<PAGE>   1
                                                             EXHIBIT 10(k)




                            REIMBURSEMENT AGREEMENT

                                     AMONG

                   CENTRAL LOUISIANA ELECTRIC COMPANY, INC.,
                        VARIOUS FINANCIAL INSTITUTIONS,
                     WESTDEUTSCHE LANDESBANK GIROZENTRALE,
                                NEW YORK BRANCH,
                       AS ISSUER OF THE LETTER OF CREDIT,

                                      AND

                      WESTDEUTSCHE LANDESBANK GIROZENTRALE
                                NEW YORK BRANCH
                                    AS AGENT


                          Dated as of October 15, 1997


                      Parish of DeSoto, Series 1991B Bonds
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                               TABLE OF CONTENTS

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ARTICLE I     DEFINITIONS   . . . . . . . . . . . . . . . . . . . . . . . . .  2

Section 1.01. Certain Defined Terms   . . . . . . . . . . . . . . . . . . . .  2

ARTICLE II    LETTER OF CREDIT; FEES  . . . . . . . . . . . . . . . . . . . . 11

Section 2.01. Agreement to Issue Letter of Credit   . . . . . . . . . . . . . 11
Section 2.02. Adjustment to LC Commitments  . . . . . . . . . . . . . . . . . 11
Section 2.03. Request to Extend the Letter of Credit  . . . . . . . . . . . . 11
Section 2.04. Letter of Credit Fee  . . . . . . . . . . . . . . . . . . . . . 12
Section 2.05. Fronting Fee  . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.06. Transfer Fees   . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.07. Drawing Fees  . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.08. Additional Fees   . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.09. Taxes   . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.10. Increased Costs   . . . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE III   REPAYMENT OF DRAWINGS   . . . . . . . . . . . . . . . . . . . . 14

Section 3.01. Repayment of Drawings; Advances   . . . . . . . . . . . . . . . 14
Section 3.02. Repayment of Advances   . . . . . . . . . . . . . . . . . . . . 14
Section 3.03. Overdue Interest  . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.04. Payments; Computations  . . . . . . . . . . . . . . . . . . . . 15
Section 3.05. Payments to Banks   . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.06. Sharing Provision   . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.07. Obligations Absolute  . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE IV    PREPAYMENTS; ESCROW BONDS   . . . . . . . . . . . . . . . . . . 17

Section 4.01. Prepayments   . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.02. Release of Escrow Bonds   . . . . . . . . . . . . . . . . . . . 17

ARTICLE V     CONDITIONS PRECEDENT  . . . . . . . . . . . . . . . . . . . . . 17

Section 5.01. Delivery of Bonds and Operative Documents   . . . . . . . . . . 17
Section 5.02. Intentionally Omitted   . . . . . . . . . . . . . . . . . . . . 18
Section 5.03. Receipt of Documents  . . . . . . . . . . . . . . . . . . . . . 18
Section 5.04. Representations and Warranties; Defaults  . . . . . . . . . . . 19
Section 5.05. Certain Other Matters   . . . . . . . . . . . . . . . . . . . . 19
Section 5.06. Proceedings   . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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ARTICLE VI    REPRESENTATIONS AND WARRANTIES  . . . . . . . . . . . . . . . . 20

Section 6.01. Due Organization, Etc   . . . . . . . . . . . . . . . . . . . . 21
Section 6.02. No Conflicts  . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.03. Due Authorization   . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.04. Enforceability  . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.05. Litigation  . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.06. Compliance with ERISA   . . . . . . . . . . . . . . . . . . . . 22
Section 6.07. No Defaults   . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.08. Financial Statements  . . . . . . . . . . . . . . . . . . . . . 23
Section 6.09. Taxes   . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.10. Disclosure  . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.11. Title to Property   . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.12. Environmental and Other Matters   . . . . . . . . . . . . . . . 24
Section 6.13. Operative Documents   . . . . . . . . . . . . . . . . . . . . . 24
Section 6.14. Margin Stock  . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.15. Investment Company  . . . . . . . . . . . . . . . . . . . . . . 24

ARTICLE VII   AFFIRMATIVE COVENANTS   . . . . . . . . . . . . . . . . . . . . 24

Section 7.01. Preservation of Corporate Existence   . . . . . . . . . . . . . 24
Section 7.02. Compliance with Law; Environmental and Other Matters  . . . . . 25
Section 7.03. Performance of Agreements   . . . . . . . . . . . . . . . . . . 25
Section 7.04. Maintenance of Insurance  . . . . . . . . . . . . . . . . . . . 25
Section 7.05. Furnishing of Information   . . . . . . . . . . . . . . . . . . 25
Section 7.06. ERISA   . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.07. Financial Statements  . . . . . . . . . . . . . . . . . . . . . 26
Section 7.08. Inspection  . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.09. Payment of Taxes, Etc   . . . . . . . . . . . . . . . . . . . . 28
Section 7.10. Maintenance of Property   . . . . . . . . . . . . . . . . . . . 28
Section 7.11. Certain Notices   . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE VIII  NEGATIVE COVENANTS  . . . . . . . . . . . . . . . . . . . . . . 28

Section 8.01. Consolidation, Merger, Sale of Assets, Etc.   . . . . . . . . . 28
Section 8.02. Redemption or Purchase of Bonds; Adjustment
              of Interest Rate Periods  . . . . . . . . . . . . . . . . . . . 29
Section 8.03. Amendment of Operative Document   . . . . . . . . . . . . . . . 29
Section 8.04. Liens   . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.05. Interest Coverage Ratio   . . . . . . . . . . . . . . . . . . . 32
Section 8.06. Tangible Net Worth Ratio  . . . . . . . . . . . . . . . . . . . 32
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ARTICLE IX     EVENTS OF DEFAULT  . . . . . . . . . . . . . . . . . . . . . . 32

Section 9.01.  Events of Default  . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.02.  No Remedy Exclusive  . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE X      THE AGENT  . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Section 10.01. The Agent  . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.02. Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.03. Investigation by Banks . . . . . . . . . . . . . . . . . . . . 36
Section 10.04. Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.05. Reliance by the Agent  . . . . . . . . . . . . . . . . . . . . 36
Section 10.06. Indemnification  . . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.07. Agent as a Bank  . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.08. Resignation by the Agent . . . . . . . . . . . . . . . . . . . 37

ARTICLE XI    MISCELLANEOUS   . . . . . . . . . . . . . . . . . . . . . . . . 38

Section 11.01. Amendments, Etc  . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.02. Addresses for Notices  . . . . . . . . . . . . . . . . . . . . 38
Section 11.03. Set-off  . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 11.04. Indemnification  . . . . . . . . . . . . . . . . . . . . . . . 39
Section 11.05. Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . 39
Section 11.06. Liability of Parties . . . . . . . . . . . . . . . . . . . . . 41
Section 11.07. Expenses, Etc  . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.08. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.09. Consent to Jurisdiction  . . . . . . . . . . . . . . . . . . . 42
Section 11.10. Governing Law  . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11.11. Headings, Etc  . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11.12. Survival of Representations and Warranties . . . . . . . . . . 43
Section 11.13. Survival of Indemnities  . . . . . . . . . . . . . . . . . . . 43
Section 11.14. Satisfaction Requirement . . . . . . . . . . . . . . . . . . . 43
Section 11.15. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . 44
Section 11.16. Calculations . . . . . . . . . . . . . . . . . . . . . . . . . 44

Schedule I     List of Banks/LC Commitments/LC Percentages
Schedule II    Existing Liens

Exhibit A      Form of Irrevocable Letter of Credit
Exhibit B-1    Form of Opinion of Baker & Botts, L.L.P.
Exhibit B-2    Form of Opinion of William O. Bonin
Exhibit C      Form of Officer's Certificate
</TABLE>
<PAGE>   5
                            REIMBURSEMENT AGREEMENT

       REIMBURSEMENT AGREEMENT dated as of October 15, 1997, among CENTRAL
LOUISIANA ELECTRIC COMPANY, INC., a corporation organized and existing under
the laws of the State of Louisiana (the "Company"), the financial institutions
listed on Schedule I attached hereto (each a "Bank", and collectively the
"Banks"), and WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, as agent
(in such capacity, together with any successor in such capacity, the "Agent")
and as issuer of the below-referenced Letter of Credit (in such capacity,
"WestLB").

                             W I T N E S S E T H :

       WHEREAS, the Parish of DeSoto, State of Louisiana (the "Issuer"),
pursuant to the Act (as defined in the Indenture hereinafter referred to), has
issued and sold its Adjustable Tender Pollution Control Revenue Refunding Bonds
(Central Louisiana Electric Company, Inc. Project) Series 1991B in the
aggregate principal amount of $25,000,000 (the "Bonds") pursuant to a Trust
Indenture dated as of May 1, 1991 ,as amended and supplemented by a First
Supplemental Trust Indenture dated as of May 1, 1993 (as further amended and
supplemented from time to time in accordance with the terms thereof, the
"Indenture") from the Issuer to First National Bank of Commerce, as trustee
(together with its successors in trust and their assigns, the "Trustee"), and
has used the proceeds thereof, together with other available funds, to refund
and redeem in full the Prior Bonds (as hereinafter defined) pursuant to that
certain Refunding Agreement dated as of May 1, 1991 between the Issuer and the
Company (as amended from time to time in accordance with the terms thereof, the
"Refunding Agreement"), which Prior Bonds were issued by the Issuer to finance
the cost of acquiring, constructing, improving and equipping the Company's
undivided interest in certain air and water pollution control facilities, as
more specifically described in Exhibit B to the Refunding Agreement (the
"Project"); and

       WHEREAS, the Company has requested WestLB to issue its irrevocable
letter of credit in the form of Exhibit A attached hereto (the "Letter of
Credit", which term shall include any substitute therefor or replacement
thereof issued in accordance with the terms of the Letter of Credit) to replace
the irrevocable letter of credit issued by Swiss Bank Corporation in connection
with the Bonds; and

       WHEREAS, subject to and on the terms and conditions herein set forth,
WestLB is willing to issue the Letter of Credit on the date hereof; and

       WHEREAS, subject to and upon the terms and conditions herein set forth,
the Company, the Agent,WestLB and the Banks are willing to enter into this
Agreement as provided herein;

       NOW, THEREFORE, in consideration of the premises contained herein and in
order to induce WestLB to issue the Letter of Credit, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:





                                       1
<PAGE>   6
                                   ARTICLE I

                                  DEFINITIONS

            Section 1.01.  Certain Defined Terms.  In addition to the terms
defined elsewhere in this Agreement, the following terms shall have the
respective meanings set forth below (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):

       "A Drawing" shall have the meaning given to such term in the Letter of
       Credit, which shall be a drawing in respect of the payment of the
       portion of the Purchase Price corresponding to principal of the Bonds.

       "Advance" and "Advances" shall have the respective meanings given to
       such terms in Section 3.01 hereof.

       "Affiliate" shall mean, with respect to any Person, any other Person
       that, directly or indirectly through one or more intermediaries,
       controls, is controlled by, or is under common control with, such first
       Person.  The term "control" and "controlled" means the possession,
       directly or indirectly, of the power to direct or cause the direction of
       the management or policies of a Person, whether through the ownership of
       voting securities or partnership or other ownership interests, by
       contract or otherwise.

       "Agent" shall have the meaning given to such term in the first paragraph
       of this Agreement.

       "Agreement" shall mean this Reimbursement Agreement, as the same may be
       amended, supplemented or otherwise modified from time to time.

       "Bank" and "Banks" shall have the respective meanings given to such
       terms in the first paragraph of this Agreement.

       "Bankruptcy Law" shall mean title 11 of the United States Code or any
       similar federal, state or foreign law for the relief of debtors.

       "Base Rate" on any date shall mean the higher of (i) the rate which the
       Agent announces from time to time as its prime lending rate, the Base
       Rate to change when and as the prime lending rate changes or (ii)  1/2
       of 1% above the weighted average of the rates on overnight Federal funds
       transactions with members of the Federal Reserve System arranged by
       Federal funds brokers, as published for such day (or, if such day is not
       a Business Day, for the next preceding Business Day) by the Federal
       Reserve Bank of New York or if such rate is not so published





                                       2
<PAGE>   7
       for any day which is a Business Day, the average of the quotations for
       such day on such transactions received by the Agent from three Federal
       funds brokers of recognized standing selected by the Agent.  The Base
       Rate is a reference rate and does not necessarily represent the lowest
       or best rate actually charged to any customer.  The Agent, WestLB and
       any Bank may make commercial loans or other loans at rates of interest
       at, above or below the Base Rate.

       "B Drawing" shall have the meaning given to such term in the Letter of
       Credit, which shall be a drawing in respect of the payment of principal
       of the Bonds.

       "Bond Purchase Agreements" shall mean the two separate Bond Purchase
       Agreements, each dated May 29, 1991, among the Company, Smith Barney,
       Harris Upham & Co. Incorporated and the Issuer and The Industrial
       Development Board of the Parish of Rapides, Inc., respectively.

       "Bonds" shall have the meaning given to such term in the first recital
       of this Agreement.

       "Business Day" shall mean a day of the year other than a Saturday,
       Sunday or other day on which commercial banks located in the City of New
       York, New York are required or authorized by law to close or on which
       The New York Stock Exchange is not open.

       "Capitalized Lease Obligations" shall mean all rental obligations under
       a lease that are required to be accounted for and classified as
       capitalized leases on the balance sheet of the Company or any of its
       Subsidiaries under generally accepted accounting principles.

       "C Drawing" shall have the meaning given to such term in the Letter of
       Credit, which shall be a drawing in respect of the payment of interest,
       or the portion of Purchase Price corresponding to interest, on the
       Bonds.

       "CLECO Mortgage" shall mean the Indenture of Mortgage, dated as of July
       1, 1950, as supplemented and amended from time to time in accordance
       with its terms, by the Company to First National Bank of Commerce
       (formerly The National Bank of Commerce in New Orleans), as trustee
       thereunder.

       "Code" shall mean the Internal Revenue Code of 1986, as amended from
       time to time, and the regulations promulgated and rulings issued
       thereunder.  Section references to the Code are to the Code, as in
       effect on the date of this Agreement, and to any subsequent provisions
       of the Code amendatory thereof, supplemental thereto or substituted
       therefor.

       "Company" shall have the meaning given to such term in the first
       paragraph of this Agreement.





                                       3
<PAGE>   8
       "Consolidated Interest Expense" shall mean, for any period, all amounts
       accounted for (without duplication) during such period as interest on
       Indebtedness, including, without limitation, (i) interest payable in
       respect of all Indebtedness under this Agreement, (ii) the portion of
       any Capitalized Lease Obligation attributable to interest, (iii)
       commissions and other fees and charges payable in respect of all letters
       of credit and (iv) the net amount due, if any, in connection with any
       interest rate hedging arrangements.

       "Consolidated Net Earnings" shall mean consolidated revenues of the
       Company and its Subsidiaries less all operating and nonoperating
       expenses of the Company and its Subsidiaries including, without
       limitation, all charges of a proper character (including current and
       deferred taxes on income and current additions to reserves), but not
       including in net revenues any gains (net of expenses and taxes
       applicable thereto) in excess of losses resulting from the sale,
       conversion or other disposition of capital assets (i.e., assets other
       than current assets), any gains resulting from the write-up of assets,
       any equity of the Company or any Subsidiary in the unremitted earnings
       of any Person acquired by the Company or any Subsidiary through
       purchase, merger or consolidation or otherwise for any year prior to the
       year of acquisition or any deferred credit representing the excess of
       equity in any Subsidiary at the date of acquisition over the cost of the
       investment in such Subsidiary.

       "Consolidated Net Tangible Assets" shall mean the total amount of assets
       appearing on a consolidated balance sheet of the Company and its
       Subsidiaries less, without duplication, the following:  (i) all reserves
       for depreciation and other asset valuation reserves but excluding any
       reserves for deferred U.S. federal income taxes arising from accelerated
       amortization or otherwise; (ii) all intangible assets such as goodwill,
       trademarks, trade names, patents and unamortized debt discount and
       expense carried as an asset on such balance sheet; and (iii) all
       appropriate adjustments on account of minority interests of other
       Persons holding Voting Stock in any Subsidiary of the Company; all
       determined in accordance with generally accepted accounting principles.

       "Consolidated Tangible Net Worth" shall mean consolidated total
       shareholders' equity in the Company and its Subsidiaries, determined in
       accordance with generally accepted accounting principles, less the
       aggregate net amount of the following items to the extent, if any, such
       items were included in consolidated assets or deducted from consolidated
       liabilities in connection with the computation of such shareholders'
       equity:  (i) all licenses, patents, copyrights, trade names, trademarks,
       goodwill, experimental or organizational expense, unamortized debt
       discount and expense and all other assets which under generally accepted
       accounting principles are deemed to be intangibles; (ii) all investments
       other than Permitted Investments; (iii) any write-up of assets (other
       than current assets) after December 31, 1996; (iv) all assets located
       outside the United States of America and Canada and all Indebtedness
       from any Person to the extent the primary portion of such Person's
       assets or business operations are located outside the United States of
       America and Canada; and (v)





                                       4
<PAGE>   9
       the book value of net tangible assets of each Subsidiary acquired in
       so-called "pooling of interests" accounting treatment transactions, to
       the extent such book value at the time of such acquisition exceeds the
       fair value of the consideration paid for such acquisition.

       "Contingent Obligation" shall mean, as to any Person, any obligation of
       such Person guaranteeing or intended to guarantee any Indebtedness,
       lease, dividend or other obligation ("Primary Obligations") of any other
       Person (the "Primary Obligor") in any manner, whether directly or
       indirectly, including, without limitation, any obligation of such Person
       whether or not contingent, (i) to purchase any such Primary Obligation
       or any property constituting direct or indirect security therefor; (ii)
       to advance or supply funds (a) for the purchase or payment of any such
       Primary Obligation or (b) to maintain working capital or equity capital
       of the Primary Obligor or otherwise to maintain the net worth or
       solvency of the Primary Obligor; (iii) to purchase property, securities
       or services primarily for the purpose of assuring the holder of any such
       Primary Obligation of the ability of the Primary Obligor to make payment
       of any such Primary Obligation; or (iv) otherwise to assure or hold
       harmless the holder of such Primary Obligation against loss in respect
       thereof; provided, however, that the term Contingent Obligation shall
       not include endorsements of instruments for deposit or collection in the
       ordinary course of business.  The amount of any Contingent Obligation
       shall be deemed to be an amount equal to the stated or determinable
       amount of the Primary Obligation in respect of which such Contingent
       Obligation is made or, if not stated or determinable, the maximum
       reasonably anticipated liability in respect thereof (assuming such
       Person is required to perform thereunder) as determined by such Person
       in good faith.

       "Cooke Commission Guidelines" shall mean risk-based capital guidelines
       in accordance with the Basle Committee on Banking Regulations and
       Supervisory Practices set forth in a paper entitled "International
       Convergence of Capital Measurement and Capital Standards" dated July
       1988.

       "Custodian" shall mean any receiver, trustee, assignee, liquidator or
       similar official under any Bankruptcy Law.

       "Date of Issuance" shall mean the date on which the Letter of Credit
       shall be issued by WestLB to the Trustee pursuant to the terms of this
       Agreement.

       "Default" shall mean any event which with notice or lapse or time, or
       both, or the happening of any further condition, event or act, would
       become an Event of Default.

       "EBITDA" shall mean, for any period, Consolidated Net Earnings for such
       period before Consolidated Interest Expense, income taxes, depreciation
       and amortization for such period.





                                       5
<PAGE>   10
       "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
       as amended from time to time, and the regulations promulgated and
       rulings issued thereunder.  Section references to ERISA are to ERISA, as
       in effect on the date of this Agreement, and to any subsequent
       provisions of ERISA amendatory thereof, supplemental thereto or
       substituted therefor.

       "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of
       ERISA) which together with the Company or any Subsidiary of the Company
       would be deemed to be a member of the same "controlled group" within the
       meaning of Section 414(b), (c), (m) and (o) of the Code.

       "Escrow Bond" shall have the meaning given to such term in the
       Indenture.

       "Event of Default" shall have the meaning given to such term in Section
       9.01 hereof.

       "Existing Directors" shall mean those individuals who on the date of
       this Agreement constitute the Board of Directors of the Company.

       "Extension Request" shall have the meaning given to such term in Section
       2.03 hereof.

       "Government Acts" shall have the meaning given to such term in Section
       11.04 hereof.

       "Indebtedness" shall mean, as to any Person, without duplication, (i)
       all indebtedness (including principal, interest, fees and charges) of
       such Person for borrowed money or for the deferred purchase price of
       property or services, excluding trade accounts payable in the ordinary
       course of business; (ii) the face amount of all letters of credit issued
       for the account of such Person and, without duplication, all drafts
       drawn thereunder; (iii) all liabilities secured by any Lien on any
       property owned by such Person, whether or not such liabilities have been
       assumed by such Person; (iv) the aggregate amount required, under
       generally accepted accounting principles, to be capitalized under leases
       under which such Person is the lessee; and (v) all Contingent
       Obligations of such Person.

       "Indenture" shall have the meaning given to such term in the first
       recital of this Agreement.

       "Issuer" shall have the meaning given to such term in the first recital
       of this Agreement.

       "Interest Increase Date" shall have the meaning given to such term in
       Section 3.01 hereof.

       "LC Commitment" shall have the meaning given to such term in Section
       2.02 hereof.

       "LC Percentage" shall have the meaning given to such term in Section
       2.02 hereof.





                                       6
<PAGE>   11
       "Letter of Credit" shall have the meaning given to such term in the
       second recital of this Agreement.

       "Lien" shall mean any mortgage, pledge, security interest, encumbrance,
       lien or charge of any kind (including any agreement to give any of the
       foregoing, any conditional sale or other title retention agreement, any
       lease in the nature thereof, and the filing of or agreement to give any
       financial statement under the Uniform Commercial Code of any
       jurisdiction).

       "Moody's" shall mean Moody's Investors Service, Inc., a corporation
       organized and existing under the laws of the State of Delaware, and its
       successors and assigns, and, if such corporation shall be dissolved or
       liquidated or shall no longer be performing the functions of a
       securities rating agency, "Moody's" shall be deemed to refer to any
       other nationally recognized securities rating agency approved by the
       Required Banks.

       "Obligations" shall mean any and all amounts owing to the Agent,WestLB
       or any Bank pursuant to the terms of this Agreement.

       "Officer's Certificate" shall mean a certificate signed by the
       President, any Vice President, Secretary-Treasurer or the chief
       financial officer of the Company.

       "Official Statement" shall mean the Official Statement, dated May 29,
       1991, prepared in connection with the issuance and remarketing of the
       Bonds, together with all amendments, modifications and supplements
       thereto.

       "Operative Documents" shall mean and include this Agreement, the
       Indenture, the Refunding Agreement, the Remarketing Agreement, the
       Tender Agreement and the Bond Purchase Agreements.

       "Other Bonds" shall mean (i) the Adjustable Tender Pollution Control
       Revenue Refunding Bonds (Central Louisiana Electric Company, Inc.
       Project) Series l991B issued by the Issuer and (ii) the Adjustable
       Tender Pollution Control Revenue Refunding Bonds (Central Louisiana
       Electric Company, Inc. Project) Series 1991 issued by The Industrial
       Development Board of the Parish of Rapides, Inc.

       "Other Letters of Credit" shall mean the letters of credit issued by
       Westdeutsche Landesbank Girozentrale, New York Branch, pursuant to the
       Other Reimbursement Agreements.

       "Other Reimbursement Agreements" shall mean the two Reimbursement
       Agreements dated as of October 15, 1997 among the Company, the financial
       institutions party thereto and Westdeutsche Landesbank Girozentrale, New
       York Branch, as agent and as issuer of





                                       7
<PAGE>   12
       the Other Letters of Credit, relating to the Other Bonds.

       "Participant" shall mean any entity that purchases a participation
       interest from any Bank in the Letter of Credit and this Agreement in
       accordance with the provisions of Section 11.05 hereof.

       "Payment Date" shall have the meaning given to such term in Section 2.04
       hereof.

       "PBGC" shall mean the Pension Benefit Guaranty Corporation established
       pursuant to Section 4002 of ERISA, or any successor thereto.

       "Permitted Investments" shall mean:  (i) direct obligations of the
       United States of America, or any agency thereof, or obligations
       guaranteed as to principal and interest by the United States of America,
       or any agency thereof, in either case maturing not more than one year
       from the date of acquisition thereof; (ii) certificates of deposit
       issued by any bank or trust company organized under the laws of the
       United States of America or any state thereof and having capital,
       surplus and undivided profits of at least $100,000,000 maturing not more
       than one year from the date of acquisition thereof; and (iii) other debt
       obligations which have been given an investment grade rating by S&P,
       Moody's or any other nationally recognized rating agency, provided such
       obligations mature not more than one year from the date of acquisition
       thereof.

       "Person" shall mean and include any of an individual, a partnership, a
       joint venture, a corporation, a trust, an unincorporated organization or
       a government or any department or agency thereof.

       "Plan" shall mean any multiemployer plan or any single employer plan,
       subject to Title IV of ERISA, which is maintained or contributed to by
       (or to which there is an obligation to contribute of), or at any time
       during the five calendar years preceding the date of this Agreement was
       maintained or contributed to by (or to which there was an obligation to
       contribute of), the Company or any of its Subsidiaries or an ERISA
       Affiliate.

       "Preliminary Official Statement" shall mean the Preliminary Official
       Statement, dated May 16, 1991, prepared in connection with the initial
       issuance of the Bonds, together with all amendments, modifications and
       supplements thereto.

       "Prior Bonds" shall mean the Annual Tender Pollution Control Revenue
       Bonds (Central Louisiana Electric Company, Inc. Project) Series 1983
       previously issued by the Issuer for and on behalf of the Company.

       "Process Agent" shall have the meaning given to such term in Section
       11.09 hereof.





                                       8
<PAGE>   13
       "Project" shall have the meaning given to such term in the first recital
       of this Agreement.

       "Purchase Price" shall have the meaning given to such term in the Letter
       of Credit.

       "Refunding Agreement" shall have the meaning given to such term in the
       first recital of this Agreement.

       "Remarketing Agreement" shall have the meaning given to such term in the
       Indenture.

       "Reoffering Supplement" shall mean the Reoffering Supplement dated
       October 15, 1997 to the Official Statement dated May 29, 1991, which
       has, as an attachment thereto, the Offical Statement.

       "Reportable Event" shall mean an event described in Section 4043(b) of
       ERISA with respect to a Plan as to which the 30-day notice requirement
       has not been waived by the PBGC.

       "Required Banks" shall mean (i) at such time as the Letter of Credit
       shall be outstanding, (a) WestLB (to the extent the relevant action will
       affect the Letter of Credit or WestLB's obligations with respect thereto
       in any way) and (b) Banks whose then outstanding LC Commitments and the
       then outstanding Advances (if any) equal or exceed 66-2/3% of the sum of
       the then Total LC Commitment and then total outstanding Advances (if
       any) and (ii) at such times as the Letter of Credit shall no longer be
       outstanding, Banks whose then outstanding Advances equal or exceed
       66-2/3% of the then total outstanding Advances.

       "S&P" shall mean Standard & Poor's Rating Services, a division of the
       McGraw Hill Companies, and its successors and assigns, and, if such
       corporation shall be dissolved or liquidated or shall no longer be
       performing the functions of a securities rating agency, "S&P" shall be
       deemed to refer to any other nationally recognized securities rating
       agency approved by the Required Banks.

       "Stated Amount" shall have the meaning given to such term in the Letter
       of Credit.

       "Subsidiary" shall mean, as to any Person, (i) any corporation more than
       50% of whose stock of any class or classes having by the terms thereof
       ordinary voting power to elect a majority of the directors of such
       corporation (irrespective of whether or not at the time stock of any
       class or classes of such corporation shall have or might have voting
       power by reason of the happening of any contingency) is at the time
       owned by such Person and/or one or more Subsidiaries of such Person and
       (ii) any partnership, association, joint venture or other entity in
       which such Person and/or one or more Subsidiaries of such Person has
       more than a 50% equity interest at the time.





                                       9
<PAGE>   14
       "Taxes" shall have the meaning given to such term in Section 2.09
       hereof.

       "Tender Agent" shall have the meaning given to such term in the
       Indenture.

       "Tender Agreement" shall have the meaning given to such term in the
       Indenture.

       "Term Repayment Date" shall have the meaning given to such term in
       Section 3.01 hereof.

       "Termination Date" shall mean the date on which the Letter of Credit
       terminates or expires in accordance with its terms (as such expiration
       date may be extended pursuant to Section 2.03 hereof).

       "Total Capitalization" shall mean (i) the sum of (a) the principal
       amount of all Indebtedness of the Company or any of its Subsidiaries
       which, at the time of the incurrence thereof, had a stated maturity in
       excess of one year, exclusive of any intercompany Indebtedness owed by
       the Company or any of its Subsidiaries but, in any event, including all
       Indebtedness of the Company incurred hereunder (regardless of the stated
       maturity thereof) (b) the par or stated value of all outstanding capital
       stock (including premiums on capital stock) of all classes of the
       Company, exclusive of all such stock held in the Company's treasury or
       owned beneficially or of record by any Affiliate of the Company, and (c)
       the retained earnings of the Company and its Subsidiaries, less (ii)
       unamortized capital stock expense.

       "Total LC Commitment" shall have the meaning given to such term in
       Section 2.01 hereof.

       "Trustee" shall have the meaning given to such term in the first recital
       of this Agreement.

       "Unfunded Current Liability" of any Plan shall mean the amount, if any,
       by which the present value of the accrued benefits under the Plan as of
       the close of its most recent plan year, determined in accordance with
       Statement of Financial Accounting Standards No. 35, based upon the
       actuarial assumptions used by the Plan's actuary in the most recent
       annual valuation of the Plan, exceeds the fair market value of the
       assets allocated thereto, determined in accordance with Section 412 of
       the Code.

       "Voting Stock" shall mean stock of the class or classes having general
       voting power under ordinary circumstances to elect at least a majority
       of the board of directors, managers or trustees of the relevant
       corporation, provided, however, that, for purposes of this Agreement,
       stock that carries only the right to vote conditionally on the happening
       of an event shall not be considered voting stock whether or not such
       event shall have happened.





                                       10
<PAGE>   15
       "WestLB" shall have the meaning given to such term in the first
       paragraph of this Agreement.

                                   ARTICLE II

                             LETTER OF CREDIT; FEES

              Section 2.01.  Agreement to Issue Letter of Credit. WestLB agrees
with the Company, on the terms and subject to the conditions herein set forth
(including, without limitation, the conditions specified in Article V hereof),
to issue the Letter of Credit to the Trustee on October 15, 1997.  The initial
face amount of the Letter of Credit shall be $25,419,178.08 (such amount, as
reduced or reinstated from time to time in accordance with the terms of the
Letter of Credit, the "Total LC Commitment"); provided, that no more than
$419,178.08 may be drawn thereunder with respect to the payment of interest on
the Bonds; and, provided further, that in no event shall any amount be drawn
under the Letter of Credit for the payment of any premium on the Bonds.  The
Letter of Credit shall expire on October 15, 2000, unless otherwise terminated
or extended. WestLB agrees that it will pay all drawings under the Letter of
Credit with its own funds.

              Section 2.02.  Adjustment to LC Commitments.  Upon any reduction
or reinstatement of the Stated Amount of the Letter of Credit in accordance
with the terms thereof, the LC Commitment (as defined below) of each Bank shall
be reduced or increased, respectively, based on the LC Percentage (as defined
below) of such Bank, to reflect the new Stated Amount of the Letter of Credit
(it being understood that the aggregate LC Commitments of the Banks with
respect to the Letter of Credit shall at all times equal the Stated Amount of
the Letter of Credit, and that in no event shall the LC Commitment of any Bank
be increased to an amount in excess of the original LC Commitment of such Bank,
except in accordance with the provisions of Section 11.01 hereof).  As used
herein, the terms (i) "LC Percentage" shall mean, for each Bank, that
percentage set forth opposite such Bank's name on Schedule I attached hereto
(as Schedule I may be amended from time to time to reflect adjustments thereto
pursuant to Section 11.05 hereof) and (ii) "LC Commitment" shall mean, for each
Bank, at any time, an amount equal to such Bank's LC Percentage at such time
multiplied by the Stated Amount of the Letter of Credit at such time.

              Section 2.03.  Request to Extend the Letter of Credit.  On any
date which is at least ninety (90) days prior to the date which is not more
than two years preceding the Termination Date of the Letter of Credit, if no
Default or Event of Default shall have occurred and be continuing, the Company
may request in writing to WestLB and the Banks, with a copy to the Agent (such
request being irrevocable), that WestLB extend the Termination Date of the
Letter of Credit for one (1) year (such request being referred to herein as the
"Extension Request").  If the Company shall have made the Extension Request,
the Agent shall, on or prior to the date which is forty-five (45) days after
the date of receipt by the Agent, WestLB and the Banks of such Extension
Request, notify the Company in writing whether or not WestLB and the Banks
consent to such Extension Request and, if WestLB and the Banks do so consent,
the terms and conditions of such consent, it being understood and agreed that
(i) no such extension shall be granted unless WestLB and all of the Banks shall
have consented in writing to such extension, (ii) if the Agent shall fail to
give such notice within such forty-five (45) day period, WestLB and the





                                       11
<PAGE>   16
Banks shall be deemed not to have consented to such extension and (iii) neither
WestLB nor any Bank shall have any obligation whatsoever to extend the Letter
of Credit pursuant to this Section 2.03 (or any liability whatsoever in the
event such Extension Request is denied for whatever reason), any such extension
being in the sole and absolute discretion of WestLB and each of the Banks.  If
WestLB and the Banks shall agree to extend for one year the Termination Date of
the Letter of Credit, and provided all of the conditions to such extension
specified in the Agent's reply to the Extension Request shall have been met,
WestLB shall issue an amendment to such Letter of Credit (or a new Letter of
Credit, as WestLB may elect) extending the Termination Date of the Letter of
Credit by one year.

              Section 2.04.  Letter of Credit Fee.  The Company hereby agrees
to pay to the Agent, for distribution to each Bank, a letter of credit fee as
agreed with each Bank and specified in a letter agreement between the Company
and the Agent for the period from and including the later of the Date of
Issuance or the date of such letter agreement.  Amounts payable under this
Section 2.04 shall be payable quarterly in arrears on the last Business Day of
each March, June, September and December occurring prior to the Termination
Date (each such date, a "Payment Date"), commencing December 31, 1997, and on
the Termination Date.

              Section 2.05.  Fronting Fee.  The Company hereby agrees to pay to
the Agent, for distribution to WestLB, a letter of credit fronting fee as
agreed with WestLB and specified in a letter agreement between the Company and
the Agent.  Such fee shall be payable quarterly on each Payment Date commencing
with December 31, 1997 and on the Termination Date.

              Section 2.06.  Transfer Fees.  The Company hereby agrees to pay
to WestLB, for its own account, upon each transfer of the Letter of Credit in
accordance with its terms, $1,000 or such other amount as shall at the time of
such transfer be the charge which WestLB is making generally for transfers of
similar letters of credit.  Amounts payable under this Section 2.06 shall be
payable at the time of such transfer of the Letter of Credit.

              Section 2.07.  Drawing Fees.  The Company hereby agrees to pay to
WestLB, for its own account, upon each drawing by the Trustee under the Letter
of Credit, the sum of $200 or such other amount as shall at the time of such
drawing be the charge which WestLB is making generally for drawings on similar
letters of credit.  Amounts payable under this Section 2.07 shall be payable
quarterly in arrears on each Payment Date, commencing on December 31, 1997, and
on the Termination Date.

              Section 2.08.  Additional Fees.  The Company hereby agrees to pay
to the Agent for its own account upfront and administrative fees specified in a
letter agreement between the Company and the Agent.





                                       12
<PAGE>   17
              Section 2.09.  Taxes.  All payments made by the Company hereunder
shall be made without set off, counterclaim or other defense.  All such
payments shall be made free and clear of, and without deduction or withholding
for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
or by any political subdivision or taxing authority thereof or therein (but
excluding any tax imposed on or measured by the net income of WestLB, any Bank
or any Participant, as applicable, pursuant to the laws of the jurisdiction (or
any political subdivision or taxing authority thereof or therein) in which the
principal office or applicable lending office of such Person is located) and
all interest, penalties or similar liabilities with respect thereto
(collectively, "Taxes").  If any Taxes are so levied or imposed, the Company
agrees to pay the full amount of such Taxes and such additional amounts as may
be necessary so that every payment of all amounts due hereunder, after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein.  The Company will furnish to the Agent, within
45 days after the date the payment of any Taxes is due pursuant to applicable
law, certified copies of tax receipts evidencing such payment by the Company.
The Company shall indemnify and hold harmless WestLB, each Bank and each
Participant, as applicable, and reimburse each such Person upon its written
request, for the amount of any Taxes so levied or imposed and paid by such
Person.

              Section 2.10.  Increased Costs.  If any change in or enactment of
any law or governmental rule, regulation or order (whether or not having the
force of law) or in the interpretation thereof by any court or administrative
or governmental authority or central bank or comparable agency charged with the
administration thereof (including implementation of the Cooke Commission
Guidelines), or compliance by WestLB, any Bank or any Participant with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, or any change in generally
accepted accounting principles at any time in effect in the United States or in
the Federal Republic of Germany, shall either (i) impose, modify or deem
applicable any reserve, capital adequacy, special deposit or similar
requirement against letters of credit issued by, or assets held by, or deposits
in or for the account of, WestLB, any Bank or any Participant in connection
with, or against participation in, the Letter of Credit or (ii) impose on
WestLB, any Bank or any Participant any other condition relating, directly or
indirectly, to this Agreement, the Letter of Credit or participation in the
Letter of Credit, and the result of any event referred to in the preceding
clause (i) or (ii) shall be to increase the cost to such Person of issuing,
maintaining or participating in the Letter of Credit (which increase in cost
shall be determined by such Person using reasonable allocation methods), then
such Person shall so notify the Agent and, upon demand by the Agent on behalf
of such Person, the Company shall immediately pay to the Agent, for
distribution to such Person, from time to time as specified by the Agent, such
additional amounts as shall be sufficient to compensate such Person for such
increased costs from the date of such change, enactment or compliance, together
with interest on each such amount from the date of demand therefor until
payment in full thereof at the Base Rate plus 2% per annum.  A certificate
setting forth in reasonable detail such increased cost incurred by such Person,
submitted by such Person to the Agent and from the Agent to the Company, shall
be conclusive, absent manifest error, as the





                                       13
<PAGE>   18
amount thereof.  Any Person seeking payment from the Company pursuant to this
Section 2.10 shall so inform the Company promptly upon learning of the
occurrence of the event or action upon which such recovery will be based.

                                  ARTICLE III

                             REPAYMENT OF DRAWINGS

              Section 3.01.  Repayment of Drawings, Advances.  The Company
hereby agrees to pay to WestLB (i) immediately after any payment is made under
the Letter of Credit pursuant to any "B Drawing" or any "C Drawing" to pay
principal of or interest (or the portion of Purchase Price corresponding to
interest) on the Bonds, an amount equal to such amount so paid under the Letter
of Credit and (ii) on the earlier to occur of the Termination Date and the day
next succeeding the first anniversary of the date that any payment is made
under the Letter of Credit pursuant to any "A Drawing" to pay the portion of
Purchase Price corresponding to principal on the Bonds (such earlier date, the
"Term Repayment Date"), an amount equal to such amount paid under the Letter of
Credit together with interest thereon (a) from and including the date of such
drawing to but excluding the earlier to occur of the Termination Date and the
fifteenth (15th) day following the date of such drawing (such earlier date, the
"Interest Increase Date"), at a rate per annum equal to the Base Rate and (b)
from and including the Interest Increase Date to but excluding the due date
thereof, at a rate per annum equal to the Base Rate plus 2%.  In the event that
the Company shall fail to reimburse WestLB when due following any drawing
specified in clause (i) above, or WestLB shall make any payment under the
Letter of Credit specified in clause (ii) above and the Company shall not
reimburse WestLB for such payment on the date such payment was made, then, (1)
WestLB shall promptly advise the Agent thereof, (2) the Agent shall promptly
advise each of the Banks thereof and of each such Bank's LC Percentage of such
unreimbursed drawing (expressed both as a percentage and in U.S. dollars), and
(3) each Bank (other than WestLB) shall make available to WestLB in the lawful
currency of the United States by wire transfer of immediately available funds
an amount equal to its LC Percentage of such unreimbursed drawing by
transferring the same, at or before 12:00 noon (New York time) on the date
designated in such advice, such date to be no less than one Business Day after
receipt by such Bank of such advice, to WestLB at its office specified in
Section 3.04 hereof.  If any payment required to be made by a Bank to WestLB is
not made as provided above, WestLB shall be entitled to recover such amount
from such Bank on demand, together with interest thereon at a rate per annum
equal to (A) the cost to WestLB of acquiring overnight Federal funds for the
initial two (2) days such amount remains unpaid and (B) the Base Rate per annum
thereafter. WestLB (upon the honoring of any drawing), and each other Bank
(upon the payment to WestLB of its LC Percentage of such drawing as provided
above), shall each be deemed to have made a loan (each an "Advance", and
collectively, the "Advances") to the Company.  Each such Advance shall be
applied (to the extent of such Advance) in satisfaction of the Company's
reimbursement obligation set forth in the first sentence of this Section 3.01,
and each Advance shall be repayable pursuant to, and shall otherwise be subject
to, the terms and conditions set forth herein.





                                       14
<PAGE>   19
              Section 3.02.  Repayment of Advances.  The Company hereby agrees
to pay to the Agent (i) immediately after any Advance is deemed made pursuant
to Section 3.01 above in respect of drawings under the Letter of Credit
specified in Section 3.01(i) above, an amount equal to such Advance so made and
(ii) on the Term Repayment Date, an amount equal to the Advances deemed made
pursuant to Section 3.01 above in respect of drawings under the Letter of
Credit specified in Section 3.01(ii) above together with interest thereon (a)
from and including the date of such Advance to but excluding the Interest
Increase Date, at a rate per annum equal to the Base Rate and (b) from and
including the Interest Increase Date to but excluding the due date thereof, at
a rate per annum equal to the Base Rate plus 2%.  All payments of interest and
principal on Advances shall be made to the Agent for distribution to the Banks
pro rata on the basis of the amounts of their respective Advances.

              Section 3.03.  Overdue Interest.  The Company hereby agrees to
pay to WestLB or the Agent, as applicable, for the account of WestLB, the Agent
or the Banks, as applicable, interest on any and all amounts required to be
paid to WestLB, the Agent or the Banks under this Agreement (including, without
limitation, under Article II hereof and under Sections 3.01(i) and 3.02(i)
hereof but excluding amounts payable under Sections 3.01(ii) and 3.02(ii)
hereof) from and after the due date thereof until payment in full, payable on
demand, at a rate per annum equal to the Base Rate plus 2%; provided that
notwithstanding the foregoing, with respect to the amounts payable pursuant to
Sections 3.01(i) and 3.02(i) hereof, for the fifteen (15) day period
immediately succeeding the due date in respect of such amounts, so long as no
Default or Event of Default shall have occurred and be continuing during such
period, the interest rate payable by the Company pursuant to this Section 3.03
shall be the Base Rate (it being understood that if any Default or Event of
Default shall occur and be continuing at any time during such fifteen (15) day
period, the interest rate payable by the Company during such fifteen (15) day
period shall be the rate per annum equal to the Base Rate plus 2% per annum).
In addition, the Company hereby agrees to pay to WestLB or the Agent, as
applicable, for the account of WestLB or the Banks, as applicable, interest on
any and all amounts required to be paid to WestLB or the Banks under Sections
3.01(ii) and 3.02(ii) hereof from and after the due date thereof until payment
in full, payable on demand, at a rate per annum equal to 2% in excess of the
interest rate payable with respect to such amounts immediately prior to such
due date.

              Section 3.04.  Payments; Computations.  All payments by the
Company to WestLB or the Agent required to be made under this Agreement shall
be made in lawful currency of the United States by wire transfer of immediately
available funds to the offices of The Chase Manhattan Bank, located at One Chase
Manhattan Plaza, New York, New York, for the account of Westdeutsche
Landesbank Girozentrale, no. 920-1-060663 unless WestLB or the Agent, as the
case may be, shall otherwise notify the Company in writing.  All computations
of amounts payable under this Agreement shall be computed, in the case of fees
and commissions, on the basis of a year of 360 days and, in the case of
interest, on the basis of a year of 365 (or 366, as the case may be) days, in
each case for the actual number of days occurring in the period for which such
fees, commissions or interest is payable.  If any payment required to be made
under this Agreement other than those payments required





                                       15
<PAGE>   20
under Sections 2.04, 2.05 and 2.07 becomes due and payable on a day other than
a Business Day, the same shall be payable on the next succeeding Business Day,
and interest shall be payable at the rate otherwise applicable thereto on any
such payment to the Business Day on which such payment is made.

              Section 3.05.  Payments to Banks.  The Agent agrees that promptly
after its receipt of each payment from or on behalf of the Company in respect
of any Obligations of the Company hereunder, it shall distribute such payment
to the Banks pro rata based upon their respective shares, if any, of the
Obligations with respect to which such payment was received.

              Section 3.06.  Sharing Provision.  Each of the Banks agrees that
if it should receive any amount hereunder (whether by voluntary payment, by
realization upon security, by the exercise of the right or set off or banker's
lien, by counterclaim or cross action, by the enforcement of any right
hereunder or under any other Operative Document, or otherwise), which is
applicable to the payment of the principal of, or interest on, the Advances or
any other amount otherwise payable under this Agreement, and which is of a sum
which, with respect to the related sum or sums received by the other Banks, is
in a greater proportion than that which the total amount of such Obligation
then owed and due to such Bank bears to the total amount of such Obligation
then owed and due to all of the Banks immediately prior to such receipt, then
such Bank receiving such excess payment shall purchase for cash without
recourse or warranty from the other Banks an interest in the Obligations of the
Company to such Banks in such amount as shall result in a proportional
participation by all the Banks in such amount; provided, however, that if all
or any portion of such excess amount is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.

              Section 3.07.  Obligations Absolute.  The obligations of the
Company under this Agreement shall be absolute, unconditional and irrevocable
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances whatsoever, notwithstanding, without limitation, the
following:

              (i)     any lack of validity or enforceability of the Letter of
       Credit, the Bonds, any Operative Document or any other instrument or
       agreement related thereto;

              (ii)    any amendment or waiver of or any consent to departure
       from all or any of the Operative Documents, the Letter of Credit or the
       Bonds;

              (iii)   the existence of any claim, set off, defense or other
       rights which the Company may have at any time against the Issuer, the
       holders of the Bonds, any beneficiary or transferee of the Letter of
       Credit (or any Persons for whom any such beneficiary or any such
       transferee may be acting), the Agent, WestLB, the Banks (other than the
       defense of indefeasible payment to the Agent, WestLB or the Banks, as
       applicable, in accordance with the terms of this Agreement) or any other
       Person, whether in connection with the Bonds, the Letter of Credit, any





                                       16
<PAGE>   21
       Operative Document or any other related or unrelated document or
       transaction;

              (iv)    any statement or any document presented under the Letter
       of Credit proving to be forged, fraudulent, invalid or insufficient in
       any respect or any statement or information therein being untrue or
       inaccurate in any respect whatsoever;

              (v)     payment by WestLB under the Letter of Credit against
       presentation of a sight draft or certificate which does not comply with
       the terms of the Letter of Credit, provided that such payment shall not
       have constituted gross negligence or willful misconduct of WestLB; and

              (vi)   any other circumstance or happening whatsoever, whether or
       not similar to any of the foregoing, provided that such other
       circumstance or happening shall not have been the result of gross
       negligence or willful misconduct of the Agent, WestLB or the Banks.

                                   ARTICLE IV

                           PREPAYMENTS; ESCROW BONDS

              Section 4.01.  Prepayments.  Any amounts from time to time owing
to the Banks pursuant to Section 3.02(ii) hereof may be prepaid (i) at any time
by the Company on one Business Day's notice stating the amount to be prepaid
(which shall be $100,000 or any integral multiple of $5,000 in excess thereof)
and (ii) at any time in connection with a remarketing of Bonds pursuant to
Section 13.06 of the Indenture.

              Section 4.02.  Release of Escrow Bonds.  Upon payment to the
Agent of the amount to be prepaid pursuant to clause (i) or (ii) of Section
4.01 (the "Prepayment Amount"), together with accrued interest, as set forth in
Section 3.02(ii), to the date of such prepayment on the amount to be prepaid,
the outstanding obligations of the Company under Section 3.02(ii) shall be
reduced by the amount of such prepayment and interest shall cease to accrue on
the amount prepaid.  In addition, upon payment to the Agent of the Prepayment
Amount and the amount owing, if any, in respect of the "C Drawing" made in
conjunction with the "A Drawing" to which such Prepayment Amount relates, the
Agent shall direct the Tender Agent to release Escrow Bonds in an aggregate
principal amount equal to the Prepayment Amount, all in accordance with the
provisions of Section 7(b) of the Tender Agreement.

                                   ARTICLE V

                              CONDITIONS PRECEDENT

              The obligation of WestLB to issue the Letter of Credit is subject
to the following conditions:





                                       17
<PAGE>   22
              Section 5.01.  Delivery of Bonds and Operative Documents.  The
Operative Documents and the Bonds shall each have been executed and delivered
by the respective parties thereto, shall each be in full force and effect, and
shall each be in form and substance satisfactory to the Agent, WestLB and each
Bank.  The Agent shall have received (with sufficient copies for WestLB and
each Bank) an executed or conformed copy of each Operative Document and a
specimen copy of the Bonds.

              Section 5.02.  Intentionally Omitted.

              Section 5.03.  Receipt of Documents.  The Agent shall have
received (with sufficient copies for WestLB and each Bank), on or before the
Date of Issuance, the following, in form and substance satisfactory to the
Agent, WestLB and each Bank:

              (i)    copies of the resolutions of the Board of Directors of the
       Company or any duly authorized committee thereof, authorizing the
       execution, delivery and performance of this Agreement, certified by the
       President, any Vice President, the chief financial officer, the
       Secretary-Treasurer or an Assistant Secretary of the Company;

              (ii)   an Officer's Certificate, certifying the names and true
       signatures of the officers of the Company authorized to sign this
       Agreement, and the other documents to be delivered hereunder;

              (iii)  an opinion of (a) Baker & Botts, L.L.P. special counsel to
       the Company, substantially in the form of Exhibit B-1 attached hereto,
       and (b) William O. Bonin, special Louisiana counsel to the Company,
       substantially in the form of Exhibit B-2 attached hereto, in each case
       dated the Date of Issuance, addressed to WestLB, the Agent and the
       Banks;

              (iv)   a copy of the Reoffering Supplement which includes, as an
       attachment thereto, the Official Statement;

              (v)    a copy of the restated articles of incorporation of the
       Company, certified as of a recent date by the Secretary of State of the
       State of Louisiana, together with a certificate of good standing for the
       Company, dated as of a recent date.

              (vi)   a letter from the Process Agent, in a form reasonably
       satisfactory to the Agent, indicating the consent by the Process Agent
       to its appointment by the Company as its agent to receive service of
       process as specified in Section 11.09 hereof;

              (vii)  copies of the by-laws of the Company, certified as of the
       Date of Issuance by the President, any Vice President, the chief
       financial officer, the Secretary-Treasurer or an Assistant Secretary of
       the Company;





                                       18
<PAGE>   23
              (viii) an opinion (or a signed copy of such opinion together with
       a satisfactory reliance letter) of Foley & Judell L.L.P., Bond Counsel,
       dated the Date of Issuance, addressed to WestLB, the Agent and the Banks
       and in form and substance satisfactory to WestLB, the Agent and the
       Banks, to the effect that the delivery of the Letter of Credit does not
       conflict with the laws of the State of Louisiana, is permitted by the
       Indenture and the Refunding Agreement, complies with the terms of the
       Indenture and the Refunding Agreement and will not adversely affect any
       exclusion from gross income for federal income tax purposes of interest
       on the Bonds;

              (ix)   an Officer's Certificate, dated the Date of Issuance,
       substantially in the form of Exhibit C attached hereto; and

              (x)    copies of written evidence from Moody's and S&P pursuant
       to Section 3.01(a) of the Indenture; and

              (xi)   such other information, documents, instruments, approvals
       and opinions as WestLB, the Agent or any Bank or any of their respective
       counsel may reasonably request.

              Section 5.04.  Representations and Warranties; Defaults.  The
following statements shall be true and correct on the Date of Issuance and the
Agent shall have received (with sufficient copies for WestLB and each Bank) an
Officer's Certificate, dated the Date of Issuance, stating that:

              (i)    on the Date of Issuance, both before and after giving
       effect to the execution and delivery of this Agreement and the issuance
       of the Letter of Credit, all representations and warranties made by the
       Company in Article VI of this Agreement and in each other Operative
       Document to which it is a party, and all representations and warranties
       otherwise made by the Company in writing in connection herewith or with
       any other Operative Document to which it is a party, are true and
       correct on and as of the Date of Issuance as though made on and as of
       such date; and

              (ii)   on the Date of Issuance, both before and after giving
       effect to the execution and delivery of this Agreement and the issuance
       of the Letter of Credit, there exists no Default or Event of Default.

              Section 5.05.  Certain Other Matters.  On and as of the Date of
Issuance:

              (i)    there shall be no order or other restrictions in effect
       issued by any court, governmental or regulatory agency or arbitrator
       against or directly involving any party to any Operative Document or the
       Bonds which prevents such party from performing any of its obligations
       under such Operative Document or the Bonds;





                                       19
<PAGE>   24
              (ii)   each Person party to an Operative Document or the Bonds
       shall have received all necessary governmental, regulatory and third
       party consents and approvals required to be obtained by such Person in
       order to consummate the transactions contemplated by the Operative
       Documents and the Bonds, including, in the case of the Company and
       without limitation, the approval of the Louisiana Public Service
       Commission in respect of the transactions contemplated in connection
       with the issuance of the Bonds and the consummation of the transactions
       contemplated by this Agreement.

              (iii)  simultaneously with the issuance of the Letter of Credit,
       all of the conditions specified in the Other Reimbursement Agreements
       for the issuance of the Other Letters of Credit shall have been
       satisfied (or waived by the Required Banks (as defined therein)), and
       the Other Letters of Credit shall have been issued simultaneously with
       the issuance of the Letter of Credit to the beneficiary thereof pursuant
       to the terms of the Other Reimbursement Agreements;

              (iv)   there shall have been no material adverse change in the
       business, operations, condition (financial or otherwise) or prospects of
       the Company or of the Company and its Subsidiaries taken as a whole
       since December 31, 1996; and

              (v)    the Agent, WestLB and the Banks shall have received all
       fees set forth or referred to in Article II hereof that shall be due and
       payable on or before the Date of Issuance.

              Section 5.06.  Proceedings.  All corporate and legal proceedings
and all instruments in connection with the transactions contemplated by this
Agreement and the other Operative Documents shall be satisfactory in form and
substance to the Agent, WestLB, the Banks and their respective counsel, and
each of the Agent, WestLB and the Banks shall have received all information and
copies of all documents, including records of corporate proceedings,
governmental approvals, incumbency certificates, and opinions which any of them
may have reasonably requested in connection with the transactions contemplated
by this Agreement and the other Operative Documents, such documents where
appropriate to be certified by proper officers.

                                   ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

              In order to induce the Agent, WestLB and each of the Banks to
enter into this Agreement, and in order to induce WestLB to issue the Letter of
Credit, the Company makes the following representations and warranties to the
Agent, WestLB and each of the Banks, which representations and warranties shall
survive the execution and delivery of this Agreement and the Letter of Credit,
regardless of any investigation made by or on behalf of the Agent, WestLB or
any of the Banks:





                                       20
<PAGE>   25
              Section 6.01.  Due Organization, Etc.  Each of the Company and
its Subsidiaries (i) is a duly organized and validly existing corporation in
good standing under the laws of the jurisdiction of its incorporation and (ii)
has all requisite corporate power and authority to own its property and assets
and to transact its business as presently conducted.

              Section 6.02.  No Conflicts.  The execution, delivery and
performance by the Company of this Agreement and each of the other Operative
Documents to which it is a party (i) are within the Company's corporate power,
(ii) have been duly authorized by all necessary corporate action on the part of
the Company, (iii) do not and will not require any consent or approval of any
class of stockholders of the Company, (iv) do not and will not (a) contravene
the charter or by-laws of the Company or (b) contravene any applicable law,
rule, regulation (including, without limitation, Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System or any rules or
regulations of the Louisiana Public Service Commission), order, writ, judgment,
injunction or decree presently in effect having applicability to the Company or
any of its Subsidiaries, (v) except as required by the provisions of the
Refunding Agreement, do not and will not result in or require the creation of
any Lien upon or with respect to any of the properties of the Company or any of
its Subsidiaries and (vi) do not and will not result in the violation of or be
in conflict with or result in a default under or breach or termination of any
term or provision of any mortgage, lease, agreement, indenture, contract,
instrument or other document to or by which the Company or any of its
Subsidiaries is a party or otherwise bound or to which any of the assets or
properties of the Company or any of its Subsidiaries are subject, except any
such violation, conflict, default, breach or termination referred to in this
clause (vi) which, individually or in the aggregate, (a) would not affect the
legality, validity, enforceability or binding effect of the Bonds, this
Agreement or any of the other Operative Documents and (b) would not have a
material adverse effect on the business, operations, condition (financial or
otherwise) or prospects of the Company or of the Company and its Subsidiaries
taken as a whole.

              Section 6.03.  Due Authorization.  No order, authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution, delivery and
performance by the Company of this Agreement or any of the other Operative
Documents to which it is a party, other than any of the foregoing which shall
have been previously obtained or made by the Company and which are currently in
full force and effect.  The Louisiana Public Service Commission has duly issued
its order authorizing the Company to enter into this Agreement and the other
Operative Documents to which it is a party and to take all action contemplated
hereby and thereby or in connection herewith or therewith, and such orders
remain in full force and effect in the forms originally issued.

              Section 6.04.  Enforceability.  This Agreement and each of the
other Operative Documents to which the Company is a party constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.





                                       21
<PAGE>   26
              Section 6.05.  Litigation.  There are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries or any of their respective properties or
rights, or involving any of the Operative Documents, before any court,
administrative, governmental or regulatory agency or arbitrator, and there is
no pending or, to the knowledge of the Company, proposed legislative,
regulatory, rule-making, rate-setting or investigatory proceeding before any
federal, state, county or municipal government, department, commission, board
or agency or any other instrumentality of any of them involving or affecting
the Company, any of its Subsidiaries or the Issuer, in any case which (i) alone
or together with others would, if adversely determined, have a material adverse
effect on the business, operations, condition (financial or otherwise) or
prospects of the Company or of the Company and its Subsidiaries taken as a
whole (except that for the purposes of this clause (I) an earnings review or
the commencement by the Company of rate increase proceedings with the Louisiana
Public Service Commission or the Federal Energy Regulatory Commission shall not
constitute such a pending or threatened action or proceeding unless and until
such commission's determination is made thereunder that has such a material
adverse effect) or (ii) questions the legality, validity, enforceability or
binding effect of the Bonds, this Agreement or any other Operative Document or
would impair materially the Company's ability to perform its obligations under
this Agreement or any of the other Operative Documents to which it is a party.

              Section 6.06.  Compliance with ERISA.  With respect to each Plan,
other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA, (i)
each such Plan is in substantial compliance with ERISA and the Code; (ii) no
Reportable Event has occurred; (iii) no such Plan has an Unfunded Current
Liability which could have a material adverse effect on the business,
operations, condition (financial or otherwise) or prospects of the Company or
of the Company and its Subsidiaries taken as a whole; (iv) no such Plan has an
accumulated or waived funding deficiency; (v) no such Plan has applied for an
extension of any amortization period under Section 412(a) of the Code; (vi) no
proceedings have been instituted to terminate any such Plan nor, to the
knowledge of the Company, does there exist reason for the PBGC to attempt to
take possession of or terminate any such Plan under Section 4042 of ERISA; and
(vii) there has been no withdrawal from any such Plan so as to result in
liability for the Company or any ERISA Affiliate under any of Sections 4062(e)
or 4063 of ERISA.  With respect to Plans that are multi employer plans within
the meaning of Section 4001(a)(3) of ERISA, (a) no such Plan is insolvent or in
reorganization; (b) neither the Company nor any ERISA Affiliate has any
liability under Section 515 with respect to such Plan except for good faith
disputes concerning the amount of such liability; and (c) neither the Company
nor any ERISA Affiliate has withdrawn or partially withdrawn from any such Plan
and as a result thereof incurred any liability under Sections 4201 or 4204 of
ERISA.  Neither the Company nor any of its Subsidiaries nor any ERISA Affiliate
expects to incur any material liability to or on account of a Plan pursuant to
Section 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA.  No lien imposed under
the Code or ERISA on the assets of the Company or any of its Subsidiaries or
any ERISA Affiliate exists.  Neither the Company nor any of its Subsidiaries
nor any ERISA Affiliate maintains or contributes to any employee welfare
benefit plan as defined in Section 3(1) of ERISA which provides benefits to
retired employees (other than as required by Section 601 of





                                       22
<PAGE>   27
ERISA) the obligations with respect to which could have a material adverse
effect on the ability of the Company to perform any of its obligations under
this Agreement.

              Section 6.07.  No Defaults.  Neither the Company nor any of its
Subsidiaries is in default under or breach of (nor does any circumstance or
occurrence exist which, with the passage of time or the giving of notice or
both, would constitute a default under or breach of) any mortgage, lease,
agreement, indenture, contract, instrument or other document to which it is a
party or to which it or any of its properties may be bound, other than any such
breach or default which would not, individually or in the aggregate, have a
material adverse effect on the business, operations, condition (financial or
otherwise) or prospects of the Company or of the Company and its Subsidiaries
taken as a whole.

              Section 6.08.  Financial Statements.  The Company has furnished,
or caused to be furnished, to the Agent, with sufficient copies for WestLB and
each Bank, the following financial statements:  (i) the consolidated balance
sheets of the Company and its Subsidiaries as at December 31, 1995 and December
31, 1996, and the related consolidated statements of income and changes in
shareholders' equity and of cash flows for the fiscal years ended as of such
dates, which, in each case, have been certified by Coopers & Lybrand L.L.P.,
independent certified public accountants for the Company; and (ii) the
consolidated balance sheets of the Company and its Subsidiaries as at June 30,
1995 and June 30, 1996, and the related consolidated statements of income and
of cash flows for the six months ended as of such dates, which, in each case,
have been prepared by the Company. Such financial statements (including any
related schedules and/or notes thereto) have been prepared in accordance with
generally accepted accounting principles in the United States consistently
applied throughout the periods involved (except as otherwise set forth in the
notes to said financial statements) and reflect all liabilities, direct and
contingent, of the Company and its Subsidiaries required to be shown in
accordance with such principles.  Such financial statements fairly present the
consolidated financial condition of the Company as at the dates thereof and the
consolidated results of operations and cash flows for the periods indicated
(subject, as to any interim statements, to normal year end adjustments).  There
has been no material adverse change in the business, operations, condition
(financial or otherwise) or prospects of the Company or of the Company and its
Subsidiaries taken as a whole since December 31, 1996.

              Section 6.09.  Taxes.  Each of the Company and its Subsidiaries
has filed all federal and state income tax returns which are required to be
filed by it, and each has paid all taxes as shown on such returns and on all
assessments received by it except to the extent that such taxes have not become
due and other than taxes the amount or validity of which are currently being
contested in good faith by appropriate proceedings with respect to which
reserves in accordance with general accepted accounting principles have been
provided.

              Section 6.10.  Disclosure.  Intentionally Omitted.





                                       23
<PAGE>   28
              Section 6.11.  Title to Property.  Each of the Company and its
Subsidiaries has good and marketable title to all of its material real
properties and good title to all of its other material properties and assets,
free and clear of all Liens, other than those permitted to exist pursuant to
Section 8.04.

              Section 6.12.  Environmental and Other Matters.  Each of the
Company and its Subsidiaries is in compliance with all applicable statutes,
rules and regulations governing pollution and environmental control, equal
employment opportunity and employee safety in all jurisdictions in which it is
doing business, other than such noncompliances which, individually or in the
aggregate, would not have a material adverse effect on the business,
operations, condition (financial or otherwise) or prospects of the Company or
of the Company and its Subsidiaries taken as a whole.  No Lien in favor of any
governmental authority has been asserted or recorded under any statute, rule or
regulation, governing pollution and environmental control with respect to any
of the assets or properties of the Company or any of its Subsidiaries.

              Section 6.13.  Operative Documents.  The Company makes to WestLB,
the Agent and each of the Banks each of the representations and warranties made
by it in each of the other Operative Documents to which it is a party to the
same extent as if the same were set forth at length herein.  There is no
default by the Company or, to the knowledge of the Company, by any other Person
under any of the other Operative Documents.

              Section 6.14.  Margin Stock.  The Company is not principally
engaged in, nor does it have as one of its principal activities, the business
of extending credit for the purpose of purchasing or carrying any "margin
stock" (as such term is defined in Regulation U of the Board of Governors of
the Federal Reserve System).  None of the proceeds of the Bonds or of any
drawing under the Letter of Credit will be used, directly or indirectly, to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock.

              Section 6.15.  Investment Company.  The Company is not an
"investment company", as defined in the Investment Company Act of 1940, as
amended.

                                  ARTICLE VII

                             AFFIRMATIVE COVENANTS

              The Company covenants that, from and after the Date of Issuance
until such time as the Letter of Credit is no longer outstanding and all
Obligations are paid in full:

              Section 7.01.  Preservation of Corporate Existence.  Subject to
Section 8.01 hereof, the Company will, and will cause each of its Subsidiaries
to, (i) preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation and (ii) qualify and remain
qualified as a foreign





                                       24
<PAGE>   29
corporation in good standing in each jurisdiction where the operation of its
businesses or the ownership of its assets requires such qualification;
provided, however, that the Company and its Subsidiaries will not be required
to preserve any such right, franchise, privilege or qualification if the
Company or any such Subsidiary determines that the preservation thereof is no
longer desirable or, in the case of qualification, required, and determines
that the loss of such rights, franchises, privileges or qualifications will not
have a material adverse effect on the business, operations, condition
(financial or otherwise) or prospects of the Company or of the Company and its
Subsidiaries taken as a whole.

              Section 7.02.  Compliance with Law; Environmental and Other
Matters.  The Company will, and will cause each of its Subsidiaries to, comply
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority having jurisdiction over it (including, without
limitation, ERISA and the statutes, rules and regulations thereunder and all
statutes, rules and regulations governing pollution and environmental control,
equal employment opportunity and employee safety), except for such
noncompliances which, individually or in the aggregate, would not have a
material adverse effect on the business, operations, condition (financial or
otherwise) or prospects of the Company or of the Company and its Subsidiaries
taken as a whole.

              Section 7.03.  Performance of Agreements.  The Company will, and
will cause each of its Subsidiaries to, observe and perform (i) with respect to
the Company, all of its obligations under this Agreement and the other
Operative Documents to which it is a party and (ii) with respect to the Company
and its Subsidiaries, all of their respective obligations under each mortgage,
lease, agreement, indenture, contract, instrument or other document to which it
is or may become a party or by which it is or may become bound, except such
non-observance or non-performance which would not, individually or in the
aggregate, have a material adverse effect on the business, operations,
condition (financial or otherwise) or prospects of the Company or of the
Company and its Subsidiaries taken as a whole.

              Section 7.04.  Maintenance of Insurance.  The Company will, and
will cause each of its Subsidiaries to, maintain insurance with responsible and
reputable insurance companies in such amounts, with such deductibles and
covering such risks as is usually maintained by companies conducting similar
businesses and owning similar properties.

              Section 7.05.  Furnishing of Information.  The Company will, for
itself and on behalf of each of its Subsidiaries, furnish to the Agent, WestLB
and each Bank the following:  (i) immediately following the occurrence of any
Default or Event of Default, an Officer's Certificate setting forth details of
such Default or Event of Default, the period of existence thereof and the
action proposed to be taken by the Company or such Subsidiary with respect
thereto and (ii) such other information respecting the business, operations,
condition (financial or otherwise) or prospects of the Company or any of its
Subsidiaries as WestLB, the Agent or any Bank may from time to time reasonably
request.





                                       25
<PAGE>   30
              Section 7.06.  ERISA.  The Company will, and will cause each of
its Subsidiaries and ERISA Affiliates to, as soon as possible and in any event
within ten days after the Company or any of its Subsidiaries or ERISA
Affiliates knows of the occurrence of any of the following, deliver to the
Agent, with sufficient copies for WestLB and each Bank, a certificate of the
chief financial officer of the Company, setting forth details as to such
occurrence and the action, if any, which the Company, such Subsidiary or such
ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Company, such
Subsidiary, such ERISA Affiliate, the PBGC, a Plan participant or the Plan
Administrator with respect thereto:  (i) the occurrence of a Reportable Event;
(ii) the existence of an accumulated funding deficiency; (iii) the making of an
application to the Secretary of the Treasury for a waiver or modification of
the minimum funding standard (including any required installment payments) or
extension of any amortization period under Section 412 of the Code with respect
to a Plan; (iv) the termination, reorganization, partition or declaration of
insolvency under Title IV of ERISA of a Plan; (v) the existence of an Unfunded
Current Liability with respect to a Plan which has resulted in a lien being
imposed under ERISA or the Code with respect to the Company or any of its
Subsidiaries or ERISA Affiliates; (vi) the institution of proceedings to
terminate a Plan; (vii) the institution of a proceeding pursuant to Section 515
of ERISA to collect delinquent contributions from the Company or any of its
Subsidiaries or ERISA Affiliates; or (viii) the incurrence of any liability
(including any contingent or secondary liability) by the Company or any of its
Subsidiaries or ERISA Affiliates to or on account of the termination or
withdrawal from a Plan under Sections 4062, 4063, 4064, 4069, 4201 or 4204 of
ERISA; provided, however, that, with respect to any person (as defined in
Section 3(9) of ERISA) that is an ERISA Affiliate only within the meaning of
Section 414(m) or 414(o) of the Code, the Company need only use its best
efforts to cause such person to deliver such certificate and notices.  The
Company will deliver and, with respect to any person (as defined in Section
3(9) of ERISA) that is an ERISA Affiliate only within the meaning of Section
414(m) or 414(o), will use its best efforts to obtain and deliver, to the
Agent, with sufficient copies for WestLB and each Bank, a complete copy of the
annual report (Form 5500) of each Plan required to be filed with the Internal
Revenue Service.  Copies of annual reports and any notices received by the
Company, any of its Subsidiaries or any ERISA Affiliates with respect to any
Plan shall be delivered to the Agent no later than ten days after the later of
the date such report or notice has been filed with the Internal Revenue Service
or received by the Company, such Subsidiary or such ERISA Affiliate; provided,
however, that, with respect to any person (as defined in Section 3(9) of ERISA)
that is an ERISA Affiliate only within the meaning of Section 414(m) or Section
414(o) of the Code, the Company need only use its best efforts to obtain such
report or notice.

              Section 7.07.  Financial Statements.  The Company will deliver,
or cause to be delivered, to the Agent, with sufficient copies for WestLB and
each Bank, in each case in duplicate: (i) as soon as available and in any event
within 60 days after the end of each fiscal quarterly period in each fiscal
year of the Company, a consolidated balance sheet of the Company and the
related consolidated statements of income and cash flows of the Company for
such period and for the period from the beginning of the then current fiscal
year to the end of such fiscal quarterly period, setting forth in each case





                                       26
<PAGE>   31
in comparative form the figures for the corresponding periods for the previous
fiscal year, in each case certified by the chief financial officer or chief
accounting officer of the Company as fairly presenting the consolidated
financial condition of the Company as at such date and the consolidated results
of operations and cash flows of the Company for the period ended on such date,
all in accordance with generally accepted accounting principles consistently
applied, subject to normal year-end audit adjustments, (ii) as soon as
available and in any event within 120 days after the end of each fiscal year of
the Company, a consolidated balance sheet of the Company and the related
consolidated statements of income and changes in shareholders' equity and cash
flows of the Company for such fiscal year, setting forth in each case in
comparative form the figures for the preceding fiscal year, in each case
certified by Coopers & Lybrand L.L.P. or such other nationally recognized
independent certified public accountants acceptable to the Required Banks whose
certificate shall be reasonably satisfactory to WestLB and the Required Banks,
(iii) promptly after receipt thereof, copies of the material portion of any
detailed reports submitted to the Company or any of its Subsidiaries by its
independent accountants in connection with each annual or interim audit of the
accounts of the Company or its Subsidiaries relating to the business,
operations, condition (financial or otherwise) or prospects of the Company or
its Subsidiaries, (iv) promptly, and in any event within ten (10) days after an
officer of the Company obtains knowledge thereof, notice of any litigation or
governmental or regulatory proceedings pending against the Company or any of
its Subsidiaries which, individually or in the aggregate, would have a material
adverse effect on the business, operations, condition (financial or otherwise)
or prospects of the Company or of the Company and its Subsidiaries taken as a
whole, or otherwise pending with respect to the Bonds or any Operative
Document, (v) promptly, and in any event within ten (10) days after an officer
of the Company obtains knowledge thereof, notice of any event not otherwise
specified in clause (iv) above which, individually or in the aggregate, would
have a material adverse effect on the business, operations, condition
(financial or otherwise) or prospects of the Company or of the Company and its
Subsidiaries taken as a whole, (vi) promptly after the sending or filing
thereof, copies of all reports and registration statements (including without
limitation Forms 10-K and 10Q) which the Company sends to any of its security
holders or which the Company or any of its Subsidiaries files with Securities
and Exchange Commission or any national securities exchange, (vii) promptly
upon the written request of the Agent, WestLB or any Bank, copies of any
report, application, petition or other similar document which the Company or
any of its Subsidiaries sends to or files with the Federal Energy Regulatory
Commission or the Louisiana Public Service Commission, and (viii) such other
financial information as the Agent, WestLB or any Bank may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company shall deliver to the Agent, with sufficient copies for
WestLB and each Bank, (a) an Officer's Certificate stating that there exists no
Default or Event of Default or, if any such Default or Event of Default exists,
stating the nature thereof, the period of existence thereof and what action the
Company proposes to take with respect thereto and (b) a certificate prepared
and certified by the chief financial officer or chief accounting officer of the
Company setting forth the calculations required to establish whether the
Company is in compliance with the provisions of Sections 8.05 and 8.06 hereof
at the end of such fiscal quarter or fiscal year, as the case may be.  The
Agent, WestLB and the Banks are hereby authorized to





                                       27
<PAGE>   32
deliver a copy of any financial statement or other document delivered to them
pursuant to this Section 7.07 to any regulatory body having jurisdiction over
them and to any prospective Participant in their interest herein or in the
Letter of Credit.

              Section 7.08.  Inspection.  The Company will, and will cause each
of its Subsidiaries to, permit officers and designated representatives of the
Agent, WestLB or any Bank to visit and inspect, at such Person's own expense,
any of the properties of the Company or any of its Subsidiaries, to examine the
corporate books and financial records of such entities and make copies thereof
or extracts therefrom, and to discuss the affairs, finances and accounts of any
of such entities with the principal officers and the internal and independent
accountants of such entities, all upon reasonable prior notice and during
regular business hours and as often as the Agent, WestLB or such Bank may
reasonably request.

              Section 7.09.  Payment of Taxes, Etc.  The Company will, and will
cause each of its Subsidiaries to, pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits,
or upon any properties belonging to it, and all lawful claims which, if unpaid,
would become a Lien upon any of its properties, in each case at such time as
such taxes, assessments, governmental charges, levies or claims shall become
due and payable; provided, however, that neither the Company nor any of its
Subsidiaries shall be required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by appropriate proceedings and
as to which appropriate reserves are being maintained in accordance with
generally accepted accounting principles.

              Section 7.10.  Maintenance of Property.  The Company will, and
will cause each of its Subsidiaries to, keep all property that is useful and
necessary in its business in good working order and condition, ordinary wear
and tear excepted.

              Section 7.11.  Certain Notices.  The Company will furnish to the
Agent, with sufficient copies for WestLB and each Bank, a copy of any notice,
certification, demand or other writing or communication given or received by
the Company under or in connection with the Bonds or any of the other Operative
Documents, in each case promptly after the receipt or giving of the same.

                                  ARTICLE VIII

                               NEGATIVE COVENANTS

              The Company covenants that, from and after the Date of Issuance
and until such time as the Letter of Credit is no longer outstanding and all
Obligations are paid in full:

              Section 8.01.  Consolidation, Merger, Sale of Assets, Etc.  The
Company will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation,





                                       28
<PAGE>   33
or convey, sell, lease or otherwise dispose of, whether in a single transaction
or a series of related transactions, more than 5% of the consolidated total
assets of the Company and its Subsidiaries as of the date of any such
conveyance, sale, lease or other disposition, to any Person, or agree to do any
of the foregoing at any future time; provided, however, that nothing contained
in this Section 8.01 shall prohibit (i) a consolidation or merger of two or
more Subsidiaries, (ii) a consolidation or merger of one or more Subsidiaries
with or into the Company, if the Company is the surviving corporation, (iii) a
consolidation or merger of another Person into the Company or a Subsidiary if
the Company or a Subsidiary is the surviving Person, (iv) the conveyance, sale,
lease or other disposition of assets of a Subsidiary to the Company or another
Subsidiary, (v) the sale or other disposition of any Subsidiary in which the
Company has made no capital investment (either by cash contribution,
contribution of assets or otherwise), (vi) sales by the Company or a Subsidiary
of its accounts receivable or other receivables or sales of undivided interests
in such accounts receivable and other receivables or (vii) the sale or other
disposition of pollution control facilities in connection with the issuance by
a governmental entity of pollution control bonds substantially all of the
proceeds of the sale of which are received by the Company.

              Section 8.02.  Redemption or Purchase of Bonds; Adjustment of
Interest Rate Periods.  The Company will not, without the prior consent of the
Required Banks, such consent not to be unreasonably withheld, (i) take any
action to cause a redemption of any of the Bonds, (ii) take any action to cause
the Interest Rate Period (as defined in the Indenture) in respect of the Bonds
to be adjusted or otherwise changed to a Short Term Interest Rate Period or a
Long-Term Interest Rate Period (as defined in the Indenture) or (iii) take any
affirmative action to purchase, or to permit any of its Subsidiaries to
purchase, any of the Bonds.

              Section 8.03.  Amendment of Operative Document.  The Company will
not, without the prior written consent of the Required Banks, terminate or
amend or consent to the termination or amendment of any of the terms or
provisions of the Bonds or any Operative Document.

              Section 8.04.  Liens.  The Company will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon or with respect to any property or assets (real or personal, tangible or
intangible) of the Company or any of its Subsidiaries, whether now owned or
hereafter acquired, provided, however, that the provisions of this Section 8.04
shall not prevent the creation, incurrence, assumption or existence of:

              (i)    Liens to secure the CLECO Mortgage;

              (ii)   the following "permitted liens" pursuant to Section 1.04
       of the CLECO Mortgage as presently in effect:  (a) liens for taxes,
       assessments or governmental charges not then delinquent; (b) the lien of
       taxes, assessments or governmental charges due, or to become due, the
       validity of which is being contested at the time by the Company in good
       faith and, if necessary, by appropriate legal proceedings, provided that
       the Company shall have made such provision as may be





                                       29
<PAGE>   34
       required by the trustee under the CLECO Mortgage for the payment of any
       amount or the giving of such security as shall be required to prevent
       the loss or forfeiture of any of the mortgaged and pledged property, and
       for the payment of the amount of any such taxes, assessments or
       governmental charges as shall ultimately be determined to be due and
       payable; (c) any liens, the Indebtedness secured by which has not been
       assumed by the Company and on which it does not customarily pay interest
       charges, existing upon real estate or rights in or relating to real
       estate acquired by the Company for substation, transmission lines,
       distribution lines, pipelines, water mains, or right-of-way purposes or
       for storeroom or service buildings incidental to any of the foregoing;
       (d) rights reserved to or vested in any municipality or public authority
       by the terms of any right, power, franchise, grant, license, permit or
       by any provision of law to terminate such right, power, franchise,
       grant, license or permit or to purchase, condemn or recapture or to
       designate a purchaser of any of the property of the Company; (e) leases,
       easements, restrictions, exceptions or reservations in any property of
       the Company created at or before the acquisition thereof by the Company
       for the purpose of roads, water mains, pipe lines, transmission lines,
       distribution lines or for the joint or common use of real property and
       equipment and other like purposes, and other minor defects and
       irregularities of title in any property, in any case which do not
       materially impair the use of such property in the operation of the
       business of the Company or which the Company itself has power to cure by
       appropriate legal proceedings; (f) rights reserved to or vested in any
       municipality or public authority to use or control or regulate any
       property of the Company; (g) any obligations or duties affecting the
       property of the Company to any municipality or public authority with
       respect to any franchise, grant, license or permit; (h) undetermined
       liens and charges incidental to construction, except such as may result
       from any delinquent obligation of the Company for the payment of money
       on account of such construction; (i) funded liens; or (j) obligations
       arising under agreements or otherwise relating to the ownership by the
       Company of an undivided interest in real or personal property;

              (iii)  Liens on any property acquired, constructed or improved by
       the Company or any of its Subsidiaries after the date of this Agreement
       which are created or assumed contemporaneously with, or within 120 days
       after, such acquisition or completion of such construction or
       improvement, or within six months thereafter pursuant to a firm
       commitment for financing arranged with a lender or investor within such
       120-day period, to secure or provide for the payment of all or any part
       of the purchase price of such property or the cost of such construction
       or improvement incurred after the date of this Agreement, or, in
       addition to Liens contemplated by clauses (iv) and (v) below, Liens on
       any property existing at the time of acquisition thereof, provided that
       the Liens shall not apply to any property theretofore owned by the
       Company or any of its Subsidiaries other than, in the case of any such
       construction or improvement, any theretofore unimproved real property on
       which the property so constructed or the improvement is located;

              (iv)   existing Liens on any property or indebtedness of a
       corporation which is merged with or into or consolidated





                                       30
<PAGE>   35
       with the Company or any of its Subsidiaries;

              (v)    Liens on property or indebtedness of a corporation
       existing at the time such corporation becomes a Subsidiary of the
       Company;

              (vi)   Liens to secure Indebtedness of a Subsidiary to the
       Company or to another of its Subsidiaries;

              (vii)  Liens in favor of the United States of America, any state,
       any foreign country or any department, agency or instrumentality or
       political subdivision of any such jurisdiction, to secure partial,
       progress, advance or other payments pursuant to any contract or statute
       or to secure any Indebtedness incurred for the purpose of financing all
       or any part of the purchase price of the cost of constructing or
       improving the property subject to such Liens, including, without
       limitation, Liens to secure pollution control or industrial revenue bond
       type Indebtedness;

              (viii) Liens to secure sales by the Company or any of its
       Subsidiaries of accounts receivable or other receivables or sales of
       undivided interests in such accounts receivable and other receivables
       provided that such liens apply only to such accounts receivable and the
       related security;

              (ix)   Liens on any property (including any natural gas, oil or
       other mineral property) to secure all or part of the cost of
       exploration, drilling or development thereof or to secure Indebtedness
       incurred to provide funds for any such purpose;

              (x)    Liens existing on the date of this Agreement and set forth
       on Schedule II attached hereto;

              (xi)   Liens consisting of (a) pledges or deposits in the
       ordinary course of business to secure obligations under worker's
       compensation laws or similar legislation, including liens of judgments
       thereunder which are not currently dischargeable, (b) deposits in the
       ordinary course of business to secure, or in lieu of, surety, appeal, or
       customs bonds to which the Company is a party, (c) Liens created by or
       resulting from any litigation or legal proceeding which is currently
       being contested in good faith by appropriate proceedings diligently
       conducted, (d) pledges or deposits in the ordinary course of business to
       secure performance in connection with bids, tenders or contracts (other
       than contracts for the payment of money) or (e) materialmen's,
       mechanics', carriers', worker's, repairmen's or other like liens
       incurred in the ordinary course of business for sums not yet due or
       currently being contested in good faith by appropriate proceedings
       diligently conducted, or deposits to obtain the release of such liens;

              (xii)  Liens for the sole purposes of extending, renewing or
       replacing in whole or in part Indebtedness secured by any





                                       31
<PAGE>   36
       Lien referred to in the foregoing clauses (i) to (xi), inclusive, or
       this clause (xii); provided, however, that the principal amount of
       Indebtedness secured thereby shall not exceed the principal amount of
       Indebtedness so secured at the time of such extension, renewal or
       replacement plus the amount of any redemption or repurchase premiums
       incurred in retiring such Indebtedness, and that such extension, renewal
       or replacement shall be limited to all or a part of the property or
       indebtedness which secured the Lien so extended, renewed or replaced
       (plus improvements on such property); and

              (xiii) Liens not otherwise permitted by foregoing clauses (i) to
       (xii), inclusive, to the extent such Liens encumber, in the aggregate,
       no more than 5% of Consolidated Net Tangible Assets.

              Section 8.05.  Interest Coverage Ratio.  The Company will not
permit the ratio of EBITDA to Consolidated Interest Expense at any time
(determined in each instance using the most recently completed 12-month period
for which the relevant financial information is available) to be less than 2.00
to 1.00.

              Section 8.06.  Tangible Net Worth Ratio.  The Company will not,
at any time, permit Consolidated Tangible Net Worth to be less than 35% of
Total Capitalization.

                                   ARTICLE IX

                               EVENTS OF DEFAULT

              Section 9.01.  Events of Default.  If any of the following events
(each an "Event of Default") shall occur and be continuing:

              (i)    any representation or warranty made by the Company in this
       Agreement or in any of the other Operative Documents or in any writing
       furnished in connection with or pursuant to this Agreement or any other
       Operative Document shall be false or incomplete in any material respect
       when made or deemed made; or

              (ii)   the Company shall fail to make any payment required to be
       made by it when due hereunder (including, without limitation, pursuant
       to Article II or Article III hereof) or under any or the Operative
       Documents; or

              (iii)  the occurrence of an "event of default" as described and
       defined in the Indenture or the Refunding Agreement; or

              (iv)   the occurrence of an "event of default" as described and
       defined in either of the Other Reimbursement Agreements; or





                                       32
<PAGE>   37
              (v)    the Company shall fail to perform or observe any of the
       terms of Article VIII hereof; or

              (vi)   the Company shall fail to perform or observe any other
       term, covenant or agreement contained in this Agreement or any of the
       Operative Documents on its part to be performed or observed and (a) with
       respect to any such term, covenant or agreement contained herein, any
       such failure remains unremedied for 30 days, and (b) with respect to any
       such term, covenant or agreement contained in any of the other Operative
       Documents, any such failure remains unremedied after any applicable
       grace period specified in such Operative Document; or

              (vii)  any material provision of the Bonds, this Agreement or any
       other Operative Document shall at any time for any reason cease to be
       valid and binding on any party hereto or thereto (other than the Agent,
       WestLB or any Bank), or shall be declared to be null and void, or any
       such party (other than the Agent, WestLB or any Bank) shall contest the
       validity or enforceability thereof, or the Company shall deny that it
       has any further liability or obligation with respect to the Bonds, this
       Agreement or any other Operative Document to which it is a party; or

              (viii) the Company or any of its Subsidiaries shall default in
       any payment of principal of or premium, if any, or interest on any
       Indebtedness of the Company or such Subsidiary (whether by scheduled
       maturity, required prepayment, acceleration, demand or otherwise) having
       an original aggregate principal amount in excess of $5,000,000, and such
       default shall continue beyond any period of grace provided with respect
       thereto, or the Company or any of its Subsidiaries shall default in the
       performance or observance of any other agreement, term or condition
       contained in any agreement under which any such Indebtedness is created
       (or if any other event of default thereunder or under such agreement
       shall occur and be continuing) and the effect of any such default is to
       cause, or as a result thereof the holder or holders of such obligation
       (or a trustee on behalf of such holder or holders) shall have caused or
       shall be entitled to cause, such obligation to become due prior to the
       stated maturity thereof; or

              (ix)   the Company or any of its Subsidiaries pursuant to or
       within the meaning of any Bankruptcy Law commences a voluntary case,
       admits in writing its inability to pay its debts generally as they
       become due, consents to the appointment of a Custodian of it or for all
       or substantially all of its property or makes a general assignment for
       the benefit of its creditors; or has an involuntary case filed against
       it, or a court of competent jurisdiction enters an order or decree under
       any Bankruptcy Law that is for relief against the Company or any of its
       Subsidiaries in an involuntary case, appoints a Custodian of the Company
       or any of its Subsidiaries for all or substantially all of its property
       or orders the liquidation of the Company or any of its Subsidiaries, and
       such involuntary case, order or decree remains unstayed and in effect
       for more than 60 days; or





                                       33
<PAGE>   38
              (x)    with respect to any Plan, other than a multiemployer plan
       within the meaning of Section 4001(a)(3) of ERISA, (a) such Plan shall
       fail to satisfy the minimum funding standard or a waiver of such
       standard or extension of any amortization period is sought under Section
       412 of the Code; (b) such Plan is or is proposed to be terminated and as
       a result thereof liability in excess of $5,000,000 can be asserted under
       Title IV of ERISA as against the Company or any Subsidiary; (c) such
       Plan shall have an Unfunded Current Liability in excess of $5,000,000;
       or (d) there has been a withdrawal from any such Plan and as a result
       liability in excess of $5,000,000 can be asserted under Section 4062(e)
       or 4063 of ERISA against the Company or any Subsidiary; or, with respect
       to any Plan that is a multiemployer plan under Section 4001(a)(3) of
       ERISA, such Plan is insolvent or in reorganization or the Company or any
       ERISA Affiliate has withdrawn, or proposes to withdraw, either totally
       or partially, from such Plan and, in any case, in the opinion of the
       Required Banks, the Company or any Subsidiary might reasonably be
       anticipated to incur a liability which would have a material adverse
       effect on the business, operations, conditions (financial or otherwise)
       or prospects of the Company or the Company and Subsidiaries taken as a
       whole; or

              (xi)   one or more judgments or decrees shall be entered against
       the Company or any of its Subsidiaries involving in the aggregate a
       liability (not covered by insurance) of $10,000,000 or more, and all
       such judgments or decrees shall not have been vacated, satisfied,
       discharged or stayed or bonded pending appeal within 30 days from the
       entry thereof;

then, and in any such event, the Agent may and, upon the written request of the
Required Banks, shall, without prejudice to the rights of the Agent, WestLB or
any Bank, (i) by notice to the Company, declare all amounts payable by the
Company hereunder (including, without limitation, all amounts payable pursuant
to Article II and Article III hereof) to be forthwith due and payable, and the
same shall thereupon become due and payable without demand, presentment,
protest or further notice of any kind, all of which are hereby expressly
waived, and/or (2) with respect to any undrawn amount under the Letter of
Credit, require that the Company place with the Agent a collateral deposit
which shall be, in the opinion of Bond counsel chosen by the Company and
acceptable to the Agent, invested by the Agent in a manner which does not
violate Section 148 of the Code, to secure repayment to the Banks by the
Company of any drawings under the Letter of Credit and/or (3) exercise any or
all of its rights and remedies under the Operative Documents and/or (4) by
notice to the Trustee, require the Trustee to accelerate payment of all of the
Bonds and interest accrued thereon as provided in Section 9.01 of the
Indenture; provided that if an Event of Default described in clause (ix) of
this Section 9.01 shall occur and be continuing, all amounts payable by the
Company hereunder shall become immediately due and payable, without written
notice and without presentment, protest or any other notice of any kind, all of
which are hereby expressly waived.

              Section 9.02.  No Remedy Exclusive.  No remedy herein conferred
or reserved is intended to be exclusive of any other available





                                       34
<PAGE>   39
remedy or remedies, but each and every such remedy shall be cumulative and
shall be in addition to every other remedy given under this Agreement or under
any of the other Operative Documents, whether now or hereafter existing at law
or in equity or by statute.  No delay or omission to exercise any right or
power accruing upon any default, omission or failure of performance hereunder
shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right or power may be exercised from time to time and as
often as may be deemed expedient.  In order to exercise any remedy reserved to
the Agent, WestLB or any Bank in this Agreement, it shall not be necessary to
give any notice, other than such notice as may be herein expressly required or
required by applicable law.  In the event any provision contained in this
Agreement should be breached by any party and thereafter duly waived by the
other party or parties so empowered to act, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.  No waiver, amendment, release or modification or this Agreement
shall be established by conduct, custom or course of dealing, but solely by an
instrument in writing duly executed by the party or parties "thereto duly
authorized by this Agreement.

                                   ARTICLE X

                                   THE AGENT

              Section 10.01.  The Agent.  The Banks hereby designate
Westdeutsche Landesbank Girozentrale, New York Branch, as agent to act as
specified herein and in the other Operative Documents.  Each Bank hereby
irrevocably authorizes the Agent to take such action on its behalf under the
provisions of this Agreement, the other Operative Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof and such
other powers as are-reasonably incidental thereto.  The Agent may perform any
of its duties hereunder by or through its officers, directors, agents or
employees.

              Section 10.02.  Duties.  The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement.  Neither
the Agent nor any of its officers, directors, agents or employees shall be
liable for any action taken or omitted by it or them hereunder or under any
other Operative Document or in connection herewith or therewith, unless caused
by its or their gross negligence or willful misconduct as determined by a
final, non-appealable order of a court of competent jurisdiction.  The duties
of the Agent shall be mechanical and administrative in nature, and the Agent
shall not have by reason of this Agreement or any other Operative Document a
fiduciary relationship in respect of any Bank.  Nothing in this Agreement or
any other Operative Document, expressed or implied, is intended to or shall be
so construed as to impose upon the Agent any obligations in respect of this
Agreement or any other Operative Document except as expressly set forth herein.





                                       35
<PAGE>   40

              Section 10.03.  Investigation by Banks.  Independently and
without reliance upon the Agent, each Bank, to the extent it deems appropriate,
has made and shall continue to make (i) its own independent investigation of
the financial condition and affairs of the Company and the transactions
contemplated herein, in each case in connection with the making and the
continuance of the LC Commitments and the Advances and the taking or not taking
of any action in connection herewith and (ii) its own appraisal of the
creditworthiness of the Company and the transactions referred to in clause (i)
above and, except as expressly provided in this Agreement, the Agent shall have
no duty or responsibility, either initially or on a continuing basis, to
provide any Bank with any credit or other information with respect thereto,
whether coming into its possession before the effectiveness of this Agreement
or at any time or times thereafter.  The Agent shall not be responsible to any
Bank for any recitals, statements, information, representations or warranties
herein or in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or any other Operative Document or the financial condition of the
Company or any other Person or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement or any other Operative Document, or the financial
condition of the Company or any other Person or the existence or possible
existence of any Default or Event of Default.

              Section 10.04.  Instructions.  If the Agent shall request
instructions from WestLB, the Banks or the Required Banks, as applicable, with
respect to any act or action (including failure to act) in connection with the
Letter of Credit, this Agreement or any other Operative Document, the Agent
shall be entitled to refrain from such act or taking such action unless and
until the Agent shall have received instructions from WestLB, the Banks or the
Required Banks, as applicable, and the Agent shall not incur liability to any
Person by reason of so refraining.  Without limiting the foregoing, no Bank
shall have any right of action whatsoever against the Agent as a result of the
Agent acting or refraining from acting hereunder or under any other Operative
Document in accordance with the instructions of WestLB, the Banks or the
Required Banks, as applicable.

              Section 10.05.  Reliance by the Agent.  The Agent shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by any Person that the Agent believed to be the
proper Person, and, with respect to all legal matters pertaining to this
Agreement and any other Operative Document and its duties hereunder and
thereunder, upon advice of counsel selected by it.

              Section 10.06.  Indemnification.  To the extent the Agent is not
reimbursed and indemnified by the Company, the Banks will reimburse and
indemnify the Agent, in proportion to their respective LC Commitments (or, if
the Letter of Credit is no longer outstanding, in proportion to their
respective LC Commitments





                                       36
<PAGE>   41
immediately prior to the expiration or other termination of the Letter of
Credit), for and against any and all liabilities, obligations, losses, damages,
penalties, claims, actions, judgments, suits, costs, expenses or disbursements
of whatsoever kind or nature which may be imposed on, asserted against or
incurred by the Agent in performing its duties hereunder or under any other
Operative Document, or in any way relating to or arising out of this Agreement
or any other Operative Document; provided that no Bank shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct.

              Section 10.07.  Agent as a Bank.  The Agent shall have the rights
and powers specified herein for a "Bank" and may exercise the same rights and
powers as though it were not performing the duties specified herein, and the
term "Banks", "Required Banks" or any similar terms shall, unless the context
clearly otherwise indicates, include the Agent in its individual capacity.  The
Agent may accept deposits from, lend money to, and generally engage in any kind
of banking, trust or other business with the Company or any Subsidiary or
Affiliate of the Company to the same extent as if it were not performing the
duties specified herein, and may accept fees and other consideration from the
Company or any such Subsidiary or Affiliate for services in connection with
this Agreement and otherwise without having to account for the same to any of
the Banks.

              Section 10.08.  Resignation by the Agent.  (i) The Agent may
resign from the performance of all its functions and duties hereunder and/or
under the other Operative Documents at any time by giving 15 Business Days'
prior written notice to the Company and the Banks.  Such resignation shall take
effect upon the appointment of a successor Agent pursuant to clauses (ii) and
(iii) below or as otherwise provided below.

              (ii)   Upon any such notice of resignation, the Required Banks
       shall appoint a successor Agent hereunder or thereunder which shall be a
       commercial bank or trust company reasonably acceptable to the Company.

              (iii)  If a successor Agent shall not have been so appointed
       within such 15 Business Day period, the Agent may then appoint a
       successor Agent who shall serve as Agent hereunder or thereunder until
       such time, if any, as the Required Banks appoint a successor Agent as
       provided above.

              (iv)   If no successor Agent has been appointed pursuant to
       clause (ii) or (iii) above by the 20th Business Day after the date such
       notice of resignation was given by the Agent, the Agent's resignation
       shall become effective and the Banks shall thereafter perform all the
       duties of the Agent hereunder and/or under any other Operative Document
       until such time, if any, as the Required Banks appoint a successor Agent
       as provided above.





                                       37
<PAGE>   42
                                   ARTICLE XI

                                 MISCELLANEOUS

              Section 11.01.  Amendments, Etc.  This Agreement may be amended,
and the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if the Company shall obtain the
written consent of the Required Banks, provided that without the consent of
each Bank no such action or omission shall (i) extend the Termination Date of
the Letter of Credit or the final maturity of any Advance, or reduce the rate
or extend the time of payment of interest on any Advance, or reduce the
principal amount of any Advance, or reduce the rate or extend the time of
payment of any fees payable for the benefit of the Banks, or increase the LC
Commitment of any Bank (it being understood that a waiver of any Event of
Default shall not constitute a change in the terms of any LC Commitment of any
Bank, and it being further understood that the LC Commitment of each Bank may
be automatically adjusted pursuant to Section 2.02 hereof), (ii) amend, modify
or waive any provision of this Section 11.01 or Sections 3.05, 3.06, 10.06,
11.03, 11.05, 11.07 or 11.16, (iii) reduce the percentage specified in the
definition of Required Banks, or (iv) consent to the assignment or transfer by
the Company of any of its rights and obligations under this Agreement or any
other Operative Document to which it is a party; provided that no amendment,
waiver or consent shall, unless in writing and signed by the Agent in addition
to the Banks required above to take such action, affect the rights or duties of
the Agent under this Agreement; and provided, further, that no amendment,
waiver or consent shall, unless in writing and signed by WestLB in addition to
the Banks required above to take such action, affect the rights or duties of
WestLB under this Agreement or the Letter of Credit.

              Section 11.02.  Addresses for Notices.  All notices and other
communications provided for hereunder shall be in writing (including facsimile
communication, receipt of which is confirmed in writing) and shall be sent by
mail (postage prepaid return receipt requested), hand delivery or fax (i) if to
the Company, to it at P.O. Box 5000, Pineville, Louisiana 71361, Attention:
Treasurer, telecopy no. (318) 484-7465; (ii) if to the Agent, to it at the
offices of Westdeutsche Landesbank Girozentrale, New York Branch, 1211 Avenue
of the Americas, New York, New York 10036, Attention:  Loan Operations,
telecopy number (212) 302-7946; (iii)if to WestLB, as issuer of the Letter of
Credit, or to Westdeutsche Landesbank Girozentrale, New York Branch, as a Bank
hereunder, to it at the offices of Westdeutsche Landesbank Girozentrale, New
York Branch, 1211 Avenue of the Americas, New York, New York 10036, Attention:
Trade Services, telecopy number (212) 768-4659; and (iv) if to any Bank (other
than Westdeutsche Landesbank Girozentrale, New York Branch), to it at its
address and telecopy number set forth opposite its signature below; or as to
any party at such other address or telecopy number as shall be designated by
such party in a written notice to all other parties hereto; provided that any
such communication to the Company may also, at the option of the Person
delivering such communication, be either delivered to the Company at its
address set forth above or to any officer of the Company.  All such notices and
other communications shall be effective when received.





                                       38
<PAGE>   43
              Section 11.03.  Set-off.  In addition to any rights now or
hereafter granted under applicable law (including, but not limited to, Section
151 of the New York Debtor and Creditor Law) and not by way of limitation of
any such rights, during the continuance of any Event of Default hereunder each
Bank is hereby authorized at any time and from time to time, without notice to
the Company or to any other Person, any such notice being hereby expressly
waived, to set-off and to appropriate and apply any and all deposits (general
or special) and any other Indebtedness at any time held or owing by WestLB or
such Bank to or for the credit or the account of the Company against and on
account of any Obligation or liability of the Company owing to SBC or the Banks
under this Agreement and/or the Letter of Credit at the time, including,
without limitation, all claims of any nature or description arising out of or
in connection with this Agreement and/or the Letter of Credit, irrespective of
whether or not the Agent, WestLB or any Bank shall have made any demand
hereunder.

              Section 11.04.  Indemnification.  The Company hereby agrees to
protect, indemnify, pay and save the Agent, WestLB and each Bank harmless from
and against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including without limitation reasonable attorneys' fees)
which such indemnified Person may incur or be subject to as a consequence,
direct or indirect, of (i) the execution and delivery of this Agreement or the
issuance of the Letter of Credit, other than as a result of the gross
negligence or willful misconduct of such indemnified Person, (ii) the failure
of WestLB to honor a drawing under the Letter of Credit as a result of any act
or omission, whether rightful or wrongful, of any present or future de jure or
de facto government or governmental authority (all such acts or omission herein
called "Government Acts"), (iii) any breach by the Company, the Issuer, the
Tender Agent, the Remarketing Agent or any other Person of any warranty,
covenant, term or condition in, or the occurrence of any default under, this
Agreement, any other Operative Document or the Bonds, together with all
reasonable expenses resulting from the compromise or defense of any claims or
liabilities arising as a result of any such breach or default, (iv) any
inaccuracy or alleged inaccuracy, or any untrue statement or alleged untrue
statement, contained in the Preliminary Official Statement or the Reoffering
Supplement, which includes, as an attachment thereto, the Official Statement,
or by reason of the omission or alleged omission to state therein any fact
necessary to make such statements, in light of the circumstances under which
they were made, not misleading (provided that this Section 11.04 shall not
apply to any information contained in the Reoffering Supplement under the
caption "WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH" or in the
Preliminary Official Statement or the Official Statement under the caption
"SWISS BANK CORPORATION, NEW YORK BRANCH") and (v) the defense against any
legal action challenging the validity of any of the above referenced agreements
or instruments.  Nothing in this Section 11.04 is intended to limit the
reimbursement or other obligations hereunder of the Company.  The obligations
of the Company under this Section 11.04 shall survive the payment of the Bonds
and the termination of this Agreement.

              Section 11.05.  Benefit of Agreement.  This Agreement is a
continuing obligation and shall (i) be binding upon the Company and





                                       39
<PAGE>   44
its successors and assigns and (ii) inure to the benefit of and be enforceable
by the parties hereto and their respective successors and permitted assigns;
provided, however, that the Company may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of WestLB and
all of the Banks, and, provided further, that, although any Bank may grant
participations in its rights hereunder and under the Letter of Credit, such
Bank shall remain a "Bank" for all purposes hereunder, the Participant shall
not constitute a "Bank" hereunder, the Company shall continue to deal solely
with the Agent and such Bank (and not with any Participant) hereunder and with
respect to this Agreement and the Letter of Credit and no such participation
shall relieve WestLB of its obligations under the Letter of Credit.

              In the case of any such participation, the Participant shall not
have any rights under this Agreement or any of the other Operative Documents
(the Participant's rights against such transferring Bank to be those set forth
in the agreement executed by such Bank in favor of the Participant relating
thereto) and all amounts payable by the Company hereunder shall be determined
as if such Bank had not sold such participation, except that the Participant
shall be entitled to the benefits of Sections 2.09 and 2.10 hereof as set forth
therein.  In connection with any such participation, the Bank proposing to
transfer or grant such participation may disclose to the proposed Participant
any information that the Company is required to deliver to such Bank pursuant
to this Agreement or otherwise delivers to such Bank in connection with such
Bank's credit review or continuing review of the Company and this Agreement,
provided, however, that, prior to any such disclosure, each such Participant
shall agree in writing to preserve the confidentiality of any confidential
information relating to the Company or any of its Subsidiaries received from
such Bank.

              Notwithstanding the foregoing, any Bank may transfer the LC
Commitment or any Advance of such Bank to another Bank or to another branch or
lending office or, with the written consent of WestLB and the Agent (such
consent not to be unreasonably withheld), an Affiliate of such Bank; provided
that each such Bank agrees that it will use its reasonable efforts (subject to
overall policy considerations of such Bank) to avoid the occurrence of any event
giving rise to the operation of Sections 2.09 and 2.10 hereof as a result of any
such transfer.

              Neither WestLB nor any Bank may assign all or any portion of its
rights and obligations hereunder to one or more banks or other financial
institutions, unless (i) WestLB and the Company each shall have given its prior
written consent to such assignment (such consent not to be unreasonably
withheld) and (ii) such assignment shall be consummated pursuant to an
assignment and acceptance agreement reasonably satisfactory to the Agent (such
agreement to state, among other things, that upon the effectiveness of such
assignment, the transferee entity shall become a "Bank" hereunder for all
purposes of this Agreement).  Upon the effectiveness of any such assignment, the
transferee entity shall become a "Bank" hereunder for all purposes of this
Agreement and Schedule I attached hereto shall be amended by the Agent to
reflect the new LC Percentage of each Bank after giving effect to such
assignment (which amended Schedule I shall be promptly delivered by the Agent to
the Company, WestLB and each Bank, provided that the failure to deliver or
prepare such amended





                                       40
<PAGE>   45


Schedule I shall in no event affect the validity of such assignment or the
respective LC Percentages resulting therefrom).

              Section 11.06.  Liability of Parties.  The Company assumes all
risks of the acts or omissions of the Trustee and any transferee of the Letter
of Credit with respect to its use of the Letter of Credit.  Neither the Agent,
WestLB nor Bank, nor any of their respective officers or directors, shall be
liable or responsible for:  (i) the use which may be made of the Letter of
Credit or for any acts or omissions of the Trustee or any transferee of the
Letter of Credit in connection therewith; (ii) the form, validity, sufficiency
or genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of the Letter of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (iii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign the
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
(iv) failure of the Trustee to comply fully with the conditions required in
order to draw upon the Letter of Credit; (v) errors, omission, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegram,
telex or otherwise, whether or not they be in cipher; (vi) errors in
interpretation of technical terms; (vii) any loss or delay in the transmission
or otherwise of any document required in order to make a drawing under the
Letter of Credit or of the proceeds thereof; (viii) any misapplication by the
Trustee of the proceeds of any drawing under the Letter of Credit; or (ix) any
consequences arising from causes beyond the control of the Agent, WestLB or any
Bank, including, without limitation, any Government Acts.  None of the above
shall affect, impair, or prevent the vesting of any of the Agent's, WestLB's or
any Bank's rights or powers hereunder.

              In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Agent, WestLB or any Bank under or in connection with this Agreement or the
Letter of Credit or the related certificates attached thereto, if taken or
omitted in good faith, shall not put the Agent, WestLB or any Bank under any
resulting liability to the Company, and the Agent, WestLB and each Bank may
accept any documents or instruments that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
any information to the contrary.

              The obligations of the Company under this Section 11.06 shall
survive the payment of the Bonds and the termination of this Agreement.

              Notwithstanding anything to the contrary contained in this
Section 11.06, the Company shall have no obligation to indemnify the Agent,
WestLB or any Bank in respect of any liability incurred by such Person arising
solely out of the gross negligence or willful misconduct of such Person or the
wrongful dishonor by WestLB of a proper demand made under the Letter of Credit.





                                       41
<PAGE>   46
              Section 11.07.  Expenses, Etc.  The Company agrees to pay on
demand (i) all costs and out-of-pocket expenses incurred by WestLB or the Agent
in connection with the preparation, execution, issuance, delivery and
administration of this Agreement, the Letter of Credit and the other Operative
Documents, including, without limitation, the reasonable fees and disbursements
of outside counsel and the allocated time charges and disbursements of internal
counsel for the Agent and WestLB, and of counsel for the Banks with respect
thereto, and (ii) all costs and out-of-pocket expenses, including, without
limitation, the reasonable fees and disbursements of outside counsel and the
allocated time charges and disbursements of internal counsel to the Agent,
WestLB and the Banks with respect thereto, in connection with the enforcement
or preservation of any rights under this Agreement, the Letter of Credit or any
other Operative Document or any modifications, amendments, consents or waivers
or similar occurrences relating to or in respect of this Agreement, the Letter
of Credit or any other Operative Document.   In addition, the Company shall pay
any and all stamp and other taxes (other than any franchise or income taxes)
and fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement, the Letter of Credit or any
other Operative Document and agrees to save the Agent, WestLB and the Banks
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes, fees and expenses
referred to in this sentence and in the immediately preceding sentence.  The
Company also agrees to indemnify, defend and hold the Agent, WestLB and each
Bank harmless from and against all liability "including, without limitation,
interest, penalties and all reasonable fees and disbursements of counsel) to
which any such Person may become subject insofar as such liability arises out
of or is based upon any action, suit, proceeding or investigation or
governmental action brought or taken in connection with the Project or the use
(or the proposed or potential use) of the proceeds of any drawing under the
Letter of Credit.  A request for payment under this Section 11.07 shall be
accompanied by supporting documentation thereof, identifying with reasonable
specificity the basis for and the amount of such costs and expenses.

              Section 11.08.  Counterparts.  This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.

              Section 11.09.  Consent to Jurisdiction.  The Company irrevocably
(i) agrees that any suit, action or other legal proceeding arising out of or
relating to this Agreement or the Letter of Credit may be brought by or on
behalf of the Agent, WestLB or any Bank in a court of record in the State of
New York or in the Courts of the United States of America located in such
State, (ii) consents to the jurisdiction of each such court in any such suit,
action or proceeding and (iii) waives any objection which it may have to the
laying of venue of any such suit, action or proceeding in any of such courts
and any claim that any such suit, action or proceeding has been brought in an
inconvenient forum.  The Company hereby irrevocably appoints CT Corporation
System (the "Process Agent") with an office on the date hereof at 1633
Broadway, New York, New York 10019 as its agent to receive on behalf of the
Company and its property service of copies of the summons and complaint and any





                                       42
<PAGE>   47
other process which may be served in any such suit, action or proceeding.  Such
service may be made by mailing or delivering a copy of such process to the
Company, in care of the Process Agent at the Process Agent's above address, and
the Company hereby irrevocably authorizes and directs the Process Agent to
accept such service on its behalf.  The Agent agrees to mail to the Company at
its address provided in Section 11.02 hereof a copy of any summons, complaint
or other process mailed or delivered by it to the Company in care of the
Process Agent.  As an alternate method of service, the Company also irrevocably
consents to the service of any and all process in any such suit, action or
proceeding by mailing of copies of such process to the Company at its address
provided in Section 11.02 hereof.  The Company agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
All mailings under this Section shall be by certified mail, return receipt
requested.  Nothing in this Section 11.09 shall affect the right of the Agent,
WestLB or any Bank to serve legal process in any other manner permitted by law
or affect the right of the Agent, WestLB or any Bank to bring any suit, action
or proceeding against the Company or its property in the courts of any other
jurisdiction.

              SECTION 11.10.  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SAID
STATE.

              SECTION 11.11.  Headings, Etc.  Section headings, the table of
contents and the cover page of this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

              Section 11.12.  Survival of Representations and Warranties.  All
representations and warranties contained herein or in any other Operative
Document or made in writing by the Company in connection herewith or therewith
shall survive the execution and delivery of this Agreement.

              Section 11.13.  Survival of Indemnities.  All indemnities set
forth herein including, without limitation, in Sections 2.09, 2.10, 10.06,
11.04 and 11.07 shall survive the execution and delivery of this Agreement and
the repayment in full of all Obligations.

              Section 11.14.  Satisfaction Requirement.  (i) If any agreement,
certificate or other writing, or any action taken or to be taken, is by the
terms of this Agreement required to be satisfactory to the Agent, WestLB or any
Bank, the determination of such satisfaction shall be made by the Agent, WestLB
or such Bank in its sole and exclusive judgment exercised in good faith.

              (ii)   For purposes of determining compliance with the conditions
specified in Article V hereof, each of the Banks shall be deemed to have
consented to, approved or accepted or to be satisfied with all matters required





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<PAGE>   48
there under to be consented to or acceptable or satisfactory to the Banks
unless an officer of the Agent responsible for the transactions contemplated by
this Agreement and holding the position of Vice President or a more senior
position shall have received notice from any such Bank prior to the issuance of
the Letter of Credit specifying such Bank's objections thereto and such
objections shall not have been with drawn by notice to the Agent to that
effect.

              Section 11.15.  Accounting Terms.  All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles in the United States in conformity with those
used in the preparation of the financial statements of the Company referred to
in Section 7.07 hereof.

              Section 11.16.  Calculations.  The financial statements to be
furnished to the Agent, WestLB and the Banks pursuant hereto shall be made and
prepared in accordance with generally accepted accounting principles in the
United States consistently applied throughout the periods involved (except as
set forth in the notes thereto).  All calculations and computations required to
determine compliance with Sections 8.05 and 8.06 hereof shall utilize
accounting principals and policies in conformity with those used to prepare the
financial statements referred to in Section 6.08(i) hereof.

              IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers "hereunto duly
authorized as of the date first above written.

CENTRAL LOUISIANA ELECTRIC COMPANY, INC.

By /s/ THOMAS J. HOWLIN
  ---------------------------------
Name: Thomas J. Howlin
Title:   Sr. V.P. Finance and CFO

WESTDEUTSCHE LANDESBANK GIROZENTRALE,
YORK BRANCH,
individually, as Agent and as issuer of the Letter of Credit

By /s/ CYNTHIA M. NIESEN
  ---------------------------------
Name: Cynthia M. Niesen
Title:   Managing Director

By /s/ KAREN E. GAREIS
  ---------------------------------
Name: Karen E. Gareis
Title:   Vice President





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<PAGE>   49
WACHOVIA BANK
By /s/ DAVID K. ALEXANDER
  ---------------------------------
Name: David K. Alexander
Title:   Senior Vice President





                                       45