**Exhibit 4-xxx**

 

EXECUTION COPY

 

 

 

LOAN AGREEMENT

 

 

between

 

 

INDIANADEVELOPMENT FINANCE AUTHORITY

 

 

and

 

 

PSI ENERGY, INC.

 

 

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$35,000,000Indiana Development Finance AuthorityEnvironmental RefundingRevenue Bonds, Series 2003(PSI Energy, Inc. Project)

 

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Datedas ofFebruary 15, 2003

 

 

 

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**TABLE OF CONTENTS**

 
| ARTICLE I.    | DEFINITIONS                                                                                                 |
|---------------|-------------------------------------------------------------------------------------------------------------|
|          |                                                                                                        |
| Section 1.1.  | Use of Defined Terms                                                                                        |
| Section 1.2.  | Definitions                                                                                                 |
| Section 1.3.  | Interpretation                                                                                              |
| Section 1.4.  | Captions and Headings                                                                                       |
|          |                                                                                                        |
| ARTICLE  II.  | REPRESENTATIONS                                                                                             |
|          |                                                                                                        |
| Section 2.1.  | Representations of the Issuer                                                                               |
| Section 2.2.  | No Warranty by Issuer of Condition or  Suitability of the Project                                           |
| Section 2.3.  | Representations and Covenants of the  Company                                                               |
|          |                                                                                                        |
| ARTICLE  III. | COMPLETION OF THE PROJECT; ISSUANCE OF THE  BONDS                                                           |
|          |                                                                                                        |
| Section 3.1.  | Acquisition, Construction and Installation                                                                  |
| Section 3.2.  | Project Description                                                                                         |
| Section 3.3.  | Issuance of the Bonds; Application of  Proceeds                                                             |
| Section 3.4.  | Investment of Fund Moneys                                                                                   |
| Section 3.5.  | Rebate Fund                                                                                                 |
|          |                                                                                                        |
| ARTICLE  IV.  | LOAN BY ISSUER; LOAN PAYMENTS; ADDITIONAL PAYMENTS; MUNICIPAL BOND  INSURANCE POLICY AND LIQUIDITY FACILITY |
|          |                                                                                                        |
| Section 4.1.  | Loan Repayment                                                                                              |
| Section 4.2.  | Additional Payments                                                                                         |
| Section 4.3.  | Place of Payments                                                                                           |
| Section 4.4.  | Obligations Unconditional                                                                                   |
| Section 4.5.  | Assignment of Revenues and Agreement                                                                        |
| Section 4.6.  | Municipal Bond Insurance Policy; Liquidity  Facility; Cancellation                                          |
| Section 4.7.  | Company’s Option to Elect Rate Period;  Changes in Auction Date and Length of Auction Periods          |
| Section 4.8.  | Company’s Obligation to Purchase Bonds                                                                 |
|          |                                                                                                        |
| ARTICLE V.    | ADDITIONAL AGREEMENTS AND COVENANTS                                                                         |
|          |                                                                                                        |
| Section 5.1.  | Right of Inspection                                                                                         |
| Section 5.2.  | Maintenance                                                                                                 |

 

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| Section 5.3.   | Removal of Portions of the Project  Facilities                                                                    |
|----------------|-------------------------------------------------------------------------------------------------------------------|
| Section 5.4.   | Operation of Project Facilities                                                                                   |
| Section 5.5.   | Insurance                                                                                                         |
| Section 5.6.   | Workers’ Compensation Coverage                                                                               |
| Section 5.7.   | Damage; Destruction and Eminent Domain                                                                            |
| Section 5.8.   | Company to Maintain its Corporate  Existence; Conditions Under Which Exceptions Permitted                         |
| Section 5.9.   | Indemnification                                                                                                   |
| Section 5.10.  | Company Not to Adversely Affect Exclusion  of Interest on Bonds From Gross Income For Federal Income Tax Purposes |
| Section 5.11.  | Use of Project Facilities                                                                                         |
| Section 5.12.  | Assignment by Company                                                                                             |
| Section 5.13.  | The Depository Trust Company Letter of  Representation                                                            |
|           |                                                                                                              |
| ARTICLE  VI.   | REDEMPTION                                                                                                        |
|           |                                                                                                              |
| Section 6.1.   | Optional Redemption                                                                                               |
| Section 6.2.   | Extraordinary Optional Redemption                                                                                 |
| Section 6.3.   | Mandatory Redemption                                                                                              |
| Section 6.4.   | Notice of Redemption                                                                                              |
| Section 6.5.   | Actions by Issuer                                                                                                 |
|           |                                                                                                              |
| ARTICLE  VII.  | EVENTS OF DEFAULT AND REMEDIES                                                                                    |
|           |                                                                                                              |
| Section 7.1.   | Events of Default                                                                                                 |
| Section 7.2.   | Remedies on Default                                                                                               |
| Section 7.3.   | No Remedy Exclusive                                                                                               |
| Section 7.4.   | Agreement to Pay Attorneys’ Fees and  Expenses                                                               |
| Section 7.5.   | No Waiver                                                                                                         |
| Section 7.6.   | Notice of Default                                                                                                 |
|           |                                                                                                              |
| ARTICLE  VIII. | MISCELLANEOUS                                                                                                     |
|           |                                                                                                              |
| Section 8.1.   | Term of Agreement                                                                                                 |
| Section 8.2.   | Amounts Remaining in Funds                                                                                        |
| Section 8.3.   | Notices                                                                                                           |
| Section 8.4.   | Extent of Covenants of the Issuer; No  Personal Liability                                                         |
| Section 8.5.   | Binding Effect                                                                                                    |
| Section 8.6.   | Amendments and Supplements                                                                                        |
| Section 8.7.   | Execution Counterparts                                                                                            |
| Section 8.8.   | Severability                                                                                                      |
| Section 8.9.   | Governing Law                                                                                                     |

 

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**LOAN AGREEMENT**

 

THIS LOANAGREEMENT is made and entered into as of February 15, 2003 between theINDIANA DEVELOPMENT FINANCE AUTHORITY (the “Issuer”), a separate body corporateand politic organized and existing under the laws of the State of Indiana, andPSI ENERGY, INC. (the “Company”), a public utility and corporation dulyorganized and validly existing under the laws of the State of Indiana.  Capitalized terms used in the followingrecitals are used as defined in Article I of this Agreement.

 

Pursuant toIndiana Code, Title 4, Article 4, Chapters 10.9 and 11 (collectively, the“Act”), the Issuer has determined to issue, sell and deliver the Bonds, and tolend the proceeds derived from the sale thereof to the Company to assist in therefunding of the Refunded Bonds as defined below.  The Refunded Bonds were issued to provide funds to make a loan tothe Company to assist in the refinancing of its portion of the costs of theProject as defined below.

 

The Companyand the Issuer each have full right and lawful authority to enter into thisAgreement and to perform and observe the provisions hereof on their respectiveparts to be performed and observed.

 

NOW THEREFORE,in consideration of the premises and the mutual representations and agreementshereinafter contained, the Issuer and the Company agree as follows (providedthat any obligation of the Issuer or the State created by or arising out ofthis Agreement shall never constitute a general debt of the Issuer or the Stateor give rise to any pecuniary liability of the Issuer or the State but shall bepayable solely out of Revenues):

 

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# **ARTICLE I.**

# ** **

# **DEFINITIONS**

 

## Section 1.1.            Useof Defined Terms.  In addition tothe words and terms defined elsewhere in this Agreement, the Indenture or byreference to another document, the words and terms set forth in Section 1.2hereof shall have the meanings set forth therein unless the context or useclearly indicates another meaning or intent. Such definitions shall be equally applicable to both the singular andplural forms of any of the words and terms defined therein.

##  

## Section 1.2.            Definitions.  As used herein:

##  

“AdditionalPayments” means the amounts required to be paid by the Company pursuant to theprovisions of Section 4.2 hereof.

 

“AdministrationExpenses” means the compensation (which compensation shall not be greater thanthat typically charged in similar circumstances) and reimbursement of reasonableexpenses and advances payable to the Trustee, the Registrar, the RemarketingAgent, the Broker-Dealer, the Auction Agent, any Paying Agent and anyAuthenticating Agent.

 

“Agreement”means this Loan Agreement, as amended or supplemented from time to time.

 

“Engineer”means an engineer (who may be an employee of the Company) or engineering firmqualified to practice the profession of engineering under the laws of the Stateand who or which is acceptable to the Trustee.

 

“EPA” meansthe Department of Environmental Management of the State and any successor body,agency, commission or department.

 

“Event ofDefault” means any of the events described as an Event of Default inSection 7.1 hereof.

 

“ForceMajeure” means any of the following:

 

#### (i)            actsof God; strikes, lockouts or other industrial disturbances; acts of publicenemies; orders or restraints of any kind of the government of the UnitedStates of America or of the State or any of their departments, agencies,political subdivisions or officials, or any civil or military authority;insurrections; civil disturbances; riots; epidemics; landslides; lightning;earthquakes; fires; hurricanes; tornados; storms; droughts; floods; arrests;restraint of government and people; explosions; breakage, nuclear accidents orother malfunction or accident to facilities, machinery, transmission pipes orcanals;  partial or entire failure of autility serving the Project; shortages of labor, materials, supplies ortransportation; or

####  

#### 2

#### 

####  

#### (ii)           anycause, circumstance or event not reasonably within the control of the Company.

####  

“GeneratingStation” means the Gibson Generating Station.

 

“Indenture”means the Trust Indenture related to the Bonds, dated as of the same date asthis Agreement, between the Issuer and the Trustee, as amended or supplementedfrom time to time.

 

“InsuranceAgreement” means the Insurance Agreement related to the Bonds, datedMarch 7, 2003, between the Company and the Bond Insurer, as amended orsupplemented from time to time.

 

“Interest Ratefor Advances” means the interest rate per year payable on the Bonds.

 

“Loan” meansthe loan by the Issuer to the Company of the proceeds received from the sale ofthe Bonds.

 

“Loan PaymentDate” means any date on which any Bond Service Charges are due and payable.

 

“LoanPayments” means the amounts required to be paid by the Company in repayment ofthe Loan pursuant to Section 4.1 hereof.

 

“1954 Code”means the Internal Revenue Code of 1954 as amended from time to time throughthe date of enactment of the Code. References to the 1954 Code and Sections of the 1954 Code includerelevant applicable regulations (including temporary regulations) and proposedregulations thereunder and any successor provisions to those Sections,regulations or proposed regulations.

 

“NoticeAddress” means:

 
| (a)    |   | As to the Issuer:  |   | Indiana Development Finance Authority |
|--------|--------|--------------------|--------|---------------------------------------|
|   |   |               |   | One North Capitol, Suite 900          |
|   |   |               |   | Indianapolis, Indiana  46204     |
|   |   |               |   | Attention:   Executive Director  |
|   |   |               |   |                                  |
| (b)    |   | As to the Company: |   | PSI Energy, Inc.                      |
|   |   |               |   | 139 East Fourth Street                |
|   |   |               |   | Cincinnati, Ohio  45202          |
|   |   |               |   | Attention:   Treasurer           |

 

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| (c)    |   | As to the Trustee: |   | Fifth Third Bank, Indiana                        |
|--------|--------|--------------------|--------|--------------------------------------------------|
|   |   |               |   | Fifth Third Center                               |
|   |   |               |   | 38 Fountain Square                               |
|   |   |               |   | Cincinnati, Ohio  45263                     |
|   |   |               |   | Attention:   Corporate Trust Administration |

###  

or such additional or different address,notice of which is given under Section 8.3 hereof.

 

“OriginalBonds” means the City of Princeton, Indiana Pollution Control Revenue Bonds,1982 Series B (Public Service Company of Indiana, Inc. Project C).

 

“Person” orwords importing persons mean firms, associations, partnerships (includingwithout limitation, general and limited partnerships), limited liabilityentities, joint ventures, societies, estates, trusts, corporations, public orgovernmental bodies, other legal entities and natural persons.

 

“PollutionControl Facility” or “Pollution Control Facilities” means those facilitieswhich are pollution control facilities as defined in Section 24 of Chapter 10.9of the Act.

 

“Prior Bonds”means the Original Bonds, the Series 1987 Bonds and the Refunded Bonds.

 

“Project” or“Project Facilities” means the real, personal or real and personal property,including undivided or other interests therein, identified in the ProjectDescription, financed with the proceeds of the Original Bonds.

 

“ProjectDescription” means collectively the description of the Project Facilitiesoriginally financed with the proceeds of the Original Bonds, attached hereto as**Exhibit A**.

 

“ProjectPurposes” means the purposes of Pollution Control Facilities as described inthe Act and as particularly described in **Exhibit A** hereto.

 

“Project Site”means the Gibson Generating Station, Highway 64 West, Gibson County, Indiana.

 

“RefundedBonds” means the City of Princeton, Indiana Pollution Control Revenue RefundingBonds, 1997 Series (PSI Energy, Inc. Project).

 

“RefundedBonds Indenture” means the Trust Indenture dated as of February 1, 1997between the City of Princeton, Indiana and Fifth Third Bank, Indiana (assuccessor to The Fifth Third Bank of Central Indiana).

 

“RefundedBonds Loan Agreement” means the Loan Agreement dated as of February 1,1997 between the City of Princeton, Indiana and the Company.

 

4

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“RefundedBonds Trustee” means Fifth Third Bank, Indiana (as successor to The Fifth ThirdBank of Central Indiana), as trustee under the Refunded Bonds Indenture.

 

“Revenues”means (a) the Loan Payments, (b) all other moneys received or to be received bythe Issuer (excluding any fees paid to the Issuer and all Unassigned IssuerRights) or the Trustee in respect of repayment of the Loan, including withoutlimitation, all moneys and investments in the Bond Fund, (c) any moneys andinvestments in the Refunding Fund, and (d) all income and profit from theinvestment of the  foregoingmoneys.  The term “Revenues” does notinclude any moneys or investments in the Rebate Fund or the Bond Purchase Fund.

 

“Series 1982Indenture” means the Trust Indenture dated as of April 1, 1982 betweenAmerican Fletcher National Bank & Trust Company, as predecessor to BankOne, Indianapolis, NA and Bank One Trust Company, NA, and the City ofPrinceton, Indiana.

 

“Series 1982Loan Agreement” means the Loan Agreement dated as of April 1, 1982 betweenthe City of Princeton, Indiana and Public Service Company of Indiana, Inc., aspredecessor to PSI Energy, Inc.

 

“Series 1987Bonds” means the City of Princeton, Indiana 7.6% Pollution Control RefundingRevenue Bonds, 1987 Series (Public Service Company of Indiana, Inc.Project C).

 

“Series 1987Indenture” means the Trust Indenture dated as of March 15, 1987 betweenAmerican Fletcher National Bank & Trust Company, as predecessor to BankOne, Indianapolis, NA and Bank One Trust Company, NA, and the City ofPrinceton, Indiana.

 

“Series 1987Loan Agreement” means the Loan Agreement dated as of March 15, 1987between the City of Princeton, Indiana and Public Service Company of Indiana,Inc., as predecessor to PSI Energy, Inc.

 

“State” meansthe State of Indiana.

 

“Trustee”means Fifth Third Bank, Indiana located in Indianapolis, Indiana, a corporationduly organized and validly existing under the laws of the State, until asuccessor Trustee shall have become such pursuant to the applicable provisionsof the Indenture, and thereafter “Trustee” shall mean the successorTrustee.  “Principal Office” of theTrustee shall mean the principal corporate trust office of the Trustee, whichoffice at the date of issuance of the Bonds is located at its Notice Address.

 

“UnassignedIssuer Rights” means all of the rights of the Issuer to receive AdditionalPayments under Section 4.2 hereof, to inspection pursuant to Section 5.1hereof, to be held harmless and indemnified under Section 5.9 hereof, to bereimbursed for attorney’s fees and expenses under Section 7.4 hereof and togive or withhold consent to amendments, changes, modifications, alterations andtermination of this Agreement under Section 8.6 hereof and its right to enforcesuch rights.

 

5

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## Section 1.3.            Interpretation.  Any reference herein to the State, to theIssuer or to any member or officer of either includes entities or officialssucceeding to their respective functions, duties or responsibilities pursuantto or by operation of law or lawfully performing their functions.

 

Any reference to a section or provision of the Constitution of theState or the Act, or to a section, provision or chapter of the Indiana Code, orto any statute of the United States of America, includes that section,provision or chapter as amended, modified, revised, supplemented or supersededfrom time to time; provided, that no amendment, modification, revision,supplement or superseding section, provision or chapter shall be applicablesolely by reason of this provision, if it constitutes in any way an impairmentof the rights or obligations of the Issuer, the State, the Holders, theTrustee, the Registrar, the Auction Agent, an Authenticating Agent, a PayingAgent, the Bond Insurer, the Remarketing Agent, or the Company under thisAgreement, the Indenture or the Bonds.

 

Unless thecontext indicates otherwise, words importing the singular number include theplural number, and vice versa; the terms “hereof”, “hereby”, “herein”,“hereto”, “hereunder” and similar terms refer to this Agreement; and the term“hereafter” means after, and the term “heretofore” means before, the date ofdelivery of the Bonds.  Words of anygender include the correlative words of the other genders, unless the senseindicates otherwise.

 

## Section 1.4.            Captionsand Headings.  The captions andheadings in this Agreement are used solely for convenience of reference and inno way define, limit or describe the scope or intent of any Articles, Sections,subsections, paragraphs or subparagraphs or clauses hereof.

##  

(End of Article I)

 

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# **ARTICLE II.**

# ** **

# **REPRESENTATIONS**

 

## Section 2.1.            Representationsof the Issuer.  The Issuer representsthat:  (a) it is a body corporate andpolitic duly organized and validly existing under the laws of the State; (b) ithas duly accomplished all conditions necessary to be accomplished by it priorto the issuance and delivery of the Bonds and the execution and delivery ofthis Agreement and the Indenture; (c) it is not in  violation of or in conflict with anyprovisions of the laws of the State which would impair its ability to carry outits obligations contained in this Agreement or the Indenture; (d) it isempowered to enter into the transactions contemplated by this Agreement and theIndenture; (e) it has duly authorized the execution, delivery andperformance of this Agreement and the Indenture; and (f) it will do allthings in its power in order to maintain its existence or assure the assumptionof its obligations under this Agreement and the Indenture by any successormunicipal corporation.

##  

## Section 2.2.            NoWarranty by Issuer of Condition or Suitability of the Project.  The Issuer makes no warranty, either expressor implied, as to the suitability or utilization of the Project for the ProjectPurposes, or as to the condition of the Project Facilities or that the ProjectFacilities are or will be suitable for the Company’s purposes or needs.

##  

## Section 2.3.            Representationsand Covenants of the Company.  TheCompany represents that:

##  

### (a)           The Company has been duly incorporated and is validlyexisting as a corporation under the laws of the State, with power and authority(corporate and other) to own its properties and conduct its business, toexecute and deliver this Agreement and to perform its obligations under thisAgreement.

###  

### (b)           This Agreement has been duly authorized, executed anddelivered by the Company and this Agreement constitutes a valid and legallybinding obligation of the Company, enforceable in accordance with its terms,subject, as to enforcement, to bankruptcy, insolvency, reorganization and otherlaws of general applicability relating to or affecting creditors’ rights and togeneral equity principles.

###  

### (c)           The execution, delivery and performance by the Company ofthis Agreement and the consummation of the transactions contemplated herebywill not violate any provision of law or regulation applicable to the Company,or of any writ or decree of any court or governmental instrumentality, or ofthe Amended Articles of Consolidation, as amended, or the By-laws of theCompany, or of any mortgage, indenture, contract, agreement or otherundertaking to which the Company is a party or which purports to be bindingupon the Company or upon any of its assets.

###  

### (d)           The Project constitutes and will constitute either land orproperty of a character subject to the allowance for depreciation for purposesof the Code, and all expenditures for the 

###  

### 7

### 

###  

### cost of constructing the Project have beencharged to a capital account for federal income tax purposes (or would havebeen so charged either with or but for a proper election to deduct suchamounts).

###  

### (e)           No portion of the Project had been acquired and placed inoperation at substantially the level for which it was designed for more thanone year prior to the date of delivery of the Original Bonds which financedsuch portion of the Project.

###  

### (f)            The weighted average maturity of the Bonds does notexceed 120% of the average reasonably expected economic life of the ProjectFacilities originally financed by the Original Bonds (determined under Section147(b) of the Code).

###  

### (g)           The Project has been and will be used wholly to controlpollution and dispose of solid waste and sewage and was designed for nosignificant purpose other than pollution control and disposal of solid wasteand sewage, and the Project was not designed to result in an increase inproduction or capacity, in a material extension of the useful life of theGenerating Station or, in the case of the portions of the Project which arePollution Control Facilities, in the recovery of by-products of any substantialvalue.

###  

### (h)           Substantially all (at least 90%) of the proceeds of theOriginal Bonds were used to provide “solid waste disposal facilities” withinthe meaning of Section 103(b)(4)(E) of the 1954 Code and “pollution controlfacilities” within the meaning of Section 103(b)(4)(F) of the 1954 Code, theoriginal use of which facilities commenced with the Company on October 1, 1982,and which facilities were described in inducement resolutions adopted by theCity of Princeton, Indiana, on October 16, 1978.  Construction of such facilities financed with the proceeds of theOriginal Bonds was not commenced by the Company prior to October 16, 1978.  All of the proceeds of the Original Bondshave been spent for the Project pursuant to the Series 1982 Loan Agreement orto pay costs of issuance of the Original Bonds.  The proceeds of the Refunded Bonds (other than any accruedinterest thereon) were used exclusively to refund the Series 1987 Bonds, whichwere used exclusively to refund the Original Bonds; any investment earnings onsuch proceeds of any of the Refunded Bonds and the Series 1987 Bonds were usedto pay principal, premium or interest on the Series 1987 Bonds and the OriginalBonds, respectively; none of the proceeds of either the Refunded Bonds or theBonds was or will be used to pay for any costs of issuance of the RefundedBonds or the Bonds, respectively.  Theprincipal amount of the Bonds does not exceed the outstanding principal amountof the Refunded Bonds.  The originalprincipal amount of the Refunded Bonds did not exceed the then-outstandingprincipal amount of the Series 1987 Bonds and the original principal amount ofthe Series 1987 Bonds did not exceed the then-outstanding amount of theOriginal Bonds.  The proceeds of theBonds, the Refunded Bonds and the Series 1987 Bonds were each used to retirethe Refunded Bonds, the Series 1987 Bonds and the Original Bonds, respectively,not later than 90 days after the date of issuance of such bonds.  The proceeds of the Bonds (other than anyaccrued interest thereon) will be used exclusively to refund the RefundedBonds; any investment earnings thereon will be used to pay principal, premiumor interest on the Refunded Bonds.

 

8

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### (i)            It has caused the Project to be completed.  The Project constitutes Pollution ControlFacilities under the Act and is consistent with the purposes of the Act.  The Project is being, and the Company willcause the Project to be, operated and maintained in such manner to conform withall applicable zoning, planning, building, environmental and other applicablegovernmental regulations and all permits, variances and orders issued orgranted pursuant thereto, including the permit-to-install for the Project,which permits, variances and orders have not been withdrawn or otherwisesuspended, and to be consistent with the Act.

###  

### (j)            It has used or operated or has caused to be used oroperated, and presently intends to use or operate or cause to be used oroperated the Project Facilities in a manner consistent with the ProjectPurposes until the date on which the Bonds have been fully paid and knows of noreason why the Project Facilities will not be so operated.  The Company does not intend to sell orotherwise dispose of the Project or any portion thereof.

###  

### (k)           None of the proceeds of each of the Prior Bonds was usedand none of the proceeds of the Bonds will be used to provide any airplane,skybox or other private luxury box, or health club facility, any facilityprimarily used for gambling or any store the principal business of which is thesale of alcoholic beverages for consumption off premises.

###  

### (l)            Less than 25% of the proceeds of each of the Prior Bondswas used to acquire land or any interest therein, and none of such proceeds wasused to provide land which was used for farming purposes.

###  

### (m)          None of the proceeds of each of the Prior Bonds was used toacquire existing property or any interest therein unless the first use of suchproperty was by the Company and was pursuant to and followed such acquisition.

###  

### (n)           At no time will any funds constituting gross proceeds ofthe Bonds be used in a manner as would constitute failure of compliance withSection 148 of the Code.

###  

### (o)           The Prior Bonds were not, and the Bonds will not be,“federally guaranteed” within the meaning of Section 149(b) of the Code.

###  

### (p)           It is not anticipated that as of the date hereof, therewill be created any “replacement proceeds”, within the meaning of Section1.148-1(c) of the Treasury Regulations, with respect to the Bonds; however, inthe event that any such replacement proceeds are deemed to have been created,such amounts will be invested in compliance with Section 148 of the Code.

###  

### (q)           On the date of issuance and delivery of each of the PriorBonds, the Company reasonably expected that at least 85% of the respectivespendable proceeds of each of the Prior Bonds would be expended to carry outthe respective governmental purpose of each such issue within the 3-year periodbeginning on the issue date of such issue and the Company reasonably expectedthat the proceeds of each of the Prior Bonds would be spent in accordance withthe spending requirements of Section 149(g)(2) of the Code.  The spendable proceeds of each of the 

###  

### 9

### 

###  

### Prior Bonds have been fully expended prior tothe date of issuance of the Bonds.  Theproceeds of each of the Prior Bonds series were not invested in nonpurposeinvestments having a substantially guaranteed yield for four years or more.

###  

### (r)            The information furnished by the Company and used by theIssuer in preparing the certifications and statements pursuant to Sections 148and 149(e) of the Code or their statutory predecessors with respect to each ofthe Prior Bonds was accurate and complete as of the respective date of issuancethereof, and the information furnished by the Company and used by the Issuer inpreparing the certification pursuant to Section 148 of the Code and inpreparing the information statement pursuant to Section 149(e) of the Code,both referred to in the Bond Resolution, will be accurate and complete as ofthe date of issuance of the Bonds.

###  

### (s)           The Project Facilities do not include any office exceptfor offices (i) located on the Project Site and (ii) not more than a de minimisamount of the functions to be performed at which is not directly related to theday-to-day operations of the Project Facilities.

###  

(End of Article II)

 

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# **ARTICLE III.**

# ** **

# **COMPLETION OF THEPROJECT; ISSUANCE OF THE BONDS**

# ** **

## Section 3.1.            Acquisition,Construction and Installation.  TheCompany represents that it has caused the Project Facilities to be acquired,constructed and installed on the Project Site, substantially in accordance withthe Project Description and in conformance with all applicable zoning,planning, building and other similar regulations of all governmentalauthorities having jurisdiction over the Project and all permits, variances andorders issued in respect of the Project by EPA, and that the proceeds derivedfrom the Original Bonds and Refunded Bonds, including any investment thereof,were expended in accordance with the Series 1982 Indenture or Series 1982 LoanAgreement, Series 1987 Indenture or Series 1987 Loan Agreement, or RefundedBonds Indenture and the Refunded Bonds Loan Agreement.

##  

## Section 3.2.            ProjectDescription.  The ProjectDescription may be changed from time to time by, or with the consent of, theCompany provided that any such change shall also be filed with the Issuer andprovided further that no change in the Project Description shall materiallychange the function of the Project Facilities unless the Trustee shall havereceived (i) an Engineer’s certificate that such changes will not impair thesignificance or character of the Project Facilities as Pollution ControlFacilities and (ii) an Opinion of Bond Counsel or ruling of the InternalRevenue Service to the effect that such amendment will not adversely affect theexclusion of interest on the Bonds from gross income for federal income taxpurposes.

##  

## Section 3.3.            Issuanceof the Bonds; Application of Proceeds. To provide funds to make the Loan to the Company to assist the Companyin the refunding of the Refunded Bonds, the Issuer will issue, sell and deliverthe Bonds to the Original Purchaser. The Bonds will be issued pursuant to the Indenture in the aggregateprincipal amount, will bear interest, will mature and will be subject toredemption as set forth therein.  TheCompany hereby approves the terms and conditions of the Indenture and theBonds, and the terms and conditions under which the Bonds will be issued, soldand delivered.

##  

The Companyhereby requests that the Issuer notify the Refunded Bonds Trustee (unless theRefunded Bonds Trustee has already received such notice), pursuant to theRefunded Bonds Indenture, that the entire outstanding principal amount of theRefunded Bonds is to be redeemed on April 1, 2003 at a redemption price of100% of the principal amount thereof plus accrued interest to that redemptiondate.

 

The proceedsfrom the sale of the Bonds (other than any accrued interest) shall be loaned tothe Company to assist the Company in refunding the Refunded Bonds in order toreduce the interest cost payable by the Company; those proceeds shall bedeposited in the Refunding Fund.  OnMarch 28, 2003, all moneys on deposit in the Refunding Fund shall bedisbursed by the Trustee as provided in Section 5.02 of the Indenture to theRefunded Bonds Trustee for deposit in the Bond Fund created in the RefundedBonds Indenture and applied by the Refunded Bonds Trustee to the defeasance ofthe Refunded Bonds on March 28, 2003, and for the payment of 

 

11

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principal of and interest on the Refunded Bonds on April 1,2003.  The Company shall pay to theRefunded Bonds Trustee prior to the date of redemption of such series ofRefunded Bonds such additional amounts as shall be required to pay in full onsuch date the entire amount of principal of, premium and interest due on theRefunded Bonds.

 

Pendingdisbursement pursuant to this Section, the proceeds so deposited in theRefunding Fund, together with any investment earnings thereon, shall constitutea part of the Revenues assigned by the Issuer to the Trustee for the payment ofBond Service Charges.  Any accruedinterest shall be deposited in the Bond Fund.

 

## Section 3.4.            Investmentof Fund Moneys.  At the oral(confirmed promptly in writing) or written request of the Company, any moneysheld as part of the Bond Fund, the Refunding Fund or the Rebate Fund shall beinvested or reinvested by the Trustee in Eligible Investments; provided, thatsuch moneys shall be invested or reinvested by the Trustee only in EligibleInvestments which shall mature, or which shall be subject to redemption by theholder thereof at the option of such holder, not later than the date upon whichthe moneys so invested are needed to make payments from those Funds.  The Issuer (to the extent it retained orretains direction or control) and the Company each hereby represents that theinvestment and reinvestment and the use of the proceeds of the Refunded Bondswere restricted in such manner and to such extent as was necessary so that theRefunded Bonds would not constitute arbitrage bonds under Section 148 of theCode or its statutory predecessor and each hereby covenants that it willrestrict that investment and reinvestment and the use of the proceeds of theBonds in such manner and to such extent, if any, as may be necessary so thatthe Bonds will not constitute arbitrage bonds under Section 148 of the Code.

##  

The Companyshall provide the Issuer with, and the Issuer may base its certificate andstatement, each as authorized by the Bond Resolution, solely on a certificateof an appropriate officer, employee or agent of or consultant to the Companyfor inclusion in the transcript of proceedings for the Bonds, setting forth thereasonable expectations of the Company on the date of  delivery of and payment for the Bonds regarding the amount anduse of the proceeds of the Bonds and the facts, estimates and circumstances onwhich those expectations are based.

 

## Section 3.5.            RebateFund.  To the extent required bySection 5.08 of the Indenture, within five days after the end of the fifth BondYear (as defined in the Indenture) and every fifth Bond Year thereafter, andwithin five days after payment in full of all outstanding Bonds, the Companyshall calculate the amount of Excess Earnings (as defined in the Indenture) asof the end of that Bond Year or the date of such payment and shall notify theTrustee of that amount.  If the amountthen on deposit in the Rebate Fund created under the Indenture is less than theamount of Excess Earnings (computed by taking into account the amount oramounts, if any, previously paid to the United States pursuant to Section 5.08of the Indenture and this Section), the Company shall, within five days afterthe date of the aforesaid calculation, pay to the Trustee for deposit in theRebate Fund an amount sufficient to cause the Rebate Fund to contain an amountequal to the Excess Earnings.  Theobligation of the Company to make such payments 

##  

## 12

## 

##  

## shall remain in effect and bebinding upon the Company notwithstanding the release and discharge of theIndenture.  The Company shall obtain andkeep such records of the computations made pursuant to this Section as arerequired under Section 148(f) of the Code.

##  

(End of Article III)

 

13

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# **ARTICLE IV.**

# ** **

# **LOAN BY ISSUER;LOAN PAYMENTS**;ADDITIONAL PAYMENTS; MUNICIPAL BOND INSURANCEPOLICY AND LIQUIDITY FACILITY

# ** **

## Section 4.1.            LoanRepayment.  Upon the terms andconditions of this Agreement, the Issuer agrees to make the Loan to theCompany.  The proceeds of the Loan shallbe deposited with the Trustee pursuant to Section 3.3 hereof.  In consideration of and in repayment of theLoan, the Company shall make, as Loan Payments, to the Trustee for the accountof the Issuer, payments which correspond, as to time, and are equal in amountas of the Loan Payment Date, to the corresponding Bond Service Charges payableon the Bonds.  All Loan Paymentsreceived by the Trustee shall be held and disbursed in accordance with theprovisions of the Indenture and this Agreement for application to the paymentof Bond Service Charges.

##  

The Companyshall be entitled to a credit against the Loan Payments required to be made onany Loan Payment Date to the extent that the balance of the Bond Fund is thenin excess of amounts required (a) for the payment of Bonds theretofore maturedor theretofore called for redemption, or to be called for redemption pursuantto Section 6.1 hereof (b) for the payment of interest for which checks ordrafts have been drawn and mailed by the Trustee or Paying Agent, and (c) to bedeposited in the Bond Fund by the Indenture for use other than for the paymentof Bond Service Charges due on that Loan Payment Date.

 

Except forsuch interest of the Company as may hereafter arise pursuant to Section 8.2hereof or Sections 5.06 or 5.07 of the Indenture, the Company and the Issuereach acknowledge that neither the Company, the State nor the Issuer has anyinterest in the Bond Fund or the Bond Purchase Fund, and any moneys depositedtherein shall be in the custody of and held by the Trustee in trust for thebenefit of the Holders.

 

## Section 4.2.            AdditionalPayments.  The Company shall pay tothe Issuer, as Additional Payments hereunder, any and all costs and expensesincurred or to be paid by the Issuer in connection with the issuance anddelivery of the Bonds or otherwise related to actions taken by the Issuer underthis Agreement or the Indenture.

##  

The Companyshall pay the Administration Expenses to the Trustee, the Registrar, theRemarketing Agent, the Auction Agent, and any Paying Agent or AuthenticatingAgent, as appropriate, as Additional Payments hereunder.

 

The Companymay, without creating a default hereunder, contest in good faith thereasonableness of any such cost or expense incurred or to be paid by the Issuerand any Administration Expenses claimed to be due to the Trustee, theRegistrar, the Auction Agent, the Remarketing Agent, any Paying Agent or anyAuthenticating Agent.

 

14

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In the eventthe Company should fail to pay any Loan Payments, Additional Payments orAdministration Expenses when due, the payment in default shall continue as anobligation of the Company until the amount in default shall have been fullypaid together with interest thereon during the default period at the InterestRate for Advances.

 

## Section 4.3.            Placeof Payments.  The Company shall makeall Loan Payments directly to the Trustee at its Principal Office.  Additional Payments shall be made directlyto the person or entity to whom or to which they are due.

##  

## Section 4.4.            ObligationsUnconditional.  The obligations ofthe Company to make Loan Payments, Additional Payments and any paymentsrequired of the Company under Section 5.08 of the Indenture shall beabsolute and unconditional, and the Company shall make such payments withoutabatement, diminution or deduction regardless of any cause or circumstanceswhatsoever including, without limitation, any defense, set-off, recoupment orcounterclaim which the Company may have or assert against the Issuer, theTrustee, the Registrar, the Remarketing Agent, the Auction Agent, the PayingAgent or any other Person.

##  

## Section 4.5.            Assignmentof Revenues and Agreement.  Tosecure the payment of Bond Service Charges, the Issuer shall, by the Indenture,(a) absolutely and irrevocably assign to the Trustee, its successors in trustand its and their assigns forever, all of the Issuer’s rights and remediesunder this Agreement (except for the Unassigned Issuer Rights), and (b) grant asecurity interest to the Trustee, its successors in trust and its and their assignsforever, in all of its rights to and interest in the Revenues including,without limitation, all Loan Payments and other amounts receivable by or onbehalf of the Issuer under the Agreement in respect of repayment of the Loan.  The Company hereby agrees and consents tothose assignments and that grant of a security interest.

##  

## Section 4.6.            MunicipalBond Insurance Policy; Liquidity Facility; Cancellation.  (a) The Company agrees to provide for thepayment of the principal of and interest on the Bonds by causing the MunicipalBond Insurance Policy to be delivered to the Trustee on the date of thedelivery of the Bonds.

##  

### (b)           The Company may provide for the delivery of a LiquidityFacility.

###  

### (c)           The Company may cancel any Liquidity Facility then ineffect at such time and direct the Trustee in writing to surrender suchLiquidity Facility to the Liquidity Facility Issuer by which it was issued inaccordance with the Indenture; provided, that no such cancellation shall becomeeffective and no such surrender shall take place until all Bonds subject topurchase pursuant to Section 4.07(d) of the Indenture have been so purchased orredeemed with the proceeds of such Liquidity Facility.

###  

## Section 4.7.            Company’sOption to Elect Rate Period; Changes in Auction Date and Length of AuctionPeriods.  The Company shall have,and is hereby granted, the option to elect to convert on any Conversion Datethe interest rate borne by the Bonds to another Variable Rate 

##  

## 15

## 

##  

## or return to the Auction Rate,to be effective for a Rate Period pursuant to the provisions of Article II ofthe Indenture and subject to the terms and conditions set forth therein.  The Company also shall have the option todirect the change of Auction Dates and/or the length of Auction Rate Periods inaccordance with the Indenture.  Toexercise such options, the Company shall give the written notice required bythe Indenture.

##  

## Section 4.8.            Company’sObligation to Purchase Bonds.  TheCompany hereby agrees to pay or cause to be paid to the Trustee or the PayingAgent, on or before each day on which Bonds may be or are required to betendered for purchase, amounts equal to the amounts to be paid by the Trusteeor the Paying Agent with respect to the Bonds tendered for purchase on suchdates pursuant to Article IV of the Indenture; provided, however, that theobligation of the Company to make any such payment under this Section shall bereduced by the amount of (A) moneys paid by the Remarketing Agent as proceeds ofthe remarketing of such Bonds by the Remarketing Agent, (B) moneys drawn underany Liquidity Facility, for the purpose of paying such purchase price and (C)other moneys made available by the Company, as set forth in Section 4.08(b)(ii)of the Indenture.

##  

(End of Article IV)

 

16

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# **ARTICLE V.**

 

# **ADDITIONALAGREEMENTS AND COVENANTS**

 

## Section 5.1.            Rightof Inspection.  The Company agreesthat, subject to reasonable security and safety regulations and to reasonable requirementsas to notice, the Issuer and the Trustee and their or any of their respectiveduly authorized agents shall have the right at all reasonable times to enterupon the Project Site to examine and inspect the Projects.

##  

## Section 5.2.            Maintenance.  The Company shall use its best efforts tokeep and maintain the Project Facilities, including all appurtenances theretoand any personal property therein or thereon, in good repair and good operatingcondition so that the Project Facilities will continue to constitute PollutionControl Facilities for the purposes of the operation thereof as required bySection 5.4 hereof.

##  

So long assuch shall not be in violation of the Act or impair the character of theProject Facilities as Pollution Control Facilities and provided there iscontinued compliance with applicable laws and regulations of governmentalentities having jurisdiction thereof, the Company shall have the right toremodel the Project Facilities or make additions, modifications andimprovements thereto, from time to time as it, in its discretion, may deem tobe desirable for its uses and purposes, the cost of which remodeling,additions, modifications and improvements shall be paid by the Company and thesame shall, when made, become a part of the Project Facilities.

 

## Section 5.3.            Removalof Portions of the Project Facilities. The Company shall not be under any obligation to renew, repair orreplace any inadequate, obsolete, worn out, unsuitable, undesirable orunnecessary portions of the Project Facilities, except that, subject to Section5.4 hereof, it will use its best efforts to ensure the continued character ofthe Project Facilities as Pollution Control Facilities.  The Company shall have the right from time totime to substitute personal property or fixtures for any portions of theProject Facilities, provided that the personal property or fixtures sosubstituted shall not impair the character of the Project Facilities asPollution Control Facilities.  Any suchsubstituted property or fixtures shall, when so substituted, become a part ofthe Project Facilities.  The Companyshall also have the right to remove any portion of the Project Facilities,without substitution therefor; provided, that the Company shall deliver to theTrustee a certificate signed by an Engineer describing said portion of theProject Facilities and stating that the removal of such property or fixtureswill not impair the character of the Project Facilities as Pollution ControlFacilities.

##  

## Section 5.4.            Operationof Project Facilities.  The Companywill, subject to its obligations and rights to maintain, repair or removeportions of the Project Facilities, as provided in Sections 5.2 and 5.3 hereof,use its best efforts to continue operation of the Project Facilities so long asand to the extent that operation thereof is required to comply with laws orregulations of governmental entities having jurisdiction thereof or unless theIssuer shall have approved the discontinuance of such operation (which approvalshall not be unreasonably withheld). The 

##  

## 17

## 

##  

## Company agrees that it will,within the design capacities thereof, use its best efforts to operate andmaintain the Project Facilities in accordance with all applicable, valid and enforceablerules and regulations of governmental entities having jurisdiction thereof;provided, that the Company reserves the right to contest in good faith any suchlaws or regulations.

##  

Nothing inthis Agreement shall prevent or restrict the Company, in its sole discretion,at any time, from discontinuing or suspending either permanently or temporarilyits use of any facility of the Company served by the Project Facilities and inthe event such discontinuance or suspension shall render unnecessary the continuedoperation of the Project Facilities, the Company shall have the right todiscontinue the operation of the Project Facilities during the period of anysuch discontinuance or suspension.

 

## Section 5.5.            Insurance.  The Company shall cause the Project Facilitiesto be kept insured against fire or other casualty to the extent that propertyof similar character is usually so insured by companies similarly situated andoperating like properties, to a reasonable amount by reputable insurancecompanies or, in lieu of or supplementing such insurance in whole or in part,adopt some other method or plan of protection against loss by fire or othercasualty at least equal in protection to the method or plan of protectionagainst loss by fire or other casualty of companies similarly situated andoperating properties subject to similar or greater fire or other hazards or onwhich properties an equal or higher primary fire or other casualty insurancerate has been set by reputable insurance companies.

##  

## Section 5.6.            Workers’Compensation Coverage.  Throughoutthe term of this Agreement, the Company shall comply, or cause compliance, withapplicable workers’ compensation laws of the State.

##  

## Section 5.7.            Damage;Destruction and Eminent Domain.  If,during the term of this Agreement, the Project Facilities or any portionthereof is destroyed or damaged in whole or in part by fire or other casualty,or title to, or the temporary use of, the Project Facilities or any portionthereof shall have been taken by the exercise of the power of eminent domain,the Company (unless it shall have exercised its option to prepay the LoanPayments pursuant to Section 6.2 hereof) shall promptly repair, rebuild orrestore the portion of the Project Facilities so damaged, destroyed or takenwith such changes, alterations and modifications (including the substitutionand addition of other property) as may be necessary or desirable for theadministration and operation of the Project Facilities as Pollution ControlFacilities and as shall not impair the character or significance of the ProjectFacilities as furthering the purposes of the Act.

##  

## Section 5.8.            Companyto Maintain its Corporate Existence; Conditions Under Which ExceptionsPermitted.  The Company agrees that,during the term of this Agreement, it will maintain its corporate existence,will not dissolve or otherwise dispose of all or substantially all of itsassets and will not consolidate with or merge into another corporation orpermit one or more other corporations to consolidate with or merge into it;provided that the Company may, without violating its agreement contained inthis Section, consolidate with or merge into another 

##  

## 18

## 

##  

## corporation, or permit one ormore other corporations to consolidate with or merge into it, or sell orotherwise transfer to another corporation all or substantially all of itsassets as an entirety and thereafter dissolve, provided the surviving,resulting or transferee corporation, as the case may be (if other than theCompany), is a corporation organized and existing under the laws of one of thestates of the United States, and assumes in writing all of the obligations ofthe Company herein, and, if not an Indiana corporation, is qualified to dobusiness in the State.

##  

Ifconsolidation, merger or sale or other transfer is made as provided in thisSection, the provisions of this Section shall continue in full force and effectand no further consolidation, merger or sale or other transfer shall be madeexcept in compliance with the provisions of this Section.

 

## Section 5.9.            Indemnification.

##  

### (a)           The Company shall release the State of Indiana, the Issuer(including, but not limited to, members of the Indiana Development FinanceAuthority, and their attorneys, agents and employees) or any of theirofficials, officers, employees, members, independent contractors or agents(hereinafter the “Indemnified Parties”) from, agrees that the IndemnifiedParties shall not be liable for, and agrees to protect, defend, indemnify andhold harmless the Indemnified Parties from and against, any loss or damage toproperty, or any injury to or death of any person, that may be occasioned byany cause whatsoever pertaining to the Project, or the use thereof or arisingfrom any act or failure to act by the Company or any of the Company’s agents,contractors, servants, employees, or licensees, or arising from any accident,injury or damage whatsoever caused to any person, firm or limited liabilitycompany occurring during the term of this Agreement, or against all losses,claims, costs, damages, liabilities and expenses which they may incur inconnection with or arising out of the direct or indirect application of theproceeds of the Loan hereunder, and from and against all costs, liabilities andexpenses incurred in or in connection with any claim, action or proceedingbrought thereon; provided, however, that the indemnity in thissection shall be effective only to the extent of any loss in excess of amountspaid to the Indemnified Parties from any insurance carried with respect to theloss sustained.  The Company furtheragrees to protect, defend, indemnify and hold harmless the Indemnified Partiesagainst and from any and all costs, liabilities, expenses and claims arisingfrom any breach or default on the part of the Company in the performance of anycovenant or agreement on the part of the Company to be performed pursuant tothe terms of any of the loan documents, or in connection with the issuance ofthe Bonds and the furnishing of information concerning the Project, theCompany, its financial status or other matters relating to the Company.  In case any action or proceeding is broughtagainst the Indemnified Parties by reason of any such claim, the Company uponnotice from the Indemnified Parties covenants to resist or defend such actionor proceeding at the Company’s expense. None of the Indemnified Parties shall settle or compromise such claim,action or proceeding without the written consent of the Company, which shallnot be unreasonably withheld, if there exists no Event of Default by theCompany as defined in Section 7.1 hereof. Nothing contained in this section, however, shall require the 

###  

### 19

### 

###  

### Company to indemnify the Indemnified Partiesfrom any cost, liability, expense, loss or claim arising out of or resultingfrom the willful misconduct or gross negligence of any such Person.

###  

### (b)           Notwithstanding the foregoing, the Company shall beentitled to pursue its remedies against the Issuer for damages to the Companyresulting directly from personal injury or property damage caused by the grossnegligence or willful misconduct of the Issuer.

###  

### (c)           Notwithstanding anything in the foregoing to the contrary,the Company shall furnish the Issuer and Bond Counsel with information requiredto complete Internal Revenue Service Form 8038 with respect to the Bonds, andthe Company shall protect, defend, indemnify and hold harmless the Issuer andBond Counsel against all consequences of any material misrepresentation in ormaterial omission from such Form 8038.

###  

### (d)           No covenant or agreement contained in the Bonds or thisAgreement shall be deemed to be a covenant or agreement of any member of theIssuer or of any officer or employee of the Issuer in his or her individualcapacity, and neither the Issuer nor any officer or employee of the Issuerexecuting the Bonds shall be liable personally on the Bonds or be subject toany personal liability or accountability by reason of the issuance of theBonds.

###  

### (e)           The indemnity set forth herein shall be in addition to anyother obligations of the Company to the holder or amounts due hereunder to theIssuer or at common law or otherwise, and shall survive any termination of thisAgreement, and the payment of all obligations.

###  

## Section 5.10.          CompanyNot to Adversely Affect Exclusion of Interest on Bonds From Gross Income ForFederal Income Tax Purposes.  TheCompany hereby covenants and represents that it has taken and caused to betaken and shall take and cause to be taken all actions that may be required ofit for the interest on the Bonds to be and remain excluded from the grossincome of the Holders for federal income tax purposes, and that it has nottaken or permitted to be taken on its behalf, and covenants that it will nottake, or permit to be taken on its behalf, any action which, if taken, wouldadversely affect that exclusion under the provisions of the Code.

##  

## Section 5.11.          Useof Project Facilities.  The Issueragrees that it will not take any action, or cause any action to be taken on itsbehalf, to interfere with the Company’s ownership interest in the Project or toprevent the Company from having possession, custody, use and enjoyment of theProject other than pursuant to Article VII of this Agreement or Article VII ofthe Indenture.

##  

## Section 5.12.          Assignmentby Company.  Notwithstanding anyother provision of this Loan Agreement, this Agreement may be assigned in wholeor in part by the Company and the Project may be sold or conveyed by theCompany without the necessity of obtaining the consent of either the Issuer orthe Trustee and after providing written notice to the Issuer but, subject,however, to each of the following conditions:

##  

## 20

## 

##  

### (a)           The Company must provide the Trustee and the RemarketingAgent with an Opinion of Bond Counsel that such action will not affect theexclusion of interest on the Bonds for federal income tax purposes.

###  

### (b)           The Bond Insurer must provide to the Trustee its writtenconsent to such action.

###  

### (c)           The Company shall, within 30 days after execution thereof,furnish or cause to be furnished to the Issuer and the Trustee a true andcomplete copy of each such assignment together with any instrument ofassumption.

###  

### (d)           Any assignment from the Company shall not materiallyimpair fulfillment of the Project Purposes to be accomplished by operation ofthe Project as herein provided.

###  

## Section 5.13.          TheDepository Trust Company Letter of Representation.  The Company agrees that it shall cause theTrustee on behalf of the Issuer to fulfill the obligations set forth in theDepository Trust Company Letter of Representation for the Bonds.

##  

(End of Article V)

 

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# **ARTICLE VI.**

# ** **

# **REDEMPTION**

 

## Section 6.1.            OptionalRedemption.  Provided no Event ofDefault shall have occurred and be subsisting, at any time and from time totime, the Company may deliver moneys to the Trustee in addition to LoanPayments or Additional Payments required to be made and direct the Trustee touse the moneys so delivered for the purpose of calling Bonds for optionalredemption in accordance with the applicable provisions of the Indentureproviding for optional redemption at the redemption price stated in theIndenture.  Pending application forthose purposes, any moneys so delivered shall be held by the Trustee in aspecial account in the Bond Fund and delivery of those moneys shall not, exceptas set forth in Section 4.1 hereof, operate to abate or postpone Loan Paymentsor Additional Payments otherwise becoming due or to alter or suspend any otherobligations of the Company under this Agreement.

##  

## Section 6.2.            ExtraordinaryOptional Redemption.  The Companyshall have, subject to the conditions hereinafter imposed, the option during aTerm Rate Period to direct the redemption of the Bonds in whole upon theoccurrence of the event described below in paragraph (c) and in part uponthe occurrence of the other events described below in accordance with theapplicable provisions of the Indenture.

##  

### (a)           The Project Facilities or the Generating Station shallhave been damaged or destroyed to such an extent that (1) the ProjectFacilities or the Generating Station cannot reasonably be expected to berestored, within a period of six consecutive months, to the condition thereofimmediately preceding such damage or destruction or (2) the Company isreasonably expected to be prevented from carrying on its normal use andoperation of the Project Facilities or Generating Station for a period of six consecutivemonths.

###  

### (b)           Title to, or the temporary use of, all or a significantpart of the Project Facilities or the Generating Station shall have been takenunder the exercise of the power of eminent domain to such an extent (1) thatthe Project Facilities or the Generating Station cannot reasonably be expectedto be restored within a period of six consecutive months to a condition ofusefulness comparable to that existing prior to the taking or (2) the Companyis reasonably expected to be prevented from carrying on its normal use andoperation of the Project Facilities or Generating Station for a period of sixconsecutive months.

###  

### (c)           As a result of any changes in the Constitution of theState, the Constitution of the United States of America or any state or federallaws or as a result of legislative or administrative action (whether state orfederal) or by  final decree, judgmentor order of any court or administrative body (whether state or federal) enteredafter any contest thereof by the Issuer or the Company in good faith, thisAgreement shall have become void or unenforceable or impossible of performancein accordance with the intent and purpose of the parties as expressed in thisAgreement.

###  

### 22

### 

###  

### (d)           Unreasonable burdens or excessive liabilities shall havebeen imposed upon the Issuer or the Company with respect to the ProjectFacilities or the Generating Station or the operation thereof, including,without limitation, the imposition of federal, state or other ad valorem,property, income or other taxes other than ad valorem taxes at the ratespresently levied upon privately owned property used for the same generalpurpose as the Project Facilities or the Generating Station.

###  

### (e)           Changes in the economic availability of raw materials,operating supplies, energy sources or supplies or facilities (including, butnot limited to, facilities in connection with the disposal of industrialwastes) necessary for the operation of the Project Facilities or the GeneratingStation for the Project Purposes occur or technological or other changes occurwhich the Company cannot reasonably overcome or control and which in theCompany’s reasonable judgment render the Project Facilities or GeneratingStation uneconomic or obsolete for the Project Purposes.

###  

### (f)            Any court or administrative body shall enter a judgment,order or decree, or shall take administrative action, requiring the Company tocease all or any substantial part of its operations served by the ProjectFacilities or the Generating Station to such extent that the Company is or willbe prevented from carrying on its normal operations at the Project Facilitiesor Generating Station for a period of six consecutive months.

###  

### (g)           The termination by the Company of operations at theGenerating Station.

###  

The amountpayable by the Company in the event of its exercise of the option granted inthis Section shall be the sum of the following:

 

#### (i)            Anamount of money which, when added to the moneys and investments held to the creditof the Bond Fund, will be sufficient pursuant to the provisions of theIndenture to pay, at 100% of the principal amount thereof plus accrued interestto the redemption date, and discharge, all or such portion of Outstanding Bondsto be redeemed on the earliest applicable redemption date, that amount to bepaid to the Trustee, plus

####  

#### (ii)           Anamount of money equal to the Additional Payments relating to those Bondsaccrued and to accrue until actual final payment and redemption of those Bonds,that amount or applicable portions thereof to be paid to the Trustee or to thePersons to whom those Additional Payments are or will be due.

####  

The requirement of (ii) abovewith respect to Additional Payments to accrue may be met if provisionssatisfactory to the Trustee and the Issuer are made for paying those amounts asthey accrue.

 

23

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The rights andoptions granted to the Company in this Section may be exercised whether or notthe Company is in default hereunder; provided, that such default will notrelieve the Company from performing those actions which are necessary toexercise any such right or option granted hereunder.

 

## Section 6.3.            MandatoryRedemption.  The Company shalldeliver to the Trustee the moneys needed to redeem the Bonds in accordance withany mandatory redemption provisions relating thereto as may be set forth inSections 4.01(b) of the Indenture.

##  

## Section 6.4.            Noticeof Redemption.  In order to exercisean option granted in, or to consummate a redemption required by, this ArticleVI, the Company shall, within 180 days following the event authorizing theexercise of such option, or at any time during the continuation of thecondition referred to in paragraphs (c), (d) or (e) of Section 6.2 hereof, or atany time that optional redemption of the Bonds is permitted under the Indentureas provided in Section 6.1 hereof, or promptly upon the occurrence of aDetermination of Taxability (as defined in the Indenture), give written noticeto the Issuer and the Trustee that it is exercising its option to direct theredemption of Bonds, or that the redemption thereof is required by Section4.01(b) of the Indenture due to the occurrence of a Determination ofTaxability, as the case may be, in accordance with the Agreement and theIndenture, and shall specify therein the date on which such redemption is to bemade, which date shall not be more than 180 days from the date such notice ismailed.  The Company shall makearrangements satisfactory to the Trustee for the giving of the required noticeof  redemption to the Holders of theBonds, in which arrangements the Issuer shall cooperate.

##  

## Section 6.5.            Actionsby Issuer.  At the request of theCompany or the Trustee, the Issuer shall take all steps required of it under theapplicable provisions of the Indenture or the Bonds to effect the redemption ofall or a portion of the Bonds pursuant to this Article VI.

##  

(End of Article VI)

 

24

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# **ARTICLE VII.**

# ** **

# **EVENTS OF DEFAULTAND REMEDIES**

# ** **

## Section 7.1.            Eventsof Default.  Each of the followingshall be an Event of Default:

##  

### (a)           The occurrence of an event of default as defined inSection 7.01 (a), (b), or (c) of the Indenture;

###  

### (b)           The Company shall fail to observe and perform any otheragreement, term or condition contained in this Agreement, other than suchfailure as will have resulted in an event of default described in (a) above andthe continuation of that failure for a period of 90 days after notice thereofshall have been given to the Company by the Issuer or the Trustee, or for suchlonger period as the Issuer and the Trustee may agree to in writing; provided,that failure shall not constitute an Event of Default so long as the Companyinstitutes curative action within the applicable period and diligently pursuesthat action to completion within 150 days after the expiration of initial cureperiod as determined above, or within such longer period as the Issuer and theTrustee may agree to in writing; and

###  

### (c)           The receipt by the Trustee of written notice from the BondInsurer that an event of default has occurred and is continuing under theInsurance Agreement; and

###  

### (d)           (i)            By decree of a court of competentjurisdiction the Company shall be adjudicated a bankrupt, or an order shall bemade approving a petition or answer filed seeking reorganization orreadjustment of the Company under the federal bankruptcy laws or other law orstatute of the United States of America or of the state of incorporation of theCompany or of any other state, or, by order of such a court, a trustee inbankruptcy, a receiver or receivers shall be appointed of all or substantiallyall of the property of the Company, and any such decree or order shall havecontinued unstayed on appeal or otherwise and in effect for a period of sixty(60) days; or

###  

#### (ii)           TheCompany shall file a petition in voluntary bankruptcy or shall make anassignment for the benefit of creditors or shall consent to the appointment ofa receiver or receivers of all or any part of its property, or shall file apetition seeking reorganization or readjustment under the Federal bankruptcylaws or other law or statute of the United States of America or any statethereof, or shall file a petition to take advantage of any debtors’ act.

####  

Notwithstandingthe foregoing, if, by reason of Force Majeure, the Company is unable to performor observe any agreement, term or condition hereof which would give rise to anEvent of Default under subsection (b) hereof, the Company shall not be deemedin default during the continuance of such inability.  However, the Company shall promptly give notice to the Trusteeand the Issuer of the existence of an event of Force Majeure and shall use itsbest efforts to 

 

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remove the effects thereof; provided that the settlement of strikes orother industrial disturbances shall be entirely within its discretion.

 

The exerciseof remedies hereunder shall be subject to any applicable limitations of federalbankruptcy law affecting or precluding that declaration or exercise during thependency of or immediately following any bankruptcy, liquidation orreorganization proceedings.

 

## Section 7.2.            Remedieson Default.  Whenever an Event ofDefault shall have happened and be subsisting, either or both of the followingremedial steps may be taken:

##  

### (a)           The Issuer or the Trustee may have access to, inspect,examine and make copies of the books, records, accounts and financial data ofthe Company, only, however, insofar as they pertain to the Project; or

###  

### (b)           The Issuer or the Trustee may pursue all remedies now orhereafter existing at law or in equity to recover all amounts, including allLoan Payments and Additional Payments and under Section 4.8 hereof the purchaseprice of Bonds tendered for purchase, then due and thereafter to become dueunder this Agreement, or to enforce the performance and observance of any otherobligation or agreement of the Company under this Agreement.

###  

Notwithstanding the foregoing,the Issuer shall not be obligated to take any step which in its opinion will ormight cause it to expend time or money or otherwise incur liability unless anduntil a satisfactory indemnity bond has been furnished to the Issuer at no costor expense to the Issuer.  Any amountscollected as Loan Payments or applicable to Loan Payments and any other amountswhich would be applicable to payment of Bond Service Charges collected pursuantto action taken under this Section shall be paid into the Bond Fund and appliedin accordance with the provisions of the Indenture or, if the outstanding Bondshave been paid and discharged in accordance with the provisions of theIndenture, shall be paid as provided in Section 5.07 of the Indenture fortransfers of remaining amounts in the Bond Fund.

 

The provisionsof this Section are subject to the further limitation that the rescission andannulment by the Trustee of its declaration that all of the Bonds areimmediately due and payable also shall constitute a rescission and annulment ofany corresponding declaration made pursuant to this Section and a rescissionand annulment of the consequences of that declaration and of the Event ofDefault with respect to which that declaration has been made, provided that nosuch rescission and annulment shall extend to or affect any subsequent or otherdefault or impair any right consequent thereon.

 

## Section 7.3.            NoRemedy Exclusive.  No remedyconferred upon or reserved to the Issuer or the Trustee by this Agreement isintended to be exclusive of any other available remedy or remedies, but eachand every such remedy shall be cumulative and shall be in addition to everyother remedy given under this Agreement, or now or hereafter existing at law,in equity or by statute.  No delay oromission to exercise any right or power accruing upon any default shall impairthat right or power or shall be construed to be a waiver thereof, but any suchright or 

##  

## 26

## 

##  

## power may be exercised fromtime to time and as often as may be deemed expedient.  In order to entitle the Issuer or the Trustee to exercise anyremedy reserved to it in this Article, it shall not be necessary to give anynotice, other than any notice required by law or for which express provision ismade herein.

##  

## Section 7.4.            Agreementto Pay Attorneys’ Fees and Expenses. If an Event of Default should occur and the Issuer or the Trustee shouldincur expenses, including attorneys’ fees, in connection with the enforcementof this Agreement or the collection of sums due hereunder, the Company shall berequired, to the extent permitted by law, to reimburse the Issuer and theTrustee, as applicable, for the expenses so incurred upon demand.

##  

## Section 7.5.            NoWaiver.  No failure by the Issuer orthe Trustee to insist upon the strict performance by the Company of anyprovision hereof shall constitute a waiver of their right to strict performanceand no express waiver shall be deemed to apply to any other existing orsubsequent right to remedy the failure by the Company to observe or comply withany provision hereof.

##  

## Section 7.6.            Noticeof Default.  The Company shallnotify the Trustee and the Bond Insurer immediately if it becomes aware of theoccurrence of any Event of Default hereunder or of any fact, condition or eventwhich, with the giving of notice or passage of time or both, would become anEvent of Default.

##  

(End of Article VII)

 

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# **ARTICLE VIII.**

# ** **

# **MISCELLANEOUS**

# ** **

## Section 8.1.            Termof Agreement.  This Agreement shallbe and remain in full force and effect from the date of delivery of the Bondsto the Original Purchaser until such time as (i) all of the Bonds shall havebeen fully paid (or provision made for such payment) and the Indenture has beenreleased pursuant to Section 9.01 thereof and (ii) all other sums payable bythe Company under this Agreement shall have been paid; provided, however, theobligations of the Company under Sections 4.2 and 5.9 hereof shall survive anytermination of this Agreement.

##  

## Section 8.2.            AmountsRemaining in Funds.  Any amounts inthe Bond Fund remaining unclaimed by the Holders of Bonds for four years afterthe due date thereof (whether at stated maturity, by redemption, uponacceleration or otherwise), at the option of the Company, shall be deemed tobelong to and shall be paid, subject to Section 5.06 of the Indenture, at thewritten request of the Company, to the Company by the Trustee.  With respect to that principal of and anypremium and interest on the Bonds to be paid from moneys paid to the Companypursuant to the preceding sentence, the Holders of the Bonds entitled to thosemoneys shall look solely to the Company for the payment of those moneys.  Further, any amounts remaining in the BondFund and any other special funds or accounts created under this Agreement orthe Indenture, except the Rebate Fund, after all of the Bonds shall be deemedto have been paid and discharged under the provisions of the Indenture and allother amounts required to be paid under this Agreement and the Indenture havebeen paid, shall be paid to the Company to the extent that those moneys are inexcess of the amounts necessary to effect the payment and discharge of theOutstanding Bonds.

##  

## Section 8.3.            Notices.  All notices, certificates, requests or othercommunications hereunder shall be in writing, except as provided in Section 3.4hereof, and shall be deemed to be sufficiently given when mailed by registeredor certified mail, postage prepaid, and addressed to the appropriate NoticeAddress.  A duplicate copy of eachnotice, certificate, request or other communication given hereunder to theIssuer, the Company, the Bond Insurer or the Trustee shall also be given to theothers.  The Company, the Issuer, theBond Insurer and the Trustee, by notice given hereunder, may designate anyfurther or different addresses to which subsequent notices, certificates,requests or other communications shall be sent.

##  

## Section 8.4.            Extentof Covenants of the Issuer; No Personal Liability.  All covenants, obligations and agreements ofthe Issuer contained in this Agreement or the Indenture shall be effective tothe extent authorized and permitted by applicable law.  No such covenant, obligation or agreementshall be deemed to be a covenant, obligation or agreement of any present orfuture member, officer, agent or employee of the Issuer in other than hisofficial capacity, and neither the members of the Issuer nor any officialexecuting the Bonds shall be liable personally on the Bonds or be subject toany personal liability or accountability by reason of the issuance thereof 

##  

## 28

## 

##  

## or by reason of the covenants,obligations or agreements of the Issuer contained in this Agreement or in theIndenture.

##  

## Section 8.5.            BindingEffect.  This Agreement shall inureto the benefit of and shall be binding in accordance with its terms upon theIssuer, the Company and their respective permitted successors and assignsprovided that this Agreement may not be assigned by the Company (except aspermitted under Sections 5.8 or 5.12 hereof) and may not be assigned by theIssuer except to (i) the Trustee pursuant to the Indenture or as otherwise maybe necessary to enforce or secure payment of Bond Service Charges or (ii) anysuccessor public body to the Issuer.

##  

## Section 8.6.            Amendmentsand Supplements.  Except asotherwise expressly provided in this Agreement or the Indenture, subsequent tothe issuance of the Bonds and prior to all conditions provided for in theIndenture for release of the Indenture having been met, this Agreement may notbe effectively amended, changed, modified, altered or terminated by the partieshereto except with the consents required by, and in accordance with, theprovisions of Article XI of the Indenture, as applicable.

##  

## Section 8.7.            ExecutionCounterparts.  This Agreement may beexecuted in any number of counterparts, each of which shall be regarded as anoriginal and all of which shall constitute but one and the same instrument.

##  

## Section 8.8.            Severability.  If any provision of this Agreement, or anycovenant, obligation or agreement contained herein is determined by a judicialor administrative authority to be invalid or unenforceable, that determinationshall not affect any other provision, covenant, obligation or agreement, eachof which shall be construed and enforced as if the invalid or unenforceableportion were not contained herein.  Thatinvalidity or unenforceability shall not affect any valid and enforceableapplication thereof, and each such provision, covenant, obligation or agreementshall be deemed to be effective, operative, made, entered into or taken in themanner and to the full extent permitted by law.

##  

## Section 8.9.            GoverningLaw.  This Agreement shall be deemedto be a contract made under the laws of the State and for all purposes shall begoverned by and construed in accordance with the laws of the State.

##  

(End of Article VIII)

 

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IN WITNESSWHEREOF, the Issuer and the Company have caused this Agreement to be duly executedin their respective names, all as of the date hereinbefore written.

 
|                                        | INDIANA DEVELOPMENT FINANCE  AUTHORITY |
|---------------------------------------------|----------------------------------------|
|                                        |                                   |
|                                        |                                   |
|                                        | By:                                    | /s/ ALFRED HAMMONDS |   |
|                                        |                                   | Alfred Hammonds, Chairman |
|                                        |                                   |
| Attest:                                     |                                   |
|                                        |                                   |
|                                        |                                   |
| /s/ W. CALVIN KELLY                         |                                   |   |
| W. Calvin Kelly, Acting  Executive Director |                                   |
|                                             |                                        |  |  |  |

 

[Issuer’s Signature Page toLoan Agreement]

 

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|   | PSI ENERGY, INC. |
|--------|------------------|
|   |             |
|   |             |
|   | By:              | /s/ WENDY L. AUMILLER |   |
|   |             | Treasurer |

 

 

[Borrower’s Signature Page toLoan Agreement]

 

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**EXHIBIT** A

 

DESCRIPTION OF POLLUTIONCONTROL FACILITIESATGIBSON GENERATING STATION

 

 

Financed by Original Bonds

 

 

Flue Gas Desulphurization andSludge Fixation System for Unit 5 of the Gibson Generating Station

 

Electrostatic Precipitator forUnit 5 of the Gibson Generating Station

 

Off-Road Solid Waste Transportand Disposal Equipment and Solid Waste Disposal Site Improvement

 

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