  respect  to any  liability  for  Taxes in
connection with this Agreement.

          (k) Contests.

               (i) Notice.  After the Closing Date, the Seller and the Purchaser
     each shall  notify the other party in writing  within  fifteen (15) days of
     the commencement of any Tax audit or administrative or judicial  proceeding
     affecting the Taxes of any of the Company or any Company  Subsidiary  that,
     if determined adversely to the taxpayer (the "Tax Indemnitee") or after the
     lapse of time would be grounds for  indemnification  under this Section 6.7
     by the other  party  (the "Tax  Indemnitor").  Such  notice  shall  contain
     factual  information  describing  any asserted Tax  liability in reasonable
     detail and shall include  copies of any notice or other  document  received
     from any Tax  authority in respect of any such asserted Tax  liability.  If
     either the Seller or the  Purchaser  fails to give the other  party  prompt
     notice of an asserted Tax liability as required under this Agreement,  then
     (A) if the Tax Indemnitor is precluded by the failure to give prompt notice
     from contesting the asserted Tax liability in any judicial forum, then such
     party shall not have any  obligation  to indemnify  the other party for any
     losses  arising  out of  such  asserted  Tax  liability  and (B) if the Tax
     Indemnitor  is not so precluded  from  contesting,  if such failure to give
     prompt notice results in a detriment to the Tax Indemnitor, then any amount
     which the Tax  Indemnitor  is  otherwise  required to pay  pursuant to this
     Section 6.7 with respect to such  liability  shall be reduced by the amount
     of such detriment.

                                       32



               (ii)  Control  of  Contests  Involving   Pre-Closing  Periods  or
     Straddle  Periods.  In the case of an audit or  administrative  or judicial
     proceeding  involving  any  asserted  liability  for Taxes  relating to any
     taxable  years or  periods  ending on or  before  the  Closing  Date or any
     Straddle Period of the Company or any Company Subsidiary,  the Seller shall
     have the right,  at its  expense,  to control  the conduct of such audit or
     proceeding; provided, however, that (i) the Seller shall keep the Purchaser
     reasonably  informed with respect to the status of such audit or proceeding
     and provide the Purchaser  with copies of all written  correspondence  with
     respect to such  audit or  proceeding  in a timely  manner and (ii) if such
     audit or proceeding  would be  reasonably  expected to result in a material
     increase in Tax  liability  of the Company or any  Company  Subsidiary  for
     which the  Purchaser  would be  liable  under  this  Section  6.7,  (A) the
     Purchaser may participate in the conduct of such audit or proceeding at its
     own  expense  and (B) the  Seller  shall  not  settle  any  such  audit  or
     proceeding  without the consent of  Purchaser,  which  consent shall not be
     unreasonably withheld.

               (iii) Control of Contests Involving  Post-Closing Periods. In the
     case of an audit or  administrative  or judicial  proceeding  involving any
     asserted  liability  for Taxes  relating  to any  taxable  years or periods
     beginning  after the Closing Date, the Purchaser  shall have the right,  at
     its expense, to control the conduct of such audit or proceeding;  provided,
     however,  that if such audit or proceeding would be reasonably  expected to
     result in a  material  increase  in Tax  liability  of the  Company  or any
     Company  Subsidiary for which the Seller would be liable under this Section
     6.7,  (A) the  Seller  may  participate  in the  conduct  of such  audit or
     proceeding  at its own expense and (B) the  Purchaser  shall not settle any
     such audit or proceeding  without the consent of the Seller,  which consent
     shall not be unreasonably withheld.

          (l) Termination Tax Sharing Agreements. On or before the Closing Date,
the  Seller  shall  cause all Tax  sharing,  Tax  allocation,  or Tax  indemnity
agreements  between the Seller or any Seller  affiliate on the one hand, and the
Company or any Company  Subsidiary on the other hand, to be terminated as of the
Closing  Date (or any  earlier  date) and the  agreements  will have no  further
effect for any taxable year (current, future, or past).

          (m)  Transfer  Taxes.  Notwithstanding  any  other  provision  of this
Agreement to the  contrary,  the  Purchaser and the Seller shall each pay 50% of
(i) all transfer  (including real property  transfer and  documentary  transfer)
Taxes  and  fees  imposed  with  respect  to the  sale and  transfer  of  Shares
contemplated  hereby and (ii) all sales,  use, gains  (including state and local
transfer gains), excise and other transfer or similar Taxes imposed with respect
to the sale and transfer of Shares contemplated hereby. The Seller shall execute
and deliver to the Purchaser at the Closing any  certificates or other documents
as the Purchaser may  reasonably  request to perfect any exemption from any such
transfer, documentary, sales, use, gains, excise or other Taxes, or to otherwise
comply  with any  applicable  reporting  requirements  with  respect to any such
Taxes.

          (n)  Retention of Tax  Attributes.  The Seller may elect to retain the
Tax attributes of the Company or any Company Subsidiary, including net operating

                                       33



losses and capital loss  carryovers of such  entities,  to the extent  permitted
under the Code,  Treasury  Regulations,  other  pronouncements  of the  Internal
Revenue Service, or other applicable law. At the Seller's request, the Purchaser
will,  and will cause any  Purchaser  Subsidiary,  the Company,  and any Company
Subsidiary  to,  take any actions  necessary  to effect  such  elections  of the
Seller.

          (o) Treatment of Purchase Price.  The Seller,  the Purchaser and their
respective  Subsidiaries  shall treat the Final  Purchase  Price as the purchase
price  for the  sale,  conveyance,  assignment,  transfer  and  delivery  to the
Purchaser of the Shares in preparing and filing their Tax Returns and shall take
no position inconsistent therewith in any proceeding before any taxing authority
or otherwise unless otherwise required pursuant to a final resolution of any Tax
for a taxable year that, under applicable law, is not subject to further appeal,
review or modification through proceedings or otherwise.

     Section 6.8 Financial Information.

          (a) After the Closing,  upon reasonable  written notice, the Purchaser
and the Seller  shall  furnish or cause to be  furnished to each other and their
respective  accountants,  counsel  and  other  representatives,   during  normal
business hours, such information (including records pertinent to the Company) as
is reasonably necessary for financial reporting and accounting matters.

          (b) The  Purchaser  shall  retain all of the books and  records of the
Company  and the  Company  Subsidiaries  after the  Closing  Date for so long as
required by law. After the end of such period, before disposing of such books or
records,  the Purchaser  shall give notice to such effect to the Seller and give
the Seller an  opportunity to remove and retain all or any part of such books or
records as the Seller may select.

     Section 6.9  Termination  of  Affiliate  Contracts.  Except as set forth on
Section 6.9 of the Seller Disclosure Schedule and except as agreed to in writing
by the  Seller  and  the  Purchaser,  all  Affiliate  Contracts,  including  any
agreements  or  understandings  (written or oral) with  respect  thereto,  shall
terminate  simultaneously  with  the  Closing  without  any  further  action  or
liability on the part of the parties thereto.  Notwithstanding the foregoing, in
the absence of a written  agreement,  the provision of any services  (similar to
those  contemplated  by the preceding  sentence) by the Seller to the Company or
any  Company  Subsidiary  from and  after the  Closing,  which  services  may be
provided by the Seller in its sole discretion, shall be for the convenience, and
at the expense, of the Purchaser, upon mutually agreed terms.

     Section 6.10 Seller's Name. The Purchaser shall not acquire,  nor shall the
Company  and its  Subsidiaries  retain,  any  rights  to the name  "AES" (or any
derivation  thereof) or any trademark,  trade name or symbol related thereto. As
soon as reasonably  practicable  after the Closing but not later than sixty (60)
days after the  Closing  Date,  the  Purchaser  shall  cause the Company and its
Subsidiaries  to remove  the name  "AES"  (or any  derivation  thereof)  and all
trademarks,  trade names or symbols  related  thereto  from the  properties  and
assets of the Company and its Subsidiaries.

     Section  6.11  Further  Assurances.  Each  party  will,  and will cause its
Subsidiaries  to, execute such further  documents or  instruments  and take such

                                       34



further  actions as may  reasonably  be requested by the other party in order to
consummate the transaction in accordance with the terms hereof.

     Section 6.12 Prepayment Alternative.  Notwithstanding anything contained in
this  Agreement to the  contrary,  the  Purchaser  shall waive the condition set
forth in Section  7.2(d) if so  requested  by the Seller in which  event  Seller
shall cause the Company and the Company Subsidiaries to pay off the indebtedness
pertaining  to the Seller  Required  Consents  and such  indebtedness  shall not
constitute Assumed Obligations for purposes of this Agreement (including Section
1.2(b)).

                                  ARTICLE VII
                                   CONDITIONS

     Section 7.1  Conditions  to Each Party's  Obligation to Effect the Closing.
The respective  obligations of each party to effect the Closing shall be subject
to the satisfaction on or prior to the Closing Date of the following conditions,
except,  to the extent  permitted by applicable law, that such conditions may be
waived in writing  pursuant  to Section  9.3 by the joint  action of the parties
hereto:

          (a) No Injunction.  No temporary  restraining  order or preliminary or
permanent  injunction  or other order by any  federal or state court  preventing
consummation of the transactions  contemplated hereby shall have been issued and
be continuing in effect, and the transactions contemplated hereby shall not have
been  prohibited  under  any  applicable  federal  or  state  law or  regulation
(collectively,  "Restraints"); provided, however, that each of the parties shall
have used all reasonable efforts to prevent the entry of any such Restraints and
to appeal as promptly as possible any such Restraints that may be entered.

          (b) Statutory  Approvals.  The Seller Required Statutory Approvals and
the Purchaser Required Statutory  Approvals shall have been obtained at or prior
to the Closing Date by a Final Order.  A "Final  Order" shall mean action by the
relevant regulatory authority which has not been reversed, stayed, enjoined, set
aside,  annulled  or  suspended,  with  respect  to  which  any  waiting  period
prescribed  by  law  before  the  transactions   contemplated   thereby  may  be
consummated  has expired  (but without the  requirement  for  expiration  of any
applicable  rehearing or appeal  period),  and as to which all conditions to the
consummation of such  transactions  prescribed by law,  regulation or order have
been satisfied.

          (c) HSR Act. All  applicable  waiting  periods under the HSR Act shall
have expired or been terminated.

          (d) Stock Purchase Agreement. The Stock Purchase Agreement between the
Seller and the Purchaser of even date herewith  regarding the sale of all of the
issued and  outstanding  shares of CILCORP Inc.  shall have been  consummated in
accordance with its terms.

     Section  7.2  Conditions  to  Obligation  of the  Purchaser  to Effect  the
Closing.  The obligation of the Purchaser to effect the Closing shall be further
subject to the  satisfaction,  on or prior to the Closing Date, of the following
conditions,  except as may be waived by the  Purchaser  in writing  pursuant  to
Section 9.3:

                                       35



          (a)  Performance of  Obligations  of the Seller.  The Seller will have
performed in all material respects its agreements and covenants  contained in or
contemplated  by this  Agreement  which are required to be performed by it at or
prior to the Closing.

          (b) Representations and Warranties. The representations and warranties
of the Seller set forth in this  Agreement  shall be true and correct (i) on and
as of the date  hereof  and  (ii) on and as of the  Closing  Date  with the same
effect as though such  representations and warranties had been made on and as of
the Closing Date (except for representations and warranties that expressly speak
only as of a specific  date or time  which  need only be true and  correct as of
such date or time)  except in each of cases  (i) and (ii) for such  failures  of
representations  or warranties to be true and correct  (without giving effect to
any materiality  qualification or standard contained in any such representations
and warranties) which would not result in a Company Material Adverse Effect.

          (c)  Closing  Certificates.   The  Purchaser  shall  have  received  a
certificate signed by the Seller, dated the Closing Date, to the effect that the
conditions  set forth in Section  7.2(a) and Section  7.2(b) have been satisfied
and to the further effect that there has not been any development or combination
of developments  affecting the Company or any Company  Subsidiary,  of which the
Seller or the Company has knowledge,  that would have a Company Material Adverse
Effect.

          (d) Seller  Required  Consents.  The  Seller  Required  Consents,  the
failure of which to obtain would have a Company Material  Adverse Effect,  shall
have been obtained.

          (e)  Regulatory  Approvals.  The  Final  Orders  of  any  Governmental
Authority having authority over the transactions  contemplated by this Agreement
shall  not  impose  terms or  conditions  (which  are in  addition  to terms and
conditions  due to  existing  laws,  rules or  regulations),  which would have a
Company  Material  Adverse  Effect  or  a  Purchaser  Material  Adverse  Effect,
provided,  however, that any terms or conditions imposed by the FERC, the FTC or
the Antitrust  Division of the DOJ relating to market  power,  including but not
limited to,  divestiture of generation or  transmission  improvements,  will not
constitute a Company  Material  Adverse Effect or a Purchaser  Material  Adverse
Effect.

          (f) Estoppel  Letter.  The Purchaser shall have received a letter from
Caterpillar  waiving its termination  rights pursuant to Section 4 of Appendix E
of the  Service  Agreement  dated as of  December  29,  1999 and  amended  as of
February 15, 2001 between Central  Illinois Light Company and  Caterpillar  with
respect to the transactions contemplated by this Agreement.

     Section 7.3  Conditions  to Obligation of the Seller to Effect the Closing.
The  obligation of the Seller to effect the Closing shall be further  subject to
the satisfaction,  on or prior to the Closing Date, of the following conditions,
except as may be waived by the Seller in writing pursuant to Section 9.3:

          (a) Performance of Obligations of the Purchaser. The Purchaser (and/or
its appropriate  Subsidiaries)  will have performed in all material respects its

                                       36



agreements and covenants  contained in or  contemplated  by this Agreement which
are required to be performed by it at or prior to the Closing Date.

          (b) Representations and Warranties. The representations and warranties
of the  Purchaser set forth in this  Agreement  shall be true and correct (i) on
and as of the date hereof and (ii) on and as of the  Closing  Date with the same
effect as though such  representations and warranties had been made on and as of
the Closing Date (except for representations and warranties that expressly speak
only as of a specific  date or time  which  need only be true and  correct as of
such date or time)  except in each of cases  (i) and (ii) for such  failures  of
representations  or warranties to be true and correct  (without giving effect to
any materiality  qualification or standard contained in any such representations
and warranties)  which would not prevent,  materially delay or materially impair
the  Purchaser's  ability to consummate  the  transaction  contemplated  by this
Agreement.

          (c) Closing Certificates. The Seller shall have received a certificate
signed  by the  Purchaser,  dated  the  Closing  Date,  to the  effect  that the
conditions  set forth in Section  7.3(a) and Section  7.3(b) have been satisfied
and to the further effect that, as of the respective dates of reports filed with
the SEC by the Purchaser under the Securities Act and Exchange Act since January
1, 2001,  and as of the Closing  Date,  such  reports did not contain any untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein or necessary  to make the  statements  therein,  in light of the
circumstances under which they were made, not misleading.

          (d) Purchaser Required Consents.  The Purchaser Required Consents, the
failure of which to obtain would prevent,  materially delay or materially impair
the  Purchaser's  ability to consummate the  transactions  contemplated  by this
Agreement, shall have been obtained.

                                  ARTICLE VIII
                                   TERMINATION

     Section 8.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date (the "Termination Date"):

          (a) by mutual written consent of the Seller and the Purchaser;

          (b) by the  Purchaser  or the  Seller,  if any state or  federal  law,
order,  rule or  regulation  is  adopted  or issued,  which has the  effect,  as
supported  by the  written  opinion  of  outside  counsel  for  such  party,  of
prohibiting  the  Closing,  or by any party  hereto  if any  court of  competent
jurisdiction  in the  United  States or any state  shall  have  issued an order,
judgment or decree permanently  restraining,  enjoining or otherwise prohibiting
the  Closing,  and such order,  judgment or decree  shall have become  final and
nonappealable;

          (c) by the  Purchaser  or the Seller,  by written  notice to the other
party,  if the Closing Date shall not have  occurred on or before March 27, 2003
(the "Initial Termination Date"); provided, however, that the right to terminate
the  Agreement  under this  Section  8.1(c)  shall not be available to any party
whose  failure  to  fulfill  any  obligation  under  this  Agreement  shall have
proximately contributed to the failure of the Closing Date to occur on or before

                                       37



such date; and provided,  further,  that if on the Initial  Termination Date the
conditions to the Closing set forth in Sections 7.1(b), 7.1(c),  7.1.(d), 7.2(e)
and/or  7.2(f) shall not have been  fulfilled  but all other  conditions  to the
Closing  shall be  fulfilled  or shall be capable of being  fulfilled,  then the
Initial Termination Date shall be extended for a twelve-month period;

          (d) by the Purchaser,  by written notice to the Seller, if there shall
have been a material  breach of any  representation  or warranty,  or a material
breach of any  covenant or  agreement of the Seller  hereunder,  which  breaches
would result in a Company  Material  Adverse  Effect,  and such breach shall not
have been remedied within thirty (30) days after receipt by the Seller of notice
in  writing  from the  Purchaser,  specifying  the  nature  of such  breach  and
requesting that it be remedied or the Purchaser shall not have received adequate
assurance  of a cure of such  breach  within  such thirty (30) day period or the
Seller  shall not have made a capital  contribution  to the Company in an amount
equal to the expected damages from such breach;

          (e) by the Seller, by written notice to the Purchaser,  if there shall
have been a material  breach of any  representation  or warranty,  or a material
breach of any covenant or agreement of the Purchaser  hereunder,  which breaches
would prevent,  materially delay or materially impair the Purchaser's ability to
consummate the  transactions  contemplated  by this  Agreement,  and such breach
shall not have been  remedied  within  thirty  (30) days  after  receipt  by the
Purchaser  of notice in writing from the Seller,  specifying  the nature of such
breach and requesting  that it be remedied or the Seller shall not have received
adequate assurance of a cure of such breach within such thirty (30) day period;

          (f) by the  Purchaser  or the Seller,  by written  notice to the other
party,  if the  condition  to each  party's  obligation  to effect  the  Closing
contained in Section 7.1(d) cannot be met; or

          (g) by the Purchaser,  by written notice to the Seller,  to the extent
the  Purchaser  is not in  breach of this  Agreement,  if the  condition  to the
Purchaser's  obligation to effect the Closing contained in Section 7.2(e) cannot
be met in spite of the Purchaser's use of its best efforts to obtain such Seller
Required  Regulatory  Approvals and  Purchaser  Required  Regulatory  Approvals,
including seeking to exhaust any rehearing or refiling opportunities relating to
such approvals.

     Section  8.2 Effect of  Termination.  In the event of  termination  of this
Agreement by either the Seller or the Purchaser  pursuant to Section 8.1,  there
shall be no liability on the part of either the Seller or the Purchaser or their
respective officers or directors hereunder, except (a) that nothing herein shall
relieve any party from liability for any breach of any representation, warranty,
covenant or agreement of such party  contained  in this  Agreement  and (b) that
Sections 8.2, 9.2, 9.4, 9.6, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13, and the agreement
contained in the last sentence of Section 6.1 shall survive the termination.

                                   ARTICLE IX
                               GENERAL PROVISIONS

     Section  9.1  Survival of  Obligations.  All  representations,  warranties,
covenants, obligations and agreements of the parties contained in this Agreement

                                       38



or in any instrument, certificate, opinion or other writing provided for herein,
shall not survive the Closing;  provided,  however,  that the representation and
warranty of the Seller  contained  in Section  3.2(b) and the  covenants  of the
Seller and the  Purchaser  contained in Sections  6.4,  6.5, 6.6, 6.7, 6.8, 6.9,
6.10,  6.11 and the second sentence of Section 6.1 shall survive the Closing and
provided further,  that the prohibition on solicitation for employment contained
in  Section  5.1(o)  shall  continue  in full  force  and  effect  for 12 months
following the Closing Date.

     Section 9.2  Amendment  and  Modification.  This  Agreement may be amended,
modified  and  supplemented  in any  and all  respects,  but  only by a  written
instrument  signed by each of the parties  hereto  expressly  stating  that such
instrument is intended to amend, modify or supplement this Agreement.

     Section 9.3  Extension;  Waiver.  At any time prior to the Closing  Date, a
party  hereto  may  (a)  extend  the  time  for  the  performance  of any of the
obligations or other acts of the other party hereto,  (b) waive any inaccuracies
in the  representations  and  warranties  contained  herein  or in any  document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions  contained  herein,  to the extent  permitted by applicable  law. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an  instrument  in  writing  signed on behalf of such
party.  The failure of any party to this  Agreement  to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.

     Section 9.4 Expenses.  All costs and expenses  incurred in connection  with
this  Agreement and the  transactions  contemplated  hereby shall be paid by the
party incurring such expenses except that the fee payable in connection with the
filing  required by the HSR Act shall be shared  one-half by Seller and one-half
by Purchaser. Notwithstanding the foregoing, in any action or proceeding brought
to enforce any provisions of this  Agreement,  or where any provision  hereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable  attorneys'  fees and  disbursements  in  addition  to its  costs and
expenses and any other available remedy.

     Section 9.5 Notices. All notices and other  communications  hereunder shall
be in writing and shall be deemed given (a) when delivered personally,  (b) when
sent by reputable  overnight  courier service,  or (c) when telecopied (which is
confirmed by copy sent within one business day by a reputable  overnight courier
service) to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):

              (i) If to the Seller, to

               The AES Corporation
               1001 N. 19th Street
               Arlington, VA  22209
               Attn:  General Counsel
               Telecopy:     (703) 528-4510
               Telephone:    (703) 522-1315


                                       39


               with a copy to

               Skadden, Arps, Slate, Meagher & Flom LLP
               1440 New York Avenue, N.W.
               Washington, D.C.  20005
               Attn:  Pankaj K. Sinha, Esq.
               Telecopy:     (202) 393-5760
               Telephone:    (202) 371-7000

               and with a copy to

               Baker & McKenzie
               One Prudential Plaza
               130 East Randolph Drive
               Chicago, Illinois  60601
               Attn:  James P. O'Brien, Esq.
               Telecopy:    (312) 861-2899
               Telephone:  (312) 861-8000

               and

             (ii) if to the Purchaser, to

               Ameren Corporation
               One Ameren Plaza
               1901 Chouteau Avenue
               St. Louis, MO  63103
               Attn:  Steven R. Sullivan, Esq.
               Vice President/General Counsel and Secretary
               Telecopy:     (314) 554-4014
               Telephone:    (314) 554-2098

               with a copy to

               Jones, Day, Reavis & Pogue
               77 West Wacker Drive
               Chicago, Illinois  60601-1692
               Attn:  William J. Harmon, Esq.
               Telecopy:     (312) 782-8585
               Telephone:    (312) 782-3939

     Section 9.6 Entire Agreement; No Third Party Beneficiaries. This Agreement,
the  Confidentiality  Agreement,  the Side  Agreement  Relating  to  CILCO/ENRON
Contract of even date herewith among the Seller, CILCORP Inc. and the Purchaser,
and the Stock  Purchase  Agreement  between the Seller and the Purchaser of even
date  herewith (a)  constitute  the entire  agreement  and  supersede  all prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject  matter  hereof and  thereof and (b) are not  intended to

                                       40



confer, and shall not confer,  upon any Person other than the parties hereto and
thereto  and  Company  Indemnified  Parties  as set  forth  in  Section  6.4 any
remedies,  claims of liability or  reimbursement,  causes of action or any other
rights whatsoever.

     Section 9.7  Severability.  Any term or provision of this Agreement that is
held by a court of competent jurisdiction or other authority to be invalid, void
or  unenforceable  in any  situation  in any  jurisdiction  shall not affect the
validity or  enforceability  of the remaining terms and provisions hereof or the
validity or  enforceability  of the  offending  term or  provision  in any other
situation  or in any other  jurisdiction.  If the final  judgment  of a court of
competent  jurisdiction or other  authority  declares that any term or provision
hereof is  invalid,  void or  unenforceable,  the  parties  agree that the court
making such  determination  shall have the power to reduce the scope,  duration,
area or  applicability  of the term or provision,  to delete  specific  words or
phrases, or to replace any invalid, void or unenforceable term or provision with
a term or  provision  that is valid and  enforceable  and that comes  closest to
expressing the intention of the invalid or unenforceable term or provision.

     Section  9.8  Governing  Law.  This  Agreement  shall  be  governed  by and
construed in accordance  with the laws of the State of Delaware  without  giving
effect to the principles of conflicts of law thereof.

     Section 9.9 Venue. Each of the parties hereto (a) consents to submit itself
to the  personal  jurisdiction  of any  federal  court  located  in the State of
Delaware or any Delaware state court in the event any dispute arises out of this
Agreement,  (b) agrees that it shall not attempt to deny or defeat such personal
jurisdiction  by motion or other  request  for leave from any such court and (c)
agrees  that it shall not bring any action  relating  to this  Agreement  in any
court other than a federal or state court sitting in the State of Delaware.

     Section 9.10 Waiver of Jury Trial and Certain  Damages.  Each party to this
Agreement  waives,  to the fullest extent  permitted by applicable  law, (a) any
right  it may  have  to a  trial  by  jury in  respect  of any  action,  suit or
proceeding arising out of or relating to this Agreement and (b) any right it may
have to receive  damages  from any other party based on any theory of  liability
for any special,  indirect,  consequential  (including lost profits) or punitive
damages.

     Section  9.11  Specific   Performance.   The  parties   hereto  agree  that
irreparable  damage  would  occur in the  event  any of the  provisions  of this
Agreement were not to be performed in accordance  with the terms hereof and that
the parties  shall be entitled to specific  performance  of the terms  hereof in
addition to any other remedies at law or in equity.

     Section  9.12  Assignment.  Neither this  Agreement  nor any of the rights,
interests  or  obligations  hereunder  shall be  assigned  by any  party  hereto
(whether by operation of law or otherwise)  without the prior written consent of
the other party; provided,  however, that the Seller may transfer the Units to a
wholly  owned  Subsidiary  of the  Seller as long as such  Subsidiary  agrees in
writing  to be  bound by the  applicable  terms  of this  Agreement  and no such
assignment shall relieve the Seller from its obligations hereunder.

                                       41




     Section 9.13 Interpretation.  When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement,  respectively,
unless otherwise indicated. The table of contents and headings contained in this
Agreement  are for  reference  purposes only and shall not affect in any way the
meaning or  interpretation  of this  Agreement.  Whenever  the words  "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without  limitation." Any item or other matter referenced
or disclosed in one section of the Seller  Disclosure  Schedule or the Purchaser
Disclosure Schedule, as the case may be, shall be deemed to have been referenced
or disclosed in all sections of such Disclosure Schedule where such reference or
disclosure  is  required.  In the event an  ambiguity  or  question of intent or
interpretation  arises,  this Agreement shall be construed as if drafted jointly
by the parties  and no  presumption  or burden of proof shall arise  favoring or
disfavoring  any party by virtue of the  authorship  of any  provisions  of this
Agreement.

     Section  9.14  Counterparts;  Effect.  This  Agreement  may be executed and
delivered  (including via facsimile) in one or more counterparts,  each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement.

                                       42





     IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement
to be signed by their  respective  officers  thereunto duly authorized as of the
date first written above.




                                       THE AES CORPORATION



                                       By: /s/ Lenny M. Lee
                                          ------------------------
                                       Name:   Lenny M. Lee
                                       Title:  Vice President


                                       AMEREN CORPORATION



                                       By: /s/ Steven R. Sullivan
                                           ------------------------
                                       Name:   Steven R. Sullivan
                                       Title:  Vice President & General Counsel




                                       43