SOUTHERN INDIANA GAS AND ELECTRIC COMPANY

WITH

BANKERS TRUST COMPANY,

as Trustee

SUPPLEMENTAL INDENTURE

Providing among other things for

FIRST MORTGAGE BONDS

6.72% Senior Note Series of 1999 due 2029

Dated as of July 1, 1999

SUPPLEMENTAL INDENTURE, dated as of July 1, 1999, between

SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, a corporation

organized and existing under the laws of the State of

Indiana (hereinafter called the "Company"), party of the

first part, and BANKERS TRUST COMPANY, a corporation

organized and existing under the laws of the State of New

York, as Trustee under the Mortgage hereinafter referred

to, party of the second part.

WHEREAS, the Company heretofore executed and

delivered to Bankers Trust Company, as Trustee (hereinafter

called the "Trustee"), a certain Indenture of Mortgage and

Deed of Trust dated as of April 1, 1932, to secure an issue

of bonds of the Company, issued and to be issued in series,

from time to time, in the manner and subject to the

conditions set forth in the said Indenture, and the said

Indenture has been amended and supplemented by Supplemental

Indentures dated as of August 31, 1936, October 1, 1937,

March 22, 1939, July 1, 1948, June 1, 1949, October 1,

1949, January 1, 1951, April 1, 1954, March 1, 1957,

October 1, 1965, September 1, 1966, August 1, 1968, May 1,

1970, August 1, 1971, April 1, 1972, October 1, 1973, April

1, 1975, January 15, 1977, April 1, 1978, June 4, 1981,

January 20, 1983, November 1, 1983, March 1, 1984, June 1,

1984, November 1, 1984, July 1, 1985, November 1, 1985,

June 1, 1986, November 15, 1986, January 15, 1987, December

15, 1987, December 13, 1990, April 1, 1993, May 1, 1993 and

June 1, 1993, which Indenture as so amended and

supplemented is hereinafter referred to as the "Mortgage"

and as further supplemented by this Supplemental Indenture

is hereinafter referred to as the "Indenture"; and

WHEREAS, the Mortgage provides that the Company

and the Trustee may, from time to time, enter into such

indentures supplemental to the Mortgage as shall be deemed

by them necessary or desirable, to establish the terms and

provisions of any series of bonds to be issued under said

Mortgage and to add to the covenants and agreements of the

Company for the protection of the holders of bonds and of

the mortgaged and pledged property; and

WHEREAS, the Company and the Trustee deem it

necessary or desirable to enter into this Supplemental

Indenture for such purposes; and

WHEREAS, the Company by appropriate corporate

action in conformity with the terms of the Indenture has

duly determined to create a series of bonds to be issued

under the Indenture to be designated as "First Mortgage

Bonds, 6.72% Senior Note Series of 1999 due 2029"

(hereinafter sometimes referred to as "bonds of the Thirty-

Eighth Series"), the bonds of which series are to bear

interest at the rate per annum set forth in the title

thereof; and

WHEREAS, the definitive registered (without

coupons) bonds of the Thirty-Eighth Series and the

Trustee's certificate of authentication to be borne by such

bonds are to be substantially in the following forms,

respectively:

[FORM OF FULLY REGISTERED BOND OF THE THIRTY-EIGHTH SERIES]

[FORM OF FACE OF BOND]

TRANSFER RESTRICTED. EXCEPT AS PROVIDED BELOW, THIS BOND

IS NOT TRANSFERABLE.

SOUTHERN INDIANA GAS AND ELECTRIC COMPANY

FIRST MORTGAGE BOND, 6.72% SENIOR NOTE SERIES OF 1999

DUE 2029

No. _______ $ 80,000,000

Southern Indiana Gas and Electric Company, a

corporation of the State of Indiana (hereinafter called the

"Company"), for value received, hereby promises to pay to

BANKERS TRUST COMPANY, as Trustee (hereinafter called the

"Senior Note Trustee") under and Indenture (For Senior

Notes) dated as of July 1, 1999, between the Company and

the Senior Note Trustee, as supplemented by the First

Supplemental Indenture dates as of July 1, 1999

(hereinafter called, together with such First Supplemental

Indenture, the "Senior Note Indenture"), or registered

assigns Eighty Million Dollars, on August 1, 2029 at the

office or agency of the Company in the Borough of

Manhattan, The City of New York, New York, in any coin or

currency of the United States of America which at the time

of payment is legal tender for the payment of public and

private debts, and to pay to the registered owner hereof

interest thereon from the interest payment date (February 1

or August 1) next preceding the date of this bond unless

the date hereof is prior to February 1, 2000, in which case

from July 26, 1999 (or, if this bond is dated between the

record date for any interest payment date and such interest

payment date, then from such interest payment date), at the

rate of six and seventy-two one-hundredths per cent (6.72%)

per annum in like coin or currency, payable at said office

or agency on February 1 and August 1 in each year,

commencing February 1, 2000, until the Company's obligation

with respect to the payment of such principal shall have

been discharged. The interest so payable on any February 1

or August 1 will, subject to certain exceptions provided in

the Mortgage hereinafter mentioned, be paid to the person

in whose name this bond is registered at the close of

business on the record date, which shall be the January 15

or July 15, as the case may be, next preceding such

interest payment date, or, if such January 15 or July 15

shall be a legal holiday or a day on which banking

institutions in the Borough of Manhattan, The City of New

York, New York, are authorized or obligated by law to

close, the next preceding day which shall not be a legal

holiday or a day on which such institutions are so

authorized or obligated to close.

The provisions of this bond are continued on the reverse

hereof and such continued provisions shall for all purposes

have the same effect as though fully set forth at this

place.

This bond shall not become obligatory until Bankers Trust

Company, the Trustee under the Mortgage, or its successor

thereunder, shall have signed the form of certificate

endorsed hereon.

IN WITNESS WHEREOF, Southern Indiana Gas and Electric

Company has caused this bond to be signed in its name by

its President or a Vice President, by his signature or a

facsimile thereof, and a facsimile of its corporate seal to

be imprinted hereon, attested by its Secretary or an

Assistant Secretary, by his signature or a facsimile

thereof.

Dated:

SOUTHERN INDIANA GAS AND

ELECTRIC COMPANY

By:__________________________

Name:

Title: President and

Chief Executive

Officer

Attest:

Secretary

[FORM OF TRUSTEE'S CERTIFICATE]

This bond is one of the bonds of the series designated

therein, described in the within-mentioned Mortgage.

BANKERS TRUST COMPANY,

as Trustee,

By:____________________

Name:

Title:

[FORM OF REVERSE OF BOND]

SOUTHERN INDIANA GAS AND ELECTRIC COMPANY

FIRST MORTGAGE BOND, 6.72% SENIOR NOTE SERIES OF 1999

DUE 2029

This bond is one of an issue of First Mortgage

Bonds of the Company, issuable in series, and is one of the

series designated in the title hereof, all issued and to be

issued under and equally secured (except as to any sinking

fund established in accordance with the provisions of the

Mortgage hereinafter mentioned for the bonds of any

particular series) by an Indenture of Mortgage and Deed of

Trust, dated as of April 1, 1932, executed by the Company

to Bankers Trust Company, as Trustee, as amended and

supplemented by indentures supplemental thereto, to which

Indenture as so amended and supplemented (herein referred

to as the Mortgage) reference is made for a description of

the property mortgaged and pledged, the nature and extent

of the security, the rights of the holders of the bonds in

respect thereof and the terms and conditions upon which the

bonds are secured.

The principal hereof may be declared or may

become due on the conditions, with the effect, in the

manner and at the time set forth in the Mortgage, upon the

occurrence of a completed default as provided in the

Mortgage.

The bonds of the Thirty-Eighth Series are not

transferable except (i) as required to effect an assignment

to a successor trustee under the Senior Note Indenture, or

as otherwise provided in Sections 407 and 409 of the Senior

Note Indenture, or (ii) in compliance with a final order of

a court of competent jurisdiction in connection with any

bankruptcy or reorganization proceeding of the Company.

The Company's obligation to make payments with

respect to the principal of, and/or premium, if any, and/or

interest on, the bonds of the Thirty-Eighth Series shall be

fully or partially satisfied and discharged to the extent

that, at the time any such payment shall be due, the

corresponding amount then due of principal of, and/or

premium, if any, and/or interest on, the senior notes (the

"Senior Notes") issued pursuant to the Senior Note

Indenture (the "Senior Notes") shall have been fully or

partially paid (other than by the application of the

proceeds of a payment in respect of the bonds of the

Thirty-Eighth Series), as the case may be, or there shall

have been deposited with the Senior Note Trustee pursuant

to the Senior Note Indenture trust funds sufficient under

such indenture to fully or partially pay, as the case may

be, the corresponding amount then due of principal of,

and/or or premium, if any, and/or interest on, the Senior

Notes (other than by the application of the proceeds of a

payment in respect of the bonds of the Thirty-Eighth

Series).

Upon payment of the principal of, and premium if

any, and interest due on the Senior Notes, whether at

maturity or prior to maturity by acceleration, redemption,

repayment at the option of a registered holder of Senior

Notes or otherwise, or upon provision for the payment

thereof having been made in accordance with the Senior Note

Indenture (other than by the application of the proceeds of

a payment in respect of the bonds of the Thirty-Eighth

Series), the bonds of the Thirty-Eighth Series in a

principal amount equal to the principal amount of Senior

Notes so paid or for which such provision for payment has

been made shall be deemed fully paid, satisfied and

discharged and the obligations of the Company thereunder

shall be terminated and such bonds of the Thirty-Eighth

Series shall be surrendered to and canceled by the

Trustees. From and after the Release Date (as defined in

the Senior Note Indenture), the bonds of the Thirty-Eighth

Series shall be deemed fully paid, satisfied and discharged

and the obligation of the Company thereunder shall be

terminated. On the Release Date, the bonds of the Thirty-

Eighth Series shall be surrendered to and canceled by the

Trustees.

The Company may redeem the bonds of the Thirty-

Eighth Series, in whole or in part, at any time, upon

notice as provided in the Mortgage (not less than 30 nor

more than 60 days prior to a date fixed for redemption (the

"Redemption Date")) at a redemption price equal to the

greater of (1) 100% of principal or (2) the sum of the

remaining scheduled payments of principal and interest on

the bonds of the Thirty-Eighth Series, discounted to the

Redemption Date on a semiannual basis (assuming a 360-day

year consisting of twelve 30-day months) at the Treasury

Yield plus ten basis points (.10%), plus in each case

accrued interest to the Redemption Date (the "Redemption

Price"), such Redemption Price to be set forth in an

Officer's Certificate delivered to the Trustee on or before

the Redemption Date and upon which the Trustee may

conclusively rely.

The following terms shall have the following

meanings:

"Treasury Yield" means, with respect to any

Redemption Date, the rate per annum equal to the semiannual

equivalent yield to maturity of the Comparable Treasury

Issue, assuming a price for the Comparable Treasury Issue

(expressed as a percentage of its principal amount) equal

to the Comparable Treasury Price for such Redemption Date.

"Comparable Treasury Issue" means the United

States Treasury security selected by an Independent

Investment Banker as having a maturity comparable to the

remaining term of the bonds of the Thirty-Eighth Series

that would be utilized, at the time of selection and in

accordance with customary financial practice, in pricing

new issues of corporate debt securities of comparable

maturity to the remaining term of the bonds of the Thirty-

Eighth Series.

"Independent Investment Banker" means Goldman,

Sachs & Co. or, if such firm is unwilling or unable to

select the Comparable Treasury Issue, an independent

investment banking institution of national standing

selected by the Company and appointed by the Trustee.

"Comparable Treasury Price" means, with respect

to any Redemption Date, the Reference Treasury Dealer

Quotation for such Redemption Date.

"Reference Treasury Dealer Quotation" means, with

respect to the Reference Treasury Dealer and any Redemption

Date, the average of the bid and asked prices for the

Comparable Treasury Issue (expressed as a percentage of its

principal amount) quoted in writing to the Trustee by such

Reference Treasury Dealer at 5:00 p.m. on the third

business day preceding such Redemption Date. The Company

shall furnish the Trustee a notice in writing at least five

business days and not more than ten business days prior to

such Redemption Date of (a) the name of the Reference

Treasury Dealer, (b) the Redemption Date, and (c) the third

business day preceding the Redemption Date.

"Reference Treasury Dealer" means Goldman, Sachs

& Co. and its successors; provided, however, that if

Goldman, Sachs & Co. shall cease to be a primary U.S.

Government Securities dealer in New York City (a "Primary

Treasury Dealer"), the Company shall substitute therefor

another Primary Treasury Dealer.

The Company shall deliver to the Trustee the

Officer's Certificate referred to above setting forth the

Company's calculation of the Redemption Price applicable to

any such redemption promptly after the calculation thereof

but, in any event, prior to the Redemption Date of any such

bonds of the Thirty-Eighth Series. Except with respect to

the obligations of the Trustee expressly set forth in the

foregoing definition of "Reference Treasury Dealer

Quotation," the Trustee shall be under no duty to inquire

into, may presume the correctness of, and shall be fully

protected in acting upon the Company's calculation of any

Redemption Price of the bonds of the Thirty-Eighth Series.

If the registered holder of Senior Notes elects to

have any portion of such Senior Notes repaid on August 3,

2009 pursuant to the terms of such Senior Notes, an equal

principal amount of the bonds of the Thirty-Eighth Series

shall be repaid by the Company to the holder thereof on

such date at 95.5% of such principal amount, together with

accrued interest to August 3, 2009.

Failure by the Company to repay the bonds of the

Thirty-Eighth Series when required as described in the

preceding paragraph will result in an Event of Default

under the Mortgage.

The bonds of this series are issuable as

registered bonds without coupons in denominations of $1,000

and authorized multiples thereof. In the manner and upon

payment of the charges prescribed in the Mortgage,

registered bonds without coupons of this series may be

exchanged for a like aggregate principal amount of

registered bonds without coupons of other authorized

denominations of the same series, upon presentation and

surrender thereof, for cancellation, to the Trustee at its

principal corporate trust office in the Borough of

Manhattan, The City of New York, New York.

No recourse shall be had for the payment of the

principal of, premium, if any, or interest on this bond

against any incorporator or any past, present or future

subscriber to the capital stock, stockholder, office or

director of the Company or of any predecessor or successor

corporation, either directly or through the Company or any

predecessor or successor corporation, under any rule of

law, statute or constitution or by the enforcement of any

assessment or otherwise, all such liability of

incorporators, subscribers, stockholders, officers and

directors being released by the holder or owner hereof by

the acceptance of this bond and being likewise waived and

released by the terms of the Mortgage.

Pursuant to the Mortgage, the holder or owner of

this bond by his acceptance hereof is deemed to have agreed

to amendments to the Mortgage which will eventually permit

certain amendments to the Mortgage with the consent of the

holders of 66% of the principal amount of the outstanding

bonds of all series issued under the Mortgage, which

redefine, effective at such time as all bonds of each

series of bonds issued under the Mortgage prior to January

1, 1977 are no longer outstanding, the amounts required to

be spent by the Company under the Mortgage for the repair,

maintenance, renewal and replacement of its property and

which authorize the Company, effective at such time as all

bonds of each series issued under the Mortgage on or prior

to May 31, 1986 are no longer outstanding, to designate

bonds of any series as the bonds to be redeemed pursuant to

Section 36B of the Mortgage and to do so at any time that

cash for such purpose is on deposit with Trustee pursuant

to the provisions of that Section.

[END OF FORM OF BOND]

and

WHEREAS, all things necessary to make the bonds of the

Thirty-Eighth Series, when authenticated by the Trustee and

issued as in the Indenture provided, the valid, binding and

legal obligations of the Company, entitled in all respects

to the security of the Indenture, have been done and

performed, and the creation, execution and delivery of this

Supplemental Indenture has in all respects been duly

authorized; and

WHEREAS, the Company and the Trustee deem it

advisable to enter into this Supplemental Indenture for the

purposes above stated and for the purpose of describing the

bonds of the Thirty-Eighth Series, and of providing the

terms and conditions of redemption thereof;

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE

WITNESSETH: That Southern Indiana Gas and Electric

Company, in consideration of the premises and of one dollar

to it duly paid by the Trustee at or before the ensealing

and delivery of these presents, the receipt whereof is

hereby acknowledged, and of the purchase and acceptance of

the bonds issued or to be issued hereunder by the holders

or registered owners thereof, and in order to secure the

payment of the principal, premium, if any, and interest of

all bonds at any time issued and outstanding under the

Indenture, according to their tenor and effect, and the

performance of all of the provisions hereof and of said

bonds, hath granted, bargained, sold, released, conveyed,

assigned, transferred, pledged, set over and confirmed and

by these presents doth grant, bargain, sell, release,

convey, assign, transfer, pledge, set over and confirm unto

Bankers Trust Company, as Trustee, and to its successor or

successors in said trust, and to its and their assigns

forever, all the properties of the Company located in the

State of Indiana described in Schedule A (which is

identified by the signature of an officer of each party

hereto at the end thereof) hereto annexed and hereby made a

part hereof and does hereby confirm that the Company will

not cause or consent to a partition, either voluntary or

through legal proceedings, of property, whether herein

described or heretofore or hereafter acquired, in which its

ownership shall be as a tenant in common, except as

permitted by and in conformity with the provisions of the

Indenture and particularly of Article X thereof.

TOGETHER WITH all and singular the tenements,

hereditaments and appurtenances belonging or in any wise

appertaining to the aforesaid property or any party

thereof, with the reversion and reversions, remainder and

remainders and (subject to the provisions of Article X of

the Indenture), the tolls, rents, revenues, issues,

earnings, income, product and profits thereof, and all the

estate, right title interest and claim whatsoever, at law

as well as in equity, which the Company now has or may

hereafter acquire in and to the aforesaid property and

franchises and every part and parcel thereof.

TO HAVE AND TO HOLD all such properties, real,

personal and mixed, mortgaged, pledged or conveyed by the

Company as aforesaid, or intended so to be, unto the

Trustee and its successors and assigns forever.

IN TRUST, NEVERTHELESS, upon the terms and trusts

of the Indenture, for those who shall hold the bonds and

coupons issued and to be issued thereunder, or any of them,

without preference, priority or distinction as to lien of

any of said bonds and coupons over any others thereof by

reason of priority in the time of the issue or negotiation

thereof, or otherwise howsoever, subject, however, to the

provisions in reference to extended, transferred or pledged

coupons and claims for interest set forth in the Indenture

(and subject to any sinking funds that may be created for

the benefit of any particular series).

PROVIDED, HOWEVER, and these presents are upon

the condition that, if the Company, its successors or

assigns, shall pay or cause to be paid, the principal of,

premium, if any, and interest on said bonds, at the times

and in the manner stipulated therein and herein, and shall

keep, perform and observe all and singular the covenants

and promises in said bonds and in the Indenture expressed

to be kept, performed and observed by or on the part of the

Company, then this Supplemental Indenture and the estate

and rights hereby granted shall cease, determine and be

void, otherwise to be and remain in full force and effect.

IT IS HEREBY COVENANTED, DECLARED AND AGREED, by

the Company, that all such bonds and coupons are to be

issued, authenticated and delivered, and that all property

subject or to become subject hereto is to be held, subject

to the further covenants, conditions, uses and trusts in

the Indenture set forth, and the Company, for itself and

its successors and assigns, does hereby covenant and agree

to and with the Trustee and its successor or successors in

such trust, for the benefit of those who shall hold said

bonds and interest coupons, or any of them, as follows:

SECTION 1. Bonds of the Thirty-Eighth Series

shall mature on the date set forth in the form of bond

relating thereto hereinbefore set forth, shall bear

interest at the rate per annum set forth in the title

thereof, payable semi-annually, on February 1 and August 1

in each year, and all bonds of said series shall be

designated as hereinbefore in the fourth Whereas clause set

forth. Principal of, premium, if any, and interest on said

bonds shall be payable in any coin or currency of the

United States of America which at the time of payment is

legal tender for the payment of public and private debts,

at the office or agency of the Company in the Borough of

Manhattan, The City of New York, New York. Definitive

bonds of said series may be issued, originally or

otherwise, only as registered bonds without coupons; and

they and the Trustee's certificate of authentication shall

be substantially in the forms hereinbefore recited,

respectively. Definitive registered bonds of the Thirty-

Eighth Series may be issued in the denomination of $1,000

and in such other denominations (in multiples of $1,000) as

the Board of Directors of the Company shall approve, and

execution and delivery to the Trustee for authentication

shall be conclusive evidence of such approval. In the

manner and upon payment of the charges prescribed in the

Indenture, registered bonds without coupons of said series

may be exchanged for a like aggregate principal amount of

registered bonds without coupons of other authorized

denominations of the same series, upon presentation and

surrender thereof for cancellation to the Trustee at its

principal corporate trust office in the Borough of

Manhattan, The City of New York, New York. However,

notwithstanding the provisions of Section 12 of the

Indenture, no charge shall be made upon any transfer or

exchange of bonds of said series other than for any tax or

taxes or other governmental charge required to be paid by

the Company. The form of the temporary bonds of said

series shall be in substantially the form of the form of

registered bond hereinbefore recited with such appropriate

changes therein as are required on account of the temporary

nature thereof. Said temporary bonds of said series shall

be in registered form without coupons and shall be

exchangeable for definitive bonds of said series when

prepared.

The person in whose name any registered (without

coupons) bond of the Thirty-Eighth Series is registered at

the close of business on any record date (as hereinbelow

defined) with respect to any interest payment date shall be

entitled to receive the interest payable on such interest

payment date notwithstanding the cancellation of such

registered bond upon any transfer or exchange thereof

subsequent to the record date and prior to such interest

payment date, except if and to the extent the Company shall

default in the payment of the interest due on such interest

payment date, in which case such defaulted interest shall

be paid to the person in whose name such bond is registered

either at the close of business on the day preceding the

date of payment of such defaulted interest or on a

subsequent record date for such payment if one shall have

been established as hereinafter provided. A subsequent

record date may be established by or on behalf of the

Company by notice mailed to the holders of bonds not less

than ten days preceding such record date, which record date

shall be not more than thirty days prior to the subsequent

interest payment date. The term "record date" as used in

this Section with respect to any regular interest payment

date shall mean the January 15 or July 15, as the case may

be, next preceding such interest payment date, or, if such

January 15 or July 15 shall be a legal holiday or a day on

which banking institutions in the Borough of Manhattan, The

City of New York, New York, are authorized or obligated by

law to close, the next preceding day which shall not be a

legal holiday or day on which such institutions are so

authorized or obligated to close.

Except as provided in this Section, every

registered bond without coupons of the Thirty-Eighth Series

shall be dated and shall bear interest as provided in

Section 10 of the Indenture; provided, however, that so

long as there is no existing default in the payment of

interest on the bonds, the holder of any bond authenticated

by the Trustee between the record date for any interest

payment date and such interest payment date shall not be

entitled to the payment of the interest due on such

interest payment date and shall have no claim against the

Company with respect thereto; and provided, further, that,

if and to the extent the Company shall default in the

payment of the interest due on such interest payment date,

then any such bond shall bear interest from the February 1

or August 1, as the case may be, next preceding the date of

such bond, to which interest has been paid or, if the

Company shall be in default with respect to the interest

due on February 1, 2000, then from July 26, 1999.

The Company may redeem the bonds of the Thirty-

Eighth Series, in whole or in part, at any time, upon

notice as provided in the Indenture (not less than 30 nor

more than 60 days prior to a date fixed for redemption (the

"Redemption Date")) at a redemption price equal to the

greater of (1) 100% of principal or (2) the sum of the

remaining scheduled payments of principal and interest on

the bonds of the Thirty-Eighth Series, discounted to the

Redemption Date on a semiannual basis (assuming a 360-day

year consisting of twelve 30-day months) at the Treasury

Yield plus ten basis points (.10%), plus in each case

accrued interest to the Redemption Date (the "Redemption

Price"), such Redemption Price to be set forth in an

Officer's Certificate delivered to the Trustee on or before

the Redemption Date and upon which the Trustee may

conclusively rely.

The following terms shall have the following

meanings:

"Treasury Yield" means, with respect to any

Redemption Date, the rate per annum equal to the semiannual

equivalent yield to maturity of the Comparable Treasury

Issue, assuming a price for the Comparable Treasury Issue

(expressed as a percentage of its principal amount) equal

to the Comparable Treasury Price for such Redemption Date.

"Comparable Treasury Issue" means the United

States Treasury security selected by an Independent

Investment Banker as having a maturity comparable to the

remaining term of the bonds of the Thirty-Eighth Series

that would be utilized, at the time of selection and in

accordance with customary financial practice, in pricing

new issues of corporate debt securities of comparable

maturity to the remaining term of the bonds of the Thirty-

Eighth Series.

"Independent Investment Banker" means Goldman,

Sachs & Co. or, if such firm is unwilling or unable to

select the Comparable Treasury Issue, an independent

investment banking institution of national standing

selected by the Company and appointed by the Trustee.

"Comparable Treasury Price" means, with respect

to any Redemption Date, the Reference Treasury Dealer

Quotation for such Redemption Date.

"Reference Treasury Dealer Quotation" means, with

respect to the Reference Treasury Dealer and any Redemption

Date, the average of the bid and asked prices for the

Comparable Treasury Issue (expressed as a percentage of its

principal amount) quoted in writing to the Trustee by such

Reference Treasury Dealer at 5:00 p.m. on the third

business day preceding such Redemption Date. The Company

shall furnish the Trustee a notice in writing at least five

business days and not more than ten business days prior to

such Redemption Date of (a) the name of the Reference

Treasury Dealer, (b) the Redemption Date, and (c) the third

business day preceding the Redemption Date.

"Reference Treasury Dealer" means Goldman, Sachs

& Co. and its successors; provided, however, that if

Goldman, Sachs & Co. shall cease to be a primary U.S.

Government Securities dealer in New York City (a "Primary

Treasury Dealer"), the Company shall substitute therefor

another Primary Treasury Dealer.

The Company shall deliver to the Trustee the

Officer's Certificate referred to above setting forth the

Company's calculation of the Redemption Price applicable to

any such redemption promptly after the calculation thereof

but, in any event, prior to the Redemption Date of any such

bonds of the Thirty-Eighth Series. Except with respect to

the obligations of the Trustee expressly set forth in the

foregoing definition of "Reference Treasury Dealer

Quotation," the Trustee shall be under no duty to inquire

into, may presume the correctness of, and shall be fully

protected in acting upon the Company's calculation of any

Redemption Price of the bonds of the Thirty-Eighth Series.

The bonds of the Thirty-Eighth Series may be

repaid on August 3, 2009, at the option of the registered

holders of the bonds of the Thirty-Eighth Series, at 95.5%

of their principal amount, together with accrued interest

to August 3, 2009. In order for a holder to

exercise this option, the Company must receive at its

office or agency in New York, New York, during the period

beginning on June 3, 2009 and ending at 5:00 p.m. (New York

City time) on July 3, 2009 (or, if July 3, 2009 is not a

Business Day, the next succeeding Business Day), the bonds

of the Thirty-Eighth Series with the form titled "Option to

Elect Repayment on August 3, 2009" on the reverse of the

bonds of the Thirty-Eighth Series duly completed. Any such

notice received by the Company during the period beginning

on June 3, 2009 and ending at 5:00 p.m. (New York City

time) on July 3, 2009 shall be irrevocable. The repayment

option may be exercised by the holder of a bonds of the

Thirty-Eighth Series for less than the entire principal

amount of the bonds of the Thirty-Eighth Series held by

such holder, so long as the principal amount that is to be

repaid is equal to $1,000 or an integral multiple of

$1,000. All questions as to the validity, form,

eligibility (including time of receipt) and acceptance of

any bonds of the Thirty-Eighth Series for repayment will be

determined by the Company, whose determination will be

final and binding.

Failure by the Company to repay the bonds of the

Thirty-Eighth Series when required as described in the

preceding paragraph will result in an Event of Default

under the Indenture.

As long as the bonds of the Thirty-Eighth Series are

represented by a Global Security, the Depositary's nominee

will be the registered holder of the bonds of the Thirty-

Eighth Series and therefore it will be the only entity that

can exercise the right to repayment.

SECTION 2. The Company's obligation to make

payments with respect to the principal of, and/or premium,

if any, and/or interest on, the bonds of the Thirty-Eighth

Series shall be fully or partially satisfied and discharged

to the extent that, at the time any such payment shall be

due, the corresponding amount then due of principal of,

and/or premium, if any, and/or interest then due on, the

senior notes (the "Senior Notes") issued pursuant to the

Indenture (For Senior Notes) dated as of July 1, 1999,

between the Company and Bankers Trust Company, the Senior

Note Trustee (the "Senior Note Indenture") shall have been

fully or partially paid (other than by the application of

the proceeds of a payment in respect of such bonds of the

Thirty-Eighth Series), as the case may be, or there shall

have been deposited with the Senior Note Trustee pursuant

to the Senior Note Indenture trust funds sufficient under

such indenture to fully or partially pay, as the case may

be, the corresponding amount then due of principal of,

and/or premium, if any, and/or interest on, the Senior

Notes (other than by the application of the proceeds of a

payment in respect of such bonds of the Thirty-Eighth

Series).

Upon payment of the principal of, and premium if

any, and interest due on the Senior Notes, whether at

maturity or prior to maturity by acceleration, redemption,

repayment at the option of a registered holder of Senior

Notes or otherwise, or upon provision for the payment

thereof having been made in accordance with the Senior Note

Indenture (other than by the application of the proceeds of

a payment in respect of such bonds of the Thirty-Eighth

Series), bonds of the Thirty-Eighth Series in a principal

amount equal to the principal amount of Senior Notes so

paid or for which such provision for payment has been made

shall be deemed fully paid, satisfied and discharged and

the obligations of the Company thereunder shall be

terminated and such bonds of the Thirty-Eighth Series shall

be surrendered to and cancelled by the Trustee. From and

after the Release Date (as defined in the Senior Note

Indenture), the bonds of the Thirty-Eighth Series shall be

deemed fully paid, satisfied and discharged and the

obligation of the Company thereunder shall be terminated.

On the Release Date, the bonds of the Thirty-Eighth Series

shall be surrendered to and cancelled by the Trustee.

If the registered holder of Senior Notes elects

to have any portion of such Senior Notes repaid on August

3, 2009 pursuant to the terms of such Senior Notes, an

equal principal amount of the bonds of the Thirty-Eighth

Series shall be repaid by the Company to the holder thereof

on such date at 95.5% of such principal amount, together

with accrued interest to August 3, 2009.

SECTION 3. The Company covenants that the

provisions of Section 36A of the Indenture and of Section

1.02 of the Supplemental Indenture dated as of July 1,

1948, which are to remain in effect so long as any bonds of

the series referred to in said Section shall be outstanding

under the Indenture, shall remain in full force and effect

so long as any bonds of the Thirty-Eighth Series shall be

outstanding under the Indenture.

SECTION 4. Except as herein otherwise expressly

provided, no duties, responsibilities or liabilities are

assumed, or shall be construed to be assumed, by the

Trustee by reason of this Supplemental Indenture, other

than as set forth in the Mortgage. The Trustee shall not

be responsible for the recitals herein or in the bonds

(except the Trustee's certificate of authentication), all

of which are made by the Company solely. Without limiting

the generality of the foregoing, the Trustee shall have no

responsibility for, and shall incur no liability with

respect to, the form or substance of the Certificates or

the form or substance of any agreement under which any

banking or other financial institution receives the Deposit

or makes the Payments nor shall the Trustee have any

responsibility, or incur any liability, with respect to the

performance of such banking or other financial institution

under any such agreement.

SECTION 5. As supplemented and amended by this

Supplemental Indenture, the Mortgage is in all respects

ratified and confirmed, and the Mortgage and this

Supplemental Indenture shall be read, taken and construed

as one and the same instrument.

SECTION 6. This Supplemental Indenture may be

executed in several counterparts and all such counterparts

executed and delivered, each as an original, shall

constitute but one and the same instrument.

IN WITNESS WHEREOF, SOUTHERN INDIANA GAS AND

ELECTRIC COMPANY, party of the first part hereto, and

BANKERS TRUST COMPANY, party of the second part hereto,

have caused these presents to be executed in their

respective names by their respective Chairmen of the Board

or Presidents or one of their Vice Presidents or Assistant

Vice Presidents and their respective seals to be hereunto

affixed and attested by their respective Secretaries or one

of their Assistant Secretaries, all as of the day and year

first above written.

(SEAL)                   SOUTHERN INDIANA GAS AND

                           ELECTRIC COMPANY,


                         By:/s/  Timothy L. Burke

                               Name:  Timothy L. Burke

                               Title:  Secretary/Treasurer

Attest:

/s/  Linda K. Tiemann_________

Name:  Linda K. Tiemann

Title:  Assistant Secretary



(SEAL)                   BANKERS TRUST COMPANY,


                         By:/s/  Vincent Chorney

                               Name:  Vincent Chorney

                               Title:  Assistant Vice

                                        President

Attest:

/s/  Marc Parilla__________

Name:  Marc Parilla

Title:  Assistant Vice President

STATE OF INDIANA )

) ss.:

COUNTY OF VANDERBURGH )

On this 26 day of July, 1999, before me, the

undersigned, a notary public in and for the county and

state aforesaid, personally came Timothy L. Burke, to me

known, who being by me duly sworn, did depose and say that

he resides at 3277 Brookfield Drive, Newburgh, Indiana;

that he is Secretary/Treasurer of SOUTHERN INDIANA GAS AND

ELECTRIC COMPANY, one of the corporations described in and

which executed the foregoing instrument; that he knows the

seal of the said corporation; that the seal affixed to said

instrument is such corporate seal; that it was so affixed

by order of the Board of Directors of said corporation and

that he signed his name thereto by like order; and the said

Linda K. Tiemann, Assistant Secretary acknowledged the

execution of the foregoing instrument on behalf of the said

corporation as the voluntary act and deed of the said

corporation for the uses and purposes therein set forth.

IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year first above written.

(SEAL)                   /s/ Donna S. Welden__________

                           Notary Public

My Commission Expires November 29, 2000

My County of Residence is Vanderburgh

STATE OF NEW YORK )

) ss.:

COUNTY OF NEW YORK )

On this 26 day of July, 1999, before me, the undersigned,

a notary public in and for the county and state aforesaid,

personally came Vincent Chorney, to me known, who being by

me duly sworn, did depose and say that he resides at 215 W.

75 Street, New York, NY; that he is an Assistant Vice

President of BANKERS TRUST COMPANY, one of the corporations

described in and which executed the foregoing instrument;

that he knows the seal of the said corporation; that the

seal affixed to said instrument is such corporate seal;

that it was so affixed by order of the Board of Directors

of said corporation and that he signed his name thereto by

like order; and the said Assistant Vice President

acknowledged the execution of the foregoing instrument on behalf of the said corporation as the voluntary act and

deed of the said corporation for the uses and purposes

therein set forth.

IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year first above written.

(SEAL)                        /s/  Boris Treyger

                                Notary Public

My Commission Expires November 9, 2000

My County of Residence is Kings County

SCHEDULE A

Detailed Description of Additional Properties

The following list outlines equipment and properties

pledged as collateral and placed in service between 1993

and 1996:

* Culley Generating Station Units 2 & 3 Scrubber

Project;

* Brown Unit 1 Turbine Blades

* Broadway Gas Turbine Overhaul

* Z-98 Transmission Line Phase 3 Construction

* GE Plastics Substation Purchase (Transmission)

* Point Substation Addition (Transmission)

* System Power Control Center Upgrades

* Deaconess Hospital Substation Upgrades (Distribution)

* Toyota Substation (Distribution)

* Kasson - Copperline Gas Main Installations

* CNG Fueling Station

* Wagner Operation Center Phase 5 Construction and

Improvements

Signed for identification

/s/  Timothy L. Burke

Name:  Timothy L. Burke

Title:  Secretary/Treasurer

SOUTHERN INDIANA GAS AND ELECTRIC

COMPANY

/s/  Marc J. Parilla

Name:  Marc J. Parilla

Title:  Assistant Vice President

BANKERS TRUST COMPANY

SOUTHERN INDIANA GAS AND ELECTRIC COMPANY

TO

BANKERS TRUST COMPANY,

Trustee

First Supplemental Indenture

Dated as of July 1, 1999

to

Indenture

(For Senior Notes)

Dated as of July 1, 1999

6.72% Senior Notes due August 1, 2029

THIS FIRST SUPPLEMENTAL INDENTURE, dated as of July 1,

1999, between SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, a

corporation duly organized and existing under the laws of

the State of Indiana (herein called the "Company"), having

its principal office at 20 N.W. Fourth Street, Evansville,

Indiana 47741-0001, and BANKERS TRUST COMPANY, a banking

corporation of the State of New York, having its principal

office at 4 Albany Street, 4th Floor, New York, New York

10006, as Trustee (herein called the "Trustee") under the

Indenture (For Senior Notes) dated as of July 1, 1999

between the Company and the Trustee (the "Indenture").

Capitalized terms used but not defined herein shall have

the meanings given them in the Indenture.

RECITALS OF THE COMPANY

A. The Company has executed and delivered the

Indenture to the Trustee to provide for the issuance from

time to time of its Senior Notes (the "Notes"), said Notes

to be issued in one or more series as in the Indenture

provided.

B. Pursuant to the terms of the Indenture, the

Company desires to establish a new series of its Notes to

be known as its 6.72% Senior Notes due 2029 (herein called

the "Senior Notes Due 2029"), the form and substance of

such Senior Notes Due 2029 and the terms, provisions, and

conditions thereof to be set forth as provided in the

Indenture and this First Supplemental Indenture.

C. All things necessary to make this First

Supplemental Indenture a valid agreement of the Company,

and to make the Senior Notes Due 2029, when executed by the

Company and authenticated and delivered by the Trustee, the

valid obligations of the Company, have been done.

NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE

WITNESSETH:

For and in consideration of the premises and the

purchase of the Senior Notes Due 2029 by the Holders

thereof, and for the purpose of setting forth, as provided

in the Indenture, the form and substance of the Senior

Notes Due 2029 and the terms, provisions, and conditions

thereof, it is mutually agreed, for the equal and

proportionate benefit of all Holders of the Senior Notes

Due 2029, as follows:

ARTICLE I

GENERAL TERMS AND CONDITIONS OF THE SENIOR NOTES DUE 2029

Section 101 There is hereby established a series of

Notes designated the "6.72% Senior Notes due 2029," limited

in the aggregate principal amount of EIGHTY MILLION AND

NO/100 DOLLARS ($80,000,000). Such series of Notes shall

be initially authenticated and delivered from time to time

upon delivery to the Trustee of the documents required by

Section 303 of the Indenture including, among other things,

a Company Order for the authentication and delivery of the

Senior Notes Due 2029.

Section 102 The Senior Notes Due 2029 shall be

issued in certificated form, except that the Senior Notes

Due 2029 shall be issued initially as a Global Note to and

registered in the name of a nominee of The Depository Trust

Company, as Depositary therefor. Any Senior Notes Due 2029

to be issued or transferred to, or to be held by such

nominee (or any successor thereof) for such purpose shall

bear the depositary legend in substantially the form set

forth at the top of the form of Senior Notes Due 2029 in

Article II hereof, unless otherwise agreed by the Company,

such agreement to be confirmed in writing to the Trustee.

Such Global Note may be exchanged in whole or in part for

Senior Notes Due 2029 registered, and any transfer of such

Global Note in whole or in part may be registered, in the

name or names of Persons other than such Depositary or a

nominee thereof as to which the Company shall agree, such

agreement to be confirmed in writing to the Trustee.

Principal of, and premium, if any, and interest on the

Senior Notes Due 2029 will be payable, the transfer of

Senior Notes Due 2029 will be registrable and Senior Notes

Due 2029 will be exchangeable for Senior Notes Due 2029

bearing identical terms and provisions, at the office or

agency of the Company in the Borough of Manhattan, The City

and State of New York; provided, however, that payment of

interest may be made at the option of the Company by check

mailed to the registered Holders thereof at such address as

shall appear in the Note Register. The Senior Notes Due

2029 shall have the terms set forth in the form of the

Senior Notes Due 2029 set forth in Article II hereof.

Section 103 The Company may redeem the Senior Notes

Due 2029, in whole or in part, at any time, upon notice as

provided in the Indenture (not less than 30 nor more than

60 days prior to a date fixed for redemption (the

"Redemption Date")) at a redemption price equal to the

greater of (1) 100% of principal or (2) the sum of the

remaining scheduled payments of principal and interest on

the Senior Notes Due 2029, discounted to the Redemption

Date on a semiannual basis (assuming a 360-day year

consisting of twelve 30-day months) at the Treasury Yield

plus ten basis points (.10%), plus in each case accrued

interest to the Redemption Date (the "Redemption Price"),

such Redemption Price to be set forth in an Officer's

Certificate delivered to the Trustee on or before the

Redemption Date and upon which the Trustee may conclusively

rely.

For purposes of this Section 103, the following terms

shall have the following meanings:

"Treasury Yield" means, with respect to any Redemption

Date, the rate per annum equal to the semiannual equivalent

yield to maturity of the Comparable Treasury Issue,

assuming a price for the Comparable Treasury Issue

(expressed as a percentage of its principal amount) equal

to the Comparable Treasury Price for such Redemption Date.

"Comparable Treasury Issue" means the United States

Treasury security selected by an Independent Investment

Banker as having a maturity comparable to the remaining

term of the Senior Notes Due 2029 that would be utilized,

at the time of selection and in accordance with customary

financial practice, in pricing new issues of corporate debt

securities of comparable maturity to the remaining term of

the Senior Notes Due 2029.

"Independent Investment Banker" means Goldman, Sachs &

Co. or, if such firm is unwilling or unable to select the

Comparable Treasury Issue, an independent investment

banking institution of national standing selected by the

Company and appointed by the Trustee.

"Comparable Treasury Price" means, with respect to any

Redemption Date, the Reference Treasury Dealer Quotation

for such Redemption Date.

"Reference Treasury Dealer Quotation" means, with

respect to the Reference Treasury Dealer and any Redemption

Date, the average of the bid and asked prices for the

Comparable Treasury Issue (expressed as a percentage of its

principal amount) quoted in writing to the Trustee by such

Reference Treasury Dealer at 5:00 p.m. on the third

business day preceding such Redemption Date. The Company

shall furnish the Trustee a notice in writing at least five

business days and not more than ten business days prior to

such Redemption Date of (a) the name of the Reference

Treasury Dealer, (b) the Redemption Date, and (c) the third

business day preceding the Redemption Date.

"Reference Treasury Dealer" means Goldman, Sachs & Co.

and its successors; provided, however, that if Goldman,

Sachs & Co. shall cease to be a primary U.S. Government

Securities dealer in New York City (a "Primary Treasury

Dealer"), the Company shall substitute therefor another

Primary Treasury Dealer.

The Company shall deliver to the Trustee the Officer's

Certificate referred to above in this Section 103 setting

forth the Company's calculation of the Redemption Price

applicable to any such redemption promptly after the

calculation thereof but, in any event, prior to the

Redemption Date of any such Senior Notes Due 2029. Except

with respect to the obligations of the Trustee expressly

set forth in the foregoing definition of "Reference

Treasury Dealer Quotation," the Trustee shall be under no

duty to inquire into, may presume the correctness of, and

shall be fully protected in acting upon the Company's

calculation of any Redemption Price of the Senior Notes Due

2029.

Section 104 The Senior Notes Due 2029 may be repaid

on August 3, 2009, at the option of the registered holders

of the Senior Notes Due 2029, at 95.5% of their principal

amount, together with accrued interest to August 3, 2009.

In order for a holder to exercise this option, the Company

must receive at its office or agency in New York, New York,

during the period beginning on June 3, 2009 and ending at

5:00 p.m. (New York City time) on July 3, 2009 (or, if July

3, 2009 is not a Business Day, the next succeeding Business

Day), the Senior Note Due 2029 with the form titled "Option

to Elect Repayment on August 3, 2009" on the reverse of the

Senior Note Due 2029 duly completed. Any such notice

received by the Company during the period beginning on June

3, 2009 and ending at 5:00 p.m. (New York City time) on

July 3, 2009 shall be irrevocable. The repayment option

may be exercised by the holder of a Senior Note Due 2029

for less than the entire principal amount of the Senior

Notes Due 2029 held by such holder, so long as the

principal amount that is to be repaid is equal to $1,000 or

an integral multiple of $1,000. All questions as to the

validity, form, eligibility (including time of receipt) and

acceptance of any Senior Note Due 2029 for repayment will

be determined by the Company, whose determination will be

final and binding.

Failure by the Company to repay the Senior Notes Due

2029 when required as described in the preceding paragraph

will result in an Event of Default under the Indenture.

As long as the Senior Notes Due 2029 are represented

by a Global Security, the Depositary's nominee will be the

registered holder of the Senior Notes Due 2029 and

therefore it will be the only entity that can exercise the

right to repayment.

Section 105 The Company has issued pursuant to

a Supplemental Indenture dated as of July 1, 1999 to the

First Mortgage, and hereby delivers to the Trustee for the

benefit of the Holders of all Notes from time to time

Outstanding under the Indenture, a series of Senior Note

First Mortgage Bonds designated the "First Mortgage Bonds,

6.72% Senior Note Series Due 2029." The Senior Note First

Mortgage Bonds have the same rate or rates of interest (or

interest calculated in the same manner) (including interest

payable following a default on the Senior Notes Due 2029),

interest payment dates, maturity and redemption provisions,

and have been issued in the same aggregate principal

amount, as the Senior Notes Due 2029.

Section 106 When the obligation of the Company

to make payments with respect to the principal of, and

premium, if any, and interest on all or any part of the

Senior Note First Mortgage Bonds shall be satisfied or

deemed satisfied pursuant to Section 403, Section 801 or

Section 802 of the Indenture or pursuant to Section 103 of

this First Supplemental Indenture, the Trustee shall, upon

written request of the Company and the receipt of the

certificate of the Expert described in Section 404(b) of

the Indenture (if such certificate is then required by

Section 404(b) of the Indenture), deliver to the Company

without charge therefor all of the Senior Note First

Mortgage Bonds so satisfied or deemed satisfied, together

with such appropriate instruments of transfer or release as

may be reasonably requested by the Company. All Senior

Note First Mortgage Bonds delivered to the Company in

accordance with this Section 106 shall be delivered by the

Company to the Mortgage Trustee for cancellation.

Section 107 The Senior Notes Due 2029 shall be

defeasible pursuant to Section 801 of the Indenture.

ARTICLE II

FORM OF

6.72% SENIOR NOTES DUE 2029

Section 201 The Senior Notes Due 2029 and the

Trustee's certificate of authentication to be endorsed are

to be substantially in the following forms:

[Form of Face of Note]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED

REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK

CORPORATION ("DTC"), TO SOUTHERN INDIANA GAS AND ELECTRIC

COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,

EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS

REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME

AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND

ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY

AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),

ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR

OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE

REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST

HEREIN.

SOUTHERN INDIANA GAS AND ELECTRIC COMPANY

6.72% Senior Notes due 2029

No. ____ $__________

CUSIP No. 843163AX4

Southern Indiana Gas and Electric, a corporation duly

organized and existing under the laws of the State of

Indiana (herein called the "Company", which term includes

any successor Person under the Indenture hereinafter

referred to), for value received, hereby promises to pay to

___________, or registered assigns, the principal sum of

__________ Dollars ($_________) on August 1, 2029, and to

pay interest thereon from July 26, 1999 or from the most

recent Interest Payment Date with respect to which interest

has been paid or duly provided for, semi-annually on

February 1 and August 1 in each year (each an "Interest

Payment Date"), commencing February 1, 2000, at the rate of

6.72% per annum, until the principal hereof is paid or made

available for payment, provided that any principal and

premium, and any such installment of interest, which is

overdue shall bear interest at the rate of 6.72% per annum

(to the extent that the payment of such interest shall be

legally enforceable); from the dates such amounts are due

until they are paid or made available for payment, and such

interest shall be payable on demand. The interest so

payable, and punctually paid or duly provided for, on any

Interest Payment Date will, as provided in such Indenture,

be paid to the Person in whose name this Note (or one or

more Predecessor Notes) is registered at the close of

business on the Regular Record Date for such interest,

which shall be the January 15 or July 15 (whether or not a

Business Day), as the case may be, next preceding such

Interest Payment Date. Any such interest not so punctually

paid or duly provided for will forthwith cease to be

payable to the Holder on such Regular Record Date and may

either be paid to the Person in whose name this Note (or

one or more Predecessor Notes) is registered at the close

of business on a Special Record Date for the payment of

such Defaulted Interest to be fixed by the Trustee, notice

whereof shall be given to Holders of Notes of this series

not less than 10 days prior to such Special Record Date, or

be paid at any time in any other lawful manner not

inconsistent with the requirements of any securities

exchange on which the Notes of this series may be listed,

and upon such notice as may be required by such exchange,

all as more fully provided in said Indenture.

Payment of the principal of (and premium if any) and

such interest on this Note will be made at the office or

agency of the Company maintained for that purpose in The

City of New York, in such coin or currency of the United

States of America as at the time of payment is legal tender

for payment of public and private debts; provided, however,

that at the option of the Company payment of such interest

may be made by check mailed to the address of the Person

entitled thereto as such address shall appear in the Note

Register.

The amount of interest payable for any period will be

computed on the basis of a 360-day year of twelve 30-day

months. Interest will accrue from each prior Interest

Payment Date to, but not including, the relevant payment

date. In the event that any date on which interest is

payable on the Notes of this series is not a Business Day

at any Place of Payment, then payment of interest or

principal and premium, if any, need not be made at such

Place of Payment on such date, but may be made on the next

succeeding Business Day at such Place of Payment with the

same force and effect as if made on the Interest Payment

Date or Redemption Date, or at the Stated Maturity, and, if

such payment is made or duly provided for on such Business

Day, no interest shall accrue on the amount so payable for

the period from and after such Interest Payment Date,

Redemption Date or Stated Maturity, as the case may be, to

such Business Day. A "Business Day" means when used with

respect to a Place of Payment or any other particular

location specified in the Indenture, means any day, other

than a Saturday or Sunday, which is not a day on which

banking institutions or trust companies in such Place of

Payment or other location are generally authorized or

required by law, regulation or executive order to remain

closed.

Reference is hereby made to the further provisions of

this Note set forth below, which further provisions shall

for all purposes have the same effect as if set forth at

this place.

Unless the certificate of authentication hereon has

been executed by the Trustee referred to below by manual

signature, this Note shall not be entitled to any benefit

under the Indenture or be valid or obligatory for any

purpose.

IN WITNESS WHEREOF, the Company has caused this

instrument to be duly executed under its corporate seal.

SOUTHERN INDIANA GAS AND ELECTRIC COMPANY

By:________________________

Attest:

[Form of Reverse of Note]

This Note is one of a duly authorized issue of

securities of the Company (herein called the "Notes"),

issued and to be issued in one or more series under an

Indenture (For Senior Notes), dated as of July 1, 1999

(herein called the "Indenture", which term shall have the

meaning assigned to it in such instrument), between the

Company and Bankers Trust Company, as Trustee (herein

called the "Trustee", which term includes any successor

trustee under the Indenture), and reference is hereby made

to the Indenture for a statement of the respective rights,

limitations of rights, duties and immunities thereunder of

the Company, the Trustee and the Holders of the Notes and

of the terms upon which the Notes are, and are to be,

authenticated and delivered. This Note is one of the

series designated on the face hereof, limited in aggregate

principal amount to $80,000,000.

Prior to the Release Date (as hereinafter defined),

this Note will be secured by first mortgage bonds (the

"Senior Note First Mortgage Bonds") delivered by the

Company to the Trustee for the benefit of all Holders of

Notes from time to time Outstanding, issued under the

Indenture, dated as of April 1, 1932, between the Company

and Bankers Trust Company, as trustee, as supplemented and

amended from time to time (the "First Mortgage").

Reference is made to the First Mortgage for a description

of property mortgaged and pledged, the nature and extent of

the security, the rights of the holders of the first

mortgage bonds under the First Mortgage and of the Mortgage

Trustee in respect thereof, the duties and immunities of

the Mortgage Trustee and the terms and conditions upon

which the Senior Note First Mortgage Bonds are secured and

the circumstances under which additional first mortgage

bonds may be issued.

FROM AND AFTER SUCH TIME AS ALL FIRST MORTGAGE BONDS,

OTHER THAN FIRST MORTGAGE BONDS WHICH DO NOT IN AGGREGATE

PRINCIPAL AMOUNT EXCEED THE GREATER OF FIVE PERCENT (5%) OF

THE COMPANY'S NET TANGIBLE ASSETS OR FIVE PERCENT (5%) OF

THE COMPANY'S CAPITALIZATION, HAVE BEEN RETIRED THROUGH

REPAYMENT, REDEMPTION OR OTHERWISE (INCLUDING THOSE FIRST

MORTGAGE BONDS THE PAYMENT FOR WHICH HAS BEEN PROVIDED FOR

IN ACCORDANCE WITH THE FIRST MORTGAGE) AT, BEFORE OR AFTER

THE MATURITY THEREOF, PROVIDED THAT NO DEFAULT OR EVENT OF

DEFAULT HAS OCCURRED AND IS CONTINUING (THE "RELEASE

DATE"), THE SENIOR NOTE FIRST MORTGAGE BONDS SHALL CEASE TO

SECURE THE NOTES IN ANY MANNER.

The Company may redeem the Senior Notes Due 2029, in

whole or in part, at any time, upon notice as provided in

the Indenture (not less than 30 nor more than 60 days prior

to a date fixed for redemption (the "Redemption Date")) at

a redemption price equal to the greater of (1) 100% of

principal or (2) the sum of the remaining scheduled

payments of principal and interest on the Senior Notes Due

2029, discounted to the Redemption Date on a semiannual

basis (assuming a 360-day year consisting of twelve 30-day

months) at the Treasury Yield plus ten basis points (.10%),

plus in each case accrued interest to the Redemption Date

(the "Redemption Price"), such Redemption Price to be set

forth in an Officer's Certificate delivered to the Trustee

on or before the Redemption Date and upon which the Trustee

may conclusively rely.

The following terms shall have the following meanings:

"Treasury Yield" means, with respect to any Redemption

Date, the rate per annum equal to the semiannual equivalent

yield to maturity of the Comparable Treasury Issue,

assuming a price for the Comparable Treasury Issue

(expressed as a percentage of its principal amount) equal

to the Comparable Treasury Price for such Redemption Date.

"Comparable Treasury Issue" means the United States

Treasury security selected by an Independent Investment

Banker as having a maturity comparable to the remaining

term of the Senior Notes Due 2029 that would be utilized,

at the time of selection and in accordance with customary

financial practice, in pricing new issues of corporate debt

securities of comparable maturity to the remaining term of

the Senior Notes Due 2029.

"Independent Investment Banker" means Goldman, Sachs &

Co. or, if such firm is unwilling or unable to select the

Comparable Treasury Issue, an independent investment

banking institution of national standing selected by the

Company and appointed by the Trustee.

"Comparable Treasury Price" means, with respect to any

Redemption Date, the Reference Treasury Dealer Quotation

for such Redemption Date.

"Reference Treasury Dealer Quotation" means, with

respect to the Reference Treasury Dealer and any Redemption

Date, the average of the bid and asked prices for the

Comparable Treasury Issue (expressed as a percentage of its

principal amount) quoted in writing to the Trustee by such

Reference Treasury Dealer at 5:00 p.m. on the third

business day preceding such Redemption Date. The Company

shall furnish the Trustee a notice in writing at least five

business days and not more than ten business days prior to

such Redemption Date of (a) the name of the Reference

Treasury Dealer, (b) the Redemption Date, and (c) the third

business day preceding the Redemption Date.

"Reference Treasury Dealer" means Goldman, Sachs & Co.

and its successors; provided, however, that if Goldman,

Sachs & Co. shall cease to be a primary U.S. Government

Securities dealer in New York City (a "Primary Treasury

Dealer"), the Company shall substitute therefor another

Primary Treasury Dealer.

The Company shall deliver to the Trustee the Officer's

Certificate referred to above setting forth the Company's

calculation of the Redemption Price applicable to any such

redemption promptly after the calculation thereof but, in

any event, prior to the Redemption Date of any such Senior

Notes Due 2029. Except with respect to the obligations of

the Trustee expressly set forth in the foregoing definition

of "Reference Treasury Dealer Quotation," the Trustee shall

be under no duty to inquire into, may presume the

correctness of, and shall be fully protected in acting upon

the Company's calculation of any Redemption Price of the

Senior Notes Due 2029.

This Senior Note Due 2029 may be repaid on August 3,

2009, at the option of the registered holder hereof, at

95.5% of its principal amount, together with accrued

interest to August 3, 2009. In order for the holder to

exercise this option, the Company must receive at its

office or agency in New York, New York, during the period

beginning on June 3, 2009 and ending at 5:00 p.m. (New York

City time) on July 3, 2009 (or, if July 3, 2009 is not a

Business Day, the next succeeding Business Day), this

Senior Note Due 2029 with the form titled "Option to Elect

Repayment on August 3, 2009" on the reverse hereof duly

completed. Any such notice received by the Company during

the period beginning on June 3, 2009 and ending at 5:00

p.m. (New York City time) on July 3, 2009 (or, if July 3,

2009 is not a Business Day, the next succeeding Business

Day) shall be irrevocable. No transfer or exchange of this

Senior Note Due 2029 (or, in the event that this Senior

Note Due 2029 is to be repaid in part, such portion of this

Senior Note Due 2029 to be repaid) will be permitted after

such notice is received by the Company. The repayment

option may be exercised by the holder hereof for less than

the entire principal amount of the Senior Notes Due 2029

held by such holder, so long as the principal amount that

is to be repaid is equal to $1,000 or an integral multiple

of $1,000. All questions as to the validity, form,

eligibility (including time of receipt) and acceptance of

any Senior Note Due 2029 for repayment will be determined

by the Company, whose determination will be final and

binding.

Failure by the Company to repay the Senior Notes Due

2029 when required as described in the preceding paragraph

will result in an Event of Default under the Indenture.

As long as the Senior Notes Due 2029 are represented

by a Global Security, the Depositary's nominee will be the

registered holder of the Senior Notes Due 2029 and

therefore it will be the only entity that can exercise the

right to repayment.

If notice has been given as provided in the Indenture

and funds for the redemption of any Notes (or any portion

thereof) called for redemption shall have been made

available on the redemption date referred to in such

notice, such Notes (or any portion thereof) will cease to

bear interest on the date fixed for such redemption

specified in such notice and the only right of the Holders

of such Notes will be to receive payment of the Redemption

Price.

Notice of any optional redemption of Notes of this

series (or any portion thereof) will be given to Holders at

their addresses, as shown in the Note Register for such

Notes, not more than 60 nor less than 30 days prior to the

date fixed for redemption. The notice of redemption will

specify, among other items, the method of calculation of

the Redemption Price and the principal amount of the Notes

held by such Holder to be redeemed. If less than all of

the Notes are to be redeemed at the option of the Company,

the Trustee shall select, in such manner as it shall deem

fair and appropriate, the portion of such Note to be

redeemed in whole or in part.

The Notes of this series will not be subject to any

sinking fund.

In the event of redemption of this Note in part only,

a new Note or Notes of this series and of like tenor for

the unredeemed portion hereof will be issued in the name of

the Holder hereof upon the cancellation hereof.

The Indenture contains provisions for defeasance at

any time of the entire indebtedness of this Note upon

compliance with certain conditions set forth in the

Indenture.

If an Event of Default with respect to Notes of this

series shall occur and be continuing, the principal of the

Notes may be declared due and payable in the manner and

with the effect provided in the Indenture and, upon such

declaration, the Trustee shall demand the acceleration of

the payment of principal of the Senior Note First Mortgage

Bonds as provided in the Indenture.

The Indenture permits, with certain exceptions as

therein provided, the amendment thereof and the

modification of the rights and obligations of the Company

and the rights of the Holders of the Notes to be affected

under the Indenture at any time by the Company and the

Trustee with the consent of the Holders of specified

percentages of the Notes Outstanding. The Indenture also

contains provisions permitting the Holders of specified

percentages in principal amount of the Notes at the time

Outstanding, on behalf of the Holders of all Notes, to

waive compliance by the Company with certain provisions of

the Indenture and certain past defaults under the Indenture

and their consequences. Any such consent or waiver by the

Holder of this Note shall be conclusive and binding upon

such Holder and upon all future Holders of this Note and of

any Note issued upon the registration of transfer hereof or

in exchange therefor or in lieu hereof, whether or not

notation of such consent or waiver is made upon this Note.

As provided in and subject to the provisions of the

Indenture, the Holder of this Note shall not have the right

to institute any proceeding with respect to the Indenture

or for the appointment of a receiver or trustee or for any

other remedy thereunder, unless such Holder shall have

previously given the Trustee written notice of a continuing

Event of Default with respect to the Notes of this series,

the Holders of not less than a majority in aggregate

principal amount of the Notes of all series at the time

Outstanding in respect of which an Event of Default shall

have occurred and be continuing shall have made written

request to the Trustee to institute proceedings in respect

of such Event of Default as Trustee and offered the Trustee

reasonable indemnity, and the Trustee shall not have

received from the Holders of a majority in principal amount

of Notes of all series at the time Outstanding in respect

of which an Event of Default shall have occurred and be

continuing a direction inconsistent with such request, and

shall have failed to institute any such proceeding for 60

days after receipt of such notice, request and offer of

indemnity. The foregoing shall not apply to any suit

instituted by the Holder of this Note for the enforcement

of any payment of principal hereof or any premium or

interest hereon on or after the respective due dates

expressed herein.

No reference herein to the Indenture and no provision

of this Note or of the Indenture shall alter or impair the

obligation of the Company, which is absolute and

unconditional, to pay the principal of and any premium and

interest on this Note at the times, place and rate, and in

the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain

limitations therein set forth, the transfer of this Note is

registrable in the Note Register, upon surrender of this

Note for registration of transfer at the office or agency

of the Company in any place where the principal of and any

premium and interest on this Note are payable, duly

endorsed by, or accompanied by a written instrument of

transfer in form satisfactory to the Company and the Note

Registrar duly executed by, the Holder hereof or his

attorney duly authorized in writing, and thereupon one or

more new Notes of this series and of like tenor, of

authorized denominations and for the same aggregate

principal amount, will be issued to the designated

transferee or transferees.

The Notes of this series are issuable only in

registered form without coupons in denominations of $1,000

and any integral multiple thereof. As provided in the

Indenture and subject to certain limitations therein set

forth, Notes of this series are exchangeable for a like

aggregate principal amount of Notes of this series and of

like tenor of a different authorized denomination, as

requested by the Holder surrendering the same.

No service charge shall be made for any such

registration of transfer or exchange, but the Company may

require payment of a sum sufficient to cover any tax or

other governmental charge payable in connection therewith.

Prior to due presentment of this Note for registration

of transfer, the Company, the Trustee and any agent of the

Company or the Trustee may treat the Person in whose name

this Note is registered as the owner hereof for all

purposes, whether or not this Note be overdue, and neither

the Company, the Trustee nor any such agent shall be

affected by notice to the contrary.

All terms used in this Note that are defined in the

Indenture shall have the meanings assigned to them in the

Indenture.

[Form of Option to Elect Repayment]

OPTION TO ELECT REPAYMENT ON AUGUST 3, 2009

The undersigned hereby irrevocably request(s) and

instruct(s) the Corporation to repay this Note (or portion

hereof specified below) pursuant to its terms at a price

equal to 95.5% of the principal amount to be repaid,

together with unpaid interest accrued hereon to August 3,

2009, to the undersigned, at:

(Please print or typewrite name and address of the

undersigned)

For this Note to be repaid, the Trustee must receive

at its Corporate Trust Office in The City of New York,

State of New York, currently located at 4 Albany Street, 4th

Floor, New York, New York 10006, during the period

beginning on June 3, 2009 and ending at 5:00 p.m. (New York

City time) on July 3, 2009 (or if July 3, 2009 is not a

Business Day, the next succeeding Business Day), this Note

with this "Option to Elect Repayment on August 3, 2009"

form duly completed.

If less than the entire principal amount of this Note

is to be repaid, specify the portion thereof (which shall

be in increments of $1,000) which the holder elects to have

repaid and specify the denomination or denominations of the

Notes to be issued to the holder for the portion of this

Note not being repaid (in the absence of any such

specification, one such Note will be issued for the portion

not being repaid).

Principal Amount

to be Repaid: $_______________

Date:__________     ______________________________________

                    Notice:  The signature(s) on this

                    Option to Elect Repayment on

                    August 3, 2009 must correspond

                    with the name(s) as written upon the

                    face of this Note in every particular,

                    without alteration or enlargement or

                    any change whatsoever.

[Form of Trustee's Certificate of Authentication]

CERTIFICATE OF AUTHENTICATION

This is one of the Notes of the series designated

therein referred to in the within-mentioned Indenture.

Dated: ___________________

BANKERS TRUST COMPANY,

as Trustee

By:___________________

Authorized Signatory

ARTICLE III

ORIGINAL ISSUE OF SENIOR NOTES DUE 2029

Section 301 Senior Notes Due 2029 in the

aggregate principal amount of $80,000,000, may, upon

execution of this First Supplemental Indenture, be executed

by the Company by an Authorized Officer and delivered to

the Trustee for authentication, and the Trustee shall

thereupon authenticate and deliver said Notes upon receipt

of and in accordance with a Company Order therefor without

any further action by the Company.

ARTICLE IV

PAYING AGENT AND REGISTRAR

Section 401 Bankers Trust Company will be the

Paying Agent and Note Registrar for the Senior Notes Due

2029.

ARTICLE V

MISCELLANEOUS PROVISIONS

Section 501 Except as otherwise expressly

provided in this First Supplemental Indenture or in the

form of Senior Notes Due 2029 or otherwise clearly required

by the context hereof or thereof, all terms used herein or

in said form of Senior Notes Due 2029 that are defined in

the Indenture shall have the several meanings respectively

assigned to them thereby.

Section 502 The Indenture, as supplemented by

this First Supplemental Indenture, is in all respects

ratified and confirmed, and this First Supplemental

Indenture shall be deemed part of the Indenture in the

manner and to the extent herein and therein provided.

Section 503 The Trustee hereby accepts the

trusts herein declared, provided, created, supplemented, or

amended and agrees to perform the same upon the terms and

conditions herein and in the Indenture set forth and upon

the following terms and conditions:

The Trustee shall not be responsible in any manner

whatsoever for or in respect of the validity or sufficiency

of this First Supplemental Indenture or for or in respect

of the recitals contained herein, all of which recitals are

made by the Company solely. In general, each and every

term and condition contained in Article Seven of the

Indenture shall apply to and form part of this First

Supplemental Indenture with the same force and effect as if

the same were herein set forth in full with such omissions,

variations, and insertions, if any, as may be appropriate

to make the same conform to the provisions of this First

Supplemental Indenture.

This instrument may be executed in any number of

counterparts, each of which so executed shall be deemed to

be an original, but all such counterparts shall together

constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused

this First Supplemental Indenture to be duly executed, and

their respective corporate seals to be hereunto affixed and

attested, all as of the day and year first above written.

SOUTHERN INDIANA GAS AND ELECTRIC

COMPANY

                    By:/s/  Timothy L. Burke

[SEAL]              Name:  Timothy L. Burke

                    Title:  Secretary / Treasurer


ATTEST:



/s/  Linda K. Tiemann

Name:  Linda K. Tiemann

Title:  Assistant Secretary

(Trustee's Signature Page Follows)

Trustee's Signature Page

First Supplemental Indenture, dated as of July 1, 1999, to

Indenture (For Senior Notes), dated as of July 1, 1999

BANKERS TRUST COMPANY, as Trustee

                        By: /s/  Vincent Chorney

[SEAL]                  Name:  Vincent Chorney

                        Title:  Assistant Vice President


ATTEST:


/s/  Marc Parilla

Name:  Marc Parilla

Title:  Assistant Vice President