Exhibit 10.7


                               INDEMNITY AGREEMENT

     This Indemnity Agreement (the "Indemnity Agreement"),  dated as of December
20,  1996,  made  by  and  between  Indianapolis  Power  &  Light  Company  (the
"Originator")  and  the  Agent  (as  defined  below)  for  the  benefit  of  the
Beneficiaries (as defined below);

                              W I T N E S S E T H:

     WHEREAS,  IPL  Funding  Corporation  (the  "Seller")  has  entered  into  a
Receivables  Sale Agreement  dated as of the date hereof (as amended,  restated,
supplemented  or otherwise  modified from time to time,  the  "Receivables  Sale
Agreement")  by and among the  Seller,  ABN AMRO Bank N.V.  as  provider  of the
program letter of credit (the "Program LOC Provider"),  the liquidity  providers
from time to time party thereto (the "Liquidity  Providers"),  Windmill  Funding
Corporation  ("Windmill"  and,  together  with the  Liquidity  Providers and the
Program LOG Provider, the "Purchasers") and ABN AMRO Bank N.V., as agent for the
Purchasers (in such capacity,  the "Agent") (terms used herein and not otherwise
defined  herein  having  the  respective   meanings   ascribed  thereto  in  the
Receivables Sale Agreement);

     WHEREAS, the Originator directly or indirectly owns all equity interests in
the Seller; and

     WHEREAS,  in order to induce the Agent and the Purchasers to enter into the
Receivables  Sale  Agreement and in  consideration  therefor,  the Originator is
willing to make certain representations, warranties and covenants as hereinafter
set forth and to  indemnify  the Agent for the  benefit  of the Agent on its own
behalf,  the  Purchasers and any other Person to whom any amounts are owed under
or  in  connection  with  the  Receivables  Sale  Agreement  (collectively,  the
"Beneficiaries") against certain liabilities as hereinafter described;

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

                                    ARTICLE I

                                 INDEMNIFICATION

     Section  1.1.  Indemnities.  Without  limiting  any other  rights  that any
Beneficiary may otherwise have hereunder or under applicable law, the Originator
shall pay, and shall indemnify on an after-Tax basis each  Beneficiary  for, any
and all  damages,  losses,  claims,  liabilities,  penalties,  Taxes,  costs and
expenses  (collectively,  the "Indemnified  Losses") arising out of or otherwise
relating to any Transaction Document,  the transactions  contemplated thereby or
the acquisition of any portion of the Sold Interest,  excluding only Indemnified
Losses to the extent (a) a final  judgment of a court of competent  jurisdiction
holds such  Indemnified  Losses resulted solely from gross negligence or willful
misconduct of the  Beneficiary  seeking  indemnification,  (b) solely due to the
credit risk of an Obligor and for which  reimbursement would constitute recourse
for uncollectible  Receivab1e~ or (c) such Indemnified  Losses include Taxes on,
or measured by, the overall net income of the Agent or any Purchaser computed in
accordance  with the  Intended Tax  Characterization;  provided,  however,  that
nothing  contained in this sentence  shall limit the liability of the Originator
or limit the  recourse  of any  Beneficiary  to the  Originator  for any amounts
otherwise specifically provided to be paid by the Originator hereunder.  Without
limiting the foregoing  indemnification,  the  Originator  shall  indemnify each
Beneficiary for Indemnified Losses (including losses in respect of uncollectible
Receivables,   regardless  for  these  specific  matters  whether  reimbursement
therefor would  constitute  recourse to the Seller or the Collection  Agent, but
otherwise  subject  to the  limitations  in clauses  (a) - (c) of the  preceding
sentence) relating to or resulting from:

          (a) any representation or warranty made by the Originator,  the Seller
     or the Collection  Agent (or any employee or agent of the  Originator,  the
     Seller or the  Collection  Agent)  under or in  connection  with any of the
     Transaction  Documents,  any Periodic  Report or any other  information  or
     report  delivered by the  Originator,  the Seller or the  Collection  Agent
     pursuant  thereto  having been false or incorrect  in any material  respect
     when made or deemed made;

          (b) the failure by the Originator,  the Seller or the Collection Agent
     to comply  with any  applicable  law,  rule or  regulation  related  to any
     Receivable, or the nonconformity of any Receivable with any such applicable
     law, rule or regulation;

          (c) the  failure  of the  Seller  to vest and  maintain  vested in the
     Agent, for the benefit of the Purchasers, a perfected ownership or security
     interest in the Sold Interest and the property conveyed pursuant to Section
     1.1(e) and Section 1.8 of the Sale Agreement, free and clear of any Adverse
     Claim;

          (d) any  commingling  of funds to which the Agent or any  Purchaser is
     entitled under the Transaction Documents with any other funds;

          (e) any  failure  of a Lock-Box  Bank to comply  with the terms of the
     applicable Lock-Box Letter;

          (e) any dispute,  claim,  offset or defense  (other than  discharge in
     bankruptcy of the Obligor) of the Obligor to the payment of any Receivable,
     or any  other  claim  resulting  from  the  sale or  lease  of goods or the
     rendering  of services  related to such  Receivable  or the  furnishing  or
     failure to furnish any such goods or services or other  similar  reason not
     arising  from  the  financial  ability  of any  Obligor  to pay  undisputed
     indebtedness;

          (f) any  failure of the  Originator,  the Seller or any  Affiliate  of
     either thereof to perform its duties or obligations in accordance  with the
     provisions of any Transaction Document to which such Person is a party;

          (g) any action taken by the Agent as  attorney-in-fact  for the Seller
     pursuant to Section 3.5(b) of the Sale Agreement;

          (h) any  environmental  liability  claim,  product  liability claim or
     personal  injury or property  damage suit or other similar or related claim
     or  action  of  whatever  sort  arising  out of or in  connection  with any
     Receivable or any other suit, claim action of whatever sort relating to any
     of the Transaction Documents; or

          (i) any  failure  by the Seller to pay when due any  Discount,  fee or
     other amount (including,  without  limitation,  Deemed Collections or other
     amounts  owing under  Section 1.5, and any amount owed under Article VI, of
     the  Receivables  Sale  Agreement)  owed pursuant to the  Receivables  Sale
     Agreement, the Pricing Letter or the Fee Letter.

     Section  1.2.   Payments  and   Allocations.   If  any  Beneficiary   seeks
compensation  pursuant  to this  Article  I, such  Person  shall  deliver to the
Originator  and the Agent a certificate  setting forth in reasonable  detail the
amount due to such Person, a description of the circumstance giving rise thereto
and the basis of the  calculations of such amount,  which  certificate  shall be
conclusive  absent  manifest  error  so  long  as  such  determinations  and any
allocations  are made on a reasonable  basis.  The  Originator  shall pay to the
Agent (for the  account of such  Person)  such  amount  shown as due on any such
certificate.

                                   ARTICLE II

                               EXTENT AND WAIVERS

     Section 2.1.  Indemnity  Absolute.  The  Originator  hereby agrees that the
indemnities  and  payment   obligations  set  forth  in  Article  I  hereof  are
enforceable by the Agent for the benefit of the Beneficiaries, regardless of any
law,  regulation  or  order  now or  hereafter  in  effect  in any  jurisdiction
affecting  any of such terms or the  rights of the  Beneficiaries  with  respect
thereto or any misrepresentation,  irregularity or other defect in any or all of
the  Transaction  Documents or this  Indemnity  Agreement,  or the invalidity or
unenforceability thereof. The obligations of the Originator under this Indemnity
Agreement constitute a present and continuing obligation,  shall be absolute and
unconditional,  shall not be subject to any counterclaim,  setoff,  deduction or
defense based upon any claim that the Originator or any Obligor may have against
the  Seller or any other  Person  and,  shall  remain in full  force and  effect
without regard to, and shall not be released,  discharged or in any way affected
or impaired by, any thing, event, happening,  matter,  circumstance or condition
whatsoever  (whether or not the  Originator  shall have any  knowledge or notice
thereof  or  consent  thereto).  The  liability  of the  Originator  under  this
Indemnity  Agreement  shall be absolute,  unconditional,  present and continuing
until all  Investment  and amounts  payable by the Seller under the  Transaction
Documents have been indefeasibly paid in full and the Receivables Sale Agreement
has terminated, irrespective of:

          (a) any attempt to collect from the Seller amounts due from the Seller
     under the Transaction Documents;

          (b)  any  lack  of  validity  or  enforceability  of any or all of the
     Transaction Documents,  or any provision thereof, or any other agreement or
     instrument  relating  thereto or any  assignment  or transfer of any of the
     foregoing  or any  failure  or  omission  to enforce  or  agreement  not to
     enforce, or the stay or enjoining by order of court, by operation of law or
     otherwise, of the exercise or nonexercise of any right, power, privilege or
     remedy under or with respect to the foregoing;

          (c) any amendment, or waiver, renewal,  extension or release of or any
     consent to departure  from or other action or inaction  with respect to any
     or all of the  Transaction  Documents or any other  agreement or instrument
     relating thereto;

          (d) any new conveyance of, or any exchange,  release or  nonperfection
     of,  any   collateral  or  security   interest   conveyed  to  any  of  the
     Beneficiaries  in  connection  with the  transactions  contemplated  by the
     Receivables  Sale  Agreement,  acceptance  by any of the  Beneficiaries  of
     partial  payment from the Seller of its  obligations  under the Transaction
     Documents, or any release or amendment or waiver of or consent to departure
     from any guaranty or security  for all or any of the  Investment  held,  or
     obligations owed, under the Transaction Documents;

          (e) any merger or  consolidation  of the Seller  into or wit any other
     Person, or any other change in the Seller whatsoever, or any sale, lease or
     transfer of any or all of the assets of the Seller to any other Person;

          (f) any sale,  transfer or other  disposition by the Originator of any
     stock of the Seller;

          (g)   any   bankruptcy,   insolvency,   reorganization,   arrangement,
     composition,  adjustment, dissolution, liquidation or other like proceeding
     relating to the Seller,  or any action  taken with respect to any or all of
     the  Transaction  Documents,  including  this Indemnity  Agreement,  by any
     trustee or receiver, or by any court, in any such proceeding; or

          (h) any absence of any notice to, or knowledge  by, the  Originator of
     the  existence or  occurrence  of any of the matters or events set forth in
     the foregoing subdivisions (a) through (g); or

          (i) any other  circumstance that might otherwise  constitute a defense
     available to, or a discharge of, the Originator from its obligations  under
     the  Transaction  Documents,  including the  obligations  of the Originator
     hereunder.

     Section 2.2. Waiver.  The Originator hereby waives  promptness,  diligence,
all setoffs, counterclaims,  presentments, protests and notice of acceptance and
any other  notice  with  respect  to any of its  obligations  hereunder  and any
requirement of the Beneficiaries (or any of them) to protect, secure, perfect or
insure any security  interest or lien or any property subject to the Receivables
Sale  Agreement or to exhaust any right or take any action against the Seller or
any other Person or entity or any collateral. To the fullest extent permitted by
applicable  law, the  Originator  waives all  principles  or  provisions of law,
statutory or otherwise, which are or might be in conflict with the terms of this
Indemnity  Agreement  and any legal or equitable  discharge  of its  obligations
hereunder and the benefit of any statute of limitations  affecting its liability
hereunder or the enforcement hereof.

     Section 2.3. Subrogation.  The Originator agrees that it shall not have any
rights  (direct  or  indirect)  of  subrogation,  contribution,   reimbursement,
indemnification,  or other rights of payment or recovery from the Seller for any
payments made by the Originator hereunder until all Investment and amounts owing
under the  Transaction  Documents  have been  indefeasibly  paid in full and the
Receivables Sale Agreement has terminated.

     Section 2.4.  Reinstatement.  The obligations of the Originator  under this
Indemnity  Agreement  shall continue to be effective or shall be reinstated,  as
the case may be, if at any time any payment made by the Originator  hereunder or
by the Seller with respect to any coextensive  obligations that it has under the
Transaction  Documents is rescinded or must  otherwise be returned to any Person
upon  the  insolvency,   bankruptcy,   arrangement,   adjustment,   composition,
liquidation  or  reorganization  of the Seller or any guarantor or for any other
reason,  all as though  such  payment had not been made or  performance  had not
occurred, as applicable.


                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

     Section  3.1.   Representations   and  Warranties  of  the  Originator  The
Originator  represents  and warrants to the Agent and each other  Beneficiary as
follows:

          (a) Receivables Sale Agreement.  Each representation and warranty with
     respect  to it  and  the  Receivables  or  collections  set  forth  in  the
     Receivables  Sale  Agreement  is true and correct on the date hereof and on
     the date each Purchase is made under the Receivables Sale Agreement.

          (b) Licenses,  Registrations, and Compliance with Laws. To the best of
     Originator's  knowledge,  each of Originator and its  Subsidiaries  has all
     permits,  governmental licenses,  registrations,  and approvals material to
     carrying out its  businesses as presently  conducted and as required by law
     or  the  rules  and  regulations  of  any  Governmental   Authority  having
     jurisdiction  over  Originator  or its  Subsidiaries.  There is no material
     violation or material failure of compliance or allegation or notice of such
     violation or failure of  compliance  on the part of the  Originator  or any
     Subsidiary  with any of the  foregoing  permits,  licenses,  registrations,
     approvals, rules or regulations.

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

     Section  3.2.  Representations  and  Warranties  of the  Agent.  The  Agent
represents and warrants on behalf of the Beneficiaries  that it is entering into
this Agreement  based on the separate credit of the Originator and that. it does
not expect  the assets or  liabilities  of the  Originator  and the Seller to be
substantively consolidated in any bankruptcy or similar proceeding.

                                   ARTICLE IV

                           COVENANTS OF THE ORIGINATOR

     Section  4.1.  Affirmative  Covenants.  The  Originator  hereby  covenants,
undertakes and agrees that at all times from the date hereof,  unless the Agent,
with the consent of the Instructing Group, shall otherwise consent in writing:

          (a) Financial Reporting.  The Originator shall provide the Seller with
     the annual and quarterly  financial  statements of the  Originator  and any
     certificate  of a  Designated  Officer  of the  Originator  required  to be
     delivered by the Seller pursuant to Section 5.1(a) of the Receivables  Sale
     Agreement and the Originator  shall deliver such  financial  statements and
     certificates  directly to the Agent and each  Purchaser if the Seller fails
     to comply with its obligation to do so.

          (b) Notices. The Originator will notify the Agent in writing of any of
     the following  immediately  upon any officer of the Originator  learning of
     the occurrence thereof,  describing the same and, if applicable,  the steps
     being taken by the Persons affected with respect thereto:

               (i) Potential Termination Events. The occurrence of any Potential
          Termination Event.

               (ii)   Representations   and  Warranties.   The  failure  of  any
          representation  or warranty made by the Originator in any  Transaction
          Document  to be  true  (when  made or  deemed  made)  in any  material
          respect.

               (iii) Downgrading.  The downgrading,  withdrawal or suspension of
          any rating by any Applicable  Rating Agency of any indebtedness of any
          Obligor with a Special Limit or of the Originator.

               (iv) Litigation.  The institution of any litigation,  arbitration
          proceeding or governmental  proceeding that, if adversely  determined,
          is reasonably likely to cause the  representation in Section 4.1(g) of
          the Receivables Sale Agreement to be untrue.

               (v) Changes in  Business.  Any change in, or proposed  change in,
          the character of the Originator's  business that is reasonably  likely
          to materially impair the  collectibility of any material amount of the
          Receivables.

     Section 4.2. Receivables Sale Agreement Covenants. The Originator agrees to
comply with each  covenant the Seller  agrees to cause the  Originator to comply
with  pursuant  to the  terms  of the  Receivables  Sale  Agreement,  as if such
covenant were set forth in its entirety herein.

     Section 4.3. Credit  Agreement  Covenants.  The Originator will observe and
fully comply with all the terms and  covenants  presently  set forth in Sections
5.1 and 5.2 of the Credit  Agreement  by and among the  Originator,  the various
financial   institutions  party  thereto,  Bank  One,   Indianapolis,   National
Association,  as Co-Agent, and ABN AMRO Bank N.Y., as Administrative Agent dated
December 20, 1996 (as such  document is  currently in effect and without  giving
effect to any amendment or other modification thereto not expressly consented to
by the Agent for purposes of the Agreement, the "Credit Agreement"), which terms
and covenants,  together with their related  definitions,  are hereby  expressly
incorporated into this Section 4.3, mutatis  mutandis,  in their present form by
reference  (such  observance and  compliance to be required  whether or not said
terms, covenants and definitions are hereafter amended,  waived or terminated as
though and  regardless  of whether any  indebtedness  incurred  under the Credit
Agreement remain  outstanding and the Credit Agreement  remains in effect),  and
the benefits of such terms and covenants shall run in favor of the Agent and the
Purchasers;  provided,  however,  that any provision in such terms and covenants
for notice to or delivery of any  certificate to the  "Administrative  Agent" or
any "Bank" under such Credit  Agreement shall be deemed to include a requirement
for like notice or delivery to the Agent hereunder. Accordingly, for purposes of
such incorporation  herein, all references in Sections 5.1 and 5.2 of the Credit
Agreement to (i) "Advance",  (ii) "Bank", (iii) "Administrative  Agent" and (iv)
"Borrower"  shall be deemed  references to (i) Purchase,  (ii) Purchaser,  (iii)
Agent and (iv) Originator.

                                    ARTICLE V

                                  MISCELLANEOUS

     Section  5.1. No Waiver;  Remedies.  No failure or delay on the part of the
Agent for the benefit of the  Beneficiaries  in exercising  any power,  right or
remedy under this Indemnity  Agreement  shall operate as a waiver  thereof;  nor
shall any single or partial exercise of any such power, right or remedy preclude
any other or further exercise thereof or the exercise of any other power,  right
or remedy.  The rights and remedies  provided in this  Indemnity  Agreement  are
cumulative  and  nonexclusive  of any rights or remedies  provided  by law.  Any
waiver of this  Indemnity  Agreement  shall be  effective  only in the  specific
instance and for the specific purpose for which given.

     Section 5.2.  Amendments,  etc. No amendment,  supplement,  modification or
waiver of any provision of this Indemnity Agreement nor consent to any departure
by the  Originator  therefrom  shall in any event be  effective  unless the same
shall be in writing and signed by the  Originator and the Agent and consented to
by the  Instructing  Group and,  with  respect  to Article I hereof,  all of the
Liquidity Providers. Any amendment,  supplement,  modification or waiver of this
Indemnity Agreement entered into in accordance with this Section 5.2 shall apply
to each of the  Beneficiaries  equally and shall be binding upon the Originator,
each Beneficiary and the Agent.

     Section 5.3. Waiver of  Confidentiality.  The Originator hereby consents to
the  disclosure of any nonpublic  information  relating to the Originator or the
Transaction Documents obtain in connection with the transactions contemplated by
the Transaction Documents among the Agent and the Purchasers and by the Agent or
the Purchasers to (i) any officers,  directors,  members, managers, employees or
outside  accountants,  auditors or attorneys  thereof,  (ii) any  prospective or
actual assignee or participant,  (iii) any rating agency,  surety,  guarantor or
credit or  liquidity  enhancer  to the Agent or any  Purchaser,  (iv) any entity
organized to purchase,  or make loans secured by, financial assets for which ABN
AMRO  provides  managerial  services  or acts as an  administrative  agent,  (v)
Windmill's administrator, management company, referral agents, issuing agents or
depositaries or CP Dealers and (vi)  Governmental  Authorities  with appropriate
jurisdiction,  in each case only to the extent  necessary in connection with the
services  provided by, or the requirements of, such Person.  The Originator does
not consent to any other disclosure of such nonpublic information.

     Section 5.4.  Confidentiality  of Agreement.  The Originator agrees it will
not disclose  without the prior written consent of the Agent the contents of any
Transaction  Document,  or any other  confidential  or  proprietary  information
furnished  by the  Agent  or any  Purchaser,  to any  Person  other  than to its
officers,   directors,   members,  managers,   employees,  outside  accountants,
auditors,  attorneys or financial  advisors or as required by applicable  law or
Governmental Authorities with appropriate jurisdiction.

     Section 5.5.  Agreement Not to Petition.  The  Originator  agrees,  for the
benefit of the holders of the  privately  or publicly  placed  indebtedness  for
borrowed money of Windmill, not, prior to the date which is one (1) year and one
(1) day  after  the  payment  in full of all such  indebtedness,  to  acquiesce,
petition or otherwise,  directly or  indirectly,  invoke,  or cause  Windmill to
invoke,  the  process  of any  Governmental  Authority  for the  purpose  of (a)
commencing  or  sustaining  a case against  Windmill  under any federal or state
bankruptcy,  insolvency or similar law (including the Federal  Bankruptcy Code),
(b)   appointing  a  receiver,   liquidator,   assignee,   trustee,   custodian,
sequestrator or other similar official for Windmill,  or any substantial part of
its property,  or (c) ordering the winding up or  liquidation  of the affairs of
Windmill.

     Section 5.6. Excess Funds.  Other than amounts payable under Section 9.4 of
the Receivables  Sale  Agreement,  Windmill shall be required to make payment of
the amounts  required to be paid  pursuant to any  Transaction  Document only if
Windmill has Excess Funds (as defined  below).  If Windmill does not have Excess
Funds,  the excess of the amount due under any Transaction  Document (other than
pursuant  to such  Section  9.4) over the  amount  paid shall not  constitute  a
"claim" (as defined in Section  101(5) of the Federal  Bankruptcy  Code) against
Windmill until such time as Windmill has Excess Funds. If Windmill does not have
sufficient  Excess Funds to make any payment due under any Transaction  Document
(other than pursuant to such Section 9.4), then Windmill may pay a lesser amount
and  make  additional  payments  that  in the  aggregate  equal  the  amount  of
deficiency  as soon as possible  thereafter.  The term "Excess  Funds" means the
excess of (a) the  aggregate  projected  value of  Windmill's  assets  and other
property (including cash and cash equivalents),  over (b) the sum of (i) the sum
of all scheduled  payments of principal,  interest and other amounts  payable on
publicly or privately placed  indebtedness of Windmill for borrowed money,  plus
(ii) the sum of all other  liabilities,  indebtedness  and other  obligations of
Windmill  for  borrowed  money  or owed to any  credit  or  liquidity  provider,
together  with all unpaid  interest then accrued  thereon,  plus (iii) all taxes
payable  by  Windmill  to the  Internal  Revenue  Service,  plus  (iv) all other
indebtedness,  liabilities and obligations of Windmill then due and payable, but
the amount of any  liability,  indebtedness  or obligation of Windmill shall not
exceed the projected  value of the assets to which recourse for such  liability,
indebtedness  or  obligation is limited.  Excess Funds shall be calculated  once
each Business Day.

     Section 5.7. No Recourse.  The  obligations  of  Windmill,  its  management
company,   its   administrator   and  its  referral   agents  (each  a  "Program
Administrator")  under any  Transaction  Document  or other  document  (each,  a
"Program  Document") to which a Program  Administrator is a party are solely the
corporate obligations of such Program Administrator and no recourse shall be had
for such obligations against any Affiliate,  director, officer, member, manager,
employee, attorney or agent of any Program Administrator.

     Section 5.8. Limitation of Liability.  No Person shall make a claim against
the Agent or any Purchaser (or their respective Affiliates, directors, officers,
members,  managers,  employees,  attorneys or agents) for any special, indirect,
consequential  or  punitive  damages  under any claim for breach of  contract or
other theory of liability in connection  with the  Transaction  Documents or the
transactions  contemplated thereby, and the Originator (for itself and all other
Persons claiming by or through it) hereby waives any claim for any such damages.

     Section 5.9.  Notices.  Unless otherwise  specified,  all notices and other
communications  hereunder shall be in writing  (including by telecopier or other
facsimile  communication),  given to the  appropriate  Person at its  address or
telecopy number set forth on the signature pages hereof or at such other address
or telecopy  number as such Person may specify,  and effective  when received at
the  address  or number  specified  by such  Person.  The number of days for any
advance  notice  required  hereunder may be waived (orally or in writing) by the
Person  receiving  such  notice  and,  in the case of notices to the Agent,  the
consent of each Person to which the Agent is required to forward such notice.

     Section 5.10. Governing Law; Submission to Jurisdiction;  Integration. This
Indemnity  Agreement  shall be governed by and construed in accordance  with the
internal  laws  (and not the law of  conflicts)  of the State of  Illinois.  The
Originator hereby submits to the nonexclusive  jurisdiction of the United States
District  Court for the Northern  District of Illinois and of any Illinois state
court sitting in Chicago for purposes of all legal proceedings arising out of or
relating to this Indemnity  Agreement or the transactions  contemplated  hereby.
The  Originator  hereby  irrevocably  waives,  to  the  fullest  extent  it  may
effectively  do so,  any  objection  which it may now or  hereafter  have to the
laying of the venue of any such proceeding brought in such a court and any claim
that  any  such  proceeding  brought  in such a court  has  been  brought  in an
inconvenient  forum.  Nothing in this Section 5.10 shall affect the right of the
Agent  or any  Beneficiary  to  bring  any  action  or  proceeding  against  the
Originator or its property in the courts of other jurisdictions.  This Indemnity
Agreement contains the final and complete  `integration of all prior expressions
by the  parties  hereto  with  respect to the  subject  matter  hereof and shall
constitute  the entire  agreement  among the parties  hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings.

     Section 5.11. Severability;  Counterparts.  This Indemnity Agreement may be
executed  in any  number of  counterparts  and by  different  parties  hereto in
separate  counterparts,  each of which when so executed shall be deemed to be an
original and all of which when taken together shall  constitute one and the same
agreement.  Any provisions of this Indemnity  Agreement  which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

     Section 5.12.  Assignment.  This Indemnity  Agreement shall be binding upon
the Originator,  its successors and assigns,  and inure to the benefit of and be
enforceable  by the  Agent  for  the  benefit  of the  Beneficiaries  and  their
respective  successors and assigns;  provided,  however, that the obligations of
the Originator  hereunder may not be assigned,  transferred or delegated without
the prior written  consent of the Agent and the  Instructing  Group and any such
purported assignment,  transfer or delegation absent such consent shall be void.

     Section 5.13. Survival of Warranties.  All agreements,  representations and
warranties  made  herein  shall  survive  the  execution  and  delivery  of this
Indemnity  Agreement,  any  investigation  at any time  made by the Agent or the
Beneficiaries or on their behalf,  and the execution and delivery of each of the
Transaction  Documents.  The rights and  remedies of the Agent on behalf of each
Beneficiary with respect to the  representations  and warranties made herein and
the indemnification  provisions hereof shall be continuing and shall survive any
termination of the  Receivables  Sale Agreement or any of the other  Transaction
Documents.

     Section 5.14. Further Assurances. At any time or from time to time upon the
request of the Agent,  the  Originator  shall  execute and deliver  such further
documents and do such other acts and things as the Agent may reasonably  request
in order to effect fully the purposes of this Indemnity Agreement.

     Section 5.15.  Headings.  Article and Section  headings used herein are for
convenience and reference only, are not part of this Indemnity Agreement and are
not to  affect  the  construction  of,  or to be  taken  into  consideration  in
interpreting, this Indemnity Agreement.




<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Indemnity Agreement
to be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.

                                   ABN AMRO BANK N.V., as Agent


                                   By: /s/ Mary C. Casey
                                       ------------------------------------
                                   Title: Vice President
                                         ----------------------------------

                                   By: /s/ Robert C. Smolka
                                       ------------------------------------
                                   Title: Group Vice President
                                         ----------------------------------
                                   Address:  Structured Finance, Asset
                                              Securitization
                                             Suite 725
                                             135 South LaSalle Street
                                             Chicago, Illinois 60603
                                             Attention:  Purchaser Agent-
                                              Windmill
                                   Telephone: (312) 904-6263
                                   Telecopy:  (312) 904-6376


                                   INDIANAPOLIS POWER & LIGHT COMPANY

                                   By: /s/ John R. Brehm
                                      -------------------------------------
                                   Title: Sr. V.P. Finance and Information
                                             Services
                                         ----------------------------------
                                   Address:  One Monument Circle
                                             Indianapolis, Indiana 46204
                                   Telephone:  (317) 261-8995
                                   Telecopy:   (317) 630-5763