FIRST MODIFICATION OF CREDIT AGREEMENT

FIRST MODIFICATION OF CREDIT AGREEMENT

            This First Modification of Credit Agreement ("First Modification") is made and entered into on May 18, 2005, and effective as of May 19, 2005, by and between Indianapolis Power & Light Company, an Indiana corporation ("Borrower"), The Huntington National Bank, a national banking association in its capacity as contractual representative for itself and the other Lenders (the "Agent"), and the Lenders shown on the execution pages of this First Modification (the "Lenders"):

RECITALS

            WHEREAS, on May 20, 2004, Borrower executed that certain Credit Agreement in favor of the Lenders identified therein, and Agent, pursuant to which Lenders agreed to extend certain credit facilities to Borrower (hereinafter the "Credit Agreement");

            WHEREAS, pursuant to the Credit Agreement, Lenders extended certain Loans to Borrower consisting of Revolving Loans in the aggregate amount of Forty-Five Million Dollars ($45,000,000.00) and a Swing Line Loan of Ten Million Dollars ($10,000,000.00);

            WHEREAS, to evidence the Revolving Loans, Borrower executed the Revolving Notes in favor of the Lenders in the amount of their respective Revolving Loan Commitments, and the Swing Line Note in favor of the Swing Line Bank;

            WHEREAS, the Notes mature on May 19, 2005, and Borrower has requested that the maturity of the Notes be extended, and that certain modifications be made to the terms and covenants of the Credit Agreement;

            WHEREAS, Lenders have agreed to the extension of the maturity of the Notes and the additional amendments to the Credit Agreement pursuant to the terms of this First Modification;

            NOW THEREFORE, in consideration of the foregoing recitals, and the mutual agreements contained herein and for other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Credit Agreement is modified and amended as follows.

1. Accuracy Of Recitals . Borrower acknowledges the accuracy of the Recitals, stated above.
2. Definitions . Unless otherwise specifically defined herein, capitalized terms shall have the respective meanings ascribed to them in the Recitals or the Credit Agreement.
3. Modification Of Credit Agreement Definitions . The definitions in the Agreement, including those specifically found in Article I, Section 1.1, captioned "Definitions," are amended as follows:
4. 1.             Agreement . The definition of "Agreement" means the Credit Agreement, as amended by this First Modification.
   2. IURC Order . The definition of "IURC Order" is amended to read as follows:

" IURC Order " shall mean the Order issued by the Indiana Utility Regulatory Commission on February 12, 2003 in connection with Cause No. 42292, as such Order may be amended, supplemented, or replaced by a subsequent order."

3. 3. Maturity Date . The definition of "Maturity Date" is amended by replacing the reference to "May 19, 2005" with "May 18, 2006."
   4. Permitted Short-Term Indebtedness . A new definition of "Permitted Short-Term Indebtedness" is hereby added as follows:

"' Permitted Short-Term Indebtedness ' means Indebtedness incurred by Borrower in the form of unsecured loan(s) with a principal amount not exceeding Fifty Million Dollars ($50,000,000.00) at any one time, a maturity equal to or less than one (1) year, and terms substantially similar to the terms of this Credit Agreement; provided that (1) at the time of such incurrence no Event of Default or Unmatured Event of Default has occurred and is continuing or would result from such incurrence, including, without limitation, compliance on a pro forma basis by Borrower of the financial covenants contained in Article VIII, and (2) within three (3) Business Days of the time of such incurrence, Borrower shall provide Agent with written notice of its entering into such Indebtedness, which notice shall include a summary of the material terms and conditions thereof."

4. Modification of Negative Covenants . The Credit Agreement is hereby further amended by modifying Article VI, Section 6.1 as follows:
5. 1. The word "and" is deleted from Section 6.1 (h);
   2. Section 6.1 (i) is amended to read as follows:

            "(i)         any Permitted Refinancing Indebtedness; and"

4. 3. Section 6.1 is further amended by adding a new sub-section (j) as follows:

"(j)        any Permitted Short-Term Indebtedness."

5. Modification of Schedules . Schedules 4.3, 5.10, 6.1 and 6.2 to the Credit Agreement are hereby amended and restated as set forth in Exhibit 3 to this First Modification.
6. Conditions to Acceptance of First Modification . Agent's and Lenders' respective obligations under this First Modification are conditioned upon the satisfaction of the following conditions Borrower on or before the date of execution hereof (the " Modification Closing Date "):
7. 1. No Default . No Event of Default or Unmatured Event of Default has occurred or is continuing under the Credit Agreement.
   2. Loan Documents . The Borrower shall have executed and delivered to the Agent with sufficient copies for the Lenders all of the following documents (which shall be collectively deemed incorporated into the definition of "Loan Documents" in the Credit Agreement), all of which must be satisfactory to the Agent, the Lenders, the Agent's counsel and the Lender's counsel in form, substance and execution:
   3. 1. First Modification . This First Modification duly executed by the Borrower.
      2. First Modification to Revolving Notes . A modification to each of the Revolving Notes duly executed by the Borrower substantially in the form of Exhibit 1 to this First Modification.
      3. First Modification to Swing Loan Note . A modification to the Swing Loan Note duly executed by the Borrower substantially in the form of Exhibit 2 to this First Modification.
   4. Capitalization, Etc. The corporate and capital structure of Borrower, the certificate or articles of incorporation and by-laws of Borrower, and the terms, conditions, amounts and holders of all equity, debt and other indebtedness, obligations and liabilities of each of them, shall be not unsatisfactory to the Lenders.
   5. Fees, Expenses, Etc. All reasonable fees and other compensation required to be paid to the Agent and the Lenders pursuant hereto or pursuant to any other written agreement on or prior to the Modification Closing Date, including any commitment or Agent fees, shall have been paid or received.
   6. Legal Opinions . The Agent shall have received, with an executed counterpart for each Lender, opinions addressed to the Agent and each Lender, dated the Modification Closing Date, of counsel to Borrower (which may be in-house corporate counsel of Borrower) as to such matters as may be requested by Agent and in form and substance satisfactory to Agent and its counsel.
   7. Additional Matters . The Agent shall have received such other certificates, opinions, documents and instruments as may be requested by any Lender. All corporate and other proceedings, and all documents, instruments and other matters in connection with the transactions contemplated by this Agreement and the other Loan Documents shall be satisfactory in form and substance to Agent and each Lender.
   8. Adverse Changes . No material adverse change in the financial condition or affairs of the Borrower, as determined in any Lender's sole and complete discretion, shall have occurred since December 31, 2004.
   9. Litigation . No litigation or governmental proceeding shall have been instituted against the Borrower or any of its officers or shareholders since the Closing Date which in the discretion of the Agent or any Lender reasonably exercised, materially adversely affects the financial condition or continued operation of the Borrower.
   10. Representations and Warranties . The representations and warranties made by the Borrower in Article V of the Credit Agreement (other than Section 5.23), as the same are modified by this First Modification, shall be true and correct in all material respects on the Modification Closing Date as if made on and as of such date, both before and after giving effect to the Loans requested to be made on such date.
8. Incorporation of this First Amendment . The Credit Agreement is modified to provide that it shall be an Event of Default if Borrower shall fail to comply with any of the covenants of Borrower in this First Modification or if any representation or warranty by Borrower herein is materially incomplete, incorrect, or misleading as of the date hereof.
9. Modification of Loan Documents . Each of the Loan Documents not otherwise expressly modified herein are hereby deemed modified and amended in a manner consistent with the Credit Agreement, as amended by this First Modification, and any reference in the Loan Documents to any of the Loan Documents shall be a reference to such document as modified by this First Modification.
10. Ratification Of Loan Documents . Borrower hereby ratifies and affirms the Credit Agreement and other Loan Documents, and except as modified herein shall remain in full force and effect according to the original terms thereof.
11. Cooperation . Borrower shall execute, deliver, and provide to Agent such additional agreements, documents, and instruments as reasonably required by Lenders to effectuate the intent of this First Modification.
12. Effective Date Of First Modification . Lenders shall not be bound by this First Modification until (i) Agent and all of the Lenders have executed and delivered this First Modification, and (ii) Borrower has performed all of its obligations under this First Modification to be performed prior to or contemporaneously with the execution and delivery of this First Modification.
13. Integration, Entire Agreement, Change, Discharge, Termination, Or Waiver . The Loan Documents as modified herein contain the complete understanding and agreement of Borrower and Lenders with respect to the Loans and supersede all prior representations, warranties, agreement, arrangements, understandings, and negotiations. No provision of the Loan Documents as modified herein may be changed, discharged, supplemented, terminated, or waived except in a writing signed by the parties thereto.
14. Binding Effect . The Loan Documents as modified herein shall be binding upon and shall inure to the benefit of Borrower, Agent and Lenders and their successors and assigns and the executors, legal administrators, personal representatives, heirs, devisees, and beneficiaries of Borrower, provided, however, Borrower may not assign any of its right or delegate any of its obligation under the Loan Documents and any purported assignment or delegation shall be void.
15. Choice Of Law . This First Modification shall be governed by and construed in accordance with the laws of the State of Indiana without giving effect to conflicts of law principles.
16. Not A Novation . This First Modification is a modification only and not a novation. Except for the above quoted modifications, the Notes, the Credit Agreement, all other Loan Documents, and all the terms and conditions thereof, shall be and remain in full force and effect with the changes herein deemed to be incorporated therein and Borrower has no defenses, set-offs, claims, counterclaims or causes of action of any kind or nature with respect to any of the Loan Documents or the Indebtedness.
17. Counterparts . This First Modification may be executed in two or more counterparts and when so executed each counterpart shall constitute an original of this First Modification which taken together shall b