Ipalco Enterprises, Inc. – ‘S-4’ on 4/3/02 – EX-11.12

On:  Wednesday, 4/3/02   ·   Accession #:  950103-2-333   ·   File #:  333-85438

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Registration of Securities Issued in a Business-Combination Transaction   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4         Registration of Securities Issued in a               140    727K 
                          Business-Combination Transaction                       
 2: EX-1        Underwriting Agreement                                16     87K 
 3: EX-3.1      Articles of Incorporation/Organization or By-Laws     28     97K 
 4: EX-3.2      Articles of Incorporation/Organization or By-Laws     13     53K 
 5: EX-4.1      Instrument Defining the Rights of Security Holders   102    365K 
 6: EX-4.2      Instrument Defining the Rights of Security Holders    29    113K 
 7: EX-4.3      Instrument Defining the Rights of Security Holders   147±   648K 
 8: EX-4.4      Instrument Defining the Rights of Security Holders   295±  1.28M 
 9: EX-4.6      Instrument Defining the Rights of Security Holders     2     15K 
10: EX-5        Opinion re: Legality                                   2     14K 
19: EX-10.09    Material Contract                                      2     17K 
11: EX-10.1     Material Contract                                     89±   293K 
20: EX-10.10    Material Contract                                     67±   268K 
21: EX-10.11    Material Contract                                      8     63K 
23: EX-10.13    Material Contract                                      8±    39K 
24: EX-10.14    Material Contract                                      4±    25K 
25: EX-10.15    Material Contract                                      8±    39K 
26: EX-10.16    Material Contract                                      6±    27K 
12: EX-10.2     Material Contract                                     55±   200K 
13: EX-10.3     Material Contract                                    116±   276K 
14: EX-10.4     Material Contract                                     67±   228K 
15: EX-10.5     Material Contract                                     13±    70K 
16: EX-10.6     Material Contract                                     63±   261K 
17: EX-10.7     Material Contract                                     11±    49K 
18: EX-10.8     Material Contract                                      8±    38K 
22: EX-11.12    Statement re: Computation of Earnings Per Share       58    225K 
27: EX-12       Statement re: Computation of Ratios                    1     11K 
28: EX-21       Subsidiaries of the Registrant                         1     11K 
29: EX-23.2     Consent of Experts or Counsel                          1     11K 
30: EX-25       Statement re: Eligibility of Trustee                  26    100K 
31: EX-99.1     Miscellaneous Exhibit                                 12     52K 
32: EX-99.2     Miscellaneous Exhibit                                  3     16K 
33: EX-99.3     Miscellaneous Exhibit                                  2     13K 
34: EX-99.4     Miscellaneous Exhibit                                  2     14K 
35: EX-99.5     Miscellaneous Exhibit                                  3     13K 

EX-11.12   —   Statement re: Computation of Earnings Per Share
Exhibit Table of Contents

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                                                                   Exhibit 10.12

CREDIT AGREEMENT

BY AND AMONG

 INDIANAPOLIS POWER & LIGHT COMPANY,

THE VARIOUS FINANCIAL INSTITUTIONS
 PARTY HERETO,

 THE FIRST NATIONAL BANK OF CHICAGO,
 AS SYNDICATION AGENT,

THE INDUSTRIAL BANK OF JAPAN, LIMITED,
 AS DOCUMENTATION AGENT,

 AND

 ABN AMRO BANK N.V.,
 AS ADMINISTRATIVE AGENT

DATED AS OF MAY 28, 1999

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 TABLE OF CONTENTS

                                                                            Page

                 ARTICLE I
                           DEFINITIONS AND ACCOUNTING AND OTHER TERMS..........1
Section 1.1. Certain Defined Terms.............................................1
Section 1.2.  Accounting Terms.................................................7
Section 1.3.  Other Terms......................................................7

                ARTICLE II
                                  AMOUNT AND TERMS OF THE LOANS................8
Section 2.1.  Advances.........................................................8
         (A)  Amount...........................................................8
         (B)  Notice and Manner of Borrowing...................................8
         (C)  Interest.........................................................9
         (D)  Payments.........................................................9
         (E)      Maturity....................................................10
         (F)      Reduction or Termination of the Commitments.................10
Section 2.2.  Notes...........................................................10
Section 2.3.  Computation of Interest.........................................10
Section 2.4.  Making of Payments and Prepayments,                               
                           Proration and Setoff...............................10
         (A)      Making of Payments and Prepayments..........................10
         (B)      Setoff......................................................11
         (C)      Proration of Payments.......................................11
         (D)      Unconditional Obligations and No Deductions.................12
Section 2.5.  Payment on Non-Business Days....................................12
Section 2.6.  Use of Proceeds.................................................12
Section 2.7.  Loan Advancements and Payments..................................12
Section 2.8.  Facility Fee....................................................13
Section 2.9.  Reimbursement of Costs..........................................14
Section 2.10. The Agents......................................................14
         (A)      Appointment, Powers and Immunities..........................14
         (B)      Reliance by Administrative Agent............................15
         (C)      Defaults....................................................15
         (D)      Rights as a Bank............................................15
         (E)      Indemnification.............................................16
         (F)      Non-Reliance on Agents and other Banks......................16
         (G)      Failure to Act..............................................16
(H)      Resignation or Removal of Administrative             
                           Agent..............................................16
Section 2.11.  Conversion.....................................................17
Section 2.12.  Increased Costs................................................17

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Section 2.13.  Limitation on Types of Advances................................19
Section 2.14.  Illegality.....................................................19
Section 2.15.  Pro Rata Treatment.............................................20
Section 2.16.  Funding Losses.................................................20
Section 2.17.  Reference Banks................................................20

                 ARTICLE III
                                      CONDITIONS OF LENDING...................20
Section 3.1.  Conditions Precedent to all Advances............................20
Section 3.2.  Conditions Precedent to Initial Advance.........................21

                ARTICLE IV
                                 REPRESENTATIONS AND WARRANTIES...............23
Section 4.1.  Representations and Warranties of                                 
                           Borrower...........................................23
         (A)      Organization and Existence..................................23
         (B)      Authorization and Absence of Defaults.......................23
         (C)      Acquisition of Consents.....................................24
         (D)      Validity and Enforceability.................................24
         (E)      Financial Information.......................................24
         (F)      No Litigation...............................................24
         (G)      Regulation U................................................25
         (H)      Absence of Adverse Agreements...............................25
         (I)      Taxes.......................................................25
         (J)      Accuracy of Representations and Warranties..................25
         (K)      Investment Company Act......................................26
         (L)      Solvency....................................................26
(M)      Licenses, Registrations, and Compliance              
                           with Laws..........................................26
(N)      Principal Place of Business; Books and               
                           Records............................................26
         (O)      Title to Assets and Properties..............................27
         (P)      Material Adverse Change.....................................27
         (Q)      Employee Benefit Plans......................................27
         (R)      Public Utility Holding Company Act..........................27
         (S)      Environmental Matters.......................................27
         (T)      Pari Passu Indebtedness.....................................29
         (U)      Year 2000...................................................29

 ARTICLE V
                              COVENANTS OF BORROWER...........................29
Section 5.1.  Affirmative Covenants of Borrower Other                           
                                   Than Reporting Requirements................29
         (A)      Payment of Taxes............................................29

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         (B)      Preservation of Existence...................................30
         (C)      Compliance with Laws........................................30
         (D)      Visitation Rights...........................................30
         (E)      Keeping of Records and Books of Account.....................31
         (F)      Maintenance of Properties...................................31
         (G)      Other Documents.............................................31
         (H)      Environmental Liability.....................................31
         (I)      Additional Assurances.......................................32
         (J)      Purposes....................................................32
         (K)      ERISA Compliance............................................32
Section 5.2.  Negative Covenants of Borrower..................................32
         (A)      Dissolution.................................................33
         (B)      Change in Nature of Business................................33
Section 5.3.  Reporting Requirements..........................................33

ARTICLE VI
                               EVENTS OF DEFAULT..............................35
Section 6.1.  Events of Default...............................................35

 ARTICLE VII
                                 REMEDIES OF BANKS............................37

ARTICLE VIII
                                 MISCELLANEOUS................................37
Section 8.1.  Consent to Jurisdiction and Service of                            
                                   Process....................................37
Section 8.2.  Rights and Remedies Cumulative..................................38
Section 8.3.  Delay or Omission Not Waiver....................................38
Section 8.4.  Amendments......................................................38
Section 8.5.  Addresses for Notices...........................................39
Section 8.6.  Costs, Expenses and Taxes.......................................39
Section 8.7.  Participations..................................................40
Section 8.8.  Binding Effect; Assignment......................................40
Section 8.9.  Actual Knowledge................................................42
Section 8.10.  Governing Law..................................................42
Section 8.11.  Severability of Provisions.....................................42
Section 8.12.  Headings.......................................................42
Section 8.13.  Extension of the Commitment                                      
                                   Termination Date...........................42
Section 8.14.  Counterparts...................................................42

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EXHIBITS                                                                        

A.       Form of Revolving Note                               
B.       Form of Advance Request                              
C.       Form of Opinion of Counsel                           

SCHEDULES                                                                       

I.       Banks and Commitments                                
II.      Pricing Schedule                                     

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CREDIT AGREEMENT

     THIS  CREDIT  AGREEMENT,  dated  as  of  May  28,  1999,  is by  and  among
INDIANAPOLIS POWER & LIGHT COMPANY,  an Indiana  corporation  ("Borrower"),  the
undersigned  financial  institutions  (together with their respective successors
and assigns, collectively the "Banks" and individually each a "Bank"), THE FIRST
NATIONAL  BANK  OF  CHICAGO  ("First   Chicago"),   as  syndication  agent  (the
"Syndication  Agent"),  THE INDUSTRIAL BANK OF JAPAN,  LIMITED, as documentation
agent  (the  "Documentation   Agent"),  and  ABN  AMRO  BANK  N.V.  ("ABN"),  as
administrative  agent  for the  Banks  (in such  capacity,  the  "Administrative
Agent").                                                                        

W I T N E S S E T H:
 - - - - - - - - - -

     WHEREAS,  Borrower  wishes,  from  time to  time,  to  obtain  loans in the
principal  sum of up to One Hundred Fifty Million  Dollars  ($150,000,000),  and
Banks are willing to make such loans to  Borrower,  on the terms and  conditions
hereinafter set forth:                                                          

NOW, THEREFORE, the parties hereto agree as follows:                  

 ARTICLE I

DEFINITIONS AND ACCOUNTING AND OTHER TERMS

     Section  1.1.  Certain  Defined  Terms.  As  used in  this  Agreement,  the
following words, terms and/or phrases shall have the following meanings and such
meanings  shall be applicable to both the singular and plural forms of the terms
defined:                                                                        

"ABN" is defined in the first paragraph hereof.                       

"Administrative Agent" is defined in the first paragraph hereof.      

     "Advance" means a borrowing hereunder consisting of the aggregate amount of
the several  Loans made by the Banks to Borrower  pursuant to Section 2.1 hereof
at the same interest rate and for the same Interest Period.                     

     "Advance  Request"  shall have the meaning set forth in Section 2.7 of this
Agreement.                                                                      

     "Agents" means the  Administrative  Agent,  the  Syndication  Agent and the
Documentation Agent.                                                            

     "Aggregate Commitment" means the aggregate of the Commitments of all of the
Banks, as reduced from time to time pursuant to the terms hereof.               

3293678.4 32102 1341C 98469554                                                  

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     "Agreement" means this Credit Agreement,  as amended or otherwise  modified
from time to time.                                                              

"Applicable Margin" - see the Pricing Schedule.                       

     "Banks" or "Bank" has the meaning  assigned in the first  paragraph of this
Agreement.                                                                      

     "Base Rate" means the rate per annum (rounded upwards, if necessary, to the
next 1/16 of 1%) equal to the  greater  of (a) the Prime  Rate in effect on such
day,  and (b) the  Federal  Funds  Effective  Rate in  effect  on such  day plus
one-half (1/2) of one percent (1%) per annum. For purposes hereof,  "Prime Rate"
means the rate of interest per annum publicly announced from time to time by ABN
as its prime commercial  lending rate at its Chicago office;  each change in the
Prime Rate shall be  effective on the date such change is  announced.  The prime
rate is a reference rate and does not  necessarily  represent the lowest or best
rate charged to any customer by ABN.                                            

    "Base Rate Advance" means an Advance that bears interest at the Base Rate.

"Base Rate Loan" means a Loan that bears interest at the Base Rate.   

     "Borrower"  has  the  meaning  assigned  in the  first  paragraph  of  this
Agreement.                                                                      

     "Business  Day" means any day on which banks are open for  business  (other
than a  Saturday  or  Sunday)  in New York,  New  York,  Chicago,  Illinois  and
Indianapolis,  Indiana,  and, if the  transaction  involves a LIBOR Advance,  on
which dealings are carried on in the London eurodollar interbank market.        

     "CERCLA" means the Comprehensive  Environmental Response,  Compensation and
Liability Act of 1980, as amended.                                              

     "CERCLIS"  means  the  Comprehensive  Environmental  Response  Compensation
Liability Information System List.                                              

     "Closing Date" means the date on which all  conditions  precedent set forth
in Section 3.2 are satisfied or waived by all Banks.                            

     "Commitment"  means,  for each Bank,  its  commitment  to make Loans as set
forth in Article II hereof,  as such commitment may be reduced from time to time
in  accordance  with the terms of this  Agreement.  The  amount  of the  initial
Commitment of each Bank is set forth on Schedule I.                             

     "Commitment  Termination  Date"  means  May 26,  2000 (as such  date may be
extended pursuant to Section 8.13).                                             

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     "Default"  means an event or  condition  which with the giving of notice or
lapse of time or both would become an Event of Default.                         

"Documentation Agent" is defined in the first paragraph hereof.       

     "Dollars"  and the sign "$" mean  lawful  money  of the  United  States  of
America.                                                                        

     "Environmental Laws" means all applicable federal, state or local statutes,
laws,  ordinances,  codes, rules and regulations  (including consent decrees and
administrative  orders applicable to Borrower and its Subsidiaries)  relating to
public health and safety and protection of the environment.                     

"ERISA" - see Section 5.1(K).                                         

     "Events of Default" has the meaning assigned to that term in Section 6.1 of
this Agreement.                                                                 

     "Exhibit"  means,  when followed by a letter,  the exhibit attached to this
Agreement  bearing that letter and by such reference fully  incorporated in this
Agreement.                                                                      

"Facility Fee Rate" - see the Pricing Schedule.                       

     "Federal Funds Effective Rate" means,  for any day, the weighted average of
the rates for overnight  Federal funds  transactions with members of the Federal
Reserve  System  arranged by Federal  funds  brokers,  as  published on the next
succeeding  Business Day by the Federal  Reserve  Bank of New York,  or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such  transactions  received by ABN from three Federal
funds brokers of recognized standing selected by it.                            

     "FERC" means the Federal  Energy  Regulatory  Commission  and any successor
agency thereto.                                                                 

     "FERC Order" means the order issued by the FERC to Borrower  dated July 29,
1998, Docket No.  ES98-34-000,  or an extension,  renewal or replacement of such
order in form and substance satisfactory to the Banks.                          

     "Financing Documents" means,  collectively,  this Agreement, the Notes, and
each other  agreement,  instrument  or  document  now or  hereafter  executed in
connection herewith or therewith.                                               

"First Chicago" is defined in the first paragraph hereof.             

     "FPA"  means  the  Federal  Power  Act,  as  amended,  and  all  rules  and
regulations promulgated thereunder.                                             

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     "GAAP" means generally accepted  accounting  principles in effect from time
to time in the United States of America.                                        

"Hazardous Materials" - see Section 5.1(H).                           

     "Indebtedness"  means all  obligations  and  liabilities of Borrower to any
Person (including without limitation all debts, claims and indebtedness) whether
primary, secondary, direct, contingent, fixed or payable, heretofore, now and/or
from time to time hereafter owing, due or payable,  however evidenced,  created,
incurred,  acquired or owing and however arising,  whether under written or oral
agreement,  operation  of law,  or  otherwise.  Indebtedness  includes,  without
limiting the generality of the foregoing:  (a) obligations or liabilities of any
Person that are secured by any Lien upon property  owned by Borrower even though
Borrower  has not  assumed or become  liable for the payment  therefor;  and (b)
obligations  or  liabilities  created  or  arising  under  any  lease of real or
personal property,  or conditional sale or other title retention  agreement with
respect to property used and/or acquired by Borrower, even though the rights and
remedies  of  the  lessor,  seller  and/or  lender  thereunder  are  limited  to
repossession of such property.                                                  

     "Interest Period" means: (a) with respect to any LIBOR Advance, the one (1)
month,  two (2)  month,  three  (3) month or six (6) month  period  selected  by
Borrower and commencing on the date of such Advance; and (b) with respect to any
Base Rate Advance,  the period (not to exceed thirty (30) days) mutually  agreed
to by the Banks and the Borrower and commencing on the date of such Advance.  No
Interest  Period may extend past the Maturity Date.  Each Interest  Period for a
LIBOR  Advance that begins on the last day of a calendar  month (or on a day for
which there is no numerically  corresponding  day in the appropriate  subsequent
month) shall end on the last Business Day of the appropriate subsequent calendar
month.  Each Interest  Period for a LIBOR Advance which would otherwise end on a
day which is not a Business Day shall end on the immediately succeeding Business
Day (unless such  immediately  succeeding  Business  Day is in another  calendar
month, in which case such Interest Period shall end on the immediately preceding
Business Day).                                                                  

"IPALCO" means IPALCO Enterprises, Inc., an Indiana corporation.      

     "IPSCA" means the Indiana Public Service  Commission Act, as amended,  I.C.
ss. 8.1.2 et seq., and all rules and regulations promulgated thereunder.        

     "IURC" means the Indiana  Utility  Regulatory  Commission and any successor
agency thereto.                                                                 

  "LIBOR Advance" means an Advance which bears interest at the LIBOR Rate.

     "LIBOR Base Rate" means, with respect to any LIBOR Advance for any Interest
Period, the rate per annum (rounded upwards, if necessary,  to the nearest 1/100
of 1%) equal to the rate per annum determined by the Administrative  Agent to be
the average of the respective rates per                                         

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annum at which Dollar  deposits in  immediately  available  funds are offered to
each of the  Reference  Banks two Business  Days prior to the  beginning of such
Interest  Period in the  interbank  eurodollar  market as at or about 10:00 a.m.
(New York time) for delivery on the first day of such Interest  Period,  for the
number  of days  comprised  therein  and in an  amount  approximately  equal  or
comparable  to the  amount of the  LIBOR  Loan of such  Reference  Bank for such
Interest Period.                                                                

"LIBOR Loan" means a Loan which bears interest at a LIBOR Rate.       

     "LIBOR Rate" means for each Interest Period for LIBOR Advances, the rate of
interest per annum (rounded upward, if necessary, to the next higher 1/16 of 1%)
determined by the following formula:                                            

LIBOR Rate =     LIBOR Base Rate                      
         -----------------------------
         1 - LIBOR Reserve Percentage.

     "LIBOR Reserve  Percentage" means, with respect to any Interest Period, for
any LIBOR Advance,  the maximum  aggregate  reserve  requirement  (including all
basis,  supplemental,  marginal  and  other  reserves)  which is  imposed  under
Regulation D on "Eurocurrency liabilities" as that term is defined in Regulation
D.                                                                              

     "Lien"  means any  mortgage,  pledge,  hypothecation,  assignment,  deposit
arrangement, encumbrances, lien (statutory or other) or other security agreement
or preferential  arrangement of any kind or nature whatsoever (including without
limitation  any  conditional  sale or other title  retention  agreement)  having
substantially the same economic effect as any of the foregoing and the filing of
any  financing  statement  under  the  applicable  Uniform  Commercial  Code  or
comparable law of any jurisdiction in respect of any of the foregoing.          

   "Loan" means, with respect to a Bank, such Bank's portion of any Advance.

     "Maturity  Date" means (i) if an order from the IURC, in form and substance
satisfactory to the Banks, has not been obtained permitting Borrower to have the
Indebtedness  evidenced  by the Loans  mature more than 12 months of the date of
incurrence  thereof  pursuant to IPSCA ss.8- 1-2-78 (an "IURC  Order"),  May 26,
1999 and (ii) if an IURC Order has been obtained,  one year after the Commitment
Termination Date.                                                               

     "Notes"  means  the  Revolving  Notes of  Borrower,  dated the dates of the
Advances to which they relate,  payable to the order of the respective Banks and
substantially  in the form of Exhibit A, as the same may be amended or otherwise
modified from time to time.                                                     

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     "Person" means any individual,  sole proprietorship,  partnership,  limited
liability   company,   joint  venture,   trust,   unincorporated   organization,
association,  corporation,  institution,  entity,  party or government  (whether
national,  federal,  state,  county,  city,  municipal or  otherwise,  including
without limitation any  instrumentality,  division,  agency,  body or department
thereof).                                                                       

"Pricing Schedule" - see Schedule II.                                 

   "PUHCA" means the Public Utility Holding Company Act of 1935, as amended.

"Purchaser" - see Section 8.8(B).                                     

"Reference Banks" means ABN and First Chicago.                        

     "Regulation D" means  Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation  or official  interpretation  of said Board of Governors  relating to
reserve requirements applicable to member banks of the Federal Reserve System.  

     "Regulatory  Change"  means (a) any change  after the date hereof in United
States  federal,  state or foreign  laws,  regulations,  treaties or  directives
(including  Regulation  D of the  Board  of  Governors  of the  Federal  Reserve
System),  (b)  any  change  in  the  interpretation  of  the  foregoing  by  any
governmental authority charged with the administration or interpretation thereof
or (c) any change in the manner in which  existing  guidelines of any federal or
state governmental authority are enforced.                                      

"Release" means a "release", as such term is defined in CERCLA.       

     "Reportable Event" means a "reportable event" as defined in Section 4043 of
ERISA.                                                                          

     "Required  Banks" means Banks in the  aggregate  having at least 66-2/3% of
the Aggregate  Commitment or, if the Aggregate  Commitment has been  terminated,
Banks  in the  aggregate  holding  at  least  66-2/3%  of the  aggregate  unpaid
principal amount of the outstanding Advances.                                   

     "Resource  Conservation  and Recovery Act" means the Resource  Conservation
and Recovery  Act, 42 U.S.C.  Section  6901,  et seq., as in effect from time to
time.                                                                           

"S&P" - see the Pricing Schedule.                                     

"S&P Rating" - see the Pricing Schedule.                              

     "Section"  means,  when followed by a number,  the section or subsection of
this Agreement bearing that number.                                             

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     "Subsidiary"  means,  with respect to any Person,  any corporation of which
such Person and/or its other  Subsidiaries  own,  directly or  indirectly,  such
number of  outstanding  shares as have not less than 50% of the ordinary  voting
power for the election of directors. Unless the context otherwise requires, each
reference  to  Subsidiaries  herein  shall be a  reference  to  Subsidiaries  of
Borrower.                                                                       

"Syndication Agent" is defined in the first paragraph hereof.         

"Transferee" - see Section 8.8(D).                                    

     Section  1.2.  Accounting  Terms.  All  accounting  terms not  specifically
defined  herein shall be  construed in  accordance  with GAAP,  calculations  of
amounts for the  purposes  of  calculating  any  financial  covenants  or ratios
hereunder  shall  be made in  accordance  with  GAAP,  and  all  financial  data
submitted pursuant to this Agreement shall be prepared in accordance with GAAP. 

     Section 1.3. Other Terms. The words "hereof,"  "herein" and "hereunder" and
words  of  similar  import  when  used in this  Agreement  shall  refer  to this
Agreement as a whole and not to any particular provision of this Agreement.     

ARTICLE II

 AMOUNT AND TERMS OF THE LOANS

Section 2.1. Advances.                                                

          (A) Amount. From time to time before the Commitment  Termination Date,
     each Bank  severally  agrees,  subject to the terms and  conditions of this
     Agreement,   including,  but  not  limited  to,  the  conditions  precedent
     contained  in  Section 3 hereof,  to make Loans to  Borrower,  from time to
     time,  in  amounts  not  to  exceed  in  the  aggregate  at  any  one  time
     outstanding,  the amount of its  Commitment.  In no event may the aggregate
     principal  amount  of  all  outstanding  Loans  exceed  the  amount  of the
     Aggregate Commitment.  Subject to the terms of this Agreement, Borrower may
     borrow, repay and reborrow at any time prior to the Commitment  Termination
     Date. In accordance with the terms of this Agreement, at Borrower's option,
     borrowings  may be Base Rate  Advances or LIBOR  Advances or a  combination
     thereof in principal amounts of One Million Dollars  ($1,000,000) or larger
integral multiples thereof, as more fully described in this Agreement.

          (B)  Notice  and  Manner  of  Borrowing.   Borrower   shall  give  the
     Administrative  Agent written notice, or facsimile notice (followed up with
     written notice thereof),  prior to 10:00 a.m., Chicago time, on the date of
     borrowing  for each Base Rate  Advance,  and prior to 10:00  a.m.,  Chicago
time, at least three Business Days prior to each LIBOR                

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          Advance,  specifying  the amount,  the date and the type (Base Rate or
     LIBOR) of the Advance,  and, with respect to LIBOR  Advances,  the Interest
     Period.  Promptly after receipt of such notice,  the  Administrative  Agent
shall advise each Bank thereof.                                       

          Not later than noon,  Chicago time, on the date  specified,  each Bank
     shall  provide the  Administrative  Agent,  at the  Administrative  Agent's
     account  specified in Section  2.4(A),  with  immediately  available  funds
     covering  such Bank's  share of the Advance to be made and,  subject to the
     satisfaction  of the  conditions  precedent  set  forth in  Section  3 with
     respect to such  Advance,  the  Administrative  Agent shall  promptly  make
     available to Borrower  such funds.  Each  borrowing  shall be on a Business
Day.                                                                  

          Absent contrary notice from Borrower by 10:00 a.m.,  Chicago time, one
     Business  Day prior to the last day of the  Interest  Period of an Advance,
     Borrower shall be deemed to have given the  Administrative  Agent notice at
     such time  pursuant  to this  Section  2.1(B) to the effect  that  Borrower
     requests  that the Banks  make Loans to  Borrower  on such date at the Base
     Rate in an  aggregate  principal  amount equal to the  aggregate  principal
amount of the Loans becoming due and payable on such date.            

          (C)  Interest.  Interest  shall accrue on the Loans  subject to and in
     accordance with the terms and conditions of this Agreement and the Notes as
follows:                                                              

     (1)  Base Rate Advances shall bear interest at the Base Rate; and

          (2)  LIBOR Advances  shall bear interest at the LIBOR Rate  applicable
               to each  Interest  Period for such  Advance  plus the  Applicable
       Margin in effect for each day during the relevant period;

     provided,  however,  that during the continuance of any Default or Event of
     Default,  each Advance shall bear interest at a rate per annum equal to the
Base Rate from time to time in effect plus 2%.                        

          Borrower  shall pay such  interest  in arrears  on the  balance of the
     Loans  outstanding  from  time to time in  accordance  with the  terms  and
conditions of the Notes.                                              

          (D)  Payments.  Payments  of interest on the Loans shall be payable in
     arrears  commencing (1) with respect to Interest Periods of three months or
     less,  on the last day of the  Interest  Period,  and (2) with  respect  to
     Interest Periods longer than three months, on each three-month  anniversary
     of the first day of such Interest Period,  on the last day of such Interest
Period and on the Maturity Date.                                      

          Payments of principal on each Advance shall be payable on the last day
     of the applicable Interest Period, subject, however, to Borrower's right to
     reborrow,  from  time to  time,  during  the  term of  this  Agreement,  in
accordance with the terms and conditions of this Agreement.           

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          Base Rate  Advances may be prepaid in full or in part (if in part,  in
     the amount of $1,000,000 or a larger integral multiple thereof) at any time
     upon two Business Days' notice to the Banks.  LIBOR Advances may be prepaid
     in full or in part (if in part,  in the  amount of  $1,000,000  or a larger
integral multiple thereof) as follows:                                

               (1) On the last day of an Interest  Period for the Advance,  upon
four prior Business Days' notice to the Banks; or           

               (2) On any other  Business  Day, upon four prior  Business  Days'
          notice  to  the  Banks,  and  provided   Borrower  shall  pay  to  the
          Administrative  Agent,  on demand,  the amounts  specified  by Section
2.16.                                                       

          (E) Maturity.  If not sooner paid or accelerated pursuant to the terms
     of this Agreement,  the balance of the unpaid  principal amount of, and all
     accrued and unpaid  interest  on, the Loans shall be due and payable on the
Maturity Date.                                                        

          (F) Reduction or  Termination  of the  Commitments.  Borrower may from
     time to time on at least three Business Days' prior written notice received
     by the Administrative Agent (which shall promptly advise each Bank thereof)
     permanently reduce the amount of the Aggregate  Commitment to an amount not
     less than the  aggregate  unpaid  principal  amount of the Loans.  Any such
     reduction  shall  be in an  amount  of at least  $5,000,000  or in a larger
     integral  multiple  of  $1,000,000  and shall be pro rata  among the Banks.
     Borrower  may at any time on like notice  terminate  the  Commitments  upon
     payment  in full  of all  Loans  and  all  other  obligations  of  Borrower
hereunder and under the Notes.                                        

  Section 2.2. Notes. Each Loan of each Bank shall be evidenced by a Note.

     Section 2.3. Computation of Interest. Interest due under this Agreement and
under the Notes shall be computed  for the actual  number of days elapsed on the
basis of a year of 365 or 366 days,  as the case may be, on Base Rate  Advances,
and on the basis of a 360-day year on LIBOR Advances.                           

Section 2.4. Making of Payments and Prepayments, Proration and Setoff.

          (A) Making of Payments and Prepayments. Except as set forth below, all
     payments and prepayments of principal, fees, interest and any other amounts
     owed from time to time under this Agreement and/or under the Notes shall be
     made to the Administrative  Agent at the Administrative  Agent's account at
     ABN Amro Bank N.V., New York Branch,  Swift No.  ABNAUS33,  ABA #026009580,
     Credit  to:  ABN Amro  Bank  N.V.,  Account  No.  651001011142,  Reference:
     Indianapolis  Power  &  Light  Company,   or  such  other  account  as  the
     Administrative  Agent may notify  Borrower,  in Dollars and in  immediately
     available  funds prior to 1:00 p.m.,  Chicago  time,  on the date due.  The
     Administrative  Agent  shall  promptly  remit to each Bank its share of all
such                                                                  

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     payments  received in collected funds by the  Administrative  Agent for the
     account of such Bank. Borrower hereby irrevocably  authorizes the Banks, if
     and to the extent payment of any installment of principal,  interest and/or
     fees  hereunder  and/or  under the  Notes is not made  when due,  to charge
     against any of  Borrower's  accounts  with the Banks an amount equal to the
     amount  thereof not paid when due. Any such payment or prepayment  which is
     received  by  the  Administrative  Agent  in  Dollars  and  in  immediately
     available  funds after 1:00 p.m.,  Chicago time, on a Business Day shall be
     deemed  received for all purposes of this Agreement on the next  succeeding
     Business Day except that solely for the purpose of  determining  whether an
     Event of Default has  occurred,  any such payment or prepayment if received
     by the  Administrative  Agent  prior  to the  close  of the  Administrative
     Agent's  business  on a  Business  Day  shall be  deemed  received  on such
Business Day.                                                         

          All  payments  under  Section 2.12 and (to the extent they relate to a
     Regulatory Change) Section 2.8 shall be made directly to the affected Bank.

          (B) Setoff. Upon the occurrence of any Event of Default (including any
     applicable cure period) and during the continuance of any Event of Default,
     each of the Banks is hereby  authorized  at any time and from time to time,
     without  notice to Borrower  (any such  notice  being  expressly  waived by
     Borrower),  to set off and apply any and all deposits  (general or special,
     time  or  demand,  provisional  or  final)  at  any  time  held  and  other
     indebtedness at any time owing by each of the Banks to or for the credit or
     the account of Borrower  against any and all of the obligations of Borrower
     now or hereafter  existing under this Agreement and the Notes  irrespective
     of whether or not any Bank shall have made any demand under this  Agreement
     or the Notes and although  such  obligations  may be  unmatured.  Each Bank
     exercising such right of setoff and  application  agrees to promptly notify
     Borrower after any such setoff and  application;  provided that the failure
     to give such  notice  shall not  affect  the  validity  of such  setoff and
     application.  The  rights of the Banks  under  this  Section  2.4(B) are in
     addition to all other rights and remedies  (including,  without limitation,
other rights of setoff) which the Banks may have.                     

          (C)  Proration  of  Payments.  If  any  Bank,  whether  by  setoff  or
     otherwise,  has  payment  made to it upon its Loans  (other  than  payments
     received   pursuant  to  Section  2.12  or  (to  the  extent   relating  to
     compensation for Regulatory  Changes) Section 2.8) in a greater  proportion
     than that  received  by any other Bank,  such Bank  agrees,  promptly  upon
     demand,  to  purchase  such  participations  in the Loans held by the other
     Banks so that after such  purchase  the  purchasing  Bank shall  share such
     excess  payment  ratably  with  each  of  them.  If any  Bank,  whether  in
     connection  with  setoff or  amounts  which  might be  subject to setoff or
     otherwise,   receives   collateral  or  other   protection  for  Borrower's
     obligations to such Bank hereunder, such Bank agrees, promptly upon demand,
     to take such action  necessary such that all Banks share in the benefits of
     such  collateral  ratably in  proportion  to their Loans.  In case any such
     payment is disturbed by legal  process or  otherwise,  appropriate  further
adjustments shall be made.                                            

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          (D) Unconditional Obligations and No Deductions. Borrower's obligation
     to make all payments  provided for in this Agreement and/or the Notes shall
     be unconditional. Each such payment shall be made without deduction for any
     claim,  defense or offset of any type,  including  without  limitation  any
     withholdings  and other  deductions on account of income or other taxes and
  regardless of whether any claims, defenses or offsets of any type exist.

     Section 2.5. Payment on Non-Business Days.  Whenever any payment to be made
hereunder  or under  the Notes  shall be stated to be due on a day other  than a
Business Day, such payment may be made on the next succeeding  Business Day, and
such  extension  of time shall in such case be  included in the  computation  of
payment of fees, if any, and interest under this Agreement and under the Notes. 

     Section 2.6. Use of Proceeds.  Borrower shall use the proceeds of the Loans
solely to provide liquidity support for its: (i) $40,000,000 City of Petersburg,
Indiana,   Pollution  Control   Refunding  Revenue  Bonds,   Series  1991;  (ii)
$20,000,000  City of Petersburg,  Indiana,  Solid Waste Disposal  Revenue Bonds,
Adjustable Rate Tender Securities  (ARTS),  Series 1994A; (iii) $40,000,000 City
of Petersburg,  Indiana,  Pollution Control Refunding Revenue Bonds,  Adjustable
Rate  Tender  Securities   (ARTS),   Series  1995B;  (iv)  $30,000,000  City  of
Petersburg,  Indiana, Solid Waste Disposal Revenue Bonds, Adjustable Rate Tender
Securities  (ARTS),  Series  1995C;  and (v)  $20,000,000  City  of  Petersburg,
Indiana,  Solid Waste Disposal Revenue Bonds,  Adjustable Rate Tender Securities
(ARTS), Series 1996.                                                            

     Section 2.7. Loan Advancements and Payments.  The Banks shall make Advances
as requested by Borrower and in accordance with the following notice procedures.
Each  Bank's  portion  of the  Advance  shall  be in the  proportion  which  its
Commitment  bears  to  the  Aggregate   Commitment.   Borrower  shall  give  the
Administrative Agent a written request and notice for any Advance in the form of
Exhibit B (an "Advance  Request") in accordance with the terms of Section 2.1(B)
and shall specify the date, type, Interest Period and amount of such Advance and
shall  otherwise  be in such form as the  Administrative  Agent may require from
time to time.  The  Administrative  Agent  shall  give the Banks at least  three
Business Days' notice of each LIBOR Advance requested by Borrower, and notice of
each Base Rate Advance requested by Borrower.                                   

     Section 2.8.  Facility Fee.  Borrower shall pay to the Banks a facility fee
in an  amount  equal  to the  Facility  Fee  Rate  of the  Aggregate  Commitment
(regardless  of usage).  Such fee shall  accrue from the date  hereof,  shall be
payable quarterly in arrears and on the Maturity Date (or (x) if no Advances are
outstanding on the Commitment  Termination  Date, on the Commitment  Termination
Date and (y) if any Advances are outstanding on the Commitment Termination Date,
but are paid in full on a date earlier than the date which is one year after the
Commitment  Termination  Date,  then on the date of such  payment in full),  and
shall be computed for the number of actual days elapsed in a 360-day year,  with
each Bank receiving a pro rata portion of such fee based on the proportion which
its Commitment bears to the Aggregate Commitment. Notwithstanding the foregoing,
in no event shall Borrower be liable to the Banks                               

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for a facility fee for any period after the Commitment  Termination  Date during
which the Borrower has no Advances outstanding.                                 

     If, as a result of any Regulatory Change, the amount of capital required or
expected  to be  maintained  by any  Bank is  increased  by or  based  upon  the
existence of its Commitment and other  commitments of similar type, then, and in
any such case:                                                                  

          (A) The  Administrative  Agent shall promptly  notify  Borrower of the
happening of the above described event; and                           

          (B)  Borrower   shall  pay  to  such  Bank  on  demand  as  additional
     compensation,  such amount as will compensate the Bank in the light of such
     circumstances,  to the  extent  that the Bank  reasonably  determines  such
     increase  in  capital  to be  allocable  to the  existence  of  the  Bank's
     Commitment or the making or maintaining of the Loans  hereunder;  provided,
     that Borrower may, not later than thirty (30) days after Borrower's receipt
     of such  notice  from  the  Bank,  replace  such  Bank  as a party  to this
     Agreement  with one or more  banks  or  financial  institutions  reasonably
     acceptable to the  Administrative  Agent.  Upon notice from Borrower to any
     Bank referred to in the proviso to the immediately preceding sentence, such
     Bank shall assign its Loans,  Note and Commitment to such replacement banks
     or other financial institutions for a purchase price equal to the principal
     amount of the Loans so assigned,  all accrued and unpaid  interest  thereon
     and its ratable  share of all fees to which it is  entitled,  pursuant to a
     form of assignment  acceptable to such Bank and such assignee(s).  Any such
assignment shall have the effects specified in Section 8.8(C).        

A  certificate  as to the  additional  compensation  believed to be owing to the
Banks from any Regulatory Change shall be submitted by the Administrative  Agent
to  Borrower  along  with  its  notification  under  subsection  (A)  above.  In
determining  the  additional  compensation  hereunder,  the  Banks  may  use any
reasonable  averaging and attribution methods. In the absence of manifest error,
the certificate shall be conclusive as to the amount shown thereon if determined
on a reasonable basis.                                                          

     The  additional  compensation  shall be payable  in  arrears  in  quarterly
installments  on the last  Business  Day of each  March,  June,  September,  and
December,  commencing  on the last day of such  quarter  following a  Regulatory
Change. The additional compensation shall be calculated for the actual number of
days elapsed on the basis of a year of 360 days.                                

     Section 2.9. Reimbursement of Costs. Borrower agrees to reimburse the Banks
for  all  costs   (including,   but  not  limited  to,  reasonable  legal  fees,
accountants' fees,  recording fees, filing fees, title searches,  lien searches,
title insurance and credit investigations)  incurred by the Administrative Agent
and the Banks in connection with the Loans made hereunder.                      

     Section  2.10.  The  Agents.   This  Section  2.10  specifies   rights  and
obligations  among and between the Banks and the Agents.  Borrower  acknowledges
the existence of limitations in                                                 

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Agents' authority but shall be entitled to rely upon the authority of the Agents
as conferred by this Section and otherwise specified in this Agreement.         

          (A) Appointment,  Powers and Immunities. Each Bank hereby appoints and
     authorizes the Administrative Agent to act as its agent hereunder and under
     the Notes to receive payments made in respect of the Notes and to have such
     powers as are  specifically  delegated to the  Administrative  Agent by the
     terms of this Agreement,  together with such other powers as are reasonably
     incidental  thereto.  The  Administrative  Agent  shall  have no  duties or
     responsibilities  except  those  expressly  set  forth  in this  Agreement;
     neither the Syndication  Agent nor the  Documentation  Agent shall have any
     rights or duties in its  capacity as such;  and no Agent shall by reason of
     this  Agreement be a trustee or fiduciary for any Bank. No Agent nor any of
     their  respective  directors,   officers,  agents  or  employees  shall  be
     responsible  for any recitals,  statements,  representations  or warranties
     contained  in  this  Agreement,  or  received  by any of  them  under  this
     Agreement,  or  for  the  value,  validity,   effectiveness,   genuineness,
     enforceability  or  sufficiency  of this  Agreement  or any other  document
     referred  to or  provided  for  herein or for any  failure by  Borrower  to
     perform any of its  obligations  hereunder.  The  Administrative  Agent may
     employ  agents and  attorneys  and shall not be  responsible,  except as to
     money  or  securities  received  by it or its  authorized  agents,  for the
     negligence  or  misconduct  of any such agents or attorneys  selected by it
     with  reasonable  care.  No Agent  nor any of their  respective  directors,
     officers, employees or agents shall be liable or responsible for any action
     taken  or  omitted  to be taken by it or them  hereunder  or in  connection
     herewith,  except  for  its  or  their  own  gross  negligence  or  willful
misconduct.                                                           

          (B) Reliance by Administrative  Agent. The Administrative  Agent shall
     be entitled to rely upon any certification,  notice or other  communication
     (including any thereof by telephone,  telex,  telegram,  cable or telecopy)
     received  by it in  connection  with this  Agreement  believed  by it to be
     genuine  and correct and to have been signed or sent by or on behalf of the
     proper Person or Persons,  and upon advice and statements of legal counsel,
     independent accountants and other experts selected by Administrative Agent.
     As to any  matters  not  expressly  provided  for by  this  Agreement,  the
     Administrative Agent shall in all cases be fully protected in acting, or in
     refraining from acting, hereunder in accordance with instructions signed by
     the Required Banks,  and such  instructions and any action taken or failure
to act pursuant thereto shall be binding on all of the Banks.         

          (C)  Defaults.  The  Administrative  Agent shall not be deemed to have
     knowledge of the occurrence of a Default or an Event of Default (other than
     the non-  payment of  principal  of or  interest  on the Notes or any other
     amount  payable  hereunder)  unless the  Administrative  Agent has received
     written notice or other written  documentation from a Bank or from Borrower
     indicating that a Default or an Event of Default has occurred. In the event
     that the Administrative Agent received such a notice of the occurrence of a
Default or an Event of Default, the Administrative Agent shall give   

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     prompt notice  thereof to the Banks (and shall give each Bank prompt notice
     of each such  non-payment).  The  Administrative  Agent  shall  (subject to
     subsection  (G) hereof)  take such action with  respect to such  Default or
Event of Default as shall be directed by the Required Banks.          

          (D) Rights as a Bank. With respect to the Financing Documents,  ABN in
     its  capacity  as a Bank  hereunder  shall have the same  rights and powers
     hereunder as any other Bank and may exercise the same as though it were not
     acting as  Administrative  Agent, and its affiliates may (without having to
     account  therefor  to any Bank)  accept  deposits  from,  lend money to and
     generally  engage  in any kind of  banking,  trust or other  business  with
     Borrower  as if it were not  acting as  Administrative  Agent,  and ABN may
     accept  fees  and  other   consideration  from  Borrower  for  services  in
     connection  with this Agreement or otherwise  without having to account for
the same to the Banks except as specified herein.                     

          (E)  Indemnification.  Each Bank  agrees to  indemnify  the Agents and
     their respective directors,  officers,  agents and employees (to the extent
     not reimbursed by Borrower)  ratably in the proportion its Commitment bears
     to the  Aggregate  Commitment  for any and  all  liabilities,  obligations,
     losses, damages,  penalties,  actions, judgments, suits, costs, expenses or
     disbursements  of any kind and nature  whatsoever  which may be imposed on,
     incurred  by or  asserted  against  the  Agents in any way  relating  to or
     arising out of this Agreement or any other documents contemplated hereby or
     the enforcement of any of the terms hereof or of any such other  documents,
     provided  that no Bank  shall be  liable  for any of the  foregoing  to the
     extent they arise from the gross  negligence  or willful  misconduct of the
applicable Agent.                                                     

          (F)  Non-Reliance on Agents and other Banks.  Each Bank agrees that it
     has,  independently  and without  reliance on the Agents or any other Bank,
     and based on such documents and  information as it has deemed  appropriate,
     made its own credit  analysis  of Borrower  and its  decision to enter into
     this Agreement and that it will,  independently  and without  reliance upon
     the Agents or any other Bank, and based on such  documents and  information
     as it shall deem appropriate at the time, continue to make its own analysis
     and decisions in taking or not taking  action under this  Agreement and the
     other Financing  Documents.  The Administrative Agent shall not be required
     to keep itself  informed as to the performance or observance by Borrower of
     this Agreement or any other document  referred to or provided for herein or
     to inspect the properties or books of Borrower  unless an inspection of the
properties or books is requested in writing by the Required Banks.    

          (G)  Failure  to Act.  Except  for action  expressly  required  of the
     Administrative Agent hereunder, the Administrative Agent shall in all cases
     be fully justified in failing or refusing to act hereunder  unless it shall
     be  indemnified  to its  satisfaction  by the  Banks  against  any  and all
     liability  and expenses  which may be incurred by it by reason of taking or
continuing to take any such action.                                   

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          (H)  Resignation or Removal of  Administrative  Agent.  Subject to the
     appointment and acceptance of a successor  Administrative Agent as provided
     below,  the  Administrative  Agent may resign at any time by giving  notice
     thereof  to the Banks and  Borrower,  and the  Administrative  Agent may be
     removed at any time with or without cause by the Required Banks.  Upon such
     resignation or removal,  the Required Banks shall have the right to appoint
     a successor  Administrative  Agent.  If no successor  Administrative  Agent
     shall have been so appointed by the Required Banks or such successor  shall
     not have  accepted  such  appointment  within  thirty  (30) days  after the
     retiring  Administrative  Agent's  giving of notice of resignation or after
     the removal of the Administrative  Agent, then the retiring  Administrative
     Agent  may,  on behalf of the  Banks,  appoint a  successor  Administrative
     Agent,  which shall be a bank which has an office in the United  States and
     having a  combined  capital  and  surplus of at least One  Hundred  Million
     Dollars  ($100,000,000.00).  Upon  the  acceptance  of any  appointment  as
     Administrative  Agent hereunder by a successor  Administrative  Agent, such
     successor Administrative Agent shall thereupon succeed to and become vested
     with  all  the  rights,  powers,  privileges  and  duties  of the  retiring
     Administrative  Agent,  and the  retiring  Administrative  Agent  shall  be
     discharged  from  its  duties  and  obligations  as  Administrative   Agent
     hereunder  and under  the other  Financing  Documents.  After any  retiring
     Administrative  Agent's  resignation or removal hereunder as Administrative
     Agent, the provisions of this Section 2.10 shall continue in effect for its
     benefit in respect of any actions  taken or omitted to be taken by it while
it was acting as Administrative Agent.                                

     Section  2.11.  Conversion.  Provided  that no Event of  Default or Default
shall have occurred, Borrower may, upon three Business Days' notice to the Banks
and prior to 10:00 a.m.,  Chicago time, on such date, convert all or part of any
Advance from one interest rate option to another as follows:                    

   (A) From a Base Rate Advance to a LIBOR Advance at any time; or

          (B) From a LIBOR Advance to a Base Rate Advance on the last day of the
Interest Period related thereto.                                      

Any such conversion hereunder shall be subject to the provisions of Section 2.16
hereof.  A notice  converting  an Advance to a LIBOR  Advance  shall specify the
Interest Period.  Promptly upon receipt of a notice of conversion from Borrower,
the Administrative Agent shall advise each Bank thereof.                        

Section 2.12. Increased Costs.                                        

     (A) With  respect  to any  outstanding  Indebtedness  of  Borrower,  if any
Regulatory Change shall:                                                        

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          (1) subject any Bank to any tax with  respect to that  Advance  (other
than a tax on or measured by such Bank's net income);                 

          (2) change the basis of  taxation  to any Bank (other than a change of
     tax on or measured by such Bank's net income) of payments of  principal  or
interest in respect of that Advance;                                  

          (3) impose or modify any reserve,  special deposit,  deposit insurance
     or similar  requirement  relating to any assets of, deposits with, or loans
by any Bank used to fund that Advance; or                             

      (4) impose any condition on any Bank with respect to that Advance;

and the  result is to  increase  the cost to such Bank of making or  maintaining
that  Advance or to reduce the amount  receivable  by such Bank with  respect to
that  Advance,  in either  event by an amount which such Bank  reasonably  deems
material, then, and in any such case:                                           

          (5) the  Administrative  Agent shall promptly  notify  Borrower of the
happening of the above-described event; and                           

          (6) Borrower  shall pay to such Bank on demand as additional  interest
     such  amount  as  will  compensate  the  Bank  for the  additional  cost or
     reduction,  calculated from the date of notification by the  Administrative
     Agent, and may, at its option,  within seven Business Days after receipt of
     the Administrative Agent's notification, (1) notify such Bank in accordance
     with  Section  2.1(D) of its  intent  to  prepay  the  affected  Loan,  and
     thereafter  prepay such Loan in accordance  with Section 2.1(D) (subject to
     Section 2.16),  or (2) notify such Bank in accordance  with Section 2.11 of
     its intent to convert the affected  Advance to another interest rate option
unaffected by the Regulatory Change.                                  

     (B) If any Bank shall reasonably determine that the adoption or phase-in of
any applicable law, rule or regulation regarding capital adequacy, or any change
in any applicable law, rule or regulation,  or any change in the  interpretation
or  administration  thereof  by any  governmental  authority,  central  bank  or
comparable agency charged with the interpretation or administration  thereof, or
compliance by any Bank or any Person  controlling  such Bank with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such  authority,  central bank or comparable  agency,  has or would have the
effect  of  reducing  the rate of  return  on such  Bank's  or such  controlling
Person's  capital  as  a  consequence  of  such  Bank's  obligations   hereunder
(including,  without  limitation,  such Bank's Commitment) to a level below that
which such Bank or such  controlling  Person  could have  achieved  but for such
adoption,  change or compliance  (taking into  consideration such Bank's or such
controlling  Person's  policies  with respect to capital  adequacy) by an amount
deemed by such Bank or such  controlling  Person to be material,  then such Bank
shall  promptly  notify  the  Administrative  Agent  and  the  Borrower  of such
determination  and,  from time to time,  upon demand by such Bank (which  demand
shall be accompanied by a statement setting forth the basis of such demand, a   

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copy of which shall be furnished to the  Administrative  Agent),  Borrower shall
pay to such Bank such additional  amount or amounts as will compensate such Bank
or such controlling Person for such reduction.                                  

     (C) A certificate as to the increased  cost or reduced amount  resulting to
any Bank from any Regulatory Change as described above shall be submitted by the
Administrative  Agent to Borrower along with its  notification  under subsection
(A)(5) or  subsection  (B) above.  In the  absence of manifest  error,  any such
certificate  shall be conclusive as to the amount shown thereon if determined on
a reasonable basis.                                                             

     Section  2.13.  Limitation  on Types of  Advances.  If,  on or prior to the
determination  of any  interest  rate for any  LIBOR  Advance  for any  Interest
Period,  any Bank  reasonably  and in good faith  determines  that  deposits  in
Dollars comparable to the amount and for the Interest Period of that Advance are
not available in the London interbank  eurodollar  market, or that, by reason of
circumstances  affecting the London interbank  eurodollar  market,  adequate and
reasonable  means do not exist for  ascertaining the interest rate applicable to
that Interest Period, or that the making or funding of LIBOR Advances has become
impracticable,  the  Administrative  Agent  shall give  Borrower  prompt  notice
thereof,  and so long as that  condition  remains in effect,  such Bank shall be
under no obligation to make, or to convert other Advances into,  Advances of the
type affected,  and Borrower shall, on the later of (a) the last day of the then
current  Interest  Period for the affected  Advance,  or (b) seven Business Days
after receipt of the Administrative  Agent's notice, either notify such Bank and
thereafter  prepay the Advance in accordance with Section 2.1(D), or notify such
Bank and thereafter convert the Advance into another type or types of Advance(s)
in accordance with Section 2.11 (subject, in either case, to Section 2.16).     

     Section  2.14.  Illegality.  In the event that it becomes  unlawful for any
Bank to (a) honor its obligations to make any LIBOR Advance, or (b) maintain any
LIBOR Advance,  such Bank shall promptly notify Borrower thereof (with a copy to
the  Administrative  Agent) and such Bank's obligation to make the affected type
of Advance  and to convert  other  types of  Advances  into that type of Advance
shall be  suspended  until  such time as such Bank may  again  legally  make and
maintain the affected type of Advance,  and Borrower  shall,  on the last day of
the then  current  Interest  Period for that Advance (or on such earlier date as
such Bank may reasonably specify to Borrower, but in no event earlier than seven
Business  Days after  receipt of such Bank's  notification),  either notify such
Bank and thereafter  prepay the Advance in accordance  with Section  2.1(D),  or
notify such Bank and  thereafter  convert the Advance into another type or types
of  Advance(s)  in  accordance  with Section 2.11  (subject,  in either case, to
Section 2.16).                                                                  

     Section  2.15.  Pro  Rata  Treatment.   All  borrowings,   conversions  and
repayments  shall be effected so that after giving effect thereto each Bank will
have a pro rata share  (according to the proportion its Commitment  bears to the
Aggregate Commitment) of all Advances.                                          

     Section 2.16.  Funding  Losses.  Borrower hereby agrees that upon demand by
any Bank (which  demand shall be  accompanied  by a statement  setting forth the
basis for the calculations of the amount being claimed, a copy of which shall be
furnished to the Administrative Agent)                                          

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Borrower  will  indemnify  such Bank against any net loss or expense  which such
Bank  may  sustain  or incur  (including,  without  limitation,  any net loss or
expense  incurred by reason of the  liquidation or  reemployment  of deposits or
other  funds  acquired  by such Bank to fund or  maintain  any LIBOR  Loan),  as
reasonably determined by such Bank, as a result of (a) any payment or prepayment
or  conversion  of any LIBOR Loan of such Bank on a date other than the last day
of an  Interest  Period  therefor  or (b) any  failure of  Borrower to borrow or
convert any Loans on a date  specified  therefor  in an Advance  Request or in a
notice of  conversion  pursuant  to Section  2.11  (other  than as a result of a
default by such Bank or the Administrative Agent). For this purpose, all notices
to the  Administrative  Agent pursuant to this  Agreement  shall be deemed to be
irrevocable.                                                                    

     Section 2.17.  Reference Banks.  Each Reference Bank agrees to use its best
efforts to furnish LIBOR quotations to the Administrative  Agent as contemplated
by the definition of "LIBOR Base Rate".                                         

 ARTICLE III

 CONDITIONS OF LENDING

     Section  3.1.  Conditions  Precedent to all  Advances.  Unless the Required
Banks  otherwise  consent in writing,  the  obligation  of the Banks to make any
Advance is subject to  performance by Borrower of all of its  obligations  under
this  Agreement and to the  satisfaction  of the  conditions  precedent that all
legal matters incidental to the Advance shall be satisfactory to counsel for the
Banks and that the following conditions shall be met:                           

          (A) Borrower's compliance,  from the date hereof, with the affirmative
covenants contained in Section 5.1 of this Agreement.                 

          (B) The  representations  and  warranties  of  Borrower  contained  in
Section 4.1 of this Agreement are true and accurate.                  

          (C) No Default or Event of Default shall then be in existence or would
be created thereby.                                                   

          (D) The FERC Order  shall not have  expired or been  revoked and shall
permit the issuance of Notes to evidence such Advance.                

          (E) The aggregate  amount of all unsecured  promissory notes issued by
     Borrower  having  maturities  of  twelve  months  or less  from the date of
     issuance,  after  giving  effect to such  Advance  and the  issuance of the
     related  Notes,  shall be not  greater  than  $500,000,000  (or such lesser
     maximum amount as may then be authorized under the FERC Order) and Borrower
     shall  have  delivered  to  the  Administrative   Agent  and  the  Banks  a
certificate to that effect.                                           

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          (F) Borrower  shall have executed and delivered to each Bank a Note in
     the  principal  amount of such  Bank's  Loan  being  made as a part of such
Advance.                                                              

          (G) The Administrative  Agent and Banks shall have received an opinion
     of  counsel  (which  may be  in-house  counsel  to  Borrower)  in form  and
     substance   satisfactory  to  the  Administrative   Agent  as  to  the  due
     authorization,  execution and delivery of the Notes  delivered  pursuant to
     Section  3.1(F)  with  respect  to such  Advance  and that  such  Notes are
Borrower's legal, valid and binding obligations.                      

     Section 3.2. Conditions Precedent to Initial Advance. The obligation of the
Banks to make the  initial  Advance is subject to the receipt by the Banks on or
before the Closing Date of all of the following,  each dated the Closing Date or
another date prior to the Closing Date acceptable to the Banks and each to be in
the form and substance approved by the Banks on the date on which this Agreement
is executed and delivered by Borrower and the Banks:                            

          (A) A favorable  opinion of Bryan G.  Tabler,  Senior Vice  President,
     Secretary  and General  Counsel of Borrower,  substantially  in the form of
Exhibit C attached hereto.                                            

          (B) A certified  copy of the FERC Order  authorizing  the  Borrower to
incur the Indebtedness contemplated by the Financing Documents.       

          (C) A Certificate of Existence from the Secretary of State of Indiana,
     dated not more than five (5) days before the  Closing  Date,  stating  that
     Borrower  is duly  organized  and  existing  under the laws of the State of
Indiana.                                                              

          (D)  Payment  to the  Administrative  Agent  and the Banks of the fees
     specified in this  Agreement  as being  payable on the Closing Date and the
   legal fees of the Administrative Agent and the Banks, and other expenses.

          (E)  Evidence  required by the  Administrative  Agent and the Banks to
     establish  that Borrower has the authority to enter into this Agreement and
     that all Financing  Documents executed in connection with the Loans will be
     valid and binding obligations of Borrower,  fully enforceable in accordance
     with their  respective  terms under  applicable  law. Such  evidence  shall
     include,  without limitation,  the opinion of counsel referenced in Section
     3.2(A)  hereof,  resolutions  of the board of  directors  of Borrower and a
certificate of the Secretary of Borrower certifying the same.         

          (F)  Certified  copies of  Borrower's  Articles of  Incorporation  and
By-Laws, each as amended to date.                                     

          (G) A written certificate of the Secretary of Borrower as to the names
     and  signatures  of the  officers  of  Borrower  authorized  to  sign  this
     Agreement  and the Notes and other  documents to be executed and  delivered
pursuant hereto.                                                      

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          (H) Evidence that Borrower has terminated the "Commitments" under, and
     paid in full all Indebtedness outstanding under, the Credit Agreement dated
     as of December 20, 1996 among Borrower,  various financial institutions and
ABN Amro Bank, N.V., Chicago Branch, as administrative agent.         

          (I) Such other information about Borrower and/or its assets,  business
     and/or  financial  condition as the  Administrative  Agent or the Banks may
reasonably request.                                                   

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     Section  4.1.   Representations   and  Warranties  of  Borrower.   Borrower
represents and warrants to the  Administrative  Agent and the Banks that,  after
giving effect to the Loans and the  application  of the proceeds  thereof (which
representations  and  warranties  shall  survive the making of the Loans and the
termination of this Agreement) as follows:                                      

          (A)  Organization  and  Existence.  Borrower  is a  corporation,  duly
     organized and validly  existing  under the laws of the State of Indiana and
     is duly  qualified  to do  business  in all  jurisdictions  in  which  such
     qualification  is required,  except where  failure to so qualify  would not
     have a material  adverse  effect on the financial  condition or business of
     Borrower and has all requisite power and authority to conduct its business,
     to own its properties and to execute and deliver, and to perform all of its
obligations under the Financing Documents.                            

          (B) Authorization and Absence of Defaults. The execution,  delivery to
     the  Administrative  Agent and the Banks and performance by Borrower of the
     Financing  Documents have been duly  authorized by all necessary  corporate
     and governmental  action and do not and will not (i) require any consent or
     approval of the  shareholders  or board of directors of Borrower  which has
     not been obtained,  (ii) violate any provision of any law, rule, regulation
     (including,  without  limitation,  Regulations  U and  X of  the  Board  of
     Governors  of  the  Federal  Reserve  System),   order,   writ,   judgment,
     injunction,  decree,  determination  or award  presently  in effect  having
     applicability  to  Borrower  or its  Subsidiaries  and/or the  Articles  of
     Incorporation   or  By-Laws,   where   applicable,   of  Borrower  and  its
     Subsidiaries, (iii) result in a material breach of or constitute a material
     default  under  any  indenture  or loan or  credit  agreement  or any other
     agreement, lease or instrument to which Borrower or any of its Subsidiaries
     is a party  or by  which it or its  properties  may be  bound or  affected,
     except where the failure to be in compliance is immaterial to the financial
     condition or business of Borrower and its  Subsidiaries  or (iv) result in,
     or require, the creation or imposition of any Lien on any of the properties
     or revenues of Borrower and its Subsidiaries.  Borrower and each Subsidiary
     is in compliance  with any such law  described in clause (ii) above,  rule,
     regulation,  order, writ, judgment,  injunction,  decree,  determination or
award or any such indenture, agreement,                               

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     lease or  instrument,  except  where the  failure  to be in  compliance  is
     immaterial  to the  financial  condition  or business  of Borrower  and its
Subsidiaries.                                                         

          (C)  Acquisition of Consents.  No  authorization,  consent,  approval,
     license  or  exemption  of, or filing or  registration  with,  any court or
     governmental   department,    commission,    board,   bureau,   agency   or
     instrumentality,  domestic or foreign  (including  without  limitation  any
     authorization,  consent, approval, license or exemption of, or filing with,
     the FERC, the IURC and any other regulatory  authority having jurisdiction)
     is or  will  be  necessary  to the  valid  execution  and  delivery  to the
     Administrative  Agent  and the  Banks or  performance  by  Borrower  of any
     Financing  Document,  other than those already obtained and copies of which
     have been provided to the  Administrative  Agent and the Banks  pursuant to
Section 3.2(B) hereof.                                                

          (D) Validity and  Enforceability.  This  Agreement is, and each of the
     other  Financing  Documents  when  delivered  hereunder will be, the legal,
     valid and binding  obligation of Borrower  enforceable  against Borrower in
     accordance with its terms, except to the extent  enforceability  thereof is
     limited by bankruptcy,  insolvency or other laws affecting the  enforcement
of creditors' rights generally, and by general principles of equity.  

          (E)  Financial   Information.   All  financial  statements  and  other
     financial  data which have been or will be furnished to the  Administrative
     Agent or the Banks by  Borrower  are,  and will be,  true and  correct  and
     reflect, or will reflect when delivered in the future, fairly the financial
     condition  of  Borrower  and its  Subsidiaries  and have been,  or will be,
     prepared in accordance with GAAP consistently applied except for changes as
     required  by  GAAP.  Borrower  and  its  Subsidiaries  have  no  contingent
     liabilities,   liabilities   for  taxes,   unusual  forward  or  long  term
     commitments  outside the ordinary  course of  business,  or  unrealized  or
     anticipated losses from any unfavorable commitments which are material with
     respect to the  financial  condition,  affairs,  prospects  or  business of
     Borrower and its  Subsidiaries  except as reflected or provided for in such
financial statements.                                                 

          (F) No Litigation.  There are no actions, suits or proceedings pending
     or, to the knowledge of Borrower, threatened against or affecting Borrower,
     its  Subsidiaries  or any of its or their  properties  before  any court or
     governmental   department,    commission,    board,   bureau,   agency   or
     instrumentality,  domestic or foreign,  which if  determined  adversely  to
     Borrower or any Subsidiary  would draw into question the legal existence of
     Borrower and/or the validity,  authorization  and/or  enforceability of the
     Financing  Documents  and/or  any  provision  thereof  and/or  could have a
     material  adverse  effect  on  the  financial   condition,   properties  or
operations of Borrower and its Subsidiaries.                          

          (G) Regulation U. Borrower is not engaged in the business of extending
     credit for the purpose of purchasing or carrying  "margin stock" within the
     meaning of  Regulation U of the Board of  Governors of the Federal  Reserve
System (12 CFR, Part                                                  

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     221),  does not own and has no  present  intention  of  acquiring  any such
     margin  stock.  None of the proceeds of the Loans will be used  directly or
     indirectly by Borrower for the purpose of  purchasing  or carrying,  or for
     the purpose of reducing or retiring any  Indebtedness  which was originally
     incurred  to  purchase  or carry,  any such  margin  stock or for any other
     purpose  which  might  constitute  the  transaction  contemplated  hereby a
     "purpose  credit"  within the meaning of said  Regulation  U, or cause this
     Agreement to violate any other  regulation of the Board of Governors of the
     Federal Reserve System or the Securities  Exchange Act of 1934, as amended,
     or any rules or  regulations  promulgated  under said  regulations  or said
statute.                                                              

          (H)  Absence of  Adverse  Agreements.  Borrower  is not a party to any
     indenture,  loan or credit  agreement  or any lease or other  agreement  or
     instrument or subject to any  corporate or  partnership  restriction  which
     would alter the manner in which Borrower does business and which would have
     a material adverse effect on the business,  properties,  assets, operations
     or  condition,  financial  or  otherwise,  of Borrower or on the ability of
Borrower to carry out its obligations under the Financing Documents.  

          (I) Taxes.  Borrower and its  Subsidiaries  have filed all tax returns
     (federal,  state and local)  required  to be filed and paid all taxes shown
     thereon to be due, including  interest and penalties,  or provided adequate
reserves for payment thereof in accordance with GAAP.                 

          (J) Accuracy of  Representations  and  Warranties.  None of Borrower's
     representations  or  warranties  set  forth  in  this  Agreement  or in any
     document  or  certificate  taken  together  with any  related  document  or
     certificate  furnished pursuant to this Agreement or in connection with the
     transactions  contemplated  hereby  contains  or will  contain  any  untrue
     statement of a material fact or omits or will omit to state a material fact
     necessary to make any  statement of fact  contained  herein or therein,  in
     light of the circumstances under which it was made, not misleading;  except
     that unless  provided  otherwise any such document or certificate  which is
dated speaks as of the date stated and not the present.               

          (K) Investment Company Act. Borrower is not an "investment company" or
     a company "controlled" by an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended.                    

          (L) Solvency.  After giving effect to the consummation of the Loans as
     of the time this representation and warranty is given, Borrower (a) will be
     able to pay its debts as they become  due,  (b) will have funds and capital
     sufficient to carry on its business and all businesses in which it is about
     to engage and (c) will own property  having a value both at fair  valuation
     and at fair saleable  value in the ordinary  course of Borrower's  business
     greater than the amount required to pay its  Indebtedness,  including,  for
     this  purpose,  unliquidated  and  disputed  claims.  Borrower  will not be
rendered insolvent by                                                 

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     the  execution  and  delivery of this  Agreement  and the  consummation  or
performance of any transactions contemplated herein.                  

          (M) Licenses,  Registrations, and Compliance with Laws. To the best of
     Borrower's  knowledge,  each  of  Borrower  and  its  Subsidiaries  has all
     permits,  governmental licenses,  registrations,  and approvals material to
     carrying out its  businesses as presently  conducted and as required by law
     (including,  without  limitation,  the FPA and the  IPSCA) or the rules and
     regulations of any federal, foreign,  governmental,  state, county or local
     association,  corporation, or governmental agency, body, instrumentality or
     commission   having   jurisdiction   over  Borrower  or  its  Subsidiaries,
     including,  but not  limited  to, the FERC,  the IURC,  the  United  States
     Environmental Protection Agency, the United States Department of Labor, the
     United States  Occupational  Safety and Health  Administration,  the United
     States Equal  Employment  Opportunity  Commission and analogous and related
     state and  foreign  agencies.  There is no material  violation  or material
     failure  of  compliance  or  allegation  of such  violation  or  failure of
     compliance  on the  part of  Borrower  or any  Subsidiary  with  any of the
     foregoing   permits,   licenses,   registrations,   approvals,   rules   or
     regulations,  and there is no action,  proceeding or investigation  pending
     or, to the knowledge of Borrower, threatened, nor has Borrower received any
     notice of such which might result in the  termination  or suspension of any
such permit, license, registration or approval.                       

          (N) Principal Place of Business;  Books and Records.  Borrower's chief
     executive  office is located at  Borrower's  address set forth  beneath its
     signature  hereto.  All of  Borrower's  books and  records are kept at such
address.                                                              

          (O) Title to Assets and  Properties.  Borrower has good and marketable
     title  to all of its  properties  and  assets  owned as of the date of this
     Agreement and to all properties and assets  acquired by Borrower  hereafter
     except  such  imperfections  in  title,  if  any,  that  do not  materially
     interfere  with the present or proposed  use of such  property or otherwise
materially impair business operations.                                

          (P) Material Adverse Change. There has been no material adverse change
     in  Borrower's  condition,  financial  or  otherwise,  from the date of the
     financial  statements  and other  financial  data dated  December  31, 1998
provided to Banks up to and including the Closing Date.               

          (Q) Employee  Benefit  Plans.  Each employee  benefit plan as to which
     Borrower or any Subsidiary may have any liability  complies in all material
     respects with all applicable  requirements of law and regulations,  and (i)
     to the best of Borrower's knowledge,  no Reportable Event has occurred with
     respect to any such plan,  (ii)  neither  Borrower nor any  Subsidiary  has
  withdrawn from any such plan and (iii) no such plan has been terminated.

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          (R) Public  Utility  Holding  Company Act.  Borrower is a wholly-owned
     direct subsidiary of IPALCO. IPALCO is a "holding company", as such term is
     defined in PUHCA, and, by virtue of its relationship with IPALCO,  Borrower
     is a  "subsidiary  company"  of a "holding  company"  within the meaning of
     PUHCA,  but IPALCO and its  Subsidiaries  are exempt from all provisions of
     PUHCA and all rules thereunder,  except Section 9(a)(2) thereof,  by virtue
     of having duly filed with the  Securities  and Exchange  Commission  one or
     more exemption statements pursuant to Section 3(a)(1) of PUHCA and pursuant
     to Rule 2 of the  Securities  and Exchange  Commission  and, to the best of
     Borrower's  knowledge,  no  proceedings  to revoke or modify such exemption
     have been instituted or are pending.  Neither Borrower or any Subsidiary is
     a  "holding  company"  or,  other than by virtue of its  relationship  with
     IPALCO  as  set  forth  in  the  two  immediately  preceding  sentences,  a
     "subsidiary company" of a "holding company" or an "affiliate" of a "holding
     company" or of a "subsidiary  company" of a "holding  company",  within the
meaning of PUHCA.                                                     

   (S) Environmental Matters. To the best of Borrower's knowledge:

               (1)   all   facilities   and   property   (including   underlying
          groundwater)  owned or leased by Borrower  or any of its  Subsidiaries
          have been,  and  continue to be,  owned or leased by Borrower  and its
    Subsidiaries in material compliance with all Environmental Laws;

               (2)  there  have  been no  past,  and  there  are no  pending  or
threatened                                                  

                    (i) claims, complaints,  notices or requests for information
               received by Borrower or any of its  Subsidiaries  with respect to
               any   alleged   violation   of  any   Environmental   Law  which,
               individually  or  in  the  aggregate,  have,  or  are  reasonably
               expected to have,  a material  adverse  effect on the  condition,
          financial or otherwise, of Borrower and its Subsidiaries, or

                    (ii) complaints,  notices or inquiries to the Company or any
               of its  Subsidiaries  regarding  potential  liability  under  any
               Environmental Law which, individually or in the aggregate,  have,
               or are reasonably  expected to have, a material adverse effect on
               the  condition,  financial  or  otherwise,  of  Borrower  and its
Subsidiaries;                                     

               (3) there have been no Releases of Hazardous  Materials at, on or
          under any  property now or  previously  owned or leased by Borrower or
          any of its Subsidiaries that, singly or in the aggregate, have had, or
          may  reasonably be expected to have, a material  adverse effect on the
        condition, financial or otherwise, of Borrower and its Subsidiaries;

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               (4)  Borrower  and its  Subsidiaries  have been issued and are in
          material  compliance  with  all  permits,   certificates,   approvals,
          licenses and other  authorizations  relating to environmental  matters
and necessary or desirable for their businesses;            

               (5) no property now or previously  owned or leased by Borrower or
          any of its  Subsidiaries  is listed or (with respect to owned property
          only) proposed for listing on the National Priorities List pursuant to
          CERCLA, on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up; and                              

               (6) there are no underground  storage tanks, active or abandoned,
          including  petroleum  storage  tanks,  on or under any property now or
          previously  owned or leased  by  Borrower  or any of its  Subsidiaries
          that,  singly or in the  aggregate,  have had,  or may  reasonably  be
          expected  to  have,  a  material  adverse  effect  on  the  condition,
financial or otherwise, of Borrower and its Subsidiaries.   

          (T) Pari Passu  Indebtedness.  The  Indebtedness  under the  Financing
     Documents ranks at least pari passu with all other  unsecured  Indebtedness
of the Borrower.                                                      

          (U) Year 2000.  Borrower and its Subsidiaries  have reviewed the areas
     within their business and operations which could be adversely  affected by,
     and have  developed  or are  developing  a program  to  address on a timely
     basis,   the  "Year  2000  Problem"   (that  is,  the  risk  that  computer
     applications  used  by  Borrower  and its  Subsidiaries  may be  unable  to
     recognize and perform properly  date-sensitive  functions involving certain
     dates prior to and any date after December 31, 1999), and have made related
     appropriate inquiry of material suppliers and vendors. Based on such review
     and program, Borrower believes that the "Year 2000 Problem" will not have a
     material adverse effect on (i) the business, assets, operations,  prospects
     or financial or other  condition of Borrower and its  Subsidiaries  or (ii)
     the  ability of Borrower to perform  its  obligations  under the  Financing
Documents.                                                            

 ARTICLE V

 COVENANTS OF BORROWER

     Section  5.1.  Affirmative  Covenants  of  Borrower  Other  Than  Reporting
Requirements.  From the date hereof and  thereafter for so long as any Loans are
outstanding  or Borrower  is  indebted  to the Banks under any of the  Financing
Documents and until all Commitments  are terminated,  Borrower shall ensure that
it shall, and shall cause each of its Subsidiaries to, unless the Required Banks
shall otherwise consent in writing:                                             

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          (A) Payment of Taxes.  Pay and discharge all taxes and assessments and
     governmental  charges  or  levies  imposed  upon it or upon its  income  or
     profits, or upon any properties belonging to it, prior to the date on which
     penalties  attach  thereto,  and all lawful  claims for the same which,  if
     unpaid,  might  become a Lien  upon any of its  properties,  provided  that
     (unless and until  foreclosure,  restraint,  sale or any similar proceeding
     shall  have been  commenced)  Borrower  and its  Subsidiaries  shall not be
     required to pay any such tax,  assessment,  charge,  levy or claim which is
     being  contested  in good  faith  and by proper  proceedings  and for which
     proper reserves or other provisions have been made in accordance with GAAP.

          (B) Preservation of Existence. Preserve and maintain in full force and
     effect its legal  existence,  rights and privileges in the  jurisdiction of
     its  organization,   preserve  and  maintain  all  licenses,   governmental
     approvals,  trademarks,  patents, trade secrets, copyrights and trade names
     owned or  possessed  by it and which are  necessary  or, in its  reasonable
     business judgment,  desirable in view of its business and operations or the
     ownership of its  properties  and qualify or remain  qualified as a foreign
     corporation in each  jurisdiction in which such  qualification is necessary
     or, in Borrower's  reasonable  business judgment,  desirable in view of its
business and operations and ownership of properties.                  

          (C) Compliance with Laws.  Comply with the requirements of all present
     and future applicable laws (including,  without limitation, the FPA and the
     IPSCA), rules,  regulations and orders of any governmental authority having
     jurisdiction  over it and/or  its  business,  except  where the  failure to
     comply  would  not have a  material  adverse  effect  on  Borrower  and its
Subsidiaries.                                                         

(D) Visitation Rights.                                      

               (i) Permit,  at any  reasonable  time and from time to time,  the
          Banks or any  agents or  representatives  thereof  (including  without
          limitation the  Administrative  Agent),  to examine and make copies of
          and abstracts  from the records and books of account of, and visit the
          properties of Borrower and its  Subsidiaries,  to discuss the affairs,
          finances and accounts of Borrower and its Subsidiaries with any of its
          officers or employees  designated by Borrower for such purposes and/or
any independent certified public accountant of Borrower.    

               (ii) Permit, at any reasonable time and from time to time so long
          as an Advance is outstanding or any  Commitment  exists,  the Banks or
          any agents or  representatives  thereof  (including without limitation
          the Administrative Agent), to enter the properties of Borrower and its
          Subsidiaries  and to inspect the  property  occupied  by Borrower  and
          related  equipment,  property  and soil,  and to conduct soil or water
          sampling, testing,  monitoring,  digging, drilling and analyses and to
          review  any  documents,  materials,  inventories,  financial  data  or
notices or                                                  

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          correspondence to or from private parties or governmental  authorities
in connection therewith.                                    

               (E)  Keeping  of  Records  and Books of  Account.  Keep  adequate
          records and books of account reflecting all financial  transactions to
          the best of Borrower's  knowledge,  in which complete  entries will be
          made, and maintain a standard system of accounting,  all in accordance
          with  GAAP  and  with  applicable  requirements  of  any  governmental
          authority  having   jurisdiction   over  Borrower  or  the  applicable
Subsidiary.                                                 

               (F)  Maintenance of Properties.  Maintain and preserve all of its
          properties  necessary or useful in the proper  conduct of its business
          in good working  order,  repair and  condition at all times,  ordinary
          wear and tear  excepted,  and not  commit  waste or allow  waste to be
committed against its properties.                           

               (G)  Other  Documents.  Except  as  otherwise  required  by  this
          Agreement,  pay,  perform  and  fulfill  all  of its  obligations  and
          covenants  under each  material  document,  instrument or agreement to
which it is a party.                                        

               (H)  Environmental   Liability.  (i)  Conduct  and  complete  all
          investigations,  studies,  sampling  and  testing  and  all  remedial,
          removal  and  other  actions  necessary  to  clean up and  remove  all
          Hazardous Materials (as hereinafter defined) on, from or affecting the
          property occupied,  in compliance with or in accordance with all laws,
          rules,  regulations,  orders and directives of all federal,  state and
          local governmental  authorities,  and (ii) defend, indemnify, and hold
          harmless the Administrative Agent, the Banks, their employees, agents,
          officers  and  directors,   from  and  against  any  claims,  demands,
          penalties, fines, liabilities, settlements, damages, costs or expenses
          (including,  without  limitation,  reasonable  attorney and consultant
          fees,  investigation  and laboratory  fees, court costs and litigation
          expenses) of whatever kind or nature, known or unknown,  contingent or
          otherwise, arising out of or in any way related to (a) the existing or
          future  presence  at, on, from or  affecting  any real estate owned by
          Borrower of any materials, pollutants,  substances or wastes which are
          defined,  determined,  or identified as hazardous,  toxic or otherwise
          environmentally  degrading  under  any  Environmental  Law  (any  such
          materials,   pollutants,   wastes,   and   substances   being   herein
          collectively referred to as "Hazardous Materials"),  (b) the violation
          of any Environmental Law concerning the generation, handling, storage,
          treatment  or  disposal  of any such  Hazardous  Materials  or (c) the
          enforcement of this Section 5.1(H) or the assertion by Borrower of any
          defense to the  obligations  hereunder,  whether  any of such  matters
          arise before or after the Closing Date, including, without limitation,
          (i) the costs of  removal  of any and all  Hazardous  Materials,  (ii)
          additional  costs  required to take  necessary  precautions to protect
          against the Release of Hazardous  Materials  into the air, any body of
          water,  any other  public  domain or any  surrounding  areas and (iii)
          costs incurred to comply with all applicable laws,  orders,  judgments
or regulations with respect to Hazardous Materials.         

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               (I) Additional Assurances.  From time to time hereafter,  execute
          and deliver,  or cause to be executed and delivered,  such  additional
          instruments,  certificates  and documents and take all such actions as
          the Administrative Agent or the Banks shall reasonably request for the
          purpose  of  implementing  or  effectuating   the  provisions  of  the
          Financing Documents and, upon the exercise by the Administrative Agent
          or the Banks of any power, right,  privilege or remedy pursuant to the
          Financing   Documents   which   requires   any   consent,    approval,
          registration,  qualification  or  authorization  of  any  governmental
          authority or  instrumentality,  exercise and deliver all applications,
          certifications,  instruments  and other  documents and papers that the
          Administrative  Agent  or the  Banks  may be so  required  to  obtain.
          Without  limiting the generality of the  foregoing,  the Borrower will
          give all necessary  notices to, make all necessary  filings with,  and
          obtain all necessary authorizations and approvals of, the FERC and the
          IURC with respect to the  transactions  contemplated  by the Financing
Documents.                                                  

               (J)  Purposes.  Use the  proceeds  of the  Loans  solely  for the
purposes herein described.                                  

               (K) ERISA  Compliance.  Fulfill  its  obligations  under  minimum
          funding  standards of the Employee  Retirement  Income Security Act of
          1974,  as  amended  ("ERISA"),  with  respect  to any  plan  which  is
          maintained  by  Borrower  or  pursuant  to  a  collective   bargaining
          agreement  and which is covered by Title IV of ERISA and  Borrower and
          each Subsidiary  shall be in all material  respects in compliance with
          ERISA and the Internal Revenue Code of 1986, as amended, and shall not
          have incurred any material  liability to the Pension Benefit  Guaranty
Corporation in respect thereto.                             

     Section  5.2.  Negative  Covenants  of  Borrower.  From the date hereof and
thereafter for so long as any portion of the Loans is outstanding or Borrower is
indebted  to the  Banks  under  any of the  Financing  Documents  and  until all
Commitments have been  terminated,  Borrower shall not, and shall not permit any
of its Subsidiaries to, without the prior written consent of the Required Banks:

          (A) Dissolution.  Dissolve,  liquidate,  wind up, merge or consolidate
     with another Person; provided,  however (i) Borrower may merge with another
     Person if upon the  completion  of such merger,  Borrower is the  surviving
     entity,  (ii) any  Subsidiary  may be merged into the  Borrower or a wholly
     owned   Subsidiary   and  (iii)  the  Borrower   may  dissolve   immaterial
     Subsidiaries (a Subsidiary being deemed "immaterial" for this purpose if it
     has  less  than  2%  of  the  assets  of  Borrower  and  its   consolidated
Subsidiaries).                                                        

          (B)  Change in Nature of  Business.  Make any  material  change in the
nature of its business.                                               

     Section 5.3.  Reporting  Requirements.  From the date hereof and thereafter
for so long as any  portion  of a  Commitment  is  outstanding  or  Borrower  is
indebted to the Banks under any of                                              

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the  Financing  Documents,  Borrower  shall,  unless the  Required  Banks  shall
otherwise consent in writing, furnish or cause to be furnished to the Banks:    

          (A) as soon as possible and in any event upon  acquiring  knowledge of
     an Event of Default or Default,  continuing on the date of such  statement,
     the written  statement of an officer of Borrower  setting  forth details of
     such Event of Default or Default and the action which Borrower  proposes to
take with respect thereto;                                            

          (B) within one hundred  twenty (120) days after the end of each fiscal
     year of Borrower,  an annual financial  statement,  consisting of a balance
     sheet of  Borrower  as at the end of such year,  a  statement  of income of
     Borrower for such year setting forth in each case the corresponding figures
     for the preceding fiscal year, and a statement of cash flows for such year,
     such  statements to be audited by a firm of  independent  certified  public
accountants selected by Borrower and acceptable to the Banks;         

          (C) within  forty-five (45) days after the end of each fiscal quarter,
     a balance sheet and combined  operating  income and cash flow  statement in
     the form of the Form 10-Q which is filed with the  Securities  and Exchange
Commission as signed by the Chief Financial Officer of Borrower;      

          (D)  simultaneously  with the  furnishing  of the  year-end  financial
     statements of Borrower to be delivered  pursuant to Section  5.3(B) and the
     quarterly  statements  of  Borrower  to be  delivered  pursuant  to Section
     5.3(C),  an  Officer's  Certificate  of an officer  which  shall  contain a
     statement  to the effect that no Event of Default or Default has  occurred,
     without having been waived in writing, or if there shall have been an Event
     of Default not  previously  waived in writing  pursuant  to the  provisions
     hereof, or a Default,  such Officer's Certificate shall disclose the nature
thereof;                                                              

          (E) promptly after the  commencement  thereof,  notice of all material
     actions, suits and proceedings before any court or governmental department,
     commission, board, bureau, agency or instrumentality,  domestic or foreign,
affecting Borrower or any Subsidiary;                                 

          (F) such other information respecting the business, properties, or the
     condition  or  operations,  financial  or  otherwise,  of Borrower  and its
     Subsidiaries  as the  Administrative  Agent or the Banks may,  from time to
time, reasonably request;                                             

          (G) prompt written notice of any material adverse change in Borrower's
     or any Subsidiary's condition,  financial or otherwise,  and an explanation
    thereof and of the actions Borrower proposes to take with respect thereto;

          (H)  immediately,  copies  of any  and  all  notices,  correspondence,
     warnings,  guidance or other  written  materials  specifically  directed at
     Borrower  or any  Subsidiary  which  have a material  impact on  Borrower's
ability to carry out its businesses as                                

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     presently  conducted  and which  include,  but shall not be limited to, any
     directives,  compliance  requirements or enforcement  requirements received
     from any  governmental  authority in connection  with the property owned or
     leased by Borrower or any Subsidiary,  the substances contained therein, or
     the  equipment or  operations  of Borrower or any  Subsidiary in connection
therewith; and                                                        

          (I) promptly and in any event within five (5) days thereafter, written
notice of any change in the name of Borrower.                         

     All  statements  of  financial  performance  and  compliance   certificates
     required to be  provided  on or prior to April 30, 2000 by Borrower  and/or
     its Subsidiaries to the Administrative Agent and the Banks herein shall (i)
     include a statement that the Year 2000 remediation  efforts of Borrower and
     its  Subsidiaries  are proceeding as scheduled and (ii) indicate whether an
     auditor,  regulator,  or third  party  consultant  has issued a  management
     letter or other communication regarding the Year 2000 exposure,  program or
progress of Borrower and/or its Subsidiaries.                         

ARTICLE VI

 EVENTS OF DEFAULT

     Section 6.1. Events of Default.  Borrower shall be in default under each of
the Financing Documents, upon the occurrence of any one or more of the following
events ("Events of Default"):                                                   

          (A) if  Borrower  shall fail to make due and  punctual  payment of any
     fees, interest and/or other amounts payable as provided in the Notes and/or
     in this Agreement within ten (10) days of the date when due and payable, or
     if Borrower  shall fail to make due and  punctual  payment of  principal as
     provided in the Notes and/or in this Agreement when due and payable,  or if
     Borrower shall fail to make any such payment of fees,  interest,  principal
     and/or any other amount under this  Agreement  and/or the Notes on the date
when such payment becomes due and payable by acceleration; or         

          (B) if Borrower shall make an assignment for the benefit of creditors,
     or shall fail generally to pay its debts as they become due, or shall admit
     in writing its inability to pay its debts as they become due, or shall file
     a voluntary  petition in  bankruptcy,  or shall file any petition or answer
     seeking   any   reorganization,   arrangement,   composition,   adjustment,
     liquidation,  dissolution or similar relief under the present or any future
     federal  bankruptcy  laws or  other  applicable  federal,  state  or  other
     statute, law or regulation, or shall seek or consent to or acquiesce in the
     appointment  of any trustee,  receiver or liquidator of it or of all or any
     substantial  part of its properties,  or if corporate action shall be taken
for the purpose of effecting any of the foregoing; or                 

          (C) to the extent not  described  in Section  6.1(B),(i)  if  Borrower
     shall be the subject of a bankruptcy proceeding,  or (ii) if any proceeding
against it seeking any                                                

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     reorganization,    arrangement,   composition,   adjustment,   liquidation,
     dissolution  or similar  relief  under the  present  or any future  federal
     bankruptcy  law or  other  applicable  federal,  foreign,  state  or  other
     statute,  law or regulation  shall be  commenced,  or (iii) if any trustee,
     receiver or  liquidator of it or of all or any  substantial  part of any or
     all  of  its  properties   shall  be  appointed   without  its  consent  or
     acquiescence;  provided  that in any of the cases  described  above in this
     Section  6.1(C),  such  proceeding or appointment  shall not be an Event of
     Default if  Borrower  shall  cause such  proceeding  or  appointment  to be
     discharged,  vacated,  dismissed  or stayed  within  sixty  (60) days after
commencement thereof; or                                              

          (D) if final  judgment or  judgments in the  aggregate  amount of Five
     Million Dollars ($5,000,000) or more shall be rendered against Borrower and
     shall  remain  undischarged,  unstayed or unpaid for an  aggregate of sixty
(60) days (whether or not consecutive) after entry thereof; or        

          (E) if Borrower  shall default  (after giving effect to any applicable
     grace  period) in the due and  punctual  payment or  payments  on any other
     Indebtedness  which is in excess of the  aggregate  amount of Five  Million
     Dollars   ($5,000,000),   other  than  Indebtedness   represented  by  this
     Agreement,  or if any default shall have occurred under any mortgage,  note
     or other  agreement  evidencing,  securing or providing for the creation of
     such  Indebtedness,  which results in the acceleration of such Indebtedness
     or which permits,  or with the giving of notice would permit, any holder or
     holders  of any  such  Indebtedness  in  excess  of  Five  Million  Dollars
     ($5,000,000)  in an  aggregate  amount to  accelerate  the stated  maturity
thereof; or                                                           

          (F) if there shall be any default in the  performance  of any covenant
     or condition contained in this Agreement and/or payment of any Indebtedness
     to be  observed or  performed  pursuant to the terms  hereof  after  giving
     effect to any applicable  grace period,  other than a covenant or condition
     referred to in any other  subsection  of this  Section 6.1 and such default
     shall continue  unremedied or unwaived,  (i) in the case of any covenant or
     condition  contained in Section 5.3, for ten (10) Business Days, or (ii) in
     the case of any other covenant or condition for which no other grace period
is provided, for thirty (30) days; or                                 

          (G) if any of the  representations  and warranties made or deemed made
     by  Borrower  to the  Administrative  Agent and the Banks  pursuant to this
     Agreement or in any other  Financing  Document proves to have been false or
misleading in any material respect when made; or                      

          (H) if there shall be any attachment of any deposits or other property
     of Borrower in the  possession of the Banks or any  attachment of any other
     property of Borrower, which shall not be discharged within thirty (30) days
of the date of such attachment; or                                    

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          (I) with respect to any employee  benefit plan as to which Borrower or
     any Subsidiary  may have any  liability,  there shall exist a deficiency of
     more than  $1,000,000 in the plan assets  available to satisfy the benefits
     guaranteeable  under  ERISA  with  respect  to such  plan,  or such plan is
     terminated or Borrower or any Subsidiary withdraws from such plan, but only
     if,  in the case of any  withdrawal  or  termination,  such  withdrawal  or
     termination is reasonably likely to have a material adverse effect upon the
 condition, financial or otherwise, of Borrower and its Subsidiaries; or

          (J) if IPALCO shall fail at any time to own,  directly or  indirectly,
     all of the issued and outstanding capital stock of Borrower, free and clear
of any Lien; or                                                       

          (K) if  this  Agreement  or any  other  Financing  Document  shall  be
nullified or shall cease to be in full force and effect; or           

          (L) if the S&P  Rating  shall be BB+ or lower  or the  long-term  debt
securities of IPL shall be unrated by S&P.                            

 ARTICLE VII

 REMEDIES OF BANKS

     Upon the  occurrence  and during the  continuance of any one or more of the
Events of Default,  the Required  Banks may, by notice to Borrower,  declare the
obligation of the Banks to make Loans to be terminated, whereupon the same shall
forthwith  terminate and the Required Banks may, by notice to Borrower,  declare
the  entire  unpaid  principal  amount of the  Loans  and all fees and  interest
accrued and unpaid thereon and/or under any of the other Financing Documents and
any and all  other  Indebtedness  hereunder  to be  forthwith  due and  payable,
whereupon  the Loans  and all such  accrued  fees and  interest  and other  such
Indebtedness shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by Borrower;  provided,  however, that upon the occurrence of an Event of
Default  under  Section  6.1(B)  or (C) of  this  Agreement,  all of the  unpaid
principal amounts of the Loans, all fees and interest accrued and unpaid thereon
and/or  under any of the other  Financing  Documents  and any and all other such
Indebtedness  of Borrower to the Banks and/or to any such holder shall thereupon
be due and payable in full without any need for the  Required  Banks to make any
such  declaration or take any action and the  Commitments  shall  simultaneously
terminate.                                                                      

ARTICLE VIII

 MISCELLANEOUS

     Section 8.1. Consent to Jurisdiction and Service of Process.  EXCEPT TO THE
EXTENT PROHIBITED BY APPLICABLE LAW, BORROWER IRREVOCABLY:                      

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          (A) AGREES THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING ARISING OUT
     OF THIS  AGREEMENT,  THE  OTHER  FINANCING  DOCUMENTS  OR THE  LOANS MAY BE
     BROUGHT IN THE COURTS OF RECORD OF THE STATE OF ILLINOIS SITTING IN CHICAGO
     OR THE COURTS OF THE UNITED STATES LOCATED IN THE STATE OF ILLINOIS SITTING
IN CHICAGO;                                                           

          (B) CONSENTS TO THE  NON-EXCLUSIVE  JURISDICTION OF EACH SUCH COURT IN
ANY SUCH SUIT, ACTION OR PROCEEDING;                                  

          (C)  WAIVES ANY  OBJECTION  THAT IT MAY HAVE TO THE LAYING OF VENUE OF
     ANY SUCH SUIT,  ACTION OR  PROCEEDING  IN ANY OF SUCH COURTS OR THAT ANY OF
SUCH COURTS IS AN INCONVENIENT FORUM; AND                             

          (D)  CONSENTS TO THE SERVICE OF PROCESS BY  REGISTERED  MAIL,  POSTAGE
  PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS.

     Section 8.2. Rights and Remedies  Cumulative.  No right or remedy conferred
upon or  reserved  to the  Administrative  Agent or the  Banks in the  Financing
Documents  is  intended to be  exclusive  of any other right or remedy and every
such right and remedy shall,  to the extent  permitted by law, be cumulative and
in addition to every other right and remedy given under the Financing  Documents
or now or hereafter existing at law or in equity or otherwise.  The assertion or
employment of any right or remedy under this Agreement, or otherwise,  shall not
prevent the concurrent assertion or employment of any other appropriate right or
remedy.                                                                         

     Section  8.3.  Delay or Omission  Not  Waiver.  No delay in  exercising  or
failure  to  exercise  by the  Administrative  Agent or any Bank of any right or
remedy under the  Financing  Documents  shall impair any such right or remedy or
constitute a waiver of any Event of Default or an  acquiescence  therein.  Every
right  and  remedy  given  under  the  Financing  Documents  or by  law  to  the
Administrative  Agent and the Banks  may be  exercised  from time to time and as
often as may be deemed expedient by the Administrative Agent or the Banks.      

     Section 8.4. Amendments. Subject to the provisions of this Section 8.4, the
Required Banks (or the  Administrative  Agent with the consent in writing of the
Required Banks) and Borrower may enter into agreements  supplemental  hereto for
the purpose of adding or modifying any provisions to the Financing  Documents or
changing in any manner the rights of the Banks or Borrower  hereunder or waiving
any Default hereunder;  provided,  however, that no such supplemental  agreement
shall, without the consent of each Bank:                                        

          (A) Extend the  maturity  of any Loan or Note or reduce the  principal
     amount  thereof,  or  reduce  the rate or  extend  the time of  payment  of
interest or fees hereunder or thereunder.                             

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          (B) Reduce the  percentages  specified in the  definition  of Required
Banks.                                                                

          (C) Extend the  Commitment  Termination  Date or the Maturity  Date or
     increase  the amount of the  Commitment  of any Bank  hereunder,  or permit
Borrower to assign its rights under this Agreement.                   

(D) Amend this Section 8.4.                                 

No amendment of any provision of this Agreement  relating to the  Administrative
Agent  shall be  effective  without the  written  consent of the  Administrative
Agent.                                                                          

     Section 8.5.  Addresses  for Notices.  All notices,  requests,  demands and
other  communications  provided  for  hereunder  shall be in writing  (including
telecopied  communication) and mailed, telecopied or delivered to the applicable
party at its address shown beneath its signature  hereto or, as to any party, at
such other address as shall be  designated by such party in a written  notice to
each other party  complying as to the delivery  with the terms of this  section.
All such notices,  requests, demands and other communications shall be effective
when  received;  provided,  however,  that in the case of any  notice,  request,
demand  or  other  communication  given  via  telecopier,  notice  shall  not be
effective when received unless an identical, originally executed version of such
notice, demand, request or other communication shall be mailed to the applicable
party that same day.                                                            

Section 8.6. Costs, Expenses and Taxes; Indemnification.              

          (A)  Borrower  agrees  to  pay  on  demand  the  reasonable  fees  and
     out-of-pocket  expenses,  not to exceed  $6,000,  of Mayer,  Brown & Platt,
     counsel for the  Administrative  Agent, in connection with the preparation,
     execution,   delivery,   amendment  and  administration  of  the  Financing
     Documents and the Loans.  Borrower  agrees to pay on demand all  reasonable
     costs and expenses (including,  without limitation,  reasonable  attorneys'
     fees) incurred by the Administrative  Agent and the Banks, upon or after an
     Event of Default,  if any, in connection with the enforcement of any of the
     Financing  Documents and any  amendments,  waivers or consents with respect
     thereto.  In addition,  Borrower  shall pay on demand any and all stamp and
     other taxes and fees payable or determined to be payable in connection with
     the execution and delivery of the Financing  Documents,  and agrees to save
     each of the Banks  harmless from and against any and all  liabilities  with
     respect to or  resulting  from any delay in paying or  omission to pay such
     taxes or fees,  except those resulting from such Bank's gross negligence or
     willful misconduct;  provided,  however,  this indemnity shall not apply to
any filing fees which have been previously paid by Borrower.          

          (B) Borrower agrees to indemnify each Agent and each Bank, and each of
     their  respective  directors,  officers and  employees  against all losses,
     claims, damages, penalties, judgments, liabilities and expenses (including,
     without  limitation,  all expenses of  litigation or  preparation  therefor
     whether  or not the  Administrative  Agent or any Bank is a party  thereto)
     which  any of them  may pay or incur  arising  out of or  relating  to this
Agreement, the other                                                  

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     Financing Documents, the transactions  contemplated hereby or the direct or
     indirect  application  or proposed  application of the proceeds of any Loan
hereunder.                                                            

          (C) The  obligations  of Borrower under this Section 8.6 shall survive
the termination of this Agreement.                                    

     Section 8.7.  Participations.  Each Bank may sell  participations in all or
part of the Loans made by it or any other  interest  herein,  in which event the
participant  shall  not  have any  rights  under  any  Financing  Document  (the
participant's  rights against such Bank in respect of that  participation  to be
those  set  forth  in the  agreement  executed  by the  Banks  in  favor  of the
participant  relating thereto) and all amounts payable by Borrower  hereunder or
thereunder shall be determined as if such Bank had not sold such  participation.
The Banks may furnish any  information  concerning the Banks and Borrower in the
possession of the Banks from time to time to participants (including prospective
participants).                                                                  

Section 8.8. Binding Effect; Assignment.                              

          (A) This  Agreement  shall be binding upon and inure to the benefit of
     Borrower,  the  Administrative  Agent and the  Banks  and their  respective
     successors  and assigns,  except that Borrower  shall not have the right to
     assign  its rights  hereunder  or any  interest  herein  without  the prior
written consent of all Banks.                                         

          (B) Any Bank  may,  in the  ordinary  course  of its  business  and in
     accordance  with applicable law, at any time assign to one or more banks or
     other entities  ("Purchasers") all or any part of its Loans, Commitment and
     its  rights  and  obligations  under  its Note and  under  this  Agreement,
     pursuant  to a  form  of  assignment  acceptable  to  such  Bank  and  such
     Purchaser.  Unless an Event of Default has occurred and is continuing,  the
     consent of  Borrower  shall be  required  prior to an  assignment  becoming
     effective  with respect to a Purchaser  which is not a Bank or an affiliate
     thereof. Such consent shall not be unreasonably  withheld.  Notwithstanding
     the foregoing  provisions of this Section 8.8(B),  any Bank may at any time
     assign all or any portions of its Loans and Note to a Federal  Reserve Bank
     (but no such assignment  shall release any Bank from any of its obligations
hereunder).                                                           

          (C) Upon delivery to the Administrative Agent and Borrower of a notice
     of assignment, together with any consent required by this Section 8.8, such
     assignment  shall become  effective on the effective date specified in such
     notice. On and after the effective date of such assignment,  such Purchaser
     shall for all purposes be a Bank party to this Agreement and shall have all
     the rights and  obligations  of a Bank  under this  Agreement,  to the same
     extent as if it were an original  party hereto,  and no further  consent or
     action by  Borrower,  the  Administrative  Agent or any other Bank shall be
     required to release the  transferor  Bank with respect to the percentage of
     the Loans and Commitment assigned to such Purchaser.  Upon the consummation
     of any  assignment  to a  Purchaser  pursuant  to  this  Section  8.8,  the
transferor Bank and Borrower shall make appropriate arrangements      

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     so that a replacement Note is issued to such transferor Bank and a new Note
     or, as appropriate, a replacement Note is issued to such Purchaser, in each
     case in principal  amounts  reflecting  its pro rata share of the Aggregate
Commitment.                                                           

          (D)  Borrower  authorizes  each Bank to  disclose  to any  participant
     (pursuant to Section  8.7) or  Purchaser  or any other entity  acquiring an
     interest  in  this  Agreement  or its  Note  by  operation  of law  (each a
     "Transferee")  and any  prospective  Transferee any and all  information in
     such Bank's possession  concerning the creditworthiness of Borrower and its
Subsidiaries.                                                         

          (E) This Agreement and all covenants,  representations  and warranties
     made herein and/or in any of the other  Financing  Documents  shall survive
     the  making of the Loans,  the  execution  and  delivery  of the  Financing
     Documents and shall continue in effect so long as any amounts payable under
     or in  connection  with  any  of  the  Financing  Documents  or  any  other
     Indebtedness  of Borrower  to the Banks  remains  unpaid or any  Commitment
     remains outstanding;  provided, however, that Section 8.6 shall survive and
     remain in full force and effect after  expiration  of the  Commitments  and
     repayment in full of all amounts payable under or in connection with all of
the Financing Documents and any other such Indebtedness.              

     Section 8.9. Actual Knowledge. For purposes of this Agreement,  none of the
Administrative  Agent and Banks shall be deemed to have actual  knowledge of any
fact or state of facts  unless the  senior  loan  officer  or any other  officer
responsible for Borrower's account established pursuant to this Agreement at the
Administrative  Agent or such Bank shall, in fact, have actual knowledge of such
fact or state of facts or unless  written  notice of such fact  shall  have been
received by the  Administrative  Agent or such Bank in  accordance  with Section
8.5.                                                                            

     Section  8.10.  Governing  Law.  This  Agreement  and the  other  Financing
Documents  shall be governed by and construed in accordance with the laws of the
State of Illinois  applicable  to contracts  made and to be wholly  performed in
said State.                                                                     

     Section 8.11.  Severability  of Provisions.  Any provision of any Financing
Document which is prohibited or unenforceable  in any jurisdiction  shall, as to
such  jurisdiction,  be  ineffective  to  the  extent  of  such  prohibition  or
unenforceability  without invalidating the remaining provisions or affecting the
validity or enforceability of such provision in any other jurisdiction.         

     Section 8.12. Headings.  Article and Section headings in this Agreement are
included  herein for  convenience  of reference  only and shall not constitute a
part of this Agreement for any other purpose.                                   

     Section 8.13.  Extension of the  Commitment  Termination  Date.  Unless the
Commitments  shall have been terminated in their entirety or an Event of Default
or Default has occurred and is continuing, Borrower may by written notice to the
Administrative Agent given                                                      

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no later than 30 days but not sooner  than 60 days prior to the then  applicable
Commitment  Termination Date, request the Administrative  Agent and the Banks to
extend the Commitment  Termination  Date to a Business Day falling not more than
364 days after the current Commitment Termination Date. The Administrative Agent
and the Banks have no obligation to extend the Commitment  Termination  Date and
any decision to extend the Commitment  Termination Date must be agreed to by the
Administrative  Agent and all  Banks.  Any  decision  to extend  the  Commitment
Termination  Date  shall  be  in  the  sole  and  absolute   discretion  of  the
Administrative  Agent and the Banks and shall be evidenced by a writing executed
by each of them.  The  failure of any Person to respond to a request for such an
extension  within 10 days of such  request  shall be deemed a decision not to so
extend.                                                                         

     Section 8.14. Counterparts. This Agreement may be executed in any number of
counterparts,  all of which together shall constitute one instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart.  

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

                                          INDIANAPOLIS POWER & LIGHT COMPANY

                              By: /s/Steven L. Meyer
                                               -------------------------------
                        Title: Treasurer

                           One Monument Circle
                                   Indianapolis, Indiana 46204
                                   Attention: Steven L. Meyer,
                                                       Treasurer
                                 Facsimile: (317) 630-5763

                                            ABN AMRO BANK N.V., individually and
                               as Administrative Agent

                                By: /s/Kris A. Grosshans
                                               -------------------------------
                                        Title: Vice President & Director

                              By: /s/David B. Bryant
                                               -------------------------------
                                   Title: Group Vice President

                                135 South LaSalle Street
                 Suite 710
                                    Chicago, Illinois 60674-9135
                             Attention: Mark Lasek
                                        Sonny Tran
                                 Facsimile: (312) 904-6387

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                                         THE INDUSTRIAL BANK OF JAPAN, LIMITED

                              By: /s/Walter R. Wolff
                                               -------------------------------
                                    Title: Joint General Manager

                                      227 West Monroe Street, Suite 2600
                           Chicago, Illinois 60606
                               Attention:  Nancy R. Barwig
                              Facsimile:  (312) 855-8200

                                      THE FIRST NATIONAL BANK OF CHICAGO

                                By: /s/Mary Lu D. Cramer
                                               -------------------------------
                             Title: Vice President

              Suite 0363
                            One First National Plaza
                                Chicago, Illinois 60670-0363
                             Attention: Mary Lu Cramer
                              Facsimile:  (312) 732-3055

                                 UNION PLANTERS BANK, NATIONAL
               ASSOCIATION

               By: /s/
                                               -------------------------------
                             Title: Vice President

                               One Indiana Square M.S. 227
                               Indianapolis, Indiana 46204
                           Attention: Jay Richards
                              Facsimile:  (317) 221-6120

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 EXHIBIT A

REVOLVING NOTE

$__,000,000                                 ___________, 199_  Chicago, Illinois

     FOR  VALUE  RECEIVED,  INDIANAPOLIS  POWER  &  LIGHT  COMPANY,  an  Indiana
corporation  ("Borrower"),  having its principal offices at One Monument Circle,
Indianapolis,  Indiana  46204,  unconditionally  promises to pay to the order of
_________________________ (the "Bank"), at the principal office of ABN AMRO Bank
N.V. (the "Administrative  Agent"), in Chicago,  Illinois,  the principal sum of
_________  Dollars  ($_________)  or, if less,  the aggregate  unpaid  principal
amount of all Loans made by the Bank to Borrower  pursuant to the  provisions of
that certain  Credit  Agreement  (as amended or otherwise  modified from time to
time, the "Credit Agreement"),  dated as of May 28, 1999, by and among Borrower,
various  financial  institutions  and the  Administrative  Agent. If not defined
herein,  all capitalized  terms shall have the meanings as defined in the Credit
Agreement.                                                                      

     Borrower  further  promises to pay interest on the unpaid  principal amount
hereof from the date of each Loan until such Loan is paid in full at the rate(s)
and at the time(s) provided in the Credit Agreement.  Payments of both principal
and interest are to be made in lawful money of the United States of America.  If
not sooner paid, the balance of the unpaid  principal and all accrued and unpaid
interest  shall  be due and  payable  on the  last  day of the  Interest  Period
applicable  to the Advance to which this Note  relates.  Payments  of  principal
and/or interest shall be made as specified in the Credit Agreement.             

     This  Note is one of the  Notes  referred  to in,  and is  entitled  to the
benefits and further security of, the Credit Agreement.  This Note is subject to
the terms and conditions of the Credit Agreement including those which determine
the interest rates, when payment of this Note may be accelerated and all amounts
hereunder  declared  immediately  due and payable and when payments of principal
and interest may be made.                                                       

     Borrower expressly waives demand,  presentment,  protest, notice of protest
and notice of  nonpayment  or  dishonor  of this  Note,  and  consents  that the
Required  Banks may extend the time of payment or otherwise  modify the terms of
payment  of any part of the whole of the debt  evidenced  by this  Note,  at the
request of any other person liable hereon,  and such consent shall not alter nor
diminish the liability of any Person.                                           

     No delay or omission on the part of the  Administrative  Agent or the Banks
in the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by the Administrative Agent or the Banks of any right
or remedy shall preclude other or further exercise thereof or of any other right
or remedy.                                                                      

Borrower agrees to pay all costs of collection, including             

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reasonable  attorneys' fees in case the principal of this Note or any payment on
the  principal or any interest  thereon is not paid at the  respective  maturity
thereof and to pay all costs including reasonable attorneys' fees, regardless of
whether suit be brought.  All amounts  payable  under this Note shall be payable
without relief from valuation and appraisement laws.                            

     Whenever used in this Note, the singular includes the plural and the plural
includes the singular,  the masculine  includes the feminine and the neuter, and
the terms "Borrower",  "Administrative  Agent" and "Bank", are deemed to include
those Persons named in the opening  paragraph of this Note and their  respective
successors and assigns.                                                         

     Notwithstanding any provisions herein or in any instrument now or hereafter
securing this Note,  the total  liability for payments in the nature of interest
shall  not  exceed  the  limits  imposed  by the  usury  laws of any  applicable
jurisdiction.                                                                   

     This Note shall be construed according to the laws of the State of Illinois
applicable to contracts made and to be wholly performed in said State.          

     IN WITNESS WHEREOF,  the undersigned has caused this Note to be executed by
its duly authorized representative the day and year first above written.        

                                        INDIANAPOLIS POWER & LIGHT COMPANY

                                    By:___________________________
                                    Its:__________________________

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 EXHIBIT B

 ADVANCE REQUEST

ABN AMRO Bank N.V.,                                                             
as Administrative Agent                                                     
135 South LaSalle Street                                                        
Chicago, Illinois 60674-6387                                                    

     This  Advance  Request is  delivered  to you pursuant to Section 2.7 of the
Credit  Agreement,  dated as of May 28,  1999 (as the  same  may be  amended  or
otherwise   modified  from  time  to  time,  the  "Agreement"),   by  and  among
Indianapolis Power & Light Company, an Indiana corporation ("Borrower"), various
financial  institutions  and ABN AMRO Bank N.V.,  as  administrative  agent (the
"Administrative  Agent").  Capitalized terms shall have the meanings ascribed to
them in the Agreement.                                                          

     Borrower hereby requests that an Advance be made in the aggregate principal
amount of  $__________  on ________,  _______.  Such  Advance  shall be a [LIBOR
Advance]  [Base  Rate  Advance].  The  Interest  Period for the  Advance  hereby
requested shall be ______________.                                              

     As an  inducement  to the  Banks  to make  the  Advance  hereby  requested,
Borrower  represents  and  warrants to the Banks that:  (a) all  proceeds of the
Advance  requested  hereby  will  be  used  for the  purposes  permitted  by the
Agreement; (b) all representations and warranties contained in the Agreement are
true;  (c) there has been full  compliance  with the  covenants set forth in the
Agreement; (d) no Default or Event of Default is now in existence or will result
from the  Advance  requested  hereby;  and (e) the FERC Order has not expired or
been revoked and permits the  issuance of Notes to evidence  the Advance  hereby
requested.                                                                      

     Please  disburse the proceeds of the Advance  requested  hereby on the date
specified above as follows: [include disbursement instructions].                

     Accordingly, the undersigned has caused this Advance Request to be executed
by its duly authorized officer this ____ day of _____________________, ____.    

                                        INDIANAPOLIS POWER & LIGHT COMPANY

                                    By:___________________________
                                    Its:__________________________

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 EXHIBIT C

                                                                    May 28, 1999

ABN AMRO Bank N.V.,                                                             
individually and as Administrative Agent, and                           
the other financial institutions which are parties                      
to the Credit Agreement referred to below                               

Ladies and Gentlemen:                                                           

     I am a Senior Vice President, General Counsel and Secretary of Indianapolis
Power & Light Company,  an Indiana  corporation (the  "Company"),  in connection
with the Credit  Agreement  (the  "Agreement")  dated as of May 28,  1999 by and
among  the  Company,  the  financial  institutions  which  are  parties  thereto
(collectively, the "Banks"), and ABN AMRO Bank N.V., as administrative agent for
the Banks.                                                                      

     I have made such  examination  of facts and law as I have deemed  necessary
for purposes of expressing the following opinions. In addition, I have with your
permission  relied  upon  certificates  of certain  officers  of the Company and
certificates of public officials with respect to certain matters.  I am aware of
no facts  contrary to the matters stated in such  certificates.  For purposes of
rendering  this opinion,  I have,  with your consent and without  investigation,
assumed:                                                                        

          (a) the  genuineness  of the  signatures  of all  persons  signing the
Agreement (other than the Company);                                   

          (b) the authority of the persons  executing the Agreement on behalf of
the parties thereto (other than the Company);                         

       (c) the authenticity of all documents submitted to me as originals;

          (d)  the  accuracy  and  completeness  of  all  corporate  and  public
documents and records made available to me;                           

          (e) the  conformity to authentic  original  documents of all documents
submitted to me as certified, conformed or photostatic copies;        

          (f) the due authorization,  execution and delivery of the Agreement by
the parties thereto (other than the Company);                         

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(g) the legal existence of the Banks; and                   

          (h) that the Agreement is binding upon all the parties  thereto (other
     than the  Company)  and that all parties  thereto  (other than the Company)
will act in accordance with the terms and provisions thereof.         

     Based on the foregoing and pursuant to Section 3.2(A) of the  Agreement,  I
am of the opinion that:                                                         

     A. The Company is a corporation  duly organized and validly  existing under
the laws of the State of Indiana.                                               

     B. The Company has full power to execute  and  deliver  the  Agreement  and
perform its obligations under the Agreement.                                    

     C. The execution,  delivery and performance by the Company of the Agreement
have been duly authorized by all necessary corporate action, and do not conflict
with any provision of law (including, without limitation, the FPA and the IPSCA)
or of the  Articles  of  Incorporation  or  By-Laws of the  Company,  and do not
conflict with or contravene  any  agreement,  indenture or contract to which the
Company is a party or by which any of its  property is bound or any order issued
by a regulatory  authority  (including,  without limitation,  the FERC Order, as
defined in paragraph F below) binding upon the Company.                         

     D. There is no  litigation  pending  or  threatened  against  or  otherwise
affecting the Company or any of its  properties or assets which would affect the
corporate existence of the Company or which might impair its corporate powers or
which would have a material adverse effect on the Company's ability to carry out
the transactions contemplated by the Agreement.                                 

     E. The Agreement is the legal, valid and binding obligation of the Company,
enforceable in accordance its their terms, except as the enforcement thereof may
be limited by  applicable  bankruptcy,  insolvency,  rearrangement,  moratorium,
liquidation,  conservatorship,  reorganization,  or  similar  debt  relief  laws
affecting  the  rights of  creditors  generally  from time to time in effect and
general principles of equity.                                                   

     F. No authorization,  consent, approval, license, exemption of or filing or
registration  with any  court or  governmental  department,  commission,  board,
bureau, agency or instrumentality,  domestic or foreign, is or will be necessary
to the valid  execution and delivery to the Banks or  performance by the Company
of any Financing Document (as defined in the Agreement), other than the order of
the FERC in Docket No.  ES98-34-000 dated July 29, 1998 (the "FERC Order").  The
FERC Order is final and  nonappealable  and in full force and effect and, to the
best of my  knowledge,  no  proceedings  to revoke or modify the FERC Order have
been instituted or are pending.                                                 

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     G. The Company is not an "investment  company" or a company "controlled" by
an "investment  company",  within the meaning of the  Investment  Company Act of
1940, as amended.                                                               

     H. The Company is a wholly-owned  direct subsidiary of IPALCO  Enterprises,
Inc., an Indiana corporation ("IPALCO").  IPALCO is a "holding company," as such
term is defined in the Public  Utility  Holding  Company Act of 1935, as amended
("PUHCA"),  and, by virtue of its  relationship  with  IPALCO,  the Company is a
"subsidiary  company" of a "holding  company"  within the meaning of PUHCA,  but
IPALCO and its  Subsidiaries  (as defined in the  Agreement) are exempt from all
provisions of PUHCA and all rules thereunder, except Section 9(a)(2) thereof, by
virtue of having duly filed with the Securities  and Exchange  Commission one or
more exemption  statements  pursuant to Section 3(a)(1) of PUHCA and pursuant to
Rule 2 of the  Securities  and  Exchange  Commission  and,  to  the  best  of my
knowledge,  no  proceedings  to  revoke  or  modify  such  exemption  have  been
instituted or are pending.  Neither the Company nor any Subsidiary is a "holding
company" or, other than by virtue of its  relationship  with IPALCO as set forth
in the two immediately preceding sentences, a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding  company" or of a "subsidiary  company"
of a "holding company", within the meaning of PUHCA.                            

     This  opinion  letter is limited to the current  Federal laws of the United
States and the  current  internal  laws of the State of  Indiana  and I have not
considered,  and express no opinion on, the laws of any other  jurisdiction.  In
expressing the opinion in paragraph E above, I have assumed that the laws of the
State of Indiana would apply to the Agreement  despite selection of Illinois law
as the governing law of the Agreement. In making the foregoing assumption,  I do
not mean to imply that an Indiana court would not give effect to such  selection
of Illinois law.                                                                

     This opinion is furnished  to you pursuant to the  Agreement  and is solely
for your benefit in connection with the  transactions  contemplated  thereby and
may not be used or relied upon by any other  person for any  purpose  whatsoever
without in each instance my prior and express written  consent.  Notwithstanding
the foregoing,  your assignees and  participants  may rely on this opinion as if
the same were addressed to them.                                                

                         Very truly yours,

 -3-

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SCHEDULE I

 BANKS AND COMMITMENTS

Bank                                                        Commitment          

ABN AMRO Bank N.V.                                         $45,000,000          

The Industrial Bank of Japan,                              $45,000,000          
Limited                                                                     

The First National Bank                                    $45,000,000          
of Chicago                                                                  

Union Planters Bank, National                              $15,000,000          
Association                                                                 

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 SCHEDULE II

PRICING SCHEDULE

               The "Applicable Margin" and "Facility Fee Rate" for any day
     are the  respective  rates per annum set forth below in the  applicable row
under                                                                           
the column corresponding to the Status that exists on such day:                 

         Status                   Level I Status                 Level II Status
--------------------------------------------------------------------------------
Applicable Margin                     0.20%                           0.30%     
Facility Fee Rate                     0.10%                           0.15%     

     For  purposes of this  Schedule,  the  following  terms have the  following
meanings:                                                                       

     "Level I Status"  exists at any date if, at such date, the S&P Rating is A-
or higher.                                                                      

     "Level II Status"  exists at any date if, at such date,  (i) the S&P Rating
is BBB- or higher and (ii) Level I Status does not exist.                       

"S&P" means Standard & Poor's Ratings Group.                          

     "S&P Rating" means the rating  assigned to the senior  unsecured  long-term
debt securities of Borrower  without  third-party  credit  enhancement,  and any
rating assigned to any other debt security of Borrower shall be disregarded.  If
Borrower does not have any such senior unsecured long-term debt securities, "S&P
Rating" shall mean the implied rating which S&P establishes for senior unsecured
long-term debt securities of Borrower.  The rating in effect on any date is that
in effect on the close of business on such date.                                

     "Status" refers to the determination of which of Level I Status or Level II
Status exists at any date.                                                      

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                                                               Exhibit 10.12.1

 FIRST AMENDMENT

     THIS FIRST AMENDMENT dated as of July 31, 2001 (this "Amendment") is to the
Credit Agreement (as heretofore amended, the "Credit Agreement") dated as of May
28, 1999 among INDIANAPOLIS POWER & LIGHT COMPANY,  an Indiana  corporation (the
"Borrower"),  various  financial  institutions  (the  "Banks") and ABN AMRO BANK
N.V., as administrative agent for the Banks (the "Administrative Agent"). Unless
otherwise defined herein,  terms defined in the Credit Agreement are used herein
as defined in the Credit Agreement.                                             

     WHEREAS, the parties hereto desire to amend the Credit Agreement in certain
respects;                                                                       

     NOW,  THEREFORE,  in  consideration  of the premises and for other good and
valuable  consideration  (the  receipt  and  sufficiency  of  which  are  hereby
acknowledged), the parties hereto agree as follows:                             

     SECTION 1 AMENDMENT.  On (and subject to the  occurrence  of) the Amendment
Effective Date (as defined below),  the Credit Agreement shall be amended in the
following manner:                                                               

     1.1 (a) The  following  definitions  shall be added to  Section  1.1 of the
Credit Agreement, each in its appropriate alphabetical position:                

          "Bonds" means the $40,000,000 City of Petersburg,  Indiana,  Pollution
     Control Refunding Revenue Bonds,  Adjustable Rate Tender Securities (ARTS),
Series 1995B.                                                         

          "Trustee" means Bank One Trust Company,  National Association,  in its
capacity as trustee for the Bonds.                                    

     (b) The  definitions of "Advance  Request,"  "Commitment"  and  "Commitment
Termination  Date" in Section 1.1 of the Credit  Agreement  shall be amended and
restated to read in their entireties as follows:                                

          "Advance  Request"  means a  request,  in  substantially  the  form of
     Exhibit B hereto,  and otherwise in form and substance  satisfactory to the
     Administrative  Agent,  made by the  Trustee on behalf of the  Borrower  in
accordance with Section 2.1(B).                                       

          "Commitment" means, for each Bank, its commitment to make Loans as set
     forth in Article II hereof,  as such commitment  maybe reduced from time to
     time in  accordance  with the terms of this  Agreement.  The  amount of the
 Commitment of each Bank as of July 31, 2001 is set forth on Schedule I.

          "Commitment  Termination  Date" means the earlier of (x) July  30,2002
     (as such  date may be  extended  pursuant  to  Section  8.13)  and (y) such
     earlier date,  if any, on which no Bonds are  outstanding.  Borrower  shall
     provide written notice to the Administrative Agent of the occurrence of the
date specified in clause (y) above.                                   

     1.2 Section 2.1(B) of the Credit Agreement shall be amended and restated to
read in its entirety as follows:                                                

          (B) Notice and Manner of Borrowing.  The Trustee for the Bonds may, on
     behalf of Borrower,  submit to the Administrative  Agent an Advance Request
     requesting that an Advance be made on the date and in the amount  specified
     in such Advance Request.  Concurrently  with any Advance Request,  Borrower
     may provide a written  notice to the  Administrative  Agent  specifying the
     type (Base Rate or LIBOR) of the Advance requested by such Advance Request,
     and, with respect to LIBOR Advances,  the Interest  Period;  provided that,
     unless the  Administrative  Agent receives such concurrent  notice prior to
     10:00 am.,  Chicago time, at least three Business Days prior to the date of
     the requested  Advance  specifying  that such Advance  specifying that such
     Advance  is to be a  LIBOR  Advance,  such  Advance  shall  be a Base  Rate
     Advance.  Promptly after receipt of any Advance Request or any such notice,
the Administrative Agent shall advise each Bank thereof.              

          Not later  than  noon,  Chicago  time,  on the date  specified  in the
     relevant Advance Request, each Bank shall provide the Administrative Agent,
     at the  Administrative  Agent's account  specified in Section 2.4(A),  with
     immediately  available  funds  covering  such  Bank's  share of the Advance
     requested  thereby  and,  subject  to the  satisfaction  of the  conditions
     precedent  set  forth  in  Section  3 with  respect  to such  Advance,  the
     Administrative  Agent  shall  promptly  make such  funds  available  to the
Trustee. Each borrowing shall be on a Business Day.                   

          Absent contrary  notice from Borrower by 10:00 am.,  Chicago time, one
     Business  Day prior to the last day of the  Interest  Period of an Advance,
     Borrower shall be deemed to have given the  Administrative  Agent notice at
     such time  pursuant  to this  Section  2.1(8) to the effect  that  Borrower
     requests  that the Banks  make Loans to  Borrower  on such date at the Base
     Rate in an  aggregate  principal  amount equal to the  aggregate  principal
amount of the Loans becoming due and payable on such date.            

          Borrower hereby  irrevocably  authorizes the Trustee to submit Advance
     Requests on behalf of Borrower,  subject to Section 2.6.  Without  limiting
     the  generality  of  Section   2.10(B),   the   Administrative   Agent  may
     conclusively rely on any document  purported to be submitted by the Trustee
     believed by the Administrative  Agent to be genuine and to have been signed
or presented by the proper Person.                                    

     1.3 Section 2.6 of the Credit  Agreement  shall he amended and  restated to
read in its entirety as follows:                                                

          Section 2.6 Use of  Proceeds.  Borrower  shall use the proceeds of the
     Loans solely to provide  liquidity  support for the Bonds. It is understood
     that,  notwithstanding  anything to the contrary herein, the Banks shall be
     under no obligation to advance  moneys under this Agreement to the Borrower
     directly and that only the Trustee may submit Advance Requests, and only on
behalf of Borrower for the purpose of liquidity support for the Bonds.

     1.4 Section 2.7 of the Credit  Agreement  shall be amended and  restated to
read in its entirety as follows:                                                

          Section  2.7 Loan  Advancements  and  Payments.  The Banks  shall make
     Advances as  requested  by the  Trustee on behalf of  Borrower  pursuant to
     Advance  Requests and in accordance with the following  notice  procedures.
     Each Bank's portion of an Advance requested  pursuant to an Advance Request
     shall be in the  proportion  which its  Commitment  bears to the  Aggregate
     Commitment.  Upon the Trustee submitting an Advance Request, Borrower shall
     forthwith give the  Administrative  Agent a written  notice  specifying the
     type and Interest  Period of the Advance  requested  thereby,  which notice
     shall be in such form as the Administrative  Agent may require from time to
     time. Upon any Advance Request being submitted to the Administrative Agent,
     Borrower shall forthwith deliver a certificate to the Administrative Agent,
     in form and substance  satisfactory  to the  Administrative  Agent,  to the
     effect  that all  conditions  precedent  set forth in Section 3.1 have been
satisfied.                                                            

     1.5 Section 2.16 of the Credit  Agreement shall be amended by inserting the
parenthetical phrase "(or the Trustee on behalf of Borrower)"  immediately after
the word "Borrower" in clause (b) of the first sentence of such Section.        

     1.6 Section 4.1(M) of the Credit Agreement shall be amended by deleting the
words "or  allegation  of such  violation or failure of  compliance"  where they
appear in the last sentence of such Section.                                    

     1.7 Section 4.1(0) of the Credit Agreement shall be amended by deleting the
words "owned as of the date of this  Agreement and to all  properties and assets
acquired by Borrower hereafter" where they appear in such Section.              

     1.8 Section 4.1(P) of the Credit Agreement shall be amended by deleting the
date  "December 31, 1998" where it appears in such Section and inserting in lieu
thereof the date "December 31, 2000."                                           

     1.9 Section 4.1(R) of the Credit Agreement shall be amended and restated to
read in its entirety as follows:                                                

          (R) Public  Utility  Holding  Company Act  Borrower is a  wholly-owned
     direct subsidiary of IPALCO and IPALCO is a wholly-owned  direct subsidiary
     of The  AES  Corporation,  a  Delaware  corporation  ("AES").  IPALCO  is a
     "holding company",  as such term is defined in PUHCA, and, by virtue of its
     relationship with IPALCO,  Borrower is a "subsidiary company" of a "holding
     company" within the meaning of PUHCA,  but IPALCO and its  Subsidiaries are
     exempt  from all  provisions  of PUHCA  and all  rules  thereunder,  except
     Section 9(a)(2) thereof, by virtue of having duly filed with the Securities
     and  Exchange  Commission  one or more  exemption  statements  pursuant  to
     Section  3(a)(1)  of PUHCA and  pursuant  to Rule 2 of the  Securities  and
     Exchange Commission. AES is a "holding company", as such term is defined in
     PUHCA,  and, by virtue of AES's  ownership of all of IPALCO's common stock,
     each of  IPALCO  and  Borrower  is a  "subsidiary  company"  of a  "holding
     company" within the meaning of PUHCA, but AES is exempt from all provisions
     of PUHCA and all rules  thereunder,  except  Section  9(a)(2)  thereof,  by
     virtue of the  Securities  and Exchange  Commission's  having so determined
     pursuant to Section 3(a)(5) of PUHCA. To the best of Borrower's  knowledge,
     no  proceedings  to revoke or modify  either of such  exemptions  have been
     instituted or are pending. Neither Borrower or any Subsidiary is a "holding
     company" or, other than by virtue of its relationships  with AES and IPALCO
     as set forth in the  preceding  portion of this  paragraph,  a  "subsidiary
     company" of a "holding company" or an "affiliate" of a "holding company" or
     of a  "subsidiary  company" of a "holding  company",  within the meaning of
PUHCA.                                                                

     1.10 Section 4.1(U) of the Credit  Agreement  shall be amended and restated
to read in its entirety as follows:                                             

(U) [Intentionally left blank]                              

     1.11  Schedule I to the Credit  Agreement  shall be amended and restated to
read in its entirety as set forth on Schedule I hereto.                         

     1.12 The  Pricing  Schedule  shall be amended  and  restated to read in its
entirety as set forth on Schedule II hereto.                                    

     1.13  Exhibit B to the Credit  Agreement  shall be amended and  restated to
read in its entirety as set forth on Exhibit B hereto.                          

     SECTION 2  REPRESENTATIONS  AND  WARRANTIES.  The Borrower  represents  and
warrants to the  Administrative  Agent and the Banks that after giving effect to
this  Amendment  (a) the  representations  and  warranties  made  in the  Credit
Agreement  are true and correct on and as of the Amendment  Effective  Date with
the same effect as if made on and as of the  Amendment  Effective  Date;  (b) no
Event of  Default  or  Default  exists or will  result  from the  execution  and
delivery of this  Amendment by the  Borrower;  (c) the execution and delivery by
the  Borrower  of this  Amendment  and the  performance  by the  Borrower of its
obligations  under the Credit  Agreement as amended  hereby (as so amended,  the
"Amended Credit Agreement") (i) are within the corporate powers of the Borrower,
(ii) have been duly  authorized by all necessary  corporate  action,  (iii) have
received  all  necessary  approvals  from  any  governmental   authority  having
jurisdiction  over the Borrower  and (iv) do not and will not conflict  with any
provision of any law or any  administrative  order or decree which is binding on
the Borrower or any of its  Subsidiaries  or of any provision of the certificate
of incorporation or bylaws or other organizational  documents of the Borrower or
of any  agreement  which is binding on the Borrower or any of its  Subsidiaries;
and (d) the Amended Credit Agreement is the legal,  valid and binding obligation
of the Borrower,  enforceable against the Borrower in accordance with its terms,
subject to bankruptcy,  insolvency or similar laws affecting the  enforcement of
creditors' rights generally and to general  principles of equity  (regardless of
whether considered in a proceeding at law or in equity).                        

     SECTION 3 EFFECTIVENESS.  The amendments set forth in Section 1 above shall
become effective as of the date hereof (the "Amendment Effective Date") when the
Administrative  Agent shall have  received (a) a counterpart  of this  Amendment
executed by the Borrower and the Banks,  (b) an amendment  fee from the Borrower
payable  to each Bank in an amount  equal to  0.050% of such  Bank's  Commitment
(after  giving  effect to this  Amendment)  and (e) such other  documents as the
Administrative Agent or any Bank may reasonably request.                        

SECTION 4 MISCELLANEOUS.                                              

     4.1 Continuing Effectiveness,  etc. As herein amended, the Credit Agreement
shall remain in full force and effect and is hereby  ratified  and  confirmed in
all respects.  After the Amendment  Effective Date, all references in the Credit
Agreement,  the Notes, each other Financing Document and any similar document to
the "Credit  Agreement"  or similar  terms  shall  refer to the  Amended  Credit
Agreement.                                                                      

     4.2  Counterparts.  This  Amendment  may  be  executed  in  any  number  of
counterparts  and by the different  parties on separate  counterparts,  and each
such  counterpart  shall be deemed to be an original  but all such  counterparts
shall together constitute one and the same Amendment.                           

     4.3 Expenses. The Borrower agrees to pay the reasonable out-of-pocket costs
and  expenses  of  the   Administrative   Agent  (including  without  limitation
reasonable  attorney's fees) in connection with the  preparation,  execution and
delivery of this Amendment.                                                     

     4.4  Governing  Law.  This  Amendment  shall be a  contract  made under and
governed by the laws of the State of Illinois  applicable to contracts  made and
to be wholly performed within the State of Illinois.                            

     4.5  Successors  and  Assigns.  This  Amendment  shall be binding  upon the
Borrower, the Banks and the Administrative Agent and their respective successors
and assigns,  and shall inure to the benefit of the Borrower,  the Banks and the
Administrative  Agent and the successors and assigns of the Borrower,  the Banks
and the  Administrative  Agent;  provided  that the Borrower  shall not have any
right to  assign  this  Amendment  without  the  prior  written  consent  of the
Administrative Agent and the Banks.                                             

     4.6 Continuance of Credit Agreement.  The Borrower and the undersigned Bank
acknowledge  that the other Banks party to the Credit  Agreement have not agreed
to the extension of the Commitment  Termination Date effected by this Amendment.
The parties hereto agree that, as amended hereby  (including with respect to the
reduction of the Aggregate  Commitment  to  $40,600,000),  the Credit  Agreement
shall continue in full force and effect between the parties hereto.             

Delivered as of the day and year first above written.                 

                                  INDIANAPOLIS POWER & LIGHT COMPANY

                       By:/s/William H. Henley
                                           -------------------------------------
                Title: President
                                              ----------------------------------

                  ABN AMRO BANK N.V.

                    By:/s/ Mark R. Lasek
                                           -------------------------------------
                                       Title: Senior Vice President & Managing
                          Director
                                              ----------------------------------

                     By:/s/Philip J. Leigh
                                           -------------------------------------
                     Title: Vice President
                                              ----------------------------------

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SCHEDULE I

 BANKS AND COMMITMENTS

Bank                                                  Commitment                
----                                                  ----------                
ABN AMRO Bank N.V.                                    $40,600,000               

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 SCHEDULE II

PRICING SCHEDULE

     The  "Applicable  Margin"  and  "Facility  Fee  Rate"  for  any day are the
respective  rates  per annum set  forth  below in the  applicable  row under the
column corresponding to the Status that exists on such day:                     

Status            Level I Status            Level II Status   
---------------------------------------------------------------------   
Applicable Margin          0.35%                      0.55%             
Facility Fee Rate          0.10%                      0.15%             

     For  purposes of this  Schedule,  the  following  terms have the  following
meanings:                                                                       

     "Level I Status"  exists at any date if, at such date, the S&P Rating is A-
or higher.                                                                      

     "Level II Status"  exists at any date if, at such date,  (i) the S&P Rating
is BBB- or higher and (ii) Level I Status does not exist,                       

"S&P" means Standard & Poor's Ratings Group.                          

     "S&P Rating" means the rating  assigned to the senior  unsecured  long-term
debt securities of Borrower  without  third-party  credit  enhancement,  and any
rating assigned to any other debt security of Borrower shall be disregarded.  If
Borrower does not have any such senior unsecured long-term debt securities, "S&P
Rating" shall mean the implied rating which S&P establishes for senior unsecured
long-term debt securities of Borrower.  The rating in effect on any date is that
in effect on the close of business on such date.                                

     "Status" refers to the determination of which of Level I Status or Level II
Status exists at any date.                                                      

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 EXHIBIT B

 ADVANCE REQUEST

ABN AMRO Bank N.V.,                                                             
as Administrative Agent                                                     
135 South LaSalle Street                                                        
Chicago, Illinois 60674-6387                                                    

     This Advance  Request is delivered to you pursuant to Section 2.1(B) of the
Credit  Agreement,  dated as of May 28,  1999 (as the  same  may be  amended  or
otherwise   modified  from  time  to  time,  the  "Agreement"),   by  and  among
Indianapolis Power & Light Company, an Indiana corporation ("Borrower"), various
financial  institutions  and ABN AMRO Bank N.V.,  as  administrative  agent (the
"Administrative  Agent").  Capitalized terms shall have the meanings ascribed to
them in the Agreement.                                                          

     The  undersigned  certifies to you that it is the duly appointed and acting
Trustee under the Bonds and that it is authorized to submit this Advance request
on behalf of Borrower to provide liquidity support for the Bonds.               

     The  undersigned on behalf of Borrower  hereby  requests that an Advance be
made in the aggregate principal amount of $__________ on _________, 200___.     

     As an inducement  to the Banks to make the Advance  hereby  requested,  the
undersigned  represents  and  warrants  to the Banks  that all  proceeds  of the
Advance requested hereby  will  be  used  for  the  purposes  permitted  by the 
Agreement.                                                                      

     Please  disburse the proceeds of the Advance  requested  hereby on the date
specified above as follows: [include disbursement instructions]                 

     The undersigned  agrees that none of the  Administrative  Agent, the Banks,
nor any of their directors, officers, employees, agents or affiliates shall have
any liability to the  undersigned  or any holder of any Bonds arising out of the
Agreement.  Without  limiting the generality of the foregoing,  the  undersigned
acknowledges  that it is not an assignee of the rights of the Borrower under the
Agreement nor is the undersigned an intended beneficiary of the Agreement       

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     Accordingly, the undersigned has caused this Advance Request to be executed
by its duly authorized officer this _____ day of _______________, 200___.       

                  BANK ONE TRUST COMPANY
                 NATIONAL ASSOCIATION,
                           not in its individual capacity,
                               but solely as trustee for the Bonds

By: 
                                         ---------------------------------------
Its:
                                          --------------------------------------

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                                                               Exhibit 10.12.2

SECOND AMENDMENT

     THIS SECOND  AMENDMENT dated as of November 13, 2001 (this  "Amendment") is
to the Credit Agreement (as heretofore amended, the "Credit Agreement") dated as
of May 28, 1999 among INDIANAPOLIS POWER & LIGHT COMPANY, an Indiana corporation
(the "Borrower"), various financial institutions (the "Banks") and ABN AMRO BANK
N.V., as administrative agent for the Banks (the "Administrative Agent"). Unless
otherwise defined herein,  terms defined in the Credit Agreement are used herein
as defined in the Credit Agreement.                                             

     WHEREAS, the parties hereto desire to amend the Credit Agreement in certain
respects;                                                                       

     NOW,  THEREFORE,  in  consideration  of the premises and for other good and
valuable  consideration  (the  receipt  and  sufficiency  of  which  are  hereby
acknowledged), the parties hereto agree as follows:                             

     SECTION 1 AMENDMENT.  On (and subject to the  occurrence  of) the Amendment
Effective Date (as defined below),  the Credit Agreement shall be amended in the
following manner:                                                               

     1.1 Section 5.3 of the Credit  Agreement  shall be amended by (i)  deleting
the word "and"  immediately  following  clause (H) thereof,  (ii)  replacing the
period at the end of clause  (I)  thereof  with a "; and" and (iii)  adding  the
following clause (J):                                                           

          (J)  promptly,  written  notice  of any  filing  with the IURC to seek
authority to issue any preferred stock.                               

     1.2 Section 6.1(J) of the Credit Agreement shall be amended and restated to
read in its entirety as follows:                                                

          (J) if (i)  IPALCO  shall at any time  own,  directly  or  indirectly,
     shares of the Borrower  representing  less than 93% of the aggregate voting
     power represented by all issued and outstanding  capital stock of Borrower,
     (ii) IPALCO shall at any time fail to own,  directly or indirectly,  all of
     the issued and  outstanding  common stock of Borrower or (iii) IPALCO shall
     at any time not be entitled to elect a majority of the members of the Board
of Directors of Borrower; or                                          

     SECTION 2  REPRESENTATIONS  AND  WARRANTIES.  The Borrower  represents  and
warrants to the  Administrative  Agent and the Banks that after giving effect to
this  Amendment  (a) the  representations  and  warranties  made  in the  Credit
Agreement  are true and correct on and as of the Amendment  Effective  Date with
the same effect as if made on and as of the  Amendment  Effective  Date;  (b) no
Event of  Default  or  Default  exists or will  result  from the  execution  and
delivery of this  Amendment by the  Borrower;  (c) the execution and delivery by
the  Borrower  of this  Amendment  and the  performance  by the  Borrower of its
obligations  under the Credit  Agreement as amended  hereby (as so amended,  the
"Amended Credit Agreement") (i) are within the corporate powers of the Borrower,
(ii) have been duly  authorized by all necessary  corporate  action,  (iii) have
received  all  necessary  approvals  from  any  governmental   authority  having
jurisdiction  over the Borrower  and (iv) do not and will not conflict  with any
provision of any law or any  administrative  order or decree which is binding on
the Borrower or any of its  Subsidiaries  or of any provision of the certificate
of incorporation or bylaws or other organizational  documents of the Borrower or
of any  agreement  which is binding on the Borrower or any of its  Subsidiaries;
and (d) the Amended Credit Agreement is the legal,  valid and binding obligation
of the Borrower,  enforceable against the Borrower in accordance with its terms,
subject to bankruptcy,  insolvency or similar laws affecting the  enforcement of
creditors' rights generally and to general  principles of equity  (regardless of
whether considered in a proceeding at law or in equity).                        

     SECTION 3 EFFECTIVENESS.  The amendments set forth in Section 1 above shall
become effective as of the date hereof (the "Amendment Effective Date") when the
Administrative  Agent shall have  received (a) a counterpart  of this  Amendment
executed  by the  Borrower  and the Banks and (b) such  other  documents  as the
Administrative Agent or any Bank may reasonably request.                        

SECTION 4 MISCELLANEOUS.                                              

     4.1 Continuing Effectiveness,  etc. As herein amended, the Credit Agreement
shall remain in full force and effect and is hereby  ratified  and  confirmed in
all respects.  After the Amendment  Effective Date, all references in the Credit
Agreement,  the Notes, each other Financing Document and any similar document to
the "Credit  Agreement"  or similar  terms  shall  refer to the  Amended  Credit
Agreement.                                                                      

     4.2  Counterparts.  This  Amendment  may  be  executed  in  any  number  of
counterparts  and by the different  parties on separate  counterparts,  and each
such  counterpart  shall be deemed to be an original  but all such  counterparts
shall together constitute one and the same Amendment.                           

     4.3 Expenses. The Borrower agrees to pay the reasonable out-of-pocket costs
and  expenses  of  the   Administrative   Agent  (including  without  limitation
reasonable  attorney's fees) in connection with the  preparation,  execution and
delivery of this Amendment.                                                     

     4.4  Governing  Law.  This  Amendment  shall be a  contract  made under and
governed by the laws of the State of Illinois  applicable to contracts  made and
to be wholly performed within the State of Illinois.                            

     4.5  Successors  and  Assigns.  This  Amendment  shall be binding  upon the
Borrower, the Banks and the Administrative Agent and their respective successors
and assigns,  and shall inure to the benefit of the Borrower,  the Banks and the
Administrative  Agent and the successors and assigns of the Borrower,  the Banks
and the  Administrative  Agent;  provided  that the Borrower  shall not have any
right to  assign  this  Amendment  without  the  prior  written  consent  of the
Administrative Agent and the Banks.                                             

Delivered as of the day and year first above written.                 

                                  INDIANAPOLIS POWER & LIGHT COMPANY

                        By:/s/ William H. Henley
                                           -------------------------------------
                Title: President
                                              ----------------------------------

                  ABN AMRO BANK N.V.

                      By:/s/ L. David Wright
                                           -------------------------------------
                            Title: Senior Vice President
                                              ----------------------------------

                          By:/s/ Miguel A. Pachicano
                                           -------------------------------------
                            Title: Senior Vice President
                                              ----------------------------------

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘S-4’ Filing		Date		First		Last			Other Filings
Filed on:		4/3/02
		11/13/01		58
		7/31/01		53
		12/31/00		53					U-3A-2
		5/26/00		7
		4/30/00		35
		12/31/99		30					10-K,  U-3A-2
		5/28/99		1		58
		5/26/99		10
		12/31/98		28		53			10-K,  U-3A-2
		7/29/98		8		49
		12/20/96		25
									List all Filings