EXHIBIT 10.3
                DIRECTORS AND OFFICERS LIABILITY
                        INSURANCE POLICY

                  THIS IS A "CLAIMS-FIRST-MADE"
          INSURANCE POLICY.  PLEASE READ IT CAREFULLY.

Words and phrases which appear in all capital letters have the special
                      meanings set forth in
                    Section II - Definitions

                              AEGIS
                    ASSOCIATED ELECTRIC & GAS
                   INSURANCE SERVICES LIMITED
                        HAMILTON, BERMUDA


                          DECLARATIONS

                                        POLICY NO. D0392B1A96

                                        DECLARATIONS NO. 1 

Item 1:   This POLICY provides indemnification with respect to the
DIRECTORS and OFFICERS of:

     IPALCO Enterprises, Inc.
     25 Monument Circle
     Indianapolis, IN  46204

Item 2:   POLICY PERIOD:  from the 1st day of June, 1996, to the 1st
          day of June, 1997 both days at 12:01 A.M. Standard Time at
          the address of the COMPANY.

Item 3:   RETROACTIVE DATE:  the 4th day of December, 1970 at 12:01
          A.M. Standard Time at the address of the COMPANY.

Item 4:   A.   POLICY PREMIUM:     $200,160.
          B.   MINIMUM PREMIUM:    $ 80,064.

Item 5:   Limits of Liability:
     A.   $ 35,000,000   Each WRONGFUL ACT
     B.   $ 35,000,000   Aggregate Limit of Liability for the POLICY
                         PERIOD

Item 6:   UNDERLYING LIMITS:
          This POLICY is written as primary insurance

          A.   If this POLICY is written as Primary Insurance with
               respect to Insuring Agreement I(A)(2) only:
               (1)  $ 200,000 Each WRONGFUL ACT not arising from
                              NUCLEAR OPERATIONS
               (2)  $ 200,000 Each WRONGFUL ACT arising from
                              NUCLEAR OPERATIONS
          B.   If this POLICY is written as EXCESS Insurance:
               (1)  (a) $ ________ Each WRONGFUL ACT
                    (b) $ ________ In the Aggregate for all
                                   WRONGFUL ACTS
               (2)      $ ________ Each WRONGFUL ACT not covered
                                   under Underlying Insurance
               (3)  In the Event of Exhaustion of the UNDERLYING
                    LIMIT stated in Item 6(B)(1)(b) above with
                    respect to Insuring Agreement I(A)(2) only:
                    (a) $ ________ Each WRONGFUL ACT not arising
                                   from NUCLEAR OPERATIONS
                          
                          
                          DECLARATIONS
                            continued

                                        POLICY NO. D0392B1A96

                                        DECLARATIONS NO. 1 


               (b) $ ________ Each WRONGFUL ACT arising from
                              NUCLEAR OPERATIONS

Item 7:   Any notice to be provided or any payment to be made hereunder
          to the COMPANY shall be made to:

          NAME      Mr. Bruce H. Smith
          TITLE     Administrator, Risk Management
          ENTITY    Indianapolis Power & Light Company
          ADDRESS   25 Monument Circle
                    P.O. Box 1595 (Zip 46206-1595)
                    Indianapolis, IN  46204

Item 8:   Any notice to be provided or any payment to be made hereunder
          to the INSURER shall be made to:

          NAME      Aegis Insurance Services, Inc.
          ADDRESS   10 Exchange Place
                    Jersey City, New Jersey 07302

ENDORSEMENTS ATTACHED AT POLICY ISSUANCE:  1-2



Countersigned at Jersey City, New Jersey

On July 12, 1996

Aegis Insurance Services, Inc.


By  /s/  Sandra A. Johnson                
     Authorized Representative
<PAGE>
  POLICY OF DIRECTORS AND OFFICERS LIABILITY INSURANCE EFFECTED
    WITH ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED
                        HAMILTON, BERMUDA
            (hereinafter referred to as the "POLICY")

         THIS IS A "CLAIMS-FIRST-MADE" INSURANCE POLICY.
                    PLEASE READ IT CAREFULLY.

      Words and phrases which appear in all capital letters
             have the special meanings set forth in
                    Section II - Definitions.

In consideration of the payment of premium, and in reliance upon all
statements made and information furnished to Associated Electric & Gas
Insurance Services Limited (hereinafter referred to as the "INSURER") by
the Application attached hereto which is hereby made a part hereof, and
subject to all the terms hereinafter provided, the INSURER agrees as
follows:

I.   INSURING AGREEMENT

     (A)  Indemnity

          (1)  The INSURER shall pay on behalf of the DIRECTORS and
               OFFICERS any and all sums which they shall become
               legally obligated to pay as ULTIMATE NET LOSS for which
               the COMPANY has not provided reimbursement, by reason
               of any WRONGFUL ACT which takes place during the
               COVERAGE PERIOD and is actually or allegedly caused,
               committed or attempted by the DIRECTORS or OFFICERS
               while acting in their respective capacities as
               DIRECTORS or OFFICERS, provided such ULTIMATE NET LOSS
               arises from a CLAIM first made against the DIRECTORS or
               OFFICERS during the POLICY PERIOD or during the
               DISCOVERY PERIOD, if purchased.

          (2)  The INSURER shall indemnify the COMPANY for any and all
               sums required to reimburse it for ULTIMATE NET LOSS it
               has incurred, as required or permitted by applicable
               common or statutory law or under provisions of the
               COMPANY'S Charter or Bylaws effected pursuant to such
               law, to indemnify DIRECTORS or OFFICERS for ULTIMATE
               NET LOSS which they are legally obligated to pay by
               reason of any WRONGFUL ACT which takes place during the
               COVERAGE PERIOD and is actually or allegedly caused,
               committed or attempted by such DIRECTORS or OFFICERS
               while acting in their respective capacities as
               DIRECTORS or OFFICERS, provided the ULTIMATE NET LOSS
               arises from a CLAIM first made against the DIRECTORS or
               OFFICERS during the POLICY PERIOD or during the
               DISCOVERY PERIOD, if purchased.

     (B)  Limits of Liability

          (1)  The INSURER shall only be liable hereunder for the
               amount of ULTIMATE NET LOSS in excess of the UNDERLYING
               LIMITS as stated in Item 6 of the Declarations as a
               result of each WRONGFUL ACT covered under Insuring
               Agreement I(A)(1) or I(A)(2) or both, and then only up
               to the Limit of Liability stated in Item 5A of the
               Declarations and further subject to the aggregate Limit
               of Liability stated in Item 5B of the Declarations as
               the maximum amount payable hereunder in the aggregate
               for all CLAIMS first made against the DIRECTORS or
               OFFICERS during both:

               (a)  the POLICY PERIOD and

               (b)  the DISCOVERY PERIOD, if purchased.

               Notwithstanding the foregoing, in the event that the
               INSURER cancels or refuses to renew this POLICY, and a
               DISCOVERY PERIOD extension is purchased by the COMPANY,
               then the aggregate Limit of Liability stated in Item 5B
               of the Declarations shall be reinstated but only with
               respect to CLAIMS first made against the DIRECTORS or
               OFFICERS during such DISCOVERY PERIOD.
          
          (2)  Multiple CLAIMS arising out of the same WRONGFUL ACT,
               even if made against different DIRECTORS or OFFICERS,
               shall be deemed to be a single CLAIM arising from a
               single WRONGFUL ACT and to have been reported during
               the POLICY PERIOD or, if purchased, during the
               DISCOVERY PERIOD in which the first of such multiple
               CLAIMS is made against any of the DIRECTORS or
               OFFICERS.  The Limits of Liability and UNDERLYING
               LIMITS, stated in Items 5 and 6 of the Declarations
               respectively, shall apply only once regardless of the
               number of CLAIMS arising out of the same WRONGFUL ACT. 
               All interrelated acts shall be deemed to be a single
               WRONGFUL ACT.

          (3)  The inclusion herein of more than one DIRECTOR or
               OFFICER, or the application of both Insuring Agreements
               I(A)(1) and I(A)(2), shall not operate to increase the
               INSURER'S Limits of Liability as stated in Item 5 of
               the Declarations.

          (4)  With respect to ULTIMATE NET LOSS arising out of any
               WRONGFUL ACT in connection with service for a NOT-FOR-
               PROFIT ORGANIZATION as provided in Section II(E)(2),
               if:

               (a)  such WRONGFUL ACT results in liability being
                    imposed upon one or more DIRECTORS and OFFICERS
                    under this POLICY and also upon directors and
                    officers and general partners under any other
                    directors and officers or general partner
                    liability insurance policies issued by the
                    INSURER to any organization; and

               (b)  the total of the ULTIMATE NET LOSS under this
                    POLICY and the ultimate net loss under such other
                    policies issued by the INSURER equals or exceeds
                    $35,000,000;

               the maximum amount payable by the INSURER under this
               POLICY in the aggregate for all ULTIMATE NET LOSS
               resulting from such WRONGFUL ACT shall be the lesser of
               the applicable Limit of Liability provided by this
               POLICY or the product of:

                     (i) the applicable Limit of Liability provided
                         by this POLICY divided by the total limits
                         of liability per wrongful act applicable to
                         such wrongful act under all policies issued
                         by the INSURER; and

                    (ii) $35,000,000.

               If the amount paid under this POLICY with respect to
               such WRONGFUL ACT exceeds the COMPANY'S proportionate
               share of the $35,000,000 as determined above, the
               COMPANY shall refund such excess to the INSURER
               promptly.

     (C)  UNDERLYING LIMITS

          (1)  If this POLICY is written as Primary Insurance with
               respect to Insuring Agreement I(A)(2), the UNDERLYING
               LIMIT for the COMPANY for each WRONGFUL ACT shall be as
               stated in Item 6A(1) of the Declarations, unless it is
               based upon, arises out of or is attributable to NUCLEAR
               OPERATIONS, in which event it shall be as stated in
               Item 6A(2) of the Declarations;

          (2)  If this POLICY is written as Excess Insurance:

               (a)  with respect to Insuring Agreements I(A)(1) and
                    I(A)(2), the UNDERLYING LIMIT for each WRONGFUL
                    ACT shall be as stated in Item 6B(1)(a) of the
                    Declarations and the maximum UNDERLYING LIMIT for
                    all WRONGFUL ACTS shall be as stated in Item
                    6B(1)(b) of the Declarations;

               (b)  with respect to ULTIMATE NET LOSS covered
                    hereunder:

                     (i) in the event of reduction of the underlying
                         aggregate limit as stated in Item 6B(1)(b),
                         the UNDERLYING LIMIT shall be such reduced
                         underlying aggregate limit; or

                    (ii) in the event of exhaustion of the
                         underlying aggregate limit as stated in
                         Item 6B(1)(b), the UNDERLYING LIMIT shall
                         be as stated in Item 6B(3) of the
                         Declarations;

               (c)  with respect to any WRONGFUL ACT covered
                    hereunder but not covered under such Underlying
                    Insurance, the UNDERLYING LIMIT shall be as
                    stated in Item 6B(2) of the Declarations; and

               (d)  nothing herein shall make this POLICY subject to
                    the terms and conditions of any Underlying
                    Insurance.

          (3)  Only payment of indemnity or defense expenses which,
               except for the amount thereof, would have been
               indemnifiable under this POLICY, may reduce or exhaust
               an UNDERLYING LIMIT.

          (4)  In the event that both Insuring Agreement I(A)(1) and
               I(A)(2) are applicable to INDEMNITY and DEFENSE COST
               resulting from a WRONGFUL ACT then:

               (a)  if this POLICY is written as Primary Insurance,
                    the UNDERLYING LIMIT applicable to such WRONGFUL
                    ACT shall be the UNDERLYING LIMIT stated in Item
                    6A of the Declarations; and

               (b)  if this POLICY is written as Excess Insurance and
                    the UNDERLYING LIMIT has been exhausted, the
                    UNDERLYING LIMIT applicable to such WRONGFUL ACT
                    shall be the UNDERLYING LIMIT stated in Item
                    6B(3);

               and there shall be no UNDERLYING LIMIT applicable with
               respect to coverage provided under Insuring Agreement
               I(A)(1).

          (5)  The UNDERLYING LIMITS stated in Item 6 of the
               Declarations applicable to Insuring Agreement I(A)(2)
               shall apply to all INDEMNITY and/or DEFENSE COST for
               which indemnification of the DIRECTORS and/or OFFICERS
               by the COMPANY is legally permissible, whether or not
               such indemnification is granted by the COMPANY.

II.  DEFINITIONS

     A.   CLAIM:  The term "CLAIM" shall mean:

          (1)  any demand, suit or proceeding against any DIRECTORS
               and/or OFFICERS during the POLICY PERIOD or during the
               DISCOVERY PERIOD, if purchased, which seeks actual
               monetary damages or other relief and which may result
               in any DIRECTORS and/or OFFICERS becoming legally
               obligated to pay ULTIMATE NET LOSS by reason of any
               WRONGFUL ACT actually or allegedly caused, committed or
               attempted during the COVERAGE PERIOD by the DIRECTORS
               and/or OFFICERS while acting in their capacity as such;
               or

          (2)  written notice to the INSURER during the POLICY PERIOD
               or during the DISCOVERY PERIOD, if purchased, by the
               DIRECTORS, OFFICERS and/or the COMPANY, describing with
               the specificity set forth in Condition (C) hereof,
               circumstances of which they are aware involving an
               identifiable WRONGFUL ACT actually or allegedly caused,
               committed or attempted during the COVERAGE PERIOD by
               the DIRECTORS and/or OFFICERS while acting in their
               capacity as such, which circumstances are likely to
               give rise to a demand, suit or proceeding being made
               against such DIRECTORS and/or OFFICERS.

               A CLAIM shall be deemed to be first made against a
               DIRECTOR or OFFICER at the earlier of the time at which
               a demand, suit or proceeding is first made against the
               DIRECTOR or OFFICER, as set forth in section (1) of
               this Definition or the time at which written notice is
               given to the INSURER, as set forth in section (2) of
               this Definition.

               Multiple demands or suits arising out of the same
               WRONGFUL ACT or interrelated acts shall be deemed to be
               a single "CLAIM".

     (B)  COMPANY:  The term "COMPANY" shall mean the organization(s)
          named in Item 1 of the Declarations and, subject to Condition
          (A) hereof, any SUBSIDIARIES of such organization(s).

     (C)  COVERAGE PERIOD:  The term "COVERAGE PERIOD" shall mean the
          period of time from the RETROACTIVE DATE to the termination
          of the POLICY PERIOD.

     (D)  DEFENSE COST:  The term "DEFENSE COST" shall mean all
          expenses incurred by or on behalf of the DIRECTORS, OFFICERS
          or, where reimbursable under Insuring Agreement I(A)(2), the
          COMPANY in the investigation, negotiation, settlement and
          defense of any CLAIM except all salaries, wages and benefit
          expenses of DIRECTORS, OFFICERS, or the COMPANY.

     (E)  DIRECTOR and OFFICER:  The terms "DIRECTOR" and "OFFICER" as
          used herein, either in the singular or plural, shall mean:

          (1)  any person who was, is now, or shall be a director,
               officer or trustee of the COMPANY and any other
               employee of the COMPANY who may be acting in the
               capacity of a director, officer or trustee of the
               COMPANY with the express authorization of a director,
               officer or trustee of the COMPANY;

          (2)  any director, officer or trustee of the COMPANY who is
               serving or has served at the specific request of the
               COMPANY as a director, officer or trustee of any
               outside NOT-FOR-PROFIT ORGANIZATION; or

          (3)  the estates, heirs, legal representatives or assigns of
               deceased persons who were directors, officers or
               trustees of the COMPANY at the time the WRONGFUL ACTS
               upon which such CLAIMS were based were committed, and
               the legal representatives or assigns of directors,
               officers or trustees of the COMPANY in the event of
               their incompetency, insolvency or bankruptcy;

          provided, however, that the terms "DIRECTOR" and "OFFICER"
          shall not include a trustee appointed pursuant to Title 11,
          United States Code, or pursuant to the Securities Investor
          Protection Act, a receiver appointed for the benefit of
          creditors by Federal or State courts, an assignee for the
          benefit of creditors or similar fiduciary appointed under
          Federal or State laws for the protection of creditors or the
          relief of debtors.

          In the event that a CLAIM which is within the coverage
          afforded under this POLICY is made against any DIRECTOR or
          OFFICER and such CLAIM includes a claim against the lawful
          spouse of such DIRECTOR or OFFICER solely by reason of (a)
          such spousal status or (b) such spouse's ownership interest
          in property or assets which are sought as recovery for
          WRONGFUL ACTS of a DIRECTOR or OFFICER, such spouse shall be
          deemed to be a DIRECTOR or OFFICER hereunder, but solely with
          respect to such claim.  In no event, however, shall the
          lawful spouse of a DIRECTOR or OFFICER be deemed to be a
          DIRECTOR or OFFICER as regards any CLAIM in respect of which
          there is a breach of duty, neglect, error, misstatement,
          misleading statement or omission actually or allegedly
          caused, committed or attempted by or claimed against such
          spouse, acting individually or in his or her capacity as the
          spouse of a DIRECTOR or OFFICER.

     (F)  DISCOVERY PERIOD:  The term "DISCOVERY PERIOD" shall mean the
          period of time set forth in Condition (L).

     (G)  INDEMNITY:  The term "INDEMNITY" shall mean all sums which
          the DIRECTORS, OFFICERS or, where reimbursable under Insuring
          Agreement I(A)(2), the COMPANY shall become legally obligated
          to pay as damages either by adjudication or compromise with
          the consent of the INSURER, after making proper deduction for
          the UNDERLYING LIMITS and all recoveries, salvages and other
          valid and collectible insurance.

     (H)  INSURER:  The term "INSURER" shall mean Associated Electric &
          Gas Insurance Services Limited, Hamilton, Bermuda, a non-
          assessable mutual insurance company.
 
     (I)  NOT-FOR-PROFIT ORGANIZATION:  The term "NOT-FOR-PROFIT
          ORGANIZATION" shall mean:

          (1)  an organization, no part of the income or assets of
               which is distributable to its owners, stockholders or
               members and which is formed and operated for a purpose
               other than the pecuniary profit or financial gain of
               its owners, stockholders or members; or

          (2)  a political action committee which is defined for these
               purposes as a separate segregated fund to be utilized
               for political purposes as described in the United
               States Federal Election Campaign Act (2 U.S.C.
               441b(2)(C)).

     (J)  NUCLEAR OPERATIONS:  The term "NUCLEAR OPERATIONS" shall mean
          the design, engineering, financing, construction, operation,
          maintenance, use, ownership, conversion or decommissioning of
          any nuclear facility.

     (K)  POLICY:  The term "POLICY" shall mean this insurance policy,
          including the Application, the Declarations and any
          endorsements issued by the INSURER to the organization first
          named in Item 1 of the Declarations for the POLICY PERIOD
          listed in Item 2 of the Declarations.

     (L)  POLICY PERIOD:  The term "POLICY PERIOD" shall mean the
          period of time stated in Item 2 of the Declarations.

     (M)  RETROACTIVE DATE:  The term "RETROACTIVE DATE" shall mean the
          date stated in Item 3 of the Declarations; provided, however,
          with respect to any WRONGFUL ACT actually or allegedly
          caused, committed or attempted by the DIRECTORS or OFFICERS
          of any SUBSIDIARY formed or acquired by the COMPANY or any of
          its SUBSIDIARIES after inception of the POLICY PERIOD of this
          POLICY, or after inception of any other policy issued by the
          INSURER to the COMPANY for a prior policy period, the term
          "RETROACTIVE DATE" shall mean the date of such formation or
          acquisition.

     (N)  SUBSIDIARIES:  The term "SUBSIDIARY" shall mean any entity
          more than fifty percent (50) of whose outstanding securities,
          or financial interest representing the present right to vote
          for election of directors (or the appointment of a general
          partner in respect of a limited partnership or manager in
          respect of a limited liability company) are owned by the
          COMPANY and/or one or more of its "SUBSIDIARIES".

     (O)  ULTIMATE NET LOSS:  The term "ULTIMATE NET LOSS" shall mean
          the total INDEMNITY and DEFENSE COST with respect to each
          WRONGFUL ACT to which this POLICY applies, provided that
          ULTIMATE NET LOSS does not include any amount allocated,
          pursuant to Condition (T), to CLAIMS against persons or
          entities other than DIRECTORS and OFFICERS or to non-covered
          matters.

     (P)  UNDERLYING LIMITS:  The term "UNDERLYING LIMITS" shall mean
          the amounts stated in Item 6 of the Declarations.

     (Q)  WRONGFUL ACT:  The term "WRONGFUL ACT" shall mean any actual
          or alleged breach of duty, neglect, error, misstatement,
          misleading statement or omission actually or allegedly
          caused, committed or attempted by any DIRECTOR or OFFICER
          while acting individually or collectively in their capacity
          as such, or claimed against them solely by reason of their
          being DIRECTORS or OFFICERS.

          All such interrelated breaches of duty, neglects, errors,
          misstatements, misleading statements or omissions actually or
          allegedly caused, committed or attempted by or claimed
          against one or more of the DIRECTORS or OFFICERS shall be
          deemed to be a single "WRONGFUL ACT".

III. EXCLUSIONS

     The INSURER shall not be liable to make any payment for ULTIMATE
     NET LOSS arising from any CLAIM(S) made against any DIRECTOR or
     OFFICER:

     (A)  (1)  for any fines or penalties imposed in a criminal suit,
               action or proceeding;

          (2)  for any fines or penalties imposed in conjunction with
               political contributions, payments, commissions or
               gratuities; or

          (3)  for any other fines or penalties imposed by final
               adjudication of a court of competent jurisdiction or
               any agency or commission possessing quasi-judicial
               authority; or

          (4)  where, at inception of the POLICY PERIOD, such DIRECTOR
               or OFFICER had knowledge of a fact or circumstance
               which was likely to give rise to such CLAIM(S) and
               which such DIRECTOR or OFFICER failed to disclose or
               misrepresented in the Application or in the process of
               preparation of the Application, other than in a Renewal
               Application; provided, however, that this exclusion
               shall not apply to such CLAIM(S) made against any
               DIRECTOR or OFFICER other than such DIRECTOR or OFFICER
               who failed to disclose or misrepresented such fact or
               circumstance; provided further that this exclusion
               shall not limit the INSURER'S right to exercise any
               remedy available to it with respect to such failure to
               disclose or misrepresentation other than the remedy
               provided for in this Exclusion.

     (B)  with respect to Insuring Agreement I(A)(1) only:

          (1)  based upon, arising out of or attributable to such
               DIRECTOR or OFFICER having gained any personal profit,
               advantage or remuneration to which such DIRECTOR or
               OFFICER was not legally entitled if:

               (a)  a judgment or other final adjudication adverse to
                    such DIRECTOR or OFFICER establishes that he in
                    fact gained such personal profit, advantage or
                    remuneration; or

               (b)  such DIRECTOR or OFFICER has entered into a
                    settlement agreement to repay such personal
                    profit, advantage or remuneration to the COMPANY;

          (2)  for an accounting of profits made from the purchase or
               sale by such DIRECTOR or OFFICER of securities of the
               COMPANY within the meaning of Section 16(b) of the
               Securities Exchange Act of 1934 and amendments thereto
               or similar provisions of any other federal or state
               statutory or common law;

          (3)  brought about or contributed to by the dishonest,
               fraudulent, criminal or malicious act or omission of
               such DIRECTOR or OFFICER if a final adjudication
               establishes that acts of active and deliberate
               dishonesty were committed or attempted with actual
               dishonest purpose and intent and were material to the
               cause of action so adjudicated; or

          (4)  where such payment would be contrary to applicable law.

     (C)  for bodily injury, mental anguish, mental illness, emotional
          upset, sickness or disease sustained by any person, death of
          any person or for physical injury to or destruction of
          tangible property or the loss of use thereof.

     (D)  for injury based upon, arising out of or attributable to:

          (1)  false arrest, wrongful detention or wrongful
               imprisonment or malicious prosecution;

          (2)  wrongful entry, wrongful eviction or other invasion of
               the right of private occupancy;

          (3)  discrimination or sexual harassment;

          (4)  publication or utterance:

               (a)  of a libel or slander or other defamatory or
                    disparaging material; and

               (b)  in violation of an individual's right of privacy;
                    or

          (5)  with respect to the COMPANY'S advertising activities: 
               piracy, plagiarism, unfair competition, idea
               misappropriation under implied contract, or
               infringement of copyright, title, slogan, registered
               trademark, service mark, or trade name.

     (E)  based upon, arising out of or attributable to the violation
          of any responsibility, obligation or duty imposed upon
          fiduciaries by the Employee Retirement Income Security Act of
          1974 or amendments thereto or by similar common or statutory
          law of the United States of America or any state or other
          jurisdiction therein.

     (F)  based upon, arising out of or attributable to:

          (1)  the rendering of advice with respect to;

          (2)  the interpreting of; or

          (3)  the handling of records in connection with the
               enrollment, termination or cancellation of employees
               under the COMPANY'S group life insurance, group
               accident or health insurance, pension plans, employee
               stock subscription plans, workers' compensation,
               unemployment insurance, social security, disability
               benefits and any other employee benefit programs.

     (G)  based upon, arising out of or attributable to any failure or
          omission on the part of the DIRECTORS, OFFICERS and/or the
          COMPANY to effect and maintain insurance(s) of the type and
          amount which is customary with companies in the same or
          similar business.

     (H)  (1)  arising from any circumstances, written notice of which
               has been given under any policy or any DISCOVERY PERIOD
               thereof, which policy expired prior to or upon the
               inception of this POLICY; or

          (2)  which is one of the number of CLAIMS arising out of the
               same WRONGFUL ACT, if any CLAIM of such multiple CLAIMS
               was made against the DIRECTORS or OFFICERS during "any
               policy" or any discovery period thereof, which policy
               expired prior to or upon the inception of this POLICY.

     (I)  if any other policy or policies also afford(s) coverage in
          whole or in part for such CLAIM(S); except, this exclusion
          shall not apply:

          (1)  to the amount of ULTIMATE NET LOSS with respect to such
               CLAIM(S) which is in excess of the limit of liability
               of such other policy or policies and any applicable
               deductible or retention thereunder; or

          (2)  with respect to coverage afforded such CLAIM(S) by any
               other policy or policies purchased or issued
               specifically as insurance underlying or in excess of
               the coverage afforded under this POLICY;

          provided always that nothing herein shall be construed to
          cause this POLICY to contribute with any other policy or
          policies or to make this POLICY subject to any of the terms
          of any other policy or policies.

     (J)  for any WRONGFUL ACT which took place in whole or in part
          prior to the RETROACTIVE DATE.

     (K)  by, on behalf of, in the right of, at the request of, or for
          the benefit of, any security holder of the COMPANY, any
          DIRECTOR or OFFICER, or the COMPANY, unless such CLAIM is:

          (1)  made derivatively by any shareholder of the COMPANY for
               the benefit of the COMPANY and such shareholder is:

               (a)  acting totally independent of, and totally
                    without the suggestion, solicitation, direction,
                    assistance, participation or intervention of, any
                    DIRECTOR or OFFICER, or the COMPANY; and

               (b)  not any entity within the definition of the term
                    "COMPANY"; or

          (2)  made non-derivatively by a security holder who is not:

               (a)  a DIRECTOR or OFFICER; or

               (b)  any entity within the definition of the term
                    "COMPANY"; or

          (3)  made non-derivatively by an OFFICER acting totally
               independent of, and totally without the suggestion,
               solicitation, direction, assistance, participation or
               intervention of, any other DIRECTOR or OFFICER, or the
               COMPANY, and (subject to all the other exclusions and
               POLICY provisions) arising from the wrongful
               termination of that OFFICER.

     (L)  where such CLAIM(S) arise  out of such DIRECTOR'S or
          OFFICER'S activities as a director, officer or trustee of any
          entity other than:

          (1)  the COMPANY; or

          (2)  any outside NOT-FOR-PROFIT ORGANIZATION as provided in
               Section II(E)(2).

IV.  CONDITIONS

     (A)  Acquisition, Merger and Dissolution

          (1)  (a)  If, after inception of the POLICY PERIOD, 

                    (i)  the COMPANY or any of its SUBSIDIARIES
                         forms or acquires any SUBSIDIARY or
                         acquires any entity by merger into or
                         consolidation with the COMPANY or any
                         SUBSIDIARY, and

                    (ii) the operations of such formed or acquired
                         entity are related to, arising from or
                         associated with the production,
                         transmission, delivery or furnishing of
                         electricity, gas, water or sewer service to
                         the public or the conveyance of telephone
                         messages for the public; and

                    (iii)     the total assets of such formed or acquired
                              entity are not greater than the lesser of
                              $100,000,000 or ten percent (10%) of the
                              COMPANY'S total assets, 

                    coverage shall be provided for the DIRECTORS and
                    OFFICERS of such entity from the date of
                    formation, acquisition, merger or consolidation,
                    respectively, but only with respect to WRONGFUL
                    ACTS actually or allegedly caused, committed or
                    attempted during that part of the POLICY PERIOD
                    which is subsequent to the formation,
                    acquisition, merger or consolidation.

               (b)  In respect of any SUBSIDIARY formed or acquired
                    after the inception of the POLICY PERIOD and not
                    subject to paragraph (a) above, or of any entity
                    acquired by merger into or consolidation with the
                    COMPANY or any SUBSIDIARY shall after the
                    inception of the POLICY PERIOD and not subject to
                    paragraph (a) above, the COMPANY shall report
                    such formation or acquisition within ninety (90)
                    days thereafter and, if so reported, upon payment
                    of an additional premium and upon terms as may be
                    required by the INSURER, such coverage shall be
                    provided for the DIRECTORS and OFFICERS of such
                    newly formed or acquired SUBSIDIARY or merged or
                    consolidated entity, but only with respect to
                    WRONGFUL ACTS actually or allegedly caused,
                    committed, or attempted during that part of the
                    COVERAGE PERIOD which is subsequent to such
                    acquisition, merger or consolidation.

          (2)  If, prior to or after inception of the POLICY PERIOD,
               the COMPANY or any of its SUBSIDIARIES is or has been
               acquired by or merged into any other entity, or is or
               has been dissolved, coverage under this POLICY shall
               continue for the POLICY PERIOD but only for DIRECTORS
               and OFFICERS of the COMPANY or its SUBSIDIARIES who
               were serving as such prior to such acquisition, merger
               or dissolution and only with respect to WRONGFUL ACTS
               actually or allegedly caused, committed or attempted
               during that part of the COVERAGE PERIOD which is prior
               to such acquisition, merger or dissolution.

     (B)  Non-Duplication of Limits

          To avoid the duplication of the INSURER'S Limits of Liability
          stated in Item 5 of the Declarations, the DIRECTORS, OFFICERS
          and COMPANY agree that:

          (1)  in the event the INSURER provides INDEMNITY or DEFENSE
               COSTS for any WRONGFUL ACT under this POLICY, neither
               the DIRECTORS, OFFICERS nor the COMPANY shall have any
               right to additional INDEMNITY or DEFENSE COSTS for such
               WRONGFUL ACT under any other policy issued by the
               INSURER to the DIRECTORS, OFFICERS or COMPANY that
               otherwise would apply to such WRONGFUL ACT; and

          (2)  in the event the INSURER provides INDEMNITY or DEFENSE
               COSTS for any WRONGFUL ACT under any other policy
               issued by the INSURER to the DIRECTORS, OFFICERS, or
               COMPANY, neither the DIRECTORS, OFFICERS nor the
               COMPANY shall have any right to additional INDEMNITY or
               DEFENSE COSTS for such WRONGFUL ACT under this POLICY.

     (C)  Notice of Claim

          As a condition precedent to any rights under this POLICY, the
          DIRECTORS, OFFICERS and/or the COMPANY, shall give written
          notice to the INSURER as soon as practicable of any CLAIM,
          which notice shall include the nature of the WRONGFUL ACT,
          the alleged injury, the names of the claimants, and the
          manner in which the DIRECTOR, OFFICER or COMPANY first became
          aware of the CLAIM, and shall cooperate with the INSURER and
          give such additional information as the INSURER may
          reasonably require.

          The Application or any information contained therein for this
          POLICY shall not constitute a notice of CLAIM.

     (D)  Cooperation and Settlements

          In the event of any WRONGFUL ACT which may involve this
          POLICY, the DIRECTORS, OFFICERS or COMPANY without prejudice
          as to liability, may proceed immediately with settlements
          which in their aggregate do not exceed the UNDERLYING LIMITS. 
          The COMPANY shall notify the INSURER of any such settlements
          made.

          The INSURER shall not be called upon to assume charge of the
          investigation, settlement or defense of any demand, suit or
          proceeding, but the INSURER shall have the right and shall be
          given the opportunity to associate with the DIRECTORS,
          OFFICERS and COMPANY or any underlying insurer, or both, in
          the investigation, settlement, defense and control of any
          demand, suit or proceeding relative to any WRONGFUL ACT where
          the demand, suit or proceeding involves or may involve the
          INSURER.  At all times, the DIRECTORS, OFFICERS and COMPANY
          and the INSURER shall cooperate in the investigation,
          settlement and defense of such demand, suit or proceeding.

          The DIRECTORS, OFFICERS and COMPANY and their underlying
          insurer(s) shall, at all times, use diligence and prudence in
          the investigation, settlement and defense of demands, suits
          or other proceedings.  

     (E)  Appeals

          In the event that the DIRECTORS, OFFICERS, COMPANY or any
          underlying insurer elects not to appeal a judgment in excess
          of the UNDERLYING LIMITS, the INSURER may elect to conduct
          such appeal at its own cost and expense and shall be liable
          for any taxable court costs and interest incidental thereto,
          but in no event shall the total liability of the INSURER,
          exclusive of the cost and expense of appeal, exceed its
          Limits of Liability stated in Item 5 of the Declarations.

     (F)  Subrogation

          In the event of any payment under this POLICY, the INSURER
          shall be subrogated to the extent of such payment to all
          rights of recovery thereof, and the DIRECTORS, OFFICERS and
          COMPANY shall execute all papers required and shall do
          everything that may be necessary to enable the INSURER to
          bring suit in the name of the DIRECTORS, OFFICERS or COMPANY.

     (G)  Bankruptcy or Insolvency

          Bankruptcy or insolvency of the COMPANY shall not relieve the
          INSURER of any of its obligations hereunder.

          In the event of bankruptcy or insolvency of the COMPANY,
          subject to all the terms of this POLICY, the INSURER shall
          pay on behalf of the DIRECTORS and OFFICERS under Insuring
          Agreement I(A)(1) (in excess of the UNDERLYING LIMITS, if
          any, applicable to Insuring Agreement I(A)(1) for ULTIMATE
          NET LOSS they shall become legally obligated to pay which
          would have been indemnified by the COMPANY and reimbursable
          by the INSURER under Insuring Agreement I(A)(2) but for such
          bankruptcy or insolvency; provided, however, that the INSURER
          shall be subrogated, to the extent of any payment, to the
          rights of the DIRECTORS and OFFICERS to receive
          indemnification from the COMPANY but only up to the amount of
          the UNDERLYING LIMITS applicable to Insuring Agreement
          I(A)(2) less the amount of the UNDERLYING LIMITS, if any,
          applicable to Insuring Agreement I(A)(1).

     (H)  Uncollectibility of Underlying Insurance

          Notwithstanding any of the terms of this POLICY which might
          be construed otherwise, if this POLICY is written as excess
          over any Underlying Insurance, it shall drop down only in the
          event of reduction or exhaustion of any aggregate limits
          contained in such Underlying Insurance and shall not drop
          down for any other reason including, but not limited to,
          uncollectibility (in whole or in part) because of the
          financial impairment or insolvency of an underlying insurer. 
          The risk of uncollectibility of such Underlying Insurance (in
          whole or in part) whether because of financial impairment or
          insolvency of an underlying insurer or for any other reason,
          is expressly retained by the DIRECTORS, OFFICERS and the
          COMPANY and is not in any way or under any circumstances
          insured or assumed by the INSURER.

     (I)  Maintenance of UNDERLYING LIMITS

          If this POLICY is written as Excess Insurance, it is a
          condition of this POLICY that any UNDERLYING LIMITS stated in
          Item 6 of the Declarations shall be maintained in full force
          and effect, except for reduction or exhaustion of any
          underlying aggregate limits of liability, during the currency
          of this POLICY.  Failure of the COMPANY to comply with the
          foregoing shall not invalidate this POLICY but in the event
          of such failure, without the agreement of the INSURER, the
          INSURER shall only be liable to the same extent as it would
          have been had the COMPANY complied with this Condition.

     (J)  Changes and Assignment

          The terms of this POLICY shall not be waived or changed, nor
          shall an assignment of interest be binding, except by an
          endorsement to this POLICY issued by the INSURER.

     (K)  Outside NOT-FOR-PROFIT ORGANIZATION

          If any DIRECTOR or OFFICER is serving or has served at the
          specific request of the COMPANY as a DIRECTOR or OFFICER of
          an outside NOT-FOR-PROFIT ORGANIZATION, the coverage afforded
          by this POLICY:

          (1)  shall be specifically excess of any other indemnity or
               insurance available to such DIRECTOR or OFFICER by
               reason of such service; and

          (2)  shall not be construed to extend to the outside NOT-
               FOR-PROFIT ORGANIZATION in which the DIRECTOR or
               OFFICER is serving or has served, nor to any other
               director, officer or employee of such outside NOT-FOR-
               PROFIT ORGANIZATION.

     (L)  DISCOVERY PERIOD

          (1)  In the event of cancellation or nonrenewal of this
               POLICY by the INSURER, the COMPANY shall have the
               right, upon execution of a warranty that all known
               CLAIMS and facts or circumstances likely to give rise
               to a CLAIM have been reported to the INSURER and
               payment of an additional premium to be determined by
               the INSURER which shall not exceed two hundred percent
               (200%) of the Policy Premium stated in Item 4 of the
               Declarations, to an extension of the coverage afforded
               by this POLICY with respect to any CLAIM first made
               against any DIRECTOR or OFFICER during the period of
               twelve (12) months after the effective date of such
               cancellation or nonrenewal, but only with respect to
               any WRONGFUL ACT committed during the COVERAGE PERIOD. 
               This right of extension shall terminate unless written
               notice of such election is received by the INSURER
               within thirty (30) days after the effective date of
               cancellation or nonrenewal.

               The offer by the INSURER of renewal on terms,
               conditions or premiums different from those in effect
               during the POLICY PERIOD shall not constitute
               cancellation or refusal to renew this POLICY.

          (2)  In the event of cancellation or nonrenewal of this
               POLICY by the COMPANY, the COMPANY shall have the right
               upon payment of an additional premium, which shall not
               exceed one hundred percent (100%) of the Policy Premium
               stated in Item 4 of the Declarations, to an extension
               of coverage afforded by this POLICY with respect to any
               CLAIM first made against any DIRECTOR or OFFICER during
               the period of twelve (12) months after the effective
               date of such cancellation or nonrenewal, but only with
               respect to any WRONGFUL ACT during the COVERAGE PERIOD. 
               This right of extension shall terminate unless written
               notice of such election is received by the INSURER
               within thirty (30) days after the effective date of
               cancellation or nonrenewal.

          (3)  In the event of renewal on terms and conditions
               different from those in effect during the POLICY
               PERIOD, the COMPANY shall have the right, upon
               execution of a warranty that all known CLAIMS and facts
               or circumstances likely to give rise to a CLAIM have
               been reported to the INSURER and payment of an
               additional premium to be determined by the INSURER
               which shall not exceed two hundred (200) percent of the
               Policy Premium stated in Item 4 of the Declarations, to
               an extension of the original terms and conditions with
               respect to any CLAIM first made against any DIRECTOR or
               OFFICER during the period of twelve (12) months after
               the effective date of renewal, but only with respect to
               any WRONGFUL ACT committed during the COVERAGE PERIOD
               and not covered by the renewal terms and conditions. 
               This right of extension shall terminate unless written
               notice of such election is received by the INSURER
               within thirty (30) days after the effective date of
               renewal.

     (M)  Cancellation

          This POLICY may be cancelled:

          (1)  at any time by the COMPANY by mailing written notice to
               the INSURER stating when thereafter cancellation shall
               be effective; or

          (2)  at any time by the INSURER by mailing written notice to
               the COMPANY stating when, not less than ninety (90)
               days from the date such notice was mailed, cancellation
               shall be effective, except in the event of cancellation
               for nonpayment of premiums, such cancellation shall be
               effective ten (10) days after the date notice thereof
               is mailed.

          The proof of mailing of notice to the address of the COMPANY
          stated in Item 7 of the Declarations or the address of the
          INSURER stated in Item 8 of the Declarations shall be
          sufficient proof of notice and the insurance under this
          POLICY shall end on the effective date and hour of
          cancellation stated in the notice.  Delivery of such notice
          either by the COMPANY or by the INSURER shall be equivalent
          to mailing.

          With respect to all cancellations, the premium earned and
          retained by the INSURER shall be the sum of (a) the Minimum
          Premium stated in Item 4B of the Declarations plus (b) the
          pro-rata proportion, for the period this POLICY has been in
          force, of the difference between (i) the Policy Premium
          stated in Item 4A of the  Declarations and (ii) the Minimum
          Premium stated in Item 4B of the Declarations.

          The offer by the INSURER of renewal on terms, conditions or
          premiums different from those in effect during the POLICY
          PERIOD shall not constitute cancellation or refusal to renew
          this POLICY.

     (N)  Currency

          All amounts stated herein are expressed in United States
          Dollars and all amounts payable hereunder are payable in
          United States Dollars.

     (O)  Sole Agent

          The COMPANY first named in Item 1 of the Declarations shall
          be deemed the sole agent of each DIRECTOR and OFFICER for the
          purpose of requesting any endorsement to this POLICY, making
          premium payments and adjustments, receipting for payments of
          INDEMNITY and receiving notifications, including notice of
          cancellation from the INSURER.

     (P)  Acts, Omissions or Warranties

          The acts, omissions or warranties of any DIRECTOR or OFFICER
          shall not be imputed to any other DIRECTOR or OFFICER with
          respect to the coverages applicable under this POLICY.

     (Q)  Dispute Resolution and Service of Suit

          Any controversy or dispute arising out of or relating to this
          POLICY, or the breach, termination or validity thereof, shall
          be resolved in accordance with the procedures specified in
          this Section IV (Q), which shall be the sole and exclusive
          procedures for the resolution of any such controversy or
          dispute.

          (1)  Negotiation.  The COMPANY and the INSURER shall attempt
               in good faith to resolve any controversy or dispute
               arising out of or relating to this POLICY promptly by
               negotiations between executives who have authority to
               settle the controversy.  Any party may give the other
               party written notice of any dispute not resolved in the
               normal course of business.  Within fifteen (15) days
               the receiving party shall submit to the other a written
               response.  The notice and the response shall include
               (a) a statement of each party's position and a summary
               of arguments supporting that position, and (b) the name
               and title of the executive who will represent that
               party and of any other person who will accompany the
               executive.  Within thirty (30) days after delivery of
               the disputing party's notice, the executives of both
               parties shall meet at a mutually acceptable time and
               place, and thereafter as often as they reasonably deem
               necessary, to attempt to resolve the dispute.  All
               reasonable requests for information made by one party
               to the other will be honored.  If the matter has not
               been resolved within sixty (60) days of the disputing
               party's notice, or if the parties fail to meet within
               thirty (30) days, either party may initiate mediation
               of the controversy or claim as provided hereinafter.

               All negotiations pursuant to this clause will be kept
               confidential and shall be treated as compromise and
               settlement negotiations for purposes of the Federal
               Rules of Evidence and state rules of evidence.

          (2)  Mediation.  If the dispute has not been resolved by
               negotiation as provided herein, the parties shall
               endeavor to settle the dispute by mediation under the
               then current CPR Institute Model Procedure for
               Mediation of Business Disputes.  The neutral third
               party will be selected from the CPR Institute Panels of
               Neutrals, with the assistance of the CPR Institute.

          (3)  Arbitration.  Any controversy or dispute arising out of
               or relating to this POLICY, or the breach, termination
               or validity thereof, which has not been resolved by
               non-binding means as provided herein within ninety (90)
               days of the initiation of such procedure, shall be
               settled by binding arbitration in accordance with the
               CPR Institute Rules for Non-Administered Arbitration of
               Business Disputes (the "CPR Rules") by three (3)
               independent and impartial arbitrators.  The COMPANY and
               the INSURER each shall appoint one arbitrator; the
               third arbitrator, who shall serve as the chair of the
               arbitration panel, shall be appointed in accordance
               with CPR Rules.  If either the COMPANY or the INSURER
               has requested the other to participate in a non-binding
               procedure and the other has failed to participate, the
               requesting party may initiate arbitration before
               expiration of the above period.  The arbitration shall
               be governed by the United States Arbitration Act, 9
               U.S.C. Subsection 1 et seq., and judgment upon the
               award rendered by the arbitrators may be entered by any
               court having jurisdiction thereof.  The terms of this
               POLICY are to be construed in an evenhanded fashion as
               between the COMPANY and the INSURER in accordance with
               the laws of the jurisdiction in which the situation
               forming the basis for the controversy arose.  Where the
               language of this POLICY is deemed to be ambiguous or
               otherwise unclear, the issue shall be resolved in a
               manner most consistent with the relevant terms of this
               POLICY without regard to authorship of the language and
               without any presumption or arbitrary interpretation or
               construction in favor of either the COMPANY or the
               INSURER.  In reaching any decision the arbitrators
               shall give due consideration for the customs and usages
               of the insurance industry.  The arbitrators are not
               empowered to award damages in excess of compensatory
               damages and each party hereby irrevocably waives any
               such damages.

               In the event of a judgment being entered against the
               INSURER on an arbitration award, the INSURER at the
               request of the COMPANY, shall submit to the
               jurisdiction of any court of competent jurisdiction
               within the United States of America, and shall comply
               with all requirements necessary to give such court
               jurisdiction and all matters relating to such judgment
               and its enforcement shall be determined in accordance
               with the law and practice of such court.

          (4)  Service of Suit.  Service of process in such suit or
               any other suit instituted against the INSURER under
               this POLICY may be made upon Messrs. LeBoeuf, Lamb,
               Greene, & MacRae, L.L.P., 125 West 55th Street, New
               York, New York  10019.  The INSURER will abide by the
               final decision of the court in such suit or of any
               appellate court in the event of any appeal.  Messrs.
               LeBoeuf, Lamb, Greene & MacRae, L.L.P. are authorized
               and directed to accept service of process on behalf of
               the INSURER in any such suit and, upon the COMPANY's
               request, to give a written undertaking to the COMPANY's
               that they will enter a general appearance upon the
               INSURER's behalf in the event such suit is instituted. 
               Nothing in this clause constitutes or should be
               understood to constitute a waiver of the INSURER's
               right to commence an action in any court of competent
               jurisdiction in the United States, to remove an action
               to a United States District Court, or to seek to
               transfer a case to another court as permitted by the
               laws of the United States or of any state in the United
               States.

     (R)  Severability

          In the event that any provision of this POLICY shall be
          declared or deemed to be invalid or unenforceable under any
          applicable law, such invalidity or unenforceability shall not
          affect the validity or enforceability of the remaining
          portion of this POLICY.

     (S)  Non-assessability

          The COMPANY (and, accordingly, any DIRECTOR or OFFICER for
          whom the COMPANY acts as agent) shall only be liable under
          this POLICY for the premium stated in Item 4 of the
          Declarations.  Neither the COMPANY nor any DIRECTOR or
          OFFICER for whom the COMPANY acts as agent shall be subject
          to any contingent liability or be required to pay any dues or
          assessments in addition to the premium described above.

IN WITNESS WHEREOF, Associated Electric & Gas Insurance Services Limited
has caused this POLICY to be signed by its Chairman at Hamilton, Bermuda. 
However, this POLICY shall not be binding upon the INSURER unless
countersigned on the Declaration Page by a duly authorized representative
of the INSURER.



     /s/ Bernard J. Kennedy             /s/  J.E. Bachman
     Bernard J. Kennedy, Chairman       J.E. Bachman, President
                                   and Chief Executive Officer
      ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED

Endorsement No. 2   Effective Date of Endorsement June 1, 1996

Attached to and forming part of POLICY No. D0392B1A96

COMPANY IPALCO Enterprises, Inc.

It is understood and agreed that this POLICY is hereby amended as
indicated.  All other terms and conditions of this POLICY remain
unchanged.



      OUTSIDE POSITION COVERAGE - FOR-PROFIT ORGANIZATIONS

I.   Definition (E) DIRECTOR and OFFICER is amended to include the
     following:

     (4)  (a)  any director, officer or trustee of the COMPANY who is
               named in attachment OPC-FP1 and who is serving at the
               specific written request of the COMPANY in the position
               of a director, officer or trustee of the outside FOR-
               PROFIT ORGANIZATION, which position and FOR-PROFIT
               ORGANIZATION are named in attachment OPC-FP1, while
               such director, officer or trustee is acting in such
               capacity; and

          (b)  any present or former director, officer or trustee of
               the COMPANY who has served at the specific written
               request of the COMPANY in the position of a director,
               officer or trustee of an outside FOR-PROFIT
               ORGANIZATION in respect to WRONGFUL ACTS committed
               while such director, officer or trustee was acting in
               such capacity; provided, however, that such director,
               officer or trustee, such outside FOR-PROFIT
               ORGANIZATION and such position were named in an
               endorsement (similar to this Endorsement) to the
               Directors' and Officers' Policy of the INSURER in force
               at the time at which such director, officer or trustee
               was acting in such capacity.

II.  The following Definition is added to the POLICY:

     (R)  FOR-PROFIT ORGANIZATION:  The term "FOR-PROFIT ORGANIZATION"
          shall mean an organization other than a NOT-FOR-PROFIT
          ORGANIZATION.

III. Exclusion (L) is hereby deleted in its entirety and replaced with
     the following:

     (L)  where such CLAIM(S) arises out of such DIRECTOR'S or
          OFFICER'S activities as a director, officer or trustee of any
          entity other than:

          (1)  the COMPANY; or

          (2)  any outside NOT-FOR-PROFIT ORGANIZATION as provided in
               Section II(E)(2); or

          (3)  any outside FOR-PROFIT ORGANIZATION as provided in an
               OUTSIDE POSITION COVERAGE - FOR-PROFIT ORGANIZATIONS
               Endorsement.

      OUTSIDE POSITION COVERAGE - FOR-PROFIT ORGANIZATIONS
           INCLUDING MANAGEMENT OR OPERATING COMMITTEE

IV.  Notwithstanding any other provision of the POLICY to the contrary,
     the insurance provided by this Endorsement is specifically in
     excess of and shall not contribute with any indemnification or
     insurance provided by an outside FOR-PROFIT ORGANIZATION, to any
     director, officer, trustee or employee of the COMPANY.

     Under no circumstances shall the insurance provided by this
     Endorsement apply to:

     (1)  any director, officer or trustee of the outside FOR-PROFIT
          ORGANIZATION who is or was not a director, officer, trustee
          or employee of the COMPANY and who is not named in attachment
          OPC-FPM1; or 

     (2)  the outside FOR-PROFIT ORGANIZATION

V.   The Limits of Liability stated in Item 5 of the Declarations and
     the UNDERLYING LIMITS stated in Item 6 of the Declarations shall
     apply unless a specific Limit of Liability or UNDERLYING LIMIT is
     stated below:

Item 5:   Limits of Liablity:
          A.   $                   Each WRONGFUL ACT
          B.   $                   Aggregate Limit of Liability
                                   for the POLICY PERIOD

Item 6:   UNDERLYING LIMITS:
          This POLICY is written as          insurance

          A.   If this POLICY is written as Primary Insurance with
               respect to Insuring Agreement I(A)(2) only:
               (1)  $              Each WRONGFUL ACT not arising
                                   from NUCLEAR OPERATIONS
               (2)  $              Each WRONGFUL ACT arising from
                                   NUCLEAR OPERATIONS

          B.   If this POLICY is written as Excess Insurance:
               (1)  (a)  $         Each WRONGFUL ACT
                    (b)  $         In the Aggregate for all
                                   WRONGFUL ACTS
               (2)       $         Each WRONGFUL ACT not covered
                                   under Underlying Insurance
               (3)  In the Event of Exhaustion of the UNDERLYING
                    LIMIT stated in Item 6(B)(1)(b) above with
                    respect to Insuring Agreement I(A)(2) only:
                    (a)  $         Each WRONGFUL ACT not arising
                                   from NUCLEAR OPERATIONS
                    (b)  $         Each WRONGFUL ACT arising from
                                   NUCLEAR OPERATIONS

          The Limit of Liability stated in this section is part of and
          not in addition to the Limits of Liability stated in Item 5
          of the Declarations.



/s/ Sandra A. Johnson
Signature of Authorized Representative

      ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED

Attachment OPC-FPM1 to Endorsement No. 2     Effective Date of Endorsement
                                                June 1, 1996

Attached to and forming part of POLICY No. D0392B1A96

COMPANY IPALCO Enterprises, Inc.

Name, FOR-PROFIT ORGANIZATION and position of each director, officer,
trustee or employee of the COMPANY covered under Endorsement No.


NAME           FOR-PROFIT ORGANIZATION       POSITION

J.R. Hodowal   Tecumseh Coal Corporation     Director
R.L. Humke     Tecumseh Coal Corporation    Director