Exhibit 10.1


 


EXECUTION COPY


 


 


$350,000,000


 


 


PSI ENERGY, INC.


 


 


6.12% Debentures due 2035


 


 


UNDERWRITING AGREEMENT


 


 


Dated: October 18, 2005


 





















 


Barclays Capital Inc.


Goldman, Sachs & Co.


BNP Paribas Securities Corp.


Harris Nesbitt Corp.


 


c/o
Barclays Capital Inc.


200
Park Avenue


New
York, NY 10166


 


Goldman, Sachs & Co.


85
Broad Street


New
York, NY 10004


 


Dear Sirs:


 


PSI Energy, Inc., an
Indiana corporation (hereinafter called the “Company”), proposes to issue and
sell $350,000,000 aggregate principal amount of its 6.12% Debentures due 2035
(hereinafter called the “Debentures”), to be issued pursuant to the provisions
of the Indenture, dated as of November 15, 1996, between the Company and The
Bank of New York Trust Company, N.A. (successor trustee to Fifth Third Bank),
as Trustee (hereinafter called the “Indenture”), as supplemented by the Ninth
Supplemental Indenture to be dated as of October 21, 2005 between the
Company and the Trustee (hereinafter called the “Supplemental Indenture”).


 


The Company has filed with the Securities and Exchange Commission
(hereinafter called the “Commission”) a registration statement (File No. 333-112552)
including a prospectus relating to various securities of the Company, including
debentures, and has filed with the Commission (or will promptly after the sale
so file) a prospectus supplement specifically relating to the Debentures
pursuant to Rule 424 under the Securities Act of 1933, as amended
(hereinafter called the “Securities Act”). 
The term “Registration Statement” means the registration statement as
amended to the date of this Agreement. 
The term “Basic Prospectus” means the prospectus included in the
Registration Statement.  The term “Prospectus”
means the Basic Prospectus together with the prospectus supplement specifically
relating to the Debentures, as filed with the Commission pursuant to Rule 424.  The term “preliminary prospectus” means a
preliminary prospectus supplement specifically relating to the Debentures
together with the Basic Prospectus.  As
used herein, the terms “Registration Statement”, “Basic Prospectus”, “Prospectus”
and “preliminary prospectus” shall include in each case the material, if any,
incorporated by reference therein.


 


I.


 


The
Company hereby represents and warrants to each Underwriter
that:


 


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(a)           (i) Each
prospectus and prospectus supplement filed as part of the registration
statement as originally filed or as part of any amendment thereto or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the requirements of the Securities Act and the
applicable rules and regulations thereunder, (ii) each document
incorporated by reference in the Registration Statement and the Prospectus
complied when filed (and each document subsequently filed by the Company
pursuant to the Exchange Act and deemed incorporated by reference into the
Registration Statement and the Prospectus will, at the time of filing, comply)
in all material respects with the provisions of the Securities Exchange Act of
1934, as amended (hereinafter called the “Exchange Act”), and the applicable rules and
regulations of the Commission thereunder, and (iii) the Registration
Statement and the Prospectus, as amended or supplemented, will comply in all
material respects with the Securities Act and the applicable rules and
regulations thereunder and, as of the date hereof does not, and as of the
Closing Date will not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading; except that these representations and
warranties do not apply to statements or omissions in the Registration
Statement or the Prospectus, or any preliminary prospectus based upon
information furnished to the Company in writing by any Underwriter expressly
for use therein.


 


(b)           (i) The
execution and delivery by the Company of this Agreement, the issuance of the
Debentures in accordance with the Indenture and the Supplemental Indenture, the
sale of the Debentures in accordance with this Agreement, the performance by
the Company of its obligations under this Agreement and the consummation of the
transactions contemplated herein will not result in any violation by the
Company of applicable law or any terms or provisions of its articles of
consolidation or by-laws or any indenture, mortgage or other agreement or
instrument by which the Company or its subsidiary is bound that is material to
the Company and its subsidiary, taken as a whole, or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over the
Company or its subsidiary and (ii) the consolidated historical financial
statements of the Company, together with related schedules, included or
incorporated by reference in the Prospectus, present fairly in all material
respects the consolidated financial position of the Company and its subsidiary
at the respective dates indicated and the results of their operations and their
cash flows for the respective periods indicated in accordance with generally
accepted accounting principles consistently applied throughout such periods.


 


(c)           The Company (i) is
a corporation duly incorporated and validly existing in good standing under the
laws of the State of Indiana, (ii) except for certain operating permits
for which the Company has made application but which have either been denied or
have not yet been granted in the form requested, except for certain notices of
violations and except as may be limited by state and federal environmental laws
and regulations has due corporate and governmental authority to carry on the
public utility businesses in which it is engaged and to own and operate the
properties in use in such businesses and (iii) is duly qualified to do


 


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business in each jurisdiction where the failure to
be so qualified would adversely affect the ability of the Company to perform
its obligations under this Agreement, the Indenture and the Debentures.


 


(d)           The Company’s sole
subsidiary (i) is a corporation duly incorporated and validly existing in
good standing under the laws of its state of incorporation, (ii) except
for certain operating permits for which the Company has made application but
which have either been denied or have not yet been granted in the form
requested, except for certain notices of violations and except as may be
limited by state and federal environmental laws and regulations has due
corporate and governmental authority to carry on the business in which it is engaged
and to own and operate the properties in use of such business and (iii) is
duly qualified to do business in each jurisdiction where the failure to be so
qualified would adversely affect the ability of the Company to perform its
obligations under this Agreement, the Indenture and the Debentures.


 


(e)           The Debentures
have been duly authorized and, on the Closing Date, will have been validly
executed and delivered by the Company. 
When the Debentures have been issued, executed and authenticated in
accordance with the provisions of the Indenture and the Supplemental Indenture and
delivered to and paid for by the Underwriters in accordance with the terms of
this Agreement, the holders thereof will be entitled to the benefits of the
Indenture and the Supplemental Indenture pursuant to which such Debentures are
to be issued, and the Debentures will be valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms except
as (i) the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors’ rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.


 


(f)            The Indenture
has been duly authorized, executed and delivered by the Company and the
Supplemental Indenture has been duly authorized by the Company and, on or prior
to the Closing Date, will have been validly executed and delivered by the
Company.  When the Supplemental Indenture
has been duly executed and delivered by the Company (assuming the due
authorization, execution and delivery of the Supplemental Indenture by the
Trustee), each of the Indenture and the Supplemental Indenture will be a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors’ rights
generally, and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability; and the Indenture has been duly qualified under the Trust
Indenture Act of 1939.


 


(g)           This Agreement
has been duly authorized, executed and delivered by the Company.


 


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(h)           There has not
occurred any material adverse change (not in the ordinary course of business)
in the condition of the Company and its subsidiary, taken as a whole, from that
set forth in or contemplated by the Prospectus.


 


(i)            The Company is
not, and after giving effect to the offering and sale of the Debentures and the
application of the proceeds thereof as described in the Prospectus, will not be
an “investment company” as such term is defined in the Investment Company Act
of 1940, as amended.


 


(j)            The Company
maintains a system of internal control over financial reporting (as such term
is defined in Rule 13a-15(f) of the Exchange Act) that has been
designed by the Company’s principal executive officer and principal financial
officer, or under their supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles.  The Company’s
management assessed the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2004.  In making this assessment, management used
the criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. 
Based on its assessment and those criteria, management believed that the
internal control over financial reporting maintained by the Company, as of December 31,
2004, was effective.  The Company is not
aware of any material weaknesses in its internal control over financial
reporting.


 


(i)            The Company
maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of
the Exchange Act) that have been designed to ensure that material information
relating to the Company and its subsidiaries is made known to the Company’s
principal executive officer and principal financial officer by others within
those entities; such disclosure controls and procedures were effective, as of June 30,
2005, in providing reasonable assurance that information requiring disclosure
is recorded, processed, summarized, and reported within the timeframe specified
by the Commission’s rules and forms.


 


II.


 


The Company hereby agrees to
sell to each of the Underwriters named below, and the Underwriters, upon the
basis of the representations and warranties herein contained, but subject to
the conditions hereinafter stated, agree to purchase from the Company, each
severally and not jointly, the principal amount of Debentures set forth opposite
their names at a price of 99.072% of their principal amount - the purchase
price - and accrued interest from October 21, 2005, to the date of payment
and delivery:  


 


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  Name

  	
   

  	
  Principal Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Barclays Capital Inc.

  	
   

  	
  $

  	
  122,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Goldman, Sachs & Co.

  	
   

  	
  $

  	
  122,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BNP Paribas Securities Corp.

  	
   

  	
  $

  	
  52,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Harris Nesbitt Corp.

  	
   

  	
  $

  	
  52,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  350,000,000

  	
   

  






 


III.


 


The Company is advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Debentures as soon after the execution of this Agreement as in
your judgment is advisable. The Company is further advised by you that the
Debentures are to be offered to the public at 99.947% of their principal amount
- the public offering price - and accrued interest, and to certain dealers at a
price which represents a concession of up to 0.50% of their principal amount
under the public offering price, and that any Underwriter may allow, and such
dealers may reallow, a concession, not in excess of 0.25% of their principal
amount, to certain other dealers.


 


The Company acknowledges and
agrees that the Underwriters are acting solely in the capacity of an arm’s
length contractual counterparty to the Company with respect to the offering of
Debentures contemplated hereby (including in connection with determining the
terms of the offering) and not as a financial advisor or a fiduciary to, or an
agent of, the Company or any other person.


 


IV.


 


Payment for the Debentures
shall be made by transfer of immediately available funds to an account
identified by us in writing not less than two full business days prior to the
date of payment, against delivery to you for the respective accounts of the
several Underwriters of the Debentures through The Depository Trust Company at
10:00 A.M., New York time, on October 21, 2005 or at such other time
on the same or such other date, not later than October 28, 2005 as may be
designated by you.  The time and date of
such payment and delivery are herein referred to as the “Closing Date”.  All other documents referred to herein that
are to be delivered at the Closing Date shall be delivered at that time at the
office of Davis Polk & Wardwell, 450 Lexington Avenue, New York, NY
10017.


 


V.


 


The obligations of the
Company and the several obligations of the Underwriters hereunder are subject
to the conditions that:


 


(a)           The
Registration Statement shall have become effective under the Securities Act of
1933.


 


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(b)           No
stop order suspending the effectiveness of the Registration Statement shall be
in effect and no proceedings for such purpose shall be pending before, or
threatened by, the Commission.  The
representations and warranties of the Company contained in Article I
hereof shall be true and correct on the date hereof and on and as of the
Closing Date.


 


(c)           An
appropriate order or orders of the Indiana Utility Regulatory Commission
necessary to permit the issue and sale of the Debentures as contemplated hereby
and containing no material provision or condition which is unacceptable to the
Company or the Underwriters shall be in effect and no proceedings to suspend
the effectiveness of such order or orders shall be pending or threatened.


 


The several obligations of the Underwriters hereunder are subject to the
following further conditions:


 


(d)           There
shall have been no material adverse change (not in the ordinary course of
business) in the condition of the Company and its subsidiary, taken as a whole,
from that set forth in or contemplated by the Registration Statement and the
Prospectus; and you shall have received on the Closing Date a certificate,
dated the Closing Date and signed by an executive officer of the Company, to
the foregoing effect.


 


(e)           Subsequent
to the execution and delivery of this Agreement and prior to the Closing Date,
there shall not have occurred any downgrading of, nor shall any notice have
been given of any review with a negative implication with respect to, the
rating accorded any of the Company’s securities by any of Standard &
Poor’s Ratings Service, Moody’s Investors Service, Inc. or Fitch IBCA (or
any of their successors).


 


(f)            You shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in (b) and (c) of the first
paragraph of this Article V 
(provided that such certificate may omit any reference as to the extent
to which provisions or conditions in the orders referred to in (c) above
are acceptable to the Underwriters).  The
officer making such certificate may rely upon the best of his knowledge as to
proceedings threatened.


 


(g)           You
shall have received on the
Closing Date the favorable opinion or opinions of Thompson Hine LLP, counsel
for the Company, dated the Closing Date, to the effect that:


 


(i)            each
of the Indenture and the Supplemental Indenture has been duly authorized,
executed and delivered by the Company and is valid and binding instrument
enforceable in accordance with its terms, except as (A) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally and (B) rights of acceleration
and the availability of equitable remedies may be 


 


7





















 


limited by equitable principles of general applicability; and the
Indenture has been duly qualified under the Trust Indenture Act of 1939;


 


(ii)           the
Debentures, when duly executed by the Company, authenticated by the Trustee and
delivered to and paid for by the Underwriters pursuant to this Agreement, will
be valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as (A) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally and (B) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability; and the Debentures shall be entitled to
the benefits of the Indenture and the Supplemental Indenture;


 


(iii)          the statements in the Prospectus under the
captions “Description of the Unsecured Debt Securities” and “Certain Terms of
the Debentures,” other than the statements under the captions “Description of
the Unsecured Debt Securities – Global Securities” and “Certain Terms of the
Debentures – Global Securities,”  insofar
as such statements purport to summarize certain provisions of the documents
referred to therein, fairly summarize such provisions in all material respects;


 


(iv)          this
Agreement has been duly executed and delivered by the Company;


 


(v)           no
consent, approval, authorization, filing with or order of any court or
governmental agency or body is required to be made or obtained by the Company
pursuant to the laws, rules or regulations of the State of Indiana or of
the United States of America in connection with the performance of their
obligations hereunder or under the Indenture and Supplemental Indenture, except
such as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Debentures by the
Underwriters (about which such counsel need express no opinion) and such other approvals
as have been obtained; and


 


(vi)          such
counsel (A) is of the opinion that the Registration Statement and the
Prospectus and any supplements or amendments
thereto (except for the financial statements, schedules and other financial and
statistical data included or incorporated by reference therein or excluded
therefrom or the exhibits to the Registration Statement as to which such
counsel need not express an opinion) comply as to form in all material respects
with the requirements of the Securities Act and the rules and regulations
of the Commission thereunder and (B) except for the financial statements, schedules and other
financial and statistical data included or incorporated by reference therein or
excluded therefrom or the exhibits to the Registration Statement as to
which such counsel need not express a belief, has no reason to believe that the
Registration Statement as of its effective date and at the date of this
Agreement contained an untrue statement of a


 


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material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus (as amended or supplemented if applicable) as of its date and on the
Closing Date contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.


 


In
regard to clause (vi) above, such counsel may state that their opinion and
belief is based upon their participation in the preparation of the Prospectus
and any supplements and amendments thereto (other than documents incorporated
by reference) and upon their review and discussion of the contents thereof and
of the Registration Statement (in each case, including documents incorporated
by reference), but is without independent check or verification except as
specified.  In giving such opinion, Thompson
Hine LLP may assume matters governed by New York law and may rely, as to
matters of Indiana law, on the opinion of J. William DuMond, Esq., counsel
to the Company.


 


(h)           You
shall have received on the Closing Date the favorable opinion of J. William
DuMond, Esq. counsel to the Company, dated the Closing Date, to the effect
that:


 


(i)            the Company is a
corporation duly incorporated and existing in good standing under the laws of
the State of Indiana, and the Company has due corporate and governmental
authority to carry on the public utility businesses in which it is engaged and,
except where the failure would not, singularly or in the aggregate, reasonably
be expected to have a material adverse effect on the consolidated financial
position, stockholders’ equity, results of operations, business or prospects of
the Company and its subsidiary, taken as a whole, to own and operate the
properties in use in such businesses;


 


(ii)           the Company’s sole
subsidiary is a corporation duly incorporated and existing in good standing
under the laws of its state of incorporation and has due corporate and
governmental authority to carry on the business in which it is engaged, except
where the failure would not, singularly or in the aggregate, reasonably be
expected to have a material adverse effect on the consolidated financial
position, stockholders’ equity, results of operations, business or prospects of
the Company and its subsidiary, taken as a whole, and to own and operate the
properties in use in such business;


 


(iii)          the Company and
its subsidiary are each duly qualified to transact business and are in good
standing in the jurisdictions in which the conduct of their respective
businesses or the ownership or leasing of their respective properties requires
such qualification;


 


(iv)          each of the
Indenture and the Supplemental Indenture has been duly authorized, executed and
delivered by the Company and is valid and binding instrument enforceable in
accordance with its terms, except as (A) the enforceability thereof may be
limited by bankruptcy, insolvency or


 


9





















 


similar laws affecting the enforcement of creditors’
rights generally and (B) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability; and the Indenture has been duly qualified under the Trust
Indenture Act of 1939;


 


(v)           the Debentures
have been duly authorized and executed by the Company and, when duly
authenticated by the Trustee and delivered to and paid for by the Underwriters
pursuant to this Agreement, will be valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, except
as (A) the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting the enforcement of creditors’ rights generally and (B) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability, and the Debentures shall be
entitled to the benefits of the Indenture and the Supplemental Indenture;


 


(vi)          an appropriate
order or orders of the Indiana Utility Regulatory Commission is in effect on
the Closing Date and no further approval, authorization, consent or order of
any other commission or other governmental authority (other than under state
securities or Blue Sky laws, as to which such counsel are not called upon to
express an opinion) is required for the issuance and sale of the Debentures;


 


(vii)         such counsel
does not know of any contract required to be filed as an exhibit to the
Registration Statement, or incorporated therein by reference, which has not
been so filed or incorporated by reference;


 


(viii)        this Agreement
has been duly authorized, executed and delivered by the Company; and


 


(ix)          each document
incorporated by reference in the Prospectus (except for the financial
statements and schedules and other financial and statistical data therein as to
which such counsel need not express an opinion) complied when filed with the
Commission as to form in all material respects with the requirements of the
Exchange Act, together with the applicable rules and regulations of the
Commission thereunder.


 


In regard to clauses (iv), (v) and (viii) above,
such counsel may state that no opinion is expressed with respect to the effect
of New York law.


 


(i)            You shall have received on the Closing Date
an opinion of Davis Polk & Wardwell, counsel for the Underwriters,
dated the Closing Date, covering the matters in (i), (ii), (iii), (iv) and
(vi) of (g) above, provided that with respect to (vi) of (g) above,
such counsel may state that their opinion and belief is based upon their
participation in the preparation of the Registration Statement and the Prospectus
and any amendments and supplements thereto (other than documents incorporated
by reference), and upon their review and discussion of the contents


 


10





















 


thereof
(including documents incorporated by reference), but is without independent
check or verification except as specified. 
In giving said opinion, Davis Polk & Wardwell may rely, as to
matters of Indiana law, on the opinion of J. William DuMond, Esq., counsel
to the Company.


 


(j)            You
shall have received on the
Closing Date a letter, dated the Closing Date, in form and substance
satisfactory to you, from Deloitte & Touche LLP, independent
accountants, containing statements and information of the type ordinarily
included in accountants’ “comfort letters” to underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference into the Registration Statement and the Prospectus.


 


VI.


 


In further consideration of
the agreements of the Underwriters herein contained the Company covenants as
follows:


 


(a)           To
furnish without charge to you two signed copies of the Registration Statement
(including exhibits and documents incorporated by reference), and to each other
Underwriter a copy of the Registration Statement (without exhibits but
including documents incorporated by reference) and, during the period mentioned
in paragraph (c) below, as many copies of the Prospectus and any
amendments and supplements thereto as you may reasonably request.  The terms “supplement” and “amendment” or “amend”
as used in this Agreement shall include or refer to all documents subsequently
filed by the Company with the Commission pursuant to the Exchange Act which are
deemed to be incorporated by reference in the Registration Statement and
Prospectus from the date of filing such documents in accordance with Form S-3.


 


(b)           Before
amending or supplementing the Registration Statement or the Prospectus, to
furnish to each of you a copy of each such proposed amendment or supplement.


 


(c)           If,
during such period after the first date of the public offering of the
Debentures as in the opinion of your counsel a prospectus covering the
Debentures is required by law to be delivered in connection with sales by an
Underwriter or dealer, any event shall occur as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered to
a purchaser, not misleading, or if it shall be necessary to amend or supplement
the Prospectus to comply with law, forthwith to prepare and furnish, at its own
expense, to the Underwriters and to the dealers (whose names and addresses you
will furnish to the Company) to which Debentures may have been sold by you on
behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus will comply with law.


 


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(d)           To
endeavor to qualify the Debentures for offer and sale under the securities or
Blue Sky laws of such jurisdictions as you shall reasonably request and to pay
all expenses (including fees and disbursements of counsel) in connection with
such qualification and in connection with the determination of the eligibility
of the Debentures for investment under the laws of such jurisdictions as you
may designate.


 


(e)           To
make generally available to the Company’s security holders as soon as
practicable an earnings statement covering the twelve-month period beginning
after the date of this Agreement, which shall satisfy the provisions of Section 11(a) of
the Securities Act (including Rule 158 thereunder).


 


(f)            During
the period beginning on the date of this Agreement and terminating on the
Closing Date not to offer, sell, contract to sell or otherwise dispose of any
debt securities of the Company substantially similar to the Debentures, without
your prior written consent.


 


VII.


 


The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and
all losses, claims, damages and liabilities (including the fees and expenses of
counsel in connection with any governmental or regulatory investigation or
proceeding) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or Prospectus (if used
within the period set forth in paragraph (c) of Article VI hereof and
as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) or any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information furnished in writing to the Company by any Underwriter
expressly for use therein.


 


In case any action shall be
brought against any Underwriter or any person controlling such Underwriter,
based upon the Registration Statement or Prospectus or any amendment or
supplement thereto or any preliminary prospectus and in respect of which
indemnity may be sought against the Company, such Underwriter shall promptly
notify the Company in writing, and the Company, upon the request of such
Underwriter, shall assume the defense thereof on behalf of such Underwriter or
controlling person, including the employment of counsel and payment of all
expenses.  In any such action, any
Underwriter or any such controlling person shall have the right to employ its
own counsel but the fees and expenses of such counsel shall be at the expense
of such Underwriter or such controlling person unless (i) the employment
of such counsel has been specifically authorized in writing by the Company or (ii) the
named parties to any such action (including any impleaded parties) include both
such Underwriter or such controlling person and the Company and such
Underwriter or such controlling person shall have


 


12





















 


been
advised by such counsel that there maybe one or more legal defenses available
to it which are different from or additional to those available to the Company
(it being understood, however, that the Company shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to one firm of local counsel) for all
such Underwriters and controlling persons, which firm shall be designated in writing
by you, and that such fees and expenses shall be reimbursed as they are
incurred).  The Company shall not be
liable for indemnification (or contribution as provided below) with respect to
the settlement of any such action effected without its written consent, but if
settled with the written consent of the Company or if there be a final judgment
for the plaintiff in any such action, the Company agrees to indemnify and hold
harmless any Underwriter and any such controlling person from and against any loss
or liability by reason of such settlement or judgment (or to make contribution
as provided below).


 


Each Underwriter agrees,
severally and not jointly, to indemnify and hold harmless the Company, its
directors, its officers who sign the Registration Statement and any person
controlling the Company to the same extent as the foregoing indemnity from the
Company to each Underwriter, but only with reference to information relating to
such Underwriter furnished in writing by such Underwriter expressly for use in
the Registration Statement, the Prospectus or any preliminary prospectus.  In case any action shall be brought against
the Company, any of its directors or any such officer or controlling person
based on the Registration Statement, the Prospectus or any preliminary
prospectus and in respect of which indemnity may be sought against any
Underwriter, the Underwriter shall have the rights and duties given to the
Company, and the Company, its directors or any such officer or controlling
person shall have the rights and duties given to the Underwriter, by the
preceding paragraph of this Article VII.


 


If the indemnification
provided for in the first paragraph of this Article VII is unavailable to
any Underwriter or other indemnified party in respect of any losses, claims,
damages or liabilities referred to therein, then the Company, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and such
Underwriter on the other from the offering of the Debentures or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of such Underwriter on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations.  The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. 
The relative fault of the Company and of the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.


 


13





















 


If the indemnification
provided for in this Article VII is sought solely by the Company under the
third paragraph hereof and there is no claim for indemnification by any
Underwriter or any person controlling such Underwriter arising out of the same
misstatement or omission and if such indemnification is unavailable to the
Company in respect of any losses, claims, damages or liabilities referred to in
such third paragraph, then each Underwriter, in lieu of indemnifying the
Company, shall contribute to the amount paid or payable by the Company as a
result of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and of
such Underwriter or Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or
liabilities,  as well as any other
relevant equitable considerations.  The
relative fault of the Company on the one hand and of such Underwriter or
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.


 


The Company and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this Article VII were determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the two immediately preceding paragraphs.  The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
such paragraphs shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim.  Notwithstanding the provisions of
this Article VII, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Debentures
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.  The Underwriters’ obligations to contribute
pursuant to this Article VII are several in proportion to their respective
underwriting percentages listed in Article II hereof and not joint.


 


The indemnity and
contribution agreements contained in this Article VII and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter or by or on behalf
of the Company, its directors or officers or any person controlling the Company
and (iii) acceptance of and payment for any of the Debentures.


 


VIII.


 


This Agreement shall be
subject to termination in your absolute discretion, by notice given to the
Company, if (a) prior to the Closing Date (i) trading in securities
on the New York Stock Exchange or the American Stock Exchange shall have been
suspended or materially 


 


14





















 


limited,
(ii) trading in any securities of the Company shall have been suspended on
any national securities exchange in the United States or in any
over-the-counter market in the United States, (iii) a general moratorium
on banking activities in New York shall have been declared by Federal or New
York State authorities, (iv) there shall have occurred any outbreak or
escalation of hostilities or any change in the financial markets or other
calamity or crisis, any of which is material and adverse and (b) in the
case of any of the events specified in clauses (a)(i) through (iv), such
event either singly or together makes it, in your reasonable judgment,
impracticable or inadvisable to market the Debentures.  Any termination of this Agreement pursuant to
this Article VIII shall be without liability on the part of the Company to
the Underwriters, or the Underwriters to the Company.


 


IX.


 


This Agreement shall become
effective upon signature.


 


If any one or more of the
Underwriters shall fail or refuse to purchase Debentures which it or they have
agreed to purchase hereunder, and the aggregate principal amount of Debentures
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase is not more than one-tenth of the aggregate principal amount of
Debentures, the other Underwriters shall be obligated severally in the
proportions which the principal amount of Debentures set forth opposite their
names in Article II bears to the aggregate principal amount of Debentures
so set forth opposite the names of all such non-defaulting Underwriters, or in
such other proportions as you may specify, to purchase the Debentures which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase; provided that in no event shall the principal amount of Debentures
which any Underwriter has agreed to purchase pursuant to Article II hereof
be increased pursuant to this Article IX by an amount in excess of
one-ninth of such principal amount of Debentures without the written consent of
such Underwriter.  If any Underwriter or
Underwriters shall fail or refuse to purchase Debentures and the aggregate
principal amount of Debentures with respect to which such default occurs is more
than one-tenth of the aggregate principal amount of Debentures and arrangements
satisfactory to you and the Company for the purchase of such Debentures are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or of the Company.  In any such case which does not result in
such a termination, either you or the Company shall have the right to postpone
the Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus
or in any other documents or arrangements may be effected.  Any action taken under this paragraph shall
not relieve any defaulting Underwriter from liability in respect of any default
of such Underwriter under this Agreement.


 


If this Agreement shall be
terminated by the Underwriters, or any of them, because of any failure or
refusal on the part of the Company to comply with the terms or to fulfill any
of the conditions of this Agreement or if for any reason the Company shall be
unable to perform its obligations under this Agreement, the Company will
reimburse the Underwriters or such Underwriters as have so terminated this
Agreement with respect to themselves, severally, for all out-of-pocket expenses
(including the fees and disbursements of their counsel) reasonably incurred by
such Underwriters in connection with this Agreement or the offering
contemplated hereunder.


 


15





















 


This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.


 


This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.


 


	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PSI
  ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Wendy
  L. Aumiller

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Wendy
  L. Aumiller

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President and

  
	
   

  	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Accepted:

  	
   

  
	
   

  	
   

  
	
  BARCLAYS
  CAPITAL INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Pamela
  Kendall

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Pamela
  Kendall

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  GOLDMAN,
  SACHS & CO.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Goldman,
  Sachs & Co.

  	
   

  	
   

  
	
   

  	
  (Goldman,
  Sachs & Co.)

  	
   

  
	
   

  	
   

  
	
  Acting
  severally on behalf of themselves

  	
   

  
	
  and
  the several Underwriters named in

  	
   

  
	
  Section II
  hereof

  	
   

  
								



 


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