Exhibit 10.1

 

LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT, KENTUCKY

 

AND

 

LOUISVILLE GAS AND ELECTRIC COMPANY

 

A Kentucky Corporation

 

*   *  *  *  *

 

LOAN AGREEMENT IN CONNECTION
WITH POLLUTION CONTROL FACILITIES

 

*   *   *   *   *

 

Dated as February 1, 2005

 

*   *   *   *   *

 

NOTICE:        The interest of the Louisville/Jefferson County Metro Government,
Kentucky, in and to this Loan Agreement has been assigned to Deutsche Bank Trust
Company Americas, as Trustee, under the Indenture of Trust dated as of
February 1, 2005

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

 

 

 

 

SECTION 1.1.

USE OF DEFINED TERMS

 

SECTION 1.2.

INCORPORATION OF CERTAIN TERMS BY REFERENCE

 

SECTION 1.3.

ADDITIONAL DEFINITIONS

 

 

 

 

ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS

 

 

 

 

SECTION 2.1.

REPRESENTATIONS, WARRANTIES AND COVENANTS BY ISSUER

 

SECTION 2.2.

REPRESENTATIONS, WARRANTIES AND COVENANTS BY COMPANY

 

 

 

 

ARTICLE III COMPLETION AND OWNERSHIP OF PROJECT

 

 

 

 

SECTION 3.1.

COMPLETION AND EQUIPPING OF PROJECT

 

SECTION 3.2.

AGREEMENT AS TO OWNERSHIP OF PROJECT

 

SECTION 3.3.

USE OF PROJECT

 

 

 

 

ARTICLE IV ISSUANCE OF 2005 SERIES A BONDS; APPLICATION OF PROCEEDS; COMPANY TO
ISSUE FIRST MORTGAGE BONDS

 

 

 

 

SECTION 4.1.

AGREEMENT TO ISSUE 2005 SERIES A BONDS; APPLICATION OF 2005 SERIES A BOND
PROCEEDS

 

SECTION 4.2.

PAYMENT AND DISCHARGE OF REFUNDED 1995 SERIES A BONDS

 

SECTION 4.3.

INVESTMENT OF BOND FUND AND REBATE FUND MONEYS

 

SECTION 4.4.

SPECIAL ARBITRAGE CERTIFICATIONS

 

SECTION 4.5.

OPINION OF BOND COUNSEL

 

SECTION 4.6.

FIRST MORTGAGE BONDS

 

 

 

 

ARTICLE V PROVISIONS FOR PAYMENT

 

 

 

 

SECTION 5.1.

LOAN PAYMENTS AND OTHER AMOUNTS PAYABLE

 

SECTION 5.2.

PAYMENTS ASSIGNED

 

SECTION 5.3.

TAXES AND OTHER GOVERNMENTAL CHARGES

 

SECTION 5.4.

OBLIGATIONS OF COMPANY UNCONDITIONAL

 

SECTION 5.5.

REBATE FUND

 

SECTION 5.6.

REDEMPTION OF THE 2005 SERIES A BONDS IN ADVANCE OF SCHEDULED MATURITY

 

SECTION 5.7.

CANCELLATION OF 2005 SERIES A BONDS

 

 

 

 

ARTICLE VI MAINTENANCE; DAMAGE, DESTRUCTION AND CONDEMNATION; USE OF NET
PROCEEDS; INSURANCE

 

 

 

 

SECTION 6.1.

MAINTENANCE

 

SECTION 6.2.

INSURANCE

 

 

 

 

ARTICLE VII SPECIAL COVENANTS

 

 

 

 

SECTION 7.1.

NO WARRANTY OF CONDITION OR SUITABILITY BY ISSUER

 

SECTION 7.2.

COMPANY TO MAINTAIN ITS CORPORATE EXISTENCE; CONDITIONS UNDER WHICH EXCEPTIONS
PERMITTED

 

SECTION 7.3. [a05-6725_1ex10d01.htm#Section7_3_132610]

FINANCIAL STATEMENTS [a05-6725_1ex10d01.htm#Section7_3_132610]

 

SECTION 7.4. [a05-6725_1ex10d01.htm#Section7_4__132618]

FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS
[a05-6725_1ex10d01.htm#Section7_4__132618]

 

SECTION 7.5. [a05-6725_1ex10d01.htm#Section7_5__132624]

ISSUER REPRESENTATIVE [a05-6725_1ex10d01.htm#Section7_5__132624]

 

SECTION 7.6. [a05-6725_1ex10d01.htm#Section7_6__132655]

COMPANY REPRESENTATIVE [a05-6725_1ex10d01.htm#Section7_6__132655]

 

SECTION 7.7. [a05-6725_1ex10d01.htm#Section7_7__132708]

FINANCING STATEMENTS [a05-6725_1ex10d01.htm#Section7_7__132708]

 

SECTION 7.8. [a05-6725_1ex10d01.htm#Section7_8__132711]

COMPANY’S PERFORMANCE UNDER INDENTURE [a05-6725_1ex10d01.htm#Section7_8__132711]

 

SECTION 7.9. [a05-6725_1ex10d01.htm#Section7_9__132714]

NEGATIVE PLEDGE [a05-6725_1ex10d01.htm#Section7_9__132714]

 

 

 

 

ARTICLE VIII ASSIGNMENT; INDEMNIFICATION; REDEMPTION
[a05-6725_1ex10d01.htm#Articleviii_135917]

 

 

 

 

SECTION 8.1. [a05-6725_1ex10d01.htm#Section8_1__132720]

ASSIGNMENT [a05-6725_1ex10d01.htm#Section8_1__132720]

 

SECTION 8.2. [a05-6725_1ex10d01.htm#Section8_2_132727]

RELEASE AND INDEMNIFICATION COVENANTS [a05-6725_1ex10d01.htm#Section8_2_132727]

 

SECTION 8.3. [a05-6725_1ex10d01.htm#Section8_3__132730]

ASSIGNMENT OF INTEREST IN AGREEMENT BY ISSUER
[a05-6725_1ex10d01.htm#Section8_3__132730]

 

SECTION 8.4. [a05-6725_1ex10d01.htm#Section8_4__132732]

REDEMPTION OF 2005 SERIES A BONDS [a05-6725_1ex10d01.htm#Section8_4__132732]

 

SECTION 8.5. [a05-6725_1ex10d01.htm#Section8_5__132735]

REFERENCE TO 2005 SERIES A BONDS INEFFECTIVE AFTER 2005 SERIES A BONDS PAID
[a05-6725_1ex10d01.htm#Section8_5__132735]

 

 

i

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ARTICLE IX EVENTS OF DEFAULT AND REMEDIES
[a05-6725_1ex10d01.htm#Articleix_135921]

 

 

 

 

SECTION 9.1. [a05-6725_1ex10d01.htm#Section9_1__132739]

EVENTS OF DEFAULT DEFINED [a05-6725_1ex10d01.htm#Section9_1__132739]

 

SECTION 9.2. [a05-6725_1ex10d01.htm#Section9_2__132745]

REMEDIES ON DEFAULT [a05-6725_1ex10d01.htm#Section9_2__132745]

 

SECTION 9.3. [a05-6725_1ex10d01.htm#Section9_3__132749]

NO REMEDY EXCLUSIVE [a05-6725_1ex10d01.htm#Section9_3__132749]

 

SECTION 9.4. [a05-6725_1ex10d01.htm#Section9_4__132752]

AGREEMENT TO PAY REASONABLE ATTORNEYS’ FEES AND EXPENSES
[a05-6725_1ex10d01.htm#Section9_4__132752]

 

SECTION 9.5. [a05-6725_1ex10d01.htm#Section9_5__132754]

WAIVER OF EVENTS OF DEFAULT [a05-6725_1ex10d01.htm#Section9_5__132754]

 

 

 

 

ARTICLE X PREPAYMENT OF LOAN [a05-6725_1ex10d01.htm#Articlex_135925]

 

 

 

 

SECTION 10.1. [a05-6725_1ex10d01.htm#Section10_1__132758]

OPTIONS TO PREPAY LOAN [a05-6725_1ex10d01.htm#Section10_1__132758]

 

SECTION 10.2. [a05-6725_1ex10d01.htm#Section10_2__132802]

ADDITIONAL OPTION TO PREPAY LOAN [a05-6725_1ex10d01.htm#Section10_2__132802]

 

SECTION 10.3. [a05-6725_1ex10d01.htm#Section10_3__132805]

OBLIGATIONS TO PREPAY LOAN [a05-6725_1ex10d01.htm#Section10_3__132805]

 

SECTION 10.4. [a05-6725_1ex10d01.htm#Section10_4_132810]

NOTICE OF PREPAYMENT; REDEMPTION PROCEDURES
[a05-6725_1ex10d01.htm#Section10_4_132810]

 

SECTION 10.5. [a05-6725_1ex10d01.htm#Section10_5_132813]

RELATIVE POSITION OF THIS ARTICLE AND INDENTURE
[a05-6725_1ex10d01.htm#Section10_5_132813]

 

SECTION 10.6. [a05-6725_1ex10d01.htm#Section10_6__132817]

CONCURRENT DISCHARGE OF FIRST MORTGAGE BONDS
[a05-6725_1ex10d01.htm#Section10_6__132817]

 

 

 

 

ARTICLE XI MISCELLANEOUS [a05-6725_1ex10d01.htm#Articlexi_135931]

 

 

 

 

SECTION 11.1. [a05-6725_1ex10d01.htm#Section11_1_132820]

TERM OF AGREEMENT [a05-6725_1ex10d01.htm#Section11_1_132820]

 

SECTION 11.2. [a05-6725_1ex10d01.htm#Section11_2__132824]

NOTICES [a05-6725_1ex10d01.htm#Section11_2__132824]

 

SECTION 11.3. [a05-6725_1ex10d01.htm#Section11_3_132827]

BINDING EFFECT; BOND COUNSEL OPINIONS [a05-6725_1ex10d01.htm#Section11_3_132827]

 

SECTION 11.4. [a05-6725_1ex10d01.htm#Section11_4__132832]

SEVERABILITY [a05-6725_1ex10d01.htm#Section11_4__132832]

 

SECTION 11.5. [a05-6725_1ex10d01.htm#Section11_5_132834]

AMOUNTS REMAINING IN BOND FUND, REBATE FUND AND PRIOR BOND FUND
[a05-6725_1ex10d01.htm#Section11_5_132834]

 

SECTION 11.6. [a05-6725_1ex10d01.htm#Section11_6_132837]

AMENDMENTS, CHANGES AND MODIFICATIONS [a05-6725_1ex10d01.htm#Section11_6_132837]

 

SECTION 11.7. [a05-6725_1ex10d01.htm#Section11_7_132847]

EXECUTION IN COUNTERPARTS [a05-6725_1ex10d01.htm#Section11_7_132847]

 

SECTION 11.8. [a05-6725_1ex10d01.htm#Section11_8_132850]

APPLICABLE LAW [a05-6725_1ex10d01.htm#Section11_8_132850]

 

SECTION 11.9. [a05-6725_1ex10d01.htm#Section11_9__132854]

CAPTIONS [a05-6725_1ex10d01.htm#Section11_9__132854]

 

SECTION 11.10. [a05-6725_1ex10d01.htm#Section11_10_132858]

NO PECUNIARY LIABILITY OF ISSUER [a05-6725_1ex10d01.htm#Section11_10_132858]

 

SECTION 11.11. [a05-6725_1ex10d01.htm#Section11_11_132901]

PAYMENTS DUE ON OTHER THAN BUSINESS DAYS
[a05-6725_1ex10d01.htm#Section11_11_132901]

 

 

 

 

EXHIBIT A - DESCRIPTION OF PROJECT [a05-6725_1ex10d01.htm#ExhibitA_135946]

 

 

ii

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LOAN AGREEMENT IN CONNECTION
WITH POLLUTION CONTROL FACILITIES

 

This LOAN AGREEMENT, dated as of February 1, 2005, by and between the
LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT, KENTUCKY, the governmental
successor in interest by operation of law to the County of Jefferson, Kentucky,
being a public body corporate and politic duly created and existing as a de jure
political subdivision under the Constitution and laws of the Commonwealth of
Kentucky, and LOUISVILLE GAS AND ELECTRIC COMPANY, a corporation organized and
existing under the laws of Kentucky;

 

W I T N E S S E T H:

 

WHEREAS, the Louisville/Jefferson County Metro Government, Kentucky (“Metro
Government” or “Issuer”), is the governmental successor in interest by operation
of law to the County of Jefferson, Kentucky and constitutes a public body
corporate and politic duly created and existing as a de jure political
subdivision under the Constitution and laws of the Commonwealth of Kentucky, and
pursuant to the provisions of Chapter 67C and Sections 103.200 to 103.285,
inclusive, of the Kentucky Revised Statutes (the “Act”), Issuer has the power to
enter into the transactions contemplated by this Loan Agreement and to carry out
its obligations hereunder; and

 

WHEREAS, Issuer came into legal existence on January 6, 2003 by operation of law
and voter approval in accordance with laws now codified as Chapter 67C of the
Kentucky Revised Statutes and replaced and superceded the prior governments of
both the City of Louisville, Kentucky and the County of Jefferson, Kentucky (the
“Predecessor County”) and pursuant to law has mandatorily assumed all existing
contracts and obligations of the past City and Predecessor County and has been
endowed with all powers of such prior City and Predecessor County; and

 

WHEREAS, the Metro Government, as successor to the Predecessor County, is
authorized pursuant to the Act to issue negotiable bonds and lend the proceeds
from the sale of such bonds to a utility company to finance and refinance the
acquisition, construction, installation and equipping of air pollution control
facilities, one of the categories of “pollution control facilities”, as defined
by the Act (“Pollution Control Facilities”) for the abatement and control of air
pollution and to refund bonds of the Predecessor County which were previously
issued for such purposes; and

 

WHEREAS, Issuer is further authorized pursuant to the Act to enter into a loan
agreement, which may include such provisions as Issuer shall deem appropriate to
effect the securing of a financing or refinancing undertaken in respect of
Pollution Control Facilities, including the pledge of direct securities of a
utility company; and

 

WHEREAS, the Act further provides that title to Pollution Control Facilities
shall not be acquired by Issuer in the case of a loan transaction; and

 

WHEREAS, Louisville Gas and Electric Company, a Kentucky corporation
(“Company”), has heretofore, by the issuance of the Refunded 1995 Series A
Bonds, hereinafter defined, financed and refinanced all or a portion of the
costs of acquisition of certain air

 

1

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pollution control facilities to serve the Mill Creek and Cane Run Generating
Stations of Company, which facilities constitute the Project, as hereinafter
defined in ARTICLE I (the “Project”), which Project is located within the
corporate boundaries of Issuer and consists of certain air pollution control
facilities, together with facilities functionally related and subordinate to
such facilities in furtherance of the regulations of the Natural Resources and
Environmental Protection Cabinet of the Commonwealth of Kentucky and the Air
Pollution Control District of Jefferson County, Kentucky, and which Project
qualifies for financing within the meaning of the Act; and

 

WHEREAS, the Project has been completed and placed in operation and has
contributed and does contribute to the control, containment, reduction and
abatement of atmospheric pollution in the Commonwealth of Kentucky; and

 

WHEREAS, under date of April 18, 1995, the Issuer, at the request of the
Company, issued its “County of Jefferson, Kentucky Pollution Control Revenue
Bonds, 1995 Series A (Louisville Gas and Electric Company Project)”, dated April
15, 1995, of which $40,000,000 principal amount of such bonds remains
outstanding and unpaid (the “Refunded 1995 Series A Bonds”), such Refunded 1995
Series A Bonds having been issued to currently refinance certain Predecessor
County 1985 Series A Bonds issued in original principal amount of $65,000,000,
of which $25,000,000 principal amount thereof has matured and has been paid and
discharged (the “Original Bonds”) having been issued to finance a portion of the
Cost of Construction of the Project, hereinafter described, and in connection
with the issuance of the Refunded 1995 Series A Bonds, the right was reserved to
Predecessor County, upon direction by Company, to redeem the Refunded 1995
Series A Bonds in advance of their maturity; and the Refunded 1995 Series A
Bonds will be by their terms subject to redemption at the option of Issuer in
whole or in part on any date after on and after April 15, 2005, at the price of
102% of the principal amount thereof and accrued interest to the date of
redemption, as provided in the hereinafter defined 1995 Series A Indenture; and
the immediate redemption and discharge of the Refunded 1995 Series A Bonds will
result in benefits to the general public and the Company and should be carried
out forthwith in the public interest by the issuance by the Issuer of the 2005
Series A Bonds, hereinafter defined, and the application of the proceeds of the
2005 Series A Bonds, together with funds to be provided by Company, for the
refunding, payment and discharge of the Refunded 1995 Series A Bonds on or prior
to the 90th day after the date of issuance of the 2005 Series A Bonds; and

 

WHEREAS, in respect of the Refunded 1995 Series A Bonds, the Predecessor County
entered into a certain Indenture of Trust dated as of October 15, 1993 (the
“1995 Series A Indenture”), with Liberty National Bank and Trust Company of
Kentucky (now J.P. Morgan Trust Company, N.A.), as Trustee, Paying Agent and
Bond Registrar (the “Prior Trustee”), and it is provided in Article VIII of the
1995 Series A Indenture that the Refunded 1995 Series A Bonds, or any of them,
shall be deemed to have been paid within the meaning of such 1995 Series A
Indenture when there shall have been irrevocably deposited with the Prior
Trustee, either cash or Governmental Obligations, as defined in the 1995 Series
A Indenture, maturing as to principal and interest in such amounts and at such
times as will insure the availability of sufficient moneys to pay the principal
and the applicable redemption premium, if any, on the Refunded 1995 Series A
Bonds plus interest thereon to the date of payment and discharge thereof
(whether at maturity or upon redemption or otherwise), plus sufficient moneys to
pay all necessary and proper fees, compensation and expenses of the Prior
Trustee, authenticating agent,

 

2

--------------------------------------------------------------------------------

 

bond registrar and any paying agent; together with irrevocable instructions to
call and redeem the Refunded 1995 Series A Bonds; and

 

WHEREAS, pursuant to and in accordance with the provisions of the Act and an
Ordinance duly adopted by the Metro Council of Issuer on March 10, 2005, and in
furtherance of the purposes of the Act, Issuer proposes to issue, sell and
deliver a series of its bonds in fully registered form which will be designated
“Louisville/Jefferson County Metro Government, Kentucky, Pollution Control
Revenue Bonds, 2005 Series A (Louisville Gas and Electric Company Project)” (the
“2005 Series A Bonds”), the proceeds of which will be lent to Company to cause
the outstanding principal amount of the Refunded 1995 Series A Bonds to be
refunded, paid and discharged in full on or prior to the 90th day after the date
of issuance of the 2005 Series A Bonds; and

 

WHEREAS, the 2005 Series A Bonds are to be issued under and pursuant to and are
secured by an Indenture of Trust by and between Issuer and Deutsche Bank Trust
Company Americas, as trustee thereunder, dated as of February 1, 2005 (the
“Indenture”); and

 

WHEREAS, the Natural Resources and Environmental Protection Cabinet of Kentucky
and the Air Pollution Control District of Jefferson County, Kentucky, having
jurisdiction in the premises, as applicable, have both previously certified that
the Project, as designed, is in furtherance of the purposes of abating and
controlling atmospheric pollutants or contaminants; and

 

WHEREAS, Issuer proposes to lend to Company and Company desires to borrow from
Issuer the proceeds from the sale of the 2005 Series A Bonds to cause the
outstanding principal amount of the Refunded 1995 Series A Bonds to be refunded,
paid and discharged on or prior to the 90th day after the date of issuance of
the 2005 Series A Bonds;

 

NOW, THEREFORE FOR AND IN CONSIDERATION OF THE PREMISES AND THE MUTUAL COVENANTS
AND AGREEMENTS HEREINAFTER CONTAINED, THE PARTIES HERETO AGREE EACH WITH THE
OTHER, AS FOLLOWS:

 

ARTICLE I

DEFINITIONS

 

Section 1.1.            Use of Defined Terms.  In addition to the words and
terms defined elsewhere in this Agreement or in the Indenture or by reference to
another document, the words and terms set forth in Section 1.2 and Section 1.3
shall have the meanings set forth therein unless the context or use clearly
indicates another meaning or intent.  Such definitions shall be equally
applicable to both the singular and plural forms of any of the words and terms
defined therein.

 

Section 1.2.            Incorporation of Certain Terms by Reference.  When and
if used in this Agreement, the following terms shall have the meaning set forth
in ARTICLE I of the Indenture:

 

3

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“Act”
“Agreement”
“Bond Counsel”
“Bond Fund”
“Business Day”
“Code”
“Company”
“Company Representative”
“Cost of Construction”
“Excess Earnings”
“First Mortgage Bonds”
“First Mortgage Indenture”
“First Mortgage Trustee”
“Governmental Obligations”
“Indenture”
“Interest Payment Date”
“Issuer”
“Issuer Representative”
“Loan”
“Net Proceeds”
“Paying Agent”
“Permitted Investments”
“Plans and Specifications”
“Pollution Control Facilities”
“Project”
“Project Site”
“Purchase Fund”
“Rebate Fund”
“Redemption Date”
“Redemption Demand”
“Refunded 1995 Series A Bonds”
“Release Date”
“2005 Series A Bonds”
“1995 Series A Indenture”
“Supplemental Indenture”
“Tender Agent”
“Trustee”

 

Section 1.3.            Additional Definitions.  In addition to the terms whose
definitions are incorporated by reference herein pursuant to Section 1.2, the
following terms shall have the meanings set forth in this Section unless the use
or context clearly indicates otherwise:

 

“Capitalization” means the total of all the following items appearing on, or
included in, the balance sheet of the Company:

 

(1)           liabilities for indebtedness, including short-term debt, long-term
debt and current maturities of long-term debt; and

 

4

--------------------------------------------------------------------------------

 

(2)           common stock, preferred stock, capital surplus, premium on capital
stock, capital in excess of par value and retained earnings (however the
foregoing may be designated), less to the extent not otherwise deducted, the
cost of shares of capital stock of the Company held in its treasury.

 

Capitalization shall be determined in accordance with generally accepted
accounting principles and practices applicable to the type of business in which
the Company is engaged and that are approved by the independent accountants
regularly retained by the Company, and shall be determined as of the date that
is the end of the most recent fiscal quarter prior to the happening of an event
for which such determination is being made.

 

“Debt” shall mean any outstanding debt for money borrowed.

 

“Determination of Taxability” shall have the meaning ascribed to such term in
Section 10.3 of this Agreement.

 

“Net Tangible Assets” means the amount shown as total assets on the balance
sheet of the Company, less the following:

 

(1)           intangible assets including, but without limitation, such items as
goodwill, trademarks, trade names, patents and unamortized debt discount and
expense carried as an asset on said balance sheet; and

 

(2)           appropriate adjustments, if any, on account of minority interests.

 

Net Tangible Assets shall be determined in accordance with generally accepted
accounting principles and practices applicable to the type of business in which
the Company is engaged and that are approved by the independent accountants
regularly retained by the Company, and shall be determined as of the date that
is the end of the most recent fiscal quarter prior to the happening of an event
for which such determination is being made.

 

“Operating Property” means (i) any interest in real property owned by the
Company and (ii) any asset owned by the Company that is depreciable in
accordance with generally accepted accounting principles.

 

 “Prior Bond Fund” means the “County of Jefferson, Kentucky, Pollution Control
Revenue Bond Fund, 1995 Series A (Louisville Gas and Electric Company Project) “
created by the 1995 Series A Indenture.

 

“Prior Trustee” means Liberty National Bank and Trust Company of Kentucky (now
known as J.P. Morgan Trust Company, National Association), acting as trustee in
respect of the Refunded 1995 Series A Bonds.

 

In addition to the definitions herein, terms used in this agreement and not
defined herein shall have the meanings ascribed to such terms in the Indenture.

 

5

--------------------------------------------------------------------------------

 

The words “hereof”, “herein”, “hereto”, “hereby” and “hereunder” refer to this
entire Agreement.  Unless otherwise noted, all Section and Article references
are to sections and articles in this Agreement.

 

ARTICLE II

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Section 2.1.            Representations, Warranties and Covenants by Issuer. 
Issuer represents, warrants and covenants that:

 

(A)           ISSUER IS A PUBLIC BODY CORPORATE AND POLITIC DULY CREATED AND
EXISTING AS A DE JURE POLITICAL SUBDIVISION UNDER THE CONSTITUTION AND LAWS OF
THE COMMONWEALTH OF KENTUCKY AND, PURSUANT TO THE ACT, ISSUER, THE DE JURE
GOVERNMENTAL SUCCESSOR BY OPERATION OF LAW TO THE PREDECESSOR COUNTY, HAS THE
POWER AND DUTY TO ISSUE THE 2005 SERIES A BONDS, TO ENTER INTO THIS AGREEMENT
AND THE INDENTURE AND THE TRANSACTIONS CONTEMPLATED HEREBY AND TO CARRY OUT ITS
OBLIGATIONS HEREUNDER AND THEREUNDER.  ISSUER IS NOT IN DEFAULT UNDER OR IN
VIOLATION OF THE CONSTITUTION OR ANY OF THE LAWS OF THE COMMONWEALTH OF KENTUCKY
RELEVANT TO THE ISSUANCE OF THE 2005 SERIES A BONDS OR THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR IN CONNECTION WITH SUCH ISSUANCE, AND HAS
BEEN DULY AUTHORIZED TO ISSUE THE 2005 SERIES A BONDS AND TO EXECUTE AND DELIVER
THIS AGREEMENT AND THE INDENTURE.  ISSUER AGREES THAT IT WILL DO OR CAUSE TO BE
DONE IN TIMELY MANNER ALL THINGS NECESSARY TO PRESERVE AND KEEP IN FULL FORCE
AND EFFECT ITS EXISTENCE, AND TO CARRY OUT THE TERMS OF THIS AGREEMENT.

 

(B)           ISSUER AGREES TO LOAN FUNDS DERIVED FROM THE SALE OF THE 2005
SERIES A BONDS TO COMPANY TO PROVIDE FOR THE REFUNDING, PAYMENT AND DISCHARGE OF
THE OUTSTANDING PRINCIPAL AMOUNT OF THE REFUNDED 1995 SERIES A BONDS, TO THE END
THAT AIR POLLUTION BE ABATED AND CONTROLLED IN THE COMMONWEALTH.

 

(C)           TO ACCOMPLISH THE FOREGOING, ISSUER AGREES TO ISSUE $40,000,000
AGGREGATE PRINCIPAL AMOUNT OF ITS 2005 SERIES A BONDS FOLLOWING THE EXECUTION OF
THIS AGREEMENT ON SUCH TERMS AND CONDITIONS AS ARE SET FORTH IN THE INDENTURE. 
THE PROCEEDS FROM THE SALE OF THE 2005 SERIES A BONDS SHALL BE APPLIED
EXCLUSIVELY AND IN WHOLE TO REFUND, PAY AND DISCHARGE THE OUTSTANDING PRINCIPAL
AMOUNT OF THE REFUNDED 1995 SERIES A BONDS ON OR PRIOR TO THE 90TH DAY AFTER THE
DATE OF ISSUANCE OF THE 2005 SERIES A BONDS.

 

(D)           ISSUER WILL COOPERATE WITH COMPANY AND TAKE ALL ACTIONS NECESSARY
FOR COMPANY TO COMPLY WITH SECTION 2.2(N), (R) AND (U) HEREOF AND TAKE OTHER
ACTIONS REASONABLY REQUESTED BY COMPANY IN FURTHERANCE OF THIS AGREEMENT.

 

Section 2.2.            Representations, Warranties and Covenants by Company. 
Company represents, warrants and covenants that:

 

(A)           COMPANY (I) IS A CORPORATION DULY INCORPORATED, VALIDLY EXISTING
AND IN GOOD STANDING UNDER THE LAWS OF THE COMMONWEALTH OF KENTUCKY, (II) IS
DULY QUALIFIED, AUTHORIZED AND LICENSED TO TRANSACT BUSINESS IN EACH
JURISDICTION WHEREIN FAILURE TO QUALIFY WOULD HAVE A MATERIAL ADVERSE EFFECT ON
THE CONDUCT OF ITS BUSINESS AND (III) IS NOT IN VIOLATION OF ANY PROVISION OF
ITS ARTICLES OF INCORPORATION, ITS BY-LAWS OR ANY LAWS OF THE COMMONWEALTH OF
KENTUCKY RELEVANT

 

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TO THE TRANSACTIONS CONTEMPLATED HEREBY OR IN CONNECTION WITH THE ISSUANCE OF
THE 2005 SERIES A BONDS.

 

(B)           COMPANY HAS FULL AND COMPLETE LEGAL POWER AND AUTHORITY TO EXECUTE
AND DELIVER THIS AGREEMENT, THE SUPPLEMENTAL INDENTURE AND THE FIRST MORTGAGE
BONDS TO BE ISSUED PURSUANT THERETO, AND HAS BY PROPER CORPORATE ACTION DULY
AUTHORIZED THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE SUPPLEMENTAL
INDENTURE AND THE FIRST MORTGAGE BONDS.

 

(C)           THE PROJECT CURRENTLY REFINANCED BY APPLICATION OF THE PROCEEDS OF
THE REFUNDED 1995 SERIES A BONDS WAS DESIGNED AND CONSTRUCTED TO COLLECT,
CONTAIN, REDUCE AND ABATE AIR POLLUTION AT THE PROJECT SITE.  THE PROJECT WAS
AND IS NECESSARY FOR THE PUBLIC HEALTH AND WELFARE, AND HAS BEEN DESIGNED FOR NO
MATERIAL PURPOSE EXCEPT TO CONTROL AND ABATE ATMOSPHERIC POLLUTANTS AND
CONTAMINANTS AT THE PROJECT SITE.  THE PROJECT CONSTITUTES AIR POLLUTION CONTROL
FACILITIES UNDER SECTION 103(B)(4)(F) OF THE INTERNAL REVENUE CODE OF 1954, AS
AMENDED, AND THE ACT.

 

(D)           ALL OF THE PROCEEDS OF THE 2005 SERIES A BONDS, EXCLUSIVE OF
ACCRUED INTEREST, IF ANY, SHALL BE USED ON OR PRIOR TO THE 90TH DAY AFTER THE
DATE OF ISSUANCE OF THE 2005 SERIES A BONDS EXCLUSIVELY AND ONLY TO REDEEM, PAY
AND DISCHARGE THE PRINCIPAL OF THE REFUNDED 1995 SERIES A BONDS, WHICH CURRENTLY
REFUNDED THE ORIGINAL BONDS, NOT LESS THAN SUBSTANTIALLY ALL OF THE NET PROCEEDS
OF THE ORIGINAL BONDS (I.E., AT LEAST 90% OF THE NET PROCEEDS THEREOF, INCLUDING
INVESTMENT INCOME THEREON) WERE USED TO FINANCE THE COST OF CONSTRUCTION OF AIR
POLLUTION CONTROL FACILITIES, TOGETHER WITH FACILITIES FUNCTIONALLY RELATED AND
SUBORDINATE TO SUCH FACILITIES, AND ALL OF SUCH AIR POLLUTION CONTROL FACILITIES
CONSIST EITHER OF LAND OR OF PROPERTY OF A CHARACTER SUBJECT TO THE ALLOWANCE
FOR DEPRECIATION PROVIDED IN SECTION 167 OF THE CODE.

 

(E)           THE PROJECT, AS DESIGNED, HAS BEEN PREVIOUSLY CERTIFIED BY THE
DEPARTMENT FOR NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION OF KENTUCKY (NOW
THE NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION CABINET OF THE COMMONWEALTH
OF KENTUCKY) AND THE AIR POLLUTION CONTROL DISTRICT OF JEFFERSON COUNTY,
KENTUCKY, THE AGENCIES EXERCISING JURISDICTION IN THE PREMISES, TO BE IN
FURTHERANCE OF THE PURPOSE OF ABATING OR CONTROLLING ATMOSPHERIC POLLUTANTS OR
CONTAMINANTS.

 

(F)            THE PROJECT IS OF THE TYPE AUTHORIZED AND PERMITTED BY THE ACT,
AND THE COST OF CONSTRUCTION OF THE PROJECT WAS NOT LESS THAN $40,000,000.

 

(G)           NO EVENT OF DEFAULT, AND NO EVENT OF THE TYPE DESCRIBED IN CLAUSES
(A) THROUGH (E) OF SECTION 9.1 HEREOF,  HAS OCCURRED AND IS CONTINUING AND NO
CONDITION EXISTS WHICH, WITH THE GIVING OF NOTICE OR THE LAPSE OF TIME, OR BOTH,
WOULD CONSTITUTE AN EVENT OF DEFAULT OR A DEFAULT UNDER ANY AGREEMENT OR
INSTRUMENT TO WHICH THE COMPANY IS A PARTY OR BY WHICH THE COMPANY IS OR MAY BE
BOUND OR TO WHICH ANY OF THE PROPERTY OR ASSETS OF THE COMPANY IS OR MAY BE
SUBJECT WHICH WOULD IMPAIR IN ANY MATERIAL RESPECT ITS ABILITY TO CARRY OUT ITS
OBLIGATIONS UNDER THIS AGREEMENT, THE SUPPLEMENTAL INDENTURE, THE FIRST MORTGAGE
BONDS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  NEITHER THE EXECUTION
AND DELIVERY OF THIS AGREEMENT, THE SUPPLEMENTAL INDENTURE, THE FIRST MORTGAGE
BONDS, THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY THE
INDENTURE, NOR THE FULFILLMENT OF OR COMPLIANCE WITH THE TERMS AND CONDITIONS
HEREOF OR THEREOF CONFLICTS WITH OR RESULTS IN A BREACH OF THE TERMS, CONDITIONS
OR PROVISIONS OF ANY CORPORATE RESTRICTION OR ANY AGREEMENT OR INSTRUMENT TO
WHICH COMPANY IS NOW

 

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A PARTY OR BY WHICH IT IS BOUND, OR CONSTITUTES A DEFAULT UNDER ANY OF THE
FOREGOING, OR RESULTS IN THE CREATION OR IMPOSITION OF ANY PROHIBITED LIEN,
CHARGE OR ENCUMBRANCE WHATSOEVER UPON ANY OF THE PROPERTY OR ASSETS OF COMPANY
UNDER THE TERMS OF ANY INSTRUMENT OR AGREEMENT.

 

(H)           COMPANY INTENDS TO CONTINUE TO OPERATE OR CAUSE THE PROJECT TO BE
OPERATED AS AIR POLLUTION CONTROL FACILITIES AND FACILITIES FUNCTIONALLY RELATED
AND SUBORDINATE TO SUCH FACILITIES UNTIL ALL OF THE 2005 SERIES A BONDS ARE PAID
AND DISCHARGED.

 

(I)            NO PORTION OF THE PROCEEDS OF 2005 SERIES A BONDS WILL BE
INVESTED AT A YIELD IN EXCESS OF THE YIELD ON THE 2005 SERIES A BONDS EXCEPT (I)
DURING ANY PERMITTED TEMPORARY PERIOD PROVIDED BY THE CODE, (II) PROCEEDS OF A
REASONABLY REQUIRED RESERVE OR REPLACEMENT FUND AND (III) AS PART OF A MINOR
PORTION OF THE PROCEEDS OF THE 2005 SERIES A BONDS, NOT IN EXCESS OF THE LESSER
OF 5% OF THE PROCEEDS OF THE 2005 SERIES A BONDS OR $100,000.  AS USED HEREIN,
“YIELD” SHALL HAVE THE MEANING ASSIGNED TO IT FOR PURPOSES OF SECTION 148 OF THE
CODE AND APPLICABLE TAX REGULATIONS.

 

(J)            NO PORTION OF THE PROCEEDS FROM THE SALE OF THE 2005 SERIES A
BONDS WILL BE DEPOSITED TO THE ACCOUNT OF ANY REASONABLY REQUIRED RESERVE OR
REPLACEMENT FUND OR USED TO PAY (I) ANY COSTS OF ISSUANCE OF THE 2005 SERIES A
BONDS OR (II) ANY REDEMPTION PREMIUM OR ACCRUED INTEREST ON THE REFUNDED 1995
SERIES A BONDS, BUT SUCH PROCEEDS WILL BE APPLIED AND USED SOLELY AND
EXCLUSIVELY TO REFUND, PAY AND DISCHARGE THE OUTSTANDING PRINCIPAL AMOUNT OF THE
REFUNDED 1995 SERIES A BONDS ON OR PRIOR TO THE 90TH DAY AFTER THE ISSUANCE OF
THE 2005 SERIES A BONDS.

 

(K)           COMPANY WILL PROVIDE ANY ADDITIONAL MONEYS, INCLUDING INVESTMENT
PROCEEDS OF THE 2005 SERIES A BONDS, REQUIRED FOR THE PAYMENT AND DISCHARGE OF
THE REFUNDED 1995 SERIES A BONDS, PAYMENT OF REDEMPTION PREMIUM, IF ANY, AND
ACCRUED INTEREST IN RESPECT THERETO AND PAYMENT OF ALL UNDERWRITING DISCOUNT AND
COSTS OF ISSUANCE OF THE 2005 SERIES A BONDS.  ANY INVESTMENT PROCEEDS OF THE
2005 SERIES A BONDS SHALL BE USED EXCLUSIVELY TO PAY INTEREST OR REDEMPTION
PREMIUM DUE, IF ANY, ON THE REFUNDED 1995 SERIES A BONDS ON THE REDEMPTION DATE.

 

(L)            COMPANY WILL CAUSE NO INVESTMENT OF 2005 SERIES A BOND PROCEEDS
TO BE MADE AND WILL MAKE NO OTHER USE OF OR OMIT TO TAKE ANY ACTION WITH RESPECT
TO THE PROCEEDS OF THE 2005 SERIES A BONDS OR ANY FUNDS REASONABLY EXPECTED TO
BE USED TO PAY THE 2005 SERIES A BONDS WHICH WILL CAUSE THE 2005 SERIES A BONDS
OR ANY OF THEM TO BE ARBITRAGE BONDS WITHIN THE MEANING OF SECTION 148 OF THE
CODE OR WOULD OTHERWISE RESULT IN THE LOSS OR IMPAIRMENT OF THE EXCLUSION OF THE
INTEREST ON SUCH 2005 SERIES A BONDS FROM GROSS INCOME FOR FEDERAL INCOME TAX
PURPOSES.

 

(M)          THE AVERAGE MATURITY OF THE 2005 SERIES A BONDS DOES NOT EXCEED ONE
HUNDRED TWENTY PERCENT (120%) OF THE AVERAGE REASONABLY EXPECTED REMAINING
ECONOMIC LIFE (AS OF THE DATE OF ISSUANCE OF THE 2005 SERIES A BONDS) OF THE
POLLUTION CONTROL FACILITIES REFINANCED BY THE PROCEEDS OF THE 2005 SERIES A
BONDS.

 

(N)           COMPANY WILL PROVIDE ALL INFORMATION REQUESTED BY THE ISSUER
NECESSARY TO EVIDENCE COMPLIANCE WITH THE REQUIREMENTS OF THE CODE, INCLUDING
THE INFORMATION IN UNITED STATES INTERNAL REVENUE SERVICE FORM 8038 FILED BY
ISSUER WITH RESPECT TO THE 2005 SERIES A

 

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BONDS AND THE AIR POLLUTION CONTROL FACILITIES CONSTITUTING THE PROJECT, AND
SUCH INFORMATION WILL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS.

 

(O)           WITHIN THE MEANING OF SECTION 149 OF THE CODE, NO PORTION OF THE
PAYMENT OF THE PRINCIPAL OR INTEREST ON THE 2005 SERIES A BONDS OR THE REFUNDED
1995 SERIES A BONDS WAS OR SHALL BE GUARANTEED DIRECTLY OR INDIRECTLY BY THE
UNITED STATES OR ANY AGENCY OR INSTRUMENTALITY THEREOF.

 

(P)           ALL OF THE PROCEEDS OF THE REFUNDED 1995 SERIES A BONDS HAVE BEEN
FULLY EXPENDED AND THE PROJECT HAS BEEN COMPLETED AND PLACED IN SERVICE.  ALL OF
THE ACTUAL COST OF CONSTRUCTION OF THE PROJECT REPRESENTS AMOUNTS PAID OR
INCURRED WHICH WERE CHARGEABLE TO THE CAPITAL ACCOUNT OF THE PROJECT OR WOULD BE
SO CHARGEABLE EITHER WITH A PROPER ELECTION BY THE COMPANY OR BUT FOR A PROPER
ELECTION BY THE COMPANY TO DEDUCT SUCH AMOUNTS.  SUBSTANTIALLY ALL (I.E. AT
LEAST 90%) OF THE NET ALLOCABLE PROCEEDS OF THE SALE OF THE ORIGINAL BONDS
(INCLUDING INVESTMENT INCOME THEREFROM), WERE USED TO FINANCE COST OF
CONSTRUCTION OF THE PROJECT AS DESCRIBED ABOVE, PAY COSTS AND EXPENSES OF
ISSUING THE ORIGINAL BONDS, WITHIN THEN APPLICABLE CODE LIMITS, AND PAY INTEREST
AND CARRYING CHARGES ON THE ORIGINAL BONDS DURING THE PERIOD OF CONSTRUCTION OF
THE PROJECT AND PRIOR TO ITS IN-SERVICE DATE.

 

(Q)           ALL OF THE DEPRECIABLE PROPERTIES WHICH WERE TAKEN INTO ACCOUNT IN
DETERMINING THE QUALIFYING COSTS OF THE PROJECT CONSTITUTE PROPERTIES EITHER (I)
USED FOR THE CONTROL, CONTAINMENT, REDUCTION AND ABATEMENT OF ATMOSPHERIC
POLLUTANTS AND CONTAMINANTS OR (II) FACILITIES WHICH ARE FUNCTIONALLY RELATED
AND SUBORDINATE TO SUCH FACILITIES CONSTITUTING THE PROJECT.  ALL OF SUCH
FUNCTIONALLY RELATED AND SUBORDINATE FACILITIES ARE OF A SIZE AND CHARACTER
COMMENSURATE WITH THE CHARACTER AND SIZE OF THE AIR POLLUTION CONTROL FACILITIES
CONSTITUTING THE PROJECT.

 

(R)            THE COMPANY WILL CAUSE THE ISSUER TO COMPLY IN ALL RESPECTS WITH
THE REQUIREMENTS OF SECTION 148 OF THE CODE IN RESPECT OF THE REBATE OF EXCESS
EARNINGS WITH RESPECT TO THE 2005 SERIES A BONDS TO THE UNITED STATES OF
AMERICA.

 

(S)           NONE OF THE PROCEEDS OF THE 2005 SERIES A BONDS WILL BE APPLIED
AND NONE OF THE PROCEEDS OF THE ORIGINAL BONDS WERE APPLIED TO PROVIDE ANY: (I)
WORKING CAPITAL, (II) OFFICE SPACE (OTHER THAN OFFICE SPACE LOCATED ON THE
PREMISES OF THE PROJECT WHERE NOT MORE THAN A DE MINIMIS AMOUNT OF THE FUNCTIONS
TO BE PERFORMED ARE NOT DIRECTLY RELATED TO THE DAY-TO-DAY OPERATIONS OF THE
PROJECT), (III) AIRPLANE, (IV) SKYBOX OR OTHER PRIVATE LUXURY BOX, (V) HEALTH
CLUB FACILITY, (VI) FACILITY PRIMARILY USED FOR GAMBLING OR (VII) STORE, THE
PRINCIPAL BUSINESS OF WHICH IS THE SALE OF ALCOHOLIC BEVERAGES FOR CONSUMPTION
OFF PREMISES.

 

(T)            LESS THAN TWENTY-FIVE PERCENT (25%) OF THE NET PROCEEDS OF THE
ORIGINAL BONDS WERE USED DIRECTLY OR INDIRECTLY TO ACQUIRE LAND OR ANY INTEREST
THEREIN AND NO PORTION OF SUCH LAND, IF ACQUIRED, WAS OR IS TO BE USED FOR
FARMING PURPOSES.  NO PORTION OF THE PROCEEDS OF THE ORIGINAL BONDS WAS USED TO
ACQUIRE EXISTING PROPERTY OR ANY INTEREST THEREIN WITH RESPECT TO WHICH THE
COMPANY WAS NOT THE FIRST USER FOR FEDERAL INCOME TAX PURPOSES.

 

(U)           UPON THE DATE OF ISSUANCE OF THE 2005 SERIES A BONDS, THE COMPANY
WILL HAVE CAUSED THE ISSUER TO COMPLY WITH THE PUBLIC APPROVAL REQUIREMENTS OF
SECTION 147 OF THE CODE AND AT OR FOLLOWING THE ISSUANCE OF THE 2005 SERIES A
BONDS THE COMPANY WILL CAUSE THE ISSUER

 

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TO COMPLY WITH THE INFORMATION REPORTING REQUIREMENTS OF SECTION 149 OF THE CODE
BY THE FILING OF INTERNAL REVENUE SERVICE FORM 8038 WITH THE UNITED STATES
INTERNAL REVENUE SERVICE.

 

(V)           ALL OF THE DOCUMENTS, INSTRUMENTS AND WRITTEN INFORMATION
FURNISHED BY COMPANY ON BEHALF OF COMPANY TO ISSUER OR TRUSTEE IN CONNECTION
WITH THE ISSUANCE OF THE BONDS ARE TRUE AND CORRECT IN ALL MATERIAL RESPECTS AS
OF THE DATE OF DELIVERY THEREOF AND DID NOT, AS OF THE DATE OF DELIVERY THEREOF,
OMIT OR FAIL TO STATE ANY MATERIAL FACTS NECESSARY TO BE STATED THEREIN TO MAKE
THE INFORMATION PROVIDED NOT MISLEADING.

 

(W)          THE REFUNDED 1995 SERIES A BONDS WERE ISSUED ON APRIL 18, 1995.

 

(X)            NO CONSTRUCTION, RECONSTRUCTION OR ACQUISITION OF THE PROJECT WAS
COMMENCED PRIOR TO THE TAKING OF OFFICIAL ACTION BY THE PREDECESSOR COUNTY WITH
RESPECT THERETO EXCEPT FOR PREPARATION OF PLANS AND SPECIFICATIONS AND OTHER
PRELIMINARY ENGINEERING WORK.

 

(Y)           ACQUISITION, CONSTRUCTION AND INSTALLATION OF THE PROJECT HAS BEEN
ACCOMPLISHED AND THE PROJECT IS BEING UTILIZED SUBSTANTIALLY IN ACCORDANCE WITH
THE PURPOSES OF THE PROJECT AND IN CONFORMITY WITH ALL APPLICABLE ZONING,
PLANNING, BUILDING, ENVIRONMENTAL AND OTHER APPLICABLE GOVERNMENTAL REGULATIONS
AND ALL PERMITS, VARIANCES AND ORDERS ISSUED OR GRANTED PURSUANT THERETO, WHICH
PERMITS, VARIANCES AND ORDERS HAVE NOT BEEN WITHDRAWN OR OTHERWISE SUSPENDED,
AND CONSISTENTLY WITH THE ACT.

 

(Z)            THE COMPANY HAS USED, IS CURRENTLY USING AND PRESENTLY INTENDS TO
USE OR OPERATE THE PROJECT IN A MANNER CONSISTENT WITH THE PURPOSES OF THE
PROJECT AND THE ACT UNTIL THE DATE ON WHICH THE 2005 SERIES A BONDS HAVE BEEN
FULLY PAID AND KNOWS OF NO REASON WHY THE PROJECT WILL NOT BE SO OPERATED

 

(AA)         THE PROCEEDS DERIVED FROM THE SALE OF THE 2005 SERIES A BONDS
(OTHER THAN ANY ACCRUED INTEREST THEREON) WILL BE USED EXCLUSIVELY AND SOLELY TO
REFUND THE PRINCIPAL OF THE REFUNDED 1995 SERIES A BONDS.  THE PRINCIPAL AMOUNT
OF THE 2005 SERIES A BONDS DOES NOT EXCEED THE PRINCIPAL AMOUNT OF THE REFUNDED
1995 SERIES A BONDS.  THE REDEMPTION OF THE OUTSTANDING PRINCIPAL AMOUNT OF THE
REFUNDED 1995 SERIES A BONDS WITH SUCH PROCEEDS OF THE 2005 SERIES A BONDS WILL
OCCUR NOT LATER THAN 90 DAYS AFTER THE DATE OF ISSUANCE OF THE 2005 SERIES A
BONDS.  ANY EARNINGS DERIVED FROM THE INVESTMENT OF SUCH PROCEEDS OF THE 2005
SERIES A BONDS WILL BE FULLY NEEDED AND USED ON SUCH REDEMPTION DATE TO PAY A
PORTION OF THE INTEREST ACCRUED AND PAYABLE ON THE REFUNDED 1995 SERIES A BONDS
ON SUCH DATE.

 

(BB)         IT IS NOT ANTICIPATED, AS OF THE DATE HEREOF, THAT THERE WILL BE
CREATED ANY “REPLACEMENT PROCEEDS”, WITHIN THE MEANING OF SECTION 1.148-1(C) OF
THE TREASURY REGULATIONS, WITH RESPECT TO THE 2005 SERIES A BONDS; HOWEVER, IN
THE EVENT THAT ANY SUCH REPLACEMENT PROCEEDS ARE DEEMED TO HAVE BEEN CREATED,
SUCH AMOUNTS WILL BE INVESTED IN COMPLIANCE WITH SECTION 148 OF THE CODE.

 

(CC)         ON THE DATE OF ISSUANCE AND DELIVERY OF THE ORIGINAL BONDS, THE
COMPANY REASONABLY EXPECTED THAT AT LEAST 85% OF THE PROCEEDS OF THE ORIGINAL
BONDS WOULD BE USED TO CARRY OUT THE GOVERNMENTAL PURPOSES OF SUCH ISSUE WITHIN
THE 3-YEAR PERIOD BEGINNING ON THE DATE SUCH ISSUE WAS ISSUED, WHICH WAS
ACCOMPLISHED AND NONE OF THE PROCEEDS OF SUCH ISSUE, IF ANY,

 

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WAS INVESTED IN NONPURPOSE INVESTMENTS HAVING A SUBSTANTIALLY GUARANTEED YIELD
FOR 3 YEARS OR MORE.

 

(DD)         COMPANY WILL USE ITS BEST EFFORTS TO MAINTAIN AT LEAST TWO RATINGS
ON THE 2005 SERIES A BONDS.

 

(EE)         COMPANY COVENANTS TO PERFORM AND OBSERVE ALL PROVISIONS OF THE
INDENTURE REQUIRED TO BE PERFORMED OR OBSERVED BY IT.

 

Company need not comply with the covenants or representations in this Section if
and to the extent that Issuer and Company receive a written opinion of Bond
Counsel that such failure to comply will not affect adversely the exclusion of
interest on any of the 2005  Series A Bonds from gross income for federal income
tax purposes under Section 103(a) of the Code.

 

ARTICLE III

COMPLETION AND OWNERSHIP OF PROJECT

 

Section 3.1.            Completion and Equipping of Project.  Company represents
that (a)  it has previously caused the Project to be constructed as herein
provided on the Project Site in accordance with the Plans and Specifications and
(b) the Project was completed as previously evidenced by the filing of a
completion certificate by the Company with the Prior Trustee in respect of the
Refunded 1995 Series A Bonds.

 

Section 3.2.            Agreement as to Ownership of Project. Issuer and Company
agree that title to and ownership of the Project shall remain in and be the sole
property of Company in which Issuer shall have no interest.  The Project is
acknowledged to be subject to the lien of the First Mortgage Indenture. 
Notwithstanding any other provision hereof, the Company shall be permitted to
sell or otherwise dispose of all or any portion of the Project, provided that
the Company first receives the opinion of Bond Counsel that such sale or
disposition shall not adversely affect the exclusion of the interest on the 2005
Series A Bonds from gross income for federal income tax purposes and provided
further that in the event of any assignment, in whole or in part, of this
Agreement, such assignment shall be in accordance with Section 8.1 hereof.

 

Section 3.3.            Use of Project.  Issuer does hereby covenant and agree
that it will not take any action during the term of this Agreement, other than
pursuant to ARTICLE IX of this Agreement or ARTICLE IX of the Indenture, to
interfere with Company’s ownership of the Project or to prevent Company from
having possession, custody, use and enjoyment of the Project.

 

ARTICLE IV

 

ISSUANCE OF 2005 SERIES A BONDS; APPLICATION OF PROCEEDS;
COMPANY TO ISSUE FIRST MORTGAGE BONDS

 

Section 4.1.            Agreement to Issue 2005 Series A Bonds; Application of
2005 Series A Bond Proceeds.  In order to provide funds to make the Loan, Issuer
will issue, sell and deliver

 

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the 2005 Series A Bonds to the initial purchasers thereof and deposit the
proceeds thereof with Trustee, as follows:

 

(A)           INTO THE BOND FUND, A SUM EQUAL TO THE ACCRUED INTEREST, IF ANY,
TO BE PAID BY THE INITIAL PURCHASERS OF THE 2005 SERIES A BONDS.

 

(B)           INTO THE PRIOR BOND FUND HELD BY THE PRIOR TRUSTEE, FOR THE
BENEFIT OF AND PAYMENT OF THE REFUNDED 1995 SERIES A BONDS, AN AMOUNT NOT LESS
THAN ALL OF THE BALANCE OF ALL SUCH PROCEEDS, BEING THE PRINCIPAL AMOUNT OF THE
2005 SERIES A BONDS.

 

Section 4.2.            Payment and Discharge of Refunded 1995 Series A Bonds. 
Company covenants and agrees with Issuer that it will,  upon the date of
issuance of the 2005 Series A Bonds, give irrevocable instructions to the Prior
Trustee to call and redeem the Refunded 1995 Series A Bonds in accordance with
their terms and will simultaneously deposit into the Prior Bond Fund cash or
direct United States obligations (“Governmental Obligations”) sufficient on the
date of issuance of the 2005 Series A Bonds, to fully defease and discharge the
Refunded 1995 Series A Bonds on such date in accordance with ARTICLE VIII of the
1995 Series A Indenture, without reference to any interest earnings to be
accrued during the period from the date of issuance of the 2005 Series A Bonds
to the redemption date of the Refunded 1995 Series A Bonds. Such matters shall
be confirmed by issuance of an appropriate written certificate of the Prior
Trustee confirming defeasance and full discharge of the Refunded 1995 Series A
Bonds upon the date of issuance of the 2005 Series A Bonds.  Such irrevocable
instructions, deposit of sufficient cash and Governmental Obligations and
issuance by the Prior Trustee of a certificate of defeasance and discharge is a
condition precedent to the issuance of the 2005 Series A Bonds.

 

Section 4.3.            Investment of Bond Fund and Rebate Fund Moneys.  Any
moneys held as a part of the Bond Fund or the Rebate Fund, if applicable, shall
be invested or reinvested by Trustee, at the written request of and as
specifically directed by Company, in one or more of the Permitted Investments. 
The Trustee may make any and all such investments through its own investment
department.

 

Any such investments shall be held by or under the control of Trustee.  All
moneys invested shall be deemed at all times a part of the fund for which such
investments were made.  The interest accruing thereon and any profit realized
from such investments shall be credited pro rata to such fund, and any loss
resulting from such investments shall be charged pro rata to such fund.  Trustee
shall sell and reduce to cash a sufficient amount of applicable investments
whenever the cash balance in the Bond Fund is insufficient to pay the principal
of, premium, if any, and interest on the 2005 Series A Bonds or any other amount
payable from the Bond Fund when due or upon any required disbursement from the
Rebate Fund, respectively.  The Trustee will not be liable for any investment
loss (including any loss upon a sale of any investment) or any fee, tax or other
charge in respect of any investments, reinvestments or any liquidation of
investments made pursuant to this Agreement or the Indenture.  The Rebate Fund
shall never be commingled with any other fund or account.

 

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Section 4.4.            Special Arbitrage Certifications.

 

(A)           COMPANY COVENANTS AND AGREES THAT IT, WILL NOT TAKE, AUTHORIZE OR
PERMIT ANY ACTION TO BE TAKEN AND HAS NOT TAKEN OR AUTHORIZED OR PERMITTED ANY
ACTION TO BE TAKEN WHICH RESULTS OR WOULD RESULT IN INTEREST PAID ON ANY OF THE
2005 SERIES A BONDS BEING INCLUDED IN GROSS INCOME OF ANY OWNER THEREOF FOR
PURPOSES OF FEDERAL INCOME TAXATION (OTHER THAN AN OWNER WHO IS A “SUBSTANTIAL
USER” OF THE PROJECT OR A “RELATED PERSON” WITHIN THE MEANING OF SECTION 147(A)
OF THE CODE) OR ADVERSELY AFFECTS THE VALIDITY OF THE 2005 SERIES A BONDS.

 

(B)           COMPANY WARRANTS, REPRESENTS AND CERTIFIES TO ISSUER THAT THE
PROCEEDS OF THE 2005 SERIES A BONDS WILL NOT BE USED IN ANY MANNER THAT WOULD
CAUSE THE 2005 SERIES A BONDS TO BE “ARBITRAGE BONDS” UNDER SECTIONS 103(B)(2)
AND 148 AND OTHER APPLICABLE SECTIONS OF THE CODE.  TO THE BEST KNOWLEDGE AND
BELIEF OF COMPANY, THERE ARE NO FACTS, ESTIMATES OR CIRCUMSTANCES THAT WOULD
MATERIALLY CHANGE THE FOREGOING CONCLUSION.

 

(C)           COMPANY HEREBY COVENANTS THAT IT WILL AT ALL TIMES COMPLY AND
CAUSE ISSUER TO COMPLY WITH THE PROVISIONS OF SECTION 148 AND OTHER APPLICABLE
SECTIONS OF THE CODE AND WILL RESTRICT THE USE OF THE PROCEEDS OF THE 2005
SERIES A BONDS, IN SUCH MANNER AND TO SUCH EXTENT, IF ANY, AS MAY BE NECESSARY,
AND REMIT EXCESS EARNINGS WITH RESPECT TO ALL OF THE 2005 SERIES A BONDS, IF
ANY, TO THE UNITED STATES OF AMERICA PURSUANT TO SECTION 148(F)(2) OF THE CODE
AND CARRY OUT SUCH ACTIONS SO THAT THE 2005 SERIES A BONDS WILL NOT CONSTITUTE
“ARBITRAGE BONDS” UNDER SECTIONS 103(B)(2) AND 148 OF THE CODE.  AN OFFICER OR
OFFICERS OF ISSUER HAVING RESPONSIBILITY WITH RESPECT TO THE ISSUANCE OF THE
2005 SERIES A BONDS IS OR ARE HEREBY AUTHORIZED AND DIRECTED TO GIVE AN
APPROPRIATE CERTIFICATE OF ISSUER, FOR INCLUSION IN THE TRANSCRIPT OF
PROCEEDINGS FOR THE 2005 SERIES A BONDS, SETTING FORTH THE REASONABLE
EXPECTATIONS OF ISSUER REGARDING THE AMOUNT AND USE OF THE PROCEEDS OF THE 2005
SERIES A BONDS AND THE FACTS, ESTIMATES AND CIRCUMSTANCES ON WHICH THEY ARE
BASED AND RELATED MATTERS, ALL AS OF THE DATE OF DELIVERY OF AND PAYMENT FOR THE
2005 SERIES A BONDS PURSUANT TO SAID SECTION 148 OF THE CODE.  COMPANY SHALL
PROVIDE THE ISSUER, AND ISSUER’S CERTIFICATE MAY BE EXPRESSLY BASED ON, A
CERTIFICATE OF COMPANY SETTING FORTH THE FACTS, ESTIMATES AND CIRCUMSTANCES AND
REASONABLE EXPECTATIONS OF COMPANY ON THE DATE OF DELIVERY OF AND PAYMENT FOR
THE 2005 SERIES A BONDS REGARDING THE AMOUNT AND USE OF THE PROCEEDS OF THE 2005
SERIES A BONDS AND RELATED MATTERS.  IN THE EVENT ANY SUCH REPRESENTATION OF
COMPANY RELIED UPON BY THE ISSUER IS UNTRUE OR INACCURATE AND ISSUER THEREBY
SUFFERS COSTS OR DAMAGES, COMPANY SHALL INDEMNIFY ISSUER FOR ANY SUCH COSTS OR
DAMAGES.

 

(D)           CONSISTENT WITH THE FOREGOING, COMPANY COVENANTS AND CERTIFIES TO
THE ISSUER AND TO AND FOR THE BENEFIT OF THE PURCHASERS OF THE 2005 SERIES A
BONDS, THAT NO USE WILL BE MADE OF THE PROCEEDS OF THE SALE OF THE 2005 SERIES A
BONDS WHICH WOULD CAUSE THE 2005 SERIES A BONDS TO BE CLASSIFIED AS “ARBITRAGE
BONDS” WITHIN THE MEANING OF SECTIONS 103(B)(2) AND 148 OF THE CODE AND THAT
COMPANY AND ISSUER WILL, AFTER ISSUANCE OF THE 2005 SERIES A BONDS, COMPLY WITH
THE PROVISIONS OF THE CODE AT ALL TIMES, INCLUDING AFTER THE 2005 SERIES A BONDS
ARE DISCHARGED, TO THE EXTENT EXCESS EARNINGS WITH RESPECT TO THE 2005 SERIES A
BONDS ARE REQUIRED TO BE REBATED TO THE UNITED STATES OF AMERICA PURSUANT TO
SECTION 148(F)(2) OF THE CODE.  PURSUANT TO SUCH COVENANT, ISSUER AND COMPANY
OBLIGATE THEMSELVES THROUGHOUT THE TERM OF THIS AGREEMENT AND THEREAFTER NOT TO
VIOLATE THE REQUIREMENTS OF SECTION 148 OF THE CODE.

 

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(E)           COMPANY WARRANTS, REPRESENTS AND CERTIFIES TO ISSUER THAT THE
PROCEEDS OF THE REFUNDED 1995 SERIES A BONDS WERE APPLIED AND INVESTED IN
COMPLIANCE WITH THE CURRENT REQUIREMENTS OF SECTION 149(G) OF THE CODE AND THAT
CONSEQUENTLY THE 2005 SERIES A BONDS WILL NOT BE “HEDGE BONDS” UNDER SUCH
SECTION 149(G) OF THE CODE.

 

(F)            COMPANY HEREBY COVENANTS AND AGREES THAT IT WILL AT ALL TIMES
COMPLY WITH THE PROVISIONS OF SECTION 148, INCLUDING SECTION 148(F) OF THE CODE
AND WITH SECTION 6.06 OF THE INDENTURE.  SPECIFICALLY, COMPANY SHALL CARRY OUT,
DO AND PERFORM ALL ACTS STIPULATED TO BE PERFORMED BY COMPANY PURSUANT TO SUCH
SECTION 6.06 OF THE INDENTURE.  COMPANY SHALL FURTHER UNDERTAKE TO ASSURE AND
CAUSE REBATE PAYMENTS TO BE CALCULATED AND MADE TO THE UNITED STATES OF AMERICA
IN ACCORDANCE WITH SECTION 148(F)(2) OF THE CODE FROM MONEYS ON DEPOSIT IN THE
REBATE FUND FROM TIME TO TIME AFTER THE END OF EACH COMPUTATION PERIOD, AS
DEFINED IN THE INDENTURE, AND FOLLOWING DISCHARGE OF THE 2005 SERIES A BONDS. 
COMPANY ALSO COVENANTS TO TAKE ALL NECESSARY ACTS AND STEPS AS REQUIRED TO CAUSE
ISSUER TO COMPLY WITH THE PROVISIONS OF SECTION 7.03 OF THE INDENTURE.

 

Section 4.5.            Opinion of Bond Counsel.  Company need not comply with
the covenants or representations in Section 4.4 if and to the extent that Issuer
and Company (with a copy to Trustee) receive a written opinion of Bond Counsel
that such failure to comply will not affect adversely the exclusion of interest
on any of the 2005 Series A Bonds from gross income for federal income tax
purposes under Section 103(a) of the Code.

 

Section 4.6.            First Mortgage Bonds.  Company covenants and agrees with
Issuer that it will, for the purpose of providing security for the 2005 Series A
Bonds, execute and deliver on the date of issuance of the 2005 Series A Bonds,
the First Mortgage Bonds to Trustee in aggregate principal amount not less than
the aggregate principal amount of the 2005 Series A Bonds.  The First Mortgage
Bonds shall mature as to principal identically as in the case of the 2005 Series
A Bonds and, upon the giving of a Redemption Demand to the First Mortgage
Trustee and completion of other conditions precedent set forth in the
Supplemental Indenture, shall bear interest identically as in the case of the
2005 Series A Bonds.

 

Prior to the Release Date, in the event of a default under ARTICLE IX of this
Agreement or in the event of a default in payment of the principal of, premium,
if any, or interest on the 2005 Series A Bonds as and when the same come due,
whether at maturity, by purchase, redemption, acceleration or otherwise, and
upon receipt by First Mortgage Trustee of a Redemption Demand from Trustee, the
First Mortgage Bonds shall bear interest in accordance with the provisions
specified in the Supplemental Indenture at the rate of interest of the 2005
Series A Bonds and principal and interest thereon will be payable at the same
time and in the same manner in which such amounts are payable with respect to
the 2005 Series A Bonds, whether on schedule, at maturity, by redemption, by
acceleration or otherwise.

 

Upon payment of the principal of, premium, if any, and interest on any of the
2005 Series A Bonds, whether at maturity or prior to maturity by redemption or
otherwise, and the surrender thereof to, and cancellation thereof by, Trustee,
or upon provision for the payment thereof having been made in accordance with
the provisions of ARTICLE VIII of the Indenture, First Mortgage Bonds in an
amount equal to the aggregate principal amount of the 2005 Series A Bonds so
surrendered and cancelled or for the payment of which provision has been made
shall be deemed

 

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fully paid and the obligations of Company thereunder terminated and such First
Mortgage Bonds shall be surrendered by Trustee to the First Mortgage Trustee,
and shall be cancelled by the First Mortgage Trustee.  All of the First Mortgage
Bonds shall be registered in the name of Trustee and shall be non-transferable,
except to effect transfers to any successor trustee under the Indenture.

 

Notwithstanding anything in this Agreement to the contrary, from and after the
Release Date, the obligation of the Company to make payment with respect to the
principal of and premium, if any, and interest on the First Mortgage Bonds shall
be deemed satisfied and discharged as provided in the Supplemental Indenture and
the First Mortgage Bonds shall cease to secure in any manner the 2005 Series A
Bonds.  As a result, on the Release Date, the obligations under this Agreement
shall become unsecured general obligations of the Company, subject, however to
Section 7.9.

 

The Company shall notify the Issuer, the Trustee and the Bond Insurer in writing
promptly upon the occurrence of the Release Date.  Upon receiving written notice
of the Release Date from the Company, the Trustee shall deliver for cancellation
to the First Mortgage Trustee all of the First Mortgage Bonds.

 

ARTICLE V

PROVISIONS FOR PAYMENT

 

Section 5.1.            Loan Payments and Other Amounts Payable.

 

(A)           COMPANY HEREBY COVENANTS AND AGREES TO REPAY THE LOAN, AS
FOLLOWS:  ON OR BEFORE ANY INTEREST PAYMENT DATE FOR THE 2005 SERIES A BONDS OR
ANY OTHER DATE THAT ANY PAYMENT OF INTEREST, PREMIUM, IF ANY, PURCHASE PRICE OR
PRINCIPAL IS REQUIRED TO BE MADE IN RESPECT OF THE 2005 SERIES A BONDS AT THE
TIMES SPECIFIED IN ACCORDANCE WITH THE MORE SPECIFIC PROVISIONS AND REQUIREMENTS
OF THE INDENTURE, UNTIL THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE
2005 SERIES A BONDS SHALL HAVE BEEN FULLY PAID OR PROVISION FOR THE PAYMENT
THEREOF SHALL HAVE BEEN MADE IN ACCORDANCE WITH THE INDENTURE, IT WILL PAY TO
THE TRUSTEE, FOR DISBURSEMENT BY THE TRUSTEE, AS PAYING AGENT, OR FOR
DISBURSEMENT BY ANY PAYING AGENT SUCH SUMS WHICH WILL ENABLE THE PAYING AGENT TO
PAY THE AMOUNTS PAYABLE ON SUCH DATE, IN IMMEDIATELY AVAILABLE FUNDS, AS
PRINCIPAL OF (WHETHER AT PURCHASE, MATURITY OR UPON REDEMPTION OR ACCELERATION
OR OTHERWISE), PREMIUM, IF ANY, AND INTEREST ON THE 2005 SERIES A BONDS AS
PROVIDED IN THE INDENTURE; PROVIDED THAT SUCH PAYMENTS BY COMPANY TO ENABLE THE
TENDER AGENT TO PAY THE PURCHASE PRICE OF BONDS SHALL BE MADE WITHIN THE TIMES
REQUIRED BY SECTION 3.05 OF THE INDENTURE.

 

It is understood and agreed that all payments payable by Company under this
subsection (a) of Section 5.1 are assigned by the Issuer to the Trustee, the
Paying Agent and the Tender Agent, as applicable, for the benefit of the
Bondholders.  Company assents to such assignment.  Issuer hereby directs Company
and Company hereby agrees to pay to Trustee and/or Paying Agent or Tender Agent,
as appropriate, at the Principal Office of the Trustee and/or Paying Agent or
Tender Agent, as appropriate, all payments payable by Company pursuant to this
subsection.

 

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(B)           COMPANY WILL ALSO PAY THE REASONABLE EXPENSES OF THE ISSUER
RELATED TO THE ISSUANCE OF THE 2005 SERIES A BONDS AND INCURRED UPON THE REQUEST
OF COMPANY.

 

(C)           COMPANY WILL ALSO PAY THE AGREED UPON FEES AND EXPENSES OF TRUSTEE
(INCLUDING THOSE REFERRED TO IN SECTION 10.02 OF THE INDENTURE), THE BOND
REGISTRAR, THE MARKET AGENT, THE AUCTION AGENT, THE TENDER AGENT AND THE PAYING
AGENT, AS MAY BE APPLICABLE, UNDER THE INDENTURE AND ALL OTHER AMOUNTS WHICH MAY
BE PAYABLE TO THE TRUSTEE, THE BOND REGISTRAR, THE PAYING AGENT, THE MARKET
AGENT, THE AUCTION AGENT AND THE TENDER AGENT, AS APPLICABLE FROM TIME TO TIME,
UNDER THE INDENTURE, SUCH AMOUNTS TO BE PAID DIRECTLY TO TRUSTEE, THE BOND
REGISTRAR, THE MARKET AGENT, THE AUCTION AGENT, THE PAYING AGENT AND TENDER
AGENT FOR THEIR RESPECTIVE OWN ACCOUNTS AS AND WHEN SUCH AMOUNTS BECOME DUE AND
PAYABLE.

 

The Company further agrees to hold harmless the Trustee, Bond Registrar and
Paying Agent against any loss, liability or expense, including reasonable
attorneys’ fees and expenses, incurred by it without negligence or bad faith on
its part in connection with the issuance of the 2005 Series A Bonds or the
acceptance or administration of the trusts under the Indenture, including the
costs of defending itself against any claim or liability in connection
therewith.

 

(D)           THE COMPANY COVENANTS, FOR THE BENEFIT OF THE BONDHOLDERS, TO PAY
OR CAUSE TO BE PAID, TO THE TENDER AGENT FOR DEPOSIT IN THE PURCHASE FUND, SUCH
AMOUNTS AS SHALL BE NECESSARY TO ENABLE THE TENDER AGENT TO PAY THE PURCHASE
PRICE OF 2005 SERIES A BONDS DELIVERED TO IT FOR PURCHASE, ALL AS MORE
PARTICULARLY DESCRIBED IN SECTIONS 3.03 AND 3.05 OF THE INDENTURE, AND, IN THAT
REGARD, IT WILL MAINTAIN AN ACCOUNT WITH THE TENDER AGENT AND WILL PAY IN
IMMEDIATELY AVAILABLE FUNDS, A SUM WHICH WILL ENABLE THE TENDER AGENT TO PAY THE
PURCHASE PRICE OF 2005 SERIES A BONDS DELIVERED TO IT FOR PURCHASE, AS PROVIDED
IN THE INDENTURE.

 

(E)           IN THE EVENT COMPANY SHOULD FAIL TO MAKE ANY OF THE PAYMENTS
REQUIRED IN THIS SECTION 5.1, THE ITEM OR INSTALLMENT SO IN DEFAULT SHALL
CONTINUE AS AN OBLIGATION OF COMPANY UNTIL THE AMOUNT IN DEFAULT SHALL HAVE BEEN
FULLY PAID, AND COMPANY AGREES TO PAY THE SAME WITH INTEREST THEREON, TO THE
EXTENT PERMITTED BY LAW, FROM THE DATE WHEN SUCH PAYMENT WAS DUE TO THE DATE OF
PAYMENT.

 

Section 5.2.            Payments Assigned.  As set forth in Section 5.1 hereof,
it is understood and agreed that this Agreement and all payments made by Company
pursuant to this Agreement (except payments pursuant to Section 5.1(b) and (c)
or pursuant to Section 8.2 hereof) are assigned by Issuer to Trustee.  Company
assents to such assignment and hereby agrees that, as to Trustee, Paying Agent,
Market Agent,  Auction Agent and Tender Agent, as applicable from time to time,
its obligation to make such payments shall be absolute, irrevocable and
unconditional and shall not be subject to cancellation, termination or abatement
or to any defense or any right of set-off, counterclaim or recoupment arising
out of any breach by any party, whether hereunder or otherwise, or out of any
indebtedness or liability at any time owing by any party.  Except as provided
above, Issuer hereby directs Company and Company hereby agrees to pay directly
to Trustee, Paying Agent, Market Agent, Auction Agent, Bond Registrar, Tender
Agent and Issuer, as appropriate, all said payments payable by Company pursuant
to Section 5.1 of this Agreement.

 

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Section 5.3.            Taxes and Other Governmental Charges.  Company agrees to
pay during the term of this Agreement, as the same respectively become due, all
taxes, assessments and other governmental charges of any kind whatsoever that
may at any time be lawfully assessed, levied or charged against or with respect
to the Project; provided, that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of
years, Company shall be obligated to pay only such installments as may have
become due and provided further that nothing herein shall be construed as
obligating Company to pay taxes on any interest or principal on the 2005 Series
A Bonds disbursed to Bondholders.

 

Company may, at its expense and in its own name, in good faith contest any such
taxes, assessments and other governmental charges and, in the event of any such
contest, may permit the taxes, assessments or other governmental charges so
contested to remain unpaid during the period of such contest and any appeal
therefrom unless, in the opinion of its counsel, by nonpayment of any such items
the security provided pursuant to the provisions of the Indenture will be
materially endangered, in which event such taxes, charges for payments in lieu
of taxes, assessments or charges shall be paid forthwith.  Issuer will cooperate
fully with Company in any such contest.  In the event Company shall fail to pay
any of the foregoing items required by this Section to be paid by Company,
Issuer or Trustee may (but shall be under no obligation to) pay the same and any
amounts so advanced therefor by Issuer or Trustee shall become an additional
obligation of Company to the one making the advancement, which amounts, together
with interest thereon Company agrees to pay at a rate which shall be one percent
above the lowest minimum lending rate publicly quoted at such time as being
charged by any commercial bank which is a member of the New York Clearing House
on ninety-day commercial loans to its prime commercial borrowers or the maximum
rate permitted by law, whichever is lesser, until paid; provided, however, that
no such advancement shall operate to relieve the Company from any default
hereunder.  Company may at its expense and in its own name and behalf apply for
any tax exemption or exemption from payments in lieu of taxes allowed by the
Commonwealth of Kentucky, or any political or taxing subdivision thereof under
any existing or future provision of law which grants or may grant any such tax
exemption or exemption from payments in lieu of taxes.

 

Section 5.4.            Obligations of Company Unconditional.  The obligation of
Company to make the payments pursuant to this Agreement and to make any payments
required in respect of the Rebate Fund as provided in Section 6.06 of the
Indenture shall be absolute and unconditional.  Until such time as the principal
of, premium, if any, and interest on the 2005 Series A Bonds shall have been
fully paid or provision for the payment thereof shall have been made in
accordance with the Indenture, Company (i) will not suspend or discontinue any
payments pursuant to this Agreement and (ii) except as provided in ARTICLE X
hereof, will not terminate this Agreement for any cause including, without
limiting the generality of the foregoing, failure of title to the Project or any
part thereof, any acts or circumstances that may constitute failure of
consideration, destruction of or damage to the Project, commercial frustration
of purpose, any change in the tax or other laws of the United States of America
or of the Commonwealth of Kentucky or any political subdivision thereof or any
failure of Issuer or Trustee to perform and observe any agreement, whether
express or implied or any duty, liability or obligation arising out of or
connected with this Agreement.  Nothing contained in this Section shall be
construed to release Issuer from the performance of any of the agreements on its
part herein contained; and in the event Issuer should fail to perform any such
agreement on its part, Company may institute

 

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such action against Issuer as Company may deem necessary to compel performance
so long as such action shall be in accordance with the agreements on the part of
Company contained in the preceding sentence.  Company may, however, at its own
cost and expense and in its own name or in the name of Issuer, prosecute or
defend any action or proceeding or take any other action involving third persons
which Company deems reasonably necessary in order to secure or protect its right
of ownership, possession, occupancy and use of the Project, and in such event
Issuer hereby agrees to cooperate fully with Company.

 

Section 5.5.            Rebate Fund.  Company agrees to make all payments to the
Trustee and rebate all amounts to the United States of America as are required
of it under Section 6.06 of the Indenture.  The obligation of Company to make
such payments shall remain in effect and be binding upon Company notwithstanding
the release and discharge of the Indenture.

 

Section 5.6.            Redemption of the 2005 Series A Bonds in Advance of
Scheduled Maturity.  Under the terms of the Indenture, the 2005 Series A Bonds
are and will be subject to redemption prior to their scheduled maturity.  The
Issuer agrees that it shall direct the Trustee to redeem and call 2005 Series A
Bonds at the written direction of the Company.

 

Section 5.7.            Cancellation of 2005 Series A Bonds.  The cancellation
by the Bond Registrar of any 2005 Series A Bond or Bonds purchased by the
Company and delivered to the Bond Registrar for cancellation or of any 2005
Series A Bond or Bonds redeemed or purchased by the Issuer through funds other
than funds received as Loan payments hereunder shall constitute a Loan repayment
equal to the principal amount of the 2005 Series A Bond or Bonds so cancelled.

 

ARTICLE VI

MAINTENANCE; DAMAGE, DESTRUCTION AND
CONDEMNATION; USE OF NET PROCEEDS; INSURANCE

 

Section 6.1.            Maintenance.  So long as any 2005 Series A Bonds are
Outstanding, as that term is defined in the Indenture, Company will maintain,
preserve and keep the Project, or cause the Project to be maintained, preserved
and kept, in good repair, working order and condition and will from time to time
make or cause to be made all proper repairs, replacements and renewals necessary
to continue to constitute the Project as air pollution control and abatement
facilities under Section 103(b)(4)(F) of the Internal Revenue Code of 1954, as
amended, the Code and the Act; provided, however, that Company will have no
obligation to maintain, preserve, keep, repair, replace or renew any element or
portion of the Project (a) the maintenance, preservation, keeping, repair,
replacement or renewal of which becomes uneconomical to Company because of
damage or destruction by a cause not within the control of Company, or
condemnation of all or substantially all of the Project or the generating
facilities to which the element or unit of the Project is an adjunct, or
obsolescence (including economic obsolescence) or change in government standards
and regulations, or the termination by Company of the operation of the
generating facilities to which the element or unit of the Project is an adjunct,
and (b) with respect to which Company has furnished to Issuer and Trustee a
certificate executed by Company Representative certifying that the maintenance,
preservation, keeping, repair, replacement or renewal of such element or unit of
the Project is being

 

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discontinued for one of the foregoing reasons, which shall be stated therein,
and that the discontinuance of such element or unit will not adversely affect
the exclusion of interest on any of the 2005 Series A Bonds from gross income
for federal income tax purposes under Section 103(a) of the Code.

 

Company shall have the privilege at its own expense of remodeling the Project or
making substitutions, modifications and improvements to the Project from time to
time as it, in its discretion, may deem to be desirable for its uses and
purposes, which remodeling, substitutions, modifications and improvements shall
be included under the terms of this Agreement as part of the Project; provided,
however, that Company shall take no actions which will change or alter the basic
nature of the Project as air pollution control facilities under Section
103(b)(4)(F) of the Internal Revenue Code of 1954, as amended, and the Act.

 

If, prior to full payment of all 2005 Series A Bonds outstanding (or provision
for payment thereof having been made in accordance with the provisions of the
Indenture), the Project or any portion thereof is destroyed or damaged in whole
or in part by fire or other casualty, or title to, or the temporary use of, the
Project or any portion thereof shall have been taken by the exercise of the
power of eminent domain, and the Issuer, the Company or the First Mortgage
Trustee receives Net Proceeds from insurance or any condemnation award in
connection therewith, Company (unless it shall have exercised its option to
prepay the Loan pursuant to provisions of Section 10.1(b) or (c) hereof) shall
either (i) cause such Net Proceeds to be used to repair, reconstruct, restore or
improve the Project, or (ii) take any other action, including the redemption of
2005 Series A Bonds, in whole or in part, on any date which is a Business Day,
which, in the opinion of Bond Counsel, will not adversely affect the exclusion
of interest on any of the 2005 Series A Bonds from gross income for federal
income tax purposes under Section 103(a) of the Code; provided that if the 2005
Series A Bonds bear interest at the Flexible Rate or Semi-Annual Rate, such
redemption must occur on a date on which the 2005 Series A Bonds are otherwise
subject to optional redemption.

 

Section 6.2.            Insurance.  Prior to the Release Date, Company agrees to
insure the Project at all times in accordance with the provisions of First
Mortgage Indenture.  From and after the Release Date, the Company agrees to
insure, or self-insure, the Project at all times reasonably in accordance with
investor-owned public utility industry general practices and standards.

 

ARTICLE VII

SPECIAL COVENANTS

 

Section 7.1.            No Warranty of Condition or Suitability by Issuer. 
Issuer makes no warranty, either express or implied, as to the Project or that
it will be suitable for Company’s purposes or needs.

 

Section 7.2.            Company to Maintain its Corporate Existence; Conditions
under Which Exceptions Permitted.  Company agrees that during the term of this
Agreement it will maintain its corporate existence and good standing, will
continue to be a corporation organized under the laws of the Commonwealth of
Kentucky or qualified and admitted to do business in the

 

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Commonwealth of Kentucky, and will neither dispose of all or substantially all
of its assets nor consolidate with nor merge into another corporation unless the
acquirer of its assets or the corporation with which it shall consolidate or
into which it shall merge, (i) shall be a corporation or other business
organization organized and existing under the laws of the United States or one
of the States of the United States of America or the District of Columbia, (ii)
shall be qualified and admitted to do business in the Commonwealth of Kentucky,
(iii) shall assume in writing all of the obligations and covenants of Company
herein and (iv) shall deliver a copy of such assumption to the Issuer and
Trustee.

 

Section 7.3.            Financial Statements.  Company agrees to furnish Trustee
(within 120 days after the close of each fiscal year) with an audited balance
sheet and statements of income, retained earnings and changes in cash flows
showing the financial condition of Company and its consolidated subsidiary or
subsidiaries, if any, at the close of such fiscal year and the results of
operations of Company and its consolidated subsidiary or subsidiaries, if any,
for such fiscal year, accompanied by an opinion of its regular independent
certified public accountants that such statements fairly represent the financial
condition of Company in accordance with generally accepted accounting
principles.  The requirements of this Section shall be satisfied by the
submission to Trustee of Company’s annual report on Form 10-K.  The information
so provided to Trustee shall be kept in its files and is not required to be
distributed to any Registered Holder or other person.  Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee’s receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company’s compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers’
Certificates).

 

Section 7.4.            Further Assurances and Corrective Instruments. Issuer
and Company agree that they will, from time to time, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such supplements
hereto and such further instruments as may reasonably be required for carrying
out the intention of or facilitating the performance of this Agreement.

 

Section 7.5.            Issuer Representative.  Whenever under the provisions of
this Agreement the approval of Issuer is required or Issuer is required to take
some action at the request of Company, such approval shall be made or such
action shall be taken by Issuer Representative and Company or Trustee shall be
authorized to act on any such approval or action, and Issuer shall have no
redress against Company or Trustee as a result of any such action taken.

 

Section 7.6.            Company Representative.  Whenever under the provisions
of this Agreement the approval of Company is required or Company is required to
take some action at the request of Issuer, such approval shall be made or such
action shall be taken by Company Representative and Issuer or Trustee shall be
authorized to act on any such approval or action and Company shall have no
redress against Issuer or Trustee as a result of any such action taken.

 

Section 7.7.            Financing Statements.  Company shall, to the extent
required by law, file and record, refile and rerecord, or cause to be filed and
recorded, refiled and rerecorded, all documents or notices, including financing
statements and continuation statements, required by law in order to perfect, or
maintain the perfection of, the lien of the Indenture and the

 

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Supplemental Indenture.  Issuer shall cooperate fully with Company in taking any
such action.  Concurrently with the execution and delivery of the 2005 Series A
Bonds, Company shall cause to be delivered to the Trustee an opinion of counsel
(a) stating that in the opinion of such counsel, either (i) such action has been
taken, as set forth therein, with respect to the recording and filing of such
documents, notices and financing statements as is necessary to perfect the lien
of the Indenture under the Uniform Commercial Code of the Commonwealth of
Kentucky, or (ii) no such action is necessary to so perfect such lien, and (b)
stating the requirements for the filing of continuation statements or other
documentation or notices in order to maintain the perfection of the lien of the
Indenture, which filings the Company agrees to undertake.

 

Section 7.8.            Company’s Performance Under Indenture.  The Company
agrees, for the benefit of Bondholders to do and perform all acts and things
contemplated in the Indenture to be done and performed by it.

 

Section 7.9.            Negative Pledge.

 

(A)           THE COMPANY AGREES THAT, SUBSEQUENT TO THE RELEASE DATE (AS
DEFINED IN THE INDENTURE) AND SO LONG AS ANY 2005 SERIES A BONDS REMAIN
OUTSTANDING, THE COMPANY WILL NOT ISSUE, ASSUME OR GUARANTEE ANY DEBT SECURED BY
ANY MORTGAGE, SECURITY INTEREST, PLEDGE OR LIEN (HEREIN REFERRED TO AS A
“MORTGAGE”) OF OR UPON ANY OPERATING PROPERTY OF THE COMPANY, WHETHER OWNED AT
THE DATE OF THE INDENTURE OR THEREAFTER ACQUIRED, AND WILL NOT PERMIT TO EXIST
ANY DEBT SECURED BY A MORTGAGE ON ANY OPERATING PROPERTY CREATED ON OR PRIOR TO
THE RELEASE DATE, WITHOUT IN ANY SUCH CASE EFFECTIVELY SECURING, ON THE LATER TO
OCCUR OF THE ISSUANCE, ASSUMPTION OR GUARANTY OF ANY SUCH DEBT OR THE RELEASE
DATE, THE 2005 SERIES A BONDS EQUALLY AND RATABLY WITH SUCH DEBT; PROVIDED,
HOWEVER, THAT THE FOREGOING RESTRICTION SHALL NOT APPLY TO DEBT SECURED BY ANY
OF THE FOLLOWING:

 

(I)            MORTGAGES ON ANY PROPERTY EXISTING AT THE TIME OF ACQUISITION
THEREOF;

 

(II)           MORTGAGES ON PROPERTY OF A CORPORATION EXISTING AT THE TIME SUCH
CORPORATION IS MERGED INTO OR CONSOLIDATED WITH THE COMPANY, OR AT THE TIME OF A
SALE, LEASE OR OTHER DISPOSITION OF THE PROPERTIES OF SUCH CORPORATION OR A
DIVISION THEREOF AS AN ENTIRETY OR SUBSTANTIALLY AS AN ENTIRETY TO THE COMPANY,
PROVIDED THAT SUCH MORTGAGE AS A RESULT OF SUCH MERGER, CONSOLIDATION, SALE,
LEASE OR OTHER DISPOSITION IS NOT EXTENDED TO PROPERTY OWNED BY THE COMPANY
IMMEDIATELY PRIOR THERETO;

 

(III)          MORTGAGES ON PROPERTY TO SECURE ALL OR PART OF THE COST OF
ACQUIRING, SUBSTANTIALLY REPAIRING OR ALTERING, CONSTRUCTING, DEVELOPING OR
SUBSTANTIALLY IMPROVING SUCH PROPERTY, OR TO SECURE INDEBTEDNESS INCURRED TO
PROVIDE FUNDS FOR ANY SUCH PURPOSE OR FOR REIMBURSEMENT OF FUNDS PREVIOUSLY
EXPENDED FOR ANY SUCH PURPOSE, PROVIDED SUCH MORTGAGES ARE CREATED OR ASSUMED
CONTEMPORANEOUSLY WITH, OR WITHIN 18 MONTHS AFTER, SUCH ACQUISITION OR
COMPLETION OF SUBSTANTIAL REPAIR OR ALTERATION, CONSTRUCTION, DEVELOPMENT OR
SUBSTANTIAL IMPROVEMENT OR WITHIN SIX MONTHS THEREAFTER PURSUANT TO A COMMITMENT
FOR FINANCING ARRANGED WITH A LENDER OR INVESTOR WITHIN SUCH 18 MONTH PERIOD;

 

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(IV)          MORTGAGES IN FAVOR OF THE UNITED STATES OF AMERICA OR ANY STATE
THEREOF, OR ANY DEPARTMENT, AGENCY OR INSTRUMENTALITY OR POLITICAL SUBDIVISION
OF THE UNITED STATES OF AMERICA OR ANY STATE THEREOF, OR FOR THE BENEFIT OF
HOLDERS OF SECURITIES ISSUED BY ANY SUCH ENTITY, TO SECURE ANY DEBT INCURRED FOR
THE PURPOSE OF FINANCING ALL OR ANY PART OF THE PURCHASE PRICE OR THE COST OF
SUBSTANTIALLY REPAIRING OR ALTERING, CONSTRUCTING, DEVELOPING OR SUBSTANTIALLY
IMPROVING THE PROPERTY SUBJECT TO SUCH MORTGAGES; OR

 

(V)           ANY EXTENSION, RENEWAL OR REPLACEMENT (OR SUCCESSIVE EXTENSIONS,
RENEWALS OR REPLACEMENTS), IN WHOLE OR IN PART, OF ANY MORTGAGE REFERRED TO IN
THE FOREGOING CLAUSES (1) TO (4), INCLUSIVE; PROVIDED, HOWEVER, THAT THE
PRINCIPAL AMOUNT OF INDEBTEDNESS SECURED THEREBY AND NOT OTHERWISE AUTHORIZED BY
SAID CLAUSES (1) TO (4), INCLUSIVE, SHALL NOT EXCEED THE PRINCIPAL AMOUNT OF
INDEBTEDNESS, PLUS ANY PREMIUM OR FEE PAYABLE IN CONNECTION WITH ANY SUCH
EXTENSION, RENEWAL OR REPLACEMENT, SO SECURED AT THE TIME OF SUCH EXTENSION,
RENEWAL OR REPLACEMENT.

 

(B)           NOTWITHSTANDING THE PROVISIONS OF SECTION 7.9(A) FROM AND AFTER
THE RELEASE DATE AND SO LONG AS ANY 2005 SERIES A BONDS REMAIN OUTSTANDING, THE
COMPANY MAY ISSUE, ASSUME OR GUARANTEE DEBT, OR PERMIT TO EXIST DEBT, SECURED BY
MORTGAGES WHICH WOULD OTHERWISE BE SUBJECT TO THE RESTRICTIONS OF THIS
SECTION UP TO AN AGGREGATE PRINCIPAL AMOUNT THAT, TOGETHER WITH THE PRINCIPAL
AMOUNT OF ALL OTHER DEBT OF THE COMPANY SECURED BY MORTGAGES (OTHER THAN
MORTGAGES PERMITTED BY SECTION 7.9(A) THAT WOULD OTHERWISE BE SUBJECT TO THE
FOREGOING RESTRICTIONS) DOES NOT AT THE TIME EXCEED THE GREATER OF 10% OF NET
TANGIBLE ASSETS OR 10% OF CAPITALIZATION.

 

(C)           NOTWITHSTANDING THE PROVISIONS OF SECTION 7.9(A) AND
SECTION 7.9(B), THE COMPANY WILL NOT, FROM AND AFTER THE RELEASE DATE, ISSUE,
ASSUME, GUARANTEE OR PERMIT TO EXIST ANY DEBT OF THE COMPANY SECURED BY A
MORTGAGE, THE CREDITOR OF WHICH CONTROLS, IS CONTROLLED BY, OR IS UNDER COMMON
CONTROL WITH, THE COMPANY.

 

(D)           IF AT ANY TIME THE COMPANY SHALL ISSUE, ASSUME OR GUARANTEE ANY
DEBT SECURED BY ANY MORTGAGE AND IF SECTION 7.9(A) REQUIRES THAT THE 2005 SERIES
A BONDS BE SECURED EQUALLY AND RATABLY WITH SUCH DEBT, THE COMPANY WILL PROMPTLY
EXECUTE, AT ITS EXPENSE, ANY INSTRUMENTS NECESSARY TO SO EQUALLY AND RATABLY
SECURE SUCH 2005 SERIES A BONDS.

 

ARTICLE VIII

ASSIGNMENT; INDEMNIFICATION; REDEMPTION

 

Section 8.1.            Assignment.  This Agreement may be assigned by Company
without the necessity of obtaining the consent of either Issuer or Trustee,
subject, however, to each of the following conditions:

 

(A)           NO ASSIGNMENT (OTHER THAN PURSUANT TO SECTION 7.2 HEREOF) SHALL
RELIEVE COMPANY FROM PRIMARY LIABILITY FOR ANY OF ITS OBLIGATIONS HEREUNDER, AND
IN THE EVENT OF ANY SUCH ASSIGNMENT COMPANY SHALL REMAIN PRIMARILY LIABLE FOR
PAYMENTS OF THE AMOUNTS SPECIFIED IN SECTION 5.1 HEREOF AND FOR PERFORMANCE AND
OBSERVANCE OF THE OTHER COVENANTS OR AGREEMENTS ON ITS PART HEREIN PROVIDED TO
BE PERFORMED AND OBSERVED TO THE SAME EXTENT AS THOUGH NO ASSIGNMENT HAD BEEN
MADE;

 

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(B)           THE ASSIGNEE SHALL ASSUME THE OBLIGATIONS OF COMPANY HEREUNDER TO
THE EXTENT OF THE INTEREST ASSIGNED;

 

(C)           COMPANY SHALL, WITHIN THIRTY DAYS AFTER THE DELIVERY THEREOF,
FURNISH OR CAUSE TO BE FURNISHED TO ISSUER AND TO TRUSTEE A TRUE AND COMPLETE
COPY OF EACH SUCH ASSIGNMENT AND ASSUMPTION OF OBLIGATION; AND

 

(D)           PRIOR TO SUCH ASSIGNMENT, THE COMPANY SHALL HAVE OBTAINED AN
OPINION OF BOND COUNSEL TO THE EFFECT THAT SUCH ASSIGNMENT WILL NOT ADVERSELY
AFFECT THE EXCLUSION OF INTEREST ON THE 2005 SERIES A BONDS FROM GROSS INCOME
FOR FEDERAL INCOME TAX PURPOSES UNDER SECTION 103(A) OF THE CODE.

 

Section 8.2.            Release and Indemnification Covenants.  Company releases
Issuer from and covenants and agrees that Issuer shall not be liable for, and
agrees to indemnify and hold Issuer harmless against, any expense or liability
incurred by Issuer, including attorneys’ fees, resulting from any loss or damage
to property or any injury to or death of any person occurring on or about or
resulting from any defect in the Project or from any action commenced in
connection with the financing thereof.  If any such claim is asserted, Issuer
agrees to give prompt notice to the Company and Company will assume the defense
thereof, with full power to litigate, compromise or to settle the same in its
sole discretion, it being understood that Issuer will not settle or consent to
the settlement of the same without the consent of Company.

 

Section 8.3.            Assignment of Interest in Agreement by Issuer.  Any
assignment by Issuer to Trustee pursuant to the Indenture or this Agreement of
any moneys receivable under this Agreement shall be subject and subordinate to
this Agreement.

 

Section 8.4.            Redemption of 2005 Series A Bonds.  Upon the agreement
of Company to deposit moneys in the Bond Fund in an amount sufficient to redeem
2005 Series A Bonds subject to redemption, Issuer, at the request of Company,
shall forthwith take all steps (other than the payment of the money required for
such redemption) necessary under the applicable redemption provisions of the
Indenture to effect redemption of all or part of the 2005 Series A Bonds
outstanding, as may be specified by Company, on the redemption date specified by
the Company.

 

Section 8.5.            Reference to 2005 Series A Bonds Ineffective after 2005
Series A Bonds Paid.  Upon payment in full of the 2005 Series A Bonds (or
provision for payment thereof having been made in accordance with the provisions
of the Indenture) and payment of all amounts required to be paid to the United
States of America pursuant to Section 4.4 hereof and payment of all fees and
charges of the Trustee (including reasonable attorney’s fees and expenses), the
Bond Registrar, the Authenticating Agent and any Paying Agent, all references in
this Agreement to the 2005 Series A Bonds, the First Mortgage Bonds and the
Trustee shall be ineffective and neither the Trustee nor the holders of any of
the 2005 Series A Bonds shall thereafter have any rights hereunder except as set
forth in Section 11.1.

 

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ARTICLE IX

EVENTS OF DEFAULT AND REMEDIES

 

Section 9.1.            Events of Default Defined.  The following shall be
“events of default” under this Agreement and the term “events of default” shall
mean, whenever they are used in this Agreement, any one or more of the following
events:

 

(A)           FAILURE BY THE COMPANY TO PAY ANY AMOUNT REQUIRED TO BE PAID UNDER
SUBSECTIONS (A) AND (D) OF SECTION 5.1 HEREOF WHICH RESULTS IN FAILURE TO PAY
PRINCIPAL OF, PREMIUM OR INTEREST ON OR THE PURCHASE PRICE OF THE 2005 SERIES A
BONDS, AND SUCH FAILURE SHALL CAUSE AN EVENT OF DEFAULT UNDER THE INDENTURE.

 

(B)           FAILURE BY COMPANY TO OBSERVE AND PERFORM ANY COVENANT, CONDITION
OR AGREEMENT ON ITS PART TO BE OBSERVED OR PERFORMED, OTHER THAN AS REFERRED TO
IN SUBSECTION (A) OF THIS SECTION, FOR A PERIOD OF THIRTY DAYS AFTER WRITTEN
NOTICE, SPECIFYING SUCH FAILURE AND REQUESTING THAT IT BE REMEDIED, IS GIVEN TO
COMPANY BY ISSUER OR TRUSTEE, UNLESS ISSUER AND TRUSTEE SHALL AGREE IN WRITING
TO AN EXTENSION OF SUCH TIME PRIOR TO ITS EXPIRATION; PROVIDED, HOWEVER, IF THE
FAILURE STATED IN THE NOTICE CANNOT BE CORRECTED WITHIN THE APPLICABLE PERIOD,
ISSUER AND TRUSTEE WILL NOT UNREASONABLY WITHHOLD THEIR CONSENT TO AN EXTENSION
OF SUCH TIME IF SUCH FAILURE IS CAPABLE OF BEING CURED AND CORRECTIVE ACTION IS
INSTITUTED BY COMPANY WITHIN THE APPLICABLE PERIOD AND IS BEING DILIGENTLY
PURSUED.

 

(C)           ALL BONDS OUTSTANDING UNDER THE FIRST MORTGAGE INDENTURE SHALL, IF
NOT ALREADY DUE, HAVE BECOME IMMEDIATELY DUE AND PAYABLE WHETHER BY DECLARATION
OF THE FIRST MORTGAGE TRUSTEE OR OTHERWISE, AND SUCH ACCELERATION SHALL NOT HAVE
BEEN RESCINDED OR ANNULLED BY THE FIRST MORTGAGE TRUSTEE.

 

(D)           AN INVOLUNTARY PROCEEDING SHALL BE COMMENCED OR AN INVOLUNTARY
PETITION SHALL BE FILED IN A COURT OF COMPETENT JURISDICTION SEEKING (I) RELIEF
IN RESPECT OF COMPANY, OR OF A SUBSTANTIAL PART OF THE PROPERTY OR ASSETS OF
COMPANY, UNDER TITLE 11 OF THE UNITED STATES CODE, AS NOW CONSTITUTED OR
HEREAFTER AMENDED, OR ANY OTHER FEDERAL OR STATE BANKRUPTCY, INSOLVENCY,
RECEIVERSHIP OR SIMILAR LAW, (II) THE APPOINTMENT OF A RECEIVER, TRUSTEE,
CUSTODIAN, SEQUESTRATOR, CONSERVATOR OR SIMILAR OFFICIAL FOR COMPANY OR FOR A
SUBSTANTIAL PART OF THE PROPERTY OR ASSETS OF COMPANY OR (III) THE WINDING-UP OR
LIQUIDATION OF COMPANY; AND SUCH PROCEEDING OR PETITION SHALL CONTINUE
UNDISMISSED OR UNSTAYED FOR 90 DAYS OR AN ORDER OR DECREE APPROVING OR ORDERING
ANY OF THE FOREGOING SHALL BE ENTERED.

 

(E)           COMPANY SHALL (I) VOLUNTARILY COMMENCE ANY PROCEEDING OR FILE ANY
PETITION SEEKING RELIEF UNDER TITLE 11 OF THE UNITED STATES CODE, AS NOW
CONSTITUTED OR HEREAFTER AMENDED, OR ANY OTHER FEDERAL OR STATE BANKRUPTCY,
INSOLVENCY, RECEIVERSHIP OR SIMILAR LAW, (II) CONSENT TO THE INSTITUTION OF, OR
FAIL TO CONTEST IN A TIMELY AND APPROPRIATE MANNER, ANY PROCEEDING OR THE FILING
OF ANY PETITION DESCRIBED IN (D) ABOVE, (III) APPLY FOR OR CONSENT TO THE
APPOINTMENT OF A RECEIVER, TRUSTEE, CUSTODIAN, SEQUESTRATOR, CONSERVATOR OR
SIMILAR OFFICIAL FOR COMPANY OR FOR A SUBSTANTIAL PART OF THE PROPERTY OR ASSETS
OF COMPANY, (IV) FILE AN ANSWER ADMITTING THE MATERIAL ALLEGATIONS OF A PETITION
FILED AGAINST IT IN ANY SUCH PROCEEDING, (V) MAKE A GENERAL ASSIGNMENT FOR THE
BENEFIT OF CREDITORS, (VI) BECOME UNABLE, ADMIT IN WRITING ITS INABILITY OR FAIL
GENERALLY TO

 

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PAY ITS DEBTS AS THEY BECOME DUE OR (VII) TAKE ANY ACTION FOR THE PURPOSE OF
EFFECTING ANY OF THE FOREGOING.

 

(F)            THE OCCURRENCE OF AN EVENT OF DEFAULT UNDER THE INDENTURE.

 

The provisions of Section 9.1(b) are subject to the following limitations:  If
by reason of force majeure Company is unable in whole or in part to carry out
its agreements on its part herein contained, other than the obligations on the
part of Company contained in Section 2.2(k) and (l), Section 4.2, Section 4.4,
Section 4.6 or Section 7.2 or ARTICLE V hereof and the general covenant and
obligation of Company to take all necessary actions for the continued exclusion
of interest on the 2005 Series A Bonds from gross income for federal and
Kentucky income taxes, Company shall not be deemed in default during the
continuance of such inability.  The term “force majeure” as used herein shall
mean any cause or event not reasonably within the control of Company, including
without limitation the following:  acts of God; strikes; wars or national police
actions, lockouts or other industrial disturbances; acts of public enemies,
including terrorists; orders of any kind of the government of the United States
or of the Commonwealth of Kentucky or any of their departments, agencies or
officials, or any civil or military authority; evacuations and quarantines;
insurrections; riots; epidemics; plague; famine; landslides; lightning;
earthquakes; fire; hurricanes; tornadoes; storms; typhoons; cyclones; volcanic
eruptions; floods; washouts; droughts; arrests; restraints of government and
people; civil disturbances; explosions; breakage or accident to machinery and
transmission lines or pipes; or partial or entire failure of utility services. 
Company agrees, however, to remedy with all reasonable dispatch the cause or
causes preventing the Company from carrying out its agreements; provided, that
the settlement of strikes, lockouts and other industrial disturbances shall be
entirely within the discretion of Company, and Company shall not be required to
make settlement of strikes, lockouts and other industrial disturbances by
acceding to the demands of the opposing party or parties when such course is in
the judgment of Company unfavorable to Company.

 

Section 9.2.            Remedies on Default.  Whenever any event of default
referred to in Section 9.1 hereof shall have happened and be continuing, the
Trustee, on behalf of the Issuer at the direction of the Bond Insurer, may take
any one or more of the following remedial steps:

 

(A)           BY WRITTEN NOTICE TO COMPANY, THE TRUSTEE, ON BEHALF OF THE ISSUER
AT THE DIRECTION OF THE BOND INSURER, MAY DECLARE AN AMOUNT EQUAL TO THE
PRINCIPAL AND ACCRUED INTEREST ON THE 2005 SERIES A BONDS THEN OUTSTANDING, AS
DEFINED IN THE INDENTURE, TO BE IMMEDIATELY DUE AND PAYABLE UNDER THIS
AGREEMENT, WHEREUPON THE SAME SHALL BECOME IMMEDIATELY DUE AND PAYABLE.

 

(B)           THE TRUSTEE, ON BEHALF OF THE ISSUER AT THE DIRECTION OF THE BOND
INSURER, MAY HAVE ACCESS TO AND INSPECT, EXAMINE AND MAKE COPIES OF THE BOOKS
AND RECORDS AND ANY AND ALL ACCOUNTS, DATA AND INCOME TAX AND OTHER TAX RETURNS
OF COMPANY.

 

(C)           THE TRUSTEE, ON BEHALF OF THE ISSUER AT THE DIRECTION OF THE BOND
INSURER, MAY TAKE WHATEVER ACTION AT LAW OR IN EQUITY MAY APPEAR NECESSARY OR
DESIRABLE TO COLLECT THE AMOUNTS THEN DUE AND THEREAFTER TO BECOME DUE, OR TO
ENFORCE PERFORMANCE AND OBSERVANCE OF ANY OBLIGATION, AGREEMENT OR COVENANT OF
COMPANY UNDER THIS AGREEMENT, INCLUDING, UNTIL THE RELEASE DATE, ANY REMEDIES
AVAILABLE IN RESPECT OF THE FIRST MORTGAGE BONDS.

 

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In case there shall be pending a proceeding of the nature described in
Section 9.1(d) or (e) above, Trustee, upon direction by the Bond Insurer or the
Bond Insurer itself, shall be entitled and empowered, by intervention in such
proceeding or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of Trustee allowed in such
judicial proceedings relative to Company, its creditors or its property, and to
collect and receive any moneys or other property payable or deliverable on any
such claims, and to distribute the same after the deduction of its charges and
expenses; and any custodian (including, without limitation a receiver, trustee
or liquidator) of Company appointed in connection with such proceedings is
hereby authorized to make such payments to Trustee, and to pay to Trustee any
amount due it for compensation and expenses, including reasonable counsel fees
and expenses incurred by it up to the date of such distribution.

 

Any amounts collected pursuant to action taken under this Section (other than
the compensation and expenses referred to in the immediately prior sentence)
shall be paid into the Bond Fund and applied in accordance with the provisions
of the Indenture or, if the 2005 Series A Bonds have been fully paid (or
provision for payment thereof has been made in accordance with the provisions of
the Indenture) and all reasonable and necessary fees and expenses of Trustee and
any paying agents accrued and to accrue through final payment of the 2005 Series
A Bonds, and all other liabilities of Company accrued and to accrue hereunder or
under the Indenture through final payment of the 2005 Series A Bonds have been
paid, such amounts so collected shall be paid to Company.

 

Section 9.3.            No Remedy Exclusive.  No remedy herein conferred upon or
reserved to Issuer is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or now or hereafter
existing at law or in equity or by statute.  No delay or omission to exercise
any right or power accruing upon default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right or power may be
exercised from time to time and as often as may be deemed expedient.  In order
to entitle Issuer to exercise any remedy reserved to it in this Article, it
shall not be necessary to give any notice other than such notice as may be
herein expressly required.  Such rights and remedies as are given Issuer
hereunder shall also extend to Trustee, and Trustee and the holders of the 2005
Series A Bonds, subject to the provisions of the Indenture, shall be entitled to
the benefit of all covenants and agreements herein contained.

 

Section 9.4.            Agreement to Pay Reasonable Attorneys’ Fees and
Expenses.  In the event Company should default under any of the provisions of
this Agreement and Issuer and/or Trustee should employ attorneys or incur other
expenses for the collection of amounts payable hereunder or the enforcement of
performance or observance of any obligation or agreement on the part of Company
herein contained, Company agrees that it will on demand therefor pay to Issuer
and/or Trustee the reasonable fees and expenses of such attorneys and such other
reasonable expenses so incurred by Issuer and/or Trustee.

 

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Section 9.5.            Waiver of Events of Default.  If, after the acceleration
of the maturity of the outstanding 2005 Series A Bonds by Trustee pursuant to
the Indenture, and before any judgment or decree for the appointment of a
receiver or for the payment of the moneys due shall have been obtained or
entered, Company shall cause to be deposited with Trustee a sum sufficient to
pay all matured installments of interest upon all 2005 Series A Bonds and the
principal of, and premium, if any, on any and all 2005 Series A Bonds which
shall have become due otherwise than by reason of such declaration (with
interest upon such principal and premium, if any, and overdue installments of
interest, at the rate per annum which is one percent above the highest rate
borne by any 2005 Series A Bond, until paid), and such amounts as shall be
sufficient to cover all expenses of Trustee in connection with such default, and
all defaults under the Indenture and this Agreement, other than nonpayment of
principal of 2005 Series A Bonds which shall have become due by said
declaration, shall have been remedied, and such event of default under the
Indenture shall be deemed waived by Trustee in accordance with Section 9.12 of
the Indenture with the consequence that under the Indenture such acceleration is
rescinded, then Company’s default hereunder shall be deemed to have been waived
by Issuer and no further action or consent by Trustee or Issuer shall be
required.  In the event any agreement or covenant contained in this Agreement
should be breached by either party and thereafter waived by the other party,
such waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder.

 

ARTICLE X

PREPAYMENT OF LOAN

 

Section 10.1.          Options to Prepay Loan.  Company shall have, and is
hereby granted, options to prepay the Loan in whole and to cancel or terminate
this Agreement on any Business Day at any time Company so elects, if certain
events shall have occurred within the 180 days preceding the giving of written
notice by Company to Trustee of such election, as follows:

 

(A)           IF IN THE JUDGMENT OF COMPANY, UNREASONABLE BURDENS OR EXCESSIVE
LIABILITIES SHALL HAVE BEEN IMPOSED AFTER THE ISSUANCE OF THE 2005 SERIES A
BONDS UPON COMPANY WITH RESPECT TO THE PROJECT OR THE OPERATION THEREOF,
INCLUDING WITHOUT LIMITATION FEDERAL, STATE OR OTHER AD VALOREM, PROPERTY,
INCOME OR OTHER TAXES NOT IMPOSED ON THE DATE OF THIS AGREEMENT OTHER THAN AD
VALOREM TAXES PRESENTLY LEVIED UPON PRIVATELY OWNED PROPERTY USED FOR THE SAME
GENERAL PURPOSE AS THE PROJECT;

 

(B)           IF THE PROJECT OR A PORTION THEREOF OR OTHER PROPERTY OF COMPANY
IN CONNECTION WITH WHICH THE PROJECT IS USED SHALL HAVE BEEN DAMAGED OR
DESTROYED TO SUCH AN EXTENT SO AS, IN THE JUDGMENT OF THE COMPANY, TO RENDER THE
PROJECT OR OTHER PROPERTY OF COMPANY IN CONNECTION WITH WHICH THE PROJECT IS
USED UNSATISFACTORY TO COMPANY FOR ITS INTENDED USE AND SUCH CONDITION SHALL
CONTINUE FOR A PERIOD OF SIX MONTHS;

 

(C)           THERE SHALL HAVE OCCURRED CONDEMNATION OF ALL OR SUBSTANTIALLY ALL
OF THE PROJECT OR THE TAKING BY EMINENT DOMAIN OF SUCH USE OR CONTROL OF THE
PROJECT OR OTHER PROPERTY OF COMPANY IN CONNECTION WITH WHICH THE PROJECT IS
USED SO AS, IN THE JUDGMENT OF THE COMPANY, TO RENDER THE PROJECT OR OTHER
PROPERTY OF COMPANY IN CONNECTION WITH WHICH THE PROJECT IS USED UNSATISFACTORY
TO COMPANY FOR ITS INTENDED USE;

 

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(D)           IN THE EVENT CHANGES, WHICH THE COMPANY CANNOT REASONABLY CONTROL,
IN THE ECONOMIC AVAILABILITY OF MATERIALS, SUPPLIES, LABOR, EQUIPMENT, OR OTHER
PROPERTIES OR THINGS NECESSARY FOR THE EFFICIENT OPERATION OF EITHER OF THE MILL
CREEK AND CANE RUN GENERATING STATIONS OF THE COMPANY SHALL HAVE OCCURRED WHICH,
IN THE JUDGMENT OF THE COMPANY, RENDER THE CONTINUED OPERATION OF EITHER OF THE
MILL CREEK OR CANE RUN GENERATING STATIONS OR ANY GENERATING UNIT AT EITHER SUCH
STATION UNECONOMICAL; OR CHANGES IN CIRCUMSTANCES, AFTER THE ISSUANCE OF THE
2005 SERIES A BONDS INCLUDING BUT NOT LIMITED TO CHANGES IN CLEAN AIR OR OTHER
AIR POLLUTION CONTROL REQUIREMENTS, SHALL HAVE OCCURRED SUCH THAT THE COMPANY
SHALL DETERMINE THAT USE OF THE PROJECT IS NO LONGER REQUIRED OR DESIRABLE;

 

(E)           IN THE EVENT THIS AGREEMENT SHALL BECOME VOID OR UNENFORCEABLE OR
IMPOSSIBLE OF PERFORMANCE BY REASON OF ANY CHANGES IN THE CONSTITUTION OF THE
COMMONWEALTH OF KENTUCKY OR THE CONSTITUTION OF THE UNITED STATES OF AMERICA OR
BY REASON OF LEGISLATIVE OR ADMINISTRATIVE ACTION, WHETHER STATE OR FEDERAL, OR
ANY FINAL DECREE, JUDGMENT OR ORDER OF ANY COURT OR ADMINISTRATIVE BODY, WHETHER
STATE OR FEDERAL; OR

 

(F)            A FINAL ORDER OR DECREE OF ANY COURT OR ADMINISTRATIVE BODY AFTER
THE ISSUANCE OF THE 2005 SERIES A BONDS SHALL REQUIRE THE COMPANY TO CEASE A
SUBSTANTIAL PART OF ITS OPERATIONS AT THE MILL CREEK AND CANE RUN GENERATING
STATIONS TO SUCH EXTENT THAT THE COMPANY WILL BE PREVENTED FROM CARRYING ON ITS
NORMAL OPERATIONS AT SUCH LOCATION FOR A PERIOD OF SIX MONTHS.

 

In the case of prepayment pursuant to this Section (or if any 2005 Series A
Bonds be redeemed in whole or in part pursuant to Section 6.1 hereof), the Loan
prepayment price shall be a sum sufficient, together with other funds deposited
with Trustee and available for such purpose, to redeem all 2005 Series A Bonds
then outstanding (or, in the case any 2005 Series A Bonds are redeemed in part
pursuant to Section 6.1 hereof, such portion of the 2005 Series A Bonds then
outstanding) under the Indenture at a price equal to 100% of the principal
amount thereof plus interest accrued and to accrue to the date of redemption of
the 2005 Series A Bonds and to pay all reasonable and necessary fees and
expenses of Trustee and any Paying Agents and all other liabilities of Company
accrued and to accrue hereunder to the date of redemption of the 2005 Series A
Bonds.  In order to exercise any option to prepay the Loan and to cancel or
terminate this Agreement by reason of the occurrence of any of the events
mentioned in (a) through (f) above, Company is required to give written notice
to Trustee of its election to prepay the Loan within 180 days of the occurrence
of any of the events mentioned in (a) through (f) above.

 

Section 10.2.          Additional Option to Prepay Loan.  Company shall have,
and is hereby granted, further options, to the extent that the 2005 Series A
Bonds are, from time to time, subject to optional redemption, during any period
of optional redemption, to prepay all, or any portion, of the relevant and
applicable Loan payments due or to become due hereunder by depositing with
Trustee moneys sufficient to pay, together with other funds deposited with
Trustee and available for such purpose, the principal of and applicable premium,
if any, and accrued interest, through the date of redemption (which must be a
Business Day), on all or any portion of the 2005 Series A Bonds then outstanding
under the Indenture and, upon depositing with Trustee moneys sufficient to pay
the principal, applicable premium, if any, and accrued interest, through the
date of redemption, on all 2005 Series A Bonds then outstanding under the
Indenture, as well as all reasonable and necessary expenses of Trustee and any
Paying Agents

 

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and all other liabilities of Company accrued and to accrue hereunder, to cancel
or terminate the term of this Agreement.

 

Section 10.3.          Obligations to Prepay Loan.  Company shall be obligated
to prepay the entire Loan or any part thereof, as provided below, prior to the
required full payment of the 2005 Series A Bonds (or prior to making provision
for payment thereof in accordance with the Indenture) on the 180th day (or such
earlier date as may be designated by Company), which, in every case, must be a
Business Day, upon the occurrence of a Determination of Taxability.  The Issuer
and Company shall take all actions required to mandatorily redeem the 2005
Series A Bonds at the cost of the Company upon the terms specified in this
Agreement and in ARTICLE IV of the Indenture following the occurrence of a
Determination of Taxability, including, but not limited to, prepaying
appropriate amounts due on the 2005 Series A Bonds in order to effect such
redemption.  The 2005 Series A Bonds shall be redeemed by the Issuer, in whole,
or in such part as described below, at a redemption price equal to 100% of the
principal amount thereof, without redemption premium, plus accrued interest, if
any, to the redemption date, within 180 days following a Determination of
Taxability.  For purposes of this Section, a “Determination of Taxability” shall
mean the receipt by the Trustee of written notice from a current or former
registered owner of a 2005 Series A Bond or from the Company or the Issuer of
(i) the issuance of a published or private ruling or a technical advice
memorandum by the Internal Revenue Service in which the Company participated or
has been given the opportunity to participate, and which ruling or memorandum
the Company, in its discretion, does not contest or from which no further right
of administrative or judicial review or appeal exists, or (ii) a final
determination from which no further right of appeal exists of any court of
competent jurisdiction in the United States in a proceeding in which the Company
has participated or has been a party, or has been given the opportunity to
participate or be a party, in each case, to the effect that as a result of a
failure by the Company to perform or observe any covenant or agreement or the
inaccuracy of any representation contained in this Agreement or any other
agreement or certificate delivered in connection with the 2005 Series A Bonds,
the interest on the 2005 Series A Bonds is included in the gross income of the
owners thereof for federal income tax purposes, other than with respect to a
person who is a “substantial user” or a “related person” of a substantial user
within the meaning of the Section 147 of Internal Revenue Code of 1986, as
amended (the “Code”); provided, however, that no such Determination of
Taxability shall be considered to exist as a result of the Trustee receiving
notice from a current or former registered owner of a 2005 Series A Bond or from
the Issuer unless (i) the Issuer or the registered owner or former registered
owner of the 2005 Series A Bond involved in such proceeding or action (A) gives
the Company and the Trustee prompt notice of the commencement thereof, and (B)
(if the Company agrees to pay all expenses in connection therewith) offers the
Company the opportunity to control unconditionally the defense thereof, and (ii)
either (A) the Company does not agree within 30 days of receipt of such offer to
pay such expenses and liabilities and to control such defense, or (B) the
Company shall exhaust or choose not to exhaust all available proceedings for the
contest, review, appeal or rehearing of such decree, judgment or action which
the Company determines to be appropriate.  No Determination of Taxability
described above will result from the inclusion of interest on any 2005 Series A
Bond in the computation of minimum or indirect taxes.  All of the 2005 Series A
Bonds shall be redeemed upon a Determination of Taxability as described above
unless, in the opinion of Bond Counsel, redemption of a portion of the 2005
Series A Bonds of one or more series or one or more maturities would have the
result that interest payable on the

 

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remaining 2005 Series A Bonds outstanding after the redemption would not be so
included in any such gross income.

 

In the event any of the Issuer, the Company or the Trustee has been put on
notice or becomes aware of the existence or pendency of any inquiry, audit or
other proceedings relating to the 2005 Series A Bonds being conducted by the
Internal Revenue Service, the party so put on notice shall give immediate
written notice to the other parties of such matters.

 

Promptly upon learning of the occurrence of a Determination of Taxability
(whether or not the same is being contested), or any of the events described in
this Section, the Company shall give notice thereof to the Trustee and the
Issuer.

 

In the case of the mandatory obligation of Company to prepay the Loan or any
part thereof after the occurrence of a Determination of Taxability, Company
shall be obligated to prepay such Loan or such part thereof not later than 180
days after any such final determination as specified in this Section hereof and
to provide to Trustee for deposit in the Bond Fund an amount sufficient,
together with other funds deposited with the Trustee and available for such
purpose, to redeem such 2005 Series A Bonds at the price of 100% of the
principal amount thereof in accordance with Section 5.1 hereof plus interest
accrued and to accrue to the date of redemption of the 2005 Series A Bonds and
to pay all reasonable and necessary fees and expenses of Trustee and any paying
agents and all other liabilities of Company accrued and to accrue hereunder to
the date of redemption of the 2005 Series A Bonds.

 

Section 10.4.          Notice of Prepayment; Redemption Procedures.  It is
understood and agreed by the parties hereto that in order to exercise an option
granted in, or to consummate a mandatory prepayment required by, this Article,
Company shall give written notice to Issuer and Trustee which notice shall (i)
contain the agreement of Company to deposit moneys in the Bond Fund on or before
the redemption date in an amount sufficient to redeem a principal amount of the
2005 Series A Bonds equal to the amount of the prepayment, including, in the
case of a prepayment under Section 10.2 hereof, any applicable redemption
premium in respect of such 2005 Series A Bonds, and any other amounts required
under this Agreement and (ii) specify the prepayment date (which must be a
Business Day and which shall also be the redemption date), which date shall not
be less than 30 days (45 days if the 2005 Series A Bonds are bearing interest at
the Semi-annual, Annual or Long Term Rate or in all cases such shorter period as
may be acceptable to the Trustee) nor more than 90 days from the date the notice
is mailed by Company to Issuer and Trustee.

 

Section 10.5.          Relative Position of this Article and Indenture.  The
rights and options granted to Company in this Article, except the option granted
to Company pursuant to Section 10.2 to prepay less than all of the Loan
payments, shall be and remain prior and superior to the Indenture and may be
exercised whether or not Company is otherwise in default hereunder; provided
that such default will not result in nonfulfillment of any condition to the
exercise of any such right or option.

 

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Section 10.6.          Concurrent Discharge of First Mortgage Bonds.  Prior to
the Release Date, in the event any of the 2005 Series A Bonds shall be paid and
discharged pursuant to any provisions of this Agreement, so that same are not
thereafter Outstanding, as the term “Outstanding” is defined in the Indenture, a
like principal amount of First Mortgage Bonds shall be deemed fully paid and the
obligations of Company thereunder terminated.  Thereupon, Trustee shall deliver
to First Mortgage Trustee such like principal amount of First Mortgage Bonds for
cancellation pursuant to Section 2.13 of the Indenture.

 

ARTICLE XI

 

MISCELLANEOUS

 

Section 11.1.          Term of Agreement.  This Agreement shall remain in full
force and effect from the date hereof to and including the later of February 1,
2035, or until such earlier or later time as all of the 2005 Series A Bonds
shall have been fully paid (or provision made for such payment pursuant to the
Indenture), whichever shall be later; provided, however, that this Agreement may
be cancelled and terminated prior to said date if Company shall prepay all of
the Loan pursuant to ARTICLE X hereof; and provided further, however, that all
obligations of Company under ARTICLE V and Section 8.1 hereof (a) to pay the
agreed fees and expenses of Trustee, the Tender Agent, the Bond Registrar and
any Paying Agent and (b) to pay any amount required by Section 5.5 hereof shall
continue in effect even though 2005 Series A Bonds may no longer be outstanding
and this Agreement may otherwise be terminated.  All representations and
certifications by Company as to all matters affecting the tax-exempt status of
interest on the 2005 Series A Bonds shall be for the equal and ratable benefit,
protection and security of the holders of any and all of the 2005 Series A Bonds
and shall survive the termination of this Agreement and all obligations of
Company contained herein relating to indemnification of Issuer, Trustee, Bond
Registrar, Authenticating Agent, Tender Agent and any Paying Agent shall survive
the termination of this Agreement.

 

Section 11.2.          Notices. All notices, certificates or other
communications hereunder shall be sufficiently given and shall be deemed given
when delivered or mailed by registered or certified mail, postage prepaid,
addressed as follows:

 

If to Issuer, at 527 West Jefferson Street, Louisville, Kentucky 40202,
Attention: Mayor;

 

If to Company, at its corporate headquarters, 220 West Main Street, Louisville,
Kentucky 40202, Attention: Treasurer, and

 

If to Trustee, at 60 Wall Street, 27th Floor, Mailstop NYC60-2715, New York, New
York 10005, Attn: Corporate Trust & Agency Services (Municipal Group).

 

If to Bond Insurer, at at One State Street Plaza, New York, New York 10004.

 

If to Paying Agent, Remarketing Agents, Auction Agent, Market Agent or Tender
Agent, at such addresses for notices as are set forth in the Indenture.

 

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A duplicate copy of each notice, certificate or other communication given
hereunder by either Issuer or Company to the other shall also be given to
Trustee.  Issuer, Company and Trustee may by notice given hereunder designate
any further or different addresses to which subsequent notices, certificates or
other communications shall be sent.

 

Section 11.3.          Binding Effect.  This Agreement shall inure to the
benefit of and shall be binding upon Issuer, Company and their respective
successors and assigns, subject, however, to the limitations contained in
Section 7.2, Section 8.1 and Section 8.3 hereof.

 

Section 11.4.          Severability.  In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.

 

Section 11.5.          Amounts Remaining in Bond Fund, Rebate Fund and Prior
Bond Fund.  It is agreed by the parties hereto that any amounts remaining in the
Bond Fund upon expiration or sooner termination of the term of this Agreement,
as provided in this Agreement, after payment in full of the 2005 Series A Bonds
(or provision for payment thereof having been made in accordance with the
provisions of the Indenture) and the reasonable and necessary fees and expenses
of Trustee (including reasonable attorneys fees and expenses) and any Paying
Agent in accordance with the Indenture and the payment in full of all other
amounts required to be paid under this Agreement or the Indenture, shall belong
to and be paid to Company by Trustee.  Any amounts remaining in the Rebate Fund
at such time shall be held, applied and disbursed strictly and only in
accordance with the provisions of Section 6.06 of the Indenture.  Following the
payment and discharge of the Refunded 1995 Series A Bonds on their redemption
date and the making of provision for payment of the Refunded 1995 Series A Bonds
not presented for payment, any remaining moneys in the Prior Bond Fund shall
belong to and be paid to Company by the Prior Trustee.

 

Section 11.6.          Amendments, Changes and Modifications.  Subsequent to the
issuance of the 2005 Series A Bonds and prior to payment in full of all 2005
Series A Bonds (or provision for the payment thereof having been made in
accordance with the provisions of the Indenture), except as otherwise provided
in this Agreement or in the Indenture, this Agreement may not be effectively
amended, changed, modified, altered or terminated, and no provision hereof
waived, without the written consent of Trustee, given in accordance with the
Indenture.

 

Section 11.7.          Execution in Counterparts.  This Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.

 

Section 11.8.          Applicable Law.  This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Kentucky.

 

Section 11.9.          Captions.  The captions or headings in this Agreement are
for convenience only and in no way define, limit, or describe the scope or
intent of any provisions or sections of this Agreement.

 

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Section 11.10.        No Pecuniary Liability of Issuer.  No provision, covenant
or agreement contained in this Agreement or breach thereof shall constitute or
give rise to a pecuniary liability of Issuer or a charge upon its general credit
or taxing powers.  In making such covenants, agreements or provisions, Issuer
has not obligated itself, except with respect to the Project and the application
of the revenues of this Agreement, as hereinabove provided.

 

Section 11.11.        Payments Due on Other Than Business Days.  If the date for
making any payment or the last date for performance of any act or the exercise
of any right, as provided in this Agreement, shall not be on a Business Day,
such payment may be made or act performed or right exercised on the next
succeeding Business Day with the same force and effect as if done on the date
provided in this Agreement, and if done on such succeeding Business Day no
interest with respect to such payment shall accrue for the period after such
nominal date.

 

Section 11.12.        The Bond Insurer shall be a third party beneficiary of the
provisions of this Agreement.

 

 

(remainder of page left blank intentionally)

 

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IN WITNESS WHEREOF, Issuer and Company have caused this Agreement to be executed
in their respective corporate names and their respective corporate seals to be
hereunto affixed and attested by their duly authorized officers, all as of the
date first written.

 

 

LOUISVILLE/JEFFERSON COUNTY
METRO GOVERNMENT, KENTUCKY

 

 

 

 

(SEAL)

 

 

By

/s/ JERRY E. ABRAMSON

 

 

 

JERRY E. ABRAMSON

 

 

 

Mayor

 

 

 

 

 

ATTEST:

APPROVED AS TO FORM AND LEGALITY:

 

 

 

 

/s/ Kathleen J. Herron

 

/s/ James T. Carey

 

KATHLEEN J. HERRON

 

JAMES T. CAREY

 

Metro Council Clerk

 

Assistant County Attorney

 

 

 

 

 

 

LOUISVILLE GAS AND ELECTRIC
COMPANY

 

 

 

 

(SEAL)

 

 

By

/s/ Daniel K. Arbough

 

 

 

DANIEL K. ARBOUGH

 

 

 

Treasurer

 

 

 

 

 

ATTEST:

 

 

 

 

 

/s/ John R. McCall

 

 

JOHN R. McCALL
Secretary

 

 

 

--------------------------------------------------------------------------------

 

COMMONWEALTH OF KENTUCKY

)

 

 

)  SS

 

COUNTY OF JEFFERSON

)

 

 

I, the undersigned Notary Public in and for the State and County aforesaid, do
hereby certify that on the 11th day of April, 2005, the foregoing instrument was
produced to me in said County by Jerry E. Abramson and Kathleen J. Herron,
personally known to me and personally known by me to be the Mayor and Clerk of
Metro Council, respectively, of the LOUISVILLE/JEFFERSON COUNTY METRO
GOVERNMENT, KENTUCKY, and acknowledged before me by them and each of them to be
their free act and deed as Mayor and Clerk of Metro Council of such County, and
the act and deed of said Louisville/Jefferson County Metro Government, Kentucky
as authorized by an Ordinance of the Metro Council of such Louisville/Jefferson
County Metro Government, Kentucky.

 

Witness my hand and seal this 11th day of April, 2005, My commission expires
3-25-08. (SEAL)

 

 

 

/s/ Marsha F. Martin

 

Notary Public
State at Large, Kentucky

 

COMMONWEALTH OF KENTUCKY

)

 

 

)  SS

 

COUNTY OF JEFFERSON

)

 

 

 

I, the undersigned Notary Public in and for the State and County aforesaid, do
hereby certify that on the 1st day of April, 2005, the foregoing instrument was
produced to me in said County by Daniel K. Arbough and John R. McCall,
personally known to me and personally known by me to be the Treasurer and the
Secretary respectively, of LOUISVILLE GAS AND ELECTRIC COMPANY, a corporation
incorporated under the laws of the Commonwealth of Kentucky, who being by me
duly sworn, did say that the seal affixed to said instrument is the corporate
seal of said corporation, and that said instrument was signed and sealed in
behalf of said corporation by authority of its Board of Directors, and said
respective persons acknowledged before me said instrument to be the free act and
deed of said corporation and to be their free act and deed as such officers of
such corporation.

 

Witness my hand and seal this 1st day of April, 2005. My commission expires Jan.
22, 2009.

(SEAL)

 

 

 

/s/ Kathy L Wilson

 

Notary Public
State at Large, Kentucky

 

 

 

KATHY L WILSON

 

Notary Public, State at Large, KY

 

My Commission Expires: January 22, 2009

 

This Instrument Prepared by the
Undersigned, Attorney at Law of

Harper, Ferguson & Davis

(Division of Ogden Newell & Welch PLLC)

500 West Jefferson Street, 17th Floor

Louisville, Kentucky 40202

 

 

 

/s/ Spencer E. Harper, JR.

 

 

SPENCER E. HARPER, JR.

 

 

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EXHIBIT A

DESCRIPTION OF PROJECT

 

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EXHIBIT NO. 1

 

Description of Air Pollution Control Facilities

to be Acquired and Constructed by Application of the

Proceeds of $55,000,000 “County of Jefferson, Kentucky,

Pollution Control Revenue Bonds, 1985 Series A

(Louisville Gas and Electric Company Project)”

 

MILL CREEK AND CANE RUN GENERATING STATIONS

 

The Project will consist of the acquisition, construction and installation of
air pollution control and abatement facilities consisting of major
constructions, reconstructions and modifications to the existing sulphur dioxide
removal systems serving Generating Units 1, 2, 3 and 4 of the Mill Creek
Generating Station and Generating Units 4, 5 and 6 of the Cane Run Generating
Station of Louisville Gas and Electric Company, all of the foregoing being
situated in Jefferson County, Kentucky. The Project will include new chemical
processes and major modification and reconstruction of the existing sulphur
dioxide removal facilities to upgrade such facilities to an operational level
consistent with applicable air pollution control standards, so that upon
completion of the Project, the sulphur dioxide removal systems as modified will
be capable of removing 90% of airborne sulphur dioxide created by combustion of
coal in the related generating units.  The sulphur dioxide removal systems will
cause interaction and chemical change of the sulphur dioxide gases exiting the
coal-fired steam generating units by forcing contact of such gases with reactant
liquids, thereby transforming the sulphur dioxide to an inert byproduct and
preventing the emission of sulphur dioxide gases into the environment.

 

The Project has been designed for Louisville Gas and Electric Company by Burns &
McDonnell, Engineers, Architects and Consultants of Kansas City, Missouri.

 

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