**EXHIBIT10.44**

 

 

PARTICIPATION AGREEMENT

 

BY AND AMONG

 

LOUISVILLE GAS AND ELECTRIC COMPANY220 West Main StreetPost Office Box 32010 (40232)Louisville, Kentucky 40202

 

AND

 

KENTUCKY UTILITIES COMPANY220 West Main StreetPost Office Box 32010 (40232)Louisville, Kentucky 40202

 

AND

 

INDIANA MUNICIPAL POWER AGENCY11610 North College AvenueCarmel, Indiana 46032

 

AND

 

ILLINOIS MUNICIPAL ELECTRIC AGENCY919 South Spring StreetSpringfield, Illinois 62704

 

----

 

**TABLE OF CONTENTS**

 

| ARTICLE  1. DEFINITIONS AND INTERPRETATION      |   |
|-------------------------------------------------|--------|
|                                            |   |   |   |   |
|                                            | 1.1    | Definitions. |   |
|                                            | 1.2    | Rules of Interpretation. |   |
|                                            |   |   |   |   |
| ARTICLE  2. OWNERSHIP                           |   |
|                                            |   |   |   |   |
|                                            | 2.1    | Ownership. |   |
|                                            | 2.2    | Additional Generating  Units. |   |
|                                            | 2.3    | Modification of Existing  Property. |   |
|                                            |   |   |   |
| ARTICLE  3. DEVELOPMENT CLOSING                 |   |
|                                            |   |   |   |   |
|                                            | 3.1    | Development Closing. |   |
|                                            | 3.2    | Development Costs. |   |
|                                            | 3.3    | Deliveries  of Louisville at the Development Closing. |   |
|                                            | 3.4    | Effect  of Development Closing on Article 15 Rights. |   |
|                                            |   |   |   |   |
| ARTICLE  4. REPRESENTATIONS AND WARRANTIES      |   |
|                                            |   |   |   |   |
|                                            | 4.1    | IMPA  Representations and Warranties. |   |
|                                            | 4.2    | Louisville  Representations and Warranties. |   |
|                                            | 4.3    | Kentucky  Utilities Representations and Warranties. |   |
|                                            | 4.4    | IMEA  Representations and Warranties. |   |
|                                            |   |   |   |   |
| ARTICLE  5. DEVELOPMENT AND CONSTRUCTION        |   |
|                                            |   |   |   |   |
|                                            | 5.1    | Responsibility for  Development. |   |
|                                            | 5.2    | Responsibility for Permits. |   |
|                                            | 5.3    | Development Schedule. |   |
|                                            | 5.4    | Authorization to Construct. |   |
|                                            | 5.5    | Responsibility for  Construction. |   |
|                                            | 5.6    | Construction Schedule. |   |
|                                            |   |   |   |
| ARTICLE  6. CONSTRUCTION CLOSING AND WITHDRAWAL |   |
|                                            |   |   |   |
|                                            | 6.1    | Construction Closing. |   |
|                                            | 6.2    | Closing Actions. |   |
|                                            |   | 6.2.1                        Payment to Louisville. |   |
|                                            |   | 6.2.2                        Conveyance of Real  Property. |   |
|                                            |   | 6.2.3                        Licenses and Easements. |   |
|                                            |   | 6.2.4                        Transaction Documents. |   |
|                                            | 6.3    | Conditions Precedent. |   |
|                                            | 6.4    | Deliveries at  Construction Closing. |   |
|                                            |   | 6.4.1                        Payment  of Funds by IMPA. |   |
|                                            |   | 6.4.2                        Payment  of Funds by IMEA. |   |
|                                            |   | 6.4.3                        Payment  of Funds by Kentucky Utilities. |   |
|                                            |   | 6.4.4                        General  Warranty Deeds. |   |
|                                            |   | 6.4.5                        Licenses  to Trimble County General Plant Facilities. |   |

 

----

 

|                              |   | 6.4.6                        Non-Exclusive  Easements of Trimble County Site.                                      |   |
|-----------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                              |   | 6.4.7                        Reserved.                                                                             |   |
|                              |   | 6.4.8                        Representations  and Warranties.                                                      |   |
|                              |   | 6.4.9                        Conditions.                                                                           |   |
|                              |   | 6.4.10                  Release  from Lien of Louisville’s Indenture.                                                                       |   |
|                              |   | 6.4.11                  Opinion  of Counsel for Louisville.                                                                                      |   |
|                              |   | 6.4.12                  Opinion  of Counsel for Kentucky Utilities.                                                                              |   |
|                              |   | 6.4.13                  Opinion  of Counsel for IMPA.                                                                                            |   |
|                              |   | 6.4.14                  Opinion  of Counsel for IMEA.                                                                                            |   |
|                              |   | 6.4.15                  Transaction  Documents.                                                                                                  |   |
|                              |   | 6.4.16                  Title  Commitment.                                                                                                       |   |
|                              |   | 6.4.17                  Property  Taxes.                                                                                                         |   |
|                              | 6.5    | Withdrawal.                                                                                                                                                                                                                           |   |
|                              |   | 6.5.1                        Withdrawal  Prior to Construction Closing.                                            |   |
|                              |   | 6.5.2                        Withdrawal  of IMPA or IMEA.                                                          |   |
|                              |   | 6.5.3                        Withdrawal  by the Companies or IMPA and IMEA.                                        |   |
|                              |   | 6.5.4                        No  Withdrawal During Construction Phase.                                             |   |
|                              |   | 6.5.5                        Breach  by IMPA or IMEA During the Construction Phase.                                |   |
|                              |   | 6.5.6                        CCNs  Not Filed.                                                                      |   |
|                              |   |                                                                                                                                                                                                                                  |   |
| ARTICLE 7. OPERATING ARRANGEMENTS |   |
|                              |   |                                                                                                                                                                                                                                  |   |
|                              | 7.1    | Authority for  Operation and Management.                                                                                                                                                                                              |   |
|                              | 7.2    | Electric Capacity  Entitlements.                                                                                                                                                                                                      |   |
|                              | 7.3    | Scheduling and  Dispatching of Electric Generation.                                                                                                                                                                                   |   |
|                              |   | 7.3.1                        Submittal  of Schedules.                                                              |   |
|                              |   | 7.3.2                        Scheduling  Procedures                                                                |   |
|                              |   | 7.3.3                        Utilization  of Electric Capacity Entitlement and Companies’ System  Power. |   |
|                              |   | 7.3.4                        Dispatching  Procedures.                                                              |   |
|                              |   | 7.3.5                        Ancillary  Services.                                                                  |   |
|                              |   | 7.3.6                        Holidays.                                                                             |   |
|                              |   | 7.3.7                        Records.                                                                              |   |
|                              |   | 7.3.8                        Outage  Schedules.                                                                    |   |
|                              | 7.4    | Pre-Commercial Energy.                                                                                                                                                                                                                |   |
|                              | 7.5    | Operations Management.                                                                                                                                                                                                                |   |
|                              |   | 7.5.1                        Administration  of Operating Work and Incremental Capital Assets.                     |   |
|                              |   | 7.5.2                        Purchasing  Necessary Goods and Services.                                             |   |
|                              |   | 7.5.3                        Procurement  of Fuel.                                                                 |   |
|                              |   | 7.5.4                        Expenditure  of Funds.                                                                |   |
|                              |   | 7.5.5                        Insurance.                                                                            |   |
|                              |   | 7.5.6                        Enforcement  of Claims.                                                               |   |
|                              |   | 7.5.7                        Processing  Claims.                                                                   |   |
|                              |   | 7.5.8                        Delivery  of Operating Data.                                                          |   |
|                              | 7.6    | Environmental Laws  and Regulations.                                                                                                                                                                                                  |   |
|                              | 7.7    | Environmental Fines  and Penalties.                                                                                                                                                                                                   |   |
|                              | 7.8    | General Facilities  and Constraints.                                                                                                                                                                                                  |   |
|                              | 7.9    | Rules and  Regulations in Industry Practices.                                                                                                                                                                                         |   |

 

ii

----

 

| ARTICLE 8. INCREMENTAL CAPITAL ASSETS                  |   |
|--------------------------------------------------------|--------|
|                                                   |   |   |   |
|                                                   | 8.1    | Estimate of Costs. |   |
|                                                   | 8.2    | Responsibility for Costs. |   |
|                                                   |   |   |   |
| ARTICLE 9. EXPENSES                                    |   |
|                                                   |   |   |   |
|                                                   | 9.1    | Payment  of Expenses and Charges Prior to the Commercial Operation Date. |   |
|                                                   | 9.2    | Monthly  Expenses and Charges After the Commercial Operation Date. |   |
|                                                   |   | 9.2.1                        Fuel/Reactant  Operation Expenses. |   |
|                                                   |   | 9.2.2                        Fixed  Operation and Maintenance Expenses. |   |
|                                                   |   | 9.2.3                        Non-Fuel  Operating Component. |   |
|                                                   |   | 9.2.4                        Working  Capital Component. |   |
|                                                   |   |   |   |   |
| ARTICLE 10. BILLING, PAYMENTS, AND  RECORDS            |   |
|                                                   |   |   |   |   |
|                                                   | 10.1   | Payments  before Commercial Operation Date. |   |
|                                                   | 10.2   | Billings  by the Companies after the Commercial Operation Date. |   |
|                                                   | 10.3   | Payments  after the Commercial Operation Date. |   |
|                                                   | 10.4   | Records. |   |
|                                                   | 10.5   | Timing of Certain Payments. |   |
|                                                   | 10.6   | Payment to Specified  Account. |   |
|                                                   |   |   |   |
| ARTICLE 11. INTERCONNECTION AND  TRANSMISSION SERVICES |   |
|                                                   |   |   |   |
| ARTICLE 12. TAXES                                      |   |
|                                                   |   |   |   |
|                                                   | 12.1   | Management of Tax Matters. |   |
|                                                   | 12.2   | Sharing of Taxes and Related  Payments |   |
|                                                   | 12.3   | Payment of Title Taxes and Fees. |   |
|                                                   | 12.4   | Exclusion of Income Taxes. |   |
|                                                   | 12.5   | Non-creation of Taxable Entity. |   |
|                                                   |   |   |   |
| ARTICLE 13. INSURANCE                                  |   |
|                                                   |   |   |   |
|                                                   | 13.1   | Procurement of Insurance. |   |
|                                                   |   | 13.1.1                  Sharing  of Insurance Costs. |   |
|                                                   |   | 13.1.2                  The  Parties Named as Insured. |   |
|                                                   |   | 13.1.3                  Procurement  of Additional Insurance for the Parties. |   |
|                                                   |   | 13.1.4                  Sharing  of Refunds from Insurance Premiums. |   |
|                                                   |   | 13.1.5                  Sharing  of Insurance Proceeds. |   |
|                                                   | 13.2   | Destruction. |   |
|                                                   |   | 13.2.1                  Damage  or Destruction Fully Covered By Insurance. |   |
|                                                   |   | 13.2.2                  Damage  or Destruction Not Fully Covered by Insurance. |   |
|                                                   |   |   |   |
| ARTICLE 14. PARTITION OF OR TRANSFERS OF  INTEREST     |   |
|                                                   |   |   |   |
|                                                   | 14.1   | Special  Nature of Trimble County Unit 2 Project - Waiver of Right of Partition. |   |
|                                                   | 14.2   | Transfer of Ownership  Interests. |   |
|                                                   |   | 14.2.1                  Conditions  of Transfer. |   |
|                                                   |   | 14.2.2                  Further  Conditions of Transfer. |   |
|                                                   |   | 14.2.3                  Non-applicability  of Certain Provisions. |   |
|                                                   |   | 14.2.4                  Transfer  of Associated Rights and Interests. |   |
|                                                        |        |  |  |  |  |

 

iii

----

 

|                              |   | 14.2.5                  Louisville  and Kentucky Utilities.                           |   |
|-----------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                              |   |                                                                                                                                                                       |   |
| ARTICLE 15. ASSIGNMENT            |   |
|                              |   |                                                                                                                                                                       |   |
|                              | 15.1   | Limitation of  Assignability.                                                                                                                                              |   |
|                              | 15.2   | Successors and Assigns.                                                                                                                                                    |   |
|                              |   |                                                                                                                                                                       |   |
| ARTICLE 16. LIABILITY AND DEFAULT |   |
|                              |   |                                                                                                                                                                       |   |
|                              | 16.1   | Liability to Third Parties.                                                                                                                                                |   |
|                              | 16.2   | Liability  Among the Parties; No Consequential Damages.                                                                                                                    |   |
|                              | 16.3   | Indemnification.                                                                                                                                                           |   |
|                              | 16.4   | Nature and Survival of  Representations and Warranties.                                                                                                                    |   |
|                              | 16.5   | Default.                                                                                                                                                                   |   |
|                              |   | 16.5.1                  Events  of Default.                                           |   |
|                              |   | 16.5.2                  Curing  Event of Default in Regard to Paying Money.           |   |
|                              |   | 16.5.3                  Curing  Event of Default for Other Than Failure to Pay Money. |   |
|                              |   | 16.5.4                  Non-Applicability  of Cure Provisions.                        |   |
|                              |   | 16.5.5                  Appointment  of a Receiver.                                   |   |
|                              |   | 16.5.6                  Additional  Obligations.                                      |   |
|                              |   | 16.5.7                  Notice.                                                       |   |
|                              | 16.6   | Force Majeure.                                                                                                                                                             |   |
|                              |   |                                                                                                                                                                       |   |
| ARTICLE 17. MANAGEMENT            |   |
|                              |   |                                                                                                                                                                       |   |
|                              | 17.1   | Coordination Committee.                                                                                                                                                    |   |
|                              | 17.2   | Coordination  Committee Formation.                                                                                                                                         |   |
|                              | 17.3   | Powers of  Coordination Committee.                                                                                                                                         |   |
|                              | 17.4   | Budget Approval.                                                                                                                                                           |   |
|                              |   | 17.4.1                  Development  Budget.                                          |   |
|                              |   | 17.4.2                  Construction  Budget.                                         |   |
|                              |   | 17.4.3                  Annual  Capital Budget.                                       |   |
|                              |   | 17.4.4                  Operation  and Maintenance Budget.                            |   |
|                              | 17.5   | Vote by Coordination  Committee.                                                                                                                                           |   |
|                              | 17.6   | Meetings.                                                                                                                                                                  |   |
|                              | 17.7   | Records.                                                                                                                                                                   |   |
|                              | 17.8   | Amendments.                                                                                                                                                                |   |
|                              | 17.9   | Information.                                                                                                                                                               |   |
|                              |   |                                                                                                                                                                       |   |
| ARTICLE 18. DISAGREEMENT          |   |
|                              |   |                                                                                                                                                                       |   |
|                              | 18.1   | Consultation.                                                                                                                                                              |   |
|                              | 18.2   | Disagreement.                                                                                                                                                              |   |
|                              | 18.3   | Arbitration.                                                                                                                                                               |   |
|                              | 18.4   | Obligations To Make Payments.                                                                                                                                              |   |
|                              | 18.5   | Interest.                                                                                                                                                                  |   |
|                              |   |                                                                                                                                                                       |   |
| ARTICLE 19. REMEDIES              |   |
|                              |   |                                                                                                                                                                       |   |
|                              | 19.1   | All Remedies - Setoff.                                                                                                                                                     |   |
|                              | 19.2   | Injunctive  Relief and Specific Performance.                                                                                                                               |   |
|                              | 19.3   | No Remedy Exclusive.                                                                                                                                                       |   |

 

iv

----

 

|                             | 19.4   | Failure to Participate  in Incremental Capital Assets.                                                                                             |   |
|----------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                             | 19.5   | Failure  to Participate in Construction Costs.                                                                                                     |   |
|                             |   |                                                                                                                                               |   |   |
| ARTICLE 20. MISCELLANEOUS        |   |
|                             |   |                                                                                                                                               |   |
|                             | 20.1   | Governing Law.                                                                                                                                     |   |
|                             | 20.2   | Notice to Parties.                                                                                                                                 |   |
|                             | 20.3   | Article Headings  Not to Affect Meaning.                                                                                                      |   |
|                             | 20.4   | Counterparts.                                                                                                                                      |   |
|                             | 20.5   | Emergency.                                                                                                                                         |   |
|                             | 20.6   | Severability.                                                                                                                                      |   |
|                             | 20.7   | Integration.                                                                                                                                       |   |
|                             | 20.8   | Computation of Time.                                                                                                                               |   |
|                             | 20.9   | Waiver.                                                                                                                                            |   |
|                             | 20.10  | Equal Opportunity Clause.                                                                                                                          |   |
|                             | 20.11  | Inflation.                                                                                                                                         |   |
|                             | 20.12  | Condemnation.                                                                                                                                      |   |
|                             | 20.13  | Americans with  Disabilities Act.                                                                                                                  |   |
|                             | 20.14  | Amendments.                                                                                                                                        |   |
|                             | 20.15  | No Agency or Third Party Beneficiary.                                                                                                              |   |
|                             | 20.16  | Obligations Are Several.                                                                                                                           |   |
|                             | 20.17  | Cooperation.                                                                                                                                       |   |
|                             | 20.18  | Intent.                                                                                                                                            |   |
|                             | 20.19  | Approvals.                                                                                                                                         |   |
|                             | 20.20  | Access.                                                                                                                                            |   |
|                             | 20.21  | Further Assurances.                                                                                                                                |   |
|                             | 20.22  | Joint Effect.                                                                                                                                      |   |
|                             | 20.23  | Certain Costs.                                                                                                                                     |   |
|                             | 20.24  | Good Utility Practice.                                                                                                                             |   |
|                             | 20.25  | Affiliate Transactions.                                                                                                                            |   |
|                             |   |                                                                                                                                               |   |
| ARTICLE 21. TERM AND TERMINATION |   |
|                             |   |                                                                                                                                               |   |
|                             | 21.1   | Termination.                                                                                                                                       |   |
|                             |   | 21.1.1                  Retirement.                           |   |
|                             |   | 21.1.2                  Construction  Closing Does Not Occur. |   |
|                             |   | 21.1.3                  Withdrawal  of the Companies.         |   |
|                             |   | 21.1.4                  Withdrawal  of IMPA and IMEA.         |   |
|                             | 21.2   | Retirement of Property.                                                                                                                            |   |
|                             | 21.3   | Retirement Costs.                                                                                                                                  |   |
|                             | 21.4   | Effect of  Withdrawal or Transfer on Agent.                                                                                                        |   |
|                                  |        |                                                                                                                                                    |        |  |

 

**APPENDICES**

 

|        |   |                                     |
|-------------|--------|------------------------------------------|
| Appendix  A |   | Trimble  County Unit 2                   |
| Appendix  B |   | Trimble  County General Plant Facilities |
| Appendix  C |   | Form  of License Agreement               |
| Appendix  D |   | Certain  Development Costs               |
| Appendix  E |   | Form  of Deed                            |

 

v

----

 

| Appendix  F |   | Form  of Easement                        |
|-------------|--------|------------------------------------------|
| Appendix  G |   | Estimated  Interconnection Costs         |
| Appendix  H |   | Approved  Development Budget             |
| Appendix  I |   | Interconnection  and Operating Agreement |

 

vi

----

 

PARTICIPATION AGREEMENT

 

 

This ParticipationAgreement, dated as of February 9, 2004, is among Louisville Gas andElectric Company, a Kentucky corporation (“Louisville” or a “Party”), KentuckyUtilities Company, a Kentucky corporation (“Kentucky Utilities” or a “Party”),Indiana Municipal Power Agency, a body corporate and politic and a politicalsubdivision of the State of Indiana (“IMPA” or a “Party”), and IllinoisMunicipal Electric Agency, a body politic and corporate, municipal corporationand unit of local government of the State of Illinois (“IMEA” or a “Party,”and, collectively with Louisville, Kentucky Utilities and IMPA, the “Parties”).

 

WHEREAS, Louisville andKentucky Utilities each are regulated public utilities that own and operatefacilities for the generation, transmission, and distribution of electric powerand energy in their respective service territories; and

 

WHEREAS, IMPA is a jointagency and is authorized to own and operate electric generation andtransmission facilities to supply power and energy to its members; and

 

WHEREAS, IMEA is a jointaction agency and is authorized to own and operate electric generation andtransmission facilities to supply power and energy to its members; and

 

WHEREAS, Louisville andIMEA are party to that certain Participation Agreement, datedSeptember 24, 1990 (the “IMEA Participation Agreement”), pursuant towhich, among other things, IMEA acquired from Louisville: a twelve and twelveone-hundredths percent (12.12%) undivided ownership interest, as a tenant incommon, in a four hundred ninety-five (495) megawatt coal-fired generating unit(“Trimble County Unit 1”) located at the Trimble County Generating Stationoperated by Louisville; a non-exclusive license to use certain of the generalplant facilities; and a non-exclusive easement over a certain portion of thesite on which the Trimble County Generating Station is located pertaining toIMEA’s use of Trimble County Unit 1; and

 

WHEREAS, Louisville andIMPA are party to that certain Participation Agreement (the “IMPA ParticipationAgreement”) dated February 1, 1993, pursuant to which, among other things,IMPA acquired from Louisville: a twelve and eighty-eight one-hundredths percent(12.88%) undivided ownership interest as a tenant in common in Trimble CountyUnit 1; a non-exclusive license to use certain of the general plantfacilities; and a non-exclusive easement over a certain portion of the site onwhich the Trimble County Generating Station is located pertaining to IMPA’s useof Trimble County Unit 1; and

 

WHEREAS, the IMEA ParticipationAgreement and the IMPA Participation Agreement (collectively, the “Unit 1Participation Agreements”) each provide certain rights of first refusal infavor of IMEA and IMPA, respectively, to participate in ownership in the eventthat Louisville shall apply to the Kentucky Public Service Commission for acertificate of public convenience and necessity for the installation at theTrimble County Site of a second coal-fired generating unit for use by itssystem as a base-load plant; and

 

----

 

WHEREAS, Louisville,together with Kentucky Utilities, is currently contemplating the design,procurement and construction of a second coal-fired base-load generating unitat the Trimble County Site and anticipates applying for CCNs therefor incalendar year 2004; and

 

WHEREAS, IMEA and IMPAdesire to participate in the ownership of such second coal-fired generatingunit.

 

NOW, THEREFORE, inconsideration of the premises and of the mutual covenants herein set forth, andsubject to the terms and conditions herein set forth, the Parties agree asfollows:

 

**ARTICLE 1.DEFINITIONS AND INTERPRETATION**

 

1.1                                 Definitions.

 

Affiliate. An “affiliate” of, or a Person “affiliated with” a specified Person, isa Person that directly or indirectly, through one or more intermediaries, controls,is controlled by, or is under common control with the Person specified.  The term “control” (including the terms“controlling,” “controlled by,” and “under common control with”) means thepossession, direct or indirect, of the power to direct or cause the directionof the management and policies of a Person, whether through the ownership ofvoting securities, by contract, or otherwise.

 

Affiliate Contract. Affiliate Contract has the meaning specified in Article 20.25.

 

Agreed Rate. The lesser of (i) two (2) percent per annum above the “Prime Rate” aspublished in the “Money Rates” table of TheWallStreetJournalfrom time-to-time and (ii) the maximum rate of interest permitted by ApplicableLaw.

 

Agreement. This Participation Agreement among Louisville, Kentucky Utilities, IMPAand IMEA dated as of the date set forth in the first paragraph of thisAgreement.

 

Annual Capital Budget. Annual Capital Budget has the meaning specified in Section 17.4.3.

 

Annual O&M Budget. Annual O&M Budget has the meaning specified in Section 17.4.4.

 

Applicable Law. Any applicable statute, law, treaty, rule, code, ordinance, regulation,permit, license, approval, interpretation, certificate or order of anyGovernmental Authority, or any judgment, decision, decree, injunction, writ,order or like action of any court, arbitrator or other Governmental Authority.

 

Applicable TransmissionProvider.  The Midwest Independent System Operator, itssuccessor or other applicable transmission provider or transmission arrangementapplicable to a Party.

 

2

----

 

Attributes. The attributes of Trimble County Unit 2 (e.g., capacity, ramp rate,ancillary services, etc.).

 

Authorization toConstruct.  Authorization of the Coordination Committeepursuant to Article 17.3(x) for the Companies to commence the ConstructionWork (or to issue full releases under contracts pursuant to which limited Workhas been released) on the date of the Construction Closing, and thereafterpursue the Construction Work, including executing (or releasing ConstructionWork under) final design, equipment and construction contracts authorizingequipment procurement and installation, and authorizing or performing all othernecessary activities and procurements to commence and complete construction,start-up and interconnection of Trimble County Unit 2 and the Trimble CountyGeneral Plant Facilities.  TheAuthorization to Construct shall specify the expected date of the ConstructionClosing, the expected Net Electric Generating Capacity, a description of thetechnology and unit configuration, major equipment specifications, fuel type,and the expected Construction Schedule.

 

Authorized Person. An officer of Louisville; an officer of Kentucky Utilities; thePresident or a Vice President of IMPA; or the General Manager and CEO of IMEA.

 

Auxiliary Power. Power required for operation of Trimble County Unit 2, a reasonableportion of the Trimble County General Plant Facilities, and a reasonableportion of any other shared Trimble County Site electric usage.

 

Available. The state in which a unit is capable of providing service regardless ofthe capacity level that can be provided.

 

Best Efforts. Best Efforts signify a diligent, good faith, and commercially reasonablelevel of effort to achieve the identified goal or result.  Such level of effort does not require effortsor actions that are not commercially reasonable under the circumstances facedby the Party obligated to employ Best Efforts.

 

Booked. With respect to Development Costs owed to a non-Affiliate of theCompanies, the date paid.  With respectto Development Costs to be reimbursed to Louisville, Kentucky Utilities or anyAffiliate of the Companies, the date such Development Costs are recorded on thebooks of Louisville, Kentucky Utilities or any Affiliate of the Companies.

 

CCNs. The certificates of public convenience and necessity to be sought by theCompanies from the KPSC and by Kentucky Utilities from the VSCC for theinstallation at the Trimble County Site of a second coal-fired generating unitfor use in their respective systems as a base-load plant.

 

Commercial Operation Date. The date upon which Trimble County Unit 2 and the Trimble County GeneralPlant Facilities (to the extent modifications or additions are necessary toaccommodate Trimble County Unit 2) are determined by the Companies to be readyto enter commercial service.

 

Commission Approvals. Licenses, certificates, approvals, consents, permits or otherpermissions of the FERC, SEC, ICC, IURC, KPSC, KSB or VSSC.

 

3

----

 

Companies. Except as provided in Articles 6.5.1 and 14.2.5, Louisville and KentuckyUtilities.  

 

Construction Budget. Construction Budget has the meaning specified in Article 17.4.2.

 

Construction Closing. The delivery of documents and certificates and the payment of money, allas contemplated in Article 6.

 

ConstructionContractor(s).  Construction Contractor(s) has the meaningspecified in Article 5.5.

 

Construction Contract(s). The contract(s) entered into by the Companies, as agent for the Parties,with Construction Contractors.

 

Construction Costs. The costs of Construction Work, including reasonably documented internalexpenses of the Companies incurred in connection with the Construction Work andthe costs described in the second sentence of Article 12.3.

 

Construction Phase. The Construction Phase commences on the date of the Construction Closingand concludes on the Commercial Operation Date or such later date as isnecessary to complete the original construction of Trimble County Unit 2 andthe Trimble County General Plant Facilities.

 

Construction Schedule. The schedule of Construction Work to be developed by the Companiesprior to the Construction Closing, showing, to the extent then ascertainable,construction milestones and the expected Commercial Operation Date.

 

ConstructionWork.  Work performed during the Construction Phase.

 

Coordination Committee. The committee established pursuant to Article 17.

 

Defaulting Party. Defaulting Party has the meaning specified in Article 19.1.

 

Deferred DevelopmentCosts.  Deferred Development Costs has the meaningspecified in Article 3.2.

 

Delivery Point. The high side of the main step-up transformer adjacent to Trimble CountyUnit 2 at the Trimble County Plant.

 

Development Budget. Development Budget has the meaning specified in Article 17.4.1.

 

Development Closing. The delivery of documents as contemplated in Article 3.

 

Development Costs. The costs of the Development Work, including reasonably documentedinternal expenses of the Companies incurred in connection with the DevelopmentWork and the costs described in the second sentence of Article 12.3.

 

Development Phase. The Development Phase began on or about July 1, 2001, and ends onthe date of the Construction Closing.

 

4

----

 

Development Reasons. Development Reasons means (i) Force Majeure, (ii) a decision by theCompanies not to proceed with the development of the Trimble County Unit 2Project because it cannot be developed on a commercially reasonable basis or(iii) a decision by the Companies not to proceed with the development of theTrimble County Unit 2 Project because Commission Approvals or other permits andapprovals cannot be obtained from Governmental Authorities on a commerciallyreasonable basis.

 

Development Work. Work performed during the Development Phase.

 

Dispatch, Dispatched orDispatching.  Requesting, in accordance with the terms andconditions of this Agreement, the use of Electric Capacity Entitlementutilizing real-time generation control hardware and software that interfaceswith the Companies’ generation control system.

 

Disputing Parties. Disputing Parties has the meaning specified in Article 18.4.

 

Electric CapacityEntitlement.  The percentage of the Net Electric GeneratingCapacity to which a Party is entitled under Article 7.2 as it may beotherwise adjusted in accordance with Article 7.

 

Emergency. A condition that, in the Companies’ reasonable opinion, does or maypresent a physical threat to persons or property on or near the Trimble CountySite, does or may seriously interfere with the safety or operation of theinterconnected power system, or may cause or contribute to an imminentdisruption of electric service to customers of the Parties.

 

Energy Allocation. Energy Allocation has the meaning specified in Article 7.3.

 

Escrow Account. Escrow Account has the meaning specified in Article 18.4.

 

E.S.T. Eastern Standard Time.

 

Event of Default. Event of Default has the meaning specified in Article 16.5.1.

 

Execution Date. The date as of which the Parties enter into this Agreement, which dateappears at the beginning of this Agreement.

 

Expected Ramp RateCapability.  The expected ramp rate capability of TrimbleCounty Unit 2 as determined from time to time by the Coordination Committeewith respect to various conditions (e.g., temperature, humidity, unitconditions, etc.).

 

FERC. United States Federal Energy Regulatory Commission.

 

Filing Date. The later of (i) the date on which both petitions for the CCNs are filedby the Companies or (ii) the date on which the last of the two (2) petitionsfor the CCNs is filed by the Companies.

 

Fixed Operation andMaintenance Expenses.  Fixed Operation and Maintenance Expenses arecalculated as the sum of the following expenses as they directly relate to the

 

5

----

 

operation and maintenanceof the Trimble County Unit 2 Project, as recorded in the accounting records forthe Trimble County Unit 2 Project under the Uniform System of Accounts:

 

(i)                                     Operation supervision and engineering(Account 500)

 

(ii)                                  Steam expenses (Account 502 except forscrubber reactant)

 

(iii)                               Electric expenses (Account 505)

 

(iv)                              Miscellaneous steam power expenses(Account 506)

 

(v)                                 Rents (Account 507)

 

(vi)                              Allowances (Account 509)

 

(vii)                           Maintenance supervision and engineering(Account 510)

 

(viii)                        Maintenance of structures (Account 511)

 

(ix)                                Maintenance of boiler plant (Account 512)

 

(x)                                   Maintenance of electric plant (Account513)

 

(xi)                                Maintenance of miscellaneous steam plant(Account 514)

 

Expenses in Account 509shall not be allocated to IMPA or IMEA except to the extent the Companiesobtain allowances on behalf of IMPA or IMEA pursuant to Article 7.6.

 

Force Majeure. Any cause beyond the reasonable control of a Party, and which by usingits Best Efforts the Party is unable to overcome, including the following: actsof God; strikes, lockouts, or other industrial disturbances; acts of publicenemies; acts, orders, or the absence of necessary orders and permits of anykind, from any Governmental Authority; delay in transportation; unforeseen soilconditions; equipment, material, supplies, labor, or machinery shortages;epidemics; landslides; lightning; earthquakes; fire; hurricanes; tornadoes;storms; floods; washouts; drought; arrest; war; civil disturbances;insurrections; riots; acts of terrorism; explosions; breakage or accident tomachinery, equipment, transmission lines, pipes, or canals; partial or entirefailure of utility service; breach of contract by any supplier, contractor,subcontractor, laborer, or materialman; sabotage; injunction; blight; famine;blockage; quarantine; or any other similar or dissimilar cause or event notreasonably within the control of the Party.

 

Fuel/Reactant OperationExpenses.  Fuel/Reactant Operation Expenses arecalculated as the sum of the following expenses as they relate to the operationof the Trimble County Unit 2 Project as recorded in the accounting records forthe Trimble County Unit 2 Project under the Uniform System of Accounts:

 

(i)                                     Fuel (Account 501)

 

(ii)                                  Scrubber reactant expenses in SteamExpenses (Account 502)

 

6

----

 

(iii)                               Ammonia (Account 512)

 

Good Utility Practice. At a particular time, any of the practices, methods, or acts, which, inthe exercise of reasonable judgment in the light of the facts known at the timethe decision was made, would reasonably have been expected to accomplish the desiredresult or further the possibility of achieving such result, at a reasonablecost consistent with reliability and safety and in accordance with ApplicableLaw pertaining to the Trimble County Unit 2 Project.  Such practices, methods, or acts shall includeany of the practices, methods, or acts generally engaged in or approved byother members of the electric utility industry at, prior to, or subsequent tothe time the decision was made, provided, however, practices, methods or actsthat have previously been engaged in by members of the electric utilityindustry but, at the time the decision was made, have been generallydiscredited will not be considered Good Utility Practice.  Good Utility Practice is not intended to belimited to the optimum practice, method, or act to the exclusion of all others,but rather to encompass a range of reasonable practices, methods, or acts.

 

Governmental Authority. Any United States federal, state or local governmental entity, authorityor agency, court, tribunal, regulatory commission or other body, whetherlegislative, judicial or executive, civilian or military (or a combination orpermutation thereof).

 

ICC. Illinois Commerce Commission.

 

IMEA. IMEA has the meaning specified in the first (1st) paragraphof this Agreement.

 

IMEA ParticipationAgreement.  The IMEA Participation Agreement has themeaning specified in the fourth (4th) Whereas clause of thisAgreement.

 

IMPA. IMPA has the meaning specified in the first (1st) paragraphof this Agreement.

 

IMPA ParticipationAgreement.  IMPA Participation Agreement has the meaningspecified in the fifth (5th) Whereas clause of this Agreement.

 

Incremental CapitalAssets.  All assets of the Trimble County Unit 2Project that are not included in Accounts 101, 106, or 107 of the UniformSystem of Accounts on the Commercial Operation Date or such later date as isnecessary to complete the original construction of Trimble County Unit 2 or theTrimble County General Plant Facilities and which, over the life of TrimbleCounty Unit 2, are necessary or desirable for the continued reliable,economical operation of Trimble County Unit 2.

 

Initial Capital Assets. All assets of the Trimble County Unit 2 Project that are included inAccounts 101, 106, or 107 of the Uniform System of Accounts on the CommercialOperation Date, or such later date as is necessary to complete the originalconstruction of the Trimble County Unit 2 Project.

 

Initial ConstructionBudget.  Initial Construction Budget has the meaningspecified in Article 17.4.2.

 

Interconnection andOperating Agreement.  An agreement, a copy of which is attachedhereto as Appendix I, pursuant to which Trimble County Unit 2 will beinterconnected to the

 

7

----

 

grid, by and among theApplicable Transmission Provider and one or more of the Companies, in its ortheir capacities as “Transmission Owner” and “Generator” as such terms aretherein defined.

 

IURC. Indiana Utility Regulatory Commission.

 

KPSC. Kentucky Public Service Commission.

 

KSB. Kentucky State Board on Electric Transmission and Generating Siting.

 

Kentucky Utilities. Kentucky Utilities has the meaning specified in the first (1st)paragraph of this Agreement.

 

Louisville. Louisville has the meaning specified in the first (1st)paragraph of this Agreement.

 

Major Change. Major Change has the meaning specified in Article 17.4.2.

 

Minimum Generation. Minimum Generation means (i) the level of generation below which TrimbleCounty Unit 2 cannot operate in a stable manner without stabilization fuelwhile in compliance with the standard of conduct established inArticle 20.24, (ii) such greater level as may be appropriate from time totime consistent with the standard of conduct established in Article 20.24(e.g., for required or recommended testing, etc.), or (iii) during the rampfrom synchronization to the level described in clause (i) and any ramp up tothe level described in clause (ii), the actual level of generation from time totime during the ramp.

 

NERC. North American Electric Reliability Council.

 

Net Electric GeneratingCapacity.  The maximum continuous ability to produceelectric energy that Trimble County Unit 2 can be ramped up to at anyparticular time, less Auxiliary Power, taking into account all relevantconditions and factors affecting or limiting the capability of the unit toproduce electric power at such time, including availability and quality offuel, any mechanical or other defects, breakdowns, malfunctions, andenvironmental and permit limitations then existing.

 

Net Normal OperatingCapacity.  The amount, measured in kilowatts, designatedfrom time to time by the Coordination Committee as the steady hourly output,less Auxiliary Power, which Trimble County Unit 2 can produce under normal,day-to-day conditions of unit operations that allow reliable long-termoperation, adjusted due to seasonal variations in ambient temperature,condensing water availability and/or temperature and other factors that varyseasonally. 

 

Net Seasonal Capacity. The capacity of Trimble County Unit 2 as determined according to testingcriteria defined in the East Central Area Reliability Coordination Agreement’sDocument No. 4 entitled, “Criteria and Method for the Uniform Rating ofGenerating Equipment” or any successor document.

 

8

----

 

Non-Defaulting Parties. Non-Defaulting Parties has the meaning specified in Article 19.1.

 

O&M. O&M has the meaning specified in Article 17.4.4.

 

Offered Interest. Offered Interest has the meaning specified in Article 14.2.

 

Operating Work. All engineering, contract preparation or contract negotiation,purchasing, repair, supervision, recruitment, training, expediting, inspection,accounting, testing, protection, operating, management, maintenance, and allother work and activities associated with operating the Trimble County Unit 2Project that are not included in Development Work or Construction Work, butexcluding all work on any Incremental Capital Assets.

 

Ownership Interest. The interests of a Party in the Trimble County Unit 2 Project.

 

Party or Parties. Party or Parties has the meaning specified in the first (1st)paragraph of this Agreement.

 

Percentage. Each Party’s Percentage is a percentage equal to that Party’s percentageownership interest in Trimble County Unit 2 and the Trimble County Unit 2Site.

 

Person. Any individual, corporation, partnership, joint venture, association,joint stock company, trust, limited liability company, unincorporatedorganization, Governmental Authority or any other form of entity.

 

Plant Subjects. Plant Subjects has the meaning specified in Article 18.2.

 

Ramping Request. A Request by a Party with respect to a period of time for an amount ofthat Party’s Electric Capacity Entitlement that is greater than or less thanthat Requested by that Party for the immediately preceding period of time.

 

Refund Amount. Refund Amount has the meaning specified in Article 6.5.6.

 

Return Notice. Return Notice has the meaning specified in Article 14.2.

 

Request, Requested orRequesting.  The act of requesting the use of ElectricCapacity Entitlement by Scheduling or Dispatching in accordance with the termsof this Agreement.

 

Schedule, Scheduled orScheduling.  The act of requesting, in accordance with theterms and conditions of this Agreement, the use of a fixed megawatt amount ofElectric Capacity Entitlement in each hour. The megawatt amount that is Scheduled may vary from hour to hour inaccordance with Article 7.

 

SEC. United States Securities and Exchange Commission.

 

Taxes. Taxes has the meaning specified in Article 12.1.

 

Transaction Documents. Those documents referenced in Article 6.2.4.

 

9

----

 

Transferring Party. Transferring Party has the meaning specified in Article 14.2.

 

Transmission ServiceArrangement.  Transmission Service Arrangement means therespective agreement or arrangement between each Party and the ApplicableTransmission Provider for the transmission of its Electric Capacity Entitlementto such Party’s points of delivery.

 

Trimble County GeneralPlant Facilities.  Facilities on the Trimble County Siteidentified in Appendix B that are necessary for use by IMPA and IMEA withrespect to their respective Ownership Interest, for which IMPA and IMEA shalleach be granted a non-exclusive license pursuant to Article 6.2.3.

 

Trimble County Plant. The generating and ancillary facilities at a site along the Ohio Riverat river mile 571.4 at Wises Landing in Trimble County, Kentucky, which includeTrimble County Unit 1, the Trimble County General Plant Facilities (asdefined in the Unit 1 Participation Agreements) and other generatingfacilities located thereon; and will include Trimble County Unit 2, the TrimbleCounty General Plant Facilities and other generating facilities to beconstructed on the site in the future.

 

Trimble County Site. Certain land, consisting of approximately 2,200 acres, and certainrights in land owned by Louisville, including:

 

(i)                                     that portion of the land underlyingTrimble County Unit 1 in which undivided interests were conveyed to IMPAand IMEA under the Unit 1 Participation Agreements (the “Trimble CountyUnit 1 Site”), respectively; and

 

(ii)                                  Trimble County Unit 2 Site.

 

Trimble CountyUnit 1.  Trimble County Unit 1 has the meaningspecified in the fourth (4th) Whereas clause of this Agreement.

 

Trimble CountyUnit 1 Site.  Trimble County Unit 1 Site has themeaning specified in clause (i) of the definition of Trimble County Site.

 

Trimble County Unit 2. The nominal seven hundred fifty (750) net megawatt coal-fired unitexpected to be located at the Trimble County Site as more particularlydescribed in Appendix A, as supplemented from time to time by the Parties.

 

Trimble County Unit 2Project.  The Trimble County Unit 2 Project shallconsist of Trimble County Unit 2, Trimble County General Plant Facilities andthe Trimble County Unit 2 Site.

 

Trimble County Unit 2Site.  Trimble County Unit 2 Site has the meaningspecified in Article 6.2.2.

 

Uniform System ofAccounts.  The FERC’s “Uniform System of AccountsPrescribed for Public Utilities and Licensees (Class A and Class B),”in effect as of the Execution Date, as such Uniform System of Accounts may bemodified from time to time.  Referencesin this Agreement

 

10

----

 

to any specific accountnumber shall mean the account number in effect as of the Execution Date or toany successor account.

 

Unit 1 ParticipationAgreements.  Unit 1 Participation Agreements has themeaning specified in the sixth (6th) Whereas clause of thisAgreement.

 

VSCC. Virginia State Corporation Commission.

 

Withdrawal Event. Withdrawal Event has the following meaning as it applies to thespecified Parties:  with respect to theCompanies, an Event of Default that is the responsibility of the Companies hasoccurred and is continuing, any applicable cure period associated with suchEvent of Default has expired, and such Event of Default has resulted or willresult in the cancellation, termination, or suspension of the construction ofTrimble County Unit 2 for a period of at least ninety (90) calendar days.  With respect to IMPA or IMEA, an Event ofDefault has occurred and is continuing for failure to make a payment ofConstruction Costs (or the supervisory fee thereon) otherwise due and owinghereunder and any applicable cure period associated with such Event of Defaulthas expired.

 

Withholding Party. Withholding Party has the meaning specified in Section 18.4.

 

Work. All necessary or desirable work, services, equipment, materials andsupplies arising out of or in connection with the development or completion ofthe Trimble County Unit 2 Project, its integration into the Trimble CountyPlant, and its interconnection with the Louisville 345 kV system at the TrimbleCounty Plant switchyard as determined in accordance with the Interconnectionand Operating Agreement, including site preparation, acquisition ofinterconnection transmission right-of-way, design, engineering, permitting,procurement, construction, training, start-up, commissioning, testing,management, administration, expediting, inspecting and other services, allitems, materials (including, all water, utilities, chemicals, reactants,lubricating and fuel oils and other consumables), and equipment whether or notsuch items, services, materials, or equipment are expressly specified herein,as recorded in the accounting records for the Trimble County Unit 2 Projectunder the Uniform System of Accounts. Work shall include work, services, items, materials or equipmentprovided or undertaken directly by one or both of the Companies or theirAffiliates or performed under contracts, including the preparation,negotiation, and administration of such contracts, and shall include and theservices of consultants, experts and attorneys in connection therewith.  Work shall not include any efforts orexpenses made or incurred by a Party to negotiate this Agreement, obtain theapproval of Boards of Directors, Boards of Commissioners, members, parentcompanies or any of their Affiliates in planning for or in anticipation ofparticipation in the Trimble County Unit 2 Project as well as any CommissionApprovals.  Notwithstanding theforegoing, work related to obtaining a siting permit for Trimble County Unit 2whether such permit is part of the process of obtaining the CCNs or any otherpermit or approval of the KPSC shall constitute part of the Work.

 

1.2                                 Rules of Interpretation.

 

(i)                                     The terms defined above have the meaningsset forth above for all purposes, and such meanings are equally applicable toboth the singular and plural forms of the terms defined.

 

11

----

 

(ii)                                  The words “include,” “includes,” and“including” shall be deemed to be followed by “without limitation” whether ornot they are in fact followed by such words or words of like import.

 

(iii)                               Any agreement, instrument or ApplicableLaw defined or referred herein means such agreement or instrument or ApplicableLaw as from time to time amended, modified, or replaced, restated orsupplemented, including (in the case of agreements or instruments) by waiver orconsent and (in the case of Applicable Law) by succession of a comparablesuccessor Applicable Law and includes (in the case of agreements orinstruments) references to all attachments thereto and instruments incorporatedtherein.

 

(iv)                              References to a Person are also deemed toinclude references to its successors and assigns permitted by Article 14or Article 15.

 

(v)                                 Any term defined above by reference toany agreement, instrument or Applicable Law has such meaning whether or notsuch agreement, instrument or Applicable Law is in effect.

 

(vi)                              “Hereof,” “herein,” “hereunder” andcomparable terms refer, unless otherwise expressly indicated, to the entireagreement or instrument in which such terms are used and not to any particulararticle, section or other subdivision thereof or attachment thereto.  References in an instrument to “Article,”“Section,” “Subsection” or another subdivision or to an attachment are, unlessthe context otherwise requires, to an article, section, subsection orsubdivision of or an attachment to such agreement or instrument.  All references to exhibits or appendices inany agreement or instrument are to exhibits or appendices attached to such instrumentor agreement.

 

(vii)                           The word “or” will have the inclusivemeaning represented by the phrase “and/or.”

 

(viii)                        “Shall” and “will” have equal force andeffect.

 

# **ARTICLE 2.OWNERSHIP**

 

2.1                                 Ownership.

 

Trimble County Unit 2shall be owned by the Parties as tenants in common.  The undivided ownership interest of eachParty shall be free and clear of the lien of any indenture or mortgage, deed oftrust, bond resolution, or other instrument (hereinafter called “indenture”)establishing a lien upon some or all of the property of the other Parties.  The Percentages of the Parties shall be:  the Companies, seventy-five percent (75.0%);IMPA, twelve and eighty-eight one hundredths percent (12.88%); and, IMEA twelveand twelve one-hundredths percent (12.12%), respectively.  On or before the tenth (10th)calendar day prior to the Construction Closing, the Companies will notify theother Parties in writing of the exact Percentages of Louisville and of KentuckyUtilities in Trimble County Unit 2. Louisville shall retain ownership of the Trimble County General PlantFacilities as described in Appendix B attached hereto, provided, however,Louisville shall grant non-exclusive licenses to use such facilities inaccordance with Article 6.2.3. Louisville retains ownership of the Trimble County Site except

 

12

----

 

for those portions of theTrimble County Site to be conveyed to IMPA, IMEA and Kentucky Utilitiespursuant to Article 6.2.2, and except for that portion of the TrimbleCounty Site previously conveyed to IMPA and IMEA pursuant to the Unit 1Participation Agreements.

 

The Parties acknowledgethat various items of property included in the Trimble County Unit 2 Projectmay be leased from time-to-time in lieu of purchasing such items.  Nothing in this Agreement shall preclude theParties from leasing such items.  Suchleased property shall be held by the Parties in an undivided leasehold astenants in common.

 

2.2                                 AdditionalGenerating Units.

 

The Companies shall havethe sole and exclusive right to own, install, enlarge, modify and operate anygenerating unit or units other than Trimble County Unit 2, as well as any otherfacility, including necessary appurtenances thereto, on the Trimble CountySite, provided, however, such other units or facilities shall not be soinstalled, enlarged, modified, and operated, as the case may be, as tounreasonably impair (economically or operationally) the operation of TrimbleCounty Unit 2, and provided, further, that with respect to Trimble County Unit1, the rights of Louisville, IMPA and IMEA shall be determined in accordancewith the Unit 1 Participation Agreements.

 

2.3                                 Modification of Existing Property.

 

Subject to the approvalof the Coordination Committee, and in accordance with the terms of thisAgreement, the Companies shall have the right to use, enlarge, modify orrelocate any facilities installed as a part of Trimble County Unit 2 or theTrimble County General Plant Facilities in connection with the installation,enlargement, modification, or operation, as the case may be, of such other unitor units or facilities described in Article 2.2, provided, however:

 

(i)                                     Such use, enlargement, modification, orrelocation of Trimble County Unit 2 facilities or Trimble County General Plant Facilitiesshall not unreasonably impair (economically or operationally) the operation ofTrimble County Unit 2; and

 

(ii)                                  The cost of such use, enlargement,modification or relocation of Trimble County Unit 2 facilities or TrimbleCounty General Plant Facilities, in connection with such other unit or units orfacilities, shall be borne by the Companies (except that if such use,enlargement, or relocation of Trimble County Unit 2 facilities or TrimbleCounty General Plant Facilities is in connection with the installation,enlargement, modification of any additional unit or units or facilities thatare owned or to be owned by the Parties in common, then the cost of such use,enlargement, modification, or relocation of said Trimble County Unit 2facilities or Trimble County General Plant Facilities shall be shared by theParties in proportion to their respective ownership interests in suchadditional unit or units or facilities), provided, however, that for thepurposes of this Article 2.3(ii), subject to Article 14 orArticle 15, and so long as Louisville and Kentucky Utilities areAffiliates, the Ownership Interest of Kentucky Utilities herein shall be deemedto be an interest of Louisville when assessing whether facilities are owned bythe Parties in common; and

 

(iii)                               Such action shall not enlarge or diminishthe respective Ownership Interests of the Parties in any part of the TrimbleCounty Unit 2 Project; and

 

13

----

 

(iv)                              Such action shall not enlarge or diminishthe Parties’ respective obligations to share in the costs of any part of theTrimble County Unit 2 Project; and

 

(v)                                 Where modification of existing propertyand rights requires revisions to existing documents setting forth therespective rights and interests of the Parties, or where new conveyances arerequired to properly effectuate the modifications to property and rights madehereunder, the Parties shall cooperate to promptly execute and deliver suchdocuments.

 

# **ARTICLE 3.DEVELOPMENT CLOSING**

# ** **

3.1                                 Development Closing.

 

The Development Closingshall occur simultaneously with the execution of this Agreement at suchlocation and time as may be selected by the Parties, on such date as mutuallyagreed upon by the Parties.

 

3.2                                 Development Costs.

 

On April 1, 2004,IMPA and IMEA shall each pay to the Companies, in immediately availablefunds, their proportionate share of the sum (the “Deferred Development Costs”)of (i) the aggregate Development Costs (based on their respective Percentages)incurred by the Companies prior to such date, (ii) interest at the Agreed Ratecomputed from the date that each such Development Cost was Booked toApril 1, 2004, and (iii) the supervisory fee thereon as described inArticle 9.1.  Such sums shall bewired to a single account that is specified by the Companies not less than ten(10) calendar days prior to April 1, 2004. The Parties agree that the aggregate amount of Development Costsincurred by the Companies to and until the last day of December 2003, isas set forth in Appendix D.  After theDevelopment Closing, invoicing and payment of Development Costs shall be asprovided in Article 9.1.

 

3.3                                 Deliveries of Louisville at theDevelopment Closing.

 

Louisville shall deliverto IMPA, IMEA and Kentucky Utilities a title insurance commitment ofCommonwealth Land Title Insurance Company, dated within ten (10) calendar daysof the date of the Development Closing, with respect to that portion of theTrimble County Site on which Trimble County Unit 2 is likely to be constructed,which commitment shall be in form and substance satisfactory to each of IMPAand IMEA.

 

3.4                                 Effect of Development Closing onArticle 15 Rights.

 

Upon execution of thisAgreement, IMEA and IMPA each waive any rights it may have pursuant ofArticle 15 of the Unit 1 Participation Agreement to which it is a Party,subject to the reinstatement of such rights only to the extent expresslyprovided in this Agreement.

 

14

----

 

# **ARTICLE 4.REPRESENTATIONS AND WARRANTIES**

# ** **

4.1                                 IMPA Representations and Warranties.

 

IMPA hereby representsand warrants to the Companies and IMEA as follows:

 

(i)                                     IMPA Organization. IMPA is a body corporate and politic and a political subdivision of theState of Indiana, duly organized, validly existing and in good standing underthe laws of the State of Indiana, has the full power, legal capacity, andauthority to enter into this Agreement and related agreements, to carry out thetransactions contemplated by this Agreement, and to carry on its business as itis now being conducted.  IMPA hasdelivered to the other Parties a true and complete copy of the ContractCreating the IMPA and its by-laws as amended to date.

 

(ii)                                  Authority Relative to This Agreement. The execution, delivery, and performance by IMPA of this Agreement havebeen duly authorized by all necessary corporate action on the part ofIMPA.  The execution, delivery, andperformance by IMPA of this Agreement do not contravene any Applicable Law,applicable to IMPA or its properties, or the Contract Creating the IMPA or itsby-laws and do not and will not contravene the provisions of, or constitute adefault under, any indenture, mortgage, contract, or other instrument to whichIMPA is a party or by which IMPA is bound, and this Agreement constitutes alegal, valid, and binding obligation of IMPA, enforceable in accordance withits terms, except as limited by applicable bankruptcy, insolvency,reorganization, or similar laws at the time in effect.

 

(iii)                               Approvals and Consents. Any consent or approval of, giving of notice to, registration with, ortaking of any other action by any applicable Governmental Authority inconnection with the execution, delivery, and performance of this Agreement byIMPA required to be obtained by IMPA on or before the date hereof have beenobtained.

 

(iv)                              Legal Proceedings. There is no materially adverse legal action, suit, arbitration,governmental investigation, or other legal or administrative proceeding, or anyorder, decree, or judgment in progress, pending or in effect, or to theknowledge of IMPA threatened in writing against or relating to IMPA inconnection with or relating to the transactions contemplated by this Agreement,and IMPA does not know or have any reason to be aware of any basis for thesame.

 

4.2                                 Louisville Representations andWarranties.

 

Louisville herebyrepresents and warrants to IMPA, IMEA and Kentucky Utilities as follows:

 

(i)                                     Louisville Organization. Louisville is a corporation duly organized and validly existing underthe laws of the Commonwealth of Kentucky, and has corporate power to carry onits business as it is now being conducted and as it is contemplated to beconducted.  Louisville has delivered tothe other Parties a true and complete copy of its articles of incorporation andby-laws as amended to date.

 

15

----

 

(ii)                                  Authority Relative to This Agreement. The execution, delivery, and performance by Louisville of this Agreementhave been duly authorized by all necessary corporate action on the part ofLouisville, do not contravene any Applicable Law, applicable to Louisville orits properties, or the articles of incorporation or by-laws of Louisville anddo not and will not contravene the provisions of, or constitute a defaultunder, any indenture, mortgage, contract, or other instrument to whichLouisville is a party or by which Louisville is bound, and this Agreementconstitutes a legal, valid, and binding obligation of Louisville, enforceablein accordance with its terms, except as limited by applicable bankruptcy,insolvency, reorganization, or similar laws at the time in effect.

 

(iii)                               Approvals and Consents. Any consent or approval of, giving of notice to, registration with, ortaking of any other action by any applicable Governmental Authority inconnection with the execution, delivery, and performance of this Agreement byLouisville required to be obtained by Louisville on or before the date hereofhave been obtained.

 

(iv)                              Legal Proceedings. There is no materially adverse legal action, suit, arbitration,governmental investigation, or other legal or administrative proceeding, or anyorder, decree, or judgment in progress, pending or in effect, or to theknowledge of Louisville threatened in writing against or relating to Louisvillein connection with or relating to the transactions contemplated by thisAgreement, and Louisville does not know or have any reason to be aware of anybasis for the same.

 

4.3                                 Kentucky Utilities Representationsand Warranties.

 

Kentucky Utilities herebyrepresents and warrants to IMPA, IMEA and Louisville as follows:

 

(i)                                     Kentucky Utilities Organization. Kentucky Utilities is a corporation duly organized and validly existingunder the laws of the Commonwealth of Kentucky, and has corporate power tocarry on its business as it is now being conducted and as it is contemplated tobe conducted.  Kentucky Utilities hasdelivered to the other Parties a true and complete copy of its articles ofincorporation and by-laws as amended to date.

 

(ii)                                  Authority Relative to This Agreement. The execution, delivery, and performance by Kentucky Utilities of thisAgreement have been duly authorized by all necessary corporate action on thepart of Kentucky Utilities, do not contravene any Applicable Law, applicable toKentucky Utilities or its properties, or the articles of incorporation orby-laws of Kentucky Utilities and do not and will not contravene the provisionsof, or constitute a default under, any indenture, mortgage, contract, or otherinstrument to which Kentucky Utilities is a party or by which KentuckyUtilities is bound, and this Agreement constitutes a legal, valid, and bindingobligation of Kentucky Utilities, enforceable in accordance with its terms,except as limited by applicable bankruptcy, insolvency, reorganization, orsimilar laws at the time in effect.

 

(iii)                               Approvals and Consents. Any consent or approval of, giving of notice to, registration with, ortaking of any other action by any applicable Governmental Authority inconnection with the execution, delivery, and performance of this Agreement byKentucky

 

16

----

 

Utilities required to beobtained by Kentucky Utilities on or before the date hereof have been obtained.

 

(iv)                              Legal Proceedings. There is no materially adverse legal action, suit, arbitration,governmental investigation, or other legal or administrative proceeding, or anyorder, decree, or judgment in progress, pending or in effect, or to theknowledge of Kentucky Utilities threatened in writing against or relating toKentucky Utilities in connection with or relating to the transactionscontemplated by this Agreement, and Kentucky Utilities does not know or haveany reason to be aware of any basis for the same.

 

4.4                                 IMEA Representations and Warranties.

 

IMEA hereby representsand warrants to the Companies and IMPA as follows:

 

(i)                                     IMEA Organization. IMEA is a body politic and corporate, municipal corporation and unit oflocal government of the State of Illinois duly organized and validly existing underthe laws of the State of Illinois, and has full power, legal capacity andauthority to enter into this Agreement and related agreements, to carry out thetransactions contemplated by this Agreement, and to carry on its business as itis now being conducted.  IMEA hasdelivered to the other Parties a true and complete copy of its Agency Agreementand by-laws as amended to date.

 

(ii)                                  Authority Relative to This Agreement. The execution, delivery, and performance by IMEA of this Agreement havebeen duly authorized by all necessary corporate action on the part ofIMEA.  The execution, delivery, andperformance by IMEA of this Agreement do not contravene any law, or anygovernmental rule, regulation, or order applicable to IMEA or its properties,or the Agency Agreement or by-laws of IMEA and do not and will not contravenethe provisions of, or constitute a default under, any indenture, mortgage,contract, or other instrument to which IMEA is a party or by which IMEA isbound, and this Agreement constitutes a legal, valid, and binding obligation ofIMEA, enforceable in accordance with its terms, except as limited by applicablebankruptcy, insolvency, reorganization, or similar laws at the time in effect.

 

(iii)                               Approvals and Consents. Any consent or approval of, giving of notice to, registration with, ortaking of any other action by any applicable Governmental Authority inconnection with the execution, delivery, and performance of this Agreementrequired to be obtained by IMEA on or before the date hereof have beenobtained.

 

(iv)                              Legal Proceedings. There is no materially adverse legal action, suit, arbitration,governmental investigation, or other legal or administrative proceeding, or anyorder, decree, or judgment in progress, pending or in effect, or to theknowledge of IMEA threatened in writing against or relating to IMEA inconnection with or relating to the transactions contemplated by this Agreement,and IMEA does not know or have any reason to be aware of any basis for thesame.

 

17

----

 

# **ARTICLE 5.DEVELOPMENT AND CONSTRUCTION**

# ** **

5.1                                 Responsibility for Development.

 

The Parties agree tojointly develop the Trimble County Unit 2 Project.  Trimble County Unit 2 is intended to consistof a single coal-fired steam-electric generating unit of a super-criticaldesign and associated facilities with a Net Electric Generating Capacity ofapproximately seven hundred fifty (750) megawatts, generally as described inthe “Trimble County Unit 2 Project Approach” prepared by Burns & McDonnellEngineering Company, dated September 30, 2002, as further described inAppendix A and Appendix B, and as further developed and refined during theDevelopment Phase.  The Parties will usetheir respective Best Efforts to complete the Development Phase byDecember 1, 2005, subject to Article 6.5.

 

Subject to the provisionsof Article 6.5, the Companies, as agent of the Parties, shall have theauthority and obligation to manage, control, administer, enter into contracts,perform services and make all decisions necessary and appropriate for theperformance of the Development Work.  TheCompanies shall discharge such obligations in accordance with the provisions ofthis Agreement, including the standard of conduct established inArticle 20.24 and Article 17. IMPA and IMEA do hereby appoint the Companies to be theirattorneys-in-fact, which appointment is coupled with an interest, to act intheir names, places and steads in the negotiation, execution and administrationof contracts with Affiliates and non-Affiliates of the Companies in connectionwith the Development Work.  Suchappointment shall not be revocable during the Development Phase.

 

5.2                                 Responsibility for Permits.

 

Except for CommissionApprovals required to be obtained by IMEA or IMPA, the Companies shall beresponsible for obtaining all environmental, land use and other licenses,permits and approvals for construction and operation of the Trimble County Unit2 Project.  IMPA shall be responsible forobtaining any Commission Approvals or other approvals of GovernmentalAuthorities applicable to its ownership or participation in the Trimble CountyUnit 2 Project or the execution, delivery and performance of this Agreement byIMPA.  IMEA shall be responsible forobtaining any Commission Approvals or other approvals of GovernmentalAuthorities applicable to its ownership or participation in the Trimble CountyUnit 2 Project or the execution, delivery and performance of thisAgreement by IMEA.

 

5.3                                 Development Schedule.

 

The Parties expect tocomplete the Development Phase of the Trimble County Unit 2 Project byDecember 31, 2005.  The Partiesrecognize that there are and will likely be uncertainties relating to theobtaining of necessary licenses, permits and approvals for the Trimble CountyUnit 2 Project, some of which are beyond the control of some or all of theParties.  Notwithstanding suchuncertainties, during the Development Phase, the Parties shall exercise theirrespective Best Efforts to seek and obtain according to the following milestoneschedule, the joint and individual decisions, approvals and commitmentsnecessary to achieve Construction Closing:

 

18

----

 

(i)                                     Agreement by each Party and theApplicable Transmission Provider of a Transmission Service Arrangement byJuly 1, 2004;

 

(ii)                                  Execution of the Interconnection andOperating Agreement with the Applicable Transmission Provider byDecember 1, 2003;

 

(iii)                               Decisions from applicable GovernmentalAuthorities with respect to necessary Commission Approvals by July 1,2005;

 

(iv)                              Receipt of final major environmentalpermits, not subject to appeal, rehearing or review by February 1, 2005;

 

(v)                                 Final authorization, includingarrangements for project funding by each Party by November 1, 2005; and

 

(vi)                              Construction Closing by December 31,2005.

 

5.4                                 Authorization to Construct.

 

At least thirty (30)calendar days prior to the conclusion of the Development Phase and theConstruction Closing, the Parties, acting through the Coordination Committee,shall undertake consideration and issuance of the Authorization to Constructand determine whether or not to proceed to the Construction Closing.  The Parties currently expect to achieve aCommercial Operation Date between October 1, 2009, and March 1, 2010,which date range is subject to adjustment based on the facts and circumstancesthat arise during the Development Phase and the Construction Phase.

 

5.5                                 Responsibility for Construction.

 

The Companies, as agentfor the Parties, shall have the authority and obligation to manage, control,administer, perform services and make all decisions necessary and appropriatefor the supervision of the Construction Work, including the supervision of thedesign, procurement and construction of the Trimble County Unit 2 Project.  The Companies shall discharge suchobligations in accordance with the provisions of this Agreement, including thestandard of conduct established in Article 20.24 and Article 17.  The Companies, as agent of the Parties, shallbe entitled to contract with one or more Persons (the “ConstructionContractors”) for the performance of the Construction Work in a good andworkmanlike manner and in all material respects in accordance with ApplicableLaws.  IMPA and IMEA do hereby appointthe Companies to be their attorneys-in-fact, which appointment is coupled withan interest to act in their names, places and steads in the negotiation,execution and administration of the Construction Contracts and the performanceof their other obligations in connection with the Construction Work.  Such appointment shall not be revocableduring the Construction Phase.

 

5.6                                 Construction Schedule.

 

The Companies shallmanage, administer and perform support services in aid of the constructioneffort in accordance with the standard of conduct established inArticle 20.24, with

 

19

----

 

the goal of achieving theexpected Commercial Operation Date specified in the Authorization to Construct,within the Construction Budget, subject to Article 17.

 

# **ARTICLE 6.CONSTRUCTION CLOSING AND WITHDRAWAL**

# ** **

6.1                                 Construction Closing.

 

The Construction Closingshall occur on or before December 31, 2005 (as such date may be extendedby the decision of the Coordination Committee or otherwise in accordance withArticle 21.1.2), subject to the right of each Party to withdraw inaccordance with and subject to the provision of Article 6.5, or thisAgreement shall terminate as provided in Article 21.  The Construction Closing shall occur on suchdate and at such location and time as the non-withdrawing Parties shall agree.

 

6.2                                 Closing Actions.

 

6.2.1                        Payment to Louisville.

 

At the ConstructionClosing, IMPA shall pay Louisville the sum of twelve thousand eight hundred eighty dollars ($12,880), IMEA shall payLouisville the sum of twelve thousand one hundred twenty dollars ($12,120), andKentucky Utilities shall pay Louisville the sum calculated by multiplying onehundred thousand dollars ($100,000) by the Percentage of Kentucky Utilities,respectively, representing their proportionate share of the purchase price forthe land and easements conveyed by Louisville pursuant to this Agreement.  Such payments shall be made to a singleaccount that is specified by Louisville at least ten (10) calendar days priorto the Construction Closing.

 

6.2.2                        Conveyance of Real Property.

 

At the Construction Closing, Louisville shall sell andconvey to IMPA and IMEA by general warranty deed, substantially in the formshown in Appendix E, an undivided ownership interest of twelve and eighty-eightone-hundredths percent (12.88%) and twelve and twelve one-hundredths percent(12.12%), respectively, in that portion of the real estate constituting theTrimble County Site underlying Trimble County Unit 2 (the “Trimble County Unit 2Site”) to be held as tenants in common. Prior to the Construction Closing, Louisville shall sell and convey toKentucky Utilities by general warranty deed, substantially in the form shown inAppendix E, an undivided ownership interest in its Percentage of the TrimbleCounty Unit 2 Site.  Upon suchconveyances, the undivided percentage ownership interests of the Trimble CountyUnit 2 Site will be as follows:  theCompanies — seventy-five percent (75.00%); IMPA — twelve and eighty-eightone-hundredths percent (12.88%); and IMEA — twelve and twelve one-hundredthspercent (12.12%).

 

6.2.3                        Licenses and Easements.

 

Louisville shall grant toeach IMPA, IMEA and Kentucky Utilities non-exclusive licenses, substantially inthe form of Appendix C, to use the Trimble County General Plant Facilitiesand non-exclusive easements, substantially in the form of Appendix F, overthat portion of the Trimble County Site owned by Louisville, as the TrimbleCounty General Plant

 

20

----

 

Facilities and theTrimble County Site pertain to IMPA’s, IMEA’s and Kentucky Utilities’ ownershipand use of Trimble County Unit 2.  IMPA,IMEA and Kentucky Utilities acknowledge that the Trimble County General PlantFacilities to be licensed hereunder are also subject to the pre-existingnon-exclusive licenses to IMPA and IMEA to all or a part of such facilitiesdelivered in accordance with the Unit 1 Participation Agreements.

 

6.2.4                        Transaction Documents.

 

At the ConstructionClosing, the Parties shall execute and/or deliver the documents to be executedby them as contemplated by or referenced in Articles 6.3 or 6.4, together withsuch other documents and instruments as the Coordination Committee unanimouslydetermines are necessary or desirable to confirm completion of the DevelopmentPhase and to enable and allow the Parties to proceed with the ConstructionPhase and the completion of the Trimble County Unit 2 Project.

 

6.3                                 Conditions Precedent.

 

The following conditionsconstitute the conditions precedent to each Party’s participation in theConstruction Closing.  If any suchcondition is not satisfied, each Party, in its sole discretion, is entitled towaive such condition with respect to its participation in the ConstructionClosing:

 

(i)                                     The Coordination Committee shall have issuedthe Authorization to Construct in accordance with Article 17.3(x).

 

(ii)                                  The Transaction Documents, includingdesign, major, equipment and construction contracts are in substantially finalform and have been approved by the Coordination Committee.

 

(iii)                               The Construction Budget and theConstruction Schedule shall have been approved by the CoordinationCommittee.

 

(iv)                              The final major environmental permits forthe construction of Trimble County Unit 2 have been duly issued, are in fullforce and effect and are not subject to appeal, reconsideration or review.

 

(v)                                 All other necessary regulatory approvals,including Commission Approvals, necessary for the execution, delivery andperformance of this Agreement, land use approvals, and other licenses, permitsand approvals for the construction of the Trimble County Unit 2 Project (otherthan those, which in light of the status of the project as of the date of theConstruction Closing, are not yet required to have been obtained pursuant toApplicable Law and can be obtained without substantial difficulty, expense ordelay) have been duly issued, are in full force and effect and are not subjectto appeal, reconsideration or review.

 

(vi)                              TheInterconnection and Operating Agreement is in full force and effect and one ormore of the Companies, in the capacity as “Generator” thereunder, shall haveassigned a portion of its or their rights and obligations to IMPA and IMEA, asappropriate, such that the “Generator” constitutes all of the Parties to thisAgreement in accordance with the Parties’

 

21

----

respective Percentages.  IMPA and IMEA, as appropriate, also shallhave assumed the assigned obligations under the Interconnection and OperatingAgreement.

 

(vii)                           Each Party shall have tendered at theConstruction Closing the documents, instruments and other items that it isrequired to deliver at the Construction Closing pursuant to Article 6.4,subject only to the delivery by the other Parties of the documents, instrumentsand other items that they are obligated to deliver at the Construction Closingpursuant to Article 6.4.

 

(viii)                        Each of the representations andwarranties of Louisville, Kentucky Utilities, IMPA and IMEA, respectively,contained in Article 4 shall be true and correct as of the ConstructionClosing.

 

(ix)                                Each of the Parties shall have performedall obligations and complied with all covenants that are to be performed orcomplied with in all material respects necessary to be performed or compliedwith on or before the Construction Closing.

 

(x)                                   Each of the Parties shall have enteredinto their respective Transmission Service Arrangement with the ApplicableTransmission Provider and such arrangement shall be in full force and effect.

 

(xi)                                Each of the Parties shall have tenderedat the Construction Closing written evidence of the approval of its Board ofDirectors or Board of Commissioners, as applicable, to proceed with theConstruction Closing and the transactions contemplated herein.

 

6.4                                 Deliveries at Construction Closing.

 

### 6.4.1                        Payment of Funds by IMPA.

###  

The moneys required to bepaid by IMPA to Louisville at the Construction Closing in accordance withArticle 6.2.1 shall be paid in immediately available funds.

 

### 6.4.2                        Payment of Funds by IMEA.

###  

The moneys required to bepaid by IMEA to Louisville at the Construction Closing in accordance withArticle 6.2.1 shall be paid in immediately available funds.

 

### 6.4.3                        Payment ofFunds by Kentucky Utilities.

###  

The moneys required to bepaid by Kentucky Utilities at the Construction Closing in accordance withArticle 6.2.1 shall be paid in immediately available funds.

 

### 6.4.4                        General Warranty Deeds.

###  

Louisville shall deliverto IMPA, IMEA and Kentucky Utilities general warranty deeds in accordance withArticle 6.2.2.

 

### 6.4.5                        Licenses toTrimble County General Plant Facilities.

###  

Louisville shall deliverto IMPA, IMEA, and Kentucky Utilities licenses to use the Trimble CountyGeneral Plant Facilities in accordance with Article 6.2.3.

 

22

----

 

### 6.4.6                        Non-ExclusiveEasements of Trimble County Site.

 

Louisville shall deliverto IMPA, IMEA, and Kentucky Utilities non-exclusive easements over a portion ofthe Trimble County Site in accordance with Article 6.2.3.

 

6.4.7                        Reserved.

 

6.4.8                        Representations and Warranties.

 

Each Party shall delivera certificate executed by an Authorized Person of such Party to each of theother Parties certifying that the representations and warranties of such Partyas contained in Article 4 are true and correct as of the date of theConstruction Closing.

 

6.4.9                        Conditions.

 

Each Party shall delivera certificate executed by an Authorized Person of such Party to each of theother Parties certifying that all of the conditions to its obligations to theConstruction Closing have been satisfied or waived.

 

6.4.10                  Release from Lien of Louisville’sIndenture.

 

Louisville shall furnishto each of IMPA, IMEA, and Kentucky Utilities a properly executed release ofthat portion of the real property being conveyed to IMPA, IMEA and KentuckyUtilities at the Construction Closing from the lien of any and all indentures(other than indentures created by IMPA, IMEA or Kentucky Utilities).

 

6.4.11                  Opinion of Counsel for Louisville.

 

Louisville shall furnishto IMPA, IMEA, and Kentucky Utilities an opinion of counsel for Louisville,which may include counsel employed directly by Louisville, and which counselshall be satisfactory to the Parties, in form and substance satisfactory to theParties, dated the date of the Construction Closing, to the effect that:

 

(i)                         Louisville is a corporation dulyorganized and validly existing under the laws of the Commonwealth of Kentuckyand has the corporate power and authority to carry on its business as presentlyconducted and to enter into and perform its obligations under this Agreement;and

 

(ii)                      The execution, delivery, and performanceby Louisville of this Agreement have been duly authorized by all necessarycorporate action on the part of Louisville, do not contravene any law, or anygovernmental rule, regulation, or order applicable to Louisville or itsproperties, or the articles of incorporation or by-laws of Louisville, and donot and will not contravene the provisions of, or constitute a default under,any indenture, mortgage, contract, or other instrument to which Louisville is aparty or by which Louisville is bound; and

 

(iii)                   The documents executed by Louisville in connectionwith the Construction Closing have been duly authorized, executed, anddelivered by Louisville; and

 

(iv)                  Any consent or approval of, giving of notice to,registration with or taking of any other action by, any Governmental Authority,including Commission Approvals, in connection

 

23

----

 

with the execution, delivery, and performance of this Agreementrequired to be obtained by Louisville on or before the Construction Closing hasbeen obtained; and

 

(v)                     There is no action, suit, or proceeding pendingagainst Louisville that would materially adversely affect the ability ofLouisville to perform its obligations under this Agreement.

 

6.4.12                  Opinion of Counsel for KentuckyUtilities.

 

Kentucky Utilities shallfurnish to IMPA, IMEA, and Louisville an opinion of counsel for KentuckyUtilities, which may include counsel employed directly by Kentucky Utilities,and which counsel shall be satisfactory to the Parties, in form and substancesatisfactory to the Parties, dated the date of the Construction Closing, to theeffect that:

 

(i)                         Kentucky Utilities is a corporation dulyorganized and validly existing under the laws of the Commonwealth of Kentuckyand has the corporate power and authority to carry on its business as presentlyconducted and to enter into and perform its obligations under this Agreement;and

 

(ii)                      The execution, delivery, and performanceby Kentucky Utilities of this Agreement has been duly authorized by allnecessary corporate action on the part of Kentucky Utilities, do not contraveneany law, or any governmental rule, regulation, or order applicable to KentuckyUtilities or its properties, or the articles of incorporation or by-laws of KentuckyUtilities, and do not and will not contravene the provisions of, or constitutea default under, any indenture, mortgage, contract, or other instrument towhich Kentucky Utilities is a party or by which Kentucky Utilities is bound;and

 

(iii)                   The documents executed by Kentucky Utilities inconnection with the Construction Closing have been duly authorized, executed,and delivered by Kentucky Utilities; and

 

(iv)                  Any consent or approval of, giving of notice to,registration with or taking of any other action by, any Governmental Authority,including Commission Approvals, in connection with the execution, delivery, andperformance of this Agreement required to be obtained by Kentucky Utilities onor before the Construction Closing has been obtained.

 

(v)                     There is no action, suit, or proceeding pendingagainst Kentucky Utilities that would materially adversely affect the abilityof Kentucky Utilities to perform its obligations under this Agreement.

 

6.4.13                  Opinion of Counsel for IMPA.

 

IMPA shall furnish to theCompanies and IMEA an opinion of counsel for IMPA, which may include counselemployed directly by IMPA, and which counsel shall be satisfactory to theParties, in form and substance satisfactory to the Parties, dated the date ofthe Construction Closing, to the effect that:

 

24

----

 

(i)                         IMPA is a body corporate and politic anda political subdivision of the State of Indiana and has the corporate power,legal capacity, and authority to carry on its business as presently conductedand to enter into and perform its obligations under this Agreement; and

 

(ii)                      The execution, delivery, and performanceby IMPA of this Agreement have been duly authorized by all necessary corporateaction on the part of IMPA, do not contravene any law, or any governmentalrule, regulation, or order, applicable to IMPA or its properties, or theContract Creating the IMPA, or the by-laws of IMPA and do not and will notcontravene the provisions of, or constitute a default under, any indenture,mortgage, contract, or other instrument to which IMPA is a party or by whichIMPA is bound; and

 

(iii)                   This Agreement has been duly executed and delivered byIMPA and constitutes the legal, valid, and binding obligations of IMPAenforceable in accordance with its respective terms, except as limited byapplicable bankruptcy, insolvency, reorganization, or similar laws at the timein effect; and

 

(iv)                  Any consent or approval of, giving of notice to,registration with, or taking of any other action by, any GovernmentalAuthority, including Commission Approvals, in connection with the execution,delivery, and performance of this Agreement required to be obtained by IMPA onor before the Construction Closing has been obtained.

 

(v)                     There is no action, suit, or proceeding pendingagainst IMPA that would materially adversely affect the ability of IMPA toperform its obligations under this Agreement.

 

6.4.14                  Opinion of Counsel for IMEA.

 

IMEA shall furnish to theCompanies and IMPA an opinion of counsel for IMEA, which counsel shall besatisfactory to the Parties, in form and substance satisfactory to the Parties,dated the date of the Construction Closing to the effect that:

 

(i)                         IMEA is a body politic and corporate,municipal corporation and unit of local government of the State of Illinois andhas the corporate power, legal capacity, and authority to carry on its businessas presently conducted and to enter into and perform its obligations under thisAgreement; and

 

(ii)                      The execution, delivery, and performanceby IMEA of this Agreement have been duly authorized by all necessary corporateaction on the part of IMEA, do not contravene any law, or any governmentalrule, regulation, or order, applicable to IMEA or its properties, or the AgencyAgreement, or the by-laws of IMEA and do not and will not contravene theprovisions of, or constitute a default under, any indenture, mortgage,contract, or other instrument to which IMEA is a party or by which IMEA isbound; and

 

(iii)                   This Agreement has been duly executed and delivered byIMEA and constitutes the legal, valid, and binding obligations of IMEAenforceable in accordance with its respective terms, except as limited byapplicable bankruptcy, insolvency, reorganization, or similar laws at the timein effect; and

 

25

----

 

(iv)                  Any consent or approval of, giving of notice to,registration with, or taking of any other action by, any GovernmentalAuthority, including Commission Approvals, in connection with the execution, delivery,and performance of this Agreement required to be obtained by IMEA on or beforethe Construction Closing has been obtained.

 

(v)                     There is no action, suit, or proceeding pendingagainst IMEA that would materially adversely affect the ability of IMEA toperform its obligations under this Agreement.

 

6.4.15                  Transaction Documents.

 

The Parties shall executeand deliver the Transaction Documents in accordance with Article 6.2.4.

 

6.4.16                  Title Commitment.

 

Louisville shall deliverto IMPA and IMEA a title insurance commitment of Commonwealth Land TitleInsurance Company, dated within ten (10) calendar days prior to the date of theConstruction Closing, with respect to the Trimble County Unit 2 Site whichcommitment shall be in form and substance (other than specific metes andbounds) similar to the title commitment delivered by Louisville as a conditionof the Development Closing in all material respects.

 

6.4.17                  Property Taxes.

 

Louisville shall deliverto IMPA and IMEA evidence that it has paid all property taxes that are assessedon the real property conveyed to IMPA and IMEA (as applicable) hereunder,except for property taxes assessed but not yet payable by the time of theConstruction Closing.

 

6.5                                 Withdrawal.

 

6.5.1                        Withdrawal Prior to ConstructionClosing.

 

If at any time, a Partydetermines that it will not participate in the Construction Closing, it shallgive prompt written notice to the other Parties of its withdrawal from thisAgreement, which notice shall specify the reasons for such withdrawal inreasonable detail.  Effective thirty (30)calendar days after giving such notice, the notifying Party shall cease to be aparty to this Agreement.  Except asspecifically provided herein, a Party that withdraws from this Agreement inaccordance with this Article 6.5.1 shall remain liable for all of itsobligations incurred hereunder prior to the date of withdrawal and shall not beentitled to a refund or return of any amounts paid or expended under thisAgreement.  If either Louisville orKentucky Utilities (but not both) gives notice of withdrawal under thisArticle 6.5.1 prior to the Construction Closing, the other shallautomatically succeed to its withdrawing Affiliate’s Ownership Interest, assumethe obligations related thereto and be entitled to exercise the rights of itswithdrawing Affiliate hereunder.  Uponsuch withdrawal, the defined term “Companies” shall be deemed to refer only tosuch non-withdrawing Party.

 

6.5.2                        Withdrawal of IMPA or IMEA.

 

If, prior to theConstruction Closing, either (but not both) IMPA or IMEA gives notice of itswithdrawal in accordance with Article 6.5.1 above, the other Parties shallassume such Party’s

 

26

----

 

Ownership Interest inproportion to their respective Percentages immediately prior to suchassumption.  A Party withdrawing underthis Article 6.5.2 shall have no further liability to the other Parties onaccount of such withdrawal, provided, however, such Party shall remain liablefor all of its obligations incurred prior to date of its withdrawal andprovided, further, such Party shall not be entitled to a refund or return ofany amounts paid or expended under this Agreement.  The rights of such withdrawing Party pursuantto Article 15 of the applicable Unit 1 Participation Agreement shallnot be thereafter reinstated.

 

6.5.3                        Withdrawal by the Companies or IMPAand IMEA.

 

If,on or prior to the Construction Closing, Louisville and Kentucky Utilities shall give notice of withdrawal in accordancewith Article 6.5.1, then upon receipt of notice by the remainingParties, this Agreement shall terminate in accordance with Article 6.5.6or 21.1.3, as appropriate.  If, on orprior to the Construction Closing, IMPA and IMEA give notice of withdrawal inaccordance with Article 6.5.1, then upon receipt of notice by theremaining Parties, this Agreement shall terminate in accordance withArticle 21.1.4.

 

6.5.4                        No Withdrawal During ConstructionPhase.

 

No Party shall cause aWithdrawal Event to occur during the Construction Phase, provided, however, aParty may transfer its Ownership Interest during the Construction Phase on thefollowing conditions:  If any Party (forpurposes of this Article 6.5.4, a “Withdrawing Party”) shall desire to withdrawfrom this Agreement after the Construction Closing but prior to the CommercialOperation Date:  (i) the WithdrawingParty shall use its Best Efforts to expeditiously transfer its OwnershipInterest to one or more third parties pursuant to the terms and conditions ofArticle 14.2; (ii) the Parties will continue the construction ofTrimble County Unit 2 in an expeditious manner, and will otherwise continue toperform their respective obligations under this Agreement; (iii) theWithdrawing Party shall remain responsible for its proportionate share of allConstruction Costs (and the supervisory fee thereon, as applicable) pursuant tothis Agreement until the transfer of its Ownership Interest has been completed;and (iv) any costs incurred by the Withdrawing Party in connection withthe transfer of its Ownership Interest shall be borne solely by the WithdrawingParty.

 

6.5.5                        Breach by IMPA or IMEA During theConstruction Phase.

 

The Parties agree that itwould be extremely difficult and impracticable under the presently known andanticipated facts and circumstances to ascertain and fix the actual damagesthat would be incurred if, during the Construction Phase, a Withdrawal Eventoccurs with respect to IMPA or IMEA. Upon receipt of written notice by the Companies, as the exclusive remedyof the Companies for breach of Article 6.5.4 by IMPA or IMEA, all rightsof the non-paying Party hereunder shall terminate and the non-paying Partyshall transfer all of its right, title and interest in and to the TrimbleCounty Unit 2 Project (free and clear of all liens, security interests,charges, claims and other encumbrances) to the remaining Parties in proportionto their respective Percentages.  TheParties agree to promptly undertake any and all reasonable actions, includingthe execution, delivery and filing of appropriate instruments, to effect thetransactions contemplated by this Article 6.5.5.

 

Upon the conclusion ofthe Construction Work, the Companies shall determine the actual per kilowattcost of the Trimble County Unit 2 Project. In consideration of the transfer of all of

 

27

----

 

its right, title andinterest in and to the Trimble County Unit 2 Project (free and clear of allliens, security interests, charges, claims and other encumbrances) to the otherParties in proportion to their respective Percentages and in full and completesettlement and release of all claims, causes of action, liabilities, damages orexpenses of the other Parties, direct or indirect, known or unknown, that suchother Parties have or may have in the future against the non-paying Partyarising out of such non-payment, the other Parties, as liquidated damages andnot as a penalty, will pay to the non-paying Party an amount determined by theformula set forth below.  The amount tobe paid by the paying Parties shall be in proportion to their respectivePercentages.

 

X ÷Y = Z

 

A ÷ Z = N

 

N x $1000/kilowatt = P

 

where:

 

X =  Aggregate Development Costs andConstruction Costs (plus the supervisory fees paid thereon) paid by all Partiesto complete the Trimble County Unit 2 Project

 

Y =  Actual Net Normal OperatingCapacity of Trimble County Unit 2, adjusted to 59°F on the Commercial Operation Date, measured in kilowatts

 

Z =  Actual per kilowatt DevelopmentCosts and Construction Costs (plus the supervisory fees thereon) of the TrimbleCounty Unit 2 Project

 

A =  Aggregate Development Costs andConstruction Costs (plus the supervisory fees paid thereon) actually paid bythe non-Paying Party

 

N =  The number of kilowatts actually paid for by the non-payingParty

 

P =   Payment to non-payingParty

 

6.5.6                        CCNs Not Filed.

 

Ifthe Companies (i) do not file petitions for the CCNs on or prior toDecember 31, 2004, or (ii) file petitions for the CCNs but exercise their rights to withdrawpursuant to Article 6.5.1 on or prior to the date that is one hundredeighty (180) days after the Filing Date, this Agreement shall terminate on thedate of such withdrawal or December 31, 2004, if the Filing Date has notoccurred, and no Party shall have any further liability, each to the other, onaccount of such termination, provided, however, the Companies shall refund toeach of IMPA and IMEA an amount equal to the sum of Development Costs, thesupervisory fee thereon and interest on the Deferred Development Costs paid bysuch Party to the Companies (the “Refund Amount”).  Upon such termination, the respective rightsof each of IMPA and IMEA pursuant to Article 15 of the Unit 1Participation Agreement to which it is a party shall be reinstated.

 

28

----

 

# **ARTICLE 7.**OPERATING ARRANGEMENTS

# ** **

7.1                                 Authority for Operation andManagement.

 

From and after theCommercial Operation Date and subject to the provisions of Article 17, theCompanies shall have the sole obligation and authority to manage, control,maintain (including adding Incremental Capital Assets in accordance withArticle 17.4.3) and operate the Trimble County Unit 2 Project, as agentfor the Parties, giving due consideration to each Party’s respective interestof which the Companies are aware, and the Companies shall take all steps thatthey deem necessary or appropriate for that purpose.  The Companies shall discharge such obligationand authority in accordance with the standard of conduct established inArticle 20.24 and the other provisions of this Agreement.  IMPA and IMEA do hereby appoint the Companiesto be their attorney-in-fact for such purposes, which appointment is coupledwith an interest, to act in their names, places and steads, and whichappointment shall not be revocable during the term of this Agreement.  The Companies may not assign their obligationor authority to manage, control, maintain and operate the Trimble County Unit 2Project without prior written consent of the Parties, which consent shall notbe unreasonably withheld.

 

7.2                                 Electric Capacity Entitlements.

 

EachParty’s Electric Capacity Entitlement at any one time shall be the Net ElectricGenerating Capacity at that time multiplied by that Party’s Percentage.  The Net Electric Generating Capacity shallnot exceed the applicable Net Normal Operating Capacity except under criteriaestablished by the Coordination Committee. The Companies shall declare the Net Seasonal Capacity of Trimble CountyUnit 2 twice annually.

 

TheParties shall each be entitled to take up to their respective Electric CapacityEntitlement through Scheduled or Dispatched transactions in accordance with thestandard of conduct established in Article 20.24.

 

ElectricCapacity Entitlements and Energy Allocations shall begin at the CommercialOperation Date and continue until Trimble County Unit 2 ceases to be usedfor the generation of electric energy and is permanently retired from service.

 

7.3                                 Scheduling and Dispatching of ElectricGeneration.

 

WhenTrimble County Unit 2 is Available, each Party shall have the right, inits sole discretion, to Schedule or Dispatch in accordance with provisionsof this Agreement all or any part of its Electric Capacity Entitlement,provided, however, throughout all periods when Trimble County Unit 2 isbeing operated, each Party shall Schedule or Dispatch no less than itsshare of Minimum Generation from time to time. Each Party’s share of Minimum Generation shall be that Party’sPercentage of Minimum Generation, provided, however, if one or more Partieshave Scheduled or Dispatched for any one time in excess of their share ofMinimum Generation, the other Parties share of Minimum Generation for that timewill be reduced by the amount of such excess allocated among them in proportionto their Percentages.  If any Party failsto take its entire share of Minimum Generation, that Party will be responsiblefor all attendant costs and losses and the Companies may take appropriatecorrective actions consistent

 

29

----

 

withthe standard of conduct established in Article 20.24.  If Trimble County Unit 2 is off line, butAvailable, the Companies shall cause Trimble County Unit 2 to start up andcommence operating at the Request of any Party at any time.

 

Theenergy Scheduled or Dispatched by a Party with respect to any hour representsthat Party’s requested energy delivery for that hour.  Except to the extent otherwise provided inthe following paragraph regarding ramping, each Party will be allocated (its “EnergyAllocation”) the actual Trimble County Unit 2 production (net of AuxiliaryPower) pro rated to each Party in proportion to the amount of energy they eachRequested for that hour.  The Requestedenergy delivery per hour and the current Energy Allocation per hour will beused every five (5) minutes to forecast each Party’s Energy Allocation for thehour.  Each Party will be provided thecurrent forecast of its hourly Energy Allocation approximately every five (5)minutes through electronic means at such Party’s request and cost.

 

NoParty may at any time submit a Ramping Request for a ramp rate greater thanthat Party’s Percentage of the then Expected Ramp Rate Capability.  If at any time for any reason Trimble CountyUnit 2 is unable to produce the aggregate ramp rate required to fulfill two ormore Parties’ overlapping Ramping Requests, the then actual ramping capabilityof Trimble County Unit 2 will be allocated among such Parties in proportion totheir respective Percentages, with no Party being thereby allocated a greaterramp rate than it Requested.  The rampingas provided by this paragraph will be reflected in the integrated EnergyAllocation to each Party during ramping.

 

7.3.1                        Submittal of Schedules.

 

Unlessand until it has elected to Dispatch pursuant to Article 7.3.4 by writtennotice to the Companies, each Party shall Schedule with the Companies’generation dispatch staff the amount of electric energy to be delivered foreach hour of each day.  TheSchedule for each day shall be submitted prior to 12:00 noon E.S.T. of theday prior to that day (or if the day prior is a Saturday, Sunday or holidayrecognized by the Companies, the last normal work day prior to the weekendand/or holiday) (or at such other time as is required or permitted by prevailingindustry practices applicable to the Companies at the time suchSchedule is made).  The SchedulingParty may change Schedules at any time after the deadline for submitting suchSchedule only with the mutual consent of the Companies, which consent shallnot be unreasonably withheld.

 

TheCompanies will endeavor to provide the Parties by telephonic, electronic orother means notice of any non-outage related occurrence expected to causeTrimble County Unit 2 to over or under produce more than ten (10) MWhintegrated over any one (1) hour as soon as reasonably practicable after theybecome aware of such expected change.   IMEA and IMPA may contact the Companies’ designated contact person atany time for an update on unit conditions and expected changes in unitconditions.

 

7.3.2                        SchedulingProcedures.  Each Partyshall be entitled to Schedule, in accordance with Article 7.3.1, up to theNet Normal Operating Capacity multiplied by its Percentage (with the result ofthat product rounded to the nearest whole applicable increment) in any hour,provided that, except as mutually agreed by the Parties, the change in anyParty’s Schedule from hour to hour shall not exceed such Party’sPercentage of the Expected Ramp Rate Capability over the applicable rampingperiod.  Each Scheduling Party will beliable pursuant to Article

 

30

----

 

7.3.3for any energy imbalance services required as a result of (i) the portion ofthe actual ramp rate of Trimble County Unit 2 allocated to the Scheduling Partybeing different than the ramp rate Requested by the Scheduling Party and (ii)the Energy Allocation for that Scheduling Party being different from the energyScheduled by that Scheduling Party.  AScheduling Party may Schedule a ramp greater than its Percentage of theExpected Ramp Rate Capability if it has reached an agreement with the Companiesto provide any necessary greater ramp rate and energy from the Companies’system.  The availability and price ofsystem ramping and energy will be determined at the sole discretion of theCompanies and established by agreement between the Companies and the applicableParty prior to the Schedule change.

 

AllSchedules shall be in increments of whole megawatts unless applicable industryrules permit smaller increments and may in no event exceed a Party’s ElectricCapacity Entitlement.  Schedules shallshow the requested output for each hour of the Schedule period, thebeginning and end times of any required ramping and the requested ramp rate.

 

7.3.3                        Utilization of Electric CapacityEntitlement and Companies’ System Power.

 

NoParty will deliberately (i) utilize more than its Electric Capacity Entitlementor any portion of another Party’s Energy Allocation or (ii) fail to take all ofits Energy Allocation.  Parties will berequired to change Schedules on an hourly basis after reserve-sharing energy isutilized within industry scheduling standards, or to change Dispatch signals inreal-time to comply with this requirement. Notwithstanding the preceding sentence, the Parties recognize thatvariations in the real time operations of Trimble County Unit 2 may result inunplanned variances between a Party’s Energy Allocation and the amount ofenergy Requested by that Party.  Suchvariances and the resulting inadvertent utilization by a Party of more or lesselectric energy on an integrated hourly basis than its Energy Allocation (theParty’s “energy imbalance”) will be rounded to the nearest whole megawatt hour(or such smaller increment that becomes customary in the industry ) and thenwill be treated as follows:

 

(x)                                   For that portion of a Party’s energyimbalance that is within a deviation band of +/- 1.5% (or +/-2MW, if greater)of the Party’s Requested energy that hour (the “deviation band”), the amountswill be recorded and aggregated over each calendar month.  At the end of the month, the Companies andthe Party will negotiate in good faith to eliminate any net balance for thatmonth by in kind transfers of energy during the following thirty (30) days.  For any net balance not so eliminated byin-kind transfers within thirty (30) days, the Party will purchase or sell suchenergy from or to the Companies.  Theprice for such energy sold to the Companies will be ninety percent (90%) of theCompanies’ average system lambda (based on fuel cost only) for the hours in theapplicable month during which the Party inadvertently utilized less than itsEnergy Allocation.  The price for suchenergy purchased from the Companies will be the greater of (a) $100.00 permegawatt-hour, or (b) the Companies’ average actual incremental cost to supplythat amount of energy for the hours in the applicable month during which theParty inadvertently utilized more than its Energy Allocation.

 

(y)                                 For thatportion of a Party’s energy imbalance that is outside the deviation band forthat hour, that Party will purchase or sell such energy from or to theCompanies.  The price for such energysold to the Companies will be ninety percent (90%) of the Companies’ systemlambda (based on fuel cost only) for that hour. The price for such energy purchased from the

 

31

----

 

Companieswill be the greater of (a) $100.00 per megawatt-hour, or (b) the Companiesactual incremental cost to supply such energy that hour.

 

(z)                                   Each Party willremain responsible for all costs associated with the production of its EnergyAllocation.

 

7.3.4                        Dispatching Procedures.

 

AnyParty that elects to Dispatch its Electric Capacity Entitlement shall installand maintain (orotherwise obtain the necessary access and use of) the necessary generationcontrol hardware and software that interfaces with the Companies’ generationcontrol system at its own expense to implement such Dispatch.  At the request of IMEA or IMPA, the Companieswill provide IMEA or IMPA with a not-to-exceed price from a vendor that is notan Affiliate of the Companies to accommodate IMEA’s or IMPA’s interfaces withthe Companies’ generation control system. At the completion of the installation, IMEA or IMPA, as applicable, willreimburse the Companies for the actual charges imposed by the vendor.  The Parties will agree in advance to the costallocation of any future costs required to modify, upgrade or maintain thedispatch capability of Trimble County Unit 2 associated with the Companies’generation control system.

 

ADispatching Party shall be entitled to Dispatch up to its Electric CapacityEntitlement.  Each Party that isDispatching its Electric Capacity Entitlement will have the right to change itsdesired output of its portion of Trimble County Unit 2 at any time, subject tothe allocation of the unit’s ramping capability as provided inArticle 7.3.  Real-time Dispatchshall be executed within the accuracy of the Companies’ generation controlsystem. The real-time Dispatch signal from a Party will be integrated over eachhour to determine the Requested energy delivery for that hour.  In the event of a failure of any Party’sgeneration control system to control the output of Trimble County Unit 2, Dispatchingfor the affected Party or Parties will be accomplished manually by the Partiescoordinating the desired energy to be Dispatched through a contact persondesignated by the Companies for such purpose.

 

7.3.5                        Ancillary Services.

 

For Dispatching purposes, the Parties shall share in theAttributes of Trimble County Unit 2 in proportion to their respectivePercentages as follows:

 

(i)                                     Regulation.  Any Party that is Dispatching its ElectricCapacity Entitlement may use such Dispatching provisions to provide, throughTrimble County Unit 2, a reasonable degree of regulation services for itssystem through appropriate use of automatic real-time generation controlequipment normally expected of control areas (including generation only controlareas) or load balancing authorities as defined by the North American ElectricReliability Council (“NERC”) or other industry standard setting bodies.  If the Dispatching activities of any of theParties is found to have an adverse impact on the performance of Trimble CountyUnit 2 by causing extreme ramping up or down of the output of the generator,the Coordination Committee will address the issue at the request of any Partyand establish guidelines for appropriate load following behavior by allParties.

 

32

----

 

(ii)                                  OperatingReserves.  WhenTrimble County Unit 2 is on line, any Party that is Dispatching may designatethe difference between its Electric Capacity Entitlement and the amount of suchElectric Capacity Entitlement that it is currently Dispatching as operatingreserves to any industry entity that is obligated or permitted to monitor orrequire such reserves.

 

(iii)                               Var Output.  Each Party shall be entitled to itsPercentage of the var capability of Trimble County Unit 2 and may utilize suchvars itself or sell them to other entities, including the other Parties.  The Coordination Committee will establish theprocedures for requesting vars and having such requests fulfilled, whichprocedures shall be comparable to those set forth in this Agreement forElectric Capacity Entitlement.  No Partywill be obligated to buy vars from another Party.  No Party will utilize another Party’s varcapability without the other Parties’ permission.  If industry practices permit, each Party maysell varhours to other entities.  If theCompanies are compensated for providing var support with respect to IMPA’s andIMEA’s use of Trimble County Unit 2, the vars used to provide such support willbe deemed to be IMEA’s and IMPA’s and the Companies will pass through suchcompensation to IMEA and IMPA as applicable.

 

(iv)                              Other AncillaryServices.  If, through changes in industry practices orotherwise, additional services can be derived or are required from TrimbleCounty Unit 2, such services will be shared among the Parties in proportion totheir respective Percentages.

 

7.3.6                        Holidays.

 

Priorto each calendar year, the Companies shall notify the Parties of the holidaysto be recognized by the Companies for that year.  In the event the Companies fail to providesuch notice, the holidays shall be the same as for the prior year.

 

7.3.7                        Records.

 

The Companies shallmaintain records adequate to determine each Party’s energy utilization perhour.

 

7.3.8                        Outage Schedules.

 

TheCompanies shall submit to the Parties, as far in advance as practicable,schedules showing the expected start date and time (“Start”) and duration forplanned outages of Trimble County Unit 2. The Companies will adjust such plans to accommodate any Party’s request,where such adjustment would not harm any other Party and where, in theCompanies’ sole judgment, it is practicable to do so in accordance with thestandard of conduct established in Article 20.24.  The Companies shall seek the unanimousapproval of the other Parties to change the Start of planned outages once theoutage plan has been submitted by the Companies and accepted by the otherParties, provided, however, if such approval is not granted, the Companiesshall have the right to change the Start of planned outages up to (andincluding) forty-five (45) days before then planned Start.  The Companies may change the Start of plannedoutages less than forty-five (45) days before the then scheduled Start only ifthey receive the unanimous consent of the other Parties (which consent shallnot be unreasonably withheld) or if such change is required for protection ofthe Trimble County Unit 2 Project or the electric system for reasons consistentwith the standard of conduct established in Article 20.24.

 

33

----

 

Formaintenance outages (and unplanned postponed outages, if possible), theCompanies shall not change the Start within 48 hours prior to the then plannedStart without the unanimous consent of the other Parties (which consent shallnot be unreasonably withheld) unless such change is required for protection ofthe Trimble County Unit 2 Project or the electric system for reasons consistentwith the standard of conduct established in Article 20.24.  Should any of the Parties desire aschedule for maintenance outages (or unplanned postponed outages, ifpossible) that the Companies believe is impracticable or which another Partybelieves is injurious to it, any Party shall be entitled to submit thescheduling issue to the Coordination Committee for resolution provided thatadequate time (at least 48 hours) is available to convene the CoordinationCommittee and resolve the conflict.  Theterms, “planned,” “maintenance” and “unplanned postponed,” when used todescribe outages, are intended to have the meanings ascribed to them by theNERC Generation Availability Data System.

 

7.4                                 Pre-Commercial Energy.

 

Anynet electric energy output from Trimble County Unit 2 prior to theCommercial Operation Date shall be classified as pre-commercial energy.  Each Party shall be liable for and pay itsPercentage of all costs associated with such energy production including fueland reactant costs and any automatic reserve sharing or other similar chargesimposed on the Companies as a result of fluctuations in the energy produced byTrimble County Unit 2.  Each Party shallalso take and dispose of its Percentage of all pre-commercial energy and willbe liable for applicable energy imbalance charges should it fail to do so;provided, IMEA and IMPA shall each have the option (which option may only beexercised by giving the Companies notice at least ninety (90) days prior to thefirst scheduled production of pre-commercial energy by Trimble County Unit 2)to sell all of its Percentage of such energy to the Companies at a price eachmonth per megawatt hour equal to the average cost that month of fuel andreactant used to produce a megawatt hour of electric energy at Trimble CountyUnit 1.

 

7.5                                 Operations Management.

 

7.5.1                        Administration of Operating Work andIncremental Capital Assets.

 

TheCompanies shall perform all work, or execute and enforce (including anyrenegotiation and settlement of) all contracts, contractual obligations andarrangements for Operating Work and Incremental Capital Assets, including anyand all warranties on equipment, facilities, materials, and services furnishedpursuant to any such contracts. Warranties claims and other claims arising under this Article shallbe administered in accordance with the provisions of Articles 7.5.6 and 7.5.7.

 

7.5.2                        Purchasing Necessary Goods andServices.

 

TheCompanies shall purchase and procure, through and from any source they mayselect, the equipment, apparatus, machinery, tools, services, materials andsupplies, and spare parts necessary for the performance of Operating Work or asIncremental Capital Assets.

 

7.5.3                        Procurement of Fuel.

 

Atall times, the Companies shall maintain an adequate supply of fuel inaccordance with the standard of conduct established in Article 20.24.  At any time when the Companies determine

 

34

----

 

toenter into fuel procurement negotiations for all or any part of the fuelrequirements of Trimble County Unit 2, the Companies shall notify the otherParties in a reasonable and timely manner specifying the characteristics of thefuel being sought and the schedule for procurement.  During the Companies’ Trimble CountyUnit 2 fuel procurement negotiations, if IMPA or IMEA notify the Companiesin a reasonable and timely manner and in accordance with the proposedprocurement schedule, of alternative fuel supplies with equivalent or betterquantities, quality, delivered cost, and/or other factors that affect TrimbleCounty Unit 2 operation such that overall costs and reliability of TrimbleCounty Unit 2 are improved, then such alternate supplies shall be considered bythe Companies, in good faith, for Trimble County Unit 2 fuel procurement.  No such alternative fuel supplies shall beselected unless the alternative fuel supplies meet or exceed the fuelspecifications for Trimble County Unit 2 as defined by the Companies andthe delivered cost of the alternative fuels results in a decrease in total fuelcost for Trimble County Unit 2.

 

7.5.4                        Expenditure of Funds.

 

TheCompanies shall expend funds in accordance with the terms and conditions ofthis Agreement.

 

7.5.5                        Insurance.

 

TheCompanies shall arrange for the placement and maintenance of insurance, asprovided in Article 13.

 

7.5.6                        Enforcement of Claims.

 

Duringthe term of this Agreement, the Companies shall have the obligation toinvestigate, present and prosecute known claims with respect to the TrimbleCounty Unit 2 Project, including claims against insurers and indemnitorsproviding insurance or indemnities with respect to any loss of or damage to anyproperty of the Trimble County Unit 2 Project, or any interest of the Partiespertaining thereto, and with respect to any liability of the Parties covered byinsurance or an indemnity agreement.  Tothe extent that such loss, damage, or liability is not covered by insurance orby an indemnity agreement, the Companies shall present and prosecute claimstherefor against any Persons who may be liable therefor, provided, however, theCompanies are not required to resort to litigation or an alternative resolutionprocedure against an Affiliate of the Companies or to initiate, present, orprosecute any claim which, in their sole judgment exercised in good faith, iswithout sufficient merit to warrant such enforcement, or otherwise is inconsistentwith the Parties’ general business interests related to the Trimble County Unit2 Project.  Nothing herein shall requirethe Companies to invoke any certain type of enforcement procedure, or to seek,or to continue to seek, enforcement of any claim, when in the Companies’ solejudgment, the Parties’ general business interests related to the Trimble CountyUnit 2 Project are better served by settling or withdrawing such claim.   If the amount of any such claim by theParties against non-Affiliates of the Companies arising out of the (i)Development Phase or the Construction Phase exceeds five hundred thousanddollars ($500,000) or (ii) Operating Phase exceeds two hundred fifty thousanddollars ($250,000), the Companies shall notify the Parties of the existence andnature of such claim and shall also notify the Parties if and when anysettlement of any such claim is accomplished by the Companies.

 

Inthe event that the Companies do not diligently attempt to settle or, failingsettlement, prosecute a claim nothing herein shall prevent IMEA or IMPA fromprosecuting such claim or 

 

35

----

 

demandin its own name, to the extent of, and as such claim or demand affects itsinterest, provided, however, with respect to material claims against Affiliatesof the Companies, IMEA and IMPA shall refrain from prosecution or demands untilthe Companies have had a reasonable period to settle or resolve such claim asprovided below.  Costs and expenses IMPAor IMEA incurs in prosecuting such claim shall be borne by IMPA or IMEA, as thecase may be and the proceeds recovered are to be shared by the Partiesprosecuting such claim in proportion to their respective Percentages.

 

TheCompanies shall provide prompt written notice to IMPA and IMEA of any materialclaim against any Affiliate of the Companies of which they have knowledge.  Invoices disputes or other claims involvingamounts less than two hundred fifty thousand dollars ($250,000) shall notconstitute “material claims” for purposes of this Article 7.5.6.  The Companies, on behalf of the Parties,shall be entitled to settle or resolve claims against their Affiliates,provided, however, the Companies shall not be entitled to settle or resolve amaterial claim without the prior consent of the Parties, which consent shallnot be unreasonably withheld.  Other thansettling or resolving claims against Affiliates in good faith and in accordancewith this Article 7.5.6, the Companies shall neither take any action norrefrain from taking any action that might impair the ability of IMEA or IMPA toprosecute such claims as provided herein.

 

AnyParty, at its own expense, may intervene in any proceeding on a claim pursuantto this Article as an additional party to assert or defend its respectiveOwnership Interest and rights.

 

7.5.7                        Processing Claims.

 

Duringthe term of this Agreement, the Companies shall have the obligation, asappropriate, to investigate, adjust, defend and settle claims against theParties, or any of them, arising out of or attributable to the Work,Incremental Capital Assets, or the past or future performance or nonperformanceof the obligations and duties of the Parties under or pursuant to thisAgreement, including any claim resulting from death or injury to persons or damageto property, when such claims are not covered by valid and collectibleinsurance carried by the Parties; and, whenever and to the extent reasonable,present and prosecute claims against any third party, including insurers, forany costs, losses, and damages incurred in connection with such claims.  If the amount of any such claim against theParties by a non-Affiliate of the Companies exceeds one hundred thousanddollars ($100,000) and is not covered by valid and collectible insurancecarried by the Parties, the Companies shall notify the Parties of the existenceand nature of such claim and shall also notify the Parties if and when anysettlement of any such claim is accomplished by the Companies.  Settlement of such claims in excess of twomillion dollars ($2,000,000) shall be reported to and approved in advance bythe Coordination Committee.

 

Inthe event of (i) a claim by an Affiliate of the Companies or (ii) anyother claim that the Companies have not diligently attempted to settle ordefend, nothing herein contained shall prohibit IMEA or IMPA from defendingsuch claim to the extent of and as such claim affects its interest.  Costs and expenses incurred in connectionwith any such defense or demand shall be borne by the defending Party orParties, provided, however, if the resolution of such claim accrues to thebenefit of non-defending Parties, such non-defending Parties shall share thedefense costs and expenses incurred in accordance with their respectivePercentages, but only to the extent of the fair value of the benefits receivedfrom such resolution.

 

36

----

 

TheCompanies shall provide prompt written notice to IMPA and IMEA of all pendingmaterial claims by any Affiliate of the Companies.  Invoice disputes or other claims involvingamounts less than two hundred fifty thousand dollars ($250,000) shall notconstitute “material claims” within the meaning of this Article 7.5.7(unless and until such claim is the subject of arbitration or litigation), andmay be settled by the Companies. Material claims by Affiliates of the Companies may also be settled bythe Companies, subject to the consent of IMPA and IMEA, which consent shall notbe unreasonably withheld.  Other thansettling or resolving claims by their Affiliates in good faith and inaccordance with this Article 7.5.7, the Companies shall neither take anyaction nor refrain from taking any action that might impair the ability of IMEAor IMPA to defend such claim.

 

AnyParty, at its own expense, may intervene in any proceeding on a claim pursuantto this Article as an additional party to assert or defend as to itsrespective Ownership Interest and rights.

 

7.5.8                        Delivery of Operating Data.

 

Aspromptly as practicable after the end of each month, the Companies shall renderto the Parties a statement setting forth mutually agreed upon operating data asmay be needed for reports and records.

 

7.6                                 Environmental Laws and Regulations.

 

EachParty shall be responsible for its share, in proportion to its Percentage, ofany obligations, costs, or burdens of any kind, resulting from any federal,state, or local environmental law, regulation, or requirement, as amended fromtime to time.  Similarly, each Partyshall be entitled to its share, in proportion to its Percentage, of any rights,credits, entitlements, or allowances associated with such law, regulation, orrequirement, as amended from time to time.

 

EachParty’s rights to generation from Trimble County Unit 2 shall beconditioned upon such Party’s compliance with such environmental laws,regulations, or requirements and such Party’s possession of requiredenvironmental rights, credits, entitlements, or allowances needed for suchgeneration.

 

AnyParty, to the extent its rights, credits, entitlements or allowances areinsufficient to allow the desired level of generation from that Party’s shareof Trimble County Unit 2 may acquire such rights, credits, entitlements orallowances from another Party, if available, under terms and at pricesagreeable to such Parties.

 

TheCompanies shall provide information to the other Parties regarding rights,credits, entitlements or allowances that have been used or consumed by thoseParties.  Each Party shall keep theCompanies informed as to that Party’s available rights, credits, entitlements,or allowances for use at the Trimble County Unit 2 Project and shall forecastthat Party’s need for additions thereto. On not less than ten (10) calendar days’ prior written notice to IMPA orIMEA, as appropriate, and provided that IMPA or IMEA, as appropriate, has notobtained such rights, credits, entitlements or allowances and provided writtenevidence thereof to the Companies within such ten (10) calendar day period, theCompanies shall have the right to

 

37

----

 

obtainsuch rights, credits, entitlements or allowances for IMPA or IMEA, at IMPA’s orIMEA’s respective cost, (including reasonable documented transaction costs), ifnecessary to ensure continued operation of Trimble County Unit 2.

 

7.7                                 Environmental Fines and Penalties.

 

TheCompanies shall indemnify IMPA and IMEA against administrative fines and civilpenalties arising out of the operation of the Trimble County Unit 2 Projectimposed for violations of applicable environmental laws and regulations,resulting from acts or omissions inconsistent with the standard of conductestablished in Article 20.24 of either of the Companies or any Affiliateof Louisville or Kentucky Utilities when acting in the capacity of plant operators.  Exclusions from this special indemnificationshall include operation and maintenance costs incurred as a result ofenvironmental Applicable Law, Incremental Capital Assets incurred inenvironmental compliance, occurrences from acts of IMPA, IMEA or third partiesor from equipment failure or malfunction, remedial measures imposed byadministrative agencies for environmental purposes, reimbursement of responsecosts under Comprehensive Environmental Response Compensation and Liability Act(“CERCLA”) and K.R.S. Chapter 224 and amendments thereto, or any similar orsubsequently enacted legislation covering the same subject matter as CERCLA andK.R.S. Chapter 224, and any claims of personal injury or property damage.

 

7.8                                 General Facilities and Constraints.

 

Subjectto Articles 2.2 and 2.3, should a condition or circumstance exist thatwould constrain the full and simultaneous utilization of Trimble CountyUnit 2 and other then existing generating units at the Trimble CountySite, the Companies shall allocate the available resources between or amongsuch units (including Trimble County Unit 2).  If the Parties’ interests in the affectedunits are not uniform (i.e., one or more Parties have substantially differentinterests in one or more of the affected units than in others) and theallocation of resources made by the Companies does not result in generationfrom the affected units proportionate to their respective capacities, theParties, to the extent possible, agree to make such economic adjustments amongthemselves, together with the owners of such other units, as to accomplish afair economic result.  For the purposesof this Article 7.8, subject to Article 14 and Article 15, andso long as they are Affiliates of each other, the interest of KentuckyUtilities in Trimble County Unit 2 and any affected units shall be deemedto be an interest of Louisville when assessing whether the Parties’ interestsin the affected units are uniform.

 

7.9                                 Rules and Regulations in IndustryPractices.

 

TheCoordination Committee may, by unanimous agreement, adopt and amend rules fromtime to time to amend the operating arrangements set forth in thisArticle 7.  When unanimously adoptedor amended, such rules shall supersede the applicable provisions of thisArticle 7. The Parties agree that they will cause the CoordinationCommittee to unanimously adopt and amend rules from time to time as necessaryto reflect changes in industry standards, Applicable Law, and the rules andregulations of transmission organizations that apply to the Parties so that thefollowing principles are maintained in a manner similar to the way this Article

 

38

----

 

7reflects these principles relative to the state of the industry, ApplicableLaw, and such rules and regulations as of the date of this Agreement:

 

(i)                                     The Partiesrecognize that Trimble County Unit 2 is physically located in the control areaoperated by the Companies.  As such, IMPAand IMEA need the Companies’ cooperation to Schedule or Dispatch their respectiveOwnership Interests in Trimble County Unit 2.  So long as this remains the case, the rulesshall provide for such cooperation.

 

(ii)                                  The rules willbe consistent with the standard of conduct established in Article 20.24.

 

(iii)                               At any onemoment in time, each Party shall be entitled to the benefit of its Percentageshare but not more than its Percentage share of any of the Attributes.

 

(iv)                              No Party willdeliberately take any action that might result in its taking at any one momenta greater share of the Attributes than that to which it is entitled.

 

(v)                                 Each Party isresponsible for transmission and transmission costs for its Allocated Energy.

 

(vi)                              No Party willbe entitled to be better situated than it would have been had it operated itsown generating unit of a capacity equal to its Electric CapacityEntitlement.  Similarly, no Party shallbe less favorably situated than it would have been had it operated its owngenerating unit of a capacity equal to its Electric Capacity Entitlement.

 

(vii)                           No Party shallhave rights to services or attributes associated with another Party’s system ofgeneration and transmission without paying fair compensation for such servicesor attributes in accordance with then current industry standards.

 

(viii)                        None of the Parties will vote against anyproposed rule to amend the operating provisions set forth in Article 7 tothe extent such rule is proposed by another Party to enable it to form ageneration only control area containing that other Party’s Electric Capacity Entitlementor to use dynamic scheduling, so long as such rule does not involve (a)providing any Party more than its Percentage share of any of the Attributes atany time, or (b) allocating the costs and burdens of such rule to Parties thatdo not benefit from it.

 

# **ARTICLE 8.**INCREMENTAL CAPITAL ASSETS

# ** **

8.1                                 Estimate of Costs.

 

Prior to beginning workon any Incremental Capital Asset which the Companies expect to cost more than$2,000,000, an estimate of such work shall be furnished by the Companies inreasonable detail to the Coordination Committee for use by it in anticipatingits financial requirements.  Suchestimate shall be subject to revision periodically to reflect more currentinformation on such Incremental Capital Asset.

 

39

----

 

8.2                                 Responsibility for Costs.

 

Subsequent to theCommercial Operation Date, the costs of each Incremental Capital Asset shall beborne by the Parties in proportion to their respective Percentages.  The amount incurred for Incremental CapitalAssets during each month shall be included in the monthly billings provided forin Article 10.

 

# **ARTICLE 9.**EXPENSES

# ** **

9.1                                 Payment of Expenses and ChargesPrior to the Commercial Operation Date.

 

The Parties will shareall Development Costs and Construction Costs in proportion to their respectivePercentages.  During the DevelopmentPhase (following the Development Closing) and the Construction Phase (or untilsuch later date as payments remain due in respect of such phases), no laterthan the fifteenth (15th) calendar day of each calendar month, theCompanies shall provide to each Party an invoice of Development Costs(including Deferred Development Costs) or Construction Costs (and, in eachcase, the supervisory fees thereon) that have been incurred and, withoutduplication, that will be incurred and become payable by the Companies on orprior to the last calendar day of the next succeeding calendar month (“FutureAmounts”).  In consideration for theundertaking of the Companies to supervise the Development Work and theConstruction Work, the Companies shall be entitled to a supervisory fee equalto two percent (2%) of the aggregate amount of Development Costs andConstruction Costs to be paid by each of IMPA and IMEA.  Each invoice prepared by the Companies forIMPA and IMEA under this Article 9.1 shall include such fee.  Payments of invoiced amounts are due on orbefore the fifteenth (15th) calendar day of the month subsequent tothe month in which the invoice is received provided, however, IMPA’s and IMEA’srespective share of Deferred Development Costs, shall be due and payable to theCompanies on April 1, 2004.  It isthe intent of the Parties that the issuance of invoices for payment by theCompanies, and the subsequent payments to the Companies shall be made at suchtimes as may be necessary to allow timely payment to the contractors by theCompanies in accordance with the terms of payment of applicable contracts,including the Construction Contracts.  Inthe event the aforementioned payment procedures do not allow for receipt ofpayment from the Parties or timely payments by the Companies to contractors,including Construction Contractors, for amounts greater than $1,000,000 fromtime to time, the Companies may issue an additional invoice each month, inaccordance with the foregoing terms of this paragraph, with payment due nosooner than fourteen (14) calendar days after receipt of such invoice.  To the extent amounts due in respect of aninvoice include amounts to be paid under the Construction Contracts, each Partyshall be provided with copies of the invoices under such contracts.  The Companies shall have the sole authorityand obligation to determine the validity of such invoices.  Invoices shall be accompanied by reasonabledocumentation of all other amounts specified therein.  In the event that IMPA or IMEA incursDevelopment Costs or Construction Costs at the request of the Companies duringthe period subsequent to Development Closing and during the Development Phaseor the Construction Phase, the Parties will aggregate such expenses and, atleast once per quarter but not more often than monthly, make such inter-Partypayments so that each Party pays its proportionate share of such costs.

 

40

----

 

9.2                                 Monthly Expenses and Charges Afterthe Commercial Operation Date.

 

In addition toDevelopment Costs and Construction Costs (and, in each case, the supervisoryfee thereon) that are incurred and are invoiced pursuant to Article 9.1,following the Commercial Operation Date, the Parties will share all costsassociated with the Trimble County Unit 2 Project in proportion to theirrespective Percentages.  These costs areset forth below in four (4) components for billing and accountingpurposes.  The Parties intend that thesecomponents incorporate all costs that are or could be associated with theTrimble County Unit 2 Project.  Shouldany item or category of cost not fall within the technical definitions of anyof the four components, the Parties agree to adjust the billing components soas to include such item or category.

 

Starting on theCommercial Operation Date, the Parties shall pay, in accordance withArticle 10, a monthly amount equal to the sum of the four componentsdelineated in Articles 9.2.1, 9.2.2, 9.2.3, and 9.2.4.

 

9.2.1                        Fuel/Reactant Operation Expenses.

 

All Fuel/ReactantOperation Expenses of Trimble County Unit 2 will be prorated to the Parties,according to the net electric energy delivered to the Delivery Point for eachParty as compared to the total net energy delivered to the Delivery Point byTrimble County Unit 2.

 

9.2.2                        Fixed Operation and Maintenance Expenses.

 

A Fixed Operation andMaintenance Expenses component shall be shared by the Parties in proportion totheir respective Percentages.  TheCompanies shall allocate a reasonable portion of all Fixed Operation andMaintenance Expenses shared among all generating and other assets orenterprises located on the Trimble County Site to Trimble County Unit 2 in itsannual Operation and Maintenance Budget, pursuant to Article 17.4.4, andin accordance with procedures established by the Coordination Committee.

 

9.2.3                        Non-Fuel Operating Component.

 

A non-fuel operatingcomponent shall be shared by the Parties in proportion to their respectivePercentages, calculated monthly as the sum of the following four (4) items asthey relate to the operation and maintenance of Trimble County Unit 2:

 

(i)                                     Taxes other than federal and state incometaxes (Account 408.1), except that those categories of taxes, or payments inlieu thereof, that are directly billed to the Parties by the taxing authorityand paid by the Parties, shall not be contained in this item.

 

(ii)                                  Administrative and general expenses asrecorded in Accounts 920 – 930 as recorded under the Uniform System ofAccounts.

 

(iii)                               Lease payments, which result from athird-party-financed Incremental Capital Asset or lease payments for otheritems of property pursuant to Article 2.1.

 

(iv)                              Penalties (Account 426.3), except forthose environmental penalties against which the Companies have agreed toindemnify IMPA and IMEA under Article 7.7.

 

41

----

 

The Companies shallallocate a reasonable portion of all non-fuel operating costs shared among allgenerating and other assets or enterprises located on the Trimble County Siteto Trimble County Unit 2 in its Annual O&M Budget, pursuant toArticle 17.4.4, and in accordance with procedures established by theCoordination Committee.

 

9.2.4                        Working Capital Component.

 

A working capitalcomponent shall be shared by the Parties in proportion to their respectivePercentages.  Prior to the CommercialOperation Date, at a date determined by the Coordination Committee, theCompanies shall calculate the estimated amount of working capital necessary forthe operations of the Trimble County Unit 2 Project.  IMPA and IMEA shall fund their respectiveshare of working capital to the Companies prior to the Commercial OperationDate.  This component is composed of theitems listed below, to the extent that each of these items relates to theTrimble County Unit 2 Project:

 

(i)                                     Fuel stocks (Account 151)

 

(ii)                                  Fuel stock expenses undistributed(Account 152)

 

(iii)                               Plant materials and operating supplies(Account 154)

 

(iv)                              Stores expense undistributed (Account163)

 

(v)                                 Prepayments (Account 165)

 

(iv)                              Miscellaneous deferred debits (Account186)

 

After the CommercialOperation Date, the Companies, on a monthly basis, shall compute the additionsor reductions in working capital by multiplying the beginning monthly balancesof the above items by the respective Percentage of IMPA and IMEA.  Resulting changes in working capital shall bepaid or credited monthly in accordance with the billing procedures set forth inArticle 10.2.

 

The Companies shallallocate a reasonable portion of all working capital costs shared among allgenerating and other assets or enterprises located on the Trimble County Siteto Trimble County Unit 2 in its Annual O&M Budget, pursuant toArticle 17.4.4, and in accordance with procedures established by theCoordination Committee.

 

# **ARTICLE 10.**BILLING, PAYMENTS, AND RECORDS

# ** **

10.1                           Payments before CommercialOperation Date.

 

During the DevelopmentPhase and the Construction Phase of the Trimble County Unit 2 Project, allpayments will be made by the Parties pursuant to Article 3,Article 6, and Article 9, as each Article applies.

 

42

----

 

10.2                           Billings by the Companies after theCommercial Operation Date.

 

As promptly as practicable,but in any event not more than twelve (12) working days after the end of eachcalendar month during the term of this Agreement following the CommercialOperation Date, the Companies shall prepare and send to each Party an invoice,in such detail and with such segregations as may be needed for operating andaccounting records, to indicate monthly amounts due under this Agreement.

 

10.3                           Payments after the CommercialOperation Date.

 

After the CommercialOperation Date, amounts due by a Party as specified in invoices issued by theCompanies pursuant to Article 10 shall be due and payable in immediatelyavailable funds on the thirtieth (30th) calendar day following the invoicedate.  Amounts owed by any Party toanother Party under this Agreement, other than under Articles 10.1 and 10.2,shall be settled in accordance with the procedures set forth in such provisionsas give rise to the obligations.  In theabsence of specific procedures, amounts shall be due by the thirtieth (30th)calendar day following receipt of a written demand or invoice therefor.  Interest on unpaid amounts shall accrue atthe Agreed Rate from the date due until the date upon which payment ismade.  Payments by any Party to anotherParty based on over-billing shall bear interest at the Agreed Rate beginning onthe thirty-first (31st) calendar day after the invoice (or demand)date and running until such amount is repaid or credited.  Unless otherwise agreed upon, a calendarmonth shall be the standard monthly period for the purpose of settlements underthis Agreement.

 

10.4                           Records.

 

The Companies will recordtheir accounting information in accordance with generally accepted accountingprinciples, as modified by the requirements or permitted practices ofapplicable regulatory authorities.  Forthe purpose of this Agreement, all account references are to the Uniform Systemof Accounts.  In the event of any changesin FERC’s accounting procedures that might result in charges different fromthose contemplated by the Agreement, the Parties will agree upon theappropriate changes to the Agreement to achieve the original intent of theParties, unless otherwise mutually agreed by the Parties.

 

The Parties shall keepand maintain such records as may be necessary or useful in carrying out thisAgreement.  Each Party shall keep suchrecords as may be needed to afford a clear history of all transactions underthis Agreement and make copies of such records available to the other Partiesupon request.  Each Party shall have theright during normal business hours, but no more than once each calendar year,at its own expense, to audit, or cause independent certified public accountantsof its choice to audit, the accounting and other records relating totransactions under this Agreement and shall have the right to make copies ofrecords as necessary, provided that neither IMPA nor IMEA shall be permitted toretain documents (whether hard copy or electronically) that one or both of theCompanies has designated as confidential or proprietary where to do so wouldmake such records open records under any “open records” or “public records”Applicable Law.  No Party shall make useof records of another Party without the express written consent of such Party,except for disclosure or use that is permitted by this Agreement or whererequired by Applicable Law, or for purposes of litigation or alternativedispute resolution procedures.  All suchrecords shall be considered the

 

43

----

 

confidential andproprietary business records of the Party that generated the particular recordin question.  Any such consent shall notbe withheld unreasonably.

 

10.5                           Timing of Certain Payments.

 

If the due date for anypayment to be made to any Party pursuant to this Agreement falls on a Saturday,Sunday or other calendar day on which the Federal Reserve wire transfer systemis not available, then such due date shall be deemed to be the next calendarday on which such wire transfer system is available.

 

10.6                           Payment to Specified Account.

 

All payments under thisAgreement to a Party or Parties shall be made in immediately available funds toan account or accounts specified by such Party or Parties.  Such Party or Parties may change the accountor accounts on no less than five (5) calendar days written notice to the otherParties.

 

# **ARTICLE 11.**INTERCONNECTION AND TRANSMISSION SERVICES

# ** **

The Parties shall shareproportionately the actual costs of interconnection of Trimble County Unit 2 inaccordance with the Interconnection and Operating Agreement.  Such costs are estimated, as of the datehereof, in Appendix G.  Actual costs ofinterconnection include necessary transmission upgrades and additions requiredto reliably and safely connect Trimble County Unit 2 to the regionaltransmission grid, without facility upgrades or additions related totransmission delivery to particular points of delivery.  Ongoing costs of interconnection, asdetermined in accordance with the Interconnection and Operating Agreement, shallbe borne by the Parties in proportion to their respective Percentages.  Although, as contemplated byArticle 6.3(vi), IMPA and IMEA are expected to be parties to theInterconnection and Operating Agreement they will not be entitled to receive transmissioncredits from the transmission owners group of the Companies unless theCompanies specifically receive transmission revenue from the ApplicableTransmission Provider for IMPA’s and IMEA’s use of the interconnection upgrade.

 

Each Party covenants touse its respective Best Efforts to secure a Transmission Service Arrangementwith the Applicable Transmission Provider in accordance with theschedule established in Article 5.3. Each Party shall pay the costs and expenses associated with its TransmissionService Arrangement with the Applicable Transmission Provider and shall bearits individual system upgrade expenses required to deliver its proportionateshare of Trimble County Unit 2 output to its respective points of delivery fromthe Trimble County Plant switchyard.  TheParties agree to cooperate and reasonably assist each other in the efforts ofthe individual Parties to secure their transmission needs.  Actual costs of requested cooperation shallbe fairly allocated to and paid or reimbursed by the Party or Partiesbenefiting therefrom.

 

44

----

 

# **ARTICLE 12.TAXES**

# ** **

12.1                           Management of Tax Matters.

 

Except for any paymentsof taxes or payments in lieu thereof which are directly billed to IMPA or IMEAby any taxing authority and which IMPA and IMEA shall pay directly, and exceptfor any rulings that IMPA or IMEA might require in connection with the issuanceof tax-exempt bonds, the Companies shall have the authority and responsibilityfor administering, coordinating, filing returns, making property taxdeclarations, paying, seeking official tax rulings or determinations, and otherrelated functions pertaining to all taxes, payments in lieu of taxes,assessments, impositions, charges, and related costs of every kind and nature,ordinary, or extraordinary, general or special, foreseen or unforeseen, settledor pending settlement, including property, sales, use, and payroll taxes,connected with or arising out of the development, construction, ownership,operation, maintenance, alteration, repair, rebuilding, use or retirement ofthe Trimble County Unit 2 Project or any part thereof, (collectively “Taxes”)which are or may be imposed by any taxing authority, whether federal, state,local, municipal, interregional, or quasi-governmental authority, provided, however,unless specifically authorized in writing by IMPA and/or IMEA, such authorityshall not extend to any act or action affecting any exemption or special taxtreatment arising out of the Trimble County Unit 2 Project to which IMPA orIMEA may be entitled.  IMPA and IMEA dohereby appoint the Companies to be their attorneys-in-fact, which appointmentis coupled with an interest, to act in their names, places and steads for thepurpose of exercising the tax authority described herein, filing returns, makingproperty tax declarations, payment negotiating, seeking adjustments orrevisions, protesting, seeking official tax rulings or determinations,contesting, making application for and claiming any and all exclusions,exemptions, deductions, credits and elections pertaining to all such taxes,payments in lieu of taxes, assessments, impositions, charges, and relatedcosts. Such appointment shall not be revocable during the term of thisAgreement.  IMPA, IMEA, their agents, orassigns shall promptly join in any action reasonably required which isconsistent with the exercise by the Companies of the tax authority describedherein and the status of IMPA and IMEA as governmental entities.

 

12.2                           Sharing of Taxes and Related Payments 

 

All Taxes shall be sharedand borne by the Parties in proportion to their respective Percentages,provided, however, IMPA and IMEA shall be entitled to the entire benefit to theextent of actual realizations, of their respective exemptions from andreductions of taxes, including property, sales, use, and payroll taxes,connected with or arising out of the ownership, operation, maintenance,alteration, repair, rebuilding, use, or retirement of the Trimble County Unit 2Project or any part thereof, which may be realized because of the provisions ofthe Constitutions of the Commonwealth of Kentucky, the State of Indiana, theState of Illinois, or the United States of America, or statutes, ordinances,rules, regulations, or laws applicable to IMPA and/or IMEA but not to theCompanies.

 

The portion of Taxes thatare to be borne by IMPA and IMEA, respectively, as set forth in thisArticle 12.2 shall be billed to and paid by IMPA and IMEA in accordancewith Articles 9

 

45

----

 

and 10, as applicable, exceptfor those which are paid by IMPA and IMEA, respectively, directly to the taxingauthority.

 

12.3                           Payment of Title Taxes and Fees.

 

All Taxes, recording feesand other impositions relating to the transfer of real property, if any,incurred in connection with the conveyances contemplated in this Agreementshall be borne by the transferees of such real property.  Except as provided in the first sentence ofthis Article 12.3 or in Article 12.2, all Taxes arising out of theDevelopment Work or the Construction Work shall be deemed to be DevelopmentCosts or Construction Costs, respectively.

 

12.4                           Exclusion of Income Taxes.

 

Notwithstanding thegenerality of Article 12.1 above, the Parties agree that the foregoingprovisions of this Article 12 shall not apply to any tax on or measured bynet income.

 

12.5                           Non-creation of Taxable Entity.

 

Notwithstanding any otherprovision of this Agreement, the Parties do not intend to create hereby at lawany joint venture, partnership, association taxable as a corporation, or otherentity for the conduct of any business for profit.  The Parties agree to elect underSection 761(a) of the Internal Revenue Code of 1986, as amended, toexclude the transactions created by this Agreement from the application ofSubchapter K, Chapter 1 of the Code, and the Parties agree to revisethe terms of this Agreement to the extent and in a manner necessary to permitsuch election.

 

# **ARTICLE 13.INSURANCE**

# ** **

13.1                           Procurement of Insurance.

 

Except with regard todirectors and officers liability insurance, the Companies shall maintain inforce, for the benefit of the Parties as their interests in the Trimble CountyUnit 2 Project shall appear, such insurance and self-insurance as theCoordination Committee shall determine to be appropriate.

 

13.1.1                  Sharing of Insurance Costs.

 

The costs of insurancepolicies referenced in Article 13.1 shall be shared by the Parties inproportion to their respective Percentages. IMPA and IMEA shall also pay any additional premium that results fromIMPA and IMEA being named as an additional insured party on the Companies’existing policies.  The Parties shallalso bear proportionate responsibility for costs of and any losses incurredwithin the limits of any deductibles or self-insured retentions on policies ofinsurance.  The Parties’ share of suchinsurance costs and the costs arising from claims covered by self-insuranceshall be shared by the Parties in proportion to their respective Percentagesand shall be paid in accordance with Articles 9 and 10, as applicable.

 

46

----

 

13.1.2                  The Parties Named as Insured.

 

IMPA and IMEA shall benamed as either insureds or additional insureds on such insurancepolicies.  The Companies shall cause theinsurance underwriters to furnish the Parties with a certificate of insuranceof each such insurance policy.  Inaddition, the Companies shall have each of such policies endorsed to providethat IMPA and IMEA shall be given the same advance notice of cancellation ormaterial change as is required to be given to the Companies.  Subject to the decisions of the CoordinationCommittee, a loss or claim, if any, under such insurance policies shall beadjusted and settled by the Companies with the insurance underwriters.

 

13.1.3                  Procurement of Additional Insurance forthe Parties.

 

Any Party may obtain atits cost additional insurance beyond that provided for in this Article 13to insure its interest in the Trimble County Unit 2 Project.  With respect to such additional insurance:

 

(i)                                     the proceeds from any claim arisingthrough such additional insurance shall be disbursed to the Party providing theinsurance; and

 

(ii)                                  the loss or claim, if any, under suchadditional insurance shall be adjusted and settled by the Party providing theinsurance.

 

13.1.4                  Sharing of Refunds from Insurance Premiums.

 

Any refunds of insurancepremiums shall be allocated among the Parties on the same basis as the premiumpayment allocation from which such refund was derived.

 

13.1.5                  Sharing of Insurance Proceeds.

 

In the event of damage toproperty insured under this Article 13, it is agreed that the proceedsfrom insurance obtained by the Companies on behalf of the Parties shall beshared by the Parties on a pro rata basis based on their relative payments ofinsurance premiums covering the damaged property.

 

13.2                           Destruction.

 

13.2.1                  Damage or Destruction Fully CoveredBy Insurance.

 

If property insured underthis Article 13 or any portion thereof should be damaged or destroyed tothe extent that the cost of repairs or reconstruction is estimated to becovered by the aggregate amount of insurance coverage (without regard to anydeductible) carried by the Companies for the benefit of the Parties pursuant toArticle 13, then the Companies shall cause such repairs or reconstructionto be made so that such property shall be restored to substantially the samegeneral condition, character, or use as existed prior to such damage ordestruction, provided, however, if the estimate is wrong, and the insuranceproceeds are insufficient to pay the cost of repair or reconstruction, theParties shall share the cost not reimbursed by such insurance in proportion totheir respective Percentages.

 

47

----

 

13.2.2                  Damage or Destruction Not FullyCovered by Insurance.

 

If Trimble County Unit 2,the Trimble County General Plant Facilities or any portion thereof as theypertain to Trimble County Unit 2, should be damaged or destroyed to the extentthat the cost of repairs or reconstruction is estimated to be more than theaggregate amount of insurance coverage (without regard to any deductible)carried by the Companies for the benefit of the Parties or by one or more ofthe other Parties for the benefit of the Parties pursuant to Article 13hereof and covering the cost of such repairs or reconstruction, then, if theCompanies elect to repair and reconstruct such property and upon agreement ofthe Companies and the other Parties, the Companies shall cause such repairs orreconstruction to be made and the Companies and the other Parties shall sharethe costs of such repairs or reconstruction not reimbursed by such insurance,in proportion to their respective Percentages, provided, however:

 

(i)                                     If IMPA or IMEA elects not to join theCompanies in repairing and reconstructing such property, then, at theCompanies’ election, the Parties shall determine the monetary amount to be paidby the Companies to IMPA or IMEA or by IMPA or IMEA to the Companies, asprovided for in paragraph (ii) of this Article 13.2.2.  Upon payment of such monetary amount by theCompanies to IMPA or IMEA or by IMPA or IMEA to the Companies, as the case mayrequire as set forth in said paragraph (ii), IMPA or IMEA shall transfer itsentire Ownership Interest in Trimble County Unit 2 and the Trimble County Unit2 Site, its license to use the Trimble County General Plant Facilities, and itseasement to the Trimble County Site, to the Companies free and clear of allliens, security interests, charges, claims and other encumbrances, and this Agreementshall be (a) appropriately amended if only one Party other than theCompanies elects not to join the Companies in repairing and reconstructing suchproperty or (b) deemed to have expired if IMEA and IMPA both elect not toso join the Companies.

 

(ii)                                  The monetary amount to be paid to orreceived from IMPA or IMEA pursuant to the provisions of paragraph (i) of thisArticle 13.2.2 shall be determined in accordance with the followingequation:

 

P=W*X

 

Where:

 

P   =                                           themonetary amount to be paid to or received from IMPA or IMEA. If P is positive,the monetary amount shall be paid to IMPA or IMEA; and if P is negative, themonetary amount shall be received from IMPA or IMEA.

 

W   =                                     IMPA’s/orIMEA’s Percentage before transfer of IMPA’s/or IMEA’s Ownership Interest.

 

X   =                                         thefair market value (as determined by an independent appraiser selected jointlyby the Parties) of (i) Trimble County Unit 2 and (ii) the TrimbleCounty Unit 2 Site and the Trimble County General Plant Facilities as theypertain to IMPA’s or IMEA’s use of Trimble County Unit 2, at the time IMPA orIMEA elects not to join the 

 

48

----

Companies in repairing and reconstructing Trimble County Unit 2 or theTrimble County General Plant Facilities. Fair market value shall be determined after taking into account allapplicable costs of dismantling, demolishing, and removal of equipment, facilities,and structures; security; maintenance; disposing of debris; and any site worknecessary to remove the effects of such damage or destruction.  Fair market value may be a negative figurewhere appropriate.

 

# **ARTICLE 14.PARTITION OF OR TRANSFERS OF INTEREST**

# ** **

14.1                           Special Nature of Trimble County Unit2 Project - Waiver of Right of Partition.

 

The Partiesrecognize that Trimble County Unit 2 is an integral part of the facilitiesrequired to provide adequate service in their respective service territoriesand that the physical partition of the Trimble County Unit 2 Project or anymaterial part thereof would be impossible and impractical and whollyinconsistent with the purposes for which this Agreement is made.

 

Each of theParties agrees that it will not take any action at any time by judicialproceedings or otherwise, to partition the Trimble County Unit 2 Project or anypart thereof, in any way, whether by partition in kind or by sale and divisionof the proceeds thereof.  Each of theParties further waives the right of partition and the benefit of all statutoryor common law that may now or hereafter authorize such partition of the TrimbleCounty Unit 2 Project or any part thereof. In the event any such right of partition shall hereafter accrue, each Partyshall from time-to-time upon the written request of the other Party execute anddeliver such further instruments as may be necessary to confirm the foregoingwaiver and release of its right to partition. The foregoing provisions of thisArticle 14.1 shall be binding upon and inure to the benefit of theParties, their respective successors and assigns, including mortgagees,receivers, trustees, or other representatives and their respective successorsand assigns, and shall run with the land. The Parties agree to insert a similar covenant in any contract withanother party, which acquires all or any portion of a Percentage, whichcovenant will be enforceable by any Party.

 

14.2                           Transfer of Ownership Interests.

 

If any Party(“Transferring Party”) shall desire to transfer (whether by sale, conveyance,assignment, lease, or otherwise) all or any portion of its Ownership Interest(the “Offered Interest”), it may only do so in a bona fide arm’s lengthtransaction, subject to Articles 14.2.1, 14.2.2, 14.2.3, 14.2.4, and14.2.5.  Prior to making any suchtransfer, the Transferring Party shall give not less than forty-five (45)calendar days’ written notice to the other Parties, of the proposed transactionand the identity of the proposed purchaser(s). Any such transaction or transactions shall not be consummated until eachof the other Parties has determined not to exercise its right of first refusalas set forth in this Article 14.2. Such notice shall fully disclose the terms of the proposed transactionor transactions.  Upon receipt of suchnotice, each other Party shall have a right of first refusal to acquire theOffered Interest, upon the same terms and conditions that the TransferringParty and the proposed purchaser(s) have agreed upon.  If each

 

49

----

 

Party agrees to exercise its right of first refusal, each such Partyshall acquire the Offered Interest in proportion to its respective Percentageprior to the proposed transfer.  If aParty elects not to exercise its right of first refusal, the remaining Partiesshall acquire the Offered Interest in proportion to their then existingPercentages.  If only one Party elects toexercise its right of first refusal, it must acquire the entire OfferedInterest by the Transferring Party. Within forty-five (45) calendar days following receipt of the noticefrom the Transferring Party, each of the other Parties shall give writtennotice to the Transferring Party stating whether or not it elects to acquirethe Offered Interest (the “Return Notice”). A failure to give the Return Notice shall be deemed to be an electionnot to acquire such interest.  If a Partyor Parties elects or elect to exercise its or their rights to acquire suchinterest, the Transferring Party and such Party or Parties as soon aspracticable, shall execute such instruments as may be necessary and appropriateto effectuate such sale, conveyance, transfer, assignment, lease, or otherdisposition, as the case may be, to such Party or Parties, free and clear ofall liens, security interests, charges, claims, and other encumbrances forwhich the Transferring Party, as between the Parties, is responsible, includingthe indenture(s) of the Transferring Party.

 

14.2.1                  Conditions of Transfer.

 

If none of theParties elects to acquire the Offered Interest in the Trimble County Unit 2Project as provided in Article 14.2, the Transferring Party may consummateits proposed transaction and dispose of the Offered Interest, provided,however, the other Parties have approved the proposed purchaser(s) as suitableas a joint owner(s) of Trimble County Unit 2, although such approval may notunreasonably be withheld, conditioned or delayed, and provided, further, whereone or more of the Companies is a Transferring Party, the other Parties’ rightsto approve the prospective purchaser as suitable shall be limited to situationsin which the proposed transfer reduces the Companies’ aggregate Percentage toless than fifty percent (50%) or where such proposed transfer conveys, in wholeor in part, the Companies’ rights and obligations for the operation of TrimbleCounty Unit 2 and the Trimble County General Plant Facilities under thisAgreement to the proposed purchaser(s). Grounds for withholding such approval may include financial condition,experience in the operation and management of coal-fired generation, ifapplicable, and other factors as may materially adversely affect the otherParties’ interests hereunder.  TheTransferring Party shall require (as a condition of or in connection with thesale, conveyance, transfer, assignment, lease, or other disposition, and forthe benefit of the other Party) the proposed purchaser(s) to assume and agreeto be bound by the provisions of this Agreement and any amendments thereto, andin furtherance thereof the provisions of this Agreement shall be amendedappropriately.

 

Upon consummation of the transfer, the Transferring Party shall bereleased from its obligations under this Agreement, and from any claims,liabilities or debts, that arise in respect of the transferred interest on orafter the date of such transfer.  Theconsummation of any such transfer shall not release the Transferring Party fromany of its debts or liabilities to the other Parties which, at the time of theconsummation of the transaction, have accrued under this Agreement, unless theParties shall agree in writing to the contrary. Any purported or attempted transfer of an interest in violation of thisArticle 14 shall be void and of no effect.

 

50

----

 

14.2.2                  Further Conditions of Transfer.

 

The right of the Transferring Party to dispose of the Offered Interestto one or more non-Affiliates of the Transferring Party, as set forth inArticle 14.2, is subject to the further condition that the other Partiesshall be given written notice thereof and shall have the further right of firstrefusal, to the same extent and by the same procedure described inArticle 14.2 if the Transferring Party:

 

(i)                                     undertakesto consummate its proposed transaction at a time subsequent to two hundredforty (240) calendar days following the other Parties’ receipt of the writtennotice first referred to in Article 14.2;

 

(ii)                                  undertakesto, without the consent of the other Parties, which consent will not beunreasonably withheld, dispose of such Offered Interest to Persons other thanthose whose identity was disclosed in said notice; or

 

(iii)                               undertakesto dispose of the Offered Interest upon substantially different terms andconditions than were disclosed in said notice.

 

14.2.3                  Non-applicability of Certain Provisions.

 

The provisions of the foregoing Articles 14.2, 14.2.1 and 14.2.2 shallcontinue for the duration of this Agreement and shall be applicable to each andevery occasion and whenever a Party desires to dispose of (whether by sale,conveyance, transfer, assignment, lease, or otherwise) all or any portion ofits Ownership Interest, provided, however, such provisions  (excluding the last paragraph of Article 14.2.1)shall not be applicable to, and each of the Parties hereby consents to, thefollowing:

 

(i)                                     thetransfer, sale, or assignment to a financially responsible Affiliate orsuccessor of a Party;

 

(ii)                                  thetransfer, assignment, pledge, hypothecation, mortgage, or grant (by indentureof mortgage, deed of trust, or otherwise) by any Party of its OwnershipInterest, together with all or substantially all of its other electric utilityproperty, for the purpose of securing bonds or other obligations for borrowedmoney issued or to be issued by it, including the effect of any after-acquiredproperty clause of any such indenture of mortgage, deed of trust, or otherinstrument now existing or hereafter created by such Party, or the realizationon or enforcement of such security or the exercise by the trustee or themortgagee, or as the case may be, or the beneficiaries of such security of anyof the rights, powers, or privileges provided for with respect thereto;

 

(iii)                               thetransfer by a Party to one or more third parties of its Ownership Interest,together with all or substantially all of its other electric generating assets,whether by sale or pursuant to or as a result of a merger, consolidation, orcorporate reorganization; or

 

(iv)                              thetransfer by the Companies of any interest in Trimble County Unit 2, whichtransfer would not reduce the Companies’ aggregate Percentage to a level belowseventy-five percent (75%).

 

51

----

 

All transfersof interest described in clauses (i) through (iv) of this Article 14.2.3shall be conditioned upon the transferee, by written agreement or by operationof law, assuming the obligations of this Agreement, and any amendments thereto,of the Transferring Party; except that transferees under (ii) and (iii) aboveshall not be subject to this condition prior to any exercise of ownership,control, or possession by transferee over the interest transferred.  In furtherance of such transfer, the Partiesshall amend this Agreement appropriately.

 

14.2.4                  Transfer of Associated Rights andInterests.

 

No transfer(whether by sale, conveyance, assignment, lease, or otherwise) of any OwnershipInterest shall be permitted, or shall become effective, unless the interesttransferred includes a corresponding and equivalent transfer of associatedrights and interests under this Agreement, including its rights and interestsin Trimble County Unit 2, the Trimble County General Plant Facilities, and theTrimble County Unit 2 Site (and the licenses and easements associatedtherewith), and unless such transfer is made in full compliance with thisArticle 14.

 

14.2.5                  Louisville and Kentucky Utilities.

 

In the eventthat Louisville and Kentucky Utilities cease to be Affiliates of each other,the agency established hereunder shall devolve upon either Louisville orKentucky Utilities as specified by both of them in a written notice to theother Parties.  This Agreement shallthereupon also be amended and restated by the Parties to appropriately reflectsuch change and the severing of such affiliated relationship.

 

# **ARTICLE 15.ASSIGNMENT**

# ** **

15.1                           Limitation of Assignability.

 

This Agreementshall not be assignable by any Party without the written consent of the otherParties, except that no such consent under this Article 15.1 shall berequired for the assignment of this Agreement (i) as an incident to thedisposition of Ownership Interests in accordance with Articles 14.2, 14.2.1,14.2.2 or 14.2.3 hereof or (ii) as an incident to the disposition of itsOwnership Interest to the trustee for the revenue bonds issued by IMPA or IMEAto pay the costs of the acquisition of IMPA’s or IMEA’s Ownership Interest.

 

15.2                           Successors and Assigns.

 

This Agreementshall inure to the benefit of and be binding upon the Parties and theirrespective successors and upon the assigns of the Parties when such assignmentis made in accordance with the provisions of Article 15.1.

 

52

----

 

# **ARTICLE 16.LIABILITY AND DEFAULT**

# ** **

16.1                           Liability to Third Parties.

 

Subject to anyexpress provision to the contrary in this Agreement, any liability or anypayment, cost, expense, or obligation arising from a claim of liability (afterapplication thereto of any insurance coverage or proceeds) to one or more thirdparties against one or more of the Parties and arising from the planning,engineering, design, licensing, procurement, construction, installation,completion, operation, use, management, control, maintenance, replacement,alteration, modification, renewal, rebuilding or repair, retirement, disposal,or salvaging of the Trimble County Unit 2 Project or any part thereof; or fromany other action or failure to act by any Party (or its employees, agents, orcontractors) in carrying out any of the provisions of this Agreement in regardto the Trimble County Unit 2 Project or any part thereof, shall be several andnot joint and shall be shared by the Parties in proportion to their respectivePercentages in all circumstances except where such liability or claim ofliability is the result of gross negligence or intentional wrongdoing on thepart of less than all of the Parties. If, by reason of any such liability or claim of liability (afterapplication thereto of any insurance coverage or proceeds) to one or more thirdparties, any Party shall be called upon to make any payment or to incur anycost, expense, or obligation in excess of that for which it is responsibleunder the provisions of the preceding sentence, then the other Parties shallreimburse the Party making such excess payment or incurring any such excesscost, expense, or obligation to the full extent of the excess.

 

16.2                           Liability Among the Parties; NoConsequential Damages.

 

Except asstated in Articles 6.5.5, 6.5.6, 7.7, 13.2.2, 19.4, 19.5, and 21.1.3 a Party(or its employees, agents or contractors) shall not be liable to the otherParties for any loss, cost, damage, or expense incurred by the Parties as aresult of any action or failure to act, under any circumstances, by that Party(or its employees, agents, or contractors) in carrying out any of theprovisions of this Agreement, unless such loss, cost, damage, or expense is theresult of (i) gross negligence or intentional wrongdoing on the part of thatParty, (ii) a Withdrawal Event occurs with respect to that Party after theConstruction Closing or (iii) the performance of Companies’ obligations duringthe Development Phase or Construction Phase falling below the standard ofconduct established in Article 20.24. For purposes of this paragraph “contractors” shall not be interpreted tomean Persons under contracts entered into by all of the Parties or by theCompanies when acting as the agent of the Parties.

 

Notwithstandingany other provision of this Agreement, the maximum aggregate liability of theCompanies to IMEA or IMPA in connection with any loss, cost, damage or expensearising under clause (iii) above shall be limited to the aggregate amount ofthe supervisory fee paid to the Companies by such Party pursuant toArticle 9.1.

 

Notwithstandingany other provision of this Agreement, in no event shall any Party be liable toanother Party with respect to any claim, whether based on contract, tort(including negligence), patent, trademark or service mark, or otherwise, forany indirect, special, incidental, or consequential damages.

 

53

----

 

In no eventshall any Party be excused from liability for its fraudulent acts.

 

16.3                           Indemnification.

 

Subject toArticle 16.2 hereof, each Party (“breaching Party”) hereby agrees toindemnify and hold the other Parties (“non-breaching Parties”) harmless from,against, and in respect of and shall on demand reimburse the non-breachingParties for:

 

(i)                                     anyand all loss, liability, or damage resulting from any untrue representation,breach of warranty, or non-fulfillment of any covenant or agreement by thebreaching Party contained herein or in any certificate, document, or instrumentdelivered to the non-breaching Parties hereunder; and

 

(ii)                                  anyand all loss suffered by the non-breaching Parties due to the breaching Party’sfailure to perform or satisfy any obligation assumed pursuant to thisAgreement; or

 

(iii)                               anyand all loss resulting from actions, suits, proceedings, claims, demands,assessments, judgments, costs, and expenses, including legal fees and expenses,incident to any of the foregoing or incurred in investigating or attempting toavoid the same or to oppose the imposition thereof, or in successfullyenforcing this indemnity.  The provisionsof this paragraph (iii) shall not apply unless it shall be finally adjudicatedby a court having jurisdiction of the subject matter and the Parties that aParty has committed a breach identified in paragraph (i) or (ii) of thisArticle 16.3.

 

16.4                           Nature and Survival of Representationsand Warranties.

 

Each representation,warranty, indemnity, covenant, and agreement made by the Parties in thisAgreement or in any document, certificate, or other instrument delivered by oron behalf of the Parties pursuant to this Agreement or in connection herewith,shall survive the Development Closing and the Construction Closing,respectively.

 

16.5                           Default.

 

16.5.1                  Events of Default.

 

The followingshall be an Event of Default under this Agreement:

 

(i)                                     Failureto Make Payment.  Subject toArticle 18.4, failure by any Party to make any payment to the otherParties required under this Agreement within sixty (60) calendar days after thedate on which such payment becomes due, or failure by any Party to give anycredit to the other Parties required under this Agreement for a period of sixty(60) calendar days after the date on which such credit becomes due, or failureby any Party to make payment for a period of sixty (60) calendar days after thedate on which such payment becomes due, when failure to do so is likely toresult in a lien on any of the property subject to this Agreement or otherwiseadversely affects the interests of the other Parties, provided, however, thatno Party shall be in default if the amount it owes hereunder can be, and is,offset in whole within sixty (60) calendar days after the date on which suchamount became due and payable, by the Party to whom that sum is owed under thisAgreement.

 

54

----

 

(ii)                                  Failureto Perform.  Failure by a Party toperform any material obligation, duty, or responsibility in accordance with theprovisions of this Agreement.

 

16.5.2                  Curing Event of Default in Regard toPaying Money.

 

As to anyEvent of Default resulting from the failure to pay money, the defaulting Partymay remedy its Event of Default (when such default is the failure to pay money)by paying to the non-defaulting Parties on or before ninety (90) calendar daysfrom the date the payment becomes due:

 

(i)                                     thesums due;

 

(ii)                                  intereston the sums due at the Agreed Rate from the date due until paid; and

 

(iii)                               anyother costs reasonably incurred by the non-defaulting Parties as a result ofsuch Event of Default.

 

16.5.3                  Curing Event of Default for OtherThan Failure to Pay Money.

 

An Event ofDefault other than the failure to pay money may be cured by the Party indefault by performing such act as is necessary to cure the Event of Default andby paying the non-defaulting Parties on or before ninety (90) calendar daysfrom the date such Event of Default occurred, any sums due underArticle 16.3.

 

16.5.4                  Non-Applicability of Cure Provisions.

 

The cureperiods set forth in Articles 16.5.2 and 16.5.3 are intended to allow a Partyto have the opportunity to cure a specific Event of Default and, unlessotherwise provided, do not otherwise extend the time required for theperformance of any other obligation of a Party under this Agreement.

 

16.5.5                  Appointment of a Receiver.

 

If an Event ofDefault occurring after the Commercial Operation Date continues for a period ofone hundred eighty (180) calendar days, then the non-defaulting Parties mayhave a receiver appointed by a state or federal court sitting in Louisville,Kentucky, to take control of and operate the defaulting Party’s interest in theTrimble County Unit 2 Project and perform in accordance with the terms of thisAgreement.

 

16.5.6                  Additional Obligations.

 

With respectto any Party as to which an Event of Default has occurred, such Party shall useits Best Efforts to take any and all such further actions and shall execute andfile where appropriate any and all such further legal documents and papers asmay be reasonable under the circumstances in order to facilitate the carryingout of this Agreement or otherwise effectuate its purpose, including action toseek any required governmental or regulatory approval and to obtain any otherrequired consent, release, amendment, or other similar document.

 

16.5.7                  Notice.

 

55

----

 

To entitle aParty hereto to exercise any remedy conferred upon or reserved by it in thisArticle 16, notice shall be provided in accordance with Article 20.2hereof.

 

16.6                           Force Majeure.

 

In no eventshall any Party be liable to the other Parties for failure by such Party toperform any of its obligations under this Agreement because of ForceMajeure.  Nothing contained herein shallbe construed to require a Party to settle any strike, lockout, work stoppage,or other industrial disturbance or dispute in which it may be involved or totake an appeal from any action of a Governmental Authority.  Any Party rendered unable to fulfill any ofits obligations under this Agreement by reason of Force Majeure shall exerciseBest Efforts to remove such inability with all reasonable dispatch.  In the event any Party is unable, in whole orin part, to perform any of its obligations by reason of Force Majeure, otherthan obligations to make payments hereunder, the obligations of the Partyrelying thereon, insofar as such obligations are affected by such ForceMajeure, shall be suspended during the continuance thereof but no longer.  The Party invoking Force Majeure shall notifythe other Parties of the full particulars of the Force Majeure and the time anddate when the Force Majeure occurred. Notices given by telephone under this Article 16.6 shall beconfirmed promptly by electronic mail or facsimile transmission.  When the Force Majeure ceases, the Partyrelying thereon shall give immediate notice thereof to the other Parties byelectronic mail or facsimile transmission. This Agreement shall not be terminated by reason of Force Majeure butshall remain in full force and effect. Force Majeure does not include financial inability to pay, and shallnot, in any event, excuse payment for obligations already incurred hereunder atthe time a claim is made.

 

# **ARTICLE 17.MANAGEMENT**

# ** **

17.1                           Coordination Committee.

 

From time totime various administrative, financial, and technical matters may arise inconnection with the terms and conditions of this Agreement which will requirethe cooperation and consultation of the Parties and the exchange ofinformation.  As a means of providing forsuch consultation, interchange, decision making, or ratification, aCoordination Committee is hereby established with functions as described inArticle 17.3 below.  However, suchcommittee shall not diminish in any manner the authority of the Companies asset forth in this Agreement

 

17.2                           Coordination Committee Formation.

 

Within thirty(30) calendar days after the Execution Date, each Party shall designate arepresentative and an alternate that are to serve on the Coordination Committeeand shall give written notice to the other Parties of such designations.  In the event that any Ownership Interest of aParty, in whole or in part, shall be assigned or otherwise transferred to areplacement or an additional Party in accordance with the provisions of thisAgreement, such replacement or additional Party shall designate arepresentative and an alternate to serve on the Coordination Committee.  Any change in the representative or alternateof a Party on the Coordination Committee shall be made by written notice to theother Parties.  Each Party shall beresponsible for the personal expenses of its representatives.

 

56

----

 

17.3                           Powers of Coordination Committee.

 

TheCoordination Committee shall be responsible for and shall take actions, whichit determines are necessary or advisable during the term of thisAgreement.   The Coordination Committeeshall address activities necessary or advisable to plan, license, acquirelicenses, permits and approvals for, construct, acquire, complete, maintain,operate, assure the security of, and decommission the Trimble County Unit 2Project, including:

 

(i)                                     themaking of such agreements and modifications of existing agreements and thetaking of such other action as the Coordination Committee deems necessary orthat may be required under the regulations or directives of any GovernmentalAuthority having jurisdiction thereof, with respect to the development,construction, acquisition and completion of the Trimble County Unit 2 Projectfor commercial service; the procurement, replacement, modification, or renewalof all or any part thereof; the making of additions, betterments, orimprovements thereto; the operation and maintenance thereof; and theretirement, decommissioning, storage, or salvaging of all or any part thereof;

 

(ii)                                  theexecution and filing with Governmental Authorities having jurisdiction ofapplications, amendments, reports, and other documents and filings required inconnection with the licensing and other regulatory matters, includingapplications for extension or renewal of the terms of any licenses and permitsrequired by any Governmental Authority;

 

(iii)                               theadjustment of losses and settlement of any losses covered by insurance on theTrimble County Unit 2 Project;

 

(iv)                              thepursuit and defense of claims and causes of action of any kind relating to theTrimble County Unit 2 Project, including the filing or defense of suits, appealsthereof, and settlement of claims and suits subject to the right of any Partyto conduct its own action in any litigation in which it is a party or in whichit is entitled to intervene pursuant to this Agreement;

 

(v)                                 theestablishment of such subcommittees as it believes appropriate and provide formembership, meetings, voting procedures and such other rules of procedure as itdeems appropriate consistent with the provisions of this Article 17.

 

(vi)                              thedetermination from time to time of the Net Electric Generating Capacity and theNet Seasonal Capacity of Trimble County Unit 2;

 

(vii)                           theapproval of budgets for development, construction, operation and maintenance,and Incremental Capital Assets, as described in Article 17.4;

 

(viii)                        actingupon any matter brought before the Coordination Committee by a Party;

 

(ix)                                performingsuch other duties as set forth in this Agreement; and

 

(x)                                   priorto and as a condition of the Construction Closing, undertaking dueconsideration of and issuance of the Authorization to Construct.

 

57

----

 

17.4                           Budget Approval.

 

17.4.1                  Development Budget.

 

Prior to theDevelopment Closing, the Companies shall provide a budget of the totalDevelopment Costs, together with interest thereon in accordance withArticle 3.2 and the supervisory fees thereon applicable to IMPA and IMEAin accordance with Article 9.1 (the “Development Budget”), which shallinclude all applicable charges incurred prior to Development Closing and to bepaid in accordance with Article 9.1, and the Companies’ best estimates ofall applicable charges from Development Closing to the Construction Closing,including a reasonable contingency.  Theproposed Development Budget will include such level of detail as may be reasonablyrequired by the Parties for their budgets, books and records, as well asestimated expenditures at certain milestones throughout the development of theTrimble County Unit 2 Project.  TheParties will share all Development Costs in proportion to their respectivePercentages.

 

The Partiesmust approve, by unanimous vote, the Development Budget submitted by theCompanies, with such changes as the Parties deem necessary or appropriate andsuch approved Development Budget will be attached hereto as Appendix H.  After the initial Development Budget isapproved, the Companies are authorized to expend the amounts contained therein.

 

The Companiesmay submit a revised Development Budget to the Coordination Committee forapproval or disapproval.

 

After the DevelopmentClosing and during the Development Phase, the Companies shall provide statusreports on the Development Schedule, Development Work, Development Costs (andthe supervisory fees thereon), Development Budget, Construction Schedule, andConstruction Budget on a monthly basis and at such other times as the Companiesbelieve elements thereof will change significantly.  Such reports shall disclose materialdevelopments affecting the Development Work (and the schedule impactthereof), the Development Costs, the Development Budget, the ConstructionSchedule or the Construction Budget.

 

17.4.2                  Construction Budget.

 

Not less thanninety (90) calendar days prior to the Construction Closing, the Companies willsubmit a proposed budget for Construction Costs (including the supervisory feesthereon in accordance with Article 9.1) (the “Construction Budget”) to theCoordination Committee.  The proposedConstruction Budget will include all Construction Costs (including the supervisoryfees thereon in accordance with Article 9.1) and a reasonable contingencyestablished by the Companies.  Theproposed Construction Budget will include such level of detail as may bereasonably required by the Parties for their budgets, books and records, aswell as estimated expenditures at certain milestones throughout theconstruction of the Trimble County Unit 2 Project.  The proposed Construction Budget shallinclude an estimated cash flow of payments expected to be made by the Partiesduring the Construction Phase in accordance with Article 9.1.  The Coordination Committee shall approve theConstruction Budget submitted by the Companies, with such changes as theCoordination Committee deems necessary or appropriate.  After the Construction Closing has occurred,the Companies will be authorized to expend the amounts authorized in theConstruction Budget in effect as of the date of the Construction

 

58

----

 

Closing (the “Initial Construction Budget”) contained therein.  IMPA and IMEA shall pay the Companiesdirectly for their respective proportionate share of all approved ConstructionCosts (and the supervisory fees thereon in accordance with Article 9.1) ona monthly basis, in accordance with Articles 9 and 10.

 

After theConstruction Closing has occurred, the Companies shall provide status reportsthereon not less than monthly and such other times as they believe the costs ofthe Initial Capital Assets of the Trimble County Unit 2 Project will changesignificantly.  The Companies shall havethe authority to approve change orders to the Construction Contracts whetherinitiated by the Companies or by a Construction Contractor, provided thatCompanies shall not direct discretionary changes that would be in excess of thethen existing Construction Budget (including budgeted contingency) without theunanimous consent of the Coordination Committee.  If any individual change to the InitialConstruction Budget (after utilizing all budgeted contingency) exceeds one percent(1%) of the Initial Construction Budget or any combination of change orders andchanges to the Construction Budget results in a cumulative increase in theinitial Construction Budget (after utilizing all budgeted contingency) by morethan five percent (5%) of the Initial Construction Budget a (“Major Change”),the Companies will consult with the Coordination Committee and seek anamendment to the Construction Budget. Any change orders to the engineering, equipment or other ConstructionContracts that change the guaranteed performance, including the Net ElectricGenerating Capacity, major equipment, or the guaranteed completion dates of theTrimble County Unit 2 Project shall not be authorized by the Companies withoutprior consultation with and approval of the Coordination Committee.

 

The Companieswill be authorized to expend the amounts in the Construction Budget as revisedfrom time-to-time in accordance with this Article 17.4.2.  At any time, regardless of actualconstruction expenditures, the Companies may submit a revised ConstructionBudget for the Trimble County Unit 2 Project to the Coordination Committee forapproval or disapproval.

 

After theConstruction Closing and during the Construction Phase, the Companies shallprovide status reports on the Construction Schedule, Construction Work,Construction Costs (together with the supervisory fees thereon in accordancewith Article 9.1), and Construction Budget on a monthly basis.  Such reports shall disclose materialdevelopments affecting the Construction Schedule, the Construction Work, theConstruction Costs or the Construction Budget.

 

17.4.3                  Annual Capital Budget.

 

ForIncremental Capital Assets after completion of the original construction of theTrimble County Unit 2 Project, the Companies shall prepare and submit to theCoordination Committee an annual Trimble County Unit 2 Project capital budget(the “Annual Capital Budget”) no later than August 1 of each year for thesubsequent year.  The CoordinationCommittee must approve the Annual Capital Budget submitted by the Companies withsuch changes as the Coordination Committee deems necessary or appropriate,after which the Companies will be authorized to expend the amounts containedtherein.  After approval of the AnnualCapital Budget, no further review by the Coordination Committee is requiredunless the actual, total capital expenditures are anticipated to exceed theapproved Annual Capital Budget by fifteen percent (15%) or more.  In this event, the Companies will submit arevised Annual

 

59

----

 

Capital Budget to the Coordination Committee for its approval ordisapproval on a quarterly basis.  TheCompanies are not authorized to expend construction funds in excess of onehundred fifteen percent (115%) of the total amount approved by the CoordinationCommittee in the Annual Capital Budget (as revised) except in the event of anEmergency.  In the event an Emergencyrequires expenditure of funds in excess of the approved Annual Capital Budget,the Companies shall advise the Coordination Committee immediately and requesttimely approval or disapproval.  Suchapproval or disapproval may be obtained via a telephone or electronic meetingto be confirmed later in writing.  In theabsence of timely approval, the Companies shall take whatever actions they deemnecessary to support the continued safe and efficient operation of TrimbleCounty Unit 2.

 

17.4.4                  Operation and Maintenance Budget.

 

For operationand maintenance (“O&M”) expenses, the Companies shall prepare and submit tothe Coordination Committee an annual Trimble County Unit 2 Project O&Mbudget (the “Annual O&M Budget”) no later than August 1 of eachyear.  Such Annual O&M Budget shallinclude goals as to unit efficiency and availability for the ensuing year.  The Coordination Committee must approve theAnnual O&M Budget submitted by the Companies with such changes as theCoordination Committee deems necessary or appropriate.  After the Annual O&M Budget is approved,the Companies will be authorized to expend the amounts contained therein.  Further, after approval of the Annual O&MBudget, no further review by the Coordination Committee is required unless theactual, total O&M expenditures are anticipated to exceed the budgetedamounts by fifteen percent (15%) or more. In this event, the Companies will submit on a quarterly basis a revisedAnnual O&M Budget to the Coordination Committee for its approval ordisapproval.  The Companies are notauthorized to expend O&M funds in excess of one hundred fifteen percent(115%) of the total amount approved by the Coordination Committee in the AnnualO&M Budget (as revised) except in the event of an Emergency.  In the event an Emergency requires theexpenditure of funds in excess of the approved Annual O&M Budget, theCompanies shall advise the Coordination Committee promptly and request timelyapproval or disapproval.  Such approvalmay be obtained via a telephone or electronic meeting to be confirmed later inwriting.  In the absence of timelyapproval the Companies shall take whatever actions they deem necessary tosupport the continued safe and efficient operation of Trimble County Unit 2.

 

17.5                           Vote by Coordination Committee.

 

Except asprovided otherwise in this Agreement or by agreement of all Parties, allactions taken by the Coordination Committee shall be by majority vote, witheach Party entitled to vote in shares equal to its Percentage.

 

17.6                           Meetings.

 

The Chairmanof the Coordination Committee shall rotate annually among the Parties on eachanniversary of the Execution Date.  TheChairman shall be responsible for calling meetings, except as hereinbelowprovided, and establishing the agenda. Each Party, however, shall have the right to have items included on theagenda.  The Coordination Committee mayalso act without a meeting by telephone or electronic conference or voting bycorrespondence or electronic mail.  TheCoordination Committee shall meet regularly, but not less often than once

 

60

----

 

in each calendar quarter during development and construction of theTrimble County Unit 2 Project and not less than annually after the CommercialOperation Date, and at such other times as requested by any CoordinationCommittee member upon thirty (30) calendar days’ prior written notice.  Meetings may be attended by otherrepresentatives of the Parties in addition to the members of the CoordinationCommittee.

 

17.7                           Records.

 

TheCoordination Committee shall keep written records of all meetings.

 

17.8                           Amendments.

 

The Coordination Committee shall have no authority to modify or amendthe terms of this Agreement.

 

17.9                           Information.

 

The Companiesshall use their Best Efforts to keep all members of the Coordination Committeeinformed of all significant matters with respect to the development,construction, operation and maintenance of the Trimble County Unit 2 Projectincluding, plans, specifications, engineering studies, environmental reports,budgets, estimates and schedules.   Uponthe request of any Coordination Committee member, the Companies shall furnishor make available any and all other information relating to the development,construction and operation and maintenance of the Trimble County Unit 2Project.

 

# **ARTICLE 18.DISAGREEMENT**

# ** **

18.1                           Consultation.

 

In accordancewith the provisions of Article 18, the members of the CoordinationCommittee will consult in connection with any major matter arising under thisAgreement.

 

18.2                           Disagreement.

 

If anydisagreement arises on major development, construction or operation andmaintenance matters pertaining to the Trimble County Unit 2 Project, majorcapital matters pertaining to the Trimble Unit 2 Project, or major retirementmatters, or other matters arising under this Agreement, pertaining to theTrimble County Unit 2 Project (“Plant Subjects”), such matters shall bediscussed by the Coordination Committee and timely mutual agreement sought inregard thereto.  If each of the membersof the Coordination Committee agrees to the resolution of any Plant Subject,such agreement shall be reported in writing to and shall be binding upon theParties within the authority of the Coordination Committee as provided inArticle 17.  In the unlikely eventthat each of the members of the Coordination Committee is unable to reach agreementwithin a reasonable time (giving due cognizance to the operating andmaintenance schedules of Trimble County Unit 2 and all other pertinentcircumstances) with respect to any Plant Subject under consideration, a VicePresident of Louisville, a Vice President of Kentucky

 

61

----

 

Utilities, the President of IMPA or the General Manager and CEO of IMEAcan, by written notice to the other members of the Coordination Committee,withdraw the matter from consideration by the Coordination Committee and submitthe same for resolution to a Vice President of Louisville, a Vice President ofKentucky Utilities, the President of IMPA and the General Manager and CEO ofIMEA. If these senior representatives of the Parties agree to a resolution ofthe matter, such agreement shall be reported in writing to and shall be bindingupon the Parties; but if said senior representatives fail to resolve the matterwithin seven (7) calendar days after its submission to them, then the mattermay proceed to resolution as provided in Article 18.3.

 

18.3                           Arbitration.

 

If adisagreement should arise with respect to any Plant Subject which is notresolved by the Coordination Committee or the senior representatives of theParties as provided in Article 18.2 or any other disagreement concerningthis Agreement, then such disagreement may be settled by arbitration by asingle arbitrator as hereinafter provided, in accordance with the provisions ofthis Article 18.3. If, after the procedure for resolving such disagreementby the Coordination Committee or the senior representatives of the Parties asprovided in Article 18.2 has been exhausted, a Party desires that suchdisagreement shall be settled by arbitration, it shall serve written noticeupon the other Parties setting forth in detail such disagreement with respectto which arbitration is desired.  Suchdisagreement shall be settled by arbitration if, after receipt of such writtennotice, all of the Parties shall agree in writing that such disagreement shallbe settled by arbitration.  Within aperiod of thirty (30) calendar days from the date of such agreement in writingto settle such disagreement by arbitration, the Parties shall mutually agreeupon an arbitrator.  If the arbitrator isnot so selected within the specified thirty (30)-calendar day period, eitherParty may, upon written notice to the other Parties, apply to the AmericanArbitration Association for the appointment of the arbitrator or arbitratorswho have not been so selected and such association shall thereupon be empoweredto select such arbitrator.

 

Thearbitration proceedings shall be conducted in Louisville, Kentucky, unlessotherwise mutually agreed.  TheArbitrator shall afford adequate opportunity to both of the Parties to presentinformation with respect to the disagreement submitted to arbitration and mayrequest further information from any Party. Except as provided in the preceding sentence, the Parties may, by mutualagreement, specify the rules that are to govern any proceeding before thearbitrator and limit the matters to be considered by the arbitrator, in whichevent the arbitrator shall be governed by the terms and conditions of suchagreement.  In the absence of any suchagreement respecting the rules that are to govern any proceeding, the thencurrent rules of the American Arbitration Association for the conduct ofcommercial arbitration shall govern the proceedings, except that if such rulesshall conflict with the then current provisions of the laws of Kentuckyrelating to arbitration, such conflict shall be governed by the then currentprovisions of the laws of Kentucky relating to arbitration.

 

Proceduralmatters pertaining to the conduct of the arbitration and the award shall bemade by the arbitrator.  The Partiesshall, however, be entitled to all discovery provided for by the Kentucky Rulesof Civil Procedure.  The findings andaward of the arbitrator shall be final and conclusive with respect to thedisagreement submitted for arbitration and shall be binding upon the Parties,except as otherwise provided by Applicable Law. Each Party shall equally

 

62

----

 

share the fee and expenses of the arbitrator and shall also beresponsible for****the costs and expenses incurredby it in the preparation of its case to the arbitrators.  Judgment upon the award may be entered in anycourt having jurisdiction.  In the eventall of the Parties do not agree to arbitrate, each shall have the right to takeappropriate judicial action.

 

18.4                           Obligations To Make Payments.

 

If a disagreementshould arise out of the Development Work, the Construction Work, the OperatingWork, the construction or acquisition of any Incremental Capital Asset or fromany Plant Subject which is not resolved by the Coordination Committee or thesenior representatives of the Parties as provided in Article 18.2, then,pending the resolution of the disagreement by arbitration (if applicable)and/or litigation, the Companies shall continue to pursue the Development Work,the Construction Work, operate Trimble County Unit 2, or construct or procurenecessary Incremental Capital Assets, as the case may be, in a mannerconsistent with this Agreement, and the Parties shall continue to make allpayments required in accordance with the applicable provisions of thisAgreement.  Notwithstanding theforegoing, a Party may, in good faith, withhold payment of amounts that itdisputes are properly due and payable under this Agreement (a “WithholdingParty”), provided, however, any such right to withhold payment is subject tothe following conditions:  (i) theaggregate amount withheld will not, in the aggregate at any time, exceed$1,000,000, (ii) prior to the date on which the payment(s) to be withheld wouldotherwise be due, the Withholding Party shall (a) give a detailed writtennotice to the Party or Parties otherwise entitled to payment of the amount tobe withheld and the basis on which the Withholding Party asserts that theamount withheld is not due and owing, (b) deposit the full amount of thewithheld payment(s) in an interest-bearing escrow account (the “EscrowAccount”) and (c) commence the dispute resolution process set forth inArticle 18.2 by requesting a meeting of the Coordination Committee toresolve the dispute.  The Escrow Accountshall be established by all Parties to the dispute (the “Disputing Parties”) ina reputable financial institution conducting fiduciary business in the UnitedStates, as agreed upon by the Parties. The agreement establishing the Escrow Account shall provide that theescrowed sums are not to be released except upon the signature of all DisputingParties, and shall contain such other provisions as the Disputing Parties andthe escrow agent shall agree upon.  Atsuch time that the dispute is decided in accordance with Article 18 or otherwiseresolved, the Disputing Parties shall direct the escrow agent to release theescrowed sums, including interest earned thereon, in accordance with thedecision or other resolution.  If theamount received by the receiving Party is less than the amount required inaccordance with Article 18.5, the Withholding Party shall reimburse thedifference to the Party or Parties entitled to payment.  The cost of establishing and maintaining theEscrow Account shall be initially borne by the Withholding Party, but shall beultimately borne by the Disputing Parties in inverse proportion to theirentitlement to the escrowed proceeds and interest thereon.  By way of example, if a Disputing Party isultimately entitled to all of the proceeds of the Escrow Account, the otherDisputing Parties shall bear the cost of establishing and maintaining theEscrow Account.

 

18.5                           Interest.

 

In the event that a Party withholds paymentpursuant to Article 18.4 or otherwise fails to make a payment when dueand it is determined in accordance with Article 18 or otherwise agreedthat all or any portion of such funds should have been paid when invoiced orotherwise

 

63

----

 

due, the Party that withheld such payment or otherwise failed to makefull payment shall pay to the appropriate Parties the full amount overdue,together with interest thereon at the Agreed Rate from the date such sums wereoriginally due to the date paid.  In theevent that it is determined in accordance with Article 18 or otherwiseagreed that a Party has received an overpayment under this Agreement, the Partythat received such overpayment shall reimburse the overpaying Party the amountof such overpayment together with interest thereon at the Agreed Rate from thedate such sum was overpaid to the date of such reimbursement.

 

# **ARTICLE 19.REMEDIES**

# ** **

19.1                           All Remedies - Setoff.

 

In the eventany Party (the “Defaulting Party”) fails to pay when due any amount owing by itto the other Parties (the “Non-Defaulting Parties”) under this Agreement orfails to perform or observe any covenant, condition, or agreement to beperformed or observed under this Agreement or the Interconnection and OperatingAgreement, each Non-Defaulting Party shall have available to it all remedies,legal and equitable, including those available in order to enforce payment ofany such amount or performance or observance of any such covenant, condition,or agreement, subject to the defaulting Party’s rights to cure default underArticle 16.5.  All overdue paymentsshall bear interest at the Agreed Rate. Further, the Non-Defaulting Parties shall have the right to setoffagainst any amount owed to them by the Defaulting Party the amount of anypayment which such Party has failed to pay when due under this Agreement or theInterconnection and Operating Agreement. In addition, the Non-Defaulting Parties shall have the other rights andremedies available to them under this Article 19.

 

19.2                           Injunctive Relief and SpecificPerformance.

 

The Partieshereto agree and acknowledge that the failure to perform any of theirrespective obligations (except with respect to Article 6.5.4 hereof) underthis Agreement, including the execution of documents which may be reasonablyrequested pursuant to this Agreement, would cause irreparable injury to theother Parties and that the remedy at law for any violation or threatenedviolation thereof would be inadequate, and further agree that the other Partiesshall be entitled to a temporary or permanent injunction, specific performanceor other equitable relief specifically to enforce such obligation without thenecessity of proving the inadequacy of its legal remedies.

 

19.3                           No Remedy Exclusive.

 

Except as otherwise provided in this Agreement, no remedy conferredupon or reserved to the Parties hereto in this Agreement is intended to beexclusive of any other remedy or remedies available hereunder or now orhereafter existing at law, in equity, or by statute or otherwise, but each andevery such remedy shall be cumulative and shall be in addition to every othersuch remedy.  The pursuit by any Party ofany specific remedy shall not be deemed to be an election of that remedy to theexclusion of any other or others, whether provided hereunder or by law, equity,or statute.

 

64

----

 

19.4                           Failure to Participate in IncrementalCapital Assets.

 

If IMPA orIMEA fails to make any payment of its share of the cost of Incremental CapitalAssets, the Companies shall have the right, at their election, to give writtennotice of such failure to the Party that has failed to make such payment.  In addition to the right to receive intereston such overdue payment, if such payment (with interest due thereon at theAgreed Rate) remains unpaid ninety (90) calendar days after the giving of thewritten notice first referred to in this paragraph, then (i) the non-payingParty’s rights to make any further payments of its share of the cost of theIncremental Capital Asset shall thereupon terminate, and (ii) the respectiveOwnership Interest shall be adjusted in accordance with the following formula:

 

ADD = ALGE*IPCT/(INP+ALGE)

 

where:

 
| ADD    | =      |   | Additional Ownership Interest accruing to the Party or Parties as a  result of making the additional investment to complete construction of  Incremental Capital Assets (there shall be a corresponding reduction in the  Ownership Interest of the non-paying Party. |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                                  |
| INP    | =      |   | Investment made by the non-paying Party or Parties for its or their  respective Ownership Interest to the time of the written notice first  referred to in this Article 19.4.                                                                                    |
|   |   |   |                                                                                                                                                                                                                                                                  |
| ALGE   | =      |   | Additional investment made by the paying Party or Parties to complete  construction of Incremental Capital Assets as aforesaid.                                                                                                                                       |
|   |   |   |                                                                                                                                                                                                                                                                  |
| IPCT   | =      |   | The non-paying Party’s Percentage at the time of the written notice  first referred to in this Article 19.4.                                                                                                                                                |

 

If either IMPA or IMEA fails to make a payment of its share of the costof an Incremental Capital Asset, but not both, then the Companies will notifythe other paying Party and such other paying Party shall fund its proportionateshare (based on its relative Percentage) of the additional investment of thenon-paying Party.  The Companies willthen calculate the portion of the ADD to which they and the other Paying Partyare entitled based on their respective additional investments.

 

19.5                           Failure to Participate inConstruction Costs.

 

In the event that a Partyvotes in the Coordination Committee against an amendment to the ConstructionBudget that constitutes a Major Change, such Party shall give written notice tothe other Parties, within five (5) calendar days of such vote, specifyingwhether it will or will not make payment of its share of the additionalConstruction Costs (and the supervisory fee thereon in accordance withArticle 9.1) arising from such amendment to the Construction Budget.  If such Party gives notice that it will notmake such payment or if such Party fails to make such payment, its rights tomake such payment shall thereupon terminate and the Ownership Interests in theTrimble County Unit 2 Project shall be adjusted in accordance with thefollowing formula:

 

65

----

 

ADD = IINV/(NC*$1100/kW)

 

where:

 
| ADD    | =      |   | Additional percentage of the Trimble County Unit 2 to be transferred  from the nonfunding Party to the funding Parties in proportion to their  respective Percentages. |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                   |
| IINV   | =      |   | Incremental investment made by the funding Party resulting from the  nonfunding Party’s failure to pay.                                                           |
|   |   |   |                                                                                                                                                                   |
| NC     | =      |   | Nominal capacity of the unit at 59? F in kilowatts.                                                                                                                    |

 

# **ARTICLE 20.MISCELLANEOUS**

# ** **

20.1                           Governing Law.

 

The validity,interpretation, and performance of this Agreement and each of its provisionsshall be governed by the laws of the Commonwealth of Kentucky, except that thepower and authority of IMPA to enter into this Agreement shall be governed bythe laws of the State of Indiana and the power and authority of IMEA to enterinto this Agreement shall be governed by the laws of the State of Illinois.

 

20.2                           Notice to Parties.

 

Unlessotherwise specifically provided in this Agreement, any notice, consent, orother communication required to be made under this Agreement shall be addressedto or made by such officer, agent, representative, or employee of a Party assuch Party may, from time-to-time, designate in writing, provided, however, anywritten notices hereunder shall be delivered in person, by certified mail, orby recognized next working day carrier, to the named officer of the Party atthe address listed below, provided, further that any Party may, fromtime-to-time, change such designated officer or the address thereof by givingwritten notice of such change to the other Parties.  Notice shall be deemed given when received.  Any requirement for notice in writing may bemet by telecopy or other electronic means of communicating written or printedmaterial, if promptly confirmed in writing in a manner permitted by theprevious sentence.

 

To Louisville:

 

Vice President of Generation

LOUISVILLE GAS AND ELECTRIC COMPANY

220 West Main Street

Post Office Box 32010 (40232)

Louisville, Kentucky 40202

 

To Kentucky Utilities:

 

66

----

 

Vice President of Generation

KENTUCKY UTILITIES COMPANY

220 West Main Street

Post Office Box 32010 (40232)

Louisville, Kentucky 40202

 

To IMPA:

 

President

INDIANA MUNICIPAL POWER AGENCY

11610 North College Avenue

Carmel, Indiana 46032

 

To IMEA:

 

General Manager & CEO

ILLINOIS MUNICIPAL ELECTRIC AGENCY

919 South Spring Street

Springfield Illinois 62704

 

20.3                           Article Headings Not to AffectMeaning.

 

Thedescriptive headings of the various articles of this Agreement have beeninserted for convenience of reference only and shall in no way modify orrestrict any of the terms or provisions hereof.

 

20.4                           Counterparts.

 

This Agreement(and any amendments hereto) may be executed simultaneously in four or morecounterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.

 

20.5                           Emergency.

 

Notwithstandingany other provision of this Agreement to the contrary, in the event of anEmergency, the Companies shall be entitled to take such action withoutconsultation with the Coordination Committee as to best protect and promote thedevelopment, construction, completion operation, safety or security of theTrimble County Unit 2 Project.

 

20.6                           Severability.

 

In the eventthat any provision of this Agreement, or the application of any such provisionto any Person or circumstance, shall be held invalid or unenforceable, theremainder of this Agreement, or the application of such provision to Persons orcircumstances other than those as to which it is held invalid or unenforceable,shall not be affected thereby.

 

67

----

 

20.7                           Integration.

 

The terms andprovisions contained in this Agreement and the Interconnection and OperatingAgreement constitute the entire agreement between the Parties in regard to therespective matters of said Agreement, and shall supersede all previouscommunications, representations, or agreements, either oral or written, betweenthe Parties with respect to the respective subject matters of said agreements.

 

20.8                           Computation of Time.

 

In computingany period of time prescribed or allowed by this Agreement, the calendar day ofthe act, event, or default from which the designated period of time begins torun shall not be counted.  The lastcalendar day of the period so computed shall be counted, unless it is aSaturday, Sunday, or legal holiday recognized by the Companies, in which eventthe period shall run until the end of the next calendar day which is neither aSaturday, Sunday, nor legal holiday.

 

20.9                           Waiver.

 

Any waiver atany time, by any Party, of its rights with respect to another Party, or withrespect to any other matter arising in connection with this Agreement, shallnot be considered a waiver with respect to any subsequent default or matter.

 

20.10                     Equal Opportunity Clause.

 

During theperformance of those parts of this Agreement relating to the construction by aParty of any Initial or Incremental Capital Assets, such Party agrees asfollows:

 

(i)                                     SuchParty will not discriminate against any employee or applicant for employmentbecause of any protected class status, such as race, color, religion, sex, ageor national origin.  Such Party will takeaffirmative action to insure that applicants are employed, and that employeesare treated, during employment, without regard to their protected class status.  Such action shall include, but not be limitedto, the following:  employment,upgrading, demotion, or transfer; recruitment or recruitment advertising;layoff or termination; rates of pay or other forms of compensation; andselection for training, including apprenticeship.  Such Party agrees to post, in conspicuous places,available to employees and applicants for employment, notices setting forth theprovisions of this non-discrimination clause;

 

(ii)                                  SuchParty will, in all solicitations or advertisements for employees place by or onbehalf of such Party, state that all qualified applicants will receiveconsideration for employment without regard to race, color, religion, sex, ageor national origin;

 

(iii)                               SuchParty will send to each labor union or representative of workers with which ithas a collective bargaining agreement or other contract or understanding, anotice, to be provided, advising the said labor union or workers’representative of such Party’s commitments under this Article 20.10, andshall post copies of the notice in conspicuous places, available to employeesand applicants for employment;

 

68

----

 

(iv)                              SuchParty will comply with all provisions of Executive Order No. 11246 ofSeptember 24, 1965, and of the rules, regulations, and relevant orders ofthe Secretary of Labor;

 

(v)                                 SuchParty will furnish all information and reports required by Executive Order No.11246 of September 24, 1965, and by the rules, regulations, and orders ofthe Secretary of Labor, or pursuant thereto, and will permit access to its books,records, and accounts by the administering agency and the Secretary of Labor,for purposes of investigation, to ascertain compliance with such rules,regulations, and orders;

 

(vi)                              Inthe event of such Party’s non-compliance with the non-discrimination clauses ofthis Agreement, or with any of the said rules, regulations, or orders, thisAgreement may be canceled, terminated, or suspended, in whole or in part, andsuch Party may be declared ineligible for further Government contracts orfederally assisted construction contracts in accordance with proceduresauthorized in Executive Order No. 11246 of September 24, 1965, and suchother sanctions may be imposed and remedies invoked as provided in saidExecutive Order or by rule, regulation, or order of the Secretary of Labor, oras otherwise provided by law;

 

(vii)                           SuchParty will includes the words “During the performance of this contract, thecontractor agrees as follows:” followed by the provisions of sections (i)through (vi) of this Article 20.10 in every subcontract or purchase order,unless exempted by rules, regulations, or orders or the Secretary of Laborissued pursuant to Section 204 of Executive Order No. 11246 ofSeptember 24, 1965, so that such provisions will be binding upon each subcontractoror vendor.  Such Party will take suchaction with respect to any subcontract or purchase order as the administeringagency may direct as a means of enforcing such provisions, including sanctionsfor non-compliance; provided, however, that in the event such Party becomesinvolved in, or is threatened with, litigation by a subcontractor or vendor asa result of such direction by the administering agency, such Party may requestthe United States to enter into such litigation to protect the interests of theUnited States;

 

(viii)                        Forpurposes of this Agreement, the term “this Agreement,” as used in thisArticle 20.10 shall mean those parts of this Agreement relating to theconstruction by such Party of any additions, betterments, or improvements tothe property.  Nothing in thisArticle 20 shall be construed to prevent such Party from resisting,challenging, contesting, or appealing any law, statute, regulation, or decisionof any federal, state, or local government or agency which such Party claims tobe in invalid, unlawful, arbitrary, or capricious.

 

20.11                     Inflation.

 

Monetary thresholds asexpressed in this Agreement in Articles 7.5.6, 7.5.7, and 8.1, each shallbe adjusted on each anniversary of the Execution Date hereof by the percentagechange in the Producer Price Index Turbines and Turbine Generator Sets (PPI PCU3511#(N), June 1982 = 100) during the immediately succeeding year.  Adjustments shall be made on final reviseddata.  If such index ceases to bepublished, a similar index shall be selected by the Parties in substitutionthereof.  If such index is rebased,appropriate adjustments to this formula will be made by the Parties to carryout the original intention of the Parties.

 

69

----

 

20.12                     Condemnation.

 

In the eventany portion of the Trimble County Unit 2 Project shall be condemned and takenby exercise of any right of eminent domain or for public or quasi-public use,and the Parties hereto are able to continue their use and operation of theremaining portion thereof, this Agreement shall not terminate.  The proceeds of any payment of any award orcompensation arising from such condemnation (net of any unrecovered expenses ofany nature incurred by the Parties with respect thereto, which expenses shallbe fully reimbursed to the Party or Parties incurring such expenses) shall beapportioned between the Parties on the basis of their respectivePercentages.  In the event that all orsubstantially all of the Trimble County Unit 2 Project shall be condemned andtaken by exercise of any right of eminent domain or for public or quasi-publicuse, this Agreement shall terminate as of the date of said taking and theproceeds of any award or compensation arising from such condemnation (net ofany unrecovered expenses of any nature incurred by the Parties with respectthereto, which expenses shall be fully reimbursed to the Party or Partiesincurring such expenses) shall be apportioned between the Parties on the basisof their respective Percentages.

 

20.13                     Americans with Disabilities Act.

 

Inconstructing, maintaining and operating the Trimble County Unit 2 Project, theCompanies shall comply with the Americans with Disabilities Act.

 

20.14                     Amendments.

 

This Agreementmay be amended only by a written instrument duly executed by the Parties.  When so amended, the Parties shall execute aconformed copy of the Agreement, which conformed copy shall contain allamendments to the Agreement and shall thereafter govern the Parties.

 

20.15                     No Agency or Third Party Beneficiary.

 

Except asexpressly provided herein, nothing in this Agreement is intended to or shallcreate an agency whereby a Party becomes an agent for another Party in anyrelationship with any Person.  ThisAgreement is solely among the Companies, IMPA and IMEA and shall not beconstrued to create any third-party beneficiary relationship with any otherPerson.

 

20.16                     Obligations Are Several.

 

The duties,obligations and liabilities of the Parties are intended to be several and notjoint or collective, and no Party shall be jointly and severally liable for theacts, omissions, or obligations of any other Party.

 

20.17                     Cooperation.

 

The Partiesshall cooperate with each other and provide information as may be necessary tofacilitate, among other things, the filing of applications for authorizations,permits, licenses, or financing and the execution of such other documents asmay be reasonably necessary to carry out

70

----

 

the provisions of this Agreement, subject to reasonable protectionsnecessary to preserve each Party’s confidential or proprietary information.

 

20.18                     Intent.

 

The Parties agree that alldiscussions and negotiations related to this Agreement relate expressly to theTrimble County Unit 2 Project and do not amend and may not be used by any Partyto interpret any provision or course of conduct arising out of the Unit 1Participation Agreements.  Similarly, anysimilarity to or difference between the provisions of this Agreement and theprovisions of the Unit 1 Participation Agreements shall not be used in anyway, directly or indirectly, to interpret the meaning or intent of the partiesto the Unit 1 Participation Agreements.

 

20.19                     Approvals.

 

The Partiesshall use their respective Best Efforts to obtain as quickly as possible allrequisite governmental, regulatory, and judicial approvals, includingCommission Approvals, where applicable, of the consummation of the transactionscontemplated herein.

 

20.20                     Access.

 

Officialrepresentatives of the Parties and their designees, including any Party’s bondtrustee, shall have the right, upon sufficient advance notice to the Companies,to enter upon the Trimble County Unit 2 Project facilities subject to allsafety, insurance, and industrial security requirements and the need forefficient operation of the Trimble County Unit 2 Project.

 

20.21                     Further Assurances.

 

The Partiesshall execute such other instruments, if any, as may be necessary orappropriate to confirm the respective rights and interests of the Parties hereunderand to maintain their respective Ownership Interests.

 

20.22                     Joint Effect.

 

Preparation of this Agreementand its appendices has been a joint effort of the Parties and the resultingdocument (or any portion thereof) is not to be construed more severely againstone of the Parties than against the others.

 

20.23                     Certain Costs.

 

In the course of undertaking the DevelopmentWork, the Construction Work, the Operating Work or the construction orprocurement of Incremental Capital Assets, the Companies are entitled to takeactions, that in their reasonable judgment are in the best interests of the Trimble County Unit 2Project.  If such actions causeLouisville, Kentucky Utilities, or both of them to experience a cost or expenseoutside the Trimble County Unit 2 Project, a fair share of such cost or expenseshall be allocated to the Trimble County Unit 2 Project to be shared by theParties in proportion to their respective Percentages, provided that suchactions have been 

 

71

----

 

presentedto and approved unanimously by the Coordination Committee, which approval shallnot be unreasonably withheld.

 

20.24                     Good Utility Practice.

 

Each Party hereby agrees toperform the Work and other obligations to be performed by it under thisAgreement in accordance with Good Utility Practice.

 

20.25                     Affiliate Transactions.

 

The Companies shall be entitled to engage,contract with or otherwise arrange for the use of any of their employees, theemployees of Affiliates, Affiliates or non-Affiliates in connection withthe performance of the Companies’ obligations under this Agreement.  The cost of engaging, contracting with orotherwise arranging for the use of any employee, the employees of Affiliates,Affiliates or non-Affiliates shall be charged and allocated to the Parties onthe same basis as such cost would be charged and allocated to any othergenerating station owned by either of the Companies when so engaging,contracting with or otherwise arranging for the use of its employees, employeesof Affiliates, Affiliates or non-Affiliates. If the Companies desire to enter into a contract or other arrangementwith an Affiliate (each such contract or other arrangement an “AffiliateContract”), such contract or arrangement shall be negotiated and administeredin good faith, on a basis no less favorable than an arms’ length basis, haveterms, when taken as a whole, at least as favorable to the Parties as thoseavailable in the market from non-Affiliates. If any Affiliate Contract, amendment thereof, or any aspect of the workor obligations required thereunder is approved unanimously by the CoordinationCommittee, IMPA and IMEA shall be deemed to have waived any right to object tothe terms and conditions of such Affiliate Contract, amendment or aspect to theextent so approved, including on grounds of the absence of good faith, lack ofarms’ length negotiations or the presence of terms not at least as favorable tothe Parties as those available in the market from non-Affiliates.

 

# **ARTICLE 21.TERM AND TERMINATION**

# ** **

21.1                           Termination.

 

21.1.1                  Retirement.

 

This Agreementshall terminate at such time as those activities that are necessary to retireTrimble County Unit 2 from service have been completed.  Retirement from service shall include:  dismantling, demolishing, and removal ofequipment, facilities, and structures; security; maintenance; disposing ofdebris; and any site work necessary to lawfully and responsibly effect suchretirement.  Termination of thisAgreement, however, shall not terminate or affect, as between the Parties, thecontinued liability, if any, of the Parties for environmental considerations orother obligations imposed by Applicable Law, nor shall it terminate or affect,as between the Parties, the receipt and pro rata sharing of benefits, if any,accruing to the Parties for environmental allowances or other entitlementsprovided by Applicable Law.

 

72

----

 

21.1.2                  Construction Closing Does Not Occur.

 

Except as setforth in this Article 21.1.2 or Article 2.1.3, if the ConstructionClosing has not occurred on or before December 31, 2005 (as such date maybe extended by the Coordination Committee or as provided in thisArticle 21.1.2), (i) this Agreement shall terminate and no Party shallhave any further liability, each to the other, on account of such termination,(ii) each Party shall remain liable for all of its obligations incurred priorto the date of such termination and shall not be entitled to a refund or returnof any amounts paid or expended under this Agreement, and (iii) the respectiverights of IMPA or IMEA pursuant to Article 15 of the Unit 1Participation Agreements shall not be reinstated.  Notwithstanding the foregoing, if theconditions to the participation of each of IMPA and IMEA in the ConstructionClosing as set forth in Article 6 have been satisfied or waived by IMPAand IMEA respectively and, IMPA and IMEA, in good faith, tender the paymentsrequired pursuant to Article 6.2.1, and are otherwise willing to close thetransactions contemplated herein at the Construction Closing on or beforeDecember 31, 2005 (as such date may be extended by the CoordinatingCommittee), and the Companies are not able to close, but, in good faith,continue to pursue the development of the Trimble County Unit 2 Project or asubstantially similar project based on the Development Work, then the last dayfor the Construction Closing to occur shall be extended from December 31,2005, to and until the earlier of the date upon which the Companies withdrawpursuant to Article 6.5.1 or the Companies schedule a ConstructionClosing on no less than seven (7) days’ notice if such closing is scheduled tooccur on or prior to January 31, 2006, or forty-five (45) days’ notice ifsuch closing is scheduled to occur after January 31, 2006.  Should the Companies fail to pursue thedevelopment of the Trimble County Unit 2 Project or a substantially similarproject based on the Development Work, the Companies shall be deemed to havewithdrawn under Article 6.5.1 and the rights of each of IMPA and IMEApursuant to Article 15 of the Unit 1 Participation Agreement to which itis a party shall be reinstated.

 

21.1.3                  Withdrawal of the Companies.

 

If theCompanies withdraw from this Agreement pursuant to Article 6.5.1 after theperiod specified in clause (i) or (ii) of Article 6.5.6, and IMPA and IMEAdo not withdraw and are then prepared to proceed in accordance with thisAgreement to the Construction Closing, this Agreement shall terminate on thedate of such withdrawal and no Party shall have further liability, each to theother, on account of such termination, except as provided below.  If such withdrawal by the Companies isprimarily for Development Reasons, this Agreement shall terminate and eachParty shall remain liable for its obligations incurred hereunder prior to thedate of withdrawal and no Party shall be entitled to a refund or return for anyamounts paid or expended under this Agreement. If such withdrawal by the Companies is primarily for reasons other thanDevelopment Reasons, each Party shall be liable for its obligations incurredhereunder prior to the date of such withdrawal, provided, however, theCompanies shall refund the Refund Amount to IMPA and IMEA.  Upon any withdrawal by the Companies underthis Article 21.1.3, the rights of each of IMPA and IMEA pursuant toArticle 15 the Unit 1 Participation Agreement to which it is a partyshall be reinstated.

 

21.1.4                  Withdrawal of IMPA and IMEA.

 

If IMPA andIMEA shall both withdraw from this Agreement pursuant to Article 6.5 andthe Companies then intend to proceed to develop the Trimble County Unit 2Project, this

 

73

----

 

Agreement shall terminate on the date of such withdrawal and no Partyshall have further liability, each to the other, on account of suchtermination, provided, however, each Party shall remain liable for all of itsobligations incurred prior to the date of such termination and shall not beentitled to a refund or return of any amounts paid or expended under thisAgreement and, provided, further, the rights of each of IMPA and IMEA pursuantto Article 15 of the Unit 1 Participation Agreement to which it is aparty shall not be reinstated.

 

21.2                           Retirement of Property.

 

TheCoordination Committee shall have authority in decisions regarding theretirement from service of any and all property constituting a portion ofTrimble County Unit 2 or the Trimble County General Plant Facilities which, inthe Coordination Committee’s judgment, is damaged, worn out, uneconomic,unreliable, obsolescent, or otherwise unfit for use.  However, Trimble County Unit 2 shall not beretired from service as a generating unit without the written consent of theParties prior to the earlier of:

 

(i)                                     theexpiration of thirty-five (35) years following the Commercial Operation Date ofTrimble County Unit 2; or

 

(ii)                                  thefinal maturity date of the project revenue bonds originally issued by IMPA orIMEA to finance their respective initial Ownership Interests or to pay the costof any improvements or repairs issued thereafter, or the final maturity date ofany bonds issued by IMPA or IMEA to refund such originally issued bonds.

 

21.3                           Retirement Costs.

 

All costs(less salvage credits, if any) associated with retirement of the Trimble CountyUnit 2 Project or portions thereof including: dismantling, demolishing, and removal of equipment, facilities, andstructures (including the cost of transportation and handling incidentalthereto); security; maintenance; disposing of debris; and any site worknecessary to lawfully and responsibly effect such retirement, shall be sharedby the Parties in proportion to their respective Percentages.  Payments for these costs (less salvagecredits, if any) as they are incurred, shall be made in accordance with theprovisions of Article 10.  If suchsalvage credits exceed such costs, the difference shall be shared by theParties in proportion to their respective Percentages.

 

21.4                           Effect of Withdrawal or Transfer onAgent.

 

Except asprovided below, at such time as IMPA or IMEA withdraws from this Agreement ortransfers all of its Ownership Interest in accordance with this Agreement, theagency granted to the Companies by IMPA and IMEA hereunder, as appropriate,shall be revoked prospectively and all prior acts shall remain valid andbinding, subject to the conditions and limitations set forth in thisAgreement.  Notwithstanding theforegoing, the appointment of the Companies as agent for the Parties hereundershall continue (i) with respect to the agency granted pursuant toArticle 12.1, for as long as necessary after such withdrawal or transferfor the Companies to fulfill their responsibilities under Article 12.1 inrespect of periods during which IMPA or IMEA was a Party to this Agreement and(ii) as necessary to manage and administer executory contracts, real estate andpermits and approvals of the agent or the Parties.  IMPA and IMEA each further agree that uponwithdrawal or transfer of its Ownership Interest it will

 

74

----

 

cooperate with the Companies and take any and all further actions andshall execute and file where appropriate any and all such further legaldocuments and papers as may be reasonable under the circumstances in order tofacilitate such withdrawal or transfer and the continued development,construction or operation of the Trimble County Unit 2 Project, includingaction to seek any required governmental or regulatory approval and to obtainany other required consent, release, amendment, or other similar document.

 

75

----

 

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to beduly executed.

 

 

 
|    |      |   | LOUISVILLE GAS AND ELECTRIC COMPANY |
|---------|-----------|--------|-------------------------------------|
|    |      |   |                                |   |
|    |      |   |                                |   |
| Attest: |      |   | By:                                 |   |
|    | Secretary |   |                                | Name: |
|    |      |   |                                | Title: |
|    |      |   |                                |   |
|    |      |   |                                |   |
|    |      |   | KENTUCKY UTILITIES COMPANY          |
|    |      |   |                                |   |
|    |      |   |                                |   |
| Attest: |      |   | By:                                 |   |
|    | Secretary |   |                                | Name: |
|    |      |   |                                | Title: |
|    |      |   |                                |   |
|    |      |   |                                |   |
|    |      |   | INDIANA MUNICIPAL POWER AGENCY      |
|    |      |   |                                |
|    |      |   |                                |   |
| Attest: |      |   | By:                                 |   |
|    | Secretary |   |                                | Name: |
|    |      |   |                                | Title: |
|    |      |   |                                |   |
|    |      |   |                                |   |
|    |      |   | ILLINOIS MUNICIPAL ELECTRIC AGENCY  |
|    |      |   |                                |   |
|    |      |   |                                |   |
| Attest: |      |   | By:                                 |   |
|    | Secretary |   |                                | Name: |
|    |      |   |                                | Title: |

 

----