# EDGAR Filing Document

**Accession Number:** 0002050048
**File Stem:** 0001193125-25-139685
**Filing Date:** 2025-6
**Character Count:** 925161
**Document Hash:** 26270aa15438beecadfdc543d9460708
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001193125-25-139685.hdr.sgml**: 20250612

**ACCESSION NUMBER**: 0001193125-25-139685

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 25

**CONFORMED PERIOD OF REPORT**: 20250612

**ITEM INFORMATION**: Other Events

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20250612

**DATE AS OF CHANGE**: 20250612

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** KENTUCKY POWER CO
- **CENTRAL INDEX KEY:** 0000055373
- **STANDARD INDUSTRIAL CLASSIFICATION:** ELECTRIC & OTHER SERVICES COMBINED [4931]
- **ORGANIZATION NAME:** 01 Energy & Transportation
- **EIN:** 610247775
- **STATE OF INCORPORATION:** KY
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-06858
- **FILM NUMBER:** 251041939

**BUSINESS ADDRESS:**
- **STREET 1:** 1 RIVERSIDE PLAZA
- **CITY:** COLUMBUS
- **STATE:** OH
- **ZIP:** 43215
- **BUSINESS PHONE:** 614-716-1000

**MAIL ADDRESS:**
- **STREET 1:** 1 RIVERSIDE PLAZA
- **CITY:** COLUMBUS
- **STATE:** OH
- **ZIP:** 43215

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** KENTUCKY WEST VIRGINIA GAS CO
- **DATE OF NAME CHANGE:** 19660829
**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Kentucky Power Cost Recovery LLC
- **CENTRAL INDEX KEY:** 0002050048

**ORGANIZATION NAME:**
- **EIN:** 332363654
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 333-284112-01
- **FILM NUMBER:** 251041940

**BUSINESS ADDRESS:**
- **STREET 1:** 1645 WINCHESTER AVENUE
- **CITY:** ASHLAND
- **STATE:** KY
- **ZIP:** 41101
- **BUSINESS PHONE:** 614-716-1000

**MAIL ADDRESS:**
- **STREET 1:** 1645 WINCHESTER AVENUE
- **CITY:** ASHLAND
- **STATE:** KY
- **ZIP:** 41101

?xml version='1.0' encoding='ASCII'? 8-K

### UNITED STATES

### SECURITIES AND EXCHANGE COMMISSION

#### WASHINGTON, D.C. 20549

### FORM 8-K

#### CURRENT REPORT

#### PURSUANT TO SECTION 13 OR 15(d)

#### OF THE SECURITIES EXCHANGE ACT OF 1934

#### June 12, 2025

#### Date of Report (Date of earliest event reported)

---

| | | | |
|:---|:---|:---|:---|
| **(Commission**<br>**File Number)** | **(Exact Name of Registrant<br> as Specified in its Charter)** | **(State or Other Jurisdiction of<br> Incorporation or Organization)** | **(I.R.S. Employer<br> Identification No.)** |
| **1-6858** | **KENTUCKY POWER COMPANY** | **Kentucky** | **61-0247775** |
| **333-284112-01** | **KENTUCKY POWER COST RECOVERY LLC** | **Delaware** | **33-2363654** |

---

---

| | |
|:---|:---|
| **KENTUCKY POWER COMPANY** | **KENTUCKY POWER COST RECOVERY LLC** |
| **1 Riverside Plaza** | **1645 Winchester Avenue** |
| **Columbus, OH 43215-2373** | **Ashland, Kentucky 41101** |
| **(Address of Principal Executive Offices) (Zip Code)** | **(Address of Principal Executive Offices) (Zip Code)** |
| **(614) 716-1000** | **(606) 929-1488** |
| **(Registrant's Telephone Number, Including Area Code)** | **(Registrant's Telephone Number, Including Area Code)** |

---

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (<u>see</u> General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading**<br>**Symbol** | **Name of exchange**<br>**on which registered** |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

------

<u>Item 8.01</u> Other Events

On June 12, 2025, Kentucky Power Cost Recovery LLC (the "<u>Issuing Entity</u>") issued $477,749,000 aggregate principal amount of its Series 2025 Senior Secured Recovery Bonds (the "<u>Bonds</u>"), pursuant to an Indenture, dated as of June 12, 2025, by and among the Issuing Entity, U.S. Bank Trust Company, National Association, as Indenture Trustee (the "<u>Indenture Trustee</u>"), and U.S. Bank National Association, as Securities Intermediary (the "<u>Securities Intermediary</u>"), as supplemented by the Series Supplement, dated as of June 12, 2025, by and between the Issuing Entity, the Indenture Trustee and the Securities Intermediary. The Bonds were offered pursuant to the Prospectus dated June 5, 2025. In connection with the issuance of the Bonds, Kentucky Power Company and the Issuing Entity are filing the exhibits listed in Item 9.01, which are annexed hereto as exhibits to this Current Report on Form 8-K.

------

<u>Item 9.01</u> Financial Statements and Exhibits.

(d) Exhibits.

---

| | |
|:---|:---|
| **Exhibit<br> No.** | **Description** |
| 4.1 | [Indenture by and among Kentucky Power Cost Recovery LLC, U.S. Bank Trust Company, National Association, as Indenture Trustee, and U.S. Bank National Association, as Securities Intermediary (including the form of the Bonds and the Series Supplement), dated as of June 12, 2025.](d30122dex41.htm) |
| 4.2 | [Series Supplement by and among Kentucky Power Cost Recovery LLC, U.S. Bank Trust Company, National Association, as Indenture Trustee, and U.S. Bank National Association, as Securities Intermediary, dated as of June 12, 2025.](d30122dex42.htm) |
| 5.1 | [Opinion of Sidley Austin LLP with respect to legality (filed as Exhibit 5.1 to Kentucky Power Company's and Kentucky Power Company Cost Recovery LLC's Amendment No. 2 to the Registration Statement on Form SF-1 filed on May 16, 2025 (File Nos. 333-284112 and 333-284112-01) and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/55373/000119312525121765/d912164dex51.htm) |
| 8.1 | [Opinion of Sidley Austin LLP with respect to federal tax matters (filed as Exhibit 8.1 to Kentucky Power Company's and Kentucky Power Company Cost Recovery LLC's Amendment No. 2 to the Registration Statement on Form SF-1 filed on May 16, 2025 (File Nos. 333-284112 and 333-284112-01) and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/55373/000119312525121765/d912164dex81.htm) |
| 8.2 | [Opinion of Stites & Harbison PLLC with respect to Kentucky tax matters (filed as Exhibit 8.2 to Kentucky Power Company's and Kentucky Power Company Cost Recovery LLC's Amendment No. 2 to the Registration Statement on Form SF-1 filed on May 16, 2025 (File Nos. 333-284112 and 333-284112-01) and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/55373/000119312525121765/d912164dex82.htm) |
| 10.1 | [Servicing Agreement between Kentucky Power Cost Recovery LLC and Kentucky Power Company, as Servicer, dated as of June 12, 2025.](d30122dex101.htm) |
| 10.2 | [Purchase and Sale Agreement between Kentucky Power Cost Recovery LLC and Kentucky Power Company, as Seller, dated as of June 12, 2025.](d30122dex102.htm) |
| 10.3 | [Administration Agreement between Kentucky Power Cost Recovery LLC and Kentucky Power Company, as Administrator, dated as of June 12, 2025.](d30122dex103.htm) |
| 10.4 | [Joinder to Intercreditor Agreement between Kentucky Power Company, as the Company, Securitization Property Servicer and Receivables Sub-Servicer, Kentucky Power Cost Recovery LLC, as a Bond Issuer, and U.S. Bank Trust Company, National Association, as Indenture Trustee, dated as of June 12, 2025.](d30122dex104.htm) |
| 23.1 | Consent of Sidley Austin LLP (included as part of its opinions filed as Exhibits [5.1](http://www.sec.gov/Archives/edgar/data/55373/000119312525121765/d912164dex51.htm), [8.1](http://www.sec.gov/Archives/edgar/data/55373/000119312525121765/d912164dex81.htm) and [99.2](d30122dex992.htm)). |
| 23.2 | Consent of Stites & Harbison PLLC (included as part of its opinions filed as Exhibits [8.2](http://www.sec.gov/Archives/edgar/data/55373/000119312525121765/d912164dex82.htm) and [99.3](d30122dex993.htm)). |
| 99.2 | [Opinion of Sidley Austin LLP with respect to U.S. constitutional matters.](d30122dex992.htm) |
| 99.3 | [Opinion of Stites & Harbison PLLC with respect to Kentucky constitutional matters.](d30122dex993.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |

---

------

#### SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

Dated: June 12, 2025

---

| | |
|:---|:---|
|  | **KENTUCKY POWER COMPANY** |
| By: | /s/ Matthew D. Fransen |
|  | Matthew D. Fransen |
|  | Vice President and Treasurer |
|  | **KENTUCKY POWER COST RECOVERY LLC** |
| By: | /s/ Matthew D. Fransen |
|  | Matthew D. Fransen |
|  | Manager |

---

## Exhibit 4.1

**Exhibit 4.1** 

INDENTURE

Dated as of June 12, 2025

KENTUCKY POWER COST RECOVERY LLC,

as Issuer,

and

U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,

as Indenture Trustee,

and

U.S. BANK NATIONAL ASSOCIATION,

as Securities Intermediary

------

<u>**TABLE OF CONTENTS**</u> 

---

| | | |
|:---|:---|:---|
|  |  | Page |
|  ARTICLE I | ARTICLE I | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 1.01. | Definitions | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 1.02. | Incorporation by Reference of Trust Indenture Act | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 1.03. | Rules of Construction | 2 |
|  ARTICLE II | ARTICLE II | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.01. | Form | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.02. | Denominations of Bonds | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.03. | Execution, Authentication and Delivery | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.04. | Temporary Bonds | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.05. | Registration; Registration of Transfer and Exchange of Bonds | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.06. | Mutilated, Destroyed, Lost or Stolen Bonds | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.07. | Persons Deemed Owner | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.08. | Payment of Principal, Premium, if any, and Interest; Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights Preserved | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.09. | Cancellation | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.10. | Outstanding Amount; Authentication and Delivery of Bonds | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.11. | Book-Entry Bonds | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.12. | Notices to Clearing Agency | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.13. | Definitive Bonds | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.14. | CUSIP Number | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.15. | Letter of Representations | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.16. | Tax Treatment | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.17. | State Pledge | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 2.18. | Security Interests | 14 |
|  ARTICLE III | ARTICLE III | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.01. | Payment of Principal, Premium, if any, and Interest | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.02. | Maintenance of Office or Agency | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.03. | Money for Payments To Be Held in Trust | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.04. | Existence | 17 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.05. | Protection of Collateral | 18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.06. | Opinions as to Collateral | 18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.07. | Performance of Obligations; Servicing; SEC Filings | 19 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.08. | Certain Negative Covenants | 22 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.09. | Annual Statement as to Compliance | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.10. | Issuer May Consolidate, etc., Only on Certain Terms | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.11. | Successor or Transferee | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.12. | No Other Business | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.13. | No Borrowing | 26 |

---

------

---

| | | |
|:---|:---|:---|
|  |  | Page |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.14. | Servicer's Obligations | 26 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.15. | Guarantees, Loans, Advances and Other Liabilities | 26 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.16. | Capital Expenditures | 26 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.17. | Restricted Payments | 26 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.18. | Notice of Events of Default | 26 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.19. | Additional Bonds | 27 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.20. | Further Instruments and Acts | 28 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.21. | Inspection | 28 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.22. | Sale Agreement, Servicing Agreement, Administration Agreement and Intercreditor Agreement Covenants | 28 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 3.23. | Taxes | 31 |
|  ARTICLE IV | ARTICLE IV | 31 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.01. | Satisfaction and Discharge of Indenture; Defeasance | 31 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.02. | Conditions to Defeasance | 32 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.03. | Application of Trust Money | 34 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 4.04. | Repayment of Moneys Held by Paying Agent | 34 |
|  ARTICLE V |  | 35 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.01. | Events of Default | 35 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.02. | Acceleration of Maturity; Rescission and Annulment | 36 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.03. | Collection of Indebtedness and Suits for Enforcement by Indenture Trustee | 37 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.04. | Remedies; Priorities | 39 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.05. | Optional Preservation of the Collateral | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.06. | Limitation of Suits | 40 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.07. | Unconditional Rights of Holders To Receive Principal, Premium, if any, and Interest | 41 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.08. | Restoration of Rights and Remedies | 41 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.09. | Rights and Remedies Cumulative | 41 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.10. | Delay or Omission Not a Waiver | 41 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.11. | Control by Holders | 42 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.12. | Waiver of Past Defaults | 42 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.13. | Undertaking for Costs | 42 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.14. | Waiver of Stay or Extension Laws | 43 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 5.15. | Action on Bonds | 43 |
|  ARTICLE VI | ARTICLE VI | 43 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.01. | Duties of Indenture Trustee | 43 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.02. | Rights of Indenture Trustee | 45 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.03. | Individual Rights of Indenture Trustee | 47 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.04. | Indenture Trustee's Disclaimer | 47 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.05. | Notice of Defaults | 48 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.06. | Reports by Indenture Trustee to Holders | 48 |

---

ii

------

---

| | | |
|:---|:---|:---|
|  |  | Page |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.07. | Compensation and Indemnity | 49 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.08. | Replacement of Indenture Trustee and Securities Intermediary | 50 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.09. | Successor Indenture Trustee by Merger | 51 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.10. | Appointment of Co-Trustee or Separate Trustee | 52 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.11. | Eligibility; Disqualification | 53 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.12. | Preferential Collection of Claims Against Issuer | 53 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.13. | Representations and Warranties of Indenture Trustee and Securities Intermediary | 53 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.14. | Annual Report by Independent Registered Public Accountants | 54 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.15. | Custody of Collateral | 54 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 6.16. | Related Parties | 54 |
|  ARTICLE VII | ARTICLE VII | 55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.01. | Issuer To Furnish Indenture Trustee Names and Addresses of Holders | 55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.02. | Preservation of Information; Communications to Holders | 55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.03. | Reports by Issuer | 55 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 7.04. | Reports by Indenture Trustee | 56 |
|  ARTICLE VIII | ARTICLE VIII | 56 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 8.01. | Collection of Money | 56 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 8.02. | Collection Account | 57 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 8.03. | General Provisions Regarding the Collection Account | 61 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 8.04. | Release of Collateral | 62 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 8.05. | Opinion of Counsel | 62 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 8.06. | Reports by Independent Registered Public Accountants | 63 |
|  ARTICLE IX | ARTICLE IX | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.01. | Supplemental Indentures Without Consent of Holders | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.02. | Supplemental Indentures with Consent of Holders | 65 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.03. | KPSC Condition | 66 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.04. | Execution of Supplemental Indentures | 68 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.05. | Effect of Supplemental Indenture | 68 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.06. | Conformity with Trust Indenture Act | 68 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 9.07. | Reference in Bonds to Supplemental Indentures | 68 |
|  ARTICLE X | ARTICLE X | 68 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.01. | Compliance Certificates and Opinions, etc. | 68 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.02. | Form of Documents Delivered to Indenture Trustee | 70 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.03. | Acts of Holders | 71 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.04. | Notices, etc., to Indenture Trustee, Issuer, Commission, and Rating Agencies | 71 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.05. | Notices to Holders; Waiver | 72 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.06. | Rule 17g-5 Compliance | 73 |

---

iii

------

---

| | | |
|:---|:---|:---|
|  |  | Page |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.07. | Conflict with Trust Indenture Act | 73 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.08. | Effect of Headings and **Table of Contents** | 73 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.09. | Successors and Assigns | 73 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.10. | Severability | 73 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.11. | Benefits of Indenture | 73 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.12. | Legal Holidays | 74 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.13. | GOVERNING LAW | 74 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.14. | Counterparts | 74 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.15. | Recording of Indenture | 74 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.16. | Issuer Obligation | 74 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.17. | No Recourse to Issuer | 75 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.18. | Basic Documents | 75 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.19. | No Petition | 75 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.20. | Securities Intermediary | 75 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SECTION 10.21. | Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial | 76 |

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iv

------

---

| | |
|:---|:---|
| EXHIBITS AND SCHEDULES | EXHIBITS AND SCHEDULES |
| <u>Exhibit A</u> | Form of Bonds |
| <u>Exhibit B</u> | Form of Series Supplement |
| <u>Exhibit C</u> | Servicing Criteria to be Addressed by Indenture Trustee in Assessment of Compliance |
| APPENDIX | APPENDIX |
| APPENDIX A | Definitions |

---

v

------

**<u>TRUST INDENTURE ACT CROSS REFERENCE TABLE</u>**

---

| | |
|:---|:---|
| **TIA SECTION** | **INDENTURE SECTION** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;310 (a)(1) | 6.11 |
| (a)(2) | 6.11 |
| (a)(3) | 6.10(b)(i) |
| (a)(4) | N.A. |
| (a)(5) | 6.11 |
| (b) | 6.11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;311 (a) | 6.12 |
| (b) | 6.12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;312 (a) | 7.01 and 7.02 |
| (b) | 7.02(b) |
| (c) | 7.02(c) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;313 (a) | 7.04 |
| (b)(1) | 7.04 |
| (b)(2) | 7.04 |
| (c) | 7.04 |
| (d) | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;314 (a) | 3.09, 4.01, and 7.03(a) |
| (b) | 3.06 and 4.01 |
| (c)(1) | 2.10, 4.01, 8.04(b) and 10.01(a) |
| (c)(2) | 2.10, 4.01, 8.04(b) and 10.01(a) |
| (c)(3) | 2.10, 4.01 and 10.01(a) |
| (d) | 2.10, 8.04(b) and 10.01(b) |
| (e) | 10.01(a) |
| (f) | 10.01(a) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;315 (a) | 6.01(b)(i) and (ii) |
| (b) | 6.05 |

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vi

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| | | |
|:---|:---|:---|
| **TIA SECTION** | **TIA SECTION** | **INDENTURE SECTION** |
|  | (c) | 6.01(a) |
|  | (d) | 6.01(c)(i)-(iii) |
|  | (e) | 5.13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;316 | (a) (last sentence) | Appendix A – definition of "Outstanding" |
|  | (a)(1)(A) | 5.11 |
|  | (a)(1)(B) | 5.12 |
|  | (a)(2) | N/A |
|  | (b) | 5.07 |
|  | (c) | Appendix A – definition of "Record Date" |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;317 | (a)(1) | 5.03(a) |
|  | (a)(2) | 5.03(c)(iv) |
|  | (b) | 3.03 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;318 | (a) | 10.07 |
|  | (b) | 10.07 |
|  | (c) | 10.07 |

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\*\* "N/A" shall mean "not applicable."

THIS CROSS REFERENCE TABLE SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE PART OF THIS INDENTURE.

vii

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**INDENTURE** 

This INDENTURE dated as of June 12, 2025, by and between KENTUCKY POWER COST RECOVERY LLC, a Delaware limited liability company (the "<u>Issuer</u>"), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, in its capacity as indenture trustee (the "<u>Indenture Trustee</u>") for the benefit of the Secured Parties (as defined herein), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, in its capacity as securities intermediary and account bank (the "<u>Securities Intermediary</u>").

In consideration of the mutual agreements herein contained, each party agrees as follows for the benefit of the other and each of the Holders:

RECITALS OF THE ISSUER

The Issuer has duly authorized the execution and delivery of this Indenture and the creation and issuance of the Bonds issuable hereunder, which will be of substantially the tenor set forth herein and in the Series Supplement.

The Bonds shall be non-recourse obligations and shall be secured by and payable solely out of the proceeds of the Cost Recovery Property and the other Collateral. If and to the extent that such proceeds of the Cost Recovery Property and the other Collateral are insufficient to pay all amounts owing with respect to the Bonds, then, except as otherwise expressly provided hereunder, the Holders shall have no Claim in respect of such insufficiency against the Issuer or the Indenture Trustee, and the Holders, by their acceptance of the Bonds, waive any such Claim.

All things necessary to (a) make the Bonds, when executed by the Issuer and authenticated and delivered by the Indenture Trustee hereunder and duly issued by the Issuer, valid obligations, and (b) make this Indenture a valid agreement of the Issuer, in each case, in accordance with their respective terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That the Issuer, in consideration of the premises herein contained and of the purchase of the Bonds by the Holders and of other good and lawful consideration, the receipt and sufficiency of which are hereby acknowledged, and to secure, equally and ratably without prejudice, priority or distinction, except as specifically otherwise set forth in this Indenture, the payment of the Bonds, the payment of all other amounts due under or in connection with this Indenture (including, without limitation, all fees, expenses, counsel fees and other amounts due and owing to the Indenture Trustee) and the performance and observance of all of the covenants and conditions contained herein or in the Bonds, has hereby executed and delivered this Indenture and by these presents does hereby and under the Series Supplement will convey, grant, assign, transfer and pledge, in each case, in and unto the Indenture Trustee, its successors and assigns forever, for the benefit of the Secured Parties, all and singular, all of the Issuer's right, title, and interest in, to and under any and all of the property described in the "Granting Clause" section of the Series Supplement (such property herein referred to as the "<u>Collateral</u>"). The Series Supplement will more particularly describe the obligations of the Issuer secured by the Collateral.

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AND IT IS HEREBY COVENANTED, DECLARED AND AGREED between the parties hereto that all Bonds are to be issued, countersigned and delivered and that all of the Collateral is to be held and applied, subject to the further covenants, conditions, releases, uses and trusts hereinafter set forth, and the Issuer, for itself and any successor, does hereby covenant and agree to and with the Indenture Trustee and its successors in said trust, for the benefit of the Secured Parties, as follows:

**ARTICLE I** 

**DEFINITIONS AND INCORPORATION BY REFERENCE** 

SECTION 1.01. <u>Definitions</u>. Except as otherwise specified herein or as the context may otherwise require, the capitalized terms used herein shall have the respective meanings set forth in <u>Appendix A</u> attached hereto and made a part hereof for all purposes of this Indenture. Terms used herein that are defined in the Act or the UCC and not otherwise defined shall have the respective meanings set forth in the Act or the UCC, as applicable, unless the context clearly requires otherwise.

SECTION 1.02. <u>Incorporation by Reference of Trust Indenture Act</u>. Whenever this Indenture refers to a provision of the TIA, that provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

"indenture securities" means the Bonds.

"indenture security holder" means a Holder.

"indenture to be qualified" means this Indenture.

"indenture trustee" or "institutional trustee" means the Indenture Trustee.

"obligor" on the indenture securities means the Issuer and any other obligor on the indenture securities.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

SECTION 1.03. <u>Rules of Construction</u>. Unless the context otherwise requires:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) a term has the meaning assigned to it;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in the United States of America as in effect from time to time;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) "or" is not exclusive;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) "including" means including without limitation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) words in the singular include the plural and words in the plural include the singular; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the words "herein," "hereof," "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

**ARTICLE II** 

**THE BONDS** 

SECTION 2.01. <u>Form</u>. The Bonds and the Indenture Trustee's certificate of authentication shall be in substantially the forms set forth in <u>Exhibit</u> <u>A</u>, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or by the Series Supplement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing the Bonds, as evidenced by their execution of the Bonds. Any portion of the text of any Bond may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Bond.

The Bonds shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing the Bonds, as evidenced by their execution of the Bonds.

Each Bond shall be dated the date of its authentication. The terms of the Bonds set forth in <u>Exhibit</u> <u>A</u> are part of the terms of this Indenture.

SECTION 2.02. <u>Denominations of Bonds</u>. The Bonds shall be issuable in the Minimum Denomination specified in the Series Supplement and, except as otherwise provided in the Series Supplement, in integral multiples of $1,000 in excess thereof.

The Bonds shall, at the election of and as authorized by a Responsible Officer of the Issuer, be issued in one tranche, and shall be designated generally as the "Bonds" of the Issuer, with such further particular designations added or incorporated in such title for the Bonds as a Responsible Officer of the Issuer may determine. All Bonds shall be identical in all respects except for the denominations thereof. All Bonds shall be in all respects equally and ratably entitled to the benefits hereof without preference, priority, or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the principal amount;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Bond Interest Rate or the formula, if any, used to calculate Bond Interest Rate or Bond Interest Rates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the Payment Dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the Scheduled Payment Dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the Scheduled Final Payment Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the Final Maturity Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) the place or places for the payment of interest, principal and premium, if any;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the Minimum Denominations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Expected Amortization Schedule;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) provisions with respect to the definitions set forth in <u>Appendix A</u> hereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) whether or not the Bonds are to be Book-Entry Bonds and the extent to which <u>Section</u> <u>2.11</u> should apply; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) any other provisions expressing or referring to the terms and conditions upon which the Bonds are to be issued under this Indenture that are not in conflict with the provisions of this Indenture.

SECTION 2.03. <u>Execution, Authentication and Delivery</u>. The Bonds shall be executed on behalf of the Issuer by any of its Responsible Officers. The signature of any such Responsible Officer on the Bonds may be manual, electronic or facsimile.

Bonds bearing the manual, electronic or facsimile signature of individuals who were at any time Responsible Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of the Bonds or did not hold such offices at the date of the Bonds.

At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Bonds executed by the Issuer to the Indenture Trustee pursuant to an Issuer Order for authentication; and the Indenture Trustee shall authenticate and deliver the Bonds as provided in this Indenture and not otherwise.

No Bond shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Bond a certificate of authentication substantially in the form provided for therein executed by the Indenture Trustee by the manual, electronic or facsimile signature of one of its authorized signatories, and such certificate upon any Bond shall be conclusive evidence, and the only evidence, that such Bond has been duly authenticated and delivered hereunder.

SECTION 2.04. <u>Temporary Bonds</u>. Pending the preparation of Definitive Bonds pursuant to <u>Section</u> <u>2.13</u>, the Issuer may execute, and upon receipt of an Issuer Order the Indenture Trustee shall authenticate and deliver, Temporary Bonds which are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the Definitive Bonds in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture as the officers executing the Bonds may determine, as evidenced by their execution of the Bonds.

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If Temporary Bonds are issued, the Issuer will cause Definitive Bonds to be prepared without unreasonable delay. After the preparation of Definitive Bonds, the Temporary Bonds shall be exchangeable for Definitive Bonds upon surrender of the Temporary Bonds at the office or agency of the Issuer to be maintained as provided in <u>Section</u> <u>3.02</u>, without charge to the Holder. Upon surrender for cancellation of any one or more Temporary Bonds, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor a like principal amount of Definitive Bonds in Minimum Denominations. Until so delivered in exchange, the Temporary Bonds shall in all respects be entitled to the same benefits under this Indenture as Definitive Bonds.

SECTION 2.05. <u>Registration; Registration of Transfer and Exchange of Bonds</u>. The Issuer shall cause to be kept a register (the "<u>Bond Register</u>") in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Bonds and the registration of transfers of Bonds. U.S. Bank Trust Company, National Association shall be "Bond Registrar" for the purpose of registering Bonds and transfers of Bonds as herein provided. Upon any resignation of any Bond Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Bond Registrar.

If a Person other than the Indenture Trustee is appointed by the Issuer as Bond Registrar, the Issuer will give the Indenture Trustee prompt written notice of the appointment of such Bond Registrar and of the location, and any change in the location, of the Bond Register, and the Indenture Trustee shall have the right to inspect the Bond Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely conclusively upon a certificate executed on behalf of the Bond Registrar by a Responsible Officer thereof as to the names and addresses of the Holders and the principal amounts and number of the Bonds.

Upon surrender for registration of transfer of any Bond at the office or agency of the Issuer to be maintained as provided in <u>Section</u> <u>3.02</u>, provided that the requirements of Section 8-401 of the UCC are met, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Holder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Bonds in any Minimum Denominations, of the same aggregate principal amount.

At the option of the Holder, Bonds may be exchanged for other Bonds in any Minimum Denominations, of the same aggregate principal amount, upon surrender of the Bonds to be exchanged at such office or agency as provided in <u>Section</u> <u>3.02</u>. Whenever any Bonds are so surrendered for exchange, the Issuer shall, provided that the requirements of Section 8-401 of the UCC are met, execute, and, upon any such execution, the Indenture Trustee shall authenticate and the Holder shall obtain from the Indenture Trustee, the Bonds which the Holder making the exchange is entitled to receive.

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All Bonds issued upon any registration of transfer or exchange of other Bonds shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Bonds surrendered upon such registration of transfer or exchange.

Every Bond presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by: (a) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an institution which is a member of one of the following recognized Signature Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other guarantee program acceptable to the Indenture Trustee; and (b) such other documents as the Indenture Trustee may require.

No service charge shall be made to a Holder for any registration of transfer or exchange of Bonds, but the Issuer or the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge or any fees or expenses of the Indenture Trustee that may be imposed in connection with any registration of transfer or exchange of Bonds, other than exchanges pursuant to <u>Sections</u> <u>2.04</u> or <u>2.06</u> not involving any transfer.

The preceding provisions of this <u>Section</u> <u>2.05</u> notwithstanding, the Issuer shall not be required to make, and the Bond Registrar need not register, transfers or exchanges of any Bond that has been submitted within fifteen (15) days preceding the due date for any payment with respect to such Bond until after such due date has occurred.

SECTION 2.06. <u>Mutilated, Destroyed, Lost or Stolen Bonds</u>. If (a) any mutilated Bond is surrendered to the Indenture Trustee, or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Bond and (b) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Bond Registrar or the Indenture Trustee that such Bond has been acquired by a Protected Purchaser, the Issuer shall, provided that the requirements of Section 8-401 of the UCC are met, execute and, upon the Issuer's written request, the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Bond, a replacement Bond of like tenor and principal amount, bearing a number not contemporaneously outstanding; <u>provided</u>, <u>however</u>, that, if any such destroyed, lost or stolen Bond, but not a mutilated Bond, shall have become or within seven (7) days shall be due and payable, instead of issuing a replacement Bond, the Issuer may pay such destroyed, lost or stolen Bond when so due or payable without surrender thereof. If, after the delivery of such replacement Bond or payment of a destroyed, lost or stolen Bond pursuant to the proviso to the preceding sentence, a Protected Purchaser of the original Bond in lieu of which such replacement Bond was issued presents for payment such original Bond, the Issuer and the Indenture Trustee shall be entitled to recover such replacement Bond (or such payment) from the Person to whom it was delivered or any Person taking such replacement Bond from such Person to whom such replacement Bond was delivered or any assignee of such Person, except a Protected Purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith.

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Upon the issuance of any replacement Bond under this <u>Section</u> <u>2.06</u>, the Issuer and/or the Indenture Trustee may require the payment by the Holder of such Bond of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee and the Bond Registrar) connected therewith.

Every replacement Bond issued pursuant to this <u>Section</u> <u>2.06</u> in replacement of any mutilated, destroyed, lost or stolen Bond shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Bond shall be found at any time or enforced by any Person, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Bonds duly issued hereunder.

The provisions of this <u>Section</u> <u>2.06</u> are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds.

SECTION 2.07. <u>Persons Deemed Owner</u>. Prior to due presentment for registration of transfer of any Bond, the Issuer, the Indenture Trustee, the Bond Registrar and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name any Bond is registered (as of the day of determination) as the owner of such Bond for the purpose of receiving payments of principal of and premium, if any, and interest on such Bond and for all other purposes whatsoever, whether or not such Bond be overdue, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by notice to the contrary.

SECTION 2.08. <u>Payment of Principal, Premium, if any, and Interest; Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights Preserved</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Bonds shall accrue interest as provided in the Series Supplement at the applicable Bond Interest Rate, and such interest shall be payable on each applicable Payment Date. Any installment of interest, principal or premium, if any, payable on any Bond which is punctually paid or duly provided for on the applicable Payment Date shall be paid to the Person in whose name such Bond (or one or more Predecessor Bonds) is registered on the Record Date for such Payment Date by wire transfer to an account maintained by such Holder in accordance with payment instructions delivered to the Indenture Trustee by such Holder, except that with respect to Book-Entry Bonds, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Bond unless and until such Global Bond is exchanged for Definitive Bonds (in which event payments shall be made as provided above), and except for the final installment of principal and premium, if any, payable with respect to such Bond on a Payment Date, which shall be payable as provided below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The principal of each Bond shall be paid, to the extent funds are available therefor in the Collection Account, in installments on each Payment Date as specified in the Series Supplement; <u>provided</u> that installments of principal not paid when scheduled to be paid in accordance with the Expected Amortization Schedule shall be paid upon receipt of money available for such purpose, in the order set forth in <u>Section</u> <u>8.02(e)</u>. Failure to pay principal in accordance with such Expected Amortization Schedule because moneys are not available pursuant to <u>Section</u> <u>8.02</u> to make such payments shall not constitute a Default or Event of Default under

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this Indenture; <u>provided</u>, <u>however</u>, that failure to pay the entire unpaid principal amount of the Bonds upon the Final Maturity Date for the Bonds shall constitute a Default or Event of Default under this Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of the Bonds shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, if the Indenture Trustee or the Holders of the Bonds representing not less than a majority of the Outstanding Amount of the Bonds have declared the Bonds to be immediately due and payable in the manner provided in <u>Section</u> <u>5.02</u>. All payments of principal and premium, if any, on the Bonds shall be made pro rata to the Holders entitled thereto unless otherwise provided in the Series Supplement. The Indenture Trustee shall notify the Person in whose name a Bond is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and premium, if any, and interest on such Bond will be paid. Such notice shall be mailed or made available electronically no later than five (5) days prior to such Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of such Bond and shall specify the place where such Bond may be presented and surrendered for payment of such installment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If interest on the Bonds is not paid when due, such defaulted interest shall be paid (plus interest on such defaulted interest at the applicable Bond Interest Rate to the extent lawful) to the Persons who are Holders on a subsequent Special Record Date, which date shall be at least fifteen (15) Business Days prior to the Special Payment Date. The Issuer shall fix or cause to be fixed any such Special Record Date and Special Payment Date, and, at least ten (10) days before any such Special Record Date, the Issuer shall mail or make available electronically to each affected Holder a notice that states the Special Record Date, the Special Payment Date and the amount of defaulted interest (plus interest on such defaulted interest) to be paid.

SECTION 2.09. <u>Cancellation</u>. All Bonds surrendered for payment, registration of transfer or exchange shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Bonds previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Bonds so delivered shall be promptly canceled by the Indenture Trustee. No Bonds shall be authenticated in lieu of or in exchange for any Bonds canceled as provided in this <u>Section</u> <u>2.09</u>, except as expressly permitted by this Indenture. All canceled Bonds may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time.

SECTION 2.10. <u>Outstanding Amount; Authentication and Delivery of Bonds</u>. The aggregate Outstanding Amount of Bonds that may be authenticated and delivered under this Indenture shall not exceed the aggregate of the amount of Bonds that are authorized in the Financing Order, together with any applicable Subsequent Financing Order, but otherwise shall be unlimited.

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Bonds created and established by the Series Supplement may at any time be executed by the Issuer and delivered to the Indenture Trustee for authentication and thereupon the same shall be authenticated and delivered by the Indenture Trustee upon Issuer Request and upon delivery by the Issuer to the Indenture Trustee, and receipt by the Indenture Trustee, or the causing to occur by the Issuer, of the following; <u>provided</u>, <u>however</u>, that (i) compliance with such conditions and delivery of such documents shall only be required in connection with the original issuance of the Bonds, and (ii) notwithstanding anything to the contrary in this Indenture or the Series Supplement, Bonds shall not be executed, authenticated or delivered if the Commission has issued a Disapproval Order pursuant to, and by the deadline specified in, the Financing Order:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Issuer Action</u>. An Issuer Order authorizing and directing the authentication and delivery of the Bonds by the Indenture Trustee and specifying the principal amount of Bonds to be authenticated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Authorizations</u>. Copies of (i) the Financing Order which shall be in full force and effect and be Final, (ii) certified resolutions of the Managers or Member of the Issuer authorizing the execution and delivery of the Series Supplement and the execution, authentication and delivery of the Bonds and (iii) a duly executed Series Supplement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Opinions</u>. An opinion letter or opinion letters, portions of which may be delivered by one or more external counsel for the Issuer, for the Servicer, or for the Seller, dated as of the Closing Date, in each case subject to the customary exceptions, qualifications and assumptions contained therein, to the collective effect, that (a) all conditions precedent provided for in this Indenture relating to: (i) the authentication and delivery of the Issuer's Bonds and (ii) the execution of the Series Supplement to this Indenture dated as of the date of this Indenture, have been complied with, and (b) the execution of the Series Supplement to this Indenture dated as of the date of this Indenture is permitted by this Indenture, together with the other Opinions of Counsel set forth in <u>Section</u> <u>3.06(a)</u> hereof and in Sections 9(d)-(g) and (i)-(q) of the Underwriting Agreement relating to the Issuer's Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Authorizing Certificate</u>. An Officer's Certificate, dated the Closing Date, of the Issuer certifying that (a) the Issuer has duly authorized the execution and delivery of this Indenture and the Series Supplement and the execution and delivery of the Bonds and (b) the Series Supplement is in the form attached thereto and complies with the requirements of <u>Section</u> <u>2.02</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>The Collateral</u>. The Issuer shall have made or caused to be made all filings with the Commission and the Kentucky Secretary of State pursuant to the Financing Order and the Act and all other filings necessary to perfect the Grant of the Collateral to the Indenture Trustee and the Lien of this Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>Certificates of the Issuer and the Seller</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) An Officer's Certificate from the Issuer, dated as of the Closing Date:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) to the effect that (A) the Issuer is not in Default under this Indenture and that the issuance of the Bonds will not result in any Default or in any breach of any of the terms, conditions or provisions of or constitute a default under the Financing Order or any indenture, mortgage, deed of trust or other agreement or instrument to which the Issuer is a party or by which it or its property is bound or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it or its property may be bound or to which it or its property may be subject and (B) all conditions precedent provided in this Indenture relating to the execution, authentication and delivery of the Bonds have been complied with;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) to the effect that the Issuer has not assigned any interest or participation in the Collateral except for the Grant contained in this Indenture and the Series Supplement; the Issuer has the power and right to Grant the Collateral to the Indenture Trustee as security hereunder and thereunder; and the Issuer, subject to the terms of this Indenture, has Granted to the Indenture Trustee a first priority perfected security interest in all of its right, title and interest in and to such Collateral free and clear of any Lien arising as a result of actions of the Issuer or through the Issuer, except Permitted Liens;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) to the effect that the Issuer has appointed a firm of Independent registered public accountants as contemplated in <u>Section</u> <u>8.06</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) to the effect that attached thereto are duly executed, true and complete copies of the Sale Agreement, the Servicing Agreement, the Administration Agreement and the Intercreditor Agreement, which are, to the knowledge of the Issuer, in full force and effect and, to the knowledge of the Issuer, that no party is in default of its obligations under such agreements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) stating that all filings with the Commission, the Kentucky Secretary of State and the Delaware Secretary of State pursuant to the Act, the UCC and the Financing Order and all UCC financing statements with respect to the Collateral which are required to be filed by the terms of the Financing Order, the Act, the Sale Agreement, the Servicing Agreement and this Indenture have been filed as required.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) An Officer's Certificate from the Seller, dated as of the Closing Date, to the effect that, in the case of the Cost Recovery Property identified in the Bill of Sale, immediately prior to the conveyance thereof to the Issuer pursuant to the Sale Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) the Seller was the original and the sole owner of such Cost Recovery Property, free and clear of any Lien; the Seller had not assigned any interest or participation in such Cost Recovery Property and the proceeds thereof other than to the Issuer pursuant to the Sale Agreement; the Seller has the power, authority and right to own, sell and assign such Cost Recovery Property and the proceeds thereof to the Issuer; and the Seller, subject to the terms of the Sale Agreement, has validly sold and assigned to the Issuer all of its right, title and interest in, to and under the Cost Recovery Property and the proceeds thereof, free and clear of any Lien (other than Permitted Liens) and such sale and assignment is absolute and irrevocable and has been perfected;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) the attached copy of the Financing Order creating such Cost Recovery Property is true and complete and is in full force and effect; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) an amount equal to the Required Capital Level has been deposited or caused to be deposited by the Seller with the Indenture Trustee for crediting to the Capital Subaccount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <u>Accountant's Certificate or Letter</u>. One or more certificates or letters, addressed to the Issuer, of a firm of Independent registered public accountants of recognized national reputation to the effect that (a) such accountants are Independent with respect to the Issuer within the meaning of this Indenture, and are independent public accountants within the meaning of the standards of the Public Company Accounting Oversight Board, and (b) with respect to the Collateral, they have applied such procedures as instructed by the addressees of such certificate or letter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>Rating Agency Condition</u>. The Indenture Trustee shall receive evidence reasonably satisfactory to it that the Bonds have received the ratings from the Rating Agencies required by the Underwriting Agreement as a condition to the issuance of the Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Requirements of Series</u> <u>Supplement</u>. Such other funds, accounts, documents, certificates, agreements, instruments or opinions as may be required by the terms of the Series Supplement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <u>Required Capital Level</u>. Evidence satisfactory to the Indenture Trustee that the Required Capital Level has been credited to the Capital Subaccount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) <u>Commission Deliverables</u>. Copies of the (i) Issuance Advice Letter, (ii) Charge Rider, (iii) Lowest Cost Objective Certification of Kentucky Power, (iv) Lowest Cost Objective Certification of the Underwriters and (v) Lowest Cost Objective Certification of the Financial Advisor, each filed with the Commission pursuant to the Financing Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) <u>Other Requirements</u>. Such other documents, certificates, agreements, instruments or opinions as the Indenture Trustee may reasonably require.

SECTION 2.11. <u>Book-Entry Bonds</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Unless the Series Supplement provides otherwise, all of the Bonds shall be issued in Book-Entry Form, and the Issuer shall execute and the Indenture Trustee shall, in accordance with this <u>Section</u> <u>2.11</u> and the Issuer Order, authenticate and deliver one or more Global Bonds, evidencing the Bonds which (i) shall be an aggregate original principal amount equal to the aggregate original principal amount of the Bonds to be issued pursuant to the Issuer Order, (ii) shall be registered in the name of the Clearing Agency therefor or its nominee, which shall initially be Cede & Co., as nominee for The Depository Trust Company, the initial Clearing Agency, (iii) shall be delivered by the Indenture Trustee pursuant to such Clearing Agency's or such nominee's instructions, and (iv) shall bear a legend substantially to the effect set forth in <u>Exhibit</u> <u>A</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Each Clearing Agency designated pursuant to this <u>Section</u> <u>2.11</u> must, at the time of its designation and at all times while it serves as Clearing Agency hereunder, be a "clearing agency" registered under the Exchange Act and any other applicable statute or regulation.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) No Holder of Bonds issued in Book-Entry Form shall receive a Definitive Bond representing such Holder's interest in any of the Bonds, except as provided in <u>Section</u> <u>2.13</u>. Unless (and until) certificated, fully registered Bonds (the "<u>Definitive Bonds</u>") have been issued to the Holders pursuant to <u>Section</u> <u>2.13</u> or pursuant to the Series Supplement relating thereto:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the provisions of this <u>Section</u> <u>2.11</u> shall be in full force and effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Issuer, the Servicer, the Paying Agent, the Bond Registrar and the Indenture Trustee may deal with the Clearing Agency for all purposes (including the making of distributions on the Bonds and the giving of instructions or directions hereunder) as the authorized representative of the Holders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) to the extent that the provisions of this <u>Section</u> <u>2.11</u> conflict with any other provisions of this Indenture, the provisions of this <u>Section</u> <u>2.11</u> shall control;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the rights of Holders shall be exercised only through the Clearing Agency and the Clearing Agency Participants and shall be limited to those established by applicable law and agreements between such Holders and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Letter of Representations, unless and until Definitive Bonds are issued pursuant to <u>Section</u> <u>2.13</u>, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal of and interest on the Book-Entry Bonds to such Clearing Agency Participants; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) whenever this Indenture requires or permits actions to be taken based upon instruction or directions of the Holders evidencing a specified percentage of the Outstanding Amount of Bonds, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from the Holders and/or the Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Bonds and has delivered such instructions to a Responsible Officer of the Indenture Trustee.

SECTION 2.12. <u>Notices to Clearing Agency</u>. Unless and until Definitive Bonds shall have been issued to Holders pursuant to <u>Section</u> <u>2.13</u>, whenever notice, payment, or other communications to the holders of Book-Entry Bonds is required under this Indenture, the Indenture Trustee, the Servicer and the Paying Agent, as applicable, shall make all such payments to, and give all such notices and communications specified herein to be given to Holders, to the Clearing Agency.

SECTION 2.13. <u>Definitive Bonds</u>. If (a) (i) the Issuer advises the Indenture Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities under any Letter of Representations and (ii) the Issuer is unable to locate a qualified successor Clearing Agency, (b) the Issuer, at its option, advises the Indenture Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (c) after the occurrence of an Event of Default hereunder, Holders holding Bonds aggregating not less than a majority of the aggregate Outstanding Amount of Bonds maintained as Book-Entry Bonds advise the Indenture Trustee, the Issuer and the Clearing Agency (through the Clearing Agency

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Participants) in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Holders, the Issuer shall notify the Clearing Agency, the Indenture Trustee and all such Holders in writing of the occurrence of any such event and of the availability of Definitive Bonds to the Holders requesting the same. Upon surrender to the Indenture Trustee of the Global Bonds by the Clearing Agency accompanied by registration instructions from such Clearing Agency for registration, the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver, Definitive Bonds in accordance with the instructions of the Clearing Agency. None of the Issuer, the Bond Registrar, the Paying Agent or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. Upon the issuance of Definitive Bonds, the Indenture Trustee shall recognize the Holders of the Definitive Bonds as Holders hereunder.

Definitive Bonds will be transferable and exchangeable at the offices of the Bonds Registrar. With respect to any transfer of such listed Bonds, the new Definitive Bonds registered in the names specified by the transferee and the original transferor shall be available at the offices of such transfer agent.

SECTION 2.14. <u>CUSIP Number</u>. The Issuer in issuing any Bonds may use a "CUSIP" number and, if so used, the Indenture Trustee shall use the CUSIP number provided to it by the Issuer in any notices to the Holders thereof as a convenience to such Holders; provided, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Bonds and that reliance may be placed only on the other identification numbers printed on the Bonds. The Issuer shall promptly notify the Indenture Trustee in writing of any change in the CUSIP number with respect to any Bond.

SECTION 2.15. <u>Letter of Representations</u>. Notwithstanding anything to the contrary in this Indenture or the Series Supplement, the parties hereto shall comply with the terms of each Letter of Representations applicable to such party.

SECTION 2.16. <u>Tax Treatment</u>. The Issuer and the Indenture Trustee, by entering into this Indenture, and the Holders and any Persons holding a beneficial interest in any Bond, by acquiring any Bond or interest therein, (a) express their intention that, solely for the purposes of U.S. federal income tax law and, to the extent consistent with applicable state, local and other tax law, solely for the purposes of state, local and other taxes, the Bonds qualify under applicable tax law as indebtedness of the Member secured by the Collateral and (b) solely for the purposes of U.S. federal income tax law and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Bonds are outstanding, agree to treat the Bonds as indebtedness of the Member secured by the Collateral unless otherwise required by appropriate taxing authorities.

SECTION 2.17. <u>State Pledge</u>. Bonds are "securitized bonds" as such term is defined in the Act. Principal and interest due and payable on the Bonds are payable from and secured primarily by Cost Recovery Property created and established by the Financing Order obtained from the Commission pursuant to the Act. Cost Recovery Property consists of the rights and interests of the Seller in the relevant Financing Order, including the right to impose, bill, charge, collect, receive, and adjust certain charges (defined in the Act as "securitized surcharges"),

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to be included as a separate line item in regular electric utility bills of existing and future electric service customers of Kentucky Power, a Kentucky electric utility, or its successors or assigns, as more fully described in the Financing Order. Each Bond shall state:

"Neither the full faith and credit nor the taxing power of the Commonwealth of Kentucky is pledged to the payment of the principal of, or interest on, this bond.<sup>1</sup> The Commonwealth and its agencies pledges, however, for the benefit and protection of financing parties and the electric utility, that it will not: (a) alter the provisions of KRS §§ 278.670 to 278.696 and 65.114 which authorize the commission to create an irrevocable contract right or right to sue by the issuance of a financing order creating securitized property, making the securitized surcharges imposed by a financing order irrevocable, binding, or affecting the nonbypassable charges for all existing and future retail customers of the electric utility, its successors, or assignees; (b) take or permit any action that impairs or would impair the value of securitized property or the security for the securitized bonds or revises the securitized costs for which recovery is authorized; (c) in any way impair the rights and remedies of the bondholders, assignees, and other financing parties; and (d) except for changes made pursuant to the formula-based true-up mechanism authorized under KRS § 278.678, reduce, alter, or impair securitized surcharges that are to be imposed, billed, charge, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related securitized bonds have been paid and performed in full."<sup>2</sup>

The Issuer hereby acknowledges that the purchase of any Bond by a Holder or the purchase of any beneficial interest in a Bond by any Person and the Indenture Trustee's obligations to perform hereunder are made in reliance on such agreement and pledge by the Commonwealth of Kentucky.

SECTION 2.18. <u>Security Interests</u>. The Issuer hereby makes the following representations and warranties: (a) other than the security interests granted to the Indenture Trustee pursuant to this Indenture, the Issuer has not pledged, granted, sold, conveyed or otherwise assigned any interests or security interests in the Collateral and no security agreement, financing statement or equivalent security or Lien instrument listing the Issuer as debtor covering all or any part of the Collateral is on file or of record in any jurisdiction, except such as may have been filed, recorded or made by the Issuer in favor of the Indenture Trustee on behalf of the Secured Parties in connection with this Indenture; (b) this Indenture constitutes a valid and continuing lien on, and first priority perfected security interest in, the Collateral in favor of the Indenture Trustee on behalf of the Secured Parties, which lien and security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing; (c) with respect to all Collateral, this Indenture, together with the Series Supplement, creates a valid and continuing first priority perfected security

<sup>1</sup> KRS § 278.694(3).

<sup>2</sup> KRS § 65.114(2), (3).

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interest (as defined in the UCC and as such term is used in the Act) in such Collateral, which security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing; (d) the Issuer has good and marketable title to the Collateral free and clear of any Lien, claim or encumbrance of any Person other than Permitted Liens; (e) all of the Collateral constitutes either Cost Recovery Property or accounts, deposit accounts, investment property or general intangibles (as each such term is defined in the UCC) except that proceeds of the Collateral may also take the form of instruments or money; (f) the Issuer has taken, or caused the Servicer to take, all action necessary to perfect the security interest in the Collateral granted to the Indenture Trustee, for the benefit of the Secured Parties; (g) the Issuer has filed (or has caused the Servicer to file) all appropriate financing statements in the proper filing offices in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Collateral granted to the Indenture Trustee; (h) the Issuer has not authorized the filing of and is not aware, after due inquiry, of any financing statements against the Issuer that include a description of the Collateral other than those filed in favor of the Indenture Trustee; (i) the Issuer is not aware of any judgment or tax Lien filings against the Issuer; (j) (1) the Collection Account (including all subaccounts thereof, other than the Cash Subaccounts) constitutes a "securities account" within the meaning of the UCC and (2) each Cash Subaccount constitutes a "deposit account" within the meaning of the UCC; (k) the Issuer has taken all steps necessary to cause the Securities Intermediary of each such Securities Account to identify in its records the Indenture Trustee as the Person having a Security Entitlement against the Securities Intermediary in such Securities Account, no Collection Account is in the name of any Person other than the Indenture Trustee, and the Issuer has not consented to the Securities Intermediary of the Collection Account and the Indenture Trustee acting as "bank" with respect to the Cash Subaccount to comply with entitlement orders or instructions of any Person other than the Indenture Trustee; and (l) all of the Collateral constituting investment property has been and will have been credited to the Collection Account or a subaccount thereof, and the Securities Intermediary for the Collection Account has agreed to treat all assets credited to the Collection Account (other than cash) as Financial Assets and all cash will be allocated to the applicable Cash Subaccount. Accordingly, the Indenture Trustee has a first priority perfected security interest in the Collection Account, all funds and Financial Assets on deposit therein, and all securities entitlements relating thereto. The representations and warranties set forth in this <u>Section</u> <u>2.18</u> shall survive the execution and delivery of this Indenture and the issuance of the Bonds, shall be deemed re-made on each date on which any funds in the Collection Account are distributed to Issuer as provided in <u>Section</u> <u>8.04</u> or otherwise released from the Lien of the Indenture and may not be waived by any party hereto except pursuant to a supplemental indenture executed in accordance with <u>Article</u> <u>IX</u> and as to which the Rating Agency Condition has been satisfied.

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**ARTICLE III** 

**COVENANTS** 

SECTION 3.01. <u>Payment of Principal, Premium, if any, and Interest</u>. The principal of and premium, if any, and interest on the Bonds shall be duly and punctually paid by the Issuer, or the Servicer on behalf of the Issuer, in accordance with the terms of the Bonds and this Indenture; provided that except on a Final Maturity Date or upon the acceleration of the Bonds following the occurrence of an Event of Default, the Issuer shall only be obligated to pay the principal of the Bonds on each Payment Date therefor to the extent moneys are available for such payment pursuant to <u>Section</u> <u>8.02</u>. Amounts properly withheld under the Code, the Treasury regulations promulgated thereunder or other tax laws by any Person from a payment to any Holder of interest or principal or premium, if any, shall be considered as having been paid by the Issuer to such Holder for all purposes of this Indenture.

SECTION 3.02. <u>Maintenance of Office or Agency</u>. The Issuer shall initially maintain in St. Paul, Minnesota, an office or agency where Bonds may be surrendered for registration of transfer or exchange. The Issuer shall give prompt written notice to the Indenture Trustee and the Commission of the location, and of any change in the location, of any such office or agency. The Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the foregoing purposes and the Corporate Trust Office of the Indenture Trustee shall serve as the offices provided above in this <u>Section</u> <u>3.02</u>. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders may be made at the Corporate Trust Office of the Indenture Trustee located at the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders.

SECTION 3.03. <u>Money for Payments To Be Held in Trust</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) As provided in <u>Section</u> <u>8.02(a)</u>, all payments of amounts due and payable with respect to any Bonds that are to be made from amounts withdrawn from the Collection Account pursuant to <u>Section</u> <u>8.02(d)</u> shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from such Collection Account for payments with respect to any Bonds shall be paid over to the Issuer except as provided in this <u>Section</u> <u>3.03</u> and <u>Section</u> <u>8.02</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Each Paying Agent shall meet the eligibility criteria set forth for any Indenture Trustee under <u>Section</u> <u>6.11</u>. The Issuer will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this <u>Section</u> <u>3.03</u>, that such Paying Agent will:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) hold all sums held by it for the payment of amounts due with respect to the Bonds in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) give the Indenture Trustee, the Rating Agencies, and the Commission written notice of any Default by the Issuer of which it has actual knowledge (and if the Indenture Trustee is the Paying Agent, a Responsible Officer of the Paying Agent has actual knowledge) in the making of any payment required to be made with respect to the Bonds;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) at any time during the continuance of any such Default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) immediately, with notice to the Rating Agencies and the Commission, resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Bonds if at any time the Paying Agent determines that it has ceased to meet the standards required to be met by a Paying Agent at the time of such determination; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) comply with all requirements of the Code, the Treasury regulations promulgated thereunder and other tax laws with respect to the withholding from any payments made by it on any Bonds of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Subject to applicable laws with respect to escheatment of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Bond and remaining unclaimed for two (2) years after such amount has become due and payable shall be discharged from such trust and be paid to the Issuer upon receipt of an Issuer Request; and, subject to <u>Section</u> <u>10.16</u>, the Holder of such Bond shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; <u>provided</u>, <u>however</u>, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer, cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. The Indenture Trustee may also adopt and employ, at the written direction and expense of the Issuer, any other reasonable means of notification of such repayment (including mailing notice of such repayment to Holders whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder).

SECTION 3.04. <u>Existence</u>. The Issuer shall keep in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other State or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the other Basic Documents, the Bonds, the Collateral and each other instrument or agreement referenced herein or therein.

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SECTION 3.05. <u>Protection of Collateral</u>. The Issuer shall from time to time execute and deliver all such supplements and amendments hereto and all filings with the Commission or the Secretary of State of the Commonwealth of Kentucky pursuant to the Financing Order or to the Act and all financing statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action necessary or advisable to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) maintain or preserve the Lien and security interest (and the priority thereof) of this Indenture and the Series Supplement or carry out more effectively the purposes hereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) enforce any of the Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) preserve and defend title to the Collateral and the rights of the Indenture Trustee and the Holders in such Collateral against the Claims of all Persons and parties, including, without limitation, the challenge by any party to the validity or enforceability of the Financing Order, the Charge Rider, the Cost Recovery Property or any proceeding relating thereto and institute any action or proceeding necessary to compel performance by the Commission or the Commonwealth of Kentucky of any of its obligations or duties under the Act, the State Pledge, or the Financing Order, as the case may be; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) pay any and all taxes levied or assessed upon all or any part of the Collateral.

The Issuer hereby designates the Indenture Trustee its agent and attorney-in-fact to execute or authorize, as the case may be, any filings with the Commission or the Secretary of State of the Commonwealth of Kentucky, financing statements, continuation statements or other instrument required pursuant to this <u>Section</u> <u>3.05</u>, it being understood that the Indenture Trustee shall have no such obligation or any duty to prepare or file such documents. The Indenture Trustee is specifically authorized to file financing statements covering the Collateral, including, without limitation, financing statements that describe the Collateral as "all assets" or "all personal property" of the Issuer.

SECTION 3.06. <u>Opinions as to Collateral</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Prior to the effectiveness of any amendment to the Sale Agreement, the Intercreditor Agreement or the Servicing Agreement, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer either (i) stating that, in the opinion of such counsel, all filings, including UCC financing statements and other filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the Commonwealth of Kentucky pursuant to the Act or the Financing Order, have been executed and filed that are necessary fully to maintain the Lien and perfected security interest of the Issuer and the Indenture Trustee in the Cost Recovery Property and the Collateral, respectively, and the proceeds thereof, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (ii) stating that, in the opinion of such counsel, no such action shall be necessary to maintain such Lien and perfected security interest.

SECTION 3.07. <u>Performance of Obligations; Servicing; SEC Filings</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Issuer (i) shall diligently pursue any and all actions to enforce its rights under each instrument or agreement included in the Collateral and (ii) shall not take any action and shall use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person's covenants or obligations under any such instrument or agreement or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except, in each case, as expressly provided in this Indenture, the Series Supplement, the Sale Agreement, the Servicing Agreement, the Intercreditor Agreement or such other instrument or agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Issuer may contract with other Persons to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee herein or in an Officer's Certificate shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer to assist the Issuer in performing its duties under this Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Issuer shall punctually perform and observe all of its obligations and agreements contained in this Indenture, the Series Supplement, the other Basic Documents and in the instruments and agreements included in the Collateral, including filing or causing to be filed all filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the Commonwealth of Kentucky pursuant to the Act or the Financing Order, all UCC financing statements and continuation statements required to be filed by it by the terms of this Indenture, the Series Supplement, the Sale Agreement and the Servicing Agreement in accordance with and within the time periods provided for herein and therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) If the Issuer shall have knowledge of the occurrence of a Servicer Default under the Servicing Agreement, the Issuer shall promptly give written notice thereof to the Indenture Trustee, the Rating Agencies, and the Commission, and shall specify in such notice the response or action, if any, the Issuer has taken or is taking with respect to such Servicer Default. If a Servicer Default shall arise from the failure of the Servicer to perform any of its duties or obligations under the Servicing Agreement with respect to the Cost Recovery Property, the Collateral or the Charges, the Issuer shall take all reasonable steps available to it to remedy such failure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) As promptly as possible after the giving of notice of termination to the Servicer, the Rating Agencies, and the Commission of the Servicer's rights and powers pursuant to Section 7.01 of the Servicing Agreement, the Indenture Trustee may (or, at the written direction and with the written consent of the Holders evidencing not less than a majority of the Outstanding Amount of the Bonds or at the written direction of the Commission, shall), subject to the terms of the Intercreditor Agreement, appoint a successor Servicer (the "<u>Successor Servicer</u>") with the Issuer's prior written consent thereto (which consent shall not be unreasonably withheld), and, pursuant to Section 7.02 of the Servicing Agreement, such Successor Servicer shall have accepted its appointment by a written assumption in a form reasonably acceptable to the Issuer and the Indenture Trustee and have provided prompt written notice of such assumption to the Issuer and the Rating Agencies. A Person shall qualify as a Successor Servicer only if such Person satisfies the requirements of the Servicing Agreement. If within thirty (30) days after the delivery of the notice referred to above, a new Servicer shall not have been appointed, the Indenture Trustee may petition the Commission or a court of competent jurisdiction to appoint a Successor Servicer. In connection with any such appointment, Kentucky Power may make such arrangements for the compensation of such Successor Servicer as it and such successor shall agree, subject to the limitations set forth in <u>Section</u> <u>8.02</u> and in the Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Upon any termination of the Servicer's rights and powers pursuant to the Servicing Agreement, the Indenture Trustee shall promptly notify the Issuer, the Holders and the Rating Agencies. As soon as a Successor Servicer is appointed, the Indenture Trustee shall notify the Issuer, the Holders and the Rating Agencies of such appointment, specifying in such notice the name and address of such Successor Servicer.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) The Issuer shall (or shall cause the Depositor to) post on its website and, to the extent consistent with the Issuer's and the Depositor's obligations under applicable law, file with or furnish to the SEC in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, and shall direct the Indenture Trustee to post on its website for investors the following information (other than any such information filed with the SEC and publicly available to investors unless the Issuer specifically requests such items to be posted) with respect to the Outstanding Bonds, in each case to the extent such information is reasonably available to the Issuer:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the final Prospectus;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) statements of any remittances of Charges made to the Indenture Trustee (to be included in a Form 10-D or Form 10-K, or successor forms thereto);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a statement reporting the balances in the Collection Account and in each subaccount of the Collection Account as of each Payment Date (to be included on the next Form 10-D or Form 10-K, or successor forms thereto) and as of the end of year (to be included on the next Form 10-K filed);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) a statement showing the balance of Outstanding Bonds that reflects the actual periodic payments made on the Bonds during the applicable period (to be included in the next Form 10-D or Form 10-K filed, or successor forms thereto);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the Servicer's Certificate as required to be submitted pursuant to the Servicing Agreement (to be filed with a Form 10-D, Form 10-K or Form 8-K, or successor forms thereto);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the Monthly Servicer's Certificate as required to be submitted pursuant to the Servicing Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) the text (or a link to the website where a reader can find the text) of each filing of a True-Up Adjustment and the results of each such filing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) any change in the long-term or short-term credit ratings of the Servicer assigned by the Rating Agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) material legislative or regulatory developments directly relevant to the Outstanding Bonds (to be filed or furnished in a Form 8-K); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) any reports and other information that the Issuer is required to file with the SEC under the Exchange Act.

Notwithstanding the foregoing, nothing herein shall preclude the Issuer from voluntarily suspending or terminating its filing obligations as Issuer with the SEC to the extent permitted by applicable law.

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The address of the Indenture Trustee's website for investors is https://pivot.usbank.com. The Indenture Trustee shall promptly notify the Issuer, the Holders and the Rating Agencies of any change to the address of the website for investors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) The Issuer shall make all filings required under the Act relating to the transfer of the ownership or security interest in the Cost Recovery Property other than those required to be made by the Seller or the Servicer pursuant to the Basic Documents.

SECTION 3.08. <u>Certain Negative Covenants</u>. So long as any Bonds are Outstanding, the Issuer shall not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) except as expressly permitted by this Indenture and the other Basic Documents, or in connection with the issuance of an Additional Series, sell, transfer, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Collateral, unless directed to do so by the Indenture Trustee in accordance with <u>Article</u> <u>V</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Bonds (other than amounts properly withheld from such payments under the Code, the Treasury regulations promulgated thereunder or other tax laws) or assert any claim against any present or former Holder by reason of the payment of the taxes levied or assessed upon any part of the Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) terminate its existence or dissolve or liquidate in whole or in part, except in a transaction permitted by <u>Section</u> <u>3.10</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) (i) permit the validity or effectiveness of this Indenture or the other Basic Documents to be impaired, or permit the Lien of this Indenture and the Series Supplement to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Bonds under this Indenture except as may be expressly permitted hereby, (ii) permit any Lien (other than the Lien of this Indenture or the Series Supplement) to be created on or extend to or otherwise arise upon or burden the Collateral or any part thereof or any interest therein or the proceeds thereof (other than tax liens arising by operation of law with respect to amounts not yet due) or (iii) permit the Lien granted pursuant to this Indenture and the Series Supplement not to constitute a valid first priority perfected security interest in the Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) elect to be classified as an association taxable as a corporation for federal income tax purposes or otherwise take any action, file any tax return, or make any election inconsistent with the treatment of the Issuer, for purposes of U.S. federal income tax law and, to the extent consistent with applicable State tax law, State income and franchise tax purposes, as a disregarded entity that is not separate from the sole owner of the Issuer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) change its name, identity or structure or the location of its chief executive office, unless at least ten (10) Business Days' prior to the effective date of any such change the Issuer delivers to the Indenture Trustee (with copies to the Rating Agencies) such documents, instruments or agreements, executed by the Issuer, as are necessary to reflect such change and to continue the perfection of the security interest granted pursuant to this Indenture and the Series Supplement;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) take any action which is subject to a Rating Agency Condition without satisfying the Rating Agency Condition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) except to the extent permitted by applicable law, voluntarily suspend or terminate its filing obligations with the SEC as described in <u>Section</u> <u>3.07(g)</u>; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) issue any "securitized bonds" under, and as defined in, the Act (other than the Bonds and any Additional Series).

SECTION 3.09. <u>Annual Statement as to Compliance</u>. The Issuer will deliver to the Indenture Trustee, the Rating Agencies and the Commission not later than March 31 of each year (commencing with March 31, 2026), an Officer's Certificate stating, as to the Responsible Officer signing such Officer's Certificate, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) a review of the activities of the Issuer during the preceding twelve (12) months ended December 31 (or, in the case of the first such Officer's Certificate, since the Closing Date) and of performance under this Indenture has been made; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) to the best of such Responsible Officer's knowledge, based on such review, the Issuer has in all material respects complied with all conditions and covenants under this Indenture throughout such twelve-month period (or such shorter period in the case of the first such Officer's Certificate), or, if there has been a default in the compliance of any such condition or covenant, specifying each such default known to such Responsible Officer and the nature and status thereof.

SECTION 3.10. <u>Issuer May Consolidate, etc., Only on Certain Terms</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Issuer shall not consolidate or merge with or into any other Person, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall (A) be a Person organized and existing under the laws of the United States of America or any State, (B) expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the performance or observance of every agreement and covenant of this Indenture and the Series Supplement on the part of the Issuer to be performed or observed, all as provided herein and in the Series Supplement, and (C) assume all obligations and succeed to all rights of the Issuer under the Sale Agreement, the Servicing Agreement and each other Basic Document to which the Issuer is a party;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) immediately after giving effect to such merger or consolidation, no Default, Event of Default or Servicer Default shall have occurred and be continuing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Rating Agency Condition shall have been satisfied with respect to such merger or consolidation;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the Issuer shall have delivered to Kentucky Power, the Indenture Trustee and the Rating Agencies an opinion or opinions of outside tax counsel (as selected by the Issuer, in form and substance reasonably satisfactory to Kentucky Power and the Indenture Trustee, and which may be based on a ruling from the Internal Revenue Service (unless the Internal Revenue Service has announced that it will not rule on the issues described in this paragraph)) to the effect that the consolidation or merger will not result in a material adverse U.S. federal or State income tax consequence to the Issuer, Kentucky Power, the Indenture Trustee or the then-existing Holders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the Issuer shall have delivered to the Indenture Trustee and the Commission an Officer's Certificate and an Opinion of Counsel of external counsel of the Issuer each stating that such consolidation or merger and such supplemental indenture comply with this Indenture and the Series Supplement and that all conditions precedent herein provided for in this <u>Section</u> <u>3.10(a)</u> with respect to such transaction have been complied with (including any filing required by the Exchange Act).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Except as specifically provided herein, the Issuer shall not sell, convey, exchange, transfer or otherwise dispose of any of its properties or assets included in the Collateral, to any Person, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Person that acquires the properties and assets of the Issuer, the conveyance or transfer of which is hereby restricted (A) shall be a United States citizen or a Person organized and existing under the laws of the United States of America or any State, (B) expressly assumes, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein and in the Series Supplement, (C) expressly agrees by means of such supplemental indenture that all right, title and interest so sold, conveyed, exchanged, transferred or otherwise disposed of shall be subject and subordinate to the rights of Holders, (D) unless otherwise provided in the supplemental indenture referred to in <u>clause</u> <u>(B)</u> above, expressly agrees to indemnify, defend and hold harmless the Issuer and the Indenture Trustee against and from any loss, liability or expense arising under or related to this Indenture, the Series Supplement and the Bonds (including the enforcement costs of such indemnity), (E) expressly agrees by means of such supplemental indenture that such Person (or if a group of Persons, then one specified Person) shall make all filings with the SEC (and any other appropriate Person) required by the Exchange Act in connection with Bonds and (F) if such sale, conveyance, exchange, transfer or disposal relates to the Issuer's rights and obligations under the Sale Agreement or the Servicing Agreement, assumes all obligations and succeeds to all rights of the Issuer under the Sale Agreement and the Servicing Agreement, as applicable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) immediately after giving effect to such transaction, no Default, Event of Default or Servicer Default shall have occurred and be continuing;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Rating Agency Condition shall have been satisfied with respect to such transaction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the Issuer shall have delivered to Kentucky Power, the Indenture Trustee and the Rating Agencies an opinion or opinions of outside tax counsel (as selected by the Issuer, in form and substance reasonably satisfactory to Kentucky Power and the Indenture Trustee, and which may be based on a ruling from the Internal Revenue Service) to the effect that the disposition will not result in a material adverse federal or State income tax consequence to the Issuer, Kentucky Power, the Indenture Trustee or the then-existing Holders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the Issuer shall have delivered to the Indenture Trustee and the Commission an Officer's Certificate and an Opinion of Counsel of external counsel of the Issuer each stating that such sale, conveyance, exchange, transfer or other disposition and such supplemental indenture comply with this Indenture and the Series Supplement and that all conditions precedent herein provided for in this <u>Section</u> <u>3.10(b)</u> with respect to such transaction have been complied with (including any filing required by the Exchange Act).

SECTION 3.11. <u>Successor or Transferee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Upon any consolidation or merger of the Issuer in accordance with <u>Section</u> <u>3.10(a)</u>, the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Except as set forth in <u>Section</u> <u>6.07</u>, upon a sale, conveyance, exchange, transfer or other disposition of all the assets and properties of the Issuer in accordance with <u>Section</u> <u>3.10(b)</u>, the Issuer will be released from every covenant and agreement of this Indenture and the other Basic Documents to be observed or performed on the part of the Issuer with respect to the Bonds and the Cost Recovery Property immediately following the consummation of such acquisition upon the delivery of written notice to the Indenture Trustee and the Commission from the Person acquiring such assets and properties stating that the Issuer is to be so released.

SECTION 3.12. <u>No Other Business</u>. The Issuer shall not engage in any business other than (a) financing, purchasing, owning and managing the Cost Recovery Property and the other Collateral and the issuance of the Bonds in the manner contemplated by the Financing Order and this Indenture and the other Basic Documents and activities incidental thereto and (b) issuing securities in connection with one or more Additional Series, pledging its interest in the related collateral, entering into the agreements related to such Additional Series and performing activities that are necessary, suitable or convenient to accomplish any such Additional Series.

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SECTION 3.13. <u>No Borrowing</u>. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness for borrowed money except for (a) the Bonds and any other indebtedness expressly permitted by or arising under the Basic Documents or (b) as permitted by the Commission in connection with the issuance of an Additional Series.

SECTION 3.14. <u>Servicer</u><u>'</u><u>s Obligations</u>. The Issuer shall enforce the Servicer's compliance with and performance of all of the Servicer's material obligations under the Servicing Agreement.

SECTION 3.15. <u>Guarantees, Loans, Advances and Other Liabilities</u>. Except as otherwise contemplated by the Sale Agreement, the Servicing Agreement or this Indenture, or as permitted by the Commission in connection with the issuance of an Additional Series, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person.

SECTION 3.16. <u>Capital Expenditures</u>. Other than the purchase of Cost Recovery Property from the Seller on the Closing Date or any expenditure made in connection with the issuance of any Additional Series, the Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).

SECTION 3.17. <u>Restricted Payments</u>. Except as provided in <u>Section</u> <u>8.04(c)</u>, or as required by the terms of any Additional Series, the Issuer shall not, directly or indirectly, (a) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to any owner of an interest in the Issuer or otherwise with respect to any ownership or equity interest or similar security in or of the Issuer, (b) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or similar security or (c) set aside or otherwise segregate any amounts for any such purpose; provided, however, that, if no Event of Default shall have occurred and be continuing or would be caused thereby, the Issuer may make, or cause to be made, any such distributions to any owner of an interest in the Issuer or otherwise with respect to any ownership or equity interest or similar security in or of the Issuer using funds distributed to the Issuer pursuant to <u>Section</u> <u>8.02(e)(xi)</u> to the extent that such distributions would not cause the balance of the Capital Subaccount to decline below the Required Capital Level. The Issuer will not, directly or indirectly, make payments to or distributions from the Collection Account except in accordance with this Indenture and the other Basic Documents.

SECTION 3.18. <u>Notice of Events of Default</u>. The Issuer agrees to give the Indenture Trustee, the Commission and the Rating Agencies prompt written notice of each Default or Event of Default hereunder as provided in <u>Section</u> <u>5.01</u>, and each default on the part of the Seller or the Servicer of its obligations under the Sale Agreement or the Servicing Agreement, respectively.

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SECTION 3.19. <u>Additional Bonds</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Following the issuance by the Commission of any Subsequent Financing Order or pursuant to remaining authority under the Financing Order, the Issuer may, in its sole discretion but subject to the terms contained in this <u>Section</u> <u>3.19</u>, acquire additional and separate "securitized property" (as defined in the Act) and issue an Additional Series under any such subsequent indenture that are backed by such separate additional securitized property. Any Additional Series may include terms and provisions unique to such Additional Series.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In addition to all applicable requirements set forth in any subsequent indenture for any Additional Series, the following conditions must be satisfied in connection with any issuance of an Additional Series:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Kentucky Power has existing authority under the Financing Order to issue additional securitized bonds or
Kentucky Power requests and receives a Subsequent Financing Order from the Commission to recover additional securitized costs through the issuance of additional securitized bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Kentucky Power must serve as initial servicer and administrator for such Additional Series and that the
servicer and the administrator cannot be replaced without the requisite approval of the holders of all Bonds then-Outstanding;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) satisfaction of the Rating Agency Condition;

Subsequent Financing Order, as the case may be, and funds on deposit in the trust accounts held by the trustee or securities intermediary under the indenture with respect to such Additional Series, is nonrecourse to the Cost Recovery Property
securing the Bonds and does not constitute a claim against the Issuer if revenue from the securitized surcharges and funds on deposit in the trust accounts with respect to such Additional Series are insufficient to pay such other series in full;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the Issuer has provided to the Indenture Trustee and the Rating Agencies then rating any series of the
Issuer's Outstanding Bonds an Opinion of Counsel of a nationally recognized law firm experienced in such matters to the effect that such issuance would not result in the Issuer's substantive consolidation with Kentucky Power and that there
has been a true sale of the securitized property for such Additional Series, subject to the customary exceptions, qualifications and assumptions contained therein;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) transaction documentation for the Additional Series provides that the indenture trustee on behalf of holders
of the securitized bonds of the Additional Series will not file or join in filing of any bankruptcy petition against the Issuer;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) if holders of such Additional Series are deemed to have any interest in any of the Collateral dedicated to
the Bonds, holders of such Additional Series must agree that (A) any such interest is subordinate to the claims and rights of the Holders of the Bonds and (B) that their interest in the collateral dedicated to the Additional Series is only
a first priority perfected interest in the assets relating to the Additional Series, as the case may be, in accordance with the Intercreditor Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) each Additional Series will have its own bank accounts or trust accounts and funds for each Additional
Series shall be remitted in accordance with the related servicing agreement and the Intercreditor Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) no Additional Series will be issued under this Indenture; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) each Additional Series will bear its own independent manager fees, indenture trustee fees, servicer fees and
administration fees.

SECTION 3.20. <u>Further Instruments and Acts</u>. Upon request of the Indenture Trustee, the Issuer shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture and to maintain the first priority perfected security interest of the Indenture Trustee in the Collateral.

SECTION 3.21. <u>Inspection</u>. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee or the Commission, during the Issuer's normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited annually by Independent registered public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees and Independent registered public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee and the Commission shall, and shall cause its representatives to, hold in confidence all such information except to the extent disclosure may be required by applicable law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. Notwithstanding anything herein to the contrary, the preceding sentence shall not be construed to prohibit (a) disclosure of any and all information that is or becomes publicly known, or information obtained by the Indenture Trustee from sources other than the Issuer, provided such parties are rightfully in possession of such information, (b) disclosure of any and all information (i) if required to do so by any applicable statute, law, rule or regulation, (ii) pursuant to any subpoena, civil investigative demand or similar demand or request of any court or regulatory authority exercising its proper jurisdiction, (iii) in any preliminary or final prospectus, registration statement or other document a copy of which has been filed with the SEC, (iv) to any Affiliate, independent or internal auditor, agent, employee or attorney of the Indenture Trustee having a need to know the same, provided that such parties agree to be bound by the confidentiality provisions contained in this <u>Section</u> <u>3.21</u> or (v) to any Rating Agency or (c) any other disclosure authorized by the Issuer.

SECTION 3.22. <u>Sale Agreement, Servicing Agreement, Administration Agreement and Intercreditor Agreement Covenants</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Issuer agrees to take all such lawful actions to enforce its rights under the Sale Agreement, the Servicing Agreement, the Administration Agreement and the Intercreditor Agreement and to compel or secure the performance and observance by the Seller, the Servicer, the Administrator and Kentucky Power of each of their respective obligations to the Issuer under or in connection with the Sale Agreement, the Servicing Agreement, the Administration Agreement and the Intercreditor Agreement in accordance with the terms thereof. So long as no Event of Default occurs and is continuing, but subject to <u>Section</u> <u>3.22(f)</u>, the Issuer may exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Sale Agreement, the Servicing Agreement, the Administration Agreement and the Intercreditor Agreement; <u>provided</u>, that such action shall not adversely affect the interests of the Holders in any material respect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If an Event of Default occurs and is continuing, the Indenture Trustee may, and at the direction (which direction shall be in writing) of Holders of a majority of the Outstanding Amount of the Bonds affected thereby or the Commission, shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller, Kentucky Power, the Administrator and the Servicer, as the case may be, under or in connection with the Sale Agreement, the Servicing Agreement, the Administration Agreement and the Intercreditor Agreement, including the right or power to take any action to compel or secure performance or observance by the Seller, Kentucky Power, the Administrator or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale Agreement, the Servicing Agreement, the Administration Agreement and the Intercreditor Agreement, and any right of the Issuer to take such action shall be suspended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Except as set forth in <u>Section</u> <u>3.22(e)</u>, the Administration Agreement, the Sale Agreement, the Intercreditor Agreement and the Servicing Agreement may be amended in accordance with the provisions thereof (including the satisfaction of any applicable (i) Rating Agency Condition and (ii) KPSC Condition (as described in <u>Section</u> <u>9.03</u> or alternatively, if applicable, Section 13(b) of the Administration Agreement, Section 6.01(e) of the Sale Agreement or Section 8.01(g) of the Servicing Agreement), in connection therewith) at any time and from time to time without the consent of the Holders of the Bonds; <u>provided</u> that all conditions precedent for such amendment have been satisfied and such amendment is authorized and permitted by the terms of such agreement, as evidenced by an Opinion of Counsel of external counsel to the Issuer, and such amendment shall not materially and adversely affect the interest of any Holder, as evidenced by an Officer's Certificate of the Administrator, Seller, Issuer or Servicer, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Except as set forth in <u>Section</u> <u>3.22(e)</u>, if the Issuer, the Seller, Kentucky Power, the Administrator, the Servicer or any other party to the respective agreement proposes to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, waiver, supplement, termination or surrender of, the terms of the Sale Agreement, the Intercreditor Agreement, the Administration Agreement, or the Servicing Agreement, or waive timely performance or observance by the Seller, Kentucky Power, the Administrator or the Servicer under the Sale Agreement, the Intercreditor Agreement, the Administration Agreement or the Servicing Agreement, in each case in such a way as would materially and adversely affect

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the interests of any Holder of Bonds, the Issuer shall satisfy the Rating Agency Condition and shall then promptly notify the Indenture Trustee and the Commission in writing, and the Indenture Trustee shall notify the Holders of the Bonds of the proposed amendment, modification, waiver, supplement, termination or surrender and whether the Rating Agency Condition has been satisfied with respect thereto. The Indenture Trustee shall consent to such proposed amendment, modification, waiver, supplement, termination or surrender only if the Rating Agency Condition is satisfied and only with the (i) prior written consent of the Holders of a majority of the Outstanding Amount of Bonds materially and adversely affected thereby (<u>provided</u> that, in order to determine which Holders are materially and adversely affected, the Indenture Trustee may rely upon an Officer's Certificate of the Issuer) and (ii) satisfaction of the KPSC Condition (as described in <u>Section</u> <u>9.03</u> hereof, or alternatively, if applicable, Section 13(b) of the Administration Agreement, Section 6.01(e) of the Sale Agreement or Section 8.01(g) of the Servicing Agreement). If any such amendment, modification, waiver, supplement, termination or surrender shall be so consented to by the Indenture Trustee or such Holders, the Issuer agrees to execute and deliver, in its own name and at its own expense, such agreements, instruments, consents and other documents as shall be necessary or appropriate in the circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) If the Issuer or the Servicer proposes to amend, modify, waive, supplement, terminate or surrender in any material respect, or to agree to any material amendment, modification, supplement, termination, waiver or surrender of, the process for True-Up Adjustments, except as otherwise contemplated by the Servicing Agreement, the Issuer shall notify in writing the Indenture Trustee and the Commission of such proposal, and the Indenture Trustee shall notify the Holders of the Bonds of such proposal, and the Indenture Trustee shall consent thereto only with the prior written consent of the Holders of a majority of the Outstanding Amount of Bonds materially and adversely affected thereby and only if (i) the Rating Agency Condition has been satisfied with respect thereto and (ii) the KPSC Condition (as described in <u>Section</u> <u>9.03</u>) has been satisfied with respect thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Promptly following a default by the Seller under the Sale Agreement, by the Administrator under the Administration Agreement, by Kentucky Power or any successor to Kentucky Power under the Intercreditor Agreement or the occurrence of a Servicer Default under the Servicing Agreement, and at the Issuer's expense, the Issuer agrees to take all such lawful actions as the Indenture Trustee may request to compel or secure the performance and observance by each of the Seller, the Administrator or the Servicer, of their obligations under and in accordance with the Sale Agreement, the Servicing Agreement, the Administration Agreement and the Intercreditor Agreement, as the case may be, in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with such agreements to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of any default by the Seller, the Administrator or the Servicer, respectively, thereunder and the institution of legal or administrative actions or Proceedings to compel or secure performance of their obligations under the Sale Agreement, the Servicing Agreement, the Administration Agreement or the Intercreditor Agreement, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Before consenting to any amendment, modification, supplement, termination, waiver or surrender under <u>Sections</u> <u>3.22(d)</u> or (e), the Indenture Trustee shall be entitled to receive and shall be fully protected in relying upon an Opinion of Counsel stating that such action is authorized or permitted by this Indenture and all conditions precedent to such amendment have been satisfied.

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SECTION 3.23. <u>Taxes</u>. So long as any of the Bonds are Outstanding, the Issuer shall pay all taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues thereon if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the Collateral; provided that no such tax need be paid if the Issuer is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Issuer has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

**ARTICLE IV** 

**SATISFACTION AND DISCHARGE; DEFEASANCE** 

SECTION 4.01. <u>Satisfaction and Discharge of Indenture; Defeasance</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Indenture shall cease to be of further effect with respect to the Bonds, and the Indenture Trustee, on reasonable written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Bonds, when:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) either

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) all Bonds theretofore authenticated and delivered (other than (1) Bonds that have been destroyed, lost or stolen and that have been replaced or paid as provided in <u>Section</u> <u>2.06</u> and (2) Bonds for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in the last paragraph of <u>Section</u> <u>3.03</u>) have been delivered to the Indenture Trustee for cancellation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) either (1) the Scheduled Final Payment Date has occurred with respect to all Bonds not theretofore delivered to the Indenture Trustee for cancellation or (2) the Bonds will be due and payable on their respective Scheduled Final Payment Dates within one year, and, in any such case, the Issuer has irrevocably deposited or caused to be irrevocably deposited in trust with the Indenture Trustee (x) cash and/or (y) U.S. Government Obligations which through the scheduled payments of principal and interest in respect thereof in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Bonds not theretofore delivered to the Indenture Trustee for cancellation and all other sums payable hereunder by the Issuer with respect to the Bonds when scheduled to be paid and to discharge the entire indebtedness on the Bonds when due;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Issuer has delivered to the Indenture Trustee (with a copy to the Commission) an Officer's Certificate, an Opinion of Counsel of external counsel of the Issuer and (if required by the TIA or the Indenture Trustee) an Independent Certificate from a firm of registered public accountants, each meeting the applicable requirements of <u>Section</u> <u>10.01(a)</u> and each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to the Bonds have been complied with.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Subject to <u>Sections</u> <u>4.01(c)</u> and <u>4.02</u>, the Issuer at any time may terminate (i) all its obligations under this Indenture with respect to the Bonds ("<u>Legal Defeasance Option</u>") or (ii) its obligations under <u>Sections</u> <u>3.04</u>, <u>3.05</u>, <u>3.06</u>, <u>3.07</u>, <u>3.08</u>, <u>3.09</u>, <u>3.10</u>, <u>3.12</u>, <u>3.13</u>, <u>3.14</u>, <u>3.15</u>, <u>3.16</u>, <u>3.17</u>, <u>3.18</u> <u>and 3.20</u> and the operation of <u>Section</u> <u>5.01(c)</u> ("<u>Covenant Defeasance Option</u>") with respect to Bonds. The Issuer may exercise the Legal Defeasance Option with respect to the Bonds notwithstanding its prior exercise of the Covenant Defeasance Option.

If the Issuer exercises the Legal Defeasance Option, the maturity of the Bonds may not be accelerated because of an Event of Default. If the Issuer exercises the Covenant Defeasance Option, the maturity of the Bonds may not be accelerated because of an Event of Default specified in <u>Section</u> <u>5.01(c)</u>.

Upon satisfaction of the conditions set forth herein to the exercise of the Legal Defeasance Option or the Covenant Defeasance Option with respect to Bonds, the Indenture Trustee, on reasonable written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of the obligations that are terminated pursuant to such exercise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Notwithstanding <u>Sections 4.01(a)</u> and <u>4.01(b)</u> above, (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Bonds, (iii) rights of Holders to receive payments of principal, premium, if any, and interest, (iv) <u>Sections 4.03</u> and <u>4.04</u>, (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under <u>Section</u> <u>6.07</u> and the obligations of the Indenture Trustee under <u>Section</u> <u>4.03</u>) and (vi) the rights of Holders as beneficiaries hereof with respect to the property deposited with the Indenture Trustee payable to all or any of them, shall survive until the obligations under <u>Section</u> <u>4.01(a)</u> or <u>4.01(b)</u>, as applicable, have been paid, satisfied and discharged in full. Thereafter the obligations in <u>Sections</u> <u>6.07</u> and <u>4.04</u> shall survive.

SECTION 4.02. <u>Conditions to Defeasance</u>. The Issuer may exercise the Legal Defeasance Option or the Covenant Defeasance Option with respect to the Bonds only if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Issuer has irrevocably deposited or caused to be irrevocably deposited in trust with the Indenture Trustee (i) cash and/or (ii) U.S. Government Obligations which through the scheduled payments of principal and interest in respect thereof in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Bonds not therefore delivered to the Indenture Trustee for cancellation and all other sums payable hereunder by the Issuer with respect to the Bonds when scheduled to be paid and to discharge the entire indebtedness on the Bonds when due;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Issuer delivers to the Indenture Trustee a certificate from a nationally recognized firm of Independent registered public accountants expressing its opinion that the payments of principal and interest when due and without reinvestment of the deposited U.S. Government Obligations plus any deposited cash without investment will provide cash at such times and in such amounts (but, in the case of the Legal Defeasance Option only, not more than such amounts) as will be sufficient to pay in respect of the Bonds (i) principal in accordance with the Expected Amortization Schedule therefor, (ii) interest when due and (iii) all other sums payable hereunder by the Issuer with respect to the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) in the case of the Legal Defeasance Option, ninety-five (95) days pass after the deposit is made and during the ninety-five (95)-day period no Default specified in <u>Section</u> <u>5.01(e)</u> or <u>(f)</u> occurs which is continuing at the end of the period;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) no Default has occurred and is continuing on the day of such deposit and after giving effect thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) in the case of an exercise of the Legal Defeasance Option, the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer stating that (i) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such legal defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) in the case of an exercise of the Covenant Defeasance Option, the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer to the effect that the Holders of the Bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) the Issuer delivers to the Indenture Trustee (with a copy to the Commission) an Officer's Certificate and an Opinion of Counsel of external counsel to the Issuer, each stating that all conditions precedent to the Legal Defeasance Option or the Covenant Defeasance Option, as applicable, have been complied with as required by this <u>Article IV</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the Issuer delivers to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer to the effect that: (i) in a case under the Bankruptcy Code in which Kentucky Power (or any of its Affiliates, other than the Issuer) is the debtor, the court would hold that the deposited moneys or U.S. Government Obligations would not be in the bankruptcy estate of Kentucky Power (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations); and (ii) in the event Kentucky Power (or any of its Affiliates, other

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than the Issuer, that deposited the moneys or U.S. Government Obligations) were to be a debtor in a case under the Bankruptcy Code, the court would not disregard the separate legal existence of Kentucky Power (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations) and the Issuer so as to order substantive consolidation under the Bankruptcy Code of the Issuer's assets and liabilities with the assets and liabilities of Kentucky Power or such other Affiliate; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Rating Agency Condition shall have been satisfied with respect to the exercise of any Legal Defeasance Option or Covenant Defeasance Option.

Notwithstanding any other provision of this <u>Section</u> <u>4.02</u>, no delivery of moneys or U.S. Government Obligations to the Indenture Trustee shall terminate any obligation of the Issuer to the Indenture Trustee under this Indenture or the Series Supplement or any obligation of the Issuer to apply such moneys or U.S. Government Obligations under <u>Section</u> <u>4.03</u> until principal of and premium, if any, and interest on the Bonds shall have been paid in accordance with the provisions of this Indenture and the Series Supplement.

SECTION 4.03. <u>Application of Trust Money</u>. All moneys or U.S. Government Obligations deposited with the Indenture Trustee pursuant to <u>Section</u> <u>4.01</u> or <u>4.02</u> shall be held in trust and applied by it, in accordance with the provisions of the Bonds and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Bonds for the payment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest; but such moneys need not be segregated from other funds except to the extent required herein or in the Servicing Agreement or required by law. Notwithstanding anything to the contrary in this <u>Article IV</u>, the Indenture Trustee shall deliver or pay to the Issuer from time to time upon Issuer Request any moneys or U.S. Government Obligations held by it pursuant to <u>Section</u> <u>4.02</u> which, in the opinion of a nationally recognized firm of Independent registered public accountants expressed in a written certification thereof delivered to the Indenture Trustee (and not at the cost or expense of the Indenture Trustee), are in excess of the amount thereof which would be required to be deposited for the purpose for which such moneys or U.S. Government Obligations were deposited, <u>provided</u> that any such payment shall be subject to the satisfaction of the Rating Agency Condition.

SECTION 4.04. <u>Repayment of Moneys Held by Paying Agent</u>. In connection with the satisfaction and discharge of this Indenture or the Covenant Defeasance Option or Legal Defeasance Option with respect to the Bonds, all moneys then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture or the Intercreditor Agreement with respect to the Bonds shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to <u>Section</u> <u>3.03</u> and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.

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**ARTICLE V** 

**REMEDIES** 

SECTION 5.01. <u>Events of Default</u>. "<u>Event of Default</u>" wherever used herein, means any one or more of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) default in the payment of any interest on any Bond when the same becomes due and payable (whether such failure to pay interest is caused by a shortfall in Charges received or otherwise), and such default shall continue for a period of five (5) Business Days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) default in the payment of the then outstanding unpaid principal of any Bond on the Final Maturity Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) default in the performance of any covenant or agreement of the Issuer made in this Indenture (other than defaults specified in <u>Section</u> <u>5.01(a)</u> or <u>(b)</u> above), and such default shall continue or not be cured, for a period of thirty (30) days after the earlier of (i) the date that there shall have been given, by registered or certified mail, to the Issuer and the Commission by the Indenture Trustee or to the Issuer, the Indenture Trustee and the Commission by the Holders of at least 25 percent of the Outstanding Amount of the Bonds, a written notice specifying such default and requiring it to be remedied and stating that such notice is a "<u>Notice of Default</u>" hereunder or (ii) the date that the Issuer has actual knowledge of the default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) any representation or warranty of the Issuer made in this Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and the circumstance or condition in respect of which such misrepresentation or warranty was incorrect shall not have been eliminated or otherwise cured, within thirty (30) days after the earlier of (i) the date that there shall have been given, by registered or certified mail, to the Issuer and the Commission by the Indenture Trustee or to the Issuer, the Indenture Trustee and the Commission by the Holders of at least 25 percent of the Outstanding Amount of the Bonds, a written notice specifying such incorrect representation or warranty and requiring it to be remedied and stating that such notice is a "<u>Notice of Default</u>" hereunder or (ii) the date the Issuer acquires actual knowledge of the default,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Collateral in an involuntary case or proceeding under any applicable U.S. federal or State bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Collateral, or ordering the winding-up or liquidation of the Issuer's affairs, and such decree or order shall remain unstayed and in effect for a period of ninety (90) consecutive days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the commencement by the Issuer of a voluntary case under any applicable U.S. federal or State bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case or proceeding under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Collateral, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of action by the Issuer in furtherance of any of the foregoing; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) any act or failure to act by the Commonwealth of Kentucky or any of its agencies (including the Commission), officers or employees which violates or is not in material accordance with the State Pledge.

The Issuer shall deliver to a Responsible Officer of the Indenture Trustee, the Rating Agencies, and the Commission, within five (5) days after a Responsible Officer of the Issuer has knowledge of the occurrence thereof, written notice in the form of an Officer's Certificate of any event (I) which is an Event of Default under <u>Section</u> <u>5.01(a)</u>, <u>(b)</u>, <u>(f)</u> or <u>(g)</u> or (II) which with the giving of notice, the lapse of time, or both, would become an Event of Default under <u>Section</u> <u>5.01 (c)</u>, <u>(d)</u> or <u>(e)</u>, including, in each case, the status of such Default or Event of Default and what action the Issuer is taking or proposes to take with respect thereto.

SECTION 5.02. <u>Acceleration of Maturity; Rescission and Annulment</u>. If an Event of Default (other than an Event of Default under <u>Section</u> <u>5.01(g)</u>) should occur and be continuing, then and in every such case the Indenture Trustee or the Holders representing not less than a majority of the Outstanding Amount of the Bonds may declare the Bonds to be immediately due and payable, by a notice in writing to the Issuer and the Commission (and to the Indenture Trustee if given by Holders), and upon any such declaration the unpaid principal amount of the Bonds, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable.

At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter provided in this <u>ARTICLE V</u>, the Holders representing not less than a majority of the Outstanding Amount of the Bonds, by written notice to the Issuer, the Indenture Trustee and the Commission, may rescind and annul such declaration and its consequences if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all payments of principal of and premium, if any, and interest on all Bonds due and owing at such time as if such Event of Default had not occurred and was not continuing and all other amounts that would then be due hereunder or upon the Bonds if the Event of Default giving rise to such acceleration had not occurred and was not continuing; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel; provided, that, the Indenture Trustee shall not be obligated to pay or advance any sums hereunder from its own funds if an Event of Default has occurred and is continuing; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) all Events of Default, other than the nonpayment of the principal of the Bonds that has become due solely by such acceleration, have been cured or waived as provided in <u>Section</u> <u>5.12</u>.

No such rescission shall affect any subsequent Default or impair any right consequent thereto.

SECTION 5.03. <u>Collection of Indebtedness and Suits for Enforcement by Indenture Trustee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If an Event of Default under <u>Section</u> <u>5.01(a)</u> or <u>(b)</u> has occurred and is continuing, subject to <u>Section</u> <u>10.19</u>, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and, subject to the limitations on recourse set forth herein, may enforce the same against the Issuer or other obligor upon the Bonds and collect in the manner provided by applicable law out of the property of the Issuer or other obligor upon the Bonds, wherever situated the moneys payable, or the Collateral and the proceeds thereof, the whole amount then due and payable on the Bonds for principal, premium, if any, and interest, with interest upon the overdue principal and premium, if any, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the respective rate borne by the Bonds and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel without regard to any cap.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If an Event of Default (other than an Event of Default under <u>Section</u> <u>5.01(g)</u>) occurs and is continuing, the Indenture Trustee shall, as more particularly provided in <u>Section</u> <u>5.04</u>, proceed to protect and enforce its rights and the rights of the Holders, by such appropriate Proceedings as the Indenture Trustee (subject to <u>Section</u> <u>5.11</u>) shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture and the Series Supplement or by applicable law, including foreclosing or otherwise enforcing the Lien of the Collateral securing the Bonds or applying to a court of competent jurisdiction for sequestration of revenues arising with respect to the Cost Recovery Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If an Event of Default under <u>Section</u> <u>5.01(e)</u> or <u>(f)</u> has occurred and is continuing, the Indenture Trustee, irrespective of whether the principal of any Bonds shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this <u>Section</u> <u>5.03</u>, shall be entitled and empowered, by intervention in any Proceedings related to such Event of Default or otherwise:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) to file and prove a claim or claims for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Bonds and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture

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Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in such Proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee in bankruptcy, a standby trustee or Person performing similar functions in any such Proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders allowed in any judicial proceeding relative to the Issuer, its creditors and its property; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Bonds or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such Proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) All rights of action and of asserting claims under this Indenture, or under any of the Bonds, may be enforced by the Indenture Trustee without the possession of any of the Bonds or the production thereof in any trial or other Proceedings relative thereto, and any such Proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) In any Proceedings brought by the Indenture Trustee (and also any Proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all the Holders of the Bonds, and it shall not be necessary to make any Holder a party to any such Proceedings.

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SECTION 5.04. <u>Remedies; Priorities</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If an Event of Default (other than an Event of Default under <u>Section</u> <u>5.01(g)</u>) shall have occurred and be continuing, the Indenture Trustee may do one or more of the following (subject to <u>Section</u> <u>5.05</u>):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Bonds or under this Indenture with respect thereto, whether by declaration of acceleration or otherwise, and, subject to the limitations on recovery set forth herein, enforce any judgment obtained, and collect from the Issuer or any other obligor moneys adjudged due upon the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) exercise any remedies of a secured party under the UCC, the Act or any other applicable law and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee and the Holders of the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) at the written direction of the Holders of a majority of the Outstanding Amount of the Bonds, sell the Collateral or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by applicable law, or elect that the Issuer maintain possession of all or a portion of the Collateral pursuant to <u>Section</u> <u>5.05</u> and continue to apply the Charge Collections as if there had been no declaration of acceleration; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller, the Administrator or the Servicer under or in connection with, and pursuant to the terms of, the Sale Agreement, the Administration Agreement, the Intercreditor Agreement or the Servicing Agreement;

<u>provided</u>, <u>however</u>, that the Indenture Trustee may not sell or otherwise liquidate any portion of the Collateral following such an Event of Default, other than an Event of Default described in <u>Section</u> <u>5.01(a)</u> or <u>(b)</u>, unless (A) the Holders of 100 percent of the Outstanding Amount of the Bonds consent thereto, (B) the proceeds of such sale or liquidation distributable to the Holders are sufficient to discharge in full all amounts then due and unpaid upon the Bonds for principal, premium, if any, and interest after taking into account payment of all amounts due prior thereto pursuant to the priorities set forth in <u>Section</u> <u>8.02(e)</u> or (C) the Indenture Trustee determines that the Collateral will not continue to provide sufficient funds for all payments on the Bonds as they would have become due if the Bonds had not been declared due and payable, and the Indenture Trustee obtains the written consent of Holders of at least two thirds (2/3) of the Outstanding Amount of the Bonds. In determining such sufficiency or insufficiency with respect to <u>clauses (B)</u> and <u>(C)</u>, the Indenture Trustee may, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If an Event of Default under <u>Section</u> <u>5.01(g)</u> shall have occurred and be continuing, the Indenture Trustee, for the benefit of the Secured Parties, shall be entitled and empowered, to the extent permitted by applicable law, to institute or participate in Proceedings necessary to compel performance of or to enforce the State Pledge and to collect any monetary damages incurred by the Holders or the Indenture Trustee as a result of any such Event of Default, and may prosecute any such Proceeding to final judgment or decree. Such remedy shall be the only remedy that the Indenture Trustee may exercise if the only Event of Default that has occurred and is continuing is an Event of Default under <u>Section</u> <u>5.01(g)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If the Indenture Trustee collects any money pursuant to this <u>ARTICLE V</u>, it shall pay out such money in accordance with the priorities set forth in <u>Section</u> <u>8.02(e) without regard to any cap</u>.

SECTION 5.05. <u>Optional Preservation of the Collateral</u>. If the Bonds have been declared to be due and payable under <u>Section</u> <u>5.02</u> following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of all or a portion of the Collateral. It is the desire of the parties hereto and the Holders that there be at all times sufficient funds for the payment of principal of and premium, if any, and interest on the Bonds, and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the Collateral. In determining whether to maintain possession of the Collateral or sell or liquidate the same, the Indenture Trustee may, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose.

SECTION 5.06. <u>Limitation of Suits</u>. No Holder of any Bond shall have any right to institute any Proceeding, judicial or otherwise, to avail itself of any remedies provided in the Act or to avail itself of the right to foreclose on the Collateral or otherwise enforce the Lien and the security interest on the Collateral with respect to this Indenture and the Series Supplement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) such Holder previously has given written notice to the Indenture Trustee and the Commission of a continuing Event of Default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Holders of not less than a majority of the Outstanding Amount of the Bonds have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) such Holder or Holders have offered to the Indenture Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such request;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the Indenture Trustee for sixty (60) days after its receipt of notice of a continuing Event of Default, request and offer of indemnity has failed to institute such Proceedings; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) no direction inconsistent with such written request has been given to the Indenture Trustee during such sixty-day period by the Holders of a majority of the Outstanding Amount of the Bonds;

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it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided.

In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders, each representing less than a majority of the Outstanding Amount of the Bonds, the Indenture Trustee in its sole discretion may file a petition with a court of competent jurisdiction to resolve such conflict or determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture.

SECTION 5.07. <u>Unconditional Rights of Holders To Receive Principal, Premium, if any, and Interest</u>. Notwithstanding any other provisions in this Indenture, the Holder of any Bond shall have the right, which is absolute and unconditional, (a) to receive payment of (i) the interest, if any, on such Bond on the due dates thereof expressed in such Bond or in this Indenture or (ii) the unpaid principal, if any, of the Bonds on the Final Maturity Date therefor and (b) to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder.

SECTION 5.08. <u>Restoration of Rights and Remedies</u>. If the Indenture Trustee or any Holder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Holder, then and in every such case the Issuer, the Indenture Trustee and the Holders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Holders shall continue as though no such Proceeding had been instituted.

SECTION 5.09. <u>Rights and Remedies Cumulative</u>. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by applicable law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

SECTION 5.10. <u>Delay or Omission Not a Waiver</u>. No delay or omission of the Indenture Trustee or any Holder to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this <u>ARTICLE V</u> or by applicable law to the Indenture Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Holders, as the case may be.

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SECTION 5.11. <u>Control by Holders</u>. The Holders of not less than a majority of the Outstanding Amount of the Bonds shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Bonds or exercising any trust or power conferred on the Indenture Trustee; <u>provided</u> <u>that</u>:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) such direction shall not be in conflict with any rule of applicable law or with this Indenture and shall not involve the Indenture Trustee in any personal liability or expense;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) subject to other conditions specified in <u>Section</u> <u>5.04</u>, any direction to the Indenture Trustee to sell or liquidate any Collateral shall be by the Holders representing the applicable percentage of the Outstanding Amount of the Bonds as provided in <u>Section</u> <u>5.04</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) if the conditions set forth in <u>Section</u> <u>5.05</u> have been satisfied and the Indenture Trustee elects to retain the Collateral pursuant to <u>Section</u> <u>5.05</u>, then any direction to the Indenture Trustee by Holders representing less than 100 percent of the Outstanding Amount of the Bonds to sell or liquidate the Collateral shall be of no force and effect; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction;

<u>provided</u>, <u>however</u>, that, the Indenture Trustee's duties shall be subject to <u>Section</u> <u>6.01</u>, and the Indenture Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Holders not consenting to such action. Furthermore and without limiting the foregoing, the Indenture Trustee shall not be required to take any action for which it reasonably believes that it will not be indemnified to its satisfaction against any cost, expense or liabilities.

SECTION 5.12. <u>Waiver of Past Defaults</u>. Prior to the declaration of the acceleration of the maturity of the Bonds as provided in <u>Section</u> <u>5.02</u>, the Holders representing not less than a majority of the Outstanding Amount of the Bonds, by written notice to the Indenture Trustee and the Commission, may waive any past Default or Event of Default and its consequences except a Default (a) in payment of principal of or premium, if any, or interest on any of the Bonds or (b) in respect of a covenant or provision hereof that cannot be modified or amended without the consent of the Holder of each Bond. In the case of any such waiver, the Issuer, the Indenture Trustee and the Holders shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto.

Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto.

SECTION 5.13. <u>Undertaking for Costs</u>. All parties to this Indenture agree, and each Holder of any Bond by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or

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omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this <u>Section</u> <u>5.13</u> shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Holder, or group of Holders, in each case holding in the aggregate more than ten (10) percent of the Outstanding Amount of the Bonds or (c) any suit instituted by any Holder for the enforcement of the payment of (i) interest on any Bond on or after the due dates expressed in such Bond and in this Indenture or (ii) the unpaid principal, if any, of any Bond on or after the Final Maturity Date therefor.

SECTION 5.14. <u>Waiver of Stay or Extension Laws</u>. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

SECTION 5.15. <u>Action on Bonds</u>. The Indenture Trustee's right to seek and recover judgment on the Bonds or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the Lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Holders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or any other assets of the Issuer.

**ARTICLE VI** 

**THE INDENTURE TRUSTEE** 

SECTION 6.01. <u>Duties of Indenture Trustee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Except during the continuance of an Event of Default:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) in the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming on their face to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Indenture Trustee may not be relieved from liability for its own negligent action, its own bad faith, its own negligent failure to act or its own willful misconduct, except that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) this <u>Section</u> <u>6.01(c)</u> does not limit the effect of <u>Section</u> <u>6.01(b)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by the Indenture Trustee unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to <u>Section</u> <u>6.01(a)</u>, <u>(b)</u> and <u>(c)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Money held in trust by the Indenture Trustee need not be segregated from other funds held by the Indenture Trustee except to the extent required by applicable law or the terms of this Indenture, the Sale Agreement, the Servicing Agreement, Administration Agreement or the Intercreditor Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayments of such funds or indemnity satisfactory to it against such risk or liability is not reasonably assured to it.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this <u>Section</u> <u>6.01</u> and to the provisions of the TIA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) In the event that the Indenture Trustee is also acting as Paying Agent or Bond Registrar hereunder, the protections of this <u>Article VI</u> shall also be afforded to the Indenture Trustee in its capacity as Paying Agent or Bond Registrar.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) Except for the express duties of the Indenture Trustee set forth in the Basic Documents, the Indenture Trustee shall have no obligation to administer, service or collect Cost Recovery Property or to maintain, monitor or otherwise supervise the administration, servicing or collection of the Cost Recovery Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) Under no circumstance shall the Indenture Trustee be liable for any indebtedness of the Issuer, the Servicer or the Seller evidenced by or arising under the Bonds or the Basic Documents. None of the provisions of this Indenture shall in any event require the Indenture Trustee to perform or be responsible for the performance of any of the Servicer's obligations under the Basic Documents.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) Commencing with March 15, 2026, on or before March 15<sup>th</sup> of each fiscal year ending December 31, the Indenture Trustee shall (i) deliver to the Issuer a report (in form and substance reasonably satisfactory to the Issuer and addressed to the Issuer and signed by an authorized officer of the Indenture Trustee) regarding the Indenture Trustee's assessment of compliance, during the immediately preceding fiscal year ending December 31, with each of the applicable servicing criteria specified on <u>Exhibit</u> <u>C</u> hereto as required under Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB and (ii) deliver to the Issuer a report of an Independent registered public accounting firm reasonably acceptable to the Issuer that attests to and reports on, in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act, the assessment of compliance made by the Indenture Trustee and delivered pursuant to clause (i) of this <u>Section</u> <u>6.01(l)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) The Indenture Trustee shall not be required to take any action it is directed to take under this Indenture if the Indenture Trustee determines in good faith that the action so directed is inconsistent with this Indenture, any other Basic Document or applicable Law, or would involve the Indenture Trustee in personal liability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) The Indenture Trustee shall not be responsible for special, indirect, punitive or consequential damages (including lost profits), except as a result of its own willful misconduct, negligence or bad faith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) In no event shall the Indenture Trustee be liable for failure to perform its duties hereunder or any other Basic Document if such failure is a direct result of another party's failure to perform its obligations hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) Any discretion, permissive right or privilege of the Indenture Trustee hereunder shall not be deemed to be or otherwise construed as a duty or obligation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) The Indenture Trustee's receipt of publicly available reports hereunder shall constitute notice of any information contained therein or determinable therefrom, including but not limited to a party's compliance with covenants under the Indenture.

SECTION 6.02. <u>Rights of Indenture Trustee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Indenture Trustee may conclusively rely and shall be fully protected in relying on any document (including electronic documents and communications delivered in accordance with the terms of this Indenture) believed by it to be genuine and to have been signed or presented by the proper Person. The Indenture Trustee need not investigate any fact or matter stated in such document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Before the Indenture Trustee acts or refrains from acting, it may require and shall be entitled to receive an Officer's Certificate or an Opinion of Counsel of external counsel of the Issuer (at no cost or expense to the Indenture Trustee) that such action is required or permitted hereunder. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate or Opinion of Counsel.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder. The Indenture Trustee shall give prompt written notice to the Rating Agencies and the Commission of the appointment of any such agent, custodian or nominee to whom it delegates any of its express duties under this Indenture; <u>provided</u>, that the Indenture Trustee shall not be obligated to give such notice (i) if the Issuer or the Holders have directed the Indenture Trustee to appoint such agent, custodian or nominee (in which event the Issuer shall give prompt notice to the Rating Agencies and the Commission of any such direction) or (ii) of the appointment of any agents, custodians or nominees made at any time that an Event of Default on account of non-payment of principal or interest on the Bonds or insolvency of the Issuer has occurred and is continuing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; <u>provided</u>, <u>however</u>, that the Indenture Trustee's conduct does not constitute willful misconduct, negligence or bad faith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Indenture Trustee may consult with counsel, accountants and other experts, and the advice or Opinion of Counsel with respect to legal matters and such accountants or other experts with respect to other matters relating to this Indenture and the Bonds shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel, accountants, or other experts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Except as otherwise expressly provided herein, the Indenture Trustee shall be under no obligation to (i) take any action or exercise any of the rights or powers vested in it by this Indenture or any other Basic Document at the request or direction of any of the Holders pursuant to this Indenture or (ii) institute, conduct or defend any litigation hereunder or thereunder or in relation hereto or thereto or to investigate any matter, at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture and the Series Supplement or otherwise, unless it is requested to do so by Holders of not less than 25% of the Outstanding Amount of the Bonds and it shall have received security or indemnity reasonably satisfactory against the costs, expenses and liabilities which may be incurred therein by the Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) In no event shall the Indenture Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, pandemics or epidemics, loss or malfunctions of utilities, communications or computer systems and services; it being understood that the Indenture Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) The Indenture Trustee shall not be deemed to have notice or knowledge of any Servicer Default, Default or Event of Default unless a Responsible Officer of the Indenture Trustee has actual knowledge thereof or the Indenture Trustee has received written notice thereof pursuant to <u>Section</u> <u>10.04(a)(i)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or an Issuer Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) Whenever in the administration of this Indenture the Indenture Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Indenture Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officer's Certificate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) The Indenture Trustee shall not be responsible for (i) the validity of the title of the Issuer to the Collateral, (ii) insuring the Collateral or (iii) the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) The Indenture Trustee shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Indenture or any of the other Basic Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) The Indenture Trustee shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral.

SECTION 6.03. <u>Individual Rights of Indenture Trustee</u>. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Bonds and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee. Any Paying Agent, Bond Registrar, co-registrar or co-paying agent or agent appointed under <u>Section</u> <u>3.02</u> may do the same with like rights. However, the Indenture Trustee must comply with <u>Sections</u> <u>6.11</u> and <u>6.12</u>.

SECTION 6.04. <u>Indenture Trustee</u><u>'</u><u>s Disclaimer</u>. The Indenture Trustee shall not be responsible for and makes no representation (other than as set forth in <u>Section</u> <u>6.13</u>) as to the validity or adequacy of this Indenture or the Bonds, it shall not be accountable for the Issuer's use of the proceeds from the Bonds, and it shall not be responsible for any statement of the Issuer in this Indenture or in any document issued in connection with the sale of the Bonds or in the Bonds other than the Indenture Trustee's certificate of authentication. The Indenture Trustee shall not be responsible for the form, character, genuineness, sufficiency, value or validity of any of the Collateral, or for or in respect of the Bonds (other than the certificate of authentication for the Bonds) or the Basic Documents, and the Indenture Trustee shall in no event assume or incur any liability, duty or obligation to any Holder, other than as expressly provided in this Indenture. The Indenture Trustee shall not be liable for the default or misconduct of the Issuer, the Seller, or the Servicer under the Basic Documents or otherwise, and the Indenture Trustee shall have no obligation or liability to perform the obligations of such Persons.

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SECTION 6.05. <u>Notice of Defaults</u>. If a Default occurs and is continuing and if it is actually known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall mail to the Commission, each Rating Agency and each Holders notice of the Default within ten (10) Business Days after such Default was actually known to a Responsible Officer of the Indenture Trustee (provided that the Indenture Trustee shall give the Rating Agencies prompt notice of any payment default in respect of the Bonds). Except in the case of a Default in payment of principal of and premium, if any, or interest on any Bond, the Indenture Trustee may withhold the notice if a Responsible Officer in good faith determines that prompt notice of the Default is not likely to be material to Holders and the Default is likely to be cured and therefore that withholding the notice is in the interests of Holders. Except for an Event of Default under <u>Section</u> <u>5.01(a)</u> or <u>(b)</u> in no event shall the Indenture Trustee be deemed to have knowledge of a Default unless a Responsible Officer of the Indenture Trustee shall have actual knowledge of a Default or shall have received written notice thereof.

SECTION 6.06. <u>Reports by Indenture Trustee to Holders</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) So long as Bonds are Outstanding and the Indenture Trustee is the Bond Registrar and Paying Agent, upon the written request of any Holder or the Issuer, within the prescribed period of time for tax reporting purposes after the end of each calendar year, the Indenture Trustee shall deliver to each relevant current or former Holder such information in its possession as may be required to enable such Holder to prepare its U.S. federal income and any applicable local or State tax returns. If the Bond Registrar and Paying Agent is other than the Indenture Trustee, such Bond Registrar and Paying Agent, within the prescribed period of time for tax reporting purposes after the end of each calendar year, shall deliver to each relevant current or former Holder such information in its possession as may be required to enable such Holder to prepare its U.S. federal income and any applicable local or State tax returns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) On or prior to each Payment Date or Special Payment Date therefor, the Indenture Trustee will deliver or make available electronically to the Commission and each Holder of the Bonds on such Payment Date or Special Payment Date a statement as provided and prepared by the Servicer, which will include (to the extent applicable) the following information (and any other information so specified in the Series Supplement) as to the Bonds with respect to such Payment Date or Special Payment Date or the period since the previous Payment Date, as applicable:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the amount of the payment to Holders allocable to principal, if any;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the amount of the payment to Holders allocable to interest;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the aggregate Outstanding Amount of the Bonds, before and after giving effect to any payments allocated to principal reported under <u>Section</u> <u>6.06(b)(i)</u> above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the difference, if any, between the amount specified in <u>Section(b)(iii)</u> above and the Outstanding Amount specified in the related Expected Amortization Schedule;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) any other transfers and payments to be made on such Payment Date or Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Issuer shall send a copy of each of the Certificate of Compliance delivered to it pursuant to <u>Section</u> <u>3.03</u> of the Servicing Agreement and the Annual Accountant's Report delivered to it pursuant to <u>Section</u> <u>3.04</u> of the Servicing Agreement to the Rating Agencies, the Indenture Trustee and to the Servicer for posting on the 17g-5 Website in accordance with Rule 17g-5 under the Exchange Act. A copy of such certificate and report may be obtained by any Holder by a request in writing to the Indenture Trustee.

SECTION 6.07. <u>Compensation and Indemnity</u>. The Issuer shall pay to the Indenture Trustee from time to time reasonable compensation for its services. The Indenture Trustee's compensation shall not, to the extent permitted by applicable law, be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Indenture Trustee for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall indemnify and hold harmless the Indenture Trustee and its officers, directors, employees and agents (each an "Indemnified Person") against any and all cost, damage, loss, liability, tax or expense (including reasonable attorneys' fees and expenses, the fees of experts and agents and any reasonable extraordinary out-of-pocket expenses) incurred by it in connection with the administration and the enforcement of this Indenture, the Series Supplement and the Basic Documents, including the costs and expenses of defending themselves against any claim of liability in connection with the exercise of the Indenture Trustee's rights, powers and obligations under this Indenture, the Series Supplement and the other Basic Documents and the performance of its duties hereunder and obligations under or pursuant to this Indenture, the Series Supplement and the Basic Documents and the costs of defending any claim or bringing any claim to enforce the Issuer's indemnification obligations hereunder. The Issuer shall not be required to indemnify the Indemnified Person for any amount paid or payable by such Indemnified Person in the settlement of any action, proceeding or investigation without the prior written consent of the Issuer, which consent shall not be unreasonably withheld. Promptly after receipt by an Indemnified Person of notice of the commencement of any action, proceeding or investigation, such Indemnified Person shall, if a claim in respect thereof is to be made against the Issuer under this <u>Section</u> <u>6.07</u>, notify the Issuer in writing of the commencement thereof. Failure by an Indemnified Person to so notify the Issuer shall not relieve the Issuer from the obligation to indemnify and hold harmless such Indemnified Person under this <u>Section</u> <u>6.07</u>. With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this <u>Section</u> <u>6.07</u> the Issuer shall be entitled to conduct and control, at its expense and with counsel of its choosing that is reasonably satisfactory to such Indemnified Person, the defense of any such action, proceeding or investigation (in which case the Issuer shall not thereafter be responsible for the fees and expenses of any separate counsel retained by such Indemnified Person except as set forth below); provided that such Indemnified Person shall have the right to participate in such action, proceeding or investigation through counsel chosen by it and at its own expense. Notwithstanding the Issuer's election to assume the defense of any action, proceeding or investigation, such Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Issuer shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the defendants in any such

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action include both the Indemnified Person and the Issuer and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Issuer, (ii) the Issuer shall not have employed counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iii) the Issuer shall authorize the Indemnified Person to employ separate counsel at the expense of the Issuer. Notwithstanding the foregoing, the Issuer shall not be obligated to pay for the fees, costs and expenses of more than one separate counsel for the Indemnified Person other than one local counsel, if appropriate. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indemnified Person's own willful misconduct, negligence or bad faith. The rights of the Indenture Trustee set forth in this <u>Section</u> <u>6.07</u> are subject to and limited by the priority of payments set forth in <u>Section</u> <u>8.02(e)</u>.

The payment obligations to the Indenture Trustee pursuant to this <u>Section</u> <u>6.07</u> shall survive the discharge of this Indenture and the Series Supplement or the earlier resignation or removal of the Indenture Trustee. When the Indenture Trustee incurs expenses after the occurrence of a Default specified in <u>Section</u> <u>5.01(e)</u> or <u>(f)</u> with respect to the Issuer, the expenses are intended to constitute expenses of administration under the Bankruptcy Code or any other applicable U.S. federal or state bankruptcy, insolvency or similar law.

SECTION 6.08. <u>Replacement of Indenture Trustee and Securities Intermediary</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Indenture Trustee may resign at any time upon thirty (30) days' prior written notice to the Issuer and the Commission subject to <u>Section</u> <u>6.08(c)</u> below. The Holders of a majority of the Outstanding Amount of the Bonds may remove the Indenture Trustee with thirty (30) days' prior written notice by so notifying the Indenture Trustee and the Commission and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Indenture Trustee fails to comply with <u>Section</u> <u>6.11</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Indenture Trustee is adjudged as bankrupt or insolvent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a receiver or other public officer takes charge of the Indenture Trustee or its property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the Indenture Trustee otherwise becomes incapable of acting; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the Indenture Trustee fails to provide to the Issuer any information reasonably requested by the Issuer pertaining to the Indenture Trustee and necessary for the Issuer or the Depositor to comply with its reporting obligations under the Exchange Act and Regulation AB and such failure is not resolved to the Issuer's and the Indenture Trustee's mutual satisfaction within a reasonable period of time.

Any removal or resignation of the Indenture Trustee shall also constitute a removal or resignation of the Securities Intermediary.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If the Indenture Trustee or Securities Intermediary gives notice of resignation or is removed or if a vacancy exists in the office of Indenture Trustee or Securities Intermediary for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee and the Securities Intermediary in such event being referred to herein as the retiring Securities Intermediary), the Issuer shall promptly appoint a successor Indenture Trustee or a successor Securities Intermediary, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Each of the successor Indenture Trustee and the successor Securities Intermediary, as the case may be, shall deliver a written acceptance of its appointment as the Indenture Trustee or as the Securities Intermediary, as applicable, to the retiring Indenture Trustee and the retiring Securities Intermediary, as applicable, and to the Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee or the retiring Securities Intermediary, as the case may be, shall become effective, and the successor Indenture Trustee or the successor Securities Intermediary, as applicable, shall have all the rights, powers and duties of the Indenture Trustee and Securities Intermediary, as applicable, under this Indenture, the Intercreditor Agreement and other Basic Documents. No resignation or removal of the Indenture Trustee pursuant to this <u>Section</u> <u>6.08</u> shall become effective until acceptance of the appointment by a successor Indenture Trustee having the qualifications set forth in <u>Section</u> <u>6.11</u>. Notice of any such appointment shall be promptly given to each Rating Agency and the Commission by the successor Indenture Trustee. The successor Indenture Trustee shall mail a notice of its succession to Holders. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) If a successor Indenture Trustee or a successor Securities Intermediary does not take office within sixty (60) days after the retiring Indenture Trustee or the retiring Securities Intermediary, as the case may be, resigns or is removed, the retiring Indenture Trustee or the retiring Securities Intermediary, as the case may be the Issuer or the Holders of a majority in Outstanding Amount of the Bonds may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee or a successor Securities Intermediary, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) If the Indenture Trustee fails to comply with <u>Section</u> <u>6.11</u>, any Holder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Notwithstanding the replacement of the Indenture Trustee or the Securities Intermediary pursuant to this <u>Section</u> <u>6.08</u>, the Issuer's obligations under <u>Section</u> <u>6.07</u> shall continue for the benefit of the retiring Indenture Trustee and the retiring Securities Intermediary.

SECTION 6.09. <u>Successor Indenture Trustee by Merger</u>. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Indenture Trustee; provided, however, that, if such successor Indenture Trustee is not eligible under <u>Section</u> <u>6.11</u>, then the successor Indenture Trustee shall be replaced in accordance with <u>Section</u> <u>6.08</u>. Notice of any such event shall be promptly given to each Rating Agency and the Commission by the successor Indenture Trustee.

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SECTION 6.10. <u>Appointment of Co-Trustee or Separate Trustee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Every separate trustee and co-trustee shall, to the extent permitted by applicable law, be appointed and act subject to the following provisions and conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any applicable law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Collateral or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then-separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this <u>Article VI</u>. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Any separate trustee or co-trustee may at any time constitute the Indenture Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by applicable law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by applicable law, without the appointment of a new or successor trustee.

SECTION 6.11. <u>Eligibility; Disqualification</u>. The Indenture Trustee shall at all times satisfy the requirements of TIA § 310(a)(1) and § 310(a)(5) and Section 26(a)(1) of the Investment Company Act. The Indenture Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and it shall have a long-term debt or long-term issuer rating of "Baa3" or better by Moody's and "BBB-" or better by Standard & Poor's. The Indenture Trustee shall comply with TIA § 310(b), including the optional provision permitted by the second sentence of TIA § 310(b)(9); <u>provided</u>, <u>however</u>, that there shall be excluded from the operation of TIA § 310(b)(1) any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA § 310(b)(1) are met.

SECTION 6.12. <u>Preferential Collection of Claims Against Issuer</u>. The Indenture Trustee shall comply with TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). An Indenture Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

SECTION 6.13. <u>Representations and Warranties of Indenture Trustee and Securities Intermediary</u>. Each of the Indenture Trustee and Securities Intermediary hereby represents and warrants as of the date hereof that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) it is a national banking association duly organized and validly existing under the laws of the United States of America;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) it has full power, authority and legal right to execute, deliver and perform its obligations under this Indenture and the other Basic Documents to which it is a party and has taken all necessary action to authorize the execution, delivery, and performance of obligations by it of this Indenture and such other Basic Documents; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) no consent, license, approval or authorization of, or filing or registration with, any governmental authority, bureau or agency is required to be obtained that has not been obtained by it in connection with the execution, delivery or performance by it of this Indenture and the other Basic Documents to which it is a party.

SECTION 6.14. <u>Annual Report by Independent Registered Public Accountants</u>. In the event the firm of Independent registered public accountants requires the Indenture Trustee to agree or consent to the procedures performed by such firm pursuant to Section 3.04(a) of the Servicing Agreement, the Indenture Trustee shall deliver such letter of agreement or consent in conclusive reliance upon the written direction of the Issuer in accordance with Section 3.04(a) of the Servicing Agreement. In the event such firm requires the Indenture Trustee to agree to the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to so agree, it being understood and agreed that the Indenture Trustee will deliver such letter of agreement in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee makes no independent inquiry or investigation to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures.

SECTION 6.15. <u>Custody of Collateral</u>. The Indenture Trustee shall hold such of the Collateral (and any other collateral that may be granted to the Indenture Trustee) as consists of instruments, deposit accounts, negotiable documents, money, goods, tangible chattel paper, and letters of credit in the State of New York. The Indenture Trustee shall hold such of the Collateral as constitute investment property through the Securities Intermediary (which, as of the date hereof, is U.S. Bank National Association) pursuant to <u>Section</u> <u>8.02</u>. The initial Securities Intermediary, hereby agrees (and each future Securities Intermediary shall agree) with the Indenture Trustee that (a) such investment property shall at all times be credited to the Collection Account, and (b) such Securities Accounts and the property credited thereto shall not be subject to any Lien or right of set-off in favor of the Securities Intermediary or anyone claiming through it (other than the Indenture Trustee). The Indenture Trustee shall hold any Collateral consisting of money in a deposit account pursuant to <u>Section</u> <u>8.02</u>. Except as permitted by this <u>Section</u> <u>6.15</u>, or <u>Section</u> <u>8.02</u>, the Indenture Trustee shall not hold Collateral through an agent or a nominee.

SECTION 6.16. <u>Related Parties</u>. It is expressly acknowledged, agreed and consented to that U.S. Bank National Association will be acting in the capacity of Securities Intermediary and its affiliate, U.S. Bank Trust Company, National Association will be acting in the capacities of Indenture Trustee, Bond Registrar, Paying Agent hereunder and in such other roles as are assigned to them under the Basic Documents. Each of U.S. Bank National Association and U.S. Bank Trust Company, National Association, may in such multiple capacities, discharge its separate functions fully, without hindrance or regard to conflict of interest principles, duty of loyalty principles or other equitable principles to the extent that any such conflict arises from the performance by it of its express duties set forth in this Indenture or any other Basic Document, in any such capacities, all of which defenses, claims or assertions based on the foregoing are hereby expressly waived by the Issuer and Holders and any other Person having rights pursuant to hereto or thereto; provided, in no event shall this <u>Section</u> <u>6.16</u> exculpate either U.S. Bank National Association or U.S. Bank Trust Company, National Association, in the case of its own willful misconduct, negligence or bad faith.

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**ARTICLE VII** 

**HOLDERS' LISTS AND REPORTS** 

SECTION 7.01. <u>Issuer To Furnish Indenture Trustee Names and Addresses of Holders</u>. The Issuer will furnish or cause to be furnished to the Indenture Trustee (a) not more than five (5) days after the earlier of (i) each Record Date and (ii) six (6) months after the last Record Date, a list, in such form as the Indenture Trustee may reasonably require, of the names and addresses of the Holders as of such Record Date, and (b) at such other times as the Indenture Trustee may request in writing, within thirty (30) days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than ten (10) days prior to the time such list is furnished; provided, however, that, so long as the Indenture Trustee is the Bond Registrar, no such list shall be required to be furnished.

SECTION 7.02. <u>Preservation of Information;</u> <u>Communications to Holders</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders contained in the most recent list furnished to the Indenture Trustee as provided in <u>Section</u> <u>7.01</u> and the names and addresses of Holders received by the Indenture Trustee in its capacity as Bond Registrar. The Indenture Trustee may destroy any list furnished to it as provided in <u>Section</u> <u>7.01</u> upon receipt of a new list so furnished.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or under the Bonds. In addition, upon the written request of any Holder or group of Holders of Outstanding Bonds evidencing not less than 10 percent of the Outstanding Amount of the Bonds, the Indenture Trustee shall afford the Holder or Holders making such request a copy of a current list of Holders for purposes of communicating with other Holders with respect to their rights hereunder; <u>provided</u>, that the Indenture Trustee gives prior written notice to the Issuer of such request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Issuer, the Indenture Trustee and the Bond Registrar shall have the protection of TIA § 312(c).

SECTION 7.03. <u>Reports by Issuer</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Issuer shall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) so long as the Issuer or the Depositor is required to file such documents with the SEC, provide to the Indenture Trustee and the Commission, within fifteen (15) days after the Issuer is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Issuer or the Depositor may be required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) provide to the Indenture Trustee and the Commission and file with the SEC, in accordance with rules and regulations prescribed from time to time by the SEC such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) supply to the Indenture Trustee (and the Indenture Trustee shall transmit to all Holders described in TIA § 313(c)) and the Commission, such summaries of any information, documents and reports required to be filed by the Issuer pursuant to <u>Section</u> <u>7.03(a)(i)</u> and <u>(ii)</u> as may be required by rules and regulations prescribed from time to time by the SEC.

Except as may be provided by Section 313(c) of the Trust Indenture Act, the Issuer may fulfill its obligation to provide the materials described in this <u>Section</u> <u>7.03(a)</u> by providing such materials in electronic format, and the Issuer shall be deemed to have provided such materials to the Indenture Trustee and the Commission if such materials are available on the SEC's EDGAR website (or any successor SEC website).

Delivery of such reports, information and documents to the Indenture Trustee is for informational purposes only and the Indenture Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer's compliance with any of its covenants hereunder (as to which the Indenture Trustee is entitled to rely exclusively on Officer's Certificates).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year.

SECTION 7.04. <u>Reports by Indenture Trustee</u>. If required by TIA § 313(a), within sixty (60) days after March 30 of each year, commencing with March 30, 2026, the Indenture Trustee shall send to each Holder as required by TIA § 313(c) a brief report dated as of such date that complies with TIA § 313(a). The Indenture Trustee also shall comply with TIA § 313(b); provided, however, that the initial report if required to be so issued shall be delivered not more than twelve (12) months after the initial issuance of the Bonds.

A copy of each report at the time of its sending to Holders shall be filed by the Servicer with the SEC and each stock exchange, if any, on which the Bonds are listed. The Issuer shall notify the Indenture Trustee in writing if and when the Bonds are listed on any stock exchange.

**ARTICLE VIII** 

**ACCOUNTS, DISBURSEMENTS AND RELEASES** 

SECTION 8.01. <u>Collection of Money</u>. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture and the other Basic Documents. The Indenture Trustee shall apply all such money received by it as provided in this Indenture. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Collateral, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, subject to Article VI, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in Article V.

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SECTION 8.02. <u>Collection Account</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Prior to the Closing Date, the Issuer shall open or cause to be opened with the Securities Intermediary, or at another Eligible Institution, one or more segregated trust accounts in the Indenture Trustee's name for the deposit of Estimated Collections, Charge Collections and all other amounts received with respect to the Collateral (the "<u>Collection Account</u>"). The Securities Intermediary shall hold the Collection Account for the benefit of the Secured Parties and other Persons indemnified hereunder. Initially, the Collection Account shall be divided into three subaccounts, which need not be separate accounts: a general subaccount (the "<u>General Subaccount</u>"), an excess funds subaccount (the "<u>Excess Funds Subaccount</u>") and a capital subaccount (the "<u>Capital Subaccount</u>" and, together with the General Subaccount and the Excess Funds Subaccount, the "<u>Subaccounts</u>"). Each Subaccount shall have a separate subledger account (each, a "<u>Cash Subaccount</u>") where cash allocated to the related Subaccount will be held. Only cash shall be allocated to a Cash Subaccount and no other Collateral shall be allocated to a Cash Subaccount. References to any Subaccount shall be deemed to include the related Cash Subaccount. For administrative purposes, the Subaccounts may be established by the Indenture Trustee as separate accounts. Such separate accounts will be recognized individually as a Subaccount and collectively as the "Collection Account." Prior to or concurrently with the issuance of Bonds, the Member shall deposit into the Capital Subaccount an amount equal to the Required Capital Level. All amounts in the Collection Account not allocated to any other subaccount shall be allocated to the General Subaccount. Any cash transferred to, or arising under, a Subaccount will be held in the related Cash Subaccount. Prior to the Initial Payment Date, all amounts in the Collection Account (other than funds deposited into the Capital Subaccount, up to the Required Capital Level and Return on Invested Capital) shall be allocated to the General Subaccount. All references to the Collection Account shall be deemed to include reference to all Subaccounts contained therein. Withdrawals from and deposits to each of Subaccounts of the Collection Account shall be made as set forth in <u>Section</u> <u>8.02(d)</u> and <u>(e)</u>. The Collection Account shall at all times be maintained in an Eligible Account, under the sole dominion and exclusive control of the Indenture Trustee, at the Securities Intermediary, and only the Indenture Trustee shall have access to the Collection Account for the purpose of making deposits in and withdrawals from the Collection Account in accordance with this Indenture. Funds in the Collection Account shall not be commingled with any other moneys. All moneys deposited from time to time in the Collection Account, all deposits therein pursuant to this Indenture, and all investments made in Eligible Investments as directed in writing by the Issuer with such moneys, including all income or other gain from such investments other than Return on Invested Capital, shall be held by the Indenture Trustee in the Collection Account as part of the Collateral as herein provided. The Securities Intermediary shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or its date of redemption or the failure of the Issuer or the Servicer to provide timely written investment direction (other than losses on investments on which the Indenture Trustee is an obligor).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Securities Intermediary hereby confirms and agrees that (i) the Collection Account (other than each Cash Subaccount) is, or at inception will be established as, and will at all times be maintained as, a "securities account" as such term is defined in Section 8-501(a) of the UCC, (ii) it is and will at all times be a "securities intermediary" (as such term is defined in Section 8-102(a) (14) of the UCC) and is and will at all times be acting in such capacity with respect to the Collection Account, (iii) the Indenture Trustee for the benefit of the Secured Parties is and will at all times be the sole "entitlement holder" (as such term is defined in Section 8-102(a)(7) of the UCC) with respect to the Collection Account and no other Person shall have the right to give "entitlement orders" (as such term is defined in Section 8-102(a)(8)) with respect to such Collection Account and (iv) the Securities Intermediary shall comply with "entitlement orders" originated by the Indenture Trustee with respect to the Collection Account without further consent of the Issuer or any other Person. The Securities Intermediary hereby further confirms and agrees that (i) each item of property (whether investment property, financial asset, security, instrument or cash) received by it will be credited to the Collection Account (and that all cash will be credited to the related Cash Subaccount); and (ii) such property, other than cash, shall be treated by it as a Financial Asset. The Indenture Trustee shall cause the Securities Intermediary to hold any Collateral consisting of money in the applicable Cash Subaccount and the Securities Intermediary hereby confirms and agrees that each Cash Subaccount is and will at all times be maintained as a "deposit account" within the meaning of Section 9-102(a)(29) of the UCC. The Securities Intermediary further confirms and agrees that for purposes of perfecting the security interest in such deposit account, it is and at all times shall be a bank and act as the "bank" within the meaning of Section 9-102(a)(8) of the UCC. The parties hereto agree that the Securities Intermediary shall comply with instructions originated by the Indenture Trustee directing disposition of the funds in each Cash Subaccount without further consent of the Issuer or any other Person. The Securities Intermediary shall not change the name or account number of the Collection Account or any subaccount thereof without the prior written consent of the Indenture Trustee and the Issuer. The Securities Intermediary shall not agree with any person or entity other than the Indenture Trustee that it will comply with entitlement orders or instructions originated by any person or entity other than the Indenture Trustee. Notwithstanding anything to the contrary, for purposes of the UCC, the State of New York shall be deemed to be "securities intermediary jurisdiction" within the meaning of Section 8-110(e) of the UCC of the Securities Intermediary and "bank's jurisdiction" within the meaning of Section 9-304(a) of the UCC of the Securities Intermediary acting as the "bank" and the Collection Account (as well as the securities entitlements related thereto) shall be governed by the laws of the State of New York. The Securities Intermediary represents and agrees that (i) the "account agreement" (within the meaning of the Hague Securities Convention establishing the Collection Account is governed by the law of the State of New York and that the law of the State of New York shall govern all issues specified in Article 2(1) of the Hague Securities Convention) and (ii) at the time of entry of such account agreement, the Securities Intermediary had one or more offices (within the meaning of the Hague Securities Convention) in the United States of America which satisfies the criteria provided in Article 4(1)(a) or (b) of the Hague Securities Convention.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Indenture Trustee shall have sole dominion and exclusive control over all moneys in, and all other property credited to, the Collection Account through the Securities Intermediary and shall apply such amounts therein as provided in this <u>Section</u> <u>8.02</u>. The Indenture Trustee shall also pay from the Collection Account any amounts requested in writing to be paid by or to the Servicer pursuant to <u>Section</u> <u>6.11(c)(ii)</u> of the Servicing Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Charge Collections shall be deposited in the General Subaccount as provided in <u>Section</u> <u>6.11</u> of the Servicing Agreement. All deposits to and withdrawals from the Collection Account, all allocations to the Subaccounts of the Collection Account and any amounts to be paid to the Servicer under <u>Section</u> <u>8.02(c)</u> shall be made by the Indenture Trustee in accordance with the written instructions provided by the Servicer in the Monthly Servicer's Certificate, the Servicer's Certificate or upon other written notice provided by the Servicer pursuant to <u>Section</u> <u>6.11(a)</u> of the Servicing Agreement, as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) On each Payment Date, the Indenture Trustee shall apply all amounts on deposit in the Collection Account, including all Investment Earnings thereon, to pay the following amounts, solely in accordance with the Servicer's Certificate, in the following priority:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all amounts owed by the Issuer to the Indenture Trustee (including legal fees and expenses and outstanding indemnity amounts) shall be paid to the Indenture Trustee (subject to <u>Section</u> <u>6.07</u>) in an amount not to exceed annually the amount set forth in the Series Supplement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Servicing Fee with respect to such Payment Date and all unpaid Servicing Fees for prior Payment Dates shall be paid to the Servicer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Administration Fee for such Payment Date shall be paid to the Administrator and the Independent Manager Fee for such Payment Date shall be paid to the Independent Managers, and in each case with any unpaid Administration Fees or Independent Manager Fees from prior Payment Dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) all other ordinary and periodic Operating Expenses for such Payment Date (including Reimbursable Servicing Expenses and Reimbursable Administrative Expenses) not described above shall be paid to the parties, pro rata, to which such Operating Expenses are owed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Periodic Interest for such Payment Date, including any overdue Periodic Interest (together with, to the extent lawful, interest on such overdue Periodic Interest at the applicable Bond Interest Rate), with respect to the Bonds shall be paid to the Holders of Bonds, on a pro rata basis as described below;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) principal due on the Final Maturity Date of the Bonds or, if the principal of the Bonds has been accelerated following an Event of Default, payment on the principal of the Bonds, in each case shall be paid to the Holders of Bonds, until the outstanding principal of the Bonds has been paid in full, without regard to the Expected Amortization Schedule;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) Periodic Principal for such Payment Date, including any Periodic Principal that was not paid on prior Payment Dates, with respect to the Bonds shall be paid to the Holders of Bonds, on a pro rata basis as described below;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) any other unpaid fees, expenses and indemnity amounts owed to the Indenture Trustee;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) any other unpaid Operating Expenses and any remaining amounts owed pursuant to the Basic Documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) the amount, if any, by which the Required Capital Level exceeds the amount in the Capital Subaccount as of such Payment Date shall be allocated to the Capital Subaccount;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi) any Return on Invested Capital then due and payable shall be paid to Kentucky Power;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii) the balance, if any, shall be allocated to the Excess Funds Subaccount for distribution on subsequent Payment Dates; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiii) after principal of and premium, if any, and interest on all Bonds, and all of the other foregoing amounts, have been paid in full, including, without limitation, amounts due and payable to the Indenture Trustee under <u>Section</u> <u>6.07</u> or otherwise, the balance (including all amounts then held in the Capital Subaccount and the Excess Funds Subaccount), if any, shall be paid to the Issuer, free from the Lien of this Indenture and the Series Supplement.

All payments to the Holders of the Bonds pursuant to <u>Section</u> <u>8.02(e)(v)</u>, <u>(vi)</u> and <u>(vii)</u> above shall be made to such Holders pro rata based on the respective amounts of interest and/or principal owed, unless the Series Supplement provides otherwise. Payments in respect of principal of and premium, if any, and interest on the Bonds will be made on a pro rata basis among all the Holders. In the case of an Event of Default, then, in accordance with <u>Section</u> <u>5.04(c)</u>, in respect of any application of moneys pursuant to <u>Section</u> <u>8.02(e)(v)</u> or <u>(vi)</u>, moneys will be applied pursuant to <u>Section</u> <u>8.02(e)(v)</u> and <u>(vi)</u>, as the case may be, in such order, on a pro rata basis, based upon the interest or the principal owed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) If on any Payment Date funds on deposit in the General Subaccount are insufficient to make the payments contemplated by <u>Section</u> <u>8.02(e)(i)-(ix)</u> above, the Indenture Trustee shall: (i) <u>first</u>, draw from amounts on deposit in the Excess Funds Subaccount and (ii) <u>second</u>, draw from amounts on deposit in the Capital Subaccount, in each case, up to the amount of such shortfall in order to make the payments contemplated by <u>Section</u> <u>8.02(e)(i)-(ix)</u>. In addition, if on any Payment Date funds on deposit in the General Subaccount are insufficient to make the allocations contemplated by <u>clause (x)</u> above, the Indenture Trustee shall draw from amounts on deposit in the Excess Funds Subaccount to make such allocations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) On any Business Day upon which the Indenture Trustee receives a written request from the Administrator stating that any Operating Expense payable by the Issuer (but only as described in <u>Section</u> <u>8.02(e)(i)</u>-<u>(iv)</u>) will become due and payable prior to the next Payment Date, and setting forth the amount and nature of such Operating Expense and the date such Operating Expense is due, as well as any supporting documentation that the Indenture Trustee may reasonably request, the Indenture Trustee, upon receipt of such information, will make payment of such Operating Expenses on or before the date such payment is due from amounts on deposit in the General Subaccount, the Excess Funds Subaccount and the Capital Subaccount, in that order and only to the extent required to make such payment.

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SECTION 8.03. <u>General Provisions Regarding the Collection Account</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) So long as no Default or Event of Default shall have occurred and be continuing, all or a portion of the funds in the Collection Account shall be invested in Eligible Investments and reinvested by the Indenture Trustee upon Issuer Order; <u>provided</u>, <u>however</u>, that such Eligible Investments shall not mature or be redeemed later than the Business Day prior to the next Payment Date or Special Payment Date, if applicable, for the Bonds. All income or other gain from investments of moneys deposited in the Collection Account shall be deposited by the Indenture Trustee in such Collection Account, and any loss resulting from such investments shall be charged to the Collection Account. The Issuer will not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in the Collection Account unless the security interest Granted and perfected in such account will continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Indenture Trustee to make any such investment or sale, if requested by the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer (at the Issuer's cost and expense) to such effect. In no event shall the Indenture Trustee be liable for the selection of Eligible Investments or for investment losses incurred thereon. The Indenture Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or its date of redemption or the failure of the Issuer or the Servicer to provide timely written investment direction. The Indenture Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of written investment direction pursuant to an Issuer Order, in which case such amounts shall remain uninvested.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Subject to <u>Section</u> <u>6.01(c)</u>, the Indenture Trustee shall not in any way be held liable by reason of any insufficiency in the Collection Account resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee's failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If (i) the Issuer shall have failed to give written investment directions for any funds on deposit in the Collection Account to the Indenture Trustee by 11:00 a.m. Eastern Time (or such other time as may be agreed by the Issuer and Indenture Trustee) on any Business Day; or (ii) a Default or Event of Default shall have occurred and be continuing with respect to the Bonds but the Bonds shall not have been declared due and payable pursuant to <u>Section</u> <u>5.02</u>, then the Indenture Trustee shall, to the fullest extent practicable, invest and reinvest funds in such Collection Account in Eligible Investments specified in the most recent written investment directions delivered by the Issuer to the Indenture Trustee; <u>provided</u>, that if the Issuer has never delivered written investment directions to the Indenture Trustee, the Indenture Trustee shall not invest or reinvest such funds in any investments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The parties hereto acknowledge that the Servicer may, pursuant to the Servicing Agreement, select Eligible Investments on behalf of the Issuer; <u>provided, however,</u> that such investment direction on behalf of the Issuer must be given in writing to the Indenture Trustee.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Except as otherwise provided hereunder or agreed in writing among the parties hereto, the Issuer shall retain the authority to institute, participate and join in any plan of reorganization, readjustment, merger or consolidation with respect to the issuer of any Eligible Investments held hereunder, and, in general, to exercise each and every other power or right with respect to each such asset or investment as Persons generally have and enjoy with respect to their own assets and investment, including power to vote upon any Eligible Investments.

SECTION 8.04. <u>Release of Collateral</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) So long as the Issuer is not in default hereunder and no Default hereunder would occur as a result of such action, the Issuer, through the Servicer, may collect, sell or otherwise dispose of written-off receivables, at any time and from time to time in the ordinary course of business, without any notice to, or release or consent by, the Indenture Trustee, but only as and to the extent permitted by the Basic Documents; <u>provided</u>, <u>however</u>, that any and all proceeds of such dispositions shall become part of the Collateral and be deposited to the General Subaccount immediately upon receipt thereof by the Issuer or any other Person, including the Servicer. Without limiting the foregoing, the Servicer, may, at any time and from time to time without any notice to, or release or consent by, the Indenture Trustee, sell or otherwise dispose of any part of the Collateral previously written-off as a defaulted or uncollectible account in accordance with the terms of the Servicing Agreement and the requirements of the proviso in the immediately preceding sentence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the Lien of this Indenture, or convey the Indenture Trustee's interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this <u>Article VIII</u> shall be bound to ascertain the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. The Indenture Trustee shall release property from the Lien of this Indenture pursuant to this <u>Section</u> <u>8.04(b)</u> only upon receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel of external counsel of the Issuer (at the Issuer's cost and expense) and (if required by the TIA) Independent Certificates in accordance with TIA §§ 314(c) and 314(d)(1) meeting the applicable requirements of <u>Section</u> <u>10.01</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Indenture Trustee shall, at such time as there are no Bonds Outstanding and all sums payable to the Indenture Trustee pursuant to <u>Section</u> <u>6.07</u> or otherwise have been paid, release any remaining portion of the Collateral that secured the Bonds from the Lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds or investments then on deposit in or credited to the Collection Account in accordance with <u>Section</u> <u>8.02</u>.

SECTION 8.05. <u>Opinion of Counsel</u>. The Indenture Trustee shall receive at least seven (7) days' notice when requested by the Issuer to take any action pursuant to <u>Section</u> <u>8.04</u>, accompanied by copies of any instruments involved, and the Indenture Trustee shall also require, as a condition to such action, an Opinion of Counsel of external counsel of the Issuer, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the perfection or priority of the remaining security for the Bonds or the rights of the Holders in contravention of the provisions of this Indenture and the Series Supplement; provided, however, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the Collateral. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee in connection with any such action.

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SECTION 8.06. <u>Reports by Independent Registered Public Accountants</u>. As of the Closing Date, the Issuer shall appoint a firm of Independent registered public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture and the Series Supplement. In the event such firm requires the Indenture Trustee to agree to the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to so agree; it being understood and agreed that the Indenture Trustee will deliver such letter of agreement in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee makes no independent inquiry or investigation to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures. Upon any resignation by, or termination by the Issuer of, such firm, the Issuer shall provide written notice thereof to the Indenture Trustee and the Commission and shall promptly appoint a successor thereto that shall also be a firm of Independent registered public accountants of recognized national reputation. If the Issuer shall fail to appoint a successor to a firm of Independent registered public accountants that has resigned or been terminated within fifteen (15) days after such resignation or termination, the Indenture Trustee shall promptly notify the Issuer of such failure in writing. If the Issuer shall not have appointed a successor within ten (10) days thereafter the Indenture Trustee shall promptly appoint a successor firm of Independent registered public accountants of recognized national reputation; <u>provided</u> that the Indenture Trustee shall have no liability with respect to such appointment. The fees of such Independent registered public accountants and its successor shall be payable by the Issuer as an Operating Expense.

**ARTICLE IX** 

**SUPPLEMENTAL INDENTURES** 

SECTION 9.01. <u>Supplemental Indentures Without Consent of Holders</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Without the consent of the Holders of any Bonds but with prior notice to the Rating Agencies, the Issuer, and the Indenture Trustee, and after satisfaction of the KPSC Condition (as described in <u>Section</u> <u>9.03</u>), when authorized by an Issuer Order, at any time and from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the TIA as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee, for any of the following purposes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) to correct or amplify the description of any property, including, without limitation, the Collateral, at any time subject to the Lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the Lien of this Indenture and the Series Supplement, or to subject to the Lien of this Indenture and the Series Supplement additional property;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) to evidence the succession, in compliance with the applicable provisions hereof, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) to add to the covenants of the Issuer, for the benefit of the Secured Parties, or to surrender any right or power herein conferred upon the Issuer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) to cure any ambiguity or mistake, to correct or supplement any provision herein or in any supplemental indenture, including the Series Supplement, which may be inconsistent with any other provision herein or in any supplemental indenture, including the Series Supplement, or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; <u>provided</u>, that (A) such action shall not, as evidenced by an Officer's Certificate of the Issuer, adversely affect in any material respect the interests of the Holders of the Bonds and (B) the Rating Agency Condition shall have been satisfied with respect thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Bonds and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of <u>Article VI</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar or successor federal statute hereafter enacted and to add to this Indenture such other provisions as may be expressly required by the TIA;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) to evidence the final terms of the Bonds in the Series Supplement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) to qualify the Bonds for registration with a Clearing Agency;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) to satisfy any Rating Agency requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi) to make any amendment to this Indenture or the Bonds relating to the transfer and legending of the Bonds to comply with applicable securities laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii) to conform the text of this Indenture or the Bonds to any provisions of the Registration Statement filed by the Issuer with the SEC with respect to the issuance of the Bonds to the extent that such provision was intended to be a verbatim recitation of a provision of this Indenture or the Bonds; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiii) to authorize the appointment of any Person for the Bonds required or advisable with the listing of the Bonds on any stock exchange and otherwise amend this Indenture to incorporate changes requested or required by a Governmental Authority, stock exchange authority or fiduciary for the Bonds in connection with such listing.

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The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Bonds, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Bonds under this Indenture; <u>provided</u>, <u>however</u>, that (i) such action shall not, as evidenced by an Opinion of Counsel of nationally recognized counsel of the Issuer experienced in structured finance transactions, adversely affect in any material respect the interests of the Holders and (ii) the Rating Agency Condition shall have been satisfied with respect thereto.

SECTION 9.02. <u>Supplemental Indentures with Consent of Holders</u>. The Issuer and the Indenture Trustee, when authorized by an Issuer Order and satisfaction of the KPSC Condition (as described in <u>Section</u> <u>9.03</u>), may, with prior notice to the Rating Agencies and with the consent of the Holders of not less than a majority of the Outstanding Amount of the Bonds to be adversely affected, by Act of such Holders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Bonds under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Bond:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) change the date of payment of any installment of principal of or premium, if any, or interest on any Bond, or reduce the principal amount thereof, the interest rate thereon or premium, if any, with respect thereto, change the provisions of this Indenture and the Series Supplement relating to the application of collections on, or the proceeds of the sale of, the Collateral to payment of principal of or premium, if any, or interest on the Bonds, or change any place of payment where, or the coin or currency in which, any Bond or the interest thereon is payable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) reduce the percentage of the Outstanding Amount of the Bonds, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) reduce the percentage of the Outstanding Amount of the Bonds required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the Collateral pursuant to <u>Section</u> <u>5.04</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) modify any provision of this <u>Section</u> <u>9.02</u> except to increase any percentage specified herein or to provide that those provisions of this Indenture or the other Basic Documents referenced in this <u>Section</u> <u>9.02</u> cannot be modified or waived without the consent of the Holder of each Outstanding Bond affected thereby;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest, principal or premium, if any, due on any Bond on any Payment Date (including the calculation of any of the individual components of such calculation) or change the Expected Amortization Schedule or Final Maturity Date of the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) decrease the Required Capital Level;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) permit the creation of any Lien ranking prior to or on a parity with the Lien of this Indenture with respect to any part of the Collateral or, except as otherwise permitted or contemplated herein, terminate the Lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Bond of the security provided by the Lien of this Indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) cause any material adverse U.S. federal income tax consequence to the Seller, the Issuer, the Indenture Trustee or the then-existing Holders; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) impair the right to institute suit for the enforcement of the provisions of this Indenture relating to payment or application of funds.

It shall not be necessary for any Act of Holders under this <u>Section</u> <u>9.02</u> to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this <u>Section</u> <u>9.02</u>, the Issuer shall mail to the Rating Agencies a copy of such supplemental indenture and to the Holders of the Bonds to which such supplemental indenture relates either a copy of such supplemental indenture or a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

SECTION 9.03. <u>KPSC Condition</u>. Notwithstanding anything to the contrary in <u>Section</u> <u>9.01</u> or <u>9.02</u>, no amendment, modification or supplemental indenture to this Indenture (other than the Series Supplement which shall not be subject to the KPSC Condition (as described in this <u>Section</u> <u>9.03</u>)) shall be effective except upon satisfaction of the conditions precedent in this <u>Section</u> <u>9.03</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) At least 15 days prior to the effectiveness of any such amendment, modification or supplemental indenture, the Issuer may submit the proposed amendment, modification or supplemental indenture, as the case may be, to the Commission by delivering to the Commission's Executive Director a written request for such consent, which request shall contain:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) a reference to Case No. 2023-00159;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a statement as to the possible effect of the proposed amendment, modification or supplemental indenture, as the case may be, on Ongoing Financing Costs;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) an Officer's Certificate stating that the proposed amendment, modification or supplemental indenture, as the case may be, has been approved by all parties to this Indenture, and if applicable, the Holders; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) a statement identifying the Person to whom the Commission or its staff is to address its consent to the proposed amendment, modification or supplemental indenture, as the case may be, or to request additional time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If the Commission or the Commission's Executive Director, within 15 days (subject to extension as provided in clause (c)) of receiving a notification complying with subparagraph (a), shall have delivered to the office of the person specified in clause (a)(iv) a written statement that the Commission might object to the proposed amendment, modification or supplemental indenture, then, subject to clause (d) below, such proposed amendment, modification or supplemental indenture shall not be effective unless and until either (A) the Commission subsequently delivers a written statement that it does not object to such proposed amendment, modification or supplemental indenture or (B) the Commission is conclusively deemed to not have any objection pursuant to clause (d) below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If the Commission or the Commission's Executive Director, within 15 days of receiving a notification complying with subparagraph (a), shall have delivered to the office of the person specified in clause (a)(iv) a written statement requesting an additional amount of time not to exceed 30 days in which to consider such proposed amendment, modification or supplemental indenture, then such proposed amendment, modification or supplemental indenture shall not be effective if, within such extended period, the Commission shall have delivered to the office of the person specified in clause (a)(iv) a written statement as described in subparagraph (b), unless and until either (A) the Commission subsequently delivers a written statement that it does not object to such proposed amendment, modification or supplemental indenture or (B) the Commission is conclusively deemed to not have any objection pursuant to clause (d) below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) If (A) the Commission or the Commission's Executive Director, has not delivered written notice that the Commission might object to such proposed amendment, modification or supplemental indenture within the time periods described in subparagraphs (b) or (c), whichever is applicable, or (B) the Commission or the Commission's Executive Director has delivered such written notice but does not within 45 days of the delivery of the notification in (a) above, provide subsequent written notice confirming that it does in fact object and the reasons therefor or advise that it has initiated a proceeding to determine what action it might take with respect to the matter, then the Commission shall be conclusively deemed not to have any objection to the proposed amendment, modification or supplemental indenture and amendment, modification or supplemental indenture may subsequently become effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Following the delivery of a notice to the Commission by the Issuer under <u>Section</u> <u>9.03(a)</u> above, the Issuer shall have the right at any time to withdraw from the Commission further consideration of any notification of a proposed amendment, modification or supplemental indenture. Such withdrawal shall be evidenced by the prompt written notice thereof by the Issuer to the Commission, the Indenture Trustee and the Servicer.

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SECTION 9.04. <u>Execution of Supplemental Indentures</u>. In executing any supplemental indenture permitted by this <u>Article</u> <u>IX</u> or the modifications thereby of the Collateral, the Indenture Trustee shall be entitled to receive, and subject to <u>Sections 6.01</u> and <u>6.02</u>, shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and all conditions precedent, if any, provided for in this Indenture relating to such supplemental indenture or modification have been satisfied. The Indenture Trustee and the Securities Intermediary may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee's or the Securities Intermediary's own rights, duties, liabilities or immunities under this Indenture or otherwise.

SECTION 9.05. <u>Effect of Supplemental Indenture</u>. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

SECTION 9.06. <u>Conformity with Trust Indenture Act</u>. Every amendment of this Indenture and every supplemental indenture executed pursuant to this <u>Article IX</u> shall conform to the requirements of the TIA as then in effect so long as this Indenture shall then be qualified under the TIA.

SECTION 9.07. <u>Reference in Bonds to Supplemental Indentures</u>. Bonds authenticated and delivered after the execution of any supplemental indenture pursuant to this <u>Article IX</u> may bear a notation as to any matter provided for in such supplemental indenture. If the Issuer or the Indenture Trustee shall so determine, new Bonds so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Bonds.

**ARTICLE X** 

**MISCELLANEOUS** 

SECTION 10.01. <u>Compliance Certificates and Opinions, etc.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with and (iii) (if required by the TIA) an Independent Certificate from a firm of registered public accountants meeting the applicable requirements of this <u>Section</u> <u>10.01</u>, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished.

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Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) (i) Prior to the deposit of any Collateral or other property or securities with the Indenture Trustee that is to be made the basis for the release of any property or securities subject to the Lien of this Indenture, the Issuer shall, in addition to any obligation imposed in <u>Section</u> <u>10.01(a)</u> or elsewhere in this Indenture, furnish to the Indenture Trustee and the Commission an Officer's Certificate certifying or stating the opinion of each Person signing such certificate as to the fair value (within ninety (90) days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Whenever the Issuer is required to furnish to the Indenture Trustee and the Commission an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in <u>Section</u> <u>10.01(b)(i)</u> above, the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to <u>Section</u> <u>10.01(b)(i)</u> and this <u>Section</u> <u>10.01(b)(ii)</u>, is ten percent or more of the Outstanding Amount of the Bonds, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof to the Issuer as set forth in the related Officer's Certificate is less than the lesser of (A) $25,000 or (B) one percent of the Outstanding Amount of the Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Whenever any property or securities are to be released from the Lien of this Indenture other than pursuant to <u>Section</u> <u>8.02(e)</u>, the Issuer shall also furnish to the Indenture Trustee and the Commission an Officer's Certificate certifying or stating the opinion of each Person signing such certificate as to the fair value (within ninety (90) days of such release) of the property or securities proposed to be released and stating that in the opinion of such Person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Whenever the Issuer is required to furnish to the Indenture Trustee and the Commission an Officer's Certificate certifying or stating the opinion of any signatory thereof as to the matters described in <u>Section</u> <u>10.01(b)(iii)</u> above, the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities with respect thereto, or securities released from the Lien of this Indenture (other than pursuant to <u>Section</u> <u>8.02(e)</u>) since the commencement of the then-current calendar year, as set forth in the certificates required by <u>Section</u> <u>10.01(b)(iii)</u> and this <u>Section</u> <u>10.01(b)(iv)</u>, equals ten percent or more of the Outstanding Amount of the Bonds, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer's Certificate is less than the lesser of (A) $25,000 or (B) one percent of the then Outstanding Amount of the Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Notwithstanding any other provision of this <u>Section</u> <u>10.01</u>, the Indenture Trustee may (A) collect, liquidate, sell or otherwise dispose of the Cost Recovery Property and the other Collateral as and to the extent permitted or required by the Basic Documents and (B) make cash payments out of the Collection Account as and to the extent permitted or required by the Basic Documents.

SECTION 10.02. <u>Form of Documents Delivered to Indenture Trustee</u>. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of a Responsible Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Responsible Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters (including financial and capital markets), upon a certificate or opinion of, or representations by, an officer or officers of the Servicer or the Issuer and other documents necessary and advisable in the judgment of counsel delivering such Opinion of Counsel.

Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee's right to rely conclusively upon the truth and accuracy of any statement or opinion contained in any such document as provided in <u>Article</u> <u>VI</u>.

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Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

SECTION 10.03. <u>Acts of Holders</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing, and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "<u>Act</u>" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to <u>Section</u> <u>6.01</u>) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this <u>Section</u> <u>10.03</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The ownership of Bonds shall be proved by the Bond Register.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Bonds shall bind the Holder of every Bond issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Bond.

SECTION 10.04. <u>Notices, etc., to Indenture Trustee, Issuer, Commission, and Rating Agencies</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other documents provided or permitted by this Indenture to be made upon, given or furnished to or filed with:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Indenture Trustee by any Holder or by the Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing by facsimile or other electronic transmission, first-class mail or overnight delivery service to or with the Indenture Trustee at the Corporate Trust Office,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Issuer by the Indenture Trustee or by any Holder shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage prepaid, to the Issuer addressed to: Kentucky Power Cost Recovery LLC at 1645 Winchester Avenue, Ashland, Kentucky 41101, Attention: Vice President – Regulatory and Finance, Telephone: (606) 929-1488, Email: Treasury_Operations_AEP@aep.com, or at any other address previously furnished in writing to the Indenture Trustee by the Issuer. The Issuer shall promptly transmit any notice received by it from the Holders to the Indenture Trustee, or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Commission by the Seller, the Issuer or the Indenture Trustee shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage prepaid, to the Commission addressed to: to Kentucky Public Service Commission, P.O. Box 615, 211 Sower Boulevard, Frankfort, Kentucky 40602-0615, Telephone: (502) 564-3940, Email: psced@ky.gov.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Notices required to be given to the Rating Agencies by the Issuer or the Indenture Trustee shall be in writing, facsimile or other electronic transmission, personally delivered or mailed by certified mail, return receipt requested to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) in the case of Moody's, to: Moody's Investors Service, Inc., ABS/RMBS Monitoring Department, 24th Floor, 7 World Trade Center, 250 Greenwich, New York, New York 10007, Email: ServicerReports@moodys.com (all such notices to be delivered to Moody's in writing by email), and solely for purposes of Rating Agency Condition communications: abscormonitoring@moodys.com;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) in the case of Standard & Poor's, to: Standard & Poor's Ratings Group, Inc., Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@spglobal.com (all such notices to be delivered to Standard & Poor's in writing by email); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.

Any notice, report or other communication given hereunder may be in writing and addressed as follows or to the extent receipt is confirmed telephonically sent by Electronic Means to the address provided above.

SECTION 10.05. <u>Notices to Holders; Waiver</u>. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid, or otherwise delivered in accordance with DTC's procedures, to each Holder affected by such event, at such Holder's address as it appears on the Bond Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver.

In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event of Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice.

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Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder, and shall not under any circumstance constitute a Default or Event of Default.

SECTION 10.06. <u>Rule 17g-5 Compliance</u>. The Indenture Trustee agrees that any notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Indenture Trustee to any Rating Agency under this Indenture or any other Basic Document to which it is a party for the purpose of determining or confirming the credit rating of the Bonds or undertaking credit rating surveillance of the Bonds shall be provided, substantially concurrently, to the Servicer for posting on a password-protected website (the "17g-5 Website"). The Servicer shall be responsible for posting all of the information on the 17g-5 Website.

SECTION 10.07. <u>Conflict with Trust Indenture Act</u>. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the TIA, such required provision shall control.

The provisions of TIA §§ 310 through 317 that impose duties on any Person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein.

SECTION 10.08. <u>Effect of Headings and **Table of Contents**</u>. The Article and Section headings herein and the **Table of Contents** are for convenience only and shall not affect the construction hereof.

SECTION 10.09. <u>Successors and Assigns</u>. All covenants and agreements in this Indenture and the Bonds by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Indenture Trustee in this Indenture shall bind its successors.

SECTION 10.10. <u>Severability</u>. Any provision in this Indenture or in the Bonds that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 10.11. <u>Benefits of Indenture</u>. Nothing in this Indenture or in the Bonds, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Holders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture, provided that the Commission also shall be a third-party beneficiary of this Indenture for the benefit of the Customers. In this capacity, so long as an event constituting an Event of Default has occurred and is continuing, the Commission shall be authorized to declare an Event of Default under this Indenture. Notwithstanding anything to the contrary contained herein, as provided in the Financing Order, any right, remedy or claim to which any Customer may be entitled pursuant to the Financing Order and to this Indenture may be asserted or exercised by the Commission (or its authorized representative) for the benefit of such Customer.

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SECTION 10.12. <u>Legal Holidays</u>. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Bonds or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date.

SECTION 10.13. <u>GOVERNING LAW</u>. THIS INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND SECTIONS 9-301 THROUGH 9-306 OF THE NY UCC), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED THAT THE CREATION, ATTACHMENT AND PERFECTION OF ANY LIENS CREATED HEREUNDER IN COST RECOVERY PROPERTY, AND ALL RIGHTS AND REMEDIES OF THE INDENTURE TRUSTEE, THE SECURITIES INTERMEDIARY AND THE HOLDERS WITH RESPECT TO THE COST RECOVERY PROPERTY, SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF KENTUCKY.

SECTION 10.14. <u>Counterparts</u>. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. This Indenture may be electronically signed, that any digital or electronic signatures (including pdf, facsimile or electronically imaged signatures provided by DocuSign or any other digital signature provider as specified in writing to the Indenture Trustee) appearing on this Indenture are the same as handwritten signatures for the purposes of validity, enforceability and admissibility, and that delivery of any such electronic signature to, or a signed copy of, this Indenture may be made by facsimile, email or other electronic transmission.

SECTION 10.15. <u>Recording of Indenture</u>. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel at the Issuer's cost and expense (which shall be external counsel of the Issuer) to the effect that such recording is necessary either for the protection of the Holders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture.

SECTION 10.16. <u>Issuer Obligation</u>. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Bonds or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (a) the Issuer, other than from the Collateral as specified in <u>Section</u> <u>10.17</u> below, (b) any owner of a membership interest in the Issuer (including Kentucky Power) or (c) any shareholder, partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Kentucky Power) in its respective individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed in writing. Each Holder by accepting a Bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Bonds.

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SECTION 10.17. <u>No Recourse to Issuer</u>. Notwithstanding any provision of this Indenture or the Series Supplement to the contrary, Holders shall look only to the Collateral with respect to any amounts due to the Holders hereunder and under the Bonds and, in the event such Collateral is insufficient to pay in full the amounts owed on the Bonds, shall have no recourse against the Issuer in respect of such insufficiency. Each Holder by accepting a Bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Bonds.

SECTION 10.18. <u>Basic Documents</u>. The Indenture Trustee is hereby authorized to execute and deliver the Intercreditor Agreement and the Servicing Agreement and to execute and deliver any other Basic Document which it is requested to acknowledge and, upon receipt of an Issuer Request, to modify the Intercreditor Agreement in order to add as parties thereto any other trustees for holders of "securitized bonds" (as defined in the Act) issued by Affiliates of Kentucky Power so long as such modification, as evidenced by an Officer's Certificate delivered to the Indenture Trustee and the Commission, does not materially and adversely affect any Holder's rights in and to the Bonds, or otherwise hereunder. Such request shall be accompanied by an Opinion of Counsel of external counsel of the Issuer, upon which the Indenture Trustee may rely conclusively with no duty of independent investigation or inquiry, to the effect that all conditions precedent for an amendment to the Intercreditor Agreement have been satisfied. The Intercreditor Agreement shall be binding on the Holders.

SECTION 10.19. <u>No Petition</u>. The Indenture Trustee, by entering into this Indenture, and each Holder, by accepting a Bond (or interest therein) issued hereunder, hereby covenant and agree that they shall not, prior to the date which is one year and one day after the termination of this Indenture, acquiesce, petition or otherwise invoke or cause the Issuer or any Manager to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer under any insolvency law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its respective property, or ordering the dissolution, winding up or liquidation of the affairs of the Issuer. Nothing in this paragraph shall preclude, or be deemed to estop, such Holder or the Indenture Trustee (a) from taking or omitting to take any action prior to such date in (i) any case or proceeding voluntarily filed or commenced by or on behalf of the Issuer under or pursuant to any such law or (ii) any involuntary case or proceeding pertaining to the Issuer which is filed or commenced by or on behalf of a Person other than such Holder and is not joined in by such Holder (or any Person to which such Holder shall have assigned, transferred or otherwise conveyed any part of the obligations of the Issuer hereunder) under or pursuant to any such law, or (b) from commencing or prosecuting any legal action which is not an involuntary case or proceeding under or pursuant to any such law against the Issuer or any of its properties.

SECTION 10.20. <u>Securities Intermediary</u>. The Securities Intermediary, in acting under this Indenture, is entitled to all rights, benefits, protections, immunities and indemnities accorded to U.S. Bank Trust Company, National Association, a national banking association, in its capacity as Indenture Trustee under this Indenture; <u>provided</u> that the Securities Intermediary shall comply with its obligations hereunder, including <u>Section</u> <u>8.02(b)</u>.

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SECTION 10.21. <u>Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial</u>. Each of the Issuer, the Indenture Trustee, the Securities Intermediary and each Holder (by its acceptance of the Bonds) hereby irrevocably submits to the non-exclusive jurisdiction of any New York State court sitting in The Borough of Manhattan in The City of New York or any U.S. federal court sitting in The Borough of Manhattan in The City of New York in respect of any suit, action or proceeding arising out of or relating to this Indenture and the Bonds and irrevocably accepts for itself and in respect of its respective property, generally and unconditionally, jurisdiction of the aforesaid courts. EACH OF THE ISSUER, THE INDENTURE TRUSTEE, THE SECURITIES INTERMEDIARY, AND EACH HOLDER (BY ITS ACCEPTANCE OF THE BONDS) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY.

(SIGNATURE PAGE FOLLOWS)

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IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the Securities Intermediary have caused this Indenture to be duly executed by their respective officers thereunto duly authorized and duly attested, all as of the day and year first above written.

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| | |
|:---|:---|
| **KENTUCKY POWER COST RECOVERY LLC**, as Issuer | **KENTUCKY POWER COST RECOVERY LLC**, as Issuer |
| By: | /s/ Matthew D. Fransen |
|  | Name: Matthew D. Fransen |
|  | Title: Vice President and Treasurer |

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| | |
|:---|:---|
| **U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION**, as Indenture Trustee | **U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION**, as Indenture Trustee |
| By: | /s/ Matthew M. Smith |
|  | Name: Matthew M. Smith |
|  | Title: Vice President |
| **U.S. BANK NATIONAL ASSOCIATION**, <br>as Securities Intermediary | **U.S. BANK NATIONAL ASSOCIATION**, <br>as Securities Intermediary |
| By: | /s/ Matthew M. Smith |
|  | Name: Matthew M. Smith |
|  | Title: Vice President |

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*Signature Page to*

*Indenture*

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**EXHIBIT A** 

<u>FORM OF BOND</u> 

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

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| | |
|:---|:---|
| REGISTERED No. _____ | $________ |

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SEE REVERSE FOR CERTAIN DEFINITIONS

CUSIP NO.

THE PRINCIPAL OF THIS SERIES 2025 SENIOR SECURED RECOVERY BOND (THIS "<u>BOND</u>"), WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE HOLDER OF THIS BOND HAS NO RECOURSE TO THE ISSUER HEREOF AND AGREES TO LOOK ONLY TO THE COLLATERAL, AS DESCRIBED IN THE INDENTURE, FOR PAYMENT OF ANY AMOUNTS DUE HEREUNDER. ALL OBLIGATIONS OF THE ISSUER OF THIS BOND UNDER THE TERMS OF THE INDENTURE WILL BE RELEASED AND DISCHARGED UPON PAYMENT IN FULL HEREOF OR AS OTHERWISE PROVIDED IN <u>SECTION 3.11(b)</u> OR <u>ARTICLE IV</u> OF THE INDENTURE. THE HOLDER OF THIS BOND HEREBY COVENANTS AND AGREES THAT PRIOR TO THE DATE WHICH IS ONE (1) YEAR AND ONE (1) DAY AFTER THE PAYMENT IN FULL OF THE BONDS, IT WILL NOT INSTITUTE AGAINST, OR JOIN ANY OTHER PERSON IN INSTITUTING AGAINST, THE ISSUER ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT, INSOLVENCY OR LIQUIDATION PROCEEDINGS OR OTHER SIMILAR PROCEEDING UNDER THE LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES. NOTHING IN THIS PARAGRAPH SHALL PRECLUDE, OR BE DEEMED TO ESTOP, SUCH HOLDER (A) FROM TAKING OR OMITTING TO TAKE ANY ACTION PRIOR TO SUCH

EXHIBIT A

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DATE IN (I) ANY CASE OR PROCEEDING VOLUNTARILY FILED OR COMMENCED BY OR ON BEHALF OF THE ISSUER UNDER OR PURSUANT TO ANY SUCH LAW OR (II) ANY INVOLUNTARY CASE OR PROCEEDING PERTAINING TO THE ISSUER WHICH IS FILED OR COMMENCED BY OR ON BEHALF OF A PERSON OTHER THAN SUCH HOLDER AND IS NOT JOINED IN BY SUCH HOLDER (OR ANY PERSON TO WHICH SUCH HOLDER SHALL HAVE ASSIGNED, TRANSFERRED OR OTHERWISE CONVEYED ANY PART OF THE OBLIGATIONS OF THE ISSUER HEREUNDER) UNDER OR PURSUANT TO ANY SUCH LAW, OR (B) FROM COMMENCING OR PROSECUTING ANY LEGAL ACTION WHICH IS NOT AN INVOLUNTARY CASE OR PROCEEDING UNDER OR PURSUANT TO ANY SUCH LAW AGAINST THE ISSUER OR ANY OF ITS PROPERTIES.

KENTUCKY POWER COST RECOVERY LLC

SERIES 2025 SENIOR SECURED RECOVERY BONDS

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| | | | |
|:---|:---|:---|:---|
| BOND INTEREST<br> RATE | ORIGINAL<br> PRINCIPAL<br> AMOUNT | SCHEDULED<br> FINAL PAYMENT<br> DATE | FINAL MATURITY<br> DATE |

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Kentucky Power Cost Recovery LLC, a limited liability company created under the laws of the State of Delaware (herein referred to as the "<u>Issuer</u>"), for value received, hereby promises to pay to **[ ]**, or registered assigns, the Original Principal Amount shown above in semi-annual installments on the Payment Dates and in the amounts specified on the reverse hereof or, if less, the amounts determined pursuant to <u>Section</u> <u>8.02</u> of the Indenture, in each year, commencing on the date determined as provided on the reverse hereof and ending on or before the Final Maturity Date shown above and to pay interest, at the Interest Rate shown above, on each __________ and __________ or if any such day is not a Business Day, the next succeeding Business Day, commencing on **[ ]** and continuing until the earlier of the payment in full of the principal hereof and the Final Maturity Date (each a "<u>Payment Date</u>"), on the principal amount of this Bond. Interest on this Bond will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the date of issuance. Interest will be computed on the basis of **[**specify method of computation**]**. Such principal of and interest on this Bond shall be paid in the manner specified on the reverse hereof.

The principal of and interest on this Bond are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Bond shall be applied first to interest due and payable on this Bond as provided above and then to the unpaid principal of and premium, if any, on this Bond, all in the manner set forth in the Indenture.

EXHIBIT A

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Reference is made to the further provisions of this Bond set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Bond.

Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual, electronic or facsimile signature, this Bond shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually, electronically or in facsimile, by its Responsible Officer.

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| | | |
|:---|:---|:---|
| Date: | KENTUCKY POWER COST RECOVERY LLC | KENTUCKY POWER COST RECOVERY LLC |
|  | By: |  |
|  |  | Name: |
|  |  | Title: |

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EXHIBIT A

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INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION

Dated: __________ ___, ____

This is one of the Bonds, designated above and referred to in the within-mentioned Indenture.

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| | |
|:---|:---|
|  U.S. Bank Trust Company, National Association,<br> as Indenture Trustee | U.S. Bank Trust Company, National Association,<br> as Indenture Trustee |
| By: |  |
|  | Name: |
|  | Title: |

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EXHIBIT A

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REVERSE OF BOND<sup>\*</sup>

This Bond is one of a duly authorized issue of Series 2025 Senior Secured Recovery Bonds of the Issuer (herein called the "<u>Bonds</u>"), all issued and to be issued under that certain Indenture dated as of June 12, 2025, (as supplemented by the Series Supplement (as defined below), the "<u>Indenture</u>"), by and among the Issuer, U.S. Bank Trust Company, National Association, a national banking association, not in its individual capacity but solely in its capacity as indenture trustee (the "<u>Indenture Trustee</u>", which term includes any successor indenture trustee under the Indenture), and U.S. Bank National Association, a national banking association, not in its individual capacity but solely in its capacity as securities intermediary and account bank (the "<u>Securities Intermediary</u>", which term includes any successor securities intermediary under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Bonds. For purposes herein, "Series Supplement" means that certain Series Supplement dated as of June 12, 2025, among the Issuer, the Indenture Trustee and the Securities Intermediary. All terms used in this Bond that are defined in the Indenture, as amended, restated, supplemented or otherwise modified from time to time, shall have the meanings assigned to such terms in the Indenture.

All of the Bonds are and will be equally and ratably secured by the Collateral pledged as security therefor as provided in the Indenture.

The principal of this Bond shall be payable on each Payment Date only to the extent that amounts in the Collection Account are available therefor, and only until the outstanding principal balance thereof on the preceding Payment Date (after giving effect to all payments of principal, if any, made on the preceding Payment Date) has been reduced to the principal balance specified in the Expected Amortization Schedule which is attached to the Series Supplement as Schedule A, unless payable earlier because an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders representing not less than a majority of the Outstanding Amount of the Bonds have declared the Bonds to be immediately due and payable in accordance with <u>Section</u> <u>5.02</u> of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with <u>Section</u> <u>5.02</u> of the Indenture). However, actual principal payments may be made in lesser than expected amounts and at later than expected times as determined pursuant to <u>Section</u> <u>8.02</u> of the Indenture. The entire unpaid principal amount of this Bond shall be due and payable on the Final Maturity Date hereof. Notwithstanding the foregoing, the entire unpaid principal amount of the Bonds shall be due and payable, if not then previously paid, on the date on which an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders of the Bonds representing not less than a majority of the Outstanding Amount of the Bonds have declared the Bonds to be immediately due and payable in the manner provided in <u>Section</u> <u>5.02</u> of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with <u>Section</u> <u>5.02</u> of the Indenture). All principal payments on the Bonds shall be made pro rata to the Holders entitled thereto based on the respective principal amounts of the Bonds held by them.

<sup>\*</sup> The form of the reverse of a Bond is substantially as follows, unless otherwise specified in the Series Supplement.

EXHIBIT A

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Payments of interest on this Bond due and payable on each Payment Date, together with the installment of principal or premium, if any, shall be made by wire transfer to an account maintained by the Person whose name appears as the Registered Holder of this Bond (or one or more Predecessor Bonds) on the Bond Register as of the close of business on the Record Date or in such other manner as may be provided in the Indenture or the Series Supplement, except that if this Bond is held in Book-Entry Form, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Bond evidencing this Bond unless and until such Global Bond is exchanged for Definitive Bonds (in which event payments shall be made as provided above), and except for the final installment of principal and premium, if any, payable with respect to this Bond on a Payment Date which shall be payable as provided below. Any reduction in the principal amount of this Bond (or any one or more Predecessor Bonds) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Bond and of any Bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Bond on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice sent no later than five (5) days prior to such Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of this Bond and shall specify the place where this Bond may be presented and surrendered for payment of such installment.

The Issuer shall pay interest on overdue installments of interest at the Bond Interest Rate to the extent lawful.

This Bond is a "securitized bond" as such term is defined in the Act. Principal and interest due and payable on this Bond are payable from and secured primarily by Cost Recovery Property created and established by the Financing Order obtained from the Public Service Commission of the Commonwealth of Kentucky pursuant to the Act. Cost Recovery Property, as more fully defined in the Indenture, consists of the rights and interests of the Seller in the relevant Financing Order, including the right to impose, collect and recover certain charges (defined in the Act as "securitized surcharges"), to be included as a separate line item in regular electric utility bills of existing and future electric service customers within the service territory of Kentucky Power, a Kentucky electric utility, or its successors or assigns, as more fully described in the Financing Order.

The Act provides that: Neither the full faith and credit nor the taxing power of the Commonwealth of Kentucky is pledged to the payment of the principal of, or interest on, this bond. The Commonwealth and its agencies pledges, however, for the benefit and protection of financing parties and the electric utility, that it will not: (a) alter the provisions of Sections 278.670 to 278.696 and Section 65.114 of the Act which authorize the commission to create an irrevocable contract right or right to sue by the issuance of a financing order creating securitized property, making the securitized surcharges imposed by a financing order irrevocable, binding, or affecting the nonbypassable charges for all existing and future retail customers of the electric utility, its successors, or assignees; (b) take or permit any action that impairs or would impair the value of securitized property or the security for the securitized bonds or revises the securitized costs for which recovery is authorized; (c) in any way impair the rights and remedies of the bondholders,

EXHIBIT A

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assignees, and other financing parties; and (d) except for changes made pursuant to the formula-based true-up mechanism authorized under Section 278.678 of the Act, reduce, alter, or impair securitized surcharges that are to be imposed, billed, charge, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related securitized bonds have been paid and performed in full.

The Issuer and Kentucky Power hereby acknowledge that the purchase of this Bond by the Holder hereof or the purchase of any beneficial interest herein by any Person are made in reliance on the foregoing pledge.

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Bond may be registered on the Bond Register upon surrender of this Bond for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by (a) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder hereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an institution which is a member of one of the following recognized Signature Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) in such other guarantee program acceptable to the Indenture Trustee, and (b) such other documents as the Indenture Trustee may require, and thereupon one or more new Bonds of Minimum Denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Bond, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange, other than exchanges pursuant to <u>Sections 2.04</u> or <u>2.06</u> of the Indenture not involving any transfer.

Each Holder, by acceptance of a Bond, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Bonds or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) any owner of a membership interest in the Issuer (including Kentucky Power) or (ii) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Kentucky Power) in its respective individual or corporate capacities, or of any successor or assign of any of them in their individual or corporate capacities, except as any such Person may have expressly agreed in writing. Each Holder by accepting a Bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Bonds.

Prior to the due presentment for registration of transfer of this Bond, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Bond is registered (as of the day of determination) as the owner hereof for the purpose of receiving payments of principal of and premium, if any, and interest on this Bond and for all other purposes whatsoever, whether or not this Bond be overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall be affected by notice to the contrary.

EXHIBIT A

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The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Bonds under the Indenture at any time by the Issuer with the consent of the Holders representing not less than a majority of the Outstanding Amount of all Bonds at the time outstanding. The Indenture also contains provisions permitting the Holders representing specified percentages of the Outstanding Amount of the Bonds, on behalf of the Holders of all the Bonds, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Bond (or any one of more Predecessor Bonds) shall be conclusive and binding upon such Holder and upon all future Holders of this Bond and of any Bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Bond. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Bonds issued thereunder.

The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Issuer on this Bond and (b) certain restrictive covenants and the related Events of Default, upon compliance by the Issuer with certain conditions set forth herein, which provisions apply to this Bond.

The term "Issuer" as used in this Bond includes any successor to the Issuer under the Indenture.

The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Holders under the Indenture.

The Bonds are issuable only in registered form in denominations as provided in the Indenture and the Series Supplement subject to certain limitations therein set forth.

THIS BOND, THE INDENTURE AND THE SERIES SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND SECTIONS 9-301 THROUGH 9-306 OF THE NY UCC), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; <u>PROVIDED</u> THAT THE CREATION, ATTACHMENT AND PERFECTION OF ANY LIENS CREATED UNDER THE INDENTURE IN COST RECOVERY PROPERTY, AND ALL RIGHTS AND REMEDIES OF THE INDENTURE TRUSTEE, THE SECURITIES INTERMEDIARY AND THE HOLDERS WITH RESPECT TO THE COST RECOVERY PROPERTY, SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF KENTUCKY.

No reference herein to the Indenture and no provision of this Bond or of the Indenture shall alter or impair the obligation, which is absolute and unconditional, to pay the principal of and interest on this Bond at the times, place, and rate, and in the coin or currency herein prescribed.

EXHIBIT A

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The Issuer and the Indenture Trustee, by entering into the Indenture, and the Holders and any Persons holding a beneficial interest in any Bond, by acquiring any Bond or interest therein, (i) express their intention that, solely for the purpose of U.S. federal income tax law and, to the extent consistent with applicable state, local and other tax law, solely for the purpose of state, local and other taxes, the Bonds qualify under applicable tax law as indebtedness of the sole owner of the Issuer secured by the Collateral and (ii) solely for purposes of U.S. federal income tax law and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Bonds are outstanding, agree to treat the Bonds as indebtedness of the sole owner of the Issuer secured by the Collateral unless otherwise required by appropriate taxing authorities.

EXHIBIT A

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ABBREVIATIONS

The following abbreviations, when used in the inscription of the face of this Bond, shall be construed as though they were written out in full according to applicable laws or regulations.

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| | | | |
|:---|:---|:---|:---|
| TEN COM | as tenants in common | as tenants in common | as tenants in common |
| TEN ENT | as tenants by the entireties | as tenants by the entireties | as tenants by the entireties |
| JT TEN | as joint tenants with right of survivorship and not as tenants in common | as joint tenants with right of survivorship and not as tenants in common | as joint tenants with right of survivorship and not as tenants in common |
| UNIF GIFT MIN ACT | | Custodian | |
|  | (Custodian) |  | (minor) |
|  | Under Uniform Gifts to Minor Act () | Under Uniform Gifts to Minor Act () | Under Uniform Gifts to Minor Act () |
|  |  | (State) | (State) |

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Additional abbreviations may also be used though not in the above list.

EXHIBIT A

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ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee ____________<u> </u>

FOR VALUE RECEIVED, the undersigned<sup>4</sup> hereby sells, assigns and transfers unto

(name and address of assignee)

the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints ______<u> </u><u>,</u> attorney, to transfer said Bond on the books kept for registration thereof, with full power of substitution in the premises.

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| | |
|:---|:---|
| Dated: ________________ | |
|  | Signature Guaranteed: |

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<sup>4</sup> BOND: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Bond in every particular, without alteration, enlargement or any change whatsoever.

NOTE: Signature(s) must be guaranteed by an institution which is a member of one of the following recognized Signature Guaranty Programs: (i) The Securities Transfer Agent Medallion Program (STAMP), (ii) The New York Stock Exchange Medallion Program (MSP), (iii) the Stock Exchange Medallion Program (SEMP) or (iv) such other guarantee program acceptable to the Indenture Trustee.

EXHIBIT A

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**EXHIBIT B** 

<u>FORM OF SERIES SUPPLEMENT</u> 

This SERIES SUPPLEMENT dated as of **[_____] [ ]**, 2025 (this "<u>Supplement</u>"), by and among Kentucky Power Cost Recovery LLC, a limited liability company created under the laws of the State of Delaware (the "<u>Issuer</u>"), U.S. Bank Trust Company, National Association, a national banking association ("<u>BANK</u>"), in its capacity as indenture trustee (the "<u>Indenture Trustee</u>"), and U.S. Bank National Association, a national banking association, in its capacity as securities intermediary (the "<u>Securities Intermediary</u>"), for the benefit of the Secured Parties under the Indenture dated as of June 12, 2025(the "<u>Indenture</u>"), by and among the Issuer, the Indenture Trustee and the Securities Intermediary.

PRELIMINARY STATEMENT

Section 9.01 of the Indenture provides, among other things, that the Issuer and the Indenture Trustee may at any time enter into an indenture supplemental to the Indenture for the purposes of authorizing the issuance by the Issuer of the Bonds and specifying the terms thereof. The Issuer has duly authorized the creation of the Bonds with an initial aggregate principal amount of $[ ] to be known as Kentucky Power Cost Recovery LLC Series 2025 Senior Secured Recovery Bonds (the "<u>Bonds</u>"), and the Issuer and the Indenture Trustee are executing and delivering this Supplement in order to provide for the Bonds.

All terms used in this Supplement that are defined in the Indenture, either directly or by reference therein, have the meanings assigned to them therein, except to the extent such terms are defined or modified in this Supplement or the context clearly requires otherwise. In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture, the terms and provisions of this Supplement shall govern.

GRANTING CLAUSE

With respect to the Bonds, the Issuer hereby Grants to the Indenture Trustee, as Indenture Trustee for the benefit of the Secured Parties of the Bonds, all of the Issuer's right, title and interest (whether now owned or hereafter acquired or arising) in and to the following (the "<u>Collateral</u>"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Cost Recovery Property created under and pursuant to the Act and Financing Order, and transferred by the Seller to the Issuer pursuant to the Sale Agreement (including, to the fullest extent permitted by applicable law, the right to impose, bill, charge, collect, receive, and adjust Charges, the right to obtain periodic adjustments to the Charges, and all revenues, collections, claims, rights to payments, payments, moneys and proceeds arising from the rights and interests specified in the Financing Order);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) all Charges related to the Cost Recovery Property;

EXHIBIT B

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the Sale Agreement and the Bill of Sale executed in connection therewith and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to the Cost Recovery Property and the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the Servicing Agreement, the Intercreditor Agreement, the Administration Agreement and any subservicing, agency, other intercreditor, administration or collection agreements executed in connection therewith, to the extent related to the Cost Recovery Property and the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the Collection Account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all Financial Assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) all rights to compel the Servicer to file for and obtain periodic adjustments to the Charges in accordance with the Act, the Financing Order, the Charge Rider and any Charge Rider Adjustments filed in connection therewith;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) all rights to compel performance by the Commission and the Commonwealth of Kentucky of their respective obligations or duties under the Act, the State Pledge and the Financing Order, including with respect to the guarantee of the Commission to implement the periodic adjustments to the Charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute Cost Recovery Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) all payments on or under, and all proceeds in respect of, any or all of the foregoing;

<u>provided</u> that none of the following shall constitute any part of the Collateral:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) cash that has been released pursuant to <u>Section</u> <u>8.02(e)(xi)</u> of the Indenture and, following retirement of all Outstanding Bonds, cash that has been released pursuant to <u>Section</u> <u>8.02(e)(xiii)</u> of the Indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y) amounts deposited with the Issuer on the Closing Date, for payment of costs of issuance with respect to the Bonds (together with any interest earnings thereon); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z) proceeds from the sale of the Bonds required to pay (A) the purchase price for the Cost Recovery Property and paid pursuant to the Sale Agreement or (B) up-front Financing Costs in accordance with the Financing Order;

EXHIBIT B

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it being understood that such amounts described in <u>clauses</u> <u>(x)</u>, <u>(y)</u> and <u>(z)</u> above shall not be subject to <u>Section</u> <u>3.17</u> of the Indenture. Any "securitized property" (as defined in the Act) created with respect to an Additional Series shall not be part of the Collateral.

The foregoing Grant is made in trust to secure the payment of principal of and premium, if any, interest on, and any other amounts owing in respect of, the Bonds and all fees, expenses, counsel fees and other amounts due and payable to the Indenture Trustee equally and ratably without prejudice, priority or distinction, except as expressly provided in the Indenture, to secure compliance with the provisions of the Indenture with respect to the Bonds, all as provided in the Indenture and to secure the performance by the Issuer of all of its obligations under the Indenture. The Indenture and this Series Supplement constitute a security agreement within the meaning of the Act and under the UCC to the extent that the provisions of the UCC are applicable hereto.

The Indenture Trustee, as indenture trustee on behalf of the Secured Parties of the Bonds, acknowledges such Grant and accepts the trusts under this Supplement and the Indenture in accordance with the provisions of this Supplement and the Indenture.

SECTION 1. <u>Designation</u>. The Bonds shall be designated generally as the Series 2025 Senior Secured Recovery Bonds.

SECTION 2. <u>Initial Principal Amount; Bond Interest Rate; Scheduled Payment Date; Final Maturity Date</u>. The Bonds shall have the initial principal amount, bear interest at the rates per annum (the "<u>Bond Interest Rate</u>") and shall have the Scheduled Final Payment Dates and the Final Maturity Dates set forth below:

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| | | | | |
|:---|:---|:---|:---|:---|
| Bonds | Initial<br>Principal<br>Amount | Bond<br>Interest<br>Rate | Scheduled<br>Final Payment<br>Date | Final<br>Maturity<br>Date |

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The Bond Interest Rate shall be computed by the Issuer on the basis of a 360-day year of twelve 30-day months.

SECTION 3. <u>Authentication Date; Payment Dates; Expected Amortization Schedule for Principal; Periodic Interest; No Premium; Other Terms</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Authentication Date</u>. The Bonds that are authenticated and delivered by the Indenture Trustee to or upon the order of the Issuer on **[** ] (the "<u>Closing Date</u>") shall have as their date of authentication [ ].

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Payment Dates</u>. The Payment Dates for the Bonds are __________ and __________ of each year commencing on [____________], 202[ ], or, if any such date is not a Business Day, the next succeeding Business Day, commencing on [ ] (the "<u>Initial Payment</u> <u>Date</u>") and continuing until the earlier of repayment of the Bonds in full and the Final Maturity Date.

EXHIBIT B

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Expected Amortization Schedule for Principal</u>. Unless an Event of Default shall have occurred and be continuing on each Payment Date, the Indenture Trustee shall distribute to the Holders of record as of the related Record Date amounts payable pursuant to <u>Section</u> <u>8.02(e)</u> of the Indenture as principal to the holders of the Bonds, until the Outstanding Amount of the Bonds thereof has been reduced to zero; <u>provided</u>, <u>however</u>, that in no event shall a principal payment pursuant to this <u>Section</u> <u>3(c)</u> on a Payment Date be greater than the amount necessary to reduce the Outstanding Amount of such Bonds to the amount specified in the Expected Amortization Schedule which is attached as <u>Schedule A</u> hereto for such Payment Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Periodic Interest</u>. Periodic Interest will be payable on the Bonds on each Payment Date in an amount equal to one-half of the product of (i) the applicable Bond Interest Rate and (ii) the Outstanding Amount of the Bonds as of the close of business on the preceding Payment Date after giving effect to all payments of principal made to the Holders of the Bonds on such preceding Payment Date; <u>provided</u>, <u>however</u>, that with respect to the Initial Payment Date, or, if no payment has yet been made, interest on the outstanding principal balance will accrue from and including the Closing Date to, but excluding, the following Payment Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Book-Entry Bonds</u>. The Bonds shall be Book-Entry Bonds and the applicable provisions of <u>Section</u> <u>2.11</u> of the Indenture shall apply to the Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>Waterfall Caps</u>. The amount payable by the Issuer to the Indenture Trustee pursuant to <u>Section</u> <u>8.02(e)(i)</u> shall not exceed $100,000 annually.

SECTION 4. <u>Minimum Denominations</u>. The Bonds shall be issuable in the Minimum Denomination and integral multiples of $1,000 in excess thereof.

SECTION 5. <u>Certain Defined Terms</u>. <u>Article I</u> of the Indenture provides that the meanings of certain defined terms used in the Indenture shall be as defined in <u>Appendix A</u> to the Indenture. Additionally, <u>Article II</u> of the Indenture provides certain terms will have the meanings specified in the related Supplement. With respect to the Bonds, the following definitions shall apply:

"<u>Bond Interest Rate</u>" has the meaning set forth in <u>Section</u> <u>2</u> of this Supplement.

"<u>Initial Payment Date</u>" has the meaning set forth in Section 3 of this Supplement.

"<u>Minimum Denomination</u>" shall mean $2,000, or integral multiples of $1,000 in excess thereof, except for one bond, which may be of a smaller denomination.

"<u>Payment Date</u>" has the meaning set forth in <u>Section</u> <u>3(b)</u> of this Supplement.

"<u>Periodic Interest</u>" has the meaning set forth in <u>Section</u> <u>3(d)</u> of this Supplement.

"<u>Closing Date</u>" has the meaning set forth in <u>Section</u> <u>3(a)</u> of this Supplement.

SECTION 6. <u>Delivery and Payment for the Bonds; Form of the Bonds</u>. The Indenture Trustee shall deliver the Bonds to the Issuer when authenticated in accordance with <u>Section</u> <u>2.03</u> of the Indenture. The Bonds shall be in the form of Exhibit A to the Indenture.

EXHIBIT B

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SECTION 7. <u>Ratification of Indenture</u>. As supplemented by this Supplement, the Indenture is in all respects ratified and confirmed and the Indenture, as so supplemented by this Supplement, shall be read, taken, and construed as one and the same instrument. This Supplement amends, modifies and supplements the Indenture only in so far as it relates to the Bonds.

SECTION 8. <u>Counterparts</u>. This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. This Supplement may be electronically signed, that any digital or electronic signatures (including pdf, facsimile or electronically imaged signatures provided by DocuSign or any other digital signature provider as specified in writing to the Indenture Trustee) appearing on this Indenture are the same as handwritten signatures for the purposes of validity, enforceability and admissibility, and that delivery of any such electronic signature to, or a signed copy of, this Indenture may be made by facsimile, email or other electronic transmission.

SECTION 9. <u>GOVERNING LAW; JURISDICTION</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) <u>GOVERNING LAW</u>. THIS SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND SECTIONS 9-301 THROUGH 9-306 OF THE NY UCC), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED THAT THE CREATION, ATTACHMENT AND PERFECTION OF ANY LIENS CREATED UNDER THE INDENTURE IN COST RECOVERY PROPERTY, AND ALL RIGHTS AND REMEDIES OF THE INDENTURE TRUSTEE, THE SECURITIES INTERMEDIARY AND THE HOLDERS WITH RESPECT TO THE COST RECOVERY PROPERTY, SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF KENTUCKY.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) <u>SUBMISSION</u> <u>TO NON-EXCLUSIVE JURISDICTION</u>. EACH OF THE ISSUER AND THE INDENTURE TRUSTEE, THE SECURITIES INTERMEDIARY AND EACH HOLDER (BY ITS ACCEPTANCE OF THE BONDS) HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY U.S. FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENT AND THE BONDS AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS RESPECTIVE PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE ISSUER, THE INDENTURE TRUSTEE, THE SECURITIES INTERMEDIARY AND EACH HOLDER (BY ITS ACCEPTANCE OF THE BONDS) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY.

EXHIBIT B

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SECTION 10. <u>Issuer Obligation</u>. No recourse may be taken directly or indirectly, by the Holders with respect to the obligations of the Issuer on the Bonds, under the Indenture or under this Supplement or any certificate or other writing delivered in connection herewith or therewith, against (i) any owner of a beneficial interest in the Issuer (including Kentucky Power) or (ii) any shareholder, partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee, the Managers or any owner of a beneficial interest in the Issuer (including Kentucky Power) in its individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed. Each Holder by accepting a Bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Bonds.

SECTION 11. <u>Indenture Trustee.</u> The Indenture Trustee and the Securities Intermediary shall be entitled to the same rights, protections, privileges and indemnities under this Supplement to which they are entitled under the Indenture.

EXHIBIT B

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IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the Securities Intermediary have caused this Supplement to be duly executed by their respective officers thereunto duly authorized as of the date first above written.

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| | |
|:---|:---|
| **Kentucky Power Cost Recovery LLC,** <br>as Issuer | **Kentucky Power Cost Recovery LLC,** <br>as Issuer |
| By: |  |
|  | Name:<br> Title: |
| **U.S. Bank Trust Company, National Association**, <br>as Indenture Trustee | **U.S. Bank Trust Company, National Association**, <br>as Indenture Trustee |
| By: |  |
|  | Name:<br> Title: |
| **U.S. Bank National Association**, <br>as Securities Intermediary | **U.S. Bank National Association**, <br>as Securities Intermediary |
| By: |  |
|  | Name:<br> Title: |

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EXHIBIT B

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SCHEDULE A

EXPECTED AMORTIZATION SCHEDULE

OUTSTANDING PRINCIPAL BALANCE

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| | |
|:---|:---|
| DATE | AMOUNT |
|  Closing Date | $|
|  ________ ___, 20__ | $|
|  ________ ___, 20__ | $|
|  ________ ___, 20__ | $|
|  ________ ___, 20__ | $|

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EXHIBIT B

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**EXHIBIT C** 

<u>SERVICING CRITERIA TO BE ADDRESSED</u> 

<u>BY INDENTURE TRUSTEE IN ASSESSMENT OF COMPLIANCE</u> 

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| | | |
|:---|:---|:---|
| **Reg AB**<br> **Reference** | **Servicing Criteria** | **Applicable Indenture**<br> **Trustee**<br> **Responsibility** |
|  | **General Servicing Considerations** |  |
| 1122(d)(1)(i) | Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements. |  |
| 1122(d)(1)(ii) | If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party's performance and compliance with such servicing activities. |  |
| 1122(d)(1)(iii) | Any requirements in the transaction agreements to maintain a back-up servicer for pool assets are maintained. |  |
| 1122(d)(1)(iv) | A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements. |  |
| 1122(d)(1)(v) | Aggregation of information, as applicable, is mathematically accurate and the information conveyed accurately reflects the information. |  |
|  | **Cash Collection and Administration** |  |
| 1122(d)(2)(i) | Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days of receipt, or such other number of days specified in the transaction agreements. | **X** |
| 1122(d)(2)(ii) | Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel. | **X** |
| 1122(d)(2)(iii) | Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements. |  |
| 1122(d)(2)(iv) | The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements. | **X** |
| 1122(d)(2)(v) | Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, "federally insured depository institution" with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act. | **X** |
| 1122(d)(2)(vi) | Unissued checks are safeguarded so as to prevent unauthorized access. |  |
| 1122(d)(2)(vii) | Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations (A) are mathematically accurate; (B) are prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) are reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements. |  |
|  | **Investor Remittances and Reporting** |  |
| 1122(d)(3)(i) | Reports to investors, including those to be filed with the SEC, are maintained in accordance with the transaction agreements and applicable SEC requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the SEC as required by its rules and regulations; and (D) agree with investors' or the trustee's records as to the total unpaid principal balance and number of pool assets serviced by the servicer. |  |
| 1122(d)(3)(ii) | Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements. | **X** |

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EXHIBIT C

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| | | |
|:---|:---|:---|
| **Reg AB**<br> **Reference** | **Servicing Criteria** | **Applicable Indenture**<br> **Trustee**<br> **Responsibility** |
| 1122(d)(3)(iii) | Disbursements made to an investor are posted within two business days to the servicer's investor records, or such other number of days specified in the transaction agreements. | **X** |
| 1122(d)(3)(iv) | Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements. | **X** |
|  | **Pool Asset Administration** |  |
| 1122(d)(4)(i) | Collateral or security on pool assets is maintained as required by the transaction agreements or related documents. |  |
| 1122(d)(4)(ii) | Pool assets and related documents are safeguarded as required by the transaction agreements. |  |
| 1122(d)(4)(iii) | Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements. |  |
| 1122(d)(4)(iv) | Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the servicer's obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents. |  |
| 1122(d)(4)(v) | The servicer's records regarding the pool assets agree with the servicer's records with respect to an obligor's unpaid principal balance. |  |
| 1122(d)(4)(vi) | Changes with respect to the terms or status of an obligor's pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents. |  |
| 1122(d)(4)(vii) | Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements. |  |
| 1122(d)(4)(viii) | Records documenting collection efforts are maintained during the period any pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity's activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment). |  |
| 1122(d)(4)(ix) | Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents. |  |
| 1122(d)(4)(x) | Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor's pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements. |  |
| 1122(d)(4)(xi) | Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements. |  |
| 1122(d)(4)(xii) | Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer's funds and not charged to the obligor, unless the late payment was due to the obligor's error or omission. |  |
| 1122(d)(4)(xiii) | Disbursements made on behalf of an obligor are posted within two business days to the obligor's records maintained by the servicer, or such other number of days specified in the transaction agreements. |  |
| 1122(d)(4)(xiv) | Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements. |  |
| 1122(d)(4)(xv) | Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements. |  |

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EXHIBIT C

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**APPENDIX A** 

**DEFINITIONS** 

This is <u>Appendix A</u> to the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. <u>Defined Terms</u>. As used in the Indenture, the Sale Agreement, the Servicing Agreement, the Series Supplement, the Intercreditor Agreement or any other Basic Document as hereinafter defined, as the case may be (unless the context requires a different meaning), the following terms have the following meanings:

"<u>17g-5 Website</u>" is defined in <u>Section</u> <u>10.06</u> of the Indenture.

"<u>Account Records</u>" is defined in <u>Section</u> <u>1(a)(i)</u> of the Administration Agreement.

"<u>Act</u>" means collectively, Chapter 278 of Title XXIV Public Utilities (KRS §§ 278.010, 278.670-.696) and Chapter 65 Counties, Cities, and Other Local Units of the act relating to investor-owned utilities (KRS § 65.114), as amended from time to time.

"<u>Actual Collections</u>" means, with respect to Billed Charges in any Collection Period, the amount of such Billed Charges less the amounts held back under the Charge Rider to reflect potential write-offs calculated for such Collection Period.

"<u>Additional Series</u>" means any additional series of "securitized bonds" (as defined in the Act) issued by the Issuer after the Closing Date, either pursuant to remaining authority under the Financing Order, under a Subsequent Financing Order or otherwise as authorized or approved by the Commission.

"<u>Administration Agreement</u>" means the Administration Agreement, dated as of June 12, 2025, by and between Kentucky Power and the Issuer, as the same may be amended, restated, supplemented or otherwise modified from time to time.

"<u>Administration Fee</u>" is defined in <u>Section</u> <u>2</u> of the Administration Agreement.

"<u>Administrator</u>" means Kentucky Power, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.

"<u>AEP</u>" means American Electric Power Company, Inc.

"<u>Affiliate</u>" means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

Appendix A-1

------

"<u>Annual Accountant's Report</u>" is defined in <u>Section</u> <u>3.04(a)</u> of the Servicing Agreement.

"<u>Annual Compliance Certificate</u>" is defined in <u>Section</u> <u>3.03(a)</u> of the Servicing Agreement.

"<u>Application</u>" means the Electronic Application Of Kentucky Power Company For (1) A General Adjustment Of Its Rates For Electric Service; (2) Approval Of Tariffs And Riders; (3) Approval Of Accounting Practices To Establish Regulatory Assets And Liabilities; (4) A Securitization Financing Order; And (5) All Other Required Approvals And Relief filed by Kentucky Power with the Commission dated June 29, 2023 pursuant to the Act, or any subsequent similar Application of Kentucky Power.

"<u>Bankruptcy Code</u>" means Title 11 of the United States Code (11 U.S.C. §§ 101 <u>et seq.</u>), as amended from time to time.

"<u>Basic Documents</u>" means the Indenture, the Administration Agreement, the Sale Agreement and the Bill of Sale, the Certificate of Formation, the LLC Agreement, the Servicing Agreement, the Intercreditor Agreement, the Series Supplement, the Letter of Representations, the Underwriting Agreement and all other documents and certificates delivered in connection therewith.

"<u>Bill of Sale</u>" means the Bill of Sale, dated as of June 12, 2025, by and between the Seller and the Issuer, as the same may be amended, restated, supplemented or otherwise modified from time to time.

"<u>Billed Charges</u>" is defined in Annex I to the Servicing Agreement.

"<u>Bills</u>" means each of the regular monthly bills, summary bills, opening bills and closing bills issued to Customers by Kentucky Power on its own behalf and in its capacity as Servicer.

"<u>Bond Deferral Account</u>" means the deferral account with respect to Bonds authorized by the Financing Order.

"<u>Bond Register</u>" means the register maintained pursuant to <u>Section</u> <u>2.05</u> of the Indenture, providing for the registration of the Bonds and transfers and exchanges thereof.

"<u>Bond Registrar</u>" means the registrar at any time of the Bond Register, appointed pursuant to <u>Section</u> <u>2.05</u> of the Indenture.

"<u>Bonds</u>" means the "Series 2025 Senior Secured Bonds" authorized by the Financing Order and issued by the Issuer under the Indenture and Series Supplement on the Closing Date.

Appendix A-2

------

"<u>Bond Interest Rate</u>" means the rate at which interest accrues on the Bonds, as specified in the Series Supplement.

"<u>Book-Entry Bonds</u>" means any Bonds issued in Book-Entry Form; <u>provided</u>, <u>however</u>, that after the occurrence of a condition whereupon book-entry registration and transfer are no longer permitted and Definitive Bonds are to be issued to the Holder of such Bonds, such Bonds shall no longer be "Book-Entry Bonds".

"<u>Book-Entry Form</u>" means, with respect to any Bond, that such Bond is not certificated and the ownership and transfers thereof shall be made through book entries by a Clearing Agency as described in <u>Section</u> <u>2.11</u> of the Indenture and the Series Supplement pursuant to which such Bond was issued.

"<u>Budget Billing Plan</u>" means a levelized payment plan offered by Servicer pursuant to which the related Customer's invoice amount for each billing cycle is a constant amount (or approximately constant) irrespective of usage for the related billing cycle.

"<u>Business Day</u>" means any day other than a Saturday, a Sunday or a day on which banking institutions in Ashland, Kentucky, New York, New York, or Columbus, Ohio are, or DTC or the Corporate Trust Office is, authorized or obligated by law, regulation or executive order to remain closed.

"<u>Calculation Period</u>" means, with respect to any True-Up Adjustment, the applicable Calculation Period A and the applicable Calculation Period B.

"<u>Calculation Period A</u>" means, with respect to any True-Up Adjustment, the period beginning on the date on which such True-Up Adjustment would go into effect and ending on the next Payment Date following such True-Up Adjustment effective date; <u>provided</u> that for the purpose of calculating the first Periodic Payment Requirement as of the Closing Date, "Calculation Period A" means, initially, the period commencing on the Closing Date and ending on the last day of the billing cycle of March 1, 2026.

"<u>Calculation Period B</u>" means, with respect to any True-Up Adjustment, the period beginning on the date on which such True-Up Adjustment would go into effect and ending on the second Payment Date following such True-Up Adjustment effective date; <u>provided</u> that in the case of any True-Up Adjustment which will go into effect from and after the date that is 6 months before the last Scheduled Final Payment Date, the Calculation Period shall begin on the date the True-Up Adjustment goes into effect and end on the next Payment Date following such True-Up Adjustment effective date; and <u>provided</u> <u>further</u> that for the purpose of calculating the first Periodic Payment Requirement as of the Closing Date, "Calculation Period B" means, initially, the period commencing on the Closing Date and ending on the last day of the billing cycle of September 1, 2026.

"<u>Capital Contribution</u>" means the amount of cash contributed to the Issuer by Kentucky Power as specified in the LLC Agreement.

"<u>Capital Subaccount</u>" is defined in <u>Section</u> <u>8.02(a)</u> of the Indenture.

Appendix A-3

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"<u>Cash Flow Model</u>" means the cash flow model developed by or on behalf of the Seller for use by or on behalf of the owner of Cost Recovery Property in implementing the Charge Rider, and which includes a 20-year forecast of revenues by Revenue Class.

"<u>Cash Subaccount</u>" is defined in <u>Section</u> <u>8.02(a)</u> of the Indenture.

"<u>Certificate of Compliance</u>" means the certificate referred to in <u>Section</u> <u>3.03(a)</u> of the Servicing Agreement and substantially in the form of Exhibit B attached to the Servicing Agreement.

"<u>Certificate of Formation</u>" means the Certificate of Formation filed with the Secretary of State of the State of Delaware on October 4, 2024, pursuant to which the Issuer was formed.

"<u>Charge</u>" means any "securitized surcharge" (as defined in Section 278.670(20) of the Act), which is authorized by the Financing Order.

"<u>Charge Collections</u>" means the Charge Payments actually received by the Servicer to be remitted to the Collection Account.

"<u>Charge Payments</u>" means the payments made by Customers based on the Charges.

"<u>Charge Rider</u>" means the Securitized Surcharge Rider (S.S.R.), in the form attached to the Financing Order as Appendix B, filed with the Commission pursuant to the Act to evidence the Charges pursuant to the Financing Order.

"<u>Charge Rider Adjustment</u>" means a revision to the Charge Rider or any other notice filing filed with the Commission in respect of the Charge Rider pursuant to a True-Up Adjustment.

"<u>Claim</u>" means a "claim" as defined in Section 101(5) of the Bankruptcy Code.

"<u>Clearing Agency</u>" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act.

"<u>Clearing Agency Participant</u>" means a securities broker, dealer, bank, trust company, clearing corporation or other financial institution or other Person for whom from time to time a Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency.

"<u>Closing Date</u>" means, June 12, 2025, the date on which the Bonds are originally issued in accordance with <u>Section</u> <u>2.10</u> of the Indenture and the Series Supplement.

"<u>Code</u>" means the Internal Revenue Code of 1986, as amended.

"<u>Collateral</u>" has the meaning specified in the preamble of the Indenture.

"<u>Collection Account</u>" is defined in <u>Section</u> <u>8.02(a)</u> of the Indenture.

Appendix A-4

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"<u>Collection Period</u>" means any period commencing on the first Servicer Business Day of any Billing Period and ending on the last Servicer Business Day of such Billing Period.

"<u>Commission</u>" means the Public Service Commission of the Commonwealth of Kentucky or any successor.

"<u>Commission Regulations</u>" means the rules and regulations promulgated by the Commission.

"<u>Commonwealth</u>" means the Commonwealth of Kentucky.

"<u>Company Minutes</u>" is defined in <u>Section</u> <u>1(iv)</u> of the Administration Agreement.

"<u>Corporate Trust Office</u>" means the office of the Indenture Trustee at which, at any particular time, its corporate trust business shall be administered, which office (for all purposes other than registration of transfer of Bonds) as of the Closing Date is located at 190 South LaSalle Street, 7th Floor, MK-IL-SL7R, Chicago, Illinois 60603, Attention: Corporate Trust Services / Kentucky Power Cost Recovery LLC, Telephone: (800) 934-6802, Email: (800) 934- 6802, Email: matthew.smith2@usbank.com; melissa.rosal@usbank.com; maryann.turbak@usbank.com, and for registration of transfers of Bonds, the office as of the Closing Date is located at 111 Fillmore Avenue East, St. Paul, Minnesota 55107, Attention: Bondholder Services, or at such other address as the Indenture Trustee may designate from time to time by notice to the Holders of Bonds and the Issuer, or the principal corporate trust office of any successor trustee by like notice.

"<u>Cost Recovery Property</u>" means all "securitized property" (as defined in Section 278.670(19) of the Act) created pursuant to the Financing Order and sold or otherwise conveyed to the Issuer under the Sale Agreement, including the right to impose, bill, charge, collect, receive, and adjust the Charges authorized under the Financing Order and to obtain periodic adjustments to such charges authorized under the Act as provided in the Financing Order and all revenues, collections, claims, rights to payments, payments, moneys, or proceeds arising from the rights and interests specified in the Financing Order, regardless of whether those revenues, collections, claims, rights to payment, payments, moneys, or proceeds are imposed, billed, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, moneys, or proceeds.

"<u>Cost Recovery Property Records</u>" is defined in <u>Section</u> <u>5.01</u> of the Servicing Agreement.

"<u>Covenant Defeasance Option</u>" is defined in <u>Section</u> <u>4.01(b)</u> of the Indenture.

"<u>Customer</u>" means all existing and future retail customers receiving electric service from Kentucky Power or its successors or assignees under Commission-approved rate schedules even if a retail customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of public utilities in the Commonwealth of Kentucky.

"<u>Daily Remittance</u>" is defined in <u>Section</u> <u>6.11(a)</u> of the Servicing Agreement.

Appendix A-5

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"<u>Default</u>" means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default as defined in <u>Section</u> <u>5.01</u> of the Indenture.

"<u>Definitive Bonds</u>" means Bonds issued in definitive form in accordance with <u>Section</u> <u>2.13</u> of the Indenture.

"<u>Depositor</u>" means Kentucky Power, in its capacity as depositor of the Cost Recovery Property.

"<u>Disapproval Order</u>" means an order, substantially in the form of Appendix F to the Financing Order, issued by the Commission upon a finding that: (a) the "Statutory Requirements" set forth in the Issuance Advice Letter have not been satisfied, (b) the structuring, marketing and pricing of the Bonds would not result in the lowest Charges consistent with prevailing market conditions at the time in which the Bonds are priced, or (c) all other procedures, criteria and requirements set forth in this Financing Order and the Act have not been satisfied.

"<u>DTC</u>" means The Depository Trust Company or any successor thereto.

"<u>Electronic Means</u>" means telephone, telecopy, telegraph, telex, internet, electronic mail, facsimile transmission or any other similar means of electronic communication. Any communication by telephone as an Electronic Means shall be promptly confirmed in writing or by one of the other means of electronic communication authorized herein.

"<u>Eligible Account</u>" means a segregated non-interest-bearing trust account with an Eligible Institution.

"<u>Eligible Institution</u>" means:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the corporate trust department of the Indenture Trustee, so long as the Indenture Trustee or an Affiliate thereof has (i) either a short-term credit or issuer rating from Moody's of at least "P-1" or a long term unsecured debt or issuer rating from Moody's of at least "A2" and (ii) a long-term credit or issuer rating from S&P of at least "A"; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank), which (i) has either (A) a long-term unsecured debt or issuer rating of "AA-" or higher by S&P and "A2" or higher by Moody's, (B) a short-term issuer rating of "A-1" or higher by S&P and "P-1" or higher by Moody's, or (C) any other long-term, short-term or certificate of deposit rating acceptable to the Rating Agencies and (ii) whose deposits are insured by the FDIC;

provided, however, that if an Eligible Institution then being utilized for any purposes under the Indenture or the Series Supplement no longer meets the definition of Eligible Institution, then the Issuer shall replace such Eligible Institution within thirty (30) days of such Eligible Institution no longer meeting the definition of Eligible Institution.

If so qualified under clause (b) above, the Indenture Trustee or its Affiliate may be considered an Eligible Institution for the purposes of clause (a) of this definition.

Appendix A-6

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"<u>Eligible Investments</u>" mean instruments or investment property which evidence:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of, or bankers' acceptances issued by, any depository institution (including bank deposit products of the Indenture Trustee or any of its Affiliates, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by federal or state banking authorities, so long as the commercial paper or other short term debt obligations of such depository institution are, at the time of deposit, rated not less than "A-1" and "P-1" or their equivalents by each of S&P and Moody's, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) commercial paper (including commercial paper of the Indenture Trustee or any of its Affiliates, acting in its commercial capacity, and other than commercial paper issued by Kentucky Power or any of its Affiliates), which at the time of investment or contractual commitment to invest is rated not less than "A-1" and "P-1" or their equivalents by each of S&P and Moody's, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) investments in money market funds having a rating from Moody's and S&P of "Aaa-mf" and "AAAm", respectively, including funds for which the Indenture Trustee or any of its Affiliates acts as investment manager or advisor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or certain of its agencies or instrumentalities, entered into with Eligible Institutions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) repurchase obligations with respect to any security or whole loan entered into with an Eligible Institution or with a registered broker dealer, acting as principal and that meets the ratings criteria set forth below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any broker/dealer being referred to in this definition as a "broker/dealer"), the unsecured short-term debt obligations of which are rated at least "P-1" by Moody's and "A-1+" by Standard & Poor's at the time of entering into this repurchase obligation, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least "P-1" by Moody's and "A-1+" by Standard & Poor's at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company;

Appendix A-7

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provided, however, that if any such Eligible Institution or registered broker/dealer no longer meets the requirements set forth above, then the Issuer shall replace such Eligible Institution or registered broker-dealer within 30 days of such Eligible Institution or registered broker/dealer no longer meeting such requirement; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) any other investment permitted by each of the Rating Agencies;

in each case maturing not later than the Business Day immediately preceding the next Payment Date or Special Payment Date, if applicable (for the avoidance of doubt, investments in money market funds or similar instruments which are redeemable on demand shall be deemed to satisfy the foregoing requirement). Notwithstanding the foregoing: (1) no securities or investments which mature in 30 days or more shall be "Eligible Investments" unless the issuer thereof has either a short-term unsecured debt rating of at least "P-1" from Moody's or a long-term unsecured debt rating of at least "A1" from Moody's and also has a long-term unsecured debt rating of at least "A" from S&P; (2) no securities or investments described in clauses (b) through (d) above which have maturities of more than 30 days but less than or equal to 3 months shall be "Eligible Investments" unless the issuer thereof has a long-term unsecured debt rating of at least "A1" from Moody's and a short-term unsecured debt rating of at least "P-1" from Moody's; (3) no securities or investments described in clauses (b) through (d) above which have maturities of more than 3 months shall be an "Eligible Investment" unless the issuer thereof has a long-term unsecured debt rating of at least "A1" from Moody's and a short-term unsecured debt rating of at least "P1" from Moody's; (4) no securities or investments described in clauses (b) through (d) above which have a maturity of 60 days or less shall be an "Eligible Investment" unless such securities or investments have a rating from S&P of at least "A-1"; and (5) no securities or investments described in bullet points (b) through (d) above which have a maturity of more than 60 days will be Eligible Investments unless such securities have a rating from S&P of at least "AA-", "A-1+" or "AAAm".

"<u>ERISA</u>" means the Employee Retirement Income Security Act of 1974, as amended.

"<u>ERISA Affiliate</u>" means with respect to any Person at any time, each trade or business (whether or not incorporated) that would, at that time, be treated together with such Person as a single employer under Section 401 of ERISA or Section 414(b), (c), (m) or (o) of the Code.

"<u>Estimated Collections</u>" means the sum of the payments in respect of Charges which are deemed to have been received by the Servicer, directly or indirectly, from or on behalf of Customers, calculated in accordance with Annex I of the Servicing Agreement.

"<u>Event of Default</u>" is defined in <u>Section</u> <u>5.01</u> of the Indenture.

"<u>Excess Funds Subaccount</u>" is defined in <u>Section</u> <u>8.02(a)</u> of the Indenture.

"<u>Excess Remittance</u>" means the amount, if any, calculated for a particular Collection Period, by which all Estimated Collections remitted to the Collection Account during such Collection Period exceed Actual Collections received by the Servicer during such Collection Period.

Appendix A-8

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"<u>Exchange Act</u>" means the Securities Exchange Act of 1934, as amended.

"<u>Expected Amortization Schedule</u>" means the expected amortization schedule set forth in Schedule A to the Series Supplement.

"<u>FDIC</u>" means the Federal Deposit Insurance Corporation or any successor thereto.

"<u>Federal Book-Entry Regulations</u>" means 31 C.F.R. Part 357 et seq. (Department of Treasury).

"<u>Federal Book-Entry Securities</u>" means securities issued in Book-Entry Form by the United States Treasury.

"<u>Federal Funds Rate</u>" means, for any period, a fluctuating interest rate per annum equal for each day during such period to 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 for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Servicer from three (3) federal funds brokers of recognized standing selected by it.

"<u>FERC</u>" means the Federal Energy Regulatory Commission or any successor thereto.

"<u>Final</u>" means, with respect to the Financing Order, that the Financing Order has become final, is not being appealed and that the time for filing an appeal therefrom has expired.

"<u>Final Maturity Date</u>" means the Final Maturity Date, as specified in the Series Supplement; <u>provided</u> that the Final Maturity Date of the Bonds shall not be later than (a) 22 years and 3 months after the date of issuance of such Bonds or, (b) if earlier, two years after the Scheduled Final Payment Date.

"<u>Financial Asset</u>" means "financial asset" as set forth in Section 8-102(a)(9) of the NY UCC.

"<u>Financing Costs</u>" means all "financing costs" (as defined in Section 278.670(6) of the Act) recoverable under the Financing Order.

"<u>Financing Order</u>" means the Financing Order, issued on April 11, 2025, by the Commission pursuant to the Act, authorizing the creation of the Cost Recovery Property, which amends, restated and supersedes the Financing Order issued by the Commission on January 10, 2024.

"<u>General Subaccount</u>" is defined in <u>Section</u> <u>8.02(a)</u> of the Indenture.

"<u>Global Bond</u>" means a Bond to be issued to the Holders thereof in Book-Entry Form, which Global Bond shall be issued to the Clearing Agency, or its nominee, in accordance with <u>Section</u> <u>2.11</u> of the Indenture and the Series Supplement.

Appendix A-9

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"<u>Governmental Authority</u>" means any nation or government, any federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative function of government.

"<u>Grant</u>" means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, grant, transfer, create, and grant a lien upon and a security interest in and right of set-off against, deposit, set over and confirm pursuant to the Indenture and the Series Supplement. A Grant of the Collateral or of any other agreement or instrument included therein shall include all rights, powers and options (but none of the obligations) of the Granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the Granting party or otherwise and generally to do and receive anything that the Granting party is or may be entitled to do or receive thereunder or with respect thereto.

"<u>Hague Securities Convention</u>" means the Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary, ratified September 28, 2016, S. Treaty Doc. No. 112-6 (2012).

"<u>Holder" or "Bondholder</u>" means the Person in whose name a Bond is registered on the Bond Register.

"<u>Indemnified Losses</u>" is defined in Section 5.03 of the Servicing Agreement.

"<u>Indemnified Person</u>" is defined in Section 6.02(b) of the Servicing Agreement and in Section 5.01(f) of the Sale Agreement.

"<u>Indenture</u>" means the Indenture, dated as of June 12, 2025, by and among the Issuer, U.S. Bank Trust Company, National Association, a national banking association, as Indenture Trustee, and U.S. Bank National Association, a national banking association, as Securities Intermediary, as originally executed and, as from time to time supplemented or amended by the Series Supplement or indentures supplemental thereto entered into pursuant to the applicable provisions of the Indenture, as so supplemented or amended, or both, and shall include the forms and terms of the Bonds established thereunder.

"<u>Indenture Trustee</u>" means U.S. Bank Trust Company, National Association, a national banking association, as indenture trustee for the benefit of the Secured Parties, or any successor indenture trustee under the Indenture.

"<u>Independent</u>" means, when used with respect to any specified Person, that the Person (a) is in fact independent of the Issuer, any other obligor on the Bonds, the Seller, the Servicer and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director (other than as an independent director or manager) or Person performing similar functions.

Appendix A-10

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"<u>Independent Certificate</u>" means a certificate or opinion to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of <u>Section</u> <u>10.01</u> of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and consented to by the Indenture Trustee, and such opinion or certificate shall state that the signer has read the definition of "Independent" in the Indenture and that the signer is Independent within the meaning thereof.

"<u>Independent Manager</u>" is defined in Section 4.01(a) of the LLC Agreement.

"<u>Independent Manager Fee</u>" is defined in Section 4.01(a) of the LLC Agreement.

"<u>Initial Payment Date</u>" is defined in Section 3(b) of the Series Supplement.

"<u>Insolvency Event</u>" means, with respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person's affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing.

"<u>Insolvency Law</u>" means any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect.

"<u>Intercreditor Agreement</u>" means the Intercreditor Agreement, dated as of September 7, 2022, as amended and restated as of December 9, 2024, by and among the AEP Credit, Inc., JPMorgan Chase Bank, N.A., as administrative agent and control agent, and the issuers, servicers and indenture trustees from time to time party thereto; as supplemented by the Joinder to Intercreditor Agreement, dated as of June 12, 2025, by and among Kentucky Power, the Issuer, the Indenture Trustee, AEP Credit, Inc., and JPMorgan Chase Bank, N.A.; as the same may be amended, restated, supplemented or otherwise modified from time to time.

"<u>Interim True-Up Adjustment</u>" means any adjustment (other than a Mandatory True-Up Adjustment) to the Charges made pursuant to the terms of the Charge Rider.

"<u>Interim True-Up Adjustment Date</u>" means, with respect to any Interim True-Up Adjustment, the date on which such Interim True-Up Adjustment shall take effect.

Appendix A-11

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"<u>Internal Revenue Service</u>" means the Internal Revenue Service of the United States of America.

"<u>Investment Company Act</u>" means the Investment Company Act of 1940, as amended.

"<u>Investment Earnings</u>" means investment earnings on funds deposited in the Collection Account net of losses and investment expenses.

"<u>Issuance Advice Letter</u>" means the Issuance Advice Letter filed with the Commission pursuant to the Act and the Financing Order with respect to the Bonds.

"<u>Issuer</u>" means Kentucky Power Cost Recovery LLC, a Delaware limited liability company, named as such in the Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the Bonds.

"<u>Issuer Documents</u>" is defined in <u>Section</u> <u>1(a)(iv)</u> of the Administration Agreement.

"<u>Issuer Order</u>" and "<u>Issuer Request</u>" mean a written order or request signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.

"<u>Kentucky Power</u>" means Kentucky Power Company, a Kentucky corporation.

"<u>KPSC Condition</u>" means the satisfaction of any precondition to any amendment or modification to or action under any Basic Documents through the obtaining of Commission consent or acquiescence, as described in the related Basic Document.

"<u>KRS</u>" means the Kentucky Revised Statutes, as amended from time to time.

"<u>Legal Defeasance Option</u>" is defined in <u>Section</u> <u>4.01(b)</u> of the Indenture.

"<u>Letter of Representations</u>" means any applicable agreement between the Issuer and the applicable Clearing Agency, with respect to such Clearing Agency's rights and obligations (in its capacity as a Clearing Agency) with respect to any Book-Entry Bonds, as the same may be amended, supplemented, restated or otherwise modified from time to time.

"<u>Lien</u>" means a security interest, lien, mortgage, charge, pledge, claim, equity or encumbrance of any kind.

"<u>LLC Act</u>" means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 <u>et</u> <u>seq</u>., as amended from time to time.

"<u>LLC Agreement</u>" means the Amended and Restated Limited Liability Company Agreement of Kentucky Power Cost Recovery LLC, dated as of May 6, 2025, as the same may be amended, restated, supplemented or otherwise modified from time to time.

Appendix A-12

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"<u>Losses</u>" means (a) any and all amounts of principal and interest on the Bonds not paid when due or when scheduled to be paid in accordance with their terms and the amounts of any deposits by or to the Issuer required to have been made in accordance with the terms of the Basic Documents or the Financing Order which are not made when so required and (b) any and all other liabilities, obligations, losses, claims, damages, payments, costs or expenses of any kind whatsoever.

"<u>Lowest Cost Objective Certification of Kentucky Power</u>" means a certification in substantially the form of Attachment 5 to Appendix A to the Financing Order, duly executed by Kentucky Power.

"<u>Lowest Cost Objective Certification of the Financial Advisor</u>" means a certification in substantially the form of Appendix E to the Financing Order, duly executed by Saber Partners, LLC.

"<u>Lowest Cost Objective Certification of Kentucky Power</u>" means a certification in substantially the form of Appendix D to the Financing Order, duly executed by the Underwriters.

"<u>Manager</u>" means each manager of the Issuer under the LLC Agreement.

"<u>Mandatory True-Up Adjustment</u>" means each adjustment to the Charges made pursuant to the terms of the Charge Rider in accordance with <u>Section</u> <u>4.01(b)(i)</u> of the Servicing Agreement.

"<u>Mandatory True-Up Adjustment Date</u>" means:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) first, on December 1, 2025;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) then, until the date that is 12 months prior to the Schedule Final Payment Date, each March 1 and September 1 of each year; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) thereafter, each March 1, June 1, September 1, and December 1 of each year.

"<u>Material Remittance Investment Earnings</u>" means, for any Collection Period the aggregate amount of interest and investment earnings that (a) during prior Collection Periods has accrued on Charge Collections between the time such Charge Collections were actually collected by the Servicer and the time they were remitted to the Collection Account and (b) have not been previously reconciled pursuant to Section 6.11(c) of the Servicing Agreement.

"<u>Member</u>" has the meaning specified in the first paragraph of the LLC Agreement.

"<u>Membership Interest</u>" is defined in Section 6.01 of the LLC Agreement.

"<u>Minimum Denomination</u>" means, with respect to any Bond, the minimum denomination therefor specified in the Series Supplement, which minimum denomination shall be not less than $2,000, except for one Bond which may be of smaller denomination, and, except as otherwise provided in the Series Supplement, integral multiples of $1,000.

Appendix A-13

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"<u>Monthly Servicer's Certificate</u>" means a certificate, substantially in the form of Exhibit A to the Servicing Agreement, completed and executed by a Responsible Officer of the Servicer pursuant to <u>Section</u> <u>4.01(b)(i)</u> of the Servicing Agreement.

"<u>Moody's</u>" means Moody's Investors Service, Inc. or any successor thereto. References to Moody's are effective so long as Moody's is a Rating Agency.

"<u>Notice of Default</u>" is defined in <u>Section</u> <u>5.01(c)</u> of the Indenture.

"<u>NY UCC</u>" means the Uniform Commercial Code as in effect on the date hereof in the State of New York.

"<u>Officer's Certificate</u>" means, with respect to any Person, a certificate signed by a Responsible Officer of such Person and, with respect to an Officer's Certificate of the Issuer delivered to the Indenture Trustee under the Indenture, under the circumstances described in, and otherwise complying with, the applicable requirements of <u>Section</u> <u>10.01</u> of the Indenture, and delivered to the Indenture Trustee. Unless otherwise specified, any reference in a Basic Document to an Officer's Certificate shall be to an Officer's Certificate of any Responsible Officer of the party delivering such certificate.

"<u>Ongoing Financing Costs</u>" means the Financing Costs described as such in the Financing Order, including costs that Kentucky Power and the Commission will continue to incur after the issuance of the Financing Order, Operating Expenses and any other costs identified in the Basic Documents; <u>provided</u>, <u>however</u>, that Ongoing Financing Costs do not include (a) the Issuer's costs of issuance of the Bonds and (b) the portion of costs associated with Kentucky Power's servicing functions as Servicer or administrative functions as Administrator that are already being recovered in rates as part of Kentucky Power's cost of service or net income.

"<u>Operating Expenses</u>" means all unreimbursed fees, costs and expenses of the Issuer, including all amounts owed by the Issuer to the Indenture Trustee, any Manager, the Servicing Fee, the Administration Fee, Reimbursable Administrative Expenses, Reimbursable Servicing Expenses, legal and accounting fees, Rating Agency fees and any other costs and expenses of the Issuer and Kentucky Power specified as being Operating Expenses in the Basic Documents, and any franchise or other taxes owed on investment income in the Collection Account.

"<u>Opinion of Counsel</u>" means one or more written opinions of counsel who may, except as otherwise expressly provided in the Basic Documents, be employees of or counsel to the party providing such opinion of counsel, which counsel shall be reasonably acceptable to the party receiving such opinion of counsel, and shall be in form and substance reasonably acceptable to such party. Any Opinion of Counsel may be based, insofar as it relates to factual matters (including financial and capital markets), upon a certificate or opinion or, or representations by, an officer or officer of the Servicer or the Issuer and other documents necessary and advisable in the judgment of counsel delivering such opinion.

Appendix A-14

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"<u>Outstanding</u>" means, as of the date of determination, all Bonds theretofore authenticated and delivered under the Indenture except:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Bonds theretofore canceled by the Bond Registrar or delivered to the Bond Registrar for cancellation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Bonds or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Bonds in exchange for or in lieu of other Bonds which have been issued pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Bonds are held by a Protected Purchaser;

<u>provided</u> that, in determining whether the Holders of the requisite Outstanding Amount of the Bonds have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any Basic Document, Bonds owned by the Issuer, any other obligor upon the Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding (unless one or more such Persons owns 100% of such Bonds), except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds that the Indenture Trustee actually knows to be so owned shall be so disregarded. Bonds so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Bonds and that the pledgee is not the Issuer, any other obligor upon the Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons.

"<u>Outstanding Amount</u>" means the aggregate principal amount of all Bonds Outstanding at the date of determination.

"<u>Paying Agent</u>" means, with respect to the Indenture, U.S. Bank Trust Company, National Association and any other Person appointed as a paying agent for the Bonds pursuant to the Indenture.

"<u>Payment Date</u>" means, with respect to the Bonds, the dates specified in the Series Supplement; <u>provided</u> that if any such date is not a Business Day, the Payment Date shall be the Business Day immediately succeeding such date.

"<u>Periodic Billing Requirement</u>" means, for any Calculation Period, the aggregate amount of Charges calculated by the Servicer as necessary to be billed during such period in order to collect the Periodic Payment Requirement on a timely basis, given: (a) forecast usage and revenue data, excluding the Charges, for the Calculation Period; (b) forecast uncollectibles for the Calculation Period; and (c) forecast lags in collection of Billed Charges for the Calculation Period.

"<u>Periodic Interest</u>" means, with respect to any Payment Date, the periodic interest for such Payment Date as specified in the Series Supplement.

Appendix A-15

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"<u>Periodic Payment Requirement</u>" for any Calculation Period means the total dollar amount of Charge Collections reasonably calculated by the Servicer in accordance with Section 4.01 of the Servicing Agreement as necessary to be received during such period (after giving effect to the allocation and distribution of amounts on deposit in the Excess Funds Subaccount at the time of calculation and which are projected to be available for payments on the Bonds at the end of such Calculation Period and any over or under recoveries in Periodic Payment Requirements for any prior Calculation Period) in order to ensure that, as of the last Payment Date occurring in such Calculation Period, (a) all accrued and unpaid interest on the Bonds then due shall have been paid in full on a timely basis, (b) the Outstanding Amount of the Bonds is equal to the Projected Unrecovered Balance on each Payment Date during such Calculation Period, (c) the balance on deposit in the Capital Subaccount equals the aggregate Required Capital Level and (d) all other fees and expenses due and owing and required or allowed to be paid under <u>Section</u> <u>8.02</u> of the Indenture as of such date shall have been paid in full; <u>provided</u> that, with respect to any Mandatory True-Up Adjustment or Interim True-Up Adjustment occurring after the last Scheduled Final Payment Date for the Bonds, the Periodic Payment Requirements shall be calculated to ensure that sufficient Charges will be collected to retire the Bonds in full as of the next Payment Date.

"<u>Periodic Principal</u>" means, with respect to any Payment Date, the excess, if any, of the Outstanding Amount of Bonds over the outstanding Unrecovered Balance specified for such Payment Date on the Expected Amortization Schedule.

"<u>Permitted Successor</u>" is defined in <u>Section</u> <u>5.02(e)</u> of the Sale Agreement.

"<u>Person</u>" means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or Governmental Authority.

"<u>Predecessor Bond</u>" means, with respect to any particular Bond, every previous Bond evidencing all or a portion of the same debt as that evidenced by such particular Bond, and, for the purpose of this definition, any Bond authenticated and delivered under <u>Section</u> <u>2.06</u> of the Indenture in lieu of a mutilated, lost, destroyed or stolen Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Bond.

"<u>Premises</u>" is defined in <u>Section</u> <u>1(g)</u> of the Administration Agreement.

"<u>Proceeding</u>" means any suit in equity, action at law or other judicial or administrative proceeding.

"<u>Projected Unrecovered Balance</u>" means, as of any Payment Date, the sum of the projected outstanding principal amount of the Bonds for such Payment Date set forth in the Expected Amortization Schedule.

"<u>Prospectus</u>" means the prospectus dated June 5, 2025, relating to the Bonds.

"<u>Protected Purchaser</u>" has the meaning specified in Section 8-303 of the NY UCC.

"<u>Purchase Price</u>" is defined in <u>Section</u> <u>2.01</u> of the Sale Agreement.

Appendix A-16

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"<u>Rating Agency</u>" means any of Moody's or Standard & Poor's which provides a rating with respect to the Bonds. If no such organization or successor is any longer in existence, "Rating Agency" shall be a nationally recognized statistical rating organization or other comparable Person designated by the Issuer, notice of which designation shall be given to the Indenture Trustee and the Servicer.

"<u>Rating Agency Condition</u>" means, with respect to any action, (a) not less than ten (10) Business Days' prior written notification to each Rating Agency of such action, and written confirmation from each Rating Agency to the Servicer, the Indenture Trustee and the Issuer that such action will not result in a suspension, reduction or withdrawal of the then current rating by such Rating Agency of the Bonds, and (b) that prior to the taking of the proposed action no other Rating Agency shall have provided written notice to the Issuer that such action has resulted or would result in the suspension, reduction or withdrawal of the then current rating of the Bonds; provided, that if within such ten (10) Business Day period, any Rating Agency (other than Standard & Poor's) has neither replied to such notification nor responded in a manner that indicates that such Rating Agency is reviewing and considering the notification, then (i) the Issuer shall be required to confirm that such Rating Agency has received the Rating Agency Condition request, and if it has, promptly request the related Rating Agency Condition confirmation and (ii) if the Rating Agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five (5) Business Days following such second (2nd) request, the applicable Rating Agency Condition requirement shall not be deemed to apply to such Rating Agency. For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a Rating Agency's right to review or consent).

"<u>Record Date</u>" means, with respect to a Payment Date, in the case of Definitive Bonds, the close of business on the last day of the calendar month preceding the calendar month in which such Payment Date occurs, and in the case of Book-Entry Bonds, one Business Day prior to the applicable Payment Date.

"<u>Recovery Costs</u>" means the "securitization costs" (as defined in the Kentucky Utilities Act) recoverable pursuant to the Financing Order through the issuance of the Bonds, including the Financing Costs.

"<u>Registered Holder</u>" means the Person in whose name a Bond is registered on the Bond Register.

"<u>Registration Statement</u>" means the registration statement, Form SF-1 Registration Nos. 333-284112 and 333-284112-01, filed with the SEC for registration under the Securities Act relating to the offering and sale of the Bonds, and including all amendments thereto.

"<u>Regulation AB</u>" means the rules of the SEC promulgated under Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1125, as such may be amended from time to time.

"<u>Reimbursable Administrative Expenses</u>" is defined in <u>Section</u> <u>2</u> of the Administration Agreement.

Appendix A-17

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"<u>Reimbursable Servicing Expenses</u>" is defined in <u>Section</u> <u>6.06(a)</u> of the Servicing Agreement. 

"<u>Released Parties</u>" is defined in <u>Section</u> <u>6.02(e)</u> of the Servicing Agreement.

"<u>Remittance Shortfall</u>" means the amount, if any, calculated for a particular Collection Period, by which Actual Collections received by the Servicer during such Collection Period exceed all Estimated Collections remitted to the Collection Account during such Collection Period.

"<u>Required Capital Level</u>" means an amount equal to 0.50% of the initial principal amount of the Bonds, or such other amount as may be permitted or required under the Financing Order and applicable Internal Revenue Service rulings, deposited into the Capital Subaccount by the Member prior to or upon the issuance of the Bonds.

"<u>Requirement of Law</u>" means any foreign, federal, state or local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Authority or common law.

"<u>Responsible Officer</u>" means with respect to (a) the Issuer, any Manager or any duly authorized officer; (b) the Indenture Trustee, any officer within the Corporate Trust Office of such trustee (including the President, any Vice President, Assistant Vice President, Secretary or Assistant Treasurer, Trust Officer or any other officer of the Indenture Trustee customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively), and that has direct responsibility for the administration of the Indenture and also, with respect to a particular matter, any other officer to whom such matter is referred to because of such officer's knowledge and familiarity with the particular subject; (c) any corporation (other than the Indenture Trustee), the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Assistant Treasurer or any other duly authorized officer of such Person who has been authorized to act in the circumstances; (d) any partnership, any general partner thereof; and (e) any other Person (other than an individual or the Indenture Trustee), any duly authorized officer or member of such Person, as the context may require, who is authorized to act in matters relating to such Person.

"<u>Retirement of the Bonds</u>" means any day on which the final distribution is made to the Indenture Trustee in respect of the last Outstanding Bonds.

"<u>Return on Invested Capital</u>" means, for any Payment Date with respect to any Collection Period, the sum of (a) the rate of return, payable to Kentucky Power, on its Capital Contribution, equal to Kentucky Power's then authorized pre-tax weighted average cost of capital established in Kentucky Power's then most recent base rate case *plus* (b) any Return on Invested Capital not paid on any prior Payment Date.

"<u>Revenue</u>" means (a) for the "Residential" Revenue Class, all revenues from charges for electric service to residential customers, including base rate revenues and revenue from riders, except for revenue from Kentucky Power's environmental surcharge mechanism, which is a percent of revenue surcharge authorized pursuant to KRS 278.183; nonrecurring charges as defined by 807 KAR 5:011, Section 1(4), such as a reconnection charge; and pass through charges,

Appendix A-18

------

which would consist of taxes or fees, if any, not embedded in Kentucky Power's revenue requirement and cost of service; and (b) for the "Non-Residential" Revenue Class, all revenues from charges to non-residential customers for retail electric service, including base rate revenues and revenue from riders, except for revenue for fuel costs and from Kentucky Power's environmental surcharge mechanism, nonrecurring charges, and pass through charges.

"<u>Revenue Class</u>" means those customer classes identified as a separate revenue class in the Charge Rider.

"<u>Revenue Forecast</u>" means is defined in Section 4.01(b)(i) of the Servicing Agreement.

"<u>Sale Agreement</u>" means the Purchase and Sale Agreement, dated as of June 12, 2025, by and between Kentucky Power and the Issuer, as the same may be amended, restated, supplemented or otherwise modified from time to time.

"<u>Scheduled Final Payment Date</u>" means, with respect to the Bonds, the date when all interest and principal is scheduled to be paid in accordance with the Expected Amortization Schedule, as specified in the Series Supplement; <u>provided</u> that the Scheduled Final Payment Date shall not be later than 20 years and 3 months after the date of issuance of the Bonds. For the avoidance of doubt, the Scheduled Final Payment Date shall be the last Scheduled Payment Date set forth in the Expected Amortization Schedule.

"<u>Scheduled Payment Date</u>" is defined in the Series Supplement with respect to the Bonds.

"<u>SEC</u>" means the U.S. Securities and Exchange Commission.

"<u>Secretary of State</u>" means the Secretary of State of the State of Delaware or the Secretary of State of the Commonwealth of Kentucky, as the case may be, or any Governmental Authority succeeding to the duties of such offices.

"<u>Secured Parties</u>" means the Indenture Trustee, the Bondholders and any credit enhancer described in the Series Supplement.

"<u>Securities Account</u>" means the Collection Account (to the extent it constitutes a securities account as defined in the NY UCC and Federal Book-Entry Regulations).

"<u>Securities Act</u>" means the Securities Act of 1933, as amended.

"<u>Securities Intermediary</u>" means U.S. Bank National Association, a national banking association, or any other eligible financial institution, solely in the capacity of a "securities intermediary" (as defined in the NY UCC and Federal Book-Entry Regulations) and an account bank, or any successor securities intermediary or account bank under the Indenture.

Appendix A-19

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"<u>Security Entitlement</u>" means "security entitlement" (as defined in Section 8-102(a)(17) of the NY UCC) with respect to Financial Assets now or hereafter credited to the Securities Account and, with respect to Federal Book-Entry Regulations, with respect to Federal Book-Entry Securities now or hereafter credited to the Securities Account, as applicable.

"<u>Seller</u>" is defined in the preamble to the Sale Agreement.

"<u>Series Supplement</u>" means the Series Supplement, dated as of the June 12, 2025, among the Issuer, the Indenture Trustee and the Securities Intermediary, as the same may be amended, restated, supplemented or otherwise modified from time to time.

"<u>Servicer</u>" means Kentucky Power, as Servicer under the Servicing Agreement, or any successor Servicer to the extent permitted under the Servicing Agreement.

"<u>Servicer Business Day</u>" means any day other than a Saturday, Sunday or holiday on which the Servicer maintains normal office hours and conducts business.

"<u>Servicer Default</u>" is defined in <u>Section</u> <u>7.01</u> of the Servicing Agreement.

"<u>Servicer's Certificate</u>" means a certificate, substantially in the form of <u>Exhibit B</u> to the Servicing Agreement, completed and executed by a Responsible Officer of the Servicer pursuant to <u>Section</u> <u>4.01(c)(ii)</u> of the Servicing Agreement.

"<u>Servicing Agreement</u>" means the Servicing Agreement, dated as of June 12, 2025, by and between the Issuer and Kentucky Power, as the same may be amended, restated, supplemented or otherwise modified from time to time.

"<u>Servicing Fee</u>" means the fee payable to the Servicer on each Payment Date for services rendered during the period from, but not including, the preceding Payment Date (or from the Closing Date in the case of the first Payment Date) to and including the current Payment Date, determined pursuant to <u>Section</u> <u>6.06</u> of the Servicing Agreement.

"<u>Special Member</u>" is defined in <u>Section</u> <u>1.02(b)</u> of the LLC Agreement.

"<u>Special Payment</u>" means any payment of principal of or interest on (including any interest accruing upon default), or any other amount in respect of, the Bonds that is not actually paid within five (5) days of the Payment Date applicable thereto.

"<u>Special Payment Date</u>" means the date on which a Special Payment is to be made by the Indenture Trustee to the Holders.

"<u>Special Purpose Provisions</u>" is defined in <u>Section</u> <u>11.02(a)(i)</u> of the LLC Agreement.

"<u>Special Record Date</u>" means with respect to any Special Payment Date, the close of business on the fifteenth (15<sup>th</sup>) day (whether or not a Business Day) preceding such Special Payment Date.

"<u>Sponsor</u>" means Kentucky Power, in its capacity as "sponsor" of the Bonds within the meaning of Regulation AB.

Appendix A-20

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"<u>Standard</u> <u>& Poor</u><u>'</u><u>s</u>" or "<u>S&P</u>" means Standard & Poor's Ratings Group, Inc., or any successor thereto. References to S&P are effective so long as S&P is a Rating Agency.

"<u>State</u>" means any one of the fifty states of the United States of America or the District of Columbia.

"<u>State Pledge</u>" means the pledge of the Commonwealth of Kentucky as set forth in Section 65.114(2) of the Act.

"<u>Subaccounts</u>" is defined in <u>Section</u> <u>8.02(a)</u> of the Indenture.

"<u>Subsequent Financing Order</u>" means a "financing order" (as defined in the Act) issued by the Commission to Kentucky Power subsequent to the Financing Order.

"<u>Successor Servicer</u>" is defined in <u>Section</u> <u>3.07(e)</u> of the Indenture.

"<u>Tax Return</u>" is defined in <u>Section</u> <u>1(a)(iii)</u> of the Administration Agreement.

"<u>Temporary Bonds</u>" means Bonds executed, and upon the receipt of an Issuer Order, authenticated and delivered by the Indenture Trustee pending the preparation of Definitive Bonds pursuant to <u>Section</u> <u>2.04</u> of the Indenture.

"<u>Termination Notice</u>" is defined in <u>Section</u> <u>7.01(e)</u> of the Servicing Agreement.

"<u>Treasury Regulations</u>" means the regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.

"<u>True-Up Adjustment</u>" means any Mandatory True-Up Adjustment or Interim True-Up Adjustment, as the case may be.

"<u>Trust Indenture Act</u>" or "<u>TIA</u>" means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, as in force on the Closing Date, unless otherwise specifically provided.

"<u>UCC</u>" means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time.

"<u>Underwriters</u>" means the underwriters who purchase Bonds from the Issuer and sell such Bonds in a public offering.

"<u>Underwriting Agreement</u>" means the Underwriting Agreement, dated June 5, 2025, by and among Kentucky Power, the representative of the several Underwriters named therein and the Issuer, as the same may be amended, supplemented or modified from time to time.

Appendix A-21

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"<u>Unrecovered Balance</u>" means, as of any Payment Date, the sum of the outstanding principal amount of the Bonds less the amount in the Excess Funds Subaccount available to make principal payments on the Bonds.

"<u>U.S. Government Obligations</u>" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the option of the issuer thereof.

"<u>Weighted Average Days Outstanding</u>" means the weighted average number of days Kentucky Power's Bills to Customers remain outstanding during the calendar year immediately preceding the calculation thereof pursuant <u>Section</u> <u>4.01(b)</u> the Servicing Agreement. The initial Weighted Average Days Outstanding shall be 20.3 days until updated pursuant to <u>Section</u> <u>4.01(b)</u> of the Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. <u>Other Terms</u>. All accounting terms not specifically defined herein shall be construed in accordance with United States generally accepted accounting principles. To the extent that the definitions of accounting terms in any Basic Document are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained in such Basic Document shall control. As used in the Basic Documents, the term "<u>including</u>" means "including without limitation," and other forms of the verb "to include" have correlative meanings. All references to any Person shall include such Person's permitted successors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. <u>Computation of Time Periods</u>. Unless otherwise stated in any of the Basic Documents, as the case may be, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. <u>Reference; Captions</u>. The words "hereof", "herein" and "hereunder" and words of similar import when used in any Basic Document shall refer to such Basic Document as a whole and not to any particular provision of such Basic Document; and references to "<u>Section</u>", "<u>subsection</u>", "<u>Schedule</u>" and "<u>Exhibit</u>" in any Basic Document are references to Sections, subsections, Schedules and Exhibits in or to such Basic Document unless otherwise specified in such Basic Document. The various captions (including the tables of contents) in each Basic Document are provided solely for convenience of reference and shall not affect the meaning or interpretation of any Basic Document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. <u>Terms Generally</u>. The definitions contained in this <u>Appendix A</u> are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter forms of such terms.

Appendix A-22

## Exhibit 4.2

**Exhibit 4.2** 

<u>SERIES SUPPLEMENT</u> 

This SERIES SUPPLEMENT dated as of June 12, 2025 (this "<u>Supplement</u>"), by and among Kentucky Power Cost Recovery LLC, a limited liability company created under the laws of the State of Delaware (the "<u>Issuer</u>"), U.S. Bank Trust Company, National Association, a national banking association ("<u>BANK</u>"), in its capacity as indenture trustee (the "<u>Indenture Trustee</u>"), and U.S. Bank National Association, a national banking association, in its capacity as securities intermediary (the "<u>Securities Intermediary</u>"), for the benefit of the Secured Parties under the Indenture dated as of June 12, 2025 (the "<u>Indenture</u>"), by and among the Issuer, the Indenture Trustee and the Securities Intermediary.

PRELIMINARY STATEMENT

Section 9.01 of the Indenture provides, among other things, that the Issuer and the Indenture Trustee may at any time enter into an indenture supplemental to the Indenture for the purposes of authorizing the issuance by the Issuer of the Bonds and specifying the terms thereof. The Issuer has duly authorized the creation of the Bonds with an initial aggregate principal amount of $477,749,000 to be known as Kentucky Power Cost Recovery LLC Series 2025 Senior Secured Recovery Bonds (the "<u>Bonds</u>"), and the Issuer and the Indenture Trustee are executing and delivering this Supplement in order to provide for the Bonds.

All terms used in this Supplement that are defined in the Indenture, either directly or by reference therein, have the meanings assigned to them therein, except to the extent such terms are defined or modified in this Supplement or the context clearly requires otherwise. In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture, the terms and provisions of this Supplement shall govern.

GRANTING CLAUSE

With respect to the Bonds, the Issuer hereby Grants to the Indenture Trustee, as Indenture Trustee for the benefit of the Secured Parties of the Bonds, all of the Issuer's right, title and interest (whether now owned or hereafter acquired or arising) in and to the following (the "<u>Collateral</u>"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Cost Recovery Property created under and pursuant to the Act and Financing Order, and transferred by the Seller to the Issuer pursuant to the Sale Agreement (including, to the fullest extent permitted by applicable law, the right to impose, bill, charge, collect, receive, and adjust Charges, the right to obtain periodic adjustments to the Charges, and all revenues, collections, claims, rights to payments, payments, moneys and proceeds arising from the rights and interests specified in the Financing Order);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) all Charges related to the Cost Recovery Property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the Sale Agreement and the Bill of Sale executed in connection therewith and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to the Cost Recovery Property and the Bonds;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the Servicing Agreement, the Intercreditor Agreement, the Administration Agreement and any subservicing, agency, other intercreditor, administration or collection agreements executed in connection therewith, to the extent related to the Cost Recovery Property and the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the Collection Account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all Financial Assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) all rights to compel the Servicer to file for and obtain periodic adjustments to the Charges in accordance with the Act, the Financing Order, the Charge Rider and any Charge Rider Adjustments filed in connection therewith;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) all rights to compel performance by the Commission and the Commonwealth of Kentucky of their respective obligations or duties under the Act, the State Pledge and the Financing Order, including with respect to the guarantee of the Commission to implement the periodic adjustments to the Charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute Cost Recovery Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) all payments on or under, and all proceeds in respect of, any or all of the foregoing;

<u>provided</u> that none of the following shall constitute any part of the Collateral:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) cash that has been released pursuant to <u>Section</u> <u>8.02(e)(xi)</u> of the Indenture and, following retirement of all Outstanding Bonds, cash that has been released pursuant to <u>Section</u> <u>8.02(e)(xiii)</u> of the Indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y) amounts deposited with the Issuer on the Closing Date, for payment of costs of issuance with respect to the Bonds (together with any interest earnings thereon); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z) proceeds from the sale of the Bonds required to pay (A) the purchase price for the Cost Recovery Property and paid pursuant to the Sale Agreement or (B) up-front Financing Costs in accordance with the Financing Order;

it being understood that such amounts described in <u>clauses</u> <u>(x)</u>, <u>(y)</u> and <u>(z)</u> above shall not be subject to <u>Section</u> <u>3.17</u> of the Indenture. Any "securitized property" (as defined in the Act) created with respect to an Additional Series shall not be part of the Collateral.

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The foregoing Grant is made in trust to secure the payment of principal of and premium, if any, interest on, and any other amounts owing in respect of, the Bonds and all fees, expenses, counsel fees and other amounts due and payable to the Indenture Trustee equally and ratably without prejudice, priority or distinction, except as expressly provided in the Indenture, to secure compliance with the provisions of the Indenture with respect to the Bonds, all as provided in the Indenture and to secure the performance by the Issuer of all of its obligations under the Indenture. The Indenture and this Series Supplement constitute a security agreement within the meaning of the Act and under the UCC to the extent that the provisions of the UCC are applicable hereto.

The Indenture Trustee, as indenture trustee on behalf of the Secured Parties of the Bonds, acknowledges such Grant and accepts the trusts under this Supplement and the Indenture in accordance with the provisions of this Supplement and the Indenture.

SECTION 1. <u>Designation</u>. The Bonds shall be designated generally as the Series 2025 Senior Secured Recovery Bonds.

SECTION 2. <u>Initial Principal Amount; Bond Interest Rate; Scheduled Payment Date; Final Maturity Date</u>. The Bonds shall have the initial principal amount, bear interest at the rates per annum (the "<u>Bond Interest Rate</u>") and shall have the Scheduled Final Payment Dates and the Final Maturity Dates set forth below:

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| | | | | |
|:---|:---|:---|:---|:---|
| Bonds | Initial<br>Principal<br>Amount | Bond<br>Interest<br>Rate | Scheduled<br>Final Payment<br>Date | Final<br>Maturity<br>Date |
|  A | $477749000 | 5.296% | 9/1/2045 | 9/1/2047 |

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The Bond Interest Rate shall be computed by the Issuer on the basis of a 360-day year of twelve 30-day months.

SECTION 3. <u>Authentication Date; Payment Dates; Expected Amortization Schedule for Principal; Periodic Interest; No Premium; Other Terms</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Authentication Date</u>. The Bonds that are authenticated and delivered by the Indenture Trustee to or upon the order of the Issuer on June 12, 2025 (the "<u>Closing Date</u>") shall have as their date of authentication June 12, 2025.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Payment Dates</u>. The Payment Dates for the Bonds are March 1 and September 1 of each year commencing on March 1, 2026, or, if any such date is not a Business Day, the next succeeding Business Day, commencing on March 1, 2026 (the "<u>Initial Payment Date</u>") and continuing until the earlier of repayment of the Bonds in full and the Final Maturity Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Expected Amortization Schedule for Principal</u>. Unless an Event of Default shall have occurred and be continuing on each Payment Date, the Indenture Trustee shall distribute to the Holders of record as of the related Record Date amounts payable pursuant to <u>Section</u> <u>8.02(e)</u> of the Indenture as principal to the holders of the Bonds, until the Outstanding Amount of the Bonds thereof has been reduced to zero; <u>provided</u>, <u>however</u>, that in no event shall a principal payment pursuant to this <u>Section</u> <u>3(c)</u> on a Payment Date be greater than the amount necessary to reduce the Outstanding Amount of such Bonds to the amount specified in the Expected Amortization Schedule which is attached as <u>Schedule A</u> hereto for such Payment Date.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Periodic Interest</u>. Periodic Interest will be payable on the Bonds on each Payment Date in an amount equal to one-half of the product of (i) the applicable Bond Interest Rate and (ii) the Outstanding Amount of the Bonds as of the close of business on the preceding Payment Date after giving effect to all payments of principal made to the Holders of the Bonds on such preceding Payment Date; <u>provided</u>, <u>however</u>, that with respect to the Initial Payment Date, or, if no payment has yet been made, interest on the outstanding principal balance will accrue from and including the Closing Date to, but excluding, the following Payment Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Book-Entry Bonds</u>. The Bonds shall be Book-Entry Bonds and the applicable provisions of <u>Section</u> <u>2.11</u> of the Indenture shall apply to the Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>Waterfall Caps</u>. The amount payable by the Issuer to the Indenture Trustee pursuant to <u>Section</u> <u>8.02(e)(i)</u> shall not exceed $100,000 annually.

SECTION 4. <u>Minimum Denominations</u>. The Bonds shall be issuable in the Minimum Denomination and integral multiples of $1,000 in excess thereof.

SECTION 5. <u>Certain Defined Terms</u>. <u>Article I</u> of the Indenture provides that the meanings of certain defined terms used in the Indenture shall be as defined in <u>Appendix A</u> to the Indenture. Additionally, <u>Article II</u> of the Indenture provides certain terms will have the meanings specified in the related Supplement. With respect to the Bonds, the following definitions shall apply:

"<u>Bond Interest Rate</u>" has the meaning set forth in <u>Section</u> <u>2</u> of this Supplement.

"<u>Initial Payment Date</u>" has the meaning set forth in Section 3 of this Supplement.

"<u>Minimum Denomination</u>" shall mean $2,000, or integral multiples of $1,000 in excess thereof, except for one bond, which may be of a smaller denomination.

"<u>Payment Date</u>" has the meaning set forth in <u>Section</u> <u>3(b)</u> of this Supplement.

"<u>Periodic Interest</u>" has the meaning set forth in <u>Section</u> <u>3(d)</u> of this Supplement.

"<u>Closing Date</u>" has the meaning set forth in <u>Section</u> <u>3(a)</u> of this Supplement.

SECTION 6. <u>Delivery and Payment for the Bonds; Form of the Bonds</u>. The Indenture Trustee shall deliver the Bonds to the Issuer when authenticated in accordance with <u>Section</u> <u>2.03</u> of the Indenture. The Bonds shall be in the form of Exhibit A to the Indenture.

SECTION 7. <u>Ratification of Indenture</u>. As supplemented by this Supplement, the Indenture is in all respects ratified and confirmed and the Indenture, as so supplemented by this Supplement, shall be read, taken, and construed as one and the same instrument. This Supplement amends, modifies and supplements the Indenture only in so far as it relates to the Bonds.

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SECTION 8. <u>Counterparts</u>. This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. This Supplement may be electronically signed, that any digital or electronic signatures (including pdf, facsimile or electronically imaged signatures provided by DocuSign or any other digital signature provider as specified in writing to the Indenture Trustee) appearing on this Indenture are the same as handwritten signatures for the purposes of validity, enforceability and admissibility, and that delivery of any such electronic signature to, or a signed copy of, this Indenture may be made by facsimile, email or other electronic transmission.

SECTION 9. <u>GOVERNING LAW; JURISDICTION</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) <u>GOVERNING LAW</u>. THIS SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND SECTIONS 9-301 THROUGH 9-306 OF THE NY UCC), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED THAT THE CREATION, ATTACHMENT AND PERFECTION OF ANY LIENS CREATED UNDER THE INDENTURE IN COST RECOVERY PROPERTY, AND ALL RIGHTS AND REMEDIES OF THE INDENTURE TRUSTEE, THE SECURITIES INTERMEDIARY AND THE HOLDERS WITH RESPECT TO THE COST RECOVERY PROPERTY, SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF KENTUCKY.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) <u>SUBMISSION</u> <u>TO NON-EXCLUSIVE JURISDICTION</u>. EACH OF THE ISSUER AND THE INDENTURE TRUSTEE, THE SECURITIES INTERMEDIARY AND EACH HOLDER (BY ITS ACCEPTANCE OF THE BONDS) HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY U.S. FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENT AND THE BONDS AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS RESPECTIVE PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH OF THE ISSUER, THE INDENTURE TRUSTEE, THE SECURITIES INTERMEDIARY AND EACH HOLDER (BY ITS ACCEPTANCE OF THE BONDS) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY.

SECTION 10. <u>Issuer Obligation</u>. No recourse may be taken directly or indirectly, by the Holders with respect to the obligations of the Issuer on the Bonds, under the Indenture or under this Supplement or any certificate or other writing delivered in connection herewith or therewith, against (i) any owner of a beneficial interest in the Issuer (including Kentucky Power) or (ii) any shareholder, partner, owner, beneficiary, agent, officer, director, employee or agent of

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the Indenture Trustee, the Managers or any owner of a beneficial interest in the Issuer (including Kentucky Power) in its individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed. Each Holder by accepting a Bond specifically confirms the nonrecourse nature of these obligations, and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Bonds.

SECTION 11. <u>Indenture Trustee.</u> The Indenture Trustee and the Securities Intermediary shall be entitled to the same rights, protections, privileges and indemnities under this Supplement to which they are entitled under the Indenture.

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IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the Securities Intermediary have caused this Supplement to be duly executed by their respective officers thereunto duly authorized as of the date first above written.

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| | |
|:---|:---|
| **Kentucky Power Cost Recovery LLC,**<br> as Issuer | **Kentucky Power Cost Recovery LLC,**<br> as Issuer |
| By: | /s/ Matthew D. Fransen |
|  | Name: Matthew D. Fransen |
|  | Title: Vice President and Treasurer |

---

---

| | |
|:---|:---|
| **U.S. Bank Trust Company, National Association**, as Indenture Trustee | **U.S. Bank Trust Company, National Association**, as Indenture Trustee |
| By: | /s/ Matthew M. Smith |
|  | Name: Matthew M. Smith |
|  | Title: Vice President |

---

---

| | |
|:---|:---|
| **U.S. Bank National Association**,<br> as Securities Intermediary | **U.S. Bank National Association**,<br> as Securities Intermediary |
| By: | /s/ Matthew M. Smith |
|  | Name: Matthew M. Smith |
|  | Title: Vice President |

---

*Signature Page to Series Supplement* 

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SCHEDULE A

EXPECTED AMORTIZATION SCHEDULE

OUTSTANDING PRINCIPAL BALANCE

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| | |
|:---|:---|
| **Semi-Annual**<br> **Payment Date** | **Tranche A** |
|  Issuance Date | $477749000 |
|  3/1/2026 | 468775848 |
|  9/1/2026 | 461767534 |
|  3/1/2027 | 454573640 |
|  9/1/2027 | 447189252 |
|  3/1/2028 | 439609325 |
|  9/1/2028 | 431828682 |
|  3/1/2029 | 423842007 |
|  9/1/2029 | 415643845 |
|  3/1/2030 | 407228596 |
|  9/1/2030 | 398590511 |
|  3/1/2031 | 389723689 |
|  9/1/2031 | 380622074 |
|  3/1/2032 | 371279448 |
|  9/1/2032 | 361689429 |
|  3/1/2033 | 351845467 |
|  9/1/2033 | 341740837 |
|  3/1/2034 | 331368636 |
|  9/1/2034 | 320721779 |
|  3/1/2035 | 309792993 |
|  9/1/2035 | 298574813 |
|  3/1/2036 | 287059576 |
|  9/1/2036 | 275239415 |
|  3/1/2037 | 263106256 |
|  9/1/2037 | 250651811 |
|  3/1/2038 | 237867573 |
|  9/1/2038 | 224744808 |
|  3/1/2039 | 211274552 |
|  9/1/2039 | 197447604 |
|  3/1/2040 | 183254518 |
|  9/1/2040 | 168685599 |
|  3/1/2041 | 153730895 |
|  9/1/2041 | 138380191 |
|  3/1/2042 | 122623000 |
|  9/1/2042 | 106448559 |
|  3/1/2043 | 89845818 |
|  9/1/2043 | 72803437 |
|  3/1/2044 | 55309774 |
|  9/1/2044 | 37352878 |
|  3/1/2045 | 18920484 |
|  9/1/2045 |  |

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(1) Totals may not add up due to rounding.

## Exhibit 10.1

**Exhibit 10.1** 

**SERVICING AGREEMENT** 

**by and between** 

**KENTUCKY POWER COST RECOVERY LLC,** 

**as Issuer** 

**and** 

**KENTUCKY POWER COMPANY,** 

**as Servicer** 

**Dated as of June 12, 2025** 

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<u>**TABLE OF CONTENTS**</u> 

<u>Page</u> 

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| | | |
|:---|:---|:---|
|  ARTICLE I | ARTICLE I |  |
|  DEFINITIONS | DEFINITIONS | 1 |
|  SECTION 1.01. | Definitions | 1 |
|  ARTICLE II | ARTICLE II |  |
|  APPOINTMENT AND AUTHORIZATION | APPOINTMENT AND AUTHORIZATION | 2 |
|  SECTION 2.01. | Appointment of Servicer; Acceptance of Appointment | 2 |
|  SECTION 2.02. | Authorization | 2 |
|  SECTION 2.03. | Dominion and Control Over the Cost Recovery Property | 3 |
|  ARTICLE III | ARTICLE III |  |
|  ROLE OF SERVICER | ROLE OF SERVICER | 3 |
|  SECTION 3.01. | Duties of Servicer | 3 |
|  SECTION 3.02. | Servicing and Maintenance Standards | 6 |
|  SECTION 3.03. | Annual Reports on Compliance with Regulation AB | 6 |
|  SECTION 3.04. | Annual Report by Independent Registered Public Accountants | 7 |
|  ARTICLE IV | ARTICLE IV |  |
|  SERVICES RELATED TO TRUE-UP ADJUSTMENTS | SERVICES RELATED TO TRUE-UP ADJUSTMENTS | 7 |
|  SECTION 4.01. | True-Up Adjustments | 7 |
|  SECTION 4.02. | Limitation of Liability | 11 |
|  ARTICLE V | ARTICLE V |  |
|  THE COST RECOVERY PROPERTY | THE COST RECOVERY PROPERTY | 11 |
|  SECTION 5.01. | Custody of Cost Recovery Property Records | 11 |
|  SECTION 5.02. | Duties of Servicer as Custodian | 12 |
|  SECTION 5.03. | Custodian's Indemnification | 13 |
|  SECTION 5.04. | Effective Period and Termination | 14 |
|  ARTICLE VI | ARTICLE VI |  |
|  THE SERVICER | THE SERVICER | 14 |
|  SECTION 6.01. | Representations and Warranties of Servicer | 14 |
|  SECTION 6.02. | Indemnities of Servicer; Release of Claims | 16 |
|  SECTION 6.03. | Binding Effect of Servicing Obligations | 18 |
|  SECTION 6.04. | Limitation on Liability of Servicer and Others | 19 |
|  SECTION 6.05. | Servicer Resignations | 19 |
|  SECTION 6.06. | Servicing Compensation | 20 |
|  SECTION 6.07. | Compliance with Applicable Law | 21 |
|  SECTION 6.08. | Access to Certain Records and Information Regarding Cost Recovery Property | 21 |
|  SECTION 6.09. | Appointments | 21 |

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i

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| | | |
|:---|:---|:---|
|  SECTION 6.10. | No Servicer Advances of Interest or Principal | 21 |
|  SECTION 6.11. | Remittances | 21 |
|  SECTION 6.12. | Maintenance of Operations | 22 |
|  ARTICLE VII | ARTICLE VII |  |
|  DEFAULT | DEFAULT | 23 |
|  SECTION 7.01. | Servicer Default | 23 |
|  SECTION 7.02. | Appointment of Successor | 24 |
|  SECTION 7.03. | Waiver of Past Defaults | 25 |
|  SECTION 7.04. | Notice of Servicer Default | 25 |
|  SECTION 7.05. | Cooperation with Successor | 25 |
|  ARTICLE VIII | ARTICLE VIII |  |
|  MISCELLANEOUS PROVISIONS | MISCELLANEOUS PROVISIONS | 26 |
|  SECTION 8.01. | Amendment | 26 |
|  SECTION 8.02. | Maintenance of Accounts and Records | 28 |
|  SECTION 8.03. | Notices | 28 |
|  SECTION 8.04. | Assignment | 29 |
|  SECTION 8.05. | Limitations on Rights of Others | 29 |
|  SECTION 8.06. | Severability | 30 |
|  SECTION 8.07. | Separate Counterparts | 30 |
|  SECTION 8.08. | Headings | 30 |
|  SECTION 8.09. | GOVERNING LAW | 30 |
|  SECTION 8.10. | Assignment to Indenture Trustee | 30 |
|  SECTION 8.11. | Nonpetition Covenants | 30 |
|  SECTION 8.12. | Limitation of Liability | 31 |
|  SECTION 8.13. | Rule 17g-5 Compliance | 31 |
|  SECTION 8.14. | Commission Authority | 31 |
| EXHIBITS AND SCHEDULES | EXHIBITS AND SCHEDULES | EXHIBITS AND SCHEDULES |
|  Exhibit A | Form of Monthly Servicer's Certificate |  |
|  Exhibit B | Form of Semi-Annual Servicer's Certificate |  |
|  Exhibit C-1 | Form of Regulation AB Annual Compliance Certificate |  |
|  Exhibit C-2 | Form of Certificate of Compliance |  |
|  Schedule 4.01(a) | Expected Amortization Schedule |  |
| ANNEXES | ANNEXES | ANNEXES |
|  Annex I | Servicing Procedures |  |

---

ii

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**SERVICING AGREEMENT** 

This SERVICING AGREEMENT (this "<u>Agreement</u>"), dated as of June 12, 2025, is between KENTUCKY POWER COST RECOVERY LLC, a Delaware limited liability company, as issuer (the "<u>Issuer</u>"), and KENTUCKY POWER COMPANY ("<u>Kentucky Power</u>"), a Kentucky corporation, as servicer (the "<u>Servicer</u>").

RECITALS

WHEREAS, pursuant to the Act and the Financing Order, Kentucky Power, in its capacity as seller (the "<u>Seller</u>"), and the Issuer are concurrently entering into the Sale Agreement pursuant to which the Seller is selling and the Issuer is purchasing certain Cost Recovery Property created pursuant to the Act and the Financing Order described therein;

WHEREAS, in connection with its ownership of the Cost Recovery Property and in order to collect the associated Charges, the Issuer desires to engage the Servicer to carry out the functions described herein and the Servicer desires to be so engaged;

WHEREAS, the Issuer desires to engage the Servicer to act on its behalf in obtaining True-Up Adjustments from the Commission and the Servicer desires to be so engaged;

WHEREAS, the Charges initially will be commingled with other funds collected by the Servicer;

WHEREAS, certain parties may have an interest in such commingled collections, and such parties have entered into an Intercreditor Agreement that allows Kentucky Power to allocate the collected, commingled funds according to each party's interest;

WHEREAS, as contemplated by the Financing Order, the Commission, or its attorney, will enforce this Agreement for the benefit of the Customers to the extent permitted by law; and

WHEREAS, the Financing Order calls for the Servicer to execute a servicing agreement with the Issuer pursuant to which the Servicer will be required, among other things, to impose and collect the Charges for the benefit and account of the Issuer, to obtain True-Up Adjustments from the Commission, and to account for and remit the Charges to the Indenture Trustee on behalf and for the account of the Issuer.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

**ARTICLE I** 

**DEFINITIONS** 

SECTION 1.01. <u>Definitions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in that certain Indenture (including <u>Appendix A</u> thereto), dated as of the date hereof between the Issuer, U.S. Bank Trust Company, National Association, a national banking association, in its capacity as the indenture trustee (the "<u>Indenture Trustee</u>"), and U.S. Bank National Association, a national banking association, in its capacity as a securities intermediary (the "<u>Securities Intermediary</u>"), as the same may be amended, restated, supplemented or otherwise modified from time to time.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The words "hereof," "herein," "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, Schedule, Exhibit, Annex and Attachment references contained in this Agreement are references to Sections, Schedules, Exhibits, Annexes and Attachments in or to this Agreement unless otherwise specified; and the term "including" shall mean "including without limitation."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Non-capitalized terms used herein which are defined in the Act shall, as the context requires, have the meanings assigned to such terms in the Act, but without giving effect to amendments to the Act after the date hereof which have a material adverse effect on the Issuer or the Holders.

**ARTICLE II** 

**APPOINTMENT AND AUTHORIZATION** 

SECTION 2.01. <u>Appointment of Servicer; Acceptance of Appointment</u>. The Issuer hereby appoints the Servicer, as an independent contractor, and the Servicer hereby accepts such appointment, to perform the Servicer's obligations pursuant to this Agreement on behalf of and for the benefit of the Issuer or any assignee thereof in accordance with the terms of this Agreement and applicable law. This appointment and the Servicer's acceptance thereof may not be revoked except in accordance with the express terms of this Agreement.

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SECTION 2.03. <u>Dominion and Control Over the Cost Recovery Property</u>. Notwithstanding any other provision herein, the Issuer shall have dominion and control over the Cost Recovery Property, and the Servicer, in accordance with the terms hereof, is acting solely as the servicing agent and custodian for the Issuer with respect to the Cost Recovery Property and the Cost Recovery Property Records (as defined herein). The Servicer shall not take any action that is not authorized by this Agreement, that would contravene the Act, the Commission Regulations or the Financing Order, that is not consistent with its customary procedures and practices, or that shall impair the rights of the Issuer in the Cost Recovery Property, in each case unless such action is required by applicable law or court or regulatory order.

**ARTICLE III** 

**ROLE OF SERVICER** 

SECTION 3.01. <u>Duties of Servicer</u>. The Servicer, as agent for the Issuer, shall have the following duties:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Duties of Servicer Generally</u>. The Servicer's duties in general shall include: management, servicing and administration of the Cost Recovery Property; obtaining meter reads, calculating revenue, billing, collections and posting of all payments in respect of Cost Recovery Property; responding to inquiries by Customers, the Commission, or any other Governmental Authority with respect to the Cost Recovery Property; delivering Bills to Customers; investigating and handling delinquencies (and furnishing reports with respect to such delinquencies to the Issuer), processing and depositing collections and making periodic remittances; furnishing periodic reports to the Issuer, the Indenture Trustee and the Rating Agencies; making all filings with the Commission and taking such other action as may be necessary to perfect the Issuer's ownership interests, and the Indenture Trustee's first priority Lien on and security interest, in the Cost Recovery Property; making all filings and taking such other action as may be necessary to perfect and maintain the perfection and priority of the Indenture Trustee's Lien on and security interest in all Collateral; selling, as the agent for the Issuer, as its interests may appear, defaulted or written off accounts in accordance with the Servicer's usual and customary practices; taking all necessary action in connection with the True-Up Adjustments as set forth herein; and performing such other duties as may be specified under the Financing Order to be performed by it. Anything to the contrary notwithstanding, the duties of the Servicer set forth in this Agreement shall be qualified in their entirety by any Commission Regulations, the Financing Order, and the U.S. federal securities laws and the rules and regulations promulgated thereunder, including without limitation, Regulation AB and Rule 17g-5, as in effect at the time such duties are to be performed. Without limiting the generality of this <u>Section</u> <u>3.01(a)</u>, in furtherance of the foregoing, the Servicer hereby agrees that it shall also have, and shall comply with, the duties and responsibilities relating to data acquisition, revenue, and bill calculation, billing, customer service functions, collections, payment processing and remittance set forth in <u>Annex</u> <u>I</u> hereto, as it may be amended from time to time. For the avoidance of doubt, the term "revenue" when used herein refers to revenues generated from Customers and may, among things, be based on kilowatt hour consumption and kilowatt demand.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Reporting Functions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Monthly Servicer</u><u>'</u><u>s Certificate</u>. On or before the twenty-fifth calendar day of each month (or if such day is not a Servicer Business Day, on the immediately succeeding Servicer Business Day), beginning with July, 2025, the Servicer shall prepare and deliver to the Issuer, the Indenture Trustee and the Rating Agencies a written report substantially in the form of <u>Exhibit A</u> hereto (a "<u>Monthly Servicer</u><u>'</u><u>s Certificate</u>") setting forth certain information relating to Charge Payments received by the Servicer during the Collection Period immediately preceding such date; <u>provided</u>, <u>however</u>, that for any month in which the Servicer is required to deliver a Servicer's Certificate pursuant to <u>Section</u> <u>4.01(c)(ii)</u>, the Servicer shall prepare and deliver the Monthly Servicer's Certificate no later than the date of delivery of such Servicer's Certificate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>Notification of Laws and Regulations</u>. The Servicer shall promptly notify the Issuer, the Indenture Trustee and the Rating Agencies in writing of any Requirement of Law or Commission Regulations hereafter promulgated that have a material adverse effect on the Servicer's ability to perform its duties under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) <u>Other Information</u>. Upon the reasonable request of the Issuer, the Indenture Trustee, any Rating Agency, or the Commission, the Servicer shall provide to the Issuer, the Indenture Trustee, such Rating Agency, or the Commission, as the case may be, any public financial information in respect of the Servicer, or any material information regarding the Cost Recovery Property to the extent it is reasonably available to the Servicer without undue cost or burden, as may be reasonably necessary and permitted by law to enable the Issuer, the Indenture Trustee, the Rating Agencies, or the Commission to monitor the performance by the Servicer hereunder; provided, however, that any such request by the Indenture Trustee shall not create any obligation for the Indenture Trustee to monitor the performance of the Servicer. In addition, so long as any of the Bonds are outstanding, the Servicer shall provide the Issuer, the Indenture Trustee, and the Commission, within a reasonable time after written request therefor, any information available to the Servicer or reasonably obtainable by it without undue cost or burden that is necessary to calculate the Charges applicable to each Revenue Class.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) <u>Preparation of Reports</u>. The Servicer shall prepare and deliver such additional reports as required under this Agreement, including a copy of each Servicer's Certificate described in <u>Section</u> <u>4.01(c)(ii)</u>, the Annual Compliance Certificate described in <u>Section</u> <u>3.03</u>, and the Annual Accountant's Report described in <u>Section</u> <u>3.04</u>. In addition, the Servicer shall prepare, procure, deliver and/or file, or cause to be prepared, procured, delivered or filed, any reports, attestations, exhibits, certificates or other documents required to be delivered or filed with the SEC (and/or any other Governmental Authority) by the Issuer or the Sponsor under the U.S. federal securities laws or other applicable laws or in accordance with the Basic Documents, including, but without limiting the

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generality of foregoing, filing with the SEC, if applicable and required by applicable law, a copy or copies of (A) the Monthly Servicer's Certificates described in <u>Section</u> <u>3.01(b)(i)</u> (under Form 10-D or any other applicable form), (B) the Servicer's Certificates described in <u>Section</u> <u>4.01(c)(ii)</u> (under Form 10-D or any other applicable form), (C) the annual statements of compliance, attestation reports and other certificates described in <u>Section</u> <u>3.03</u>, and (D) the Annual Accountant's Report (and any attestation required under Regulation AB) described in <u>Section</u> <u>3.04</u>. In addition, the appropriate officer or officers of the Servicer shall (in its separate capacity as Servicer) sign the Sponsor's annual report on Form 10-K (and any other applicable SEC or other reports, attestations, certifications and other documents), to the extent that the Servicer's signature is required by, and consistent with, the U.S. federal securities laws and/or any other applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Opinions of Counsel</u>. The Servicer shall deliver to the Issuer and the Indenture Trustee, with a copy to the Commission:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) promptly after the execution and delivery of this Agreement and of each amendment hereto, an Opinion of Counsel from external counsel of the Issuer either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the Secretary of State of the Commonwealth of Kentucky, the Secretary of State of the State of Delaware and all filings pursuant to the UCC, that are necessary under the UCC and the Act to perfect or maintain, as applicable, the Liens of the Indenture Trustee in the Cost Recovery Property have been authorized, executed and filed, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) within ninety (90) days after the beginning of each calendar year beginning with the first calendar year beginning more than three (3) months after the date hereof, an Opinion of Counsel from external counsel of the Issuer, dated as of a date during such ninety (90)-day period, either: (A) to the effect that, in the opinion of such counsel, all filings, including filings with the Secretary of State of the Commonwealth of Kentucky, the Secretary of State of the State of Delaware and all filings pursuant to the UCC, have been executed (if applicable) and filed that are necessary under the UCC and the Act to maintain the Liens of the Indenture Trustee in the Cost Recovery Property, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens.

Each Opinion of Counsel referred to in <u>clause (i)</u> or <u>(ii)</u> above shall specify any action necessary (as of the date of such opinion) to be taken in the following year to perfect or maintain, as applicable, such interest or Lien.

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SECTION 3.02. <u>Servicing and Maintenance Standards</u>. On behalf of the Issuer, the Servicer shall (a) manage, service, administer and make collections in respect of the Cost Recovery Property with reasonable care and in material compliance with applicable Requirements of Law, including all applicable Commission Regulations, using the same degree of care and diligence that the Servicer exercises with respect to similar assets for its own account and, if applicable, for others; (b) follow customary standards, policies and procedures in performing its duties as Servicer that are customary in the electric transmission and distribution industry in the Commonwealth of Kentucky; (c) use all reasonable efforts, consistent with its customary servicing procedures, to enforce, and maintain rights in respect of, the Cost Recovery Property and to impose, bill, charge, collect, receive, and adjust the Charges; (d) comply with all Requirements of Law, including all applicable Commission Regulations and guidelines, applicable to and binding on it relating to the Cost Recovery Property; (e) file and maintain the effectiveness of UCC financing statements with respect to the Cost Recovery Property; (f) take such other action on behalf of the Issuer to ensure that the Lien of the Indenture Trustee on the Collateral remains perfected and of first priority (including, if necessary, making any filings that are required by the UCC if the Servicer or the Issuer changes its name or its jurisdiction of organization); and (g) within thirty (30) days after each five-year anniversary of the Closing Date, provide the Indenture Trustee with confirmation that all filings required under the UCC and the Act to maintain the Liens of the Indenture Trustee in the Cost Recovery Property remain in effect. The Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of all or any portion of the Cost Recovery Property, which, in the Servicer's judgment, may include the taking of legal action, at the Issuer's expense but subject to the priority of payments set forth in Section 8.02(e) of the Indenture.

SECTION 3.03. <u>Annual Reports on Compliance with Regulation AB</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Servicer shall deliver to the Issuer, the Indenture Trustee, the Rating Agencies, and the Commission, on or before the earlier of (x) March 31 of each year, beginning March 31, 2026, or (y) with respect to each calendar year during which the Sponsor's annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, the date on which the annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, certificates from a Responsible Officer of the Servicer (i) containing, and certifying as to, the statements of compliance required by Item 1123 (or any successor or similar items or rule) of Regulation AB, as then in effect (the "<u>Annual Compliance Certificate</u>"), which may be in the form attached hereto as Exhibit C-1, and (ii) containing, and certifying as to, the statements and assessment of compliance required by Item 1122(a) (or any successor or similar items or rule) of Regulation AB, as then in effect (the "<u>Certificate of Compliance</u>"), which may be in the form attached hereto as <u>Exhibit C-2</u>, in each case, with such changes as may be required to conform to the applicable U.S. federal securities law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Servicer shall use commercially reasonable efforts to obtain, from each other party participating in the servicing function, any additional certifications as to the statements and assessment required under Item 1122 or Item 1123 (or any successor or similar items or rules) of Regulation AB to the extent required in connection with the filing of the annual report on Form 10-K; <u>provided</u>, <u>however</u>, that a failure to obtain such certifications shall not be a breach of the Servicer's duties hereunder. The parties acknowledge that the Indenture Trustee's certifications shall be limited to the Item 1122 certifications described in Exhibit C of the Indenture.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The initial Servicer, in its capacity as Sponsor, shall post on its website and file with or furnish to the SEC, in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, the information described in Section 3.07(g) of the Indenture to the extent such information is reasonably available to the Depositor. Except to the extent permitted by applicable law, the initial Servicer, in its capacity as Sponsor, shall not voluntarily suspend or terminate its filing obligations as Depositor with the SEC as described in this <u>Section</u> <u>3.03(c)</u>. The covenants of the initial Servicer, in its capacity as Sponsor, pursuant to this <u>Section</u> <u>3.03(c)</u> shall survive the resignation, removal or termination of the initial Servicer as Servicer hereunder.

SECTION 3.04. <u>Annual Report by Independent Registered Public Accountants</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Servicer shall cause a firm of Independent registered public accountants (which may provide other services to the Servicer or the Seller) to prepare annually, and the Servicer shall deliver annually to the Issuer, the Indenture Trustee the Rating Agencies, and the Commission, on or before the earlier of (a) March 31 of each year, beginning March 31, 2026, or (b) with respect to each calendar year during which the Depositor's annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, the date on which the annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, a report (the "<u>Annual Accountant</u><u>'</u><u>s Report</u>") regarding the Servicer's assessment of compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB during the immediately preceding twelve (12) months ended December 31 (or, in the case of the first Annual Accountant's Report to be delivered on or before March 31, 2026, the period of time from the date of this Agreement until December 31, 2025), in accordance with paragraph (b) of Rule 13a-18 and Rule 15d-18 of the Exchange Act and Item 1122 of Regulation AB. Such report shall be signed by an authorized officer of the Servicer and shall at a minimum address each of the servicing criteria specified in Exhibit C-1. In the event that the accounting firm providing such report requires the Indenture Trustee to agree or consent to the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to so agree; it being understood and agreed that the Indenture Trustee will deliver such letter of agreement or consent in conclusive reliance upon the written direction of the Issuer, and the Indenture Trustee will not make any independent inquiry or investigation as to, and shall have no obligation or liability in respect of the sufficiency, validity or correctness of such procedures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Annual Accountant's Report shall also indicate that the accounting firm providing such report is independent of the Servicer in accordance with the rules of the Public Company Accounting Oversight Board, and shall include any attestation report required under Item 1122(b) of Regulation AB (or any successor or similar items or rule), as then in effect. The costs of the Annual Accountant's Report shall be reimbursable as an Operating Expense under the Indenture.

**ARTICLE IV** 

**SERVICES RELATED TO TRUE-UP ADJUSTMENTS** 

SECTION 4.01. <u>True-Up Adjustments</u>. From time to time, until the Retirement of the Bonds, the Servicer shall identify the need for Mandatory True-Up Adjustments and Interim True-Up Adjustments and shall take all reasonable action to obtain and implement such True-Up Adjustments, all in accordance with the following:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Expected Amortization Schedule</u>. The Expected Amortization Schedule for the Bonds is attached hereto as <u>Schedule 4.01(a)</u>. If the Expected Amortization Schedule is revised, the Servicer shall send a copy of such revised Expected Amortization Schedule to the Issuer, the Indenture Trustee, the Rating Agencies, and the Commission promptly thereafter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>True-Up Adjustments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Mandatory True-Up Adjustments and Filings</u>. No later than ten (10) days prior to each Mandatory True-Up Adjustment Date, the Servicer shall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) update the data and assumptions underlying the calculation of the Charges, including projected Revenue for each Revenue Class during each of Calculation Period A and Calculation Period B used for the True-Up Adjustment (the "<u>Revenue Forecast</u>"); the historical Revenue for each Revenue Class, along with historical fuel cost revenue for the "Non-Residential" Revenue Class, to be used for allocation between Revenue Classes; interest and estimated expenses and fees of the Issuer to be paid during such Calculation Period, the Weighted Average Days Outstanding for each Revenue Class, projected lags between billing and collections during such Calculation Period based on the Weighted Average Days Outstanding, unless changes in circumstances support use of different lags for projected period, projected write-offs during such Calculation Period, and outstanding receivables during such Calculation Period;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) based on such updated data and assumptions, determine the Periodic Payment Requirements for each of Calculation Period A and Calculation Period B, and for each such Calculation Period, determine the allocation of the Periodic Payment Requirements across the Revenue Classes, giving effect the allocation and distribution of amounts on deposit in the Excess Funds Subaccount at the time of calculation and which are projected to be available for payments on the Bonds at the end of such Calculation Period and any over or under recoveries in Periodic Payment Requirements for any prior Calculation Period, all in accordance with the terms of the Financing Order, the Charge Rider and any other tariffs filed pursuant thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) for each of Calculation Period A and Calculation Period B, determine the Periodic Billing Requirements for each Revenue Class based on such updated data and assumptions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) for each of Calculation Period A and Calculation Period B, calculate the rate (expressed as a percent) for each Revenue Class (the "<u>Adjustment Factor</u>") determined by dividing the Periodic Billing Requirement for such Revenue Class by the projected Revenue for such Revenue Class, all in accordance with the terms of the Financing Order, the Charge Rider and any other tariffs filed pursuant thereto;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) determine the higher of the two Adjustment Factors calculated pursuant to clause (D) for such Revenue Class (each such higher Adjustment Factor, a "<u>Modified Adjustment Factor</u>"), in order to ensure enough Charges collections to satisfy the Periodic Billing Requirement for each of the two Calculation Periods for each Revenue Class;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F) make all required notice and other filings with the Commission to reflect the revised Charges and the Modified Adjustment Factor for each Revenue Class, including any Charge Rider Adjustment and the applicable Revenue Forecast; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(G) take all reasonable actions and make all reasonable efforts to effect such Mandatory True-Up Adjustment and to enforce the provisions of the Act and the Financing Order.

Subject to any mathematical correction as permitted by the Financing Order, the revised Charges resulting from such Mandatory True-Up Adjustment shall be effective as of the Mandatory True-Up Adjustment Date, and the Servicer shall begin to bill the Charges to Customers commencing in the first billing cycle following the Mandatory True-Up Adjustment Date in accordance with the Financing Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>Interim True-Up Adjustments and Filings</u>. In addition to the True-Up Adjustments described above in <u>Section</u> <u>4.01(b)(i)</u>, the Servicer may implement an Interim True-Up Adjustment (in the same manner as provided for in <u>Section</u> <u>4.01(b)(i)</u>, except with the term Mandatory True-Up Adjustment and Mandatory True-Up Adjustment Date being read as referring to the terms Interim True-Up Adjustment and Interim True-Up Adjustment Date, respectively) at any time (A) if the Servicer forecasts that Charge Collections during the current Calculation Periods will be insufficient to make all scheduled payments of principal, interest, and other amounts in respect of the Bonds on a timely basis during such Calculation Periods; (B) to replenish any draws upon the Capital Subaccount; and/or (C) generally to correct any under-collection or over-collection in order to assure timely payment of Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Reports</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Notification of Charge Rider Adjustment Filings and True-Up Adjustments</u>. Whenever the Servicer files a Charge Rider Adjustment with the Commission, the Servicer shall send a copy of such filing (together with a copy of all notices and documents which, in the Servicer's reasonable judgment, are material to the adjustments effected by such Charge Rider Adjustment) to the Issuer, the Indenture Trustee and the Rating Agencies concurrently therewith. If, for any reason any revised Charges are not implemented and effective on the applicable date set forth in the Charge Rider Adjustment, the Servicer shall notify the Issuer, the Indenture Trustee and each Rating Agency by the end of the second Servicer Business Day after such applicable date.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>Servicer</u><u>'</u><u>s Certificate</u>. Not later than five (5) Servicer Business Days prior to each Payment Date or Special Payment Date, the Servicer shall deliver a draft of a written report substantially in the form of <u>Exhibit B</u> hereto (the "<u>Servicer</u><u>'</u><u>s Certificate</u>") to the Indenture Trustee which shall include all of the following information (to the extent applicable) with respect to such Payment Date or Special Payment Date or the period since the previous Payment Date, as applicable:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) the amount of the payment to Holders allocable to principal, if any;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) the amount of the payment to Holders allocable to interest;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) the aggregate Outstanding Amount of the Bonds, before and after giving effect to any payments allocated to principal reported under <u>clause (A)</u> above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) the difference, if any, between the amount specified in <u>clause</u> <u>C</u> above and the Outstanding Amount specified in the Expected Amortization Schedule;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) any other transfers and payments to be made on such Payment Date or Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F) the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments.

On or prior to each Payment Date or Special Payment Date, the Servicer shall deliver the final Servicer's Certificate to the Issuer, the Indenture Trustee, the Rating Agencies, and the Commission.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) <u>Reports to Customers</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) After each revised Charge has gone into effect pursuant to a True-Up Adjustment, the Servicer shall, to the extent and in the manner and time frame required by applicable Commission Regulations, if any, cause to be prepared and delivered to Customers any required notices announcing such revised Charge.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) The Servicer shall comply with the requirements of the Financing Order and Charge Rider with respect to the identification of Charges on Bills to ensure that each Customer's Bill contains: (a) the portion of Charges applicable to the applicable Revenue Class and, (b) a separate line item including both the base rate of the Customer's electricity and the amount of the Charge, and that both (a) and (b) are present and identifiable on each Customer's Bill.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) The Servicer shall pay all costs of preparation and delivery incurred in connection with clauses (A) and (B) above, including printing and postage costs as the same may increase or decrease from time to time.

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SECTION 4.02. <u>Limitation of Liability</u>. (a) The Issuer and the Servicer expressly agree and acknowledge that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) In connection with any True-Up Adjustment, the Servicer is acting solely in its capacity as the servicing agent hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) None of the Servicer, the Issuer or the Indenture Trustee is responsible in any manner for, and shall have no liability whatsoever as a result of, any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the Servicer's failure to make any filings required by <u>Section</u> <u>4.01</u> in a timely and correct manner or any breach by the Servicer of its duties under this Agreement that adversely affects the Cost Recovery Property or the True-Up Adjustments), by the Commission in any way related to the Cost Recovery Property or in connection with any True-Up Adjustment, the subject of any filings under <u>Section</u> <u>4.01</u>, any proposed True-Up Adjustment, or the approval of any revised Charges and the scheduled adjustments thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Except to the extent that the Servicer is liable under <u>Section</u> <u>6.02</u>, the Servicer shall have no liability whatsoever relating to the calculation of any revised Charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculation regarding expected revenue and the Weighted Average Days Outstanding, write-offs and estimated expenses and fees of the Issuer, so long as the Servicer has acted in good faith and has not acted in a negligent manner in connection therewith, nor shall the Servicer have any liability whatsoever as a result of any Person, including the Holders, not receiving any payment, amount or return anticipated or expected or in respect of any Bonds generally.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Notwithstanding the foregoing, this <u>Section</u> <u>4.02</u> shall not relieve the Servicer of liability for any misrepresentation by the Servicer under <u>Section</u> <u>6.01</u> or for any breach by the Servicer of its other obligations under this Agreement.

**ARTICLE V** 

**THE COST RECOVERY PROPERTY** 

SECTION 5.01. <u>Custody of Cost Recovery Property Records</u>. To assure uniform quality in servicing the Cost Recovery Property and to reduce administrative costs, the Issuer hereby revocably appoints the Servicer, and the Servicer hereby accepts such appointment, to act as the agent of the Issuer as custodian of any and all documents and records that the Servicer shall keep on file, in accordance with its customary procedures, relating to the Cost Recovery Property, including copies of the Financing Order, Issuance Advice Letter, Charge Rider and Charge Rider Adjustments relating thereto and all documents filed with the Commission in connection with any True-Up Adjustment and computational records relating thereto (collectively, the "<u>Cost Recovery Property Records</u>"), which are hereby constructively delivered to the Indenture Trustee, as pledgee of the Issuer with respect to all Cost Recovery Property.

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SECTION 5.02. <u>Duties of Servicer as Custodian</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Safekeeping</u>. The Servicer shall hold the Cost Recovery Property Records on behalf of the Issuer and maintain such accurate and complete accounts, records and computer systems pertaining to the Cost Recovery Property Records as shall enable the Issuer and the Indenture Trustee, as applicable, to comply with this Agreement, the Sale Agreement and the Indenture. In performing its duties as custodian, the Servicer shall act with reasonable care, using that degree of care and diligence that the Servicer exercises with respect to comparable assets that the Servicer services for itself or, if applicable, for others. The Servicer shall promptly report to the Issuer, the Indenture Trustee, the Rating Agencies and the Commission any failure on its part to hold the Cost Recovery Property Records and maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure. Nothing herein shall be deemed to require an initial review or any periodic review by the Issuer or the Indenture Trustee of the Cost Recovery Property Records. The Servicer's duties to hold the Cost Recovery Property Records set forth in this <u>Section</u> <u>5.02</u>, to the extent the Cost Recovery Property Records have not been previously transferred to a successor Servicer pursuant to <u>Article VII</u>, shall terminate one year and one day after the earlier of the date on which (i) the Servicer is succeeded by a successor Servicer in accordance with <u>Article VII</u> and (ii) no Bonds are Outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Maintenance of and Access to Records</u>. The Servicer shall maintain the Cost Recovery Property Records at the office of Servicer identified in <u>Section</u> <u>8.03(a)</u>, the office of the Issuer identified in <u>Section</u> <u>8.03(b)</u> or at such other office as shall be specified to the Issuer, the Indenture Trustee and the Commission by written notice at least thirty (30) days prior to any change in location. The Servicer shall make available for inspection, audit and copying to the Issuer, the Indenture Trustee and the Commission or their respective duly authorized representatives, attorneys or auditors the Cost Recovery Property Records at such times during normal business hours as the Issuer, the Indenture Trustee or the Commission shall reasonably request and which do not unreasonably interfere with the Servicer's normal operations. Nothing in this <u>Section</u> <u>5.02(b)</u> shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding the Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this <u>Section</u> <u>5.02(b)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Release of Documents</u>. Upon instruction from the Indenture Trustee in accordance with the Indenture, the Servicer shall release any Cost Recovery Property Records to the Indenture Trustee, the Indenture Trustee's agent or the Indenture Trustee's designee, as the case may be, at such place or places as the Indenture Trustee may designate, as soon as practicable. Nothing in this <u>Section</u> <u>5.02(c)</u> shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding the Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this <u>Section</u> <u>5.02(c)</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Defending Cost Recovery Property Against Claims</u>. The Servicer shall institute any action or proceeding necessary to compel performance by each party to the Intercreditor Agreement of any of their respective obligations or duties under the Act, the Financing Order or the Intercreditor Agreement with respect to the Cost Recovery Property, and the Servicer agrees to take such legal or administrative actions, including without limitation defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, as may be reasonably necessary to block or overturn any attempts to cause a repeal of, modification of or supplement to the Act or the Financing Order. The costs of any action described in this <u>Section</u> <u>5.02(d)</u> shall be payable from Charge Collections as an Operating Expense (and shall not be deemed to constitute a portion of the Servicing Fee) in accordance with the Indenture. The Servicer's obligations pursuant to this <u>Section</u> <u>5.02(d)</u> shall survive and continue notwithstanding that payment of such Operating Expense pursuant to the terms of the Indenture may be delayed (it being understood that the Servicer may be required initially to advance its own funds to satisfy its obligations hereunder).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Additional Litigation to Defend Cost Recovery Property</u>. In addition to the above, the Servicer shall, at its own expense, institute any action or proceeding necessary to compel performance by the Commission or the Commonwealth of Kentucky of any of their respective obligations or duties under the Act or the Financing Order with respect to the Cost Recovery Property and Charges. In any proceedings related to the exercise of the power of eminent domain by any municipality to acquire a portion of Kentucky Power's electric distribution facilities, the Servicer shall assert that the court ordering such condemnation must treat such municipality as a successor to Kentucky Power under the Act and Financing Order and that Customers in such municipalities remain responsible for payment of Charges.

SECTION 5.03. <u>Custodian</u><u>'</u><u>s Indemnification</u>. The Servicer as custodian shall indemnify the Issuer, any Independent Manager and the Indenture Trustee (for itself and for the benefit of the Holders) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such Person from and against, any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or expenses, of any kind whatsoever (collectively, "<u>Indemnified Losses</u>") that may be imposed on, incurred by or asserted against each such Person as the result of any negligent act or omission in any way relating to the maintenance and custody by the Servicer, as custodian, of the Cost Recovery Property Records; <u>provided</u>, <u>however</u>, that the Servicer shall not be liable for any portion of any such amount resulting from the willful misconduct, bad faith or gross negligence of the Issuer, any Independent Manager or the Indenture Trustee, as the case may be.

Indemnification under this <u>Section</u> <u>5.03</u> shall survive resignation or removal of the Indenture Trustee or any Independent Manager and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorney's fees and expenses and reasonable fees, out-of-pocket expenses and costs incurred in connection with any action, claim or suit brought to enforce the Indenture Trustee's right to indemnification).

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SECTION 5.04. <u>Effective Period and Termination</u>. The Servicer's appointment as custodian shall become effective as of the Closing Date and shall continue in full force and effect until terminated pursuant to this <u>Section</u> <u>5.04</u>. If the Servicer shall resign as Servicer in accordance with the provisions of this Agreement or if all of the rights and obligations of the Servicer shall have been terminated under <u>Section</u> <u>7.01</u>, the appointment of the Servicer as custodian shall be terminated effective as of the date on which the termination or resignation of the Servicer is effective. Additionally, if not sooner terminated as provided above, the Servicer's obligations as custodian shall terminate one year and one day after the date on which no Bonds are Outstanding.

**ARTICLE VI** 

**THE SERVICER** 

SECTION 6.01. <u>Representations and Warranties of Servicer</u>. The Servicer makes the following representations and warranties, as of the Closing Date, and as of such other dates as expressly provided in this <u>Section</u> <u>6.01</u>, on which the Issuer and the Indenture Trustee are deemed to have relied in entering into this Agreement relating to the servicing of the Cost Recovery Property. The representations and warranties shall survive the execution and delivery of this Agreement, the sale of any Cost Recovery Property and the pledge thereof to the Indenture Trustee pursuant to the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Organization and Good Standing</u>. The Servicer is duly organized and validly existing and is in good standing under the laws of the Commonwealth of Kentucky, with the requisite corporate or other power and authority to own its properties as such properties are owned on the Closing Date and to conduct its business as such business is conducted by it on the Closing Date, and to execute, deliver and carry out the terms of this Agreement and the Intercreditor Agreement, and had at all relevant times, and has, the requisite power, authority and legal right to service the Cost Recovery Property and to hold the Cost Recovery Property Records as custodian.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Due Qualification</u>. The Servicer is duly qualified to do business and is in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Cost Recovery Property as required by this Agreement and the Intercreditor Agreement) requires such qualifications, licenses or approvals (except where the failure to so qualify would not be reasonably likely to have a material adverse effect on the Servicer's business, operations, assets, revenues or properties or to its servicing of the Cost Recovery Property).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Power and Authority</u>. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Servicer under its organizational or governing documents and laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Binding Obligation</u>. Each of this Agreement and the Intercreditor Agreement constitutes a legal, valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors' rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>No Violation</u>. The consummation of the transactions contemplated by this Agreement and the Intercreditor Agreement (to the extent applicable to the Servicer's responsibilities thereunder) and the fulfillment of the terms of each will not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the organizational documents of the Servicer, or any indenture or other agreement or instrument to which the Servicer is a party or by which it or any of its property is bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than any Lien that may be granted under the Basic Documents or any Lien created pursuant to Section 278.686 of the Act); nor violate any existing law or any existing order, rule or regulation applicable to the Servicer of any Governmental Authority having jurisdiction over the Servicer or its properties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>No Proceedings</u>. There are no proceedings pending and, to the Servicer's knowledge, there are no proceedings threatened, and no investigations pending or threatened, before any Governmental Authority having jurisdiction over the Servicer or its properties involving or relating to the Servicer or the Issuer or, to the Servicer's knowledge, any other Person: (i) asserting the invalidity of this Agreement or any of the other Basic Documents, (ii) seeking to prevent the issuance of the Bonds or the consummation of any of the transactions contemplated by this Agreement or any of the other Basic Documents, (iii) seeking any determination or ruling that could reasonably be expected to materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability of, this Agreement, any of the other Basic Documents or the Bonds or (iv) seeking to adversely affect the treatment of the Bonds for U.S. federal income tax or state income or franchise tax purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <u>Approvals</u>. Except for the filings to be made under the Act, no governmental approval, authorization, consent, order or other action of, or filing with, any Governmental Authority is required in connection with the execution and delivery by the Servicer of this Agreement or the Intercreditor Agreement, the performance by the Servicer of the transactions contemplated hereby or thereby or the fulfillment by the Servicer of the terms of each, except those that have been obtained or made, those that the Servicer is required to make in the future pursuant to <u>Article IV</u> and those that the Servicer may need to file in the future to continue the effectiveness of any financing statement filed under the Act and the UCC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>Reports and Certificates</u>. Each report and certificate delivered in connection with any filing made to the Commission by the Servicer on behalf of the Issuer with respect to the Charges or True-Up Adjustments will constitute a representation and warranty by the Servicer that each such report or certificate, as the case may be, is true and correct in all material respects as of its delivery date; <u>provided</u>, <u>however</u>, that, to the extent any such report or certificate is based in part upon or contains assumptions, forecasts or other predictions of future events, the representation and warranty of the Servicer with respect thereto will be limited to the representation and warranty that such assumptions, forecasts or other predictions of future events are reasonable based upon historical performance (and facts known to the Servicer on the date such report or certificate is delivered).

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SECTION 6.02. <u>Indemnities of Servicer; Release of Claims</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Servicer shall indemnify the Issuer, the Indenture Trustee (for itself and for the benefit of the Holders) and any Independent Manager, and each of their respective trustees, officers, directors, employees and agents (each, an "<u>Indemnified Person</u>") for, and defend and hold harmless each such Person from and against, any and all Indemnified Losses imposed on, incurred by or asserted against any such Person as a result of (i) the Servicer's willful misconduct, bad faith or negligence in the performance of its duties or observance of its covenants under this Agreement or its reckless disregard of its obligations and duties under this Agreement or the Intercreditor Agreement, (ii) the Servicer's breach in any material respects of any of its representations and warranties contained in this Agreement or the Intercreditor Agreement that results in a Servicer Default, or (iii) any litigation or related expenses relating to the Servicer's status or obligations as Servicer (other than any proceeding the Servicer is required to institute under this Agreement), in each case, except to the extent of Indemnified Losses either resulting from the willful misconduct, bad faith or negligence of such Person seeking indemnification hereunder or resulting from a breach of a representation or warranty made by such Person seeking indemnification hereunder in any of the Basic Documents that gives rise to the Servicer's breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) For purposes of <u>Section</u> <u>6.02(b)</u>, in the event of the termination of the rights and obligations of Kentucky Power (or any successor thereto pursuant to <u>Section</u> <u>6.03)</u> as Servicer pursuant to <u>Section</u> <u>7.01</u>, or a resignation by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be the Servicer pending appointment of a successor Servicer pursuant to <u>Section</u> <u>7.02</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Indemnification under this <u>Section</u> <u>6.02</u> shall survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Act or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or any Independent Manager or the termination of this Agreement and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorney's fees and expenses and the reasonable fees, out-of-pocket expenses and costs incurred in connection with any action, claim or suit brought to enforce the Indenture Trustee's right to indemnification).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Except to the extent expressly provided in this Agreement or the other Basic Documents (including the Servicer's claims with respect to the Servicing Fee, reimbursement for any Excess Remittance, reimbursement for costs incurred pursuant to <u>Section</u> <u>5.02(d)</u> and the payment of the purchase price of Cost Recovery Property), the Servicer hereby releases and discharges the Issuer, any Independent Manager and the Indenture Trustee, and each of their respective officers, directors and agents (collectively, the "<u>Released Parties</u>") from any and all actions, claims and demands whatsoever, whenever arising, which the Servicer, in its capacity as Servicer or otherwise, shall or may have against any such Person relating to the Cost Recovery Property or the Servicer's activities with respect thereto other than any actions, claims and demands arising out of the willful misconduct, bad faith or gross negligence of the Released Parties.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Promptly after receipt by an Indemnified Person of notice (or, in the case of the Indenture Trustee, receipt of notice by a Responsible Officer only) of the commencement of any action, proceeding or investigation, for which indemnification by the Servicer under this Agreement shall apply, such Indemnified Person shall, if a claim in respect thereof is to be made against the Servicer under this <u>Section</u> <u>6.02</u>, notify the Servicer in writing of the commencement thereof. Failure by an Indemnified Person to so notify the Servicer shall relieve the Servicer from the obligation to indemnify and hold harmless such Indemnified Person under this <u>Section</u> <u>6.02</u> only to the extent that the Servicer suffers actual prejudice as a result of such failure. With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this <u>Section</u> <u>6.02</u>, the Servicer shall be entitled to conduct and control, at its expense and with counsel of its choosing that is reasonably satisfactory to such Indemnified Person, the defense of any such action, proceeding or investigation (in which case the Servicer shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person except as set forth below); provided that the Indemnified Person shall have the right to participate in such action, proceeding or investigation through counsel chosen by it and at its own expense. Notwithstanding the Servicer's election to assume the defense of any action, proceeding or investigation, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Servicer shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the defendants in any such action include both the Indemnified Person and the Servicer and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Servicer, (ii) the Servicer shall not have employed counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action or (iii) the Servicer shall authorize the Indemnified Person to employ separate counsel at the expense of the Servicer or (iv) in the case of the Indenture Trustee, such action exposes the Indenture Trustee to a material risk of criminal liability or forfeiture or a Servicer Default has occurred and is continuing. Notwithstanding the foregoing, the Servicer shall not be obligated to pay for the fees, costs and expenses of more than one separate counsel for the Indemnified Persons other than one local counsel, if appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Without duplication of amounts indemnified pursuant to <u>Section</u> <u>6.02(h)</u>, the Servicer will credit Customers to the extent there are higher Charges, including any increase in the Servicing Fee that becomes payable to a successor Servicer pursuant to <u>Section</u> <u>6.06</u>, as a result of a Servicer Default resulting from the Servicer's willful misconduct, bad faith or negligence in performance of its duties or observance of its covenants under this Agreement, <u>provided</u>, <u>however</u>, that any credit to Customers shall not impact the Charges or the Cost Recovery Property. The Servicer's obligation to credit Customers under this <u>Section</u> <u>6.02(g)</u> will survive the termination of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) The Servicer shall indemnify the Commission (for the benefit of Customers) for, and defend and hold harmless against, any and all Indemnified Losses that may be imposed upon, incurred by or asserted against the Customers or the Commission as a result of a Servicer Default resulting from the Servicer's willful misconduct, bad faith or negligence in performance of its duties or observance of its covenants under this Agreement. The indemnification obligation set forth in this paragraph may be enforced by the Commission but is not enforceable by any Customer. Any indemnity payments required to made to the Commission under this paragraph for the benefit of Customers shall be satisfied by Servicer via a credit to Customers on their Bills; <u>provided</u>, <u>however</u>, that any credit to Customers shall not impact the Charges or the Cost Recovery Property. The Servicer's obligation to credit Customers under this <u>Section</u> <u>6.02(h)</u> will survive the termination of this Agreement.

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SECTION 6.03. <u>Binding Effect of Servicing Obligations</u>. The obligations to continue to provide service and to collect and account for Charges will be binding upon the Servicer and any other entity that provides transmission and distribution services or direct wire services to a Person that is a Customer of Kentucky Power or any successor Servicer so long as the Charges have not been fully collected and remitted. Any Person (a) into which the Servicer may be merged, converted or consolidated, (b) that may result from any merger, conversion or consolidation to which the Servicer shall be a party, (c) that may succeed to the properties and assets of the Servicer substantially as a whole, or (d) which results from the division of the Servicer into two or more Persons, which Person in any of the foregoing cases executes an agreement of assumption to perform all of the obligations of the Servicer hereunder, shall be the successor to the Servicer under this Agreement without further act on the part of any of the parties to this Agreement,; <u>provided</u>, <u>however</u>, that (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to <u>Section</u> <u>6.01</u> shall have been breached and no Servicer Default and no event which, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing, (ii) the Servicer shall have delivered to the Issuer and the Indenture Trustee (with a copy to the Commission) an Officer's Certificate and an Opinion of Counsel from external counsel stating that such consolidation, conversion, merger, division or succession and such agreement of assumption complies with this <u>Section</u> <u>6.03</u> and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, (iii) the Servicer shall have delivered to the Issuer, the Indenture Trustee and the Rating Agencies (with a copy to the Commission) an Opinion of Counsel from external counsel of the Servicer either (A) stating that, in the opinion of such counsel, all filings to be made by the Servicer, including filings with the Commission pursuant to the Act and the UCC, have been executed (if applicable) and filed and are in full force and effect that are necessary to fully preserve, perfect and maintain the priority of the interests of the Issuer and the Liens of the Indenture Trustee in the Cost Recovery Property and reciting the details of such filings or (B) stating that, in the opinion of such counsel, no such action shall be necessary to maintain such interests, (iv) the Servicer shall have delivered to the Issuer, the Indenture Trustee and the Rating Agencies (with a copy to the Commission) an Opinion of Counsel from independent tax counsel stating that, for U.S. federal income tax purposes, such consolidation, conversion, merger, division or succession and such agreement of assumption will not result in a material U.S. federal income tax consequence to the Issuer or the Holders of Bonds and (v) the Servicer shall have given the Rating Agencies prior written notice of such transaction. When any Person (or more than one Person) acquires the properties and assets of the Servicer substantially as a whole or otherwise becomes the successor, by merger, conversion, consolidation, sale, transfer, lease or otherwise, to all or substantially all of the electric transmission and distribution business of the Servicer (or, if transmission and distribution are not provided by a single entity, provides wire service directly to Customers) in accordance with the terms of this <u>Section</u> <u>6.03</u>, then upon satisfaction of all of the other conditions of this <u>Section</u> <u>6.03</u>, the preceding Servicer shall automatically and without further notice be released from all its obligations hereunder.

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SECTION 6.04. <u>Limitation on Liability of Servicer and Others</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Except as otherwise provided under this Agreement, neither the Servicer nor any of the directors, officers, employees or agents of the Servicer shall be liable to the Issuer or any other Person for any action taken or for refraining from the taking of any action pursuant to this Agreement or for good faith errors in judgment; <u>provided</u>, <u>however</u>, that this provision shall not protect the Servicer or any such person against any liability that would otherwise be imposed by reason of willful misconduct, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations and duties under this Agreement or the Intercreditor Agreement. The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Except as provided in this Agreement, including but not limited to Sections 5.02(d) and (e), the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action relating to the Cost Recovery Property that is not directly related to one of the Servicer's enumerated duties in this Agreement or related to its obligation to pay indemnification, and that in its reasonable opinion may cause it to incur any expense or liability; provided, however, that the Servicer may, in respect of any Proceeding, undertake any action that it is not specifically identified in this Agreement as a duty of the Servicer but that the Servicer reasonably determines is necessary or desirable in order to protect the rights and duties of the Issuer or the Indenture Trustee under this Agreement and the interests of the Holders and Customers under this Agreement. The Servicer's costs and expenses incurred in connection with any such proceeding shall be payable from Charge Collections as an Operating Expense (and shall not be deemed to constitute a portion of the Servicing Fee) in accordance with the Indenture. The Servicer's obligations pursuant to this Section 6.04 shall survive and continue notwithstanding that payment of such Operating Expense may be delayed pursuant to the terms of the Indenture (it being understood that the Servicer may be required initially to advance its own funds to satisfy its obligations hereunder).

SECTION 6.05. <u>Servicer Resignations</u>. Subject to the provisions of <u>Section</u> <u>6.03</u>, neither Kentucky Power nor any successor servicer shall resign from the obligations and duties hereby imposed on it as Servicer under this Agreement unless Kentucky Power or such successor servicer, as applicable, delivers to the Indenture Trustee an external Opinion of Counsel to the effect that Kentucky Power's or such successor servicer's performance of its duties under this Agreement shall no longer be permissible under applicable law. Further, in no event shall the Servicer, whether Kentucky Power or a successor Servicer, resign from the obligations and duties hereby imposed on it as Servicer under this Agreement without the prior written consent of the Commission (such consent not to be unreasonably withheld). No resignation of a Servicer shall become effective until a successor Servicer has been appointed in accordance with <u>Section</u> <u>7.02</u> and has assumed the responsibilities and obligations of the resigning Servicer in accordance with <u>Section</u> <u>7.02</u>.

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SECTION 6.06. <u>Servicing Compensation</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) In consideration for its services hereunder, until the Retirement of the Bonds, the Servicer shall receive an annual fee (the "<u>Servicing Fee</u>") in an amount equal to (i) for so long as Kentucky Power or an Affiliate of Kentucky Power is the Servicer, 0.05% of the aggregate initial principal amount of all Outstanding Bonds or (ii) if neither Kentucky Power nor any of its Affiliates is the Servicer, an amount agreed upon by the successor Servicer and the Indenture Trustee not to exceed 0.60% of the aggregate initial principal amount of all Outstanding Bonds. The Servicing Fee owing shall be calculated based on the initial principal amount of the Bonds. In addition, the Servicer shall be entitled to be reimbursed by the Issuer for filing fees and fees and expenses for printing, attorneys, accountants or other professional services retained by, and other incremental out-of-pocket third-party costs of, the Issuer and paid for by the Servicer (or procured by the Servicer on behalf of the Issuer and paid for by the Servicer) to meet the Issuer's obligations under the Basic Documents ("<u>Reimbursable Servicing Expenses</u>"). It is expressly acknowledged that the payment of fees to the Rating Agencies shall be at the expense of the Issuer and that, if the Servicer advances such payments to the Rating Agencies, such advancements shall constitute Reimbursable Servicing Expenses and the Issuer shall reimburse the Servicer for any such advances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Servicing Fee set forth in <u>Section</u> <u>6.06(a)</u> and any Reimbursable Servicing Expenses shall be paid to the Servicer by the Indenture Trustee, semi-annually with half of the Servicing Fee being paid on each Payment Date (which amount will be pro-rated for the first and final Payment Dates) in accordance with the priorities set forth in Section 8.02(e) of the Indenture, by wire transfer of immediately available funds from the Collection Account to an account designated by the Servicer. Any portion of the Servicing Fee or Reimbursable Servicing Expenses not paid on any such date shall be added to the Servicing Fee or Reimbursable Servicing Expenses, as applicable, payable on the subsequent Payment Date. In no event shall the Indenture Trustee be liable for the payment of any Servicing Fee, Reimbursable Servicing Expenses or other amounts specified in this <u>Section</u> <u>6.06</u>; <u>provided</u> that this <u>Section</u> <u>6.06</u> does not relieve the Indenture Trustee of any duties it has to allocate funds for payment for such fees under Section 8.02 of the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Other than Reimbursable Servicing Expenses and except as otherwise expressly provided elsewhere in this Agreement, the Servicer shall be required to pay from its own account expenses incurred by the Servicer in connection with its activities hereunder (including any fees to and disbursements by accountants, counsel, or any other Person, any taxes imposed on the Servicer and any expenses incurred in connection with reports to Holders, but excluding any costs and expenses incurred by Kentucky Power in its capacity as Administrator) out of the compensation retained by or paid to it pursuant to this <u>Section</u> <u>6.06</u>, and shall not be entitled to any extra payment or reimbursement therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The foregoing Servicing Fee constitutes a fair and reasonable compensation for the obligations to be performed by the Servicer. Such Servicing Fee shall be determined without regard to the income of the Issuer, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Issuer and shall be considered a fixed Operating Expense of the Issuer subject to the limitations on such expenses set forth in the Financing Order.

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SECTION 6.07. <u>Compliance with Applicable Law</u>. The Servicer covenants and agrees, in servicing the Cost Recovery Property, to comply in all material respects with all laws applicable to, and binding upon, the Servicer and relating to the Cost Recovery Property the noncompliance with which would have a material adverse effect on the value of the Cost Recovery Property; <u>provided</u>, <u>however</u>, that the foregoing is not intended to, and shall not, impose any liability on the Servicer for noncompliance with any Requirement of Law that the Servicer is contesting in good faith in accordance with its customary standards and procedures.

SECTION 6.08. <u>Access to Certain Records and Information Regarding Cost Recovery Property</u>. The Servicer shall provide to the Indenture Trustee access to the Cost Recovery Property Records as is reasonably required for the Indenture Trustee to perform its duties and obligations under the Indenture and the other Basic Documents, and shall provide access to such records to the Holders as required by applicable law. Access shall be afforded without charge, but only upon reasonable request and during normal business hours at the respective offices of the Servicer. Nothing in this <u>Section</u> <u>6.08</u> shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding the Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this <u>Section</u> <u>6.08</u>.

SECTION 6.09. <u>Appointments</u>. The Servicer may at any time appoint any Person to perform all or any portion of its obligations as Servicer hereunder; provided, however, that, unless such Person is an Affiliate of Kentucky Power, the Rating Agency Condition shall have been satisfied in connection therewith; provided further that the Servicer shall remain obligated and be liable under this Agreement for the servicing and administering of the Cost Recovery Property in accordance with the provisions hereof without diminution of such obligation and liability by virtue of the appointment of such Person and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Cost Recovery Property. The fees and expenses of any such Person shall be as agreed between the Servicer and such Person from time to time and none of the Issuer, the Indenture Trustee, the Holders or any other Person shall have any responsibility therefor or right or claim thereto. Any such appointment shall not constitute a Servicer resignation under <u>Section</u> <u>6.05</u>.

SECTION 6.10. <u>No Servicer Advances of Interest or Principal</u>. The Servicer shall not make any advances of interest on or principal of the Bonds.

SECTION 6.11. <u>Remittances</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) On each Servicer Business Day, commencing 20.3 days after the Closing Date, the Servicer shall remit to the General Subaccount of the Collection Account the total Charge Payments estimated to have been received by the Servicer from or on behalf of Customers on such Servicer Business Day in respect of all previously billed Charges (the "<u>Daily Remittance</u>"), which Daily Remittance shall be calculated according to the procedures set forth in <u>Annex</u> <u>I</u> and shall be remitted as soon as reasonably practicable but in no event later than the second Servicer Business Day after such payments are estimated to have been received. Prior to each remittance to the

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General Subaccount of the Collection Account pursuant to this <u>Section</u> <u>6.11</u>, the Servicer shall provide written notice to the Indenture Trustee of each such remittance (including the exact dollar amount to be remitted). The Servicer shall also, promptly upon receipt, remit to the Collection Account any other proceeds of the Collateral which it may receive from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Servicer agrees and acknowledges that it holds all Charge Payments collected by it and any other proceeds for the Collateral received by it for the benefit of the Indenture Trustee and the Holders and that all such amounts will be remitted by the Servicer in accordance with this <u>Section</u> <u>6.11</u> without any surcharge, fee, offset, charge, withholding or other deduction except (i) as set forth in <u>clause (c)</u> below and (ii) as permitted by <u>Section</u> <u>6.06</u>. The Servicer further agrees not to make any claim to reduce its obligation to remit all Charge Payments collected by it in accordance with this Agreement except as set forth in <u>clause (c)</u> below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) On or before the twenty-fifth (25th) calendar day of each calendar month (or, if such day is not a Servicer Business Day, on the immediately succeeding Servicer Business Day) commencing with July, 2025, the Servicer shall, in the Monthly Servicer's Certificate, calculate the amount of any Remittance Shortfall or Excess Remittance, as well as any Material Remittance Investment Earnings, for the Collection Period corresponding to the immediately preceding calendar month, and (A) if a Remittance Shortfall exists or if there are any Material Remittance Investment Earnings, the Servicer shall make a supplemental remittance, in the amount of the Remittance Shortfall plus the Material Remittance Investment Earnings, to the General Subaccount of the Collection Account within five (5) Servicer Business Days after the delivery of the applicable Monthly Servicer's Certificate, or (B) if an Excess Remittance exists, the Servicer shall be entitled either (i) to reduce the amount of each Daily Remittance which the Servicer subsequently remits to the General Subaccount of the Collection Account for application to the amount of such Excess Remittance until the balance of such Excess Remittance has been reduced to zero, with the amount of such reduction becoming the property of the Servicer or (ii) so long as such withdrawal would not cause the amounts on deposit in the General Subaccount or the Excess Funds Subaccount to be insufficient for the payment of the next installment of interest on the Bonds or principal due at maturity on the next Payment Date or upon acceleration on or before the next Payment Date, to be withdrawn immediately from the General Subaccount or Excess Funds Subaccount the amount of such Excess Remittance, with such payment becoming the property of the Servicer. If there is a Remittance Shortfall, the amount which the Servicer remits to the General Subaccount of the Collection Account on the relevant date set forth above shall be increased by the amount of such Remittance Shortfall, such increase coming from the Servicer's own funds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Unless otherwise directed to do so by the Issuer, the Servicer shall be responsible for selecting Eligible Investments in which the funds in each Collection Account shall be invested pursuant to Section 8.03 of the Indenture.

SECTION 6.12. <u>Maintenance of Operations</u>. Subject to <u>Section</u> <u>6.03</u>, Servicer agrees to use commercially reasonable efforts to continue, unless prevented by circumstances beyond its control, to operate its electric transmission and distribution system to provide service (or, if transmission and distribution are split, to provide wire service directly to Customers) so long as it is acting as the Servicer under this Agreement.

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**ARTICLE VII** 

**DEFAULT** 

SECTION 7.01. <u>Servicer Default</u>. If any one or more of the following events (a "<u>Servicer Default</u>") shall occur and be continuing:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) any failure by the Servicer to remit to the Collection Account on behalf of the Issuer any required remittance that shall continue unremedied for a period of five (5) Business Days after the earlier of the date on which (i) written notice of such failure from the Issuer or the Indenture Trustee is received by the Servicer and (ii) such failure is actually known by a Responsible Officer of the Servicer; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any failure on the part of the Servicer duly to observe or to perform in any material respect any covenants or agreements of the Servicer as set forth in this Agreement (other than as provided in <u>clause (a)</u> of this <u>Section</u> <u>7.01</u>) or any other Basic Document to which it is a party, which failure shall (i) materially and adversely affect the rights of the Holders and (ii) continue unremedied for a period of sixty (60) days after the earlier of the date on which (A) written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Issuer or the Commission (in each case, with a copy to the Indenture Trustee) or to the Servicer by the Indenture Trustee and (B) such failure is actually known by a Responsible Officer of the Servicer; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any failure in any material respect by the Servicer duly to perform its obligations under <u>Section</u> <u>4.01(b)</u> of this Agreement in the time and manner set forth therein, which failure continues unremedied for a period of five (5) Business Days; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) any representation or warranty made by the Servicer in this Agreement or any other Basic Document shall prove to have been incorrect in any material respect when made, which has a material adverse effect on the Holders and which material adverse effect continues unremedied for a period of sixty (60) days after the earlier of the date on which (A) written notice thereof, requiring the same to be remedied, shall have been delivered to the Servicer (with a copy to the Indenture Trustee) by the Issuer, the Indenture Trustee, or the Commission (with a copy to the Indenture Trustee), or (B) such failure is actually known by a Responsible Officer of the Servicer; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) an Insolvency Event occurs with respect to the Servicer;

then, and in each and every case, so long as the Servicer Default shall not have been remedied, the Indenture Trustee, acting under the Indenture may, or, upon the written instruction of the Holders evidencing not less than a majority of the Outstanding Amount of the Bonds and the written instruction of the Commission (acting on behalf of Customers), shall, in each case by notice then given in writing to the Servicer (a "<u>Termination Notice</u>"), terminate all the rights and obligations of the Servicer under this Agreement (other than the obligations set forth in <u>Section</u> <u>6.02</u> and the obligation under <u>Section</u> <u>7.02</u> to continue performing its functions as Servicer until a successor Servicer is appointed). The appointment of any successor Servicer shall be subject to the terms

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and provisions of the Intercreditor Agreement. In addition, upon a Servicer Default described in <u>Section</u> <u>7.01(a)</u>, the Holders and the Indenture Trustee as financing parties under the Act (or any of their representatives) shall be entitled to (i) apply to the Commission or the court of Franklin County, Kentucky, for sequestration and payment of revenues arising with respect to the Cost Recovery Property, (ii) foreclose on or otherwise enforce the lien and security interests in any Cost Recovery Property and (iii) exercise any other rights and remedies available to the Holders and the Indenture Trustee under the Act or under any other applicable law. On or after the receipt by the Servicer of a Termination Notice, all authority and power of the Servicer under this Agreement, whether with respect to the Bonds, the Cost Recovery Property, the Charges or otherwise, shall, without further action, pass to and be vested in such successor Servicer as may be appointed under <u>Section</u> <u>7.02</u>; and, without limitation, the Indenture Trustee is hereby authorized and empowered to execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such Termination Notice, whether to complete the transfer of the Cost Recovery Property Records and related documents, or otherwise. The predecessor Servicer shall cooperate with the successor Servicer, the Issuer and the Indenture Trustee in effecting the termination of the responsibilities and rights of the predecessor Servicer under this Agreement, including the transfer to the successor Servicer for administration by it of all Cost Recovery Property Records and all cash amounts that shall at the time be held by the predecessor Servicer for remittance, or shall thereafter be received by it with respect to the Cost Recovery Property or the Charges. As soon as practicable after receipt by the Servicer of such Termination Notice, the Servicer shall deliver the Cost Recovery Property Records to the successor Servicer. In case a successor Servicer is appointed as a result of a Servicer Default, all reasonable costs and expenses (including reasonable attorney's fees and expenses) incurred in connection with transferring the Cost Recovery Property Records to the successor Servicer and amending this Agreement to reflect such succession as Servicer pursuant to this <u>Section</u> <u>7.01</u> shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs and expenses. Termination of Kentucky Power as Servicer shall not terminate Kentucky Power's rights or obligations under the Sale Agreement (except rights thereunder deriving from its rights as the Servicer hereunder).

SECTION 7.02. <u>Appointment of Successor</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Upon the Servicer's receipt of a Termination Notice pursuant to <u>Section</u> <u>7.01</u> or the Servicer's resignation or removal in accordance with the terms of this Agreement, the predecessor Servicer shall continue to perform its functions as Servicer under this Agreement, and shall be entitled to receive the requisite portion of the Servicing Fee, until a successor Servicer shall have assumed in writing the obligations of the Servicer hereunder as described below. In the event of the Servicer's removal or resignation hereunder, the Indenture Trustee may, or, at the written direction and with the consent of the Holders of at least a majority of the Outstanding Amount of the Bonds or at the written direction of the Commission, shall, subject to the terms of the Intercreditor Agreement, appoint a successor Servicer with the Issuer's prior written consent thereto (which consent shall not be unreasonably withheld), and the successor Servicer shall accept its appointment by a written assumption in form reasonably acceptable to the Issuer and the Indenture Trustee and provide prompt written notice of such assumption to the Issuer and the Rating Agencies. If within thirty (30) days after the delivery of the Termination Notice, a new Servicer shall not have been appointed, the Indenture Trustee may, or, upon the written direction

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of the Holders of not less than a majority of Bonds, shall, in each case petition the Commission or a court of competent jurisdiction to appoint a successor Servicer under this Agreement. Except as permitted by <u>Section</u> <u>6.03</u>, a Person shall qualify as a successor Servicer only if (i) such Person is permitted under Commission Regulations to perform the duties of the Servicer, (ii) the Rating Agency Condition shall have been satisfied, (iii) the KPSC Condition described in <u>Section</u> <u>8.01(g)</u> shall have been satisfied, (iv) such Person is approved as a successor Servicer under the Intercreditor Agreement and (v) such Person enters into a servicing agreement with the Issuer having substantially the same provisions as this Agreement (as the Servicer). In no event shall the Indenture Trustee be liable for its appointment of a successor Servicer. The Indenture Trustee's expenses incurred under this <u>Section</u> <u>7.02(a)</u> shall be (x) at the sole expense of the Issuer and payable from the Collection Account as provided in Section 8.02 of the Indenture or, (y) if the removal and appointment of a successor occurred due to a Servicer Default, at the sole expense of the Servicer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Upon appointment, the successor Servicer shall be the successor in all respects to the predecessor Servicer and shall be subject to all the responsibilities, duties and liabilities arising thereafter relating thereto placed on the predecessor Servicer and shall be entitled to the Servicing Fee and all the rights granted to the predecessor Servicer by the terms and provisions of this Agreement.

SECTION 7.03. <u>Waiver of Past Defaults</u>. The Indenture Trustee, with both the written consent of the Holders evidencing not less than a majority of the Outstanding Amount of the Bonds and the written consent of the Commission, may waive in writing any default by the Servicer in the performance of its obligations hereunder and its consequences, except a default in making any required deposits to the Collection Account in accordance with this Agreement. Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereto. Promptly after the execution of any such waiver, the Servicer shall furnish copies of such waiver to each of the Rating Agencies.

SECTION 7.04. <u>Notice of Servicer Default</u>. The Servicer shall deliver to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies, promptly after having obtained knowledge thereof, but in no event later than five (5) Business Days thereafter, written notice of any event which, with the giving of notice or lapse of time, or both, would become a Servicer Default under <u>Section</u> <u>7.01</u>.

SECTION 7.05. <u>Cooperation with Successor</u>. The Servicer covenants and agrees with the Issuer that it will, on an ongoing basis, cooperate with the successor Servicer and provide whatever information is, and take whatever actions are, reasonably necessary to assist the successor Servicer in performing its obligations hereunder. All reasonable costs and expenses (including reasonable attorney's fees and expenses) incurred by the Servicer in connection with this <u>Section</u> <u>7.05</u> shall be paid by the Issuer or the successor Servicer from Charge Collections available under the Indenture, following presentation of reasonable documentation of such costs and expenses.

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**ARTICLE VIII** 

**MISCELLANEOUS PROVISIONS** 

SECTION 8.01. <u>Amendment</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Agreement may be amended in writing by the Servicer and the Issuer with (i) the prior written consent of the Indenture Trustee, (ii) the satisfaction of the Rating Agency Condition and (iii) after the issuance of the Bonds, the satisfaction of the KPSC Condition described in <u>Section</u> <u>8.01(g)</u>; <u>provided</u> that any such amendment may not, as evidenced by an Officer's Certificate of the Servicer delivered to the Issuer and the Indenture Trustee, adversely affect in any material respect the interest of any Holder in any material respect without the consent of the Holders of not less than a majority of the outstanding principal amount of the Bonds; <u>provided further that</u> any amendment affecting the rights, protections, privileges or indemnities of the Indenture Trustee shall require the prior written consent of the Indenture Trustee. Promptly after obtaining such consents and executing any such amendment, the Issuer shall furnish copies of such amendment to each of the Rating Agencies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In addition, this Agreement may be amended in writing by the Servicer and the Issuer with ten Business Days' prior written notice given to the Rating Agencies and the Indenture Trustee, without the consent of any of the Holders, (i) to cure any ambiguity, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Holders; <u>provided</u>, <u>however</u>, that such action shall not, as evidenced by an Officer's Certificate of the Servicer delivered to the Issuer and the Indenture Trustee, adversely affect in any material respect the interests of any Holder; or (ii) to conform the provisions hereof to the description of this Agreement in the Prospectus. Promptly after executing any such amendment, the Issuer shall furnish copies of such amendment to each of the Rating Agencies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Prior to the execution of any amendment to this Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel of external counsel stating that such amendment is authorized or permitted by this Agreement and that all conditions precedent have been satisfied and upon the Opinion of Counsel from external counsel referred to in <u>Section</u> <u>3.01(c)(i)</u>. The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment which affects their own rights, duties, indemnities or immunities under this Agreement or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Notwithstanding Sections 8.01(a) through (c), or anything to the contrary in this Agreement, the Servicer and the Issuer may amend Annex I to this Agreement in writing with prior written notice given to the Commission, the Indenture Trustee and the Rating Agencies but without the consent of the Commission, the Indenture Trustee, any Rating Agency or any Holder, solely to address changes to the Servicer's method of calculating Charge Payments as a result of changes to the Servicer's current computerized customer information system, including changes which would replace the remittances contemplated by the estimation procedures set forth in Annex I with remittances of Charge Collections determined to have been actually received, or to address the manner of presenting Charges on the Bills of Customers; provided that any such amendment shall not, as evidenced by an Officer's Certificate of the Seller delivered to the Issuer and the Indenture Trustee, have a material adverse effect on the Holders of then Outstanding Bonds.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) It shall not be necessary for the consent of Holders pursuant to this Article to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Any Opinion of Counsel may be based, insofar as it relates to factual matters (including financial and capital markets), upon a certificate or opinion of, or representations by, an officer or officers of the Servicer or the Issuer and other documents necessary and advisable in the judgment of counsel delivering such opinion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) KPSC Condition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) With respect to the Commission's consent to any amendment or modification to this Agreement, at least 15 days prior to the effectiveness of any such amendment, the Servicer may submit the amendment to the Commission by delivering to the Commission's Executive Director a written request for such consent, which request shall contain:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) a reference to Case No. 2023-00159;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) a statement as to the possible effect of the amendment on Ongoing Financing Costs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) an Officer's Certificate stating that the proposed amendment has been approved by all relevant parties to this Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) a statement identifying the person to whom the Commission or its staff is to address its consent to the proposed amendment or modification or request additional time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Commission or the Commission's Executive Director, within 15 days (subject to extension as provided in clause (g)(iii)) of receiving a notification complying with subparagraph (g)(i), shall have delivered to the office of the person specified in clause (g)(i)(D) a written statement that the Commission might object to the proposed amendment or modification, then, subject to clause (g)(iv) below, such proposed amendment or modification shall not be effective unless and until either (A) the Commission subsequently delivers a written statement that it does not object to such proposed amendment or modification or (B) the Commission is conclusively deemed to not have any objection pursuant to clause (g)(iv) below; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) If the Commission or the Commission's Executive Director, within 15 days of receiving a notification complying with subparagraph (g)(i), shall have delivered to the office of the person specified in clause (g)(i)(D) a written statement requesting an additional amount of time not to exceed 30 days in which to consider such proposed amendment or modification, then such proposed amendment or modification shall not be effective if, within such extended period, the Commission shall have delivered to the office of the person specified in clause (g)(i)(D) a written statement as described in subparagraph (g)(ii), unless and until either (A) the Commission subsequently delivers a written statement that it does not object to such proposed amendment or modification or (B) the Commission is conclusively deemed to not have any objection pursuant to clause (g)(iv) below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) If (A) the Commission or the Commission's Executive Director, has not delivered written notice that the Commission might object to such proposed amendment or modification within the time periods described in subparagraphs (g)(ii) or (g)(iii) above, whichever is applicable, or (B) the Commission or the Commission's Executive Director has delivered such written notice but does not within 45 days of the delivery of the notification in (g)(i) above, provide subsequent written notice confirming that it does in fact object and the reasons therefore or advise that it has initiated a proceeding to determine what action it might take with respect to the matter, then the Commission shall be conclusively deemed not to have any objection to the proposed amendment or modification and such amendment or modification may subsequently become effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Following delivery of a notice to the Commission by the Servicer under <u>Section</u> <u>8.01(g)(i)</u> above, the Servicer and Issuer may at any time withdraw from the Commission further consideration of any notification of a proposed amendment or modification.

SECTION 8.02. <u>Maintenance of Accounts and Records</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Servicer shall maintain accounts and records as to the Cost Recovery Property accurately and in accordance with its standard accounting procedures and in sufficient detail to permit reconciliation between Charge Payments received by the Servicer and Charge Collections from time to time deposited in the Collection Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Servicer shall permit the Indenture Trustee and its agents at any time during normal business hours, upon reasonable notice to the Servicer and to the extent it does not unreasonably interfere with the Servicer's normal operations, to inspect, audit and make copies of and abstracts from the Servicer's records regarding the Cost Recovery Property and the Charges. Nothing in this <u>Section</u> <u>8.02(b)</u> shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding the Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this <u>Section</u> <u>8.02(b)</u>.

SECTION 8.03. <u>Notices</u>. Unless otherwise specifically provided herein, all demands, notices and communications upon or to the Servicer, the Issuer, the Indenture Trustee or the Rating Agencies under this Agreement shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented delivery service or, to the extent receipt is confirmed telephonically, sent by telecopy or other form of electronic transmission:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) in the case of the Servicer, to Kentucky Power Company, at 1 Riverside Plaza, Columbus, Ohio 43215, Attention: Treasurer, Telephone: (614) 716-1000, Email: <u>Treasury_Operations_AEP@aep.com</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) in the case of the Issuer, to Kentucky Power Cost Recovery LLC, at 1645 Winchester Avenue, Ashland, Kentucky 41101, Attention: Vice President – Regulatory and Finance, Telephone: (606) 929-1488, Email: <u>Treasury_Operations_AEP@aep.com</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) in the case of the Indenture Trustee to the Corporate Trust Office;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) in the case of the Commission, to Kentucky Public Service Commission, P.O. Box 615, 211 Sower Boulevard, Frankfort, Kentucky 40602-0615, Telephone: (502) 564-3940, Email: <u>psced@ky.gov</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) in the case of Moody's, to Moody's Investors Service, Inc., ABS/RMBS Monitoring Department, 24th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, Email: ServicerReports@moodys.com (all such notices to be delivered to Moody's in writing by email), and solely for purposes of Rating Agency Condition communications: <u>abscormonitoring@moodys.com</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) in the case of Standard & Poor's, to Standard & Poor's Ratings Group, Inc., Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: <u>servicer_reports@spglobal.com</u> (all such notices to be delivered to Standard & Poor's in writing by email); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.

SECTION 8.04. <u>Assignment</u>. Notwithstanding anything to the contrary contained herein, except as provided in <u>Section</u> <u>6.03</u> and as provided in the provisions of this Agreement concerning the resignation of the Servicer, this Agreement may not be assigned by the Servicer.

SECTION 8.05. <u>Limitations on Rights of Others</u>. The provisions of this Agreement are solely for the benefit of the Servicer and the Issuer and, to the extent provided herein or in the Basic Documents, the Commission (for the benefit of the Customers), the Indenture Trustee and the Holders, and the other Persons expressly referred to herein, and such Persons shall have the right to enforce the relevant provisions of this Agreement. Nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Cost Recovery Property or Collateral or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. Notwithstanding anything to the contrary contained herein, for the avoidance of doubt, any right, remedy or claim to which any Customer may be entitled pursuant to the Financing Order or pursuant to this Agreement may be asserted or exercised only by the Commission (or by an authorized designee in the name of the Commission) for the benefit of such Customer.

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SECTION 8.06. <u>Severability</u>. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such a construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 8.07. <u>Separate Counterparts</u>. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Each party hereto agrees that this Agreement may be electronically signed, that any digital or electronic signatures appearing on this Agreement are the same as handwritten signatures for the purposes of validity, enforceability and admissibility, and that delivery of any such electronic signature to, or a signed copy of, this Agreement may be made by facsimile, email or other electronic transmission.

SECTION 8.08. <u>Headings</u>. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

SECTION 8.09. <u>GOVERNING LAW</u>. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF KENTUCKY, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 8.10. <u>Assignment to Indenture Trustee</u>. (a) The Servicer hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee for the benefit of the Secured Parties pursuant to the Indenture of any or all of the Issuer's rights hereunder and (b) in no event shall the Indenture Trustee have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates delivered by Issuer pursuant hereto, as to all of which any recourse shall be had solely to the assets of the Issuer subject to the availability of funds therefor under Section 8.02 of the Indenture.

SECTION 8.11. <u>Nonpetition Covenants</u>. Notwithstanding any prior termination of this Agreement or the Indenture, the Servicer shall not, prior to the date that is one year and one day after the satisfaction and discharge of the Indenture, acquiesce, petition or otherwise invoke or cause the Issuer to invoke or join with any Person in provoking the process of any Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any U.S. federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer for any substantial part of the property of the Issuer or ordering the dissolution, winding up or liquidation of the affairs of the Issuer.

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SECTION 8.12. <u>Limitation of Liability</u>. It is expressly understood and agreed by the parties hereto that this Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee in the exercise of the powers and authority conferred and vested in it, and that the Indenture Trustee, in acting hereunder, is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.

SECTION 8.13. <u>Rule 17g-5 Compliance</u>. The Servicer agrees that any notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Servicer to any Rating Agency under this Agreement or any other Basic Document to which it is a party for the purpose of determining the initial credit rating of the Bonds or undertaking credit rating surveillance of the Bonds with any Rating Agency, or satisfy the Rating Agency Condition, shall be substantially concurrently posted by the Servicer on the 17g-5 Website.

SECTION 8.14. <u>Commission Authority</u>. The Commission also shall be a third-party beneficiary of this Servicing Agreement for the benefit of Kentucky Power's Customers. In this capacity, so long as an event constituting a Servicer Default has occurred and is continuing, the Commission shall be authorized to declare a Servicer Default under this Servicing Agreement.

(SIGNATURE PAGE FOLLOWS)

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.

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| | |
|:---|:---|
|  **KENTUCKY POWER COST RECOVERY LLC**,<br> as Issuer | **KENTUCKY POWER COST RECOVERY LLC**,<br> as Issuer |
|  By: | /s/ Matthew D. Fransen |
|  | Name: Matthew D. Fransen<br> Title: Vice President and Treasurer |

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| | |
|:---|:---|
| **KENTUCKY POWER COMPANY**,<br> as Servicer | **KENTUCKY POWER COMPANY**,<br> as Servicer |
| By: | /s/ Matthew D. Fransen |
|  | Name: Matthew D. Fransen<br> Title: Vice President and Treasurer |

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| | |
|:---|:---|
| **<u>ACKNOWLEDGED AND ACCEPTED:</u>** | **<u>ACKNOWLEDGED AND ACCEPTED:</u>** |
| **U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, not in its individual capacity but solely**<br> as Indenture Trustee | **U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, not in its individual capacity but solely**<br> as Indenture Trustee |
| By: | /s/ Matthew M. Smith |
|  | Name: Matthew M. Smith<br> Title: Vice President |

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*Signature Page to* 

*Servicing Agreement* 

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**EXHIBIT A** 

**MONTHLY SERVICER'S CERTIFICATE** 

See Attached.

EXHIBIT A

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**Remittance Dates** 

***Monthly Servicer's Certificate*** 

(to be delivered each month pursuant to **Section 3.01(b)(i)** of the Servicing Agreement)

**KENTUCKY POWER COST RECOVERY LLC** 

**Kentucky Power Company, as Servicer** 

Pursuant to the Servicing Agreement dated as of June 12, 2025 (the "<u>Servicing Agreement</u>") between Kentucky Power Company, as Servicer, and Kentucky Power Cost Recovery LLC, as Issuer, the Servicer does hereby certify as follows:

Collection Period:

Remittance Dates:

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| | | | |
|:---|:---|:---|:---|
| Revenue Class | a. Charges in Effect | b. Billed Charges | c. Estimated Collections of Charge Payments |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total |  |  |  |

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Collection Period:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Revenue Class | d. Estimated Collections of Charge Payments<br> Total | e. Actual Collections of Charge Payments | f. Remittance Shortfall for this Collection Period | g. Excess Remittance for this Collection Period | h. Shortfall / (Excess) Interest | i. Total Shortfall / (Excess) Interest |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total |  |  |  |  |  |  |

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j. Daily remittances previously made by the Servicer to the Collection Account in respect of this Collection Period (c):

k. The amount to be remitted by the Servicer to the Collection Account for this Collection Period is (c + i):

l**.** If (k>j), (k-j) equals net amount due from the Servicer to the Collection Amount:

m. If (j>k), (j-k) equals net amount due to the Servicer from the Collection Amount:

Capitalized terms used herein have their respective meanings set forth in the Servicing Agreement.

EXHIBIT A

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IN WITNESS HEREOF, the undersigned has duly executed and delivered this Monthly Servicer's Certificate the day of

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| |
|:---|
| **KENTUCKY POWER COMPANY,**<br> as Servicer |
| Name: |
| Title: |

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EXHIBIT A

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**EXHIBIT B** 

**FORM OF SEMI-ANNUAL SERVICER'S CERTIFICATE** 

Pursuant to Section 4.01(c)(ii) of the Servicing Agreement, dated as of June 12, 2025 (the "<u>Servicing Agreement</u>"), between, KENTUCKY POWER COMPANY, as Servicer, and KENTUCKY POWER COST RECOVERY LLC, as Issuer, the Servicer does hereby certify, for the ________, 20__ Payment Date (the "<u>Current Payment Date</u>"), as follows:

Capitalized terms used herein have their respective meanings as set forth in the Indenture (as defined in the Servicing Agreement). References herein to certain sections and subsections are references to the respective sections of the Servicing Agreement or the Indenture, as the context indicates.

**Collection Periods:** ____ to ______

**Payment Date: _____________** 

***Collections Allocable and Aggregate Amounts Available for the Current Payment Date:***

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| | | |
|:---|:---|:---|
| i. | Remittances for the ___ Collection Period | $_________ |
| ii. | Remittances for the ___ Collection Period | $_________ |
| iii. | Remittances for the ___ Collection Period | $_________ |
| iv. | Remittances for the ___ Collection Period | $_________ |
| v. | Remittances for the ___ Collection Period | $_________ |
| vi. | Remittances for the ___ Collection Period | $_________ |
| vii. | Investment Earnings on Collection Account |  |
|  | viii. Investment Earnings on Capital Subaccount<br> ix. Investment Earnings on Excess Funds Subaccount<br> x. Investment Earnings on General Subaccount | $_________<br> $_________<br> $_________ |
| **xi.** | **General Subaccount Balance (sum of i through x above)** | $_________ |
| xii. | Excess Funds Subaccount Balance as of Prior Payment Date | $_________ |
| xiii. | Capital Subaccount Balance as of Prior Payment Date | $_________ |
| **xiv.** | **Collection Account Balance (sum of xii through xiii above)** | $_________ |

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***Outstanding Amounts of as of Prior Payment Date:***

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| | |
|:---|:---|
| **Aggregate Outstanding Amount of all Bonds:** | $__________ |

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EXHIBIT B

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***Required Funding/Payments as of Current Payment Date:***

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| | |
|:---|:---|
| ***Principal*** | ***Principal Due*** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **For all Bonds:** | $__________ |

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| | | | | |
|:---|:---|:---|:---|:---|
| ***Interest*** | ***Interest Rate*** | ***Days in Interest Period<sup>1</sup>*** | ***Principal Balance*** | ***Interest Due*** |
|  **For all Bonds:** |  |  |  | $__________ |

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| | | |
|:---|:---|:---|
|  | ***Required Level*** | ***Funding Required*** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ix. Capital Subaccount |  |  |

---

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| | |
|:---|:---|
| ***Allocation of Remittances as of Current Payment Date Pursuant to 8.02(e) of Indenture*** | ***Allocation of Remittances as of Current Payment Date Pursuant to 8.02(e) of Indenture*** |
| i. Trustee Fees and Expenses; Indemnity Amounts<sup>2</sup> | ***$_____________*** |
| ii. Servicing Fee | ***$_____________*** |
| iii. Administration Fee; Independent Manager Fee | ***$_____________*** |
| iv. Operating Expenses | ***$_____________*** |
| v. Periodic Interest (including any past-due for prior periods) | ***$_____________*** |

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| | | | |
|:---|:---|:---|:---|
|  | ***Aggregate*** | ***Per $1,000 of Original***<br> ***Principal Amount*** | ***Per $1,000 of Original***<br> ***Principal Amount*** |
|  | $_____________ | $_____________ |  |
| vi. Principal Due and Payable as a Result of an Event of Default or on Final Maturity Date |  |  | $___________ |
|  | ***Aggregate*** | ***Per $1,000 of Original***<br> ***Principal Amount*** | ***Per $1,000 of Original***<br> ***Principal Amount*** |
|  | $_____________ | $_____________ |  |

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<sup>1</sup> *On 30/360 day basis for initial payment date; otherwise use one-half of annual rate.*

<sup>2</sup> *Subject to $100,000 cap per annum.* 

EXHIBIT B

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| | | | |
|:---|:---|:---|:---|
| vii. Periodic Principal |  |  | ***$__________****_* |
|  | ***Aggregate*** | ***Per $1,000 of Original***<br> ***Principal Amount*** | ***Per $1,000 of Original***<br> ***Principal Amount*** |
|  | $_____________ | $_____________ |  |

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| | |
|:---|:---|
| viii. Other unpaid fees, expenses and indemnity amounts owed to the Indenture Trustee | $_____________ |
| viii. Other unpaid Operating Expenses | $_____________ |
| viii. Funding of Capital Subaccount (to required level) | $_____________ |
| ix. Return on Invested Capital released to Kentucky Power | $_____________ |
| x. Deposit to Excess Funds Subaccount | $_____________ |
| xi. Released to Issuer upon Retirement of all Bonds | $_____________ |
| xii. Aggregate Remittances as of Current Payment Date | $_____________ |

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***Subaccount Withdrawals as of Current Payment (if applicable, pursuant to Section 8.02(f) of Indenture):***

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| | | |
|:---|:---|:---|
| i. | Excess Funds Subaccount | $_____________ |
| ii. | Capital Subaccount | $_____________ |
| **iii.** | **Total Withdrawals** | **$**_____________ |

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***Outstanding Amount and Collection Account Balance as of Current Payment Date***

***(after giving effect to payments to be made on such Payment Date):***

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| | |
|:---|:---|
| **Aggregate Outstanding Amount of all Bonds:** | $_____________ |
| Excess Funds Subaccount Balance | $_____________ |
| Capital Subaccount Balance | $_____________ |
| **Aggregate Collection Account Balance** | **$**_____________ |

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EXHIBIT B

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***Shortfalls in Interest and Principal Payments as of Current Payment Date***

---

| | | |
|:---|:---|:---|
| i. | Semi-annual Interest Payment | $_____________ |
| ii. | Semi-annual Principal Payment | $_____________ |

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***Shortfalls in Required Subaccount Levels as of Current Payment Date***

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| | | |
|:---|:---|:---|
| ii. | Capital Subaccount | $_____________ |

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EXHIBIT B

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IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Servicer's Certificate this __ day of __________.

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| | |
|:---|:---|
| **KENTUCKY POWER COMPANY,**<br> as Servicer | **KENTUCKY POWER COMPANY,**<br> as Servicer |
| By: |  |
|  | Name:<br> Title: |

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EXHIBIT B

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**EXHIBIT C-1** 

**REGULATION AB ANNUAL COMPLIANCE CERTIFICATE** 

The undersigned hereby certifies that he/she is the duly elected and acting **[**__________**]** of **[**KENTUCKY POWER COMPANY**]**, as servicer (the "<u>Servicer</u>") under the Servicing Agreement dated as of June 12, 2025 (the "<u>Servicing Agreement</u>") between the Servicer and Kentucky Power Cost Recovery LLC (the "<u>Issuer</u>") and further that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The undersigned is responsible for assessing the Servicer's compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB (the "<u>Servicing Criteria</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. With respect to each of the Servicing Criteria, the undersigned has made the following assessment of the Servicing Criteria in accordance with Item 1122(d) of Regulation AB, with such discussion regarding the performance of such Servicing Criteria during the fiscal year covered by the Sponsor's annual report on Form 10-K Report (such fiscal year, the "<u>Assessment Period</u>"):

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| | | |
|:---|:---|:---|
|  | **Servicing Criteria** | **Applicable<br>Servicing Criteria** |
| **Reference** | **Criteria** |  |
|  | **General Servicing Considerations** |  |
| 1122(d)(1)(i) | Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements. | Applicable; assessment below. |
| 1122(d)(1)(ii) | If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party's performance and compliance with such servicing activities. | Not applicable; no servicing activities were outsourced. |
| 1122(d)(1)(iii) | Any requirements in the transaction agreements to maintain a back-up servicer for the pool assets are maintained. | Not applicable; documents do not provide for a back-up servicer. |
| 1122(d)(1)(iv) | A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements. | Not applicable; documents do not require a fidelity bond or errors and omissions policy. |

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EXHIBIT C-1

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| | | |
|:---|:---|:---|
|  | **Servicing Criteria** | **Applicable<br>Servicing Criteria** |
| **Reference** | **Criteria** |  |
| 1122(d)(1)(v) | Aggregation of information, as applicable, is mathematically accurate and the information conveyed accurately reflects the information. | Applicable |
|  | **Cash Collection and Administration** |  |
| 1122(d)(2)(i) | Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days after receipt, or such other number of days specified in the transaction agreements. | Applicable |
| 1122(d)(2)(ii) | Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel. | Applicable |
| 1122(d)(2)(iii) | Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements. | Applicable, but no current assessment required; no advances by the Servicer are permitted under the transaction agreements. |
| 1122(d)(2)(iv) | The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements. | Applicable, but no current assessment is required since transaction accounts are maintained by the Securities Intermediary and in the name of the Indenture Trustee |
| 1122(d)(2)(v) | Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, "federally insured depository institution" with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act. | Applicable, but no current assessment required; all "custodial accounts" are maintained by the Securities Intermediary. |
| 1122(d)(2)(vi) | Unissued checks are safeguarded so as to prevent unauthorized access. | Not applicable; all transfers made by wire transfer. |

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EXHIBIT C-1

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| | | |
|:---|:---|:---|
|  | **Servicing Criteria** | **Applicable<br>Servicing Criteria** |
| **Reference** | **Criteria** |  |
| 1122(d)(2)(vii) | Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations (A) are mathematically accurate; (B) are prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) are reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements. | Applicable; assessment below. |
|  | **Investor Remittances and Reporting** |  |
| 1122(d)(3)(i) | Reports to investors, including those to be filed with the SEC, are maintained in accordance with the transaction agreements and applicable SEC requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the SEC as required by its rules and regulations; and (D) agree with investors' or the trustee's records as to the total unpaid principal balance and number of pool assets serviced by the Servicer. | Applicable; assessment below. |
| 1122(d)(3)(ii) | Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements. | Not applicable; investor records maintained by Indenture Trustee. |
| 1122(d)(3)(iii) | Disbursements made to an investor are posted within two business days to the Servicer's investor records, or such other number of days specified in the transaction agreements. | Applicable |
| 1122(d)(3)(iv) | Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements. | Applicable; assessment below. |
|  | **Pool Asset Administration** |  |
| 1122(d)(4)(i) | Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents. | Applicable; assessment below. |
| 1122(d)(4)(ii) | Pool assets and related documents are safeguarded as required by the transaction agreements. | Applicable; assessment below. |

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EXHIBIT C-1

------

---

| | | |
|:---|:---|:---|
|  | **Servicing Criteria** | **Applicable<br>Servicing Criteria** |
| **Reference** | **Criteria** |  |
| 1122(d)(4)(iii) | Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements. | Not applicable; no removals or substitutions of Cost Recovery Property are contemplated or allowed under the transaction documents. |
| 1122(d)(4)(iv) | Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the Servicer's obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents. | Applicable; assessment below. |
| 1122(d)(4)(v) | The Servicer's records regarding the pool assets agree with the Servicer's records with respect to an obligor's unpaid principal balance. | Not applicable; because underlying obligation (securitized surcharge) is not an interest bearing instrument. |
| 1122(d)(4)(vi) | Changes with respect to the terms or status of an obligor's pool asset (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents. | Applicable; assessment below |
| 1122(d)(4)(vii) | Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements. | Applicable; limited assessment below. Servicer actions governed by the Financing Order and Commission regulations. |
| 1122(d)(4)(viii) | Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity's activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment). | Applicable, but does not require assessment since no explicit documentation requirement with respect to delinquent accounts are imposed under the transactional documents due to availability of "true-up" mechanism. |

---

EXHIBIT C-1

------

---

| | | |
|:---|:---|:---|
|  | **Servicing Criteria** | **Applicable<br>Servicing Criteria** |
| **Reference** | **Criteria** |  |
| 1122(d)(4)(ix) | Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents. | Not applicable; securitized surcharges are not interest bearing instruments. |
| 1122(d)(4)(x) | Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor's pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool asset, or such other number of days specified in the transaction agreements. | Not applicable. |
| 1122(d)(4)(xi) | Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements. | Not applicable; Servicer does not make payments on behalf of obligors. |
| 1122(d)(4)(xii) | Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer's funds and not charged to the obligor, unless the late payment was due to the obligor's error or omission. | Not applicable; Servicer cannot make advances of its own funds on behalf of customers under the transaction documents. |
| 1122(d)(4)(xiii) | Disbursements made on behalf of an obligor are posted within two business days to the obligor's records maintained by the servicer, or such other number of days specified in the transaction agreements. | Not applicable; Servicer cannot make advances of its own funds on behalf of customers to pay principal or interest on the bonds. |
| 1122(d)(4)(xiv) | Delinquencies, charge-offs and uncollectable accounts are recognized and recorded in accordance with the transaction agreements. | Applicable; assessment below. |

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EXHIBIT C-1

------

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| | | |
|:---|:---|:---|
|  | **Servicing Criteria** | **Applicable<br>Servicing Criteria** |
| **Reference** | **Criteria** |  |
| 1122(d)(4)(xv) | Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements. | Not applicable; no external enhancement is required under the transaction documents. |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. To the best of the undersigned's knowledge, based on such review, the Servicer is in compliance in all material respects with the applicable servicing criteria set forth above as of and for the period ending the end of the fiscal year covered by the Sponsor's annual report on Form 10-K. **[**If not true, include description of any material instance of noncompliance.**]**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. A registered public accounting firm has issued an attestation report on the undersigned's assessment of compliance with the applicable servicing criteria set forth above as of and for the period ending the end of the fiscal year covered by the Sponsor's annual report on Form 10-K.

Executed as of this ______________ day of _________________, ____.

---

| | |
|:---|:---|
| **[KENTUCKY POWER COMPANY]** | **[KENTUCKY POWER COMPANY]** |
| By: |  |
|  | Name:<br> Title: |

---

EXHIBIT C-1

------

**EXHIBIT C-2** 

**CERTIFICATE OF COMPLIANCE** 

The undersigned hereby certifies that he/she is the duly elected and acting **[**__________**]** of **[**NAME OF SERVICER**]**, as servicer (the "<u>Servicer</u>") under the Servicing Agreement dated as of June 12, 2025 (the "<u>Servicing Agreement</u>") between the Servicer and Kentucky Power Cost Recovery LLC, as issuer (the "<u>Issuer</u>"), and further that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A review of the activities of the Servicer and of its performance under the Servicing Agreement during the twelve months ended **[**________**]**, **[** **]** has been made under the supervision of the undersigned pursuant to <u>Section</u> <u>3.03</u> of the Servicing Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. To the best of the undersigned's knowledge, based on such review, the Servicer has fulfilled all of its obligations in all material respects under the Servicing Agreement throughout the twelve months ended **[**________**]**,**[** _____**]**, except as set forth on <u>Annex A</u> hereto.

Executed as of this ______________ day of _________________, ____.

---

| | |
|:---|:---|
| **[NAME OF SERVICER]** | **[NAME OF SERVICER]** |
| By: |  |
|  | Name:<br> Title: |

---

EXHIBIT C-2

------

**ANNEX A** 

**TO CERTIFICATE OF COMPLIANCE** 

**LIST OF SERVICER DEFAULTS** 

The following Servicer Defaults, or events which with the giving of notice, the lapse of time, or both, would become Servicer Defaults known to the undersigned occurred during the year ended **[**__________**]**:

Nature of Default Status

Annex A to Exhibit C-2

------

**SCHEDULE 4.01(a)** 

**EXPECTED AMORTIZATION SCHEDULE<sup>(1)</sup>** 

OUTSTANDING PRINCIPAL BALANCE

---

| | |
|:---|:---|
| **Semi-Annual Payment Date** | **Tranche A** |
|  Closing Date | $477749000 |
|  3/1/2026 | 468775848 |
|  9/1/2026 | 461767534 |
|  3/1/2027 | 454573640 |
|  9/1/2027 | 447189252 |
|  3/1/2028 | 439609325 |
|  9/1/2028 | 431828682 |
|  3/1/2029 | 423842007 |
|  9/1/2029 | 415643845 |
|  3/1/2030 | 407228596 |
|  9/1/2030 | 398590511 |
|  3/1/2031 | 389723689 |
|  9/1/2031 | 380622074 |
|  3/1/2032 | 371279448 |
|  9/1/2032 | 361689429 |
|  3/1/2033 | 351845467 |
|  9/1/2033 | 341740837 |
|  3/1/2034 | 331368636 |
|  9/1/2034 | 320721779 |
|  3/1/2035 | 309792993 |
|  9/1/2035 | 298574813 |
|  3/1/2036 | 287059576 |
|  9/1/2036 | 275239415 |
|  3/1/2037 | 263106256 |
|  9/1/2037 | 250651811 |
|  3/1/2038 | 237867573 |
|  9/1/2038 | 224744808 |
|  3/1/2039 | 211274552 |
|  9/1/2039 | 197447604 |
|  3/1/2040 | 183254518 |
|  9/1/2040 | 168685599 |
|  3/1/2041 | 153730895 |
|  9/1/2041 | 138380191 |
|  3/1/2042 | 122623000 |
|  9/1/2042 | 106448559 |
|  3/1/2043 | 89845818 |
|  9/1/2043 | 72803437 |
|  3/1/2044 | 55309774 |
|  9/1/2044 | 37352878 |
|  3/1/2045 | 18920484 |
|  9/1/2045 |  |

---

(1) Totals may not add up due to rounding.

ANNEX I

------

**ANNEX I** 

**SERVICING PROCEDURES** 

The Servicer agrees to comply with the following servicing procedures:

**SECTION 1. <u>DEFINITIONS</u>.** 

(a) Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Servicing Agreement (the "<u>Agreement</u>").

(b) Whenever used in this <u>Annex</u> <u>I</u>, the following words and phrases shall have the following meanings:

"<u>Applicable MDMA</u>" means with respect to each Customer, the meter data management agent providing meter reading services for that Customer's account.

"<u>Billed Charges</u>" means the amounts of Charges billed by the Servicer.

"<u>Servicer Policies and Practices</u>" means, with respect to the Servicer's duties under this <u>Annex</u> <u>I</u>, the policies and practices of the Servicer applicable to such duties that the Servicer follows with respect to comparable assets that it services for itself and, if applicable, others.

**SECTION 2. <u>DATA ACQUISITION</u>.** 

(a) <u>Installation and Maintenance of Meters</u>. The Servicer shall cause to be installed, replaced and maintained meters in such places and in such condition as will enable the Servicer to obtain usage measurements for each Customer at least once every Billing Period.

(b) <u>Meter Reading</u>. At least once each Billing Period, the Servicer shall obtain usage measurements from the Applicable MDMA for each Customer; <u>provided</u>, <u>however</u>, that the Servicer may estimate any Customer's usage determined in accordance with applicable Commission Regulations.

(c) <u>Cost of Metering</u>. The Issuer shall not be obligated to pay any costs associated with the routine metering duties set forth in this <u>Section</u> <u>2</u>, including the costs of installing, replacing and maintaining meters, nor shall the Issuer be entitled to any credit against the Servicing Fee for any cost savings realized by the Servicer as a result of new metering and/or billing technologies.

**SECTION 3. <u>REVENUE AND BILL CALCULATION</u>.** 

The Servicer (a) for determining revenue from each Customer, shall obtain a calculation of each Customer's usage (which may be based on data obtained from such Customer's meter read or on usage estimates determined in accordance with applicable Commission Regulations) at least once each Billing Period; and (b) shall determine therefrom each Customer's individual Charges to be included on Bills issued by it to such Customer for billing such Customer.

ANNEX I

------

**SECTION 4. <u>BILLING</u>.** 

The Servicer shall implement the Charges as of the Closing Date and shall thereafter bill each Customer for the respective Customer's outstanding current and past due Charges accruing through the date on which the Charges may no longer be billed under the Charge Rider, all in accordance with the following:

(a) <u>Frequency of Bills; Billing Practices</u>. In accordance with the Servicer's then-existing Servicer Policies and Practices for its own charges, as such Servicer Policies and Practices may be modified from time to time, the Servicer shall generate and issue a Bill to each Customer for such Customers' Charges once every applicable Billing Period, at the same time, with the same frequency and on the same Bill as that containing the Servicer's own charges to such Customers. In the event that the Servicer makes any material modification to these practices, it shall notify the Issuer, the Indenture Trustee, and the Rating Agencies prior to the effectiveness of any such modification; <u>provided</u>, <u>however</u>, that the Servicer may not make any modification that will materially adversely affect the Holders.

(b) <u>Format</u>.

(i) Each Bill issued by the Servicer shall contain the charge corresponding to the respective Charges owed by such Customer for the applicable Billing Period. The Servicer shall comply with the requirements of the Financing Order and Charge Rider with respect to the identification of Charges on Bills to ensure that each Customer's bill contains: (a) the portion of Charges applicable to the applicable Revenue Class and, (b) a separate line item including both the base rate of the customer's electricity and the amount of the Charge, and that both (a) and (b) are present and identifiable on the Customer's Bill, as required by Section 4.01(c)(iii)(B) of the Servicing Agreement.

(ii) The Servicer shall conform to such requirements in respect of the format, structure and text of Bills delivered to Customers in accordance with, if applicable, the Financing Order, Charge Rider, other tariffs and any other Commission Regulations. To the extent that Bill format, structure and text are not prescribed by the Act, or by applicable Commission Regulations, the Servicer shall, subject to <u>clause (i)</u> above, determine the format, structure and text of all Bills in accordance with its reasonable business judgment, its Servicer Policies and Practices with respect to its own charges and prevailing industry standards.

(c) <u>Delivery</u>. The Servicer shall deliver all Bills issued by it (i) by United States mail in such class or classes as are consistent with the Servicer Policies and Practices followed by the Servicer with respect to its own charges to its customers or (ii) by any other means, whether electronic or otherwise, that the Servicer may from time to time use to present its own charges to its customers. The Servicer shall pay from its own funds all costs of issuance and delivery of all Bills, including but not limited to printing and postage costs as the same may increase or decrease from time to time.

**SECTION 5. <u>CUSTOMER SERVICE FUNCTIONS</u>.** 

The Servicer shall handle all Customer inquiries and other Customer service matters according to the same procedures it uses to service Customers with respect to its own charges.

ANNEX I

------

**SECTION 6. <u>COLLECTIONS; PAYMENT PROCESSING; REMITTANCE</u>.** 

(a) <u>Collection Efforts, Policies, Procedures</u>.

(i) The Servicer shall use reasonable efforts to collect all Billed Charges from Customers as and when the same become due and shall follow such collection procedures as it follows with respect to comparable assets that it services for itself or others, including with respect to the following:

(A) The Servicer shall prepare and deliver overdue notices to Customers in accordance with applicable Commission Regulations and Servicer Policies and Practices.

(B) The Servicer shall apply late payment charges to outstanding Customer balances in accordance with applicable Commission Regulations and as required by the Financing Order.

(C) In circumstances where the Servicer is allowed to bill Customers directly, the Servicer shall deliver verbal and written final notices of delinquency and possible disconnection in accordance with applicable Commission Regulations and Servicer Policies and Practices.

(D) The Servicer shall adhere to and carry out disconnection policies in accordance with the Act, the Financing Order, applicable Commission Regulations and the Servicer Policies and Practices.

(E) The Servicer may employ the assistance of collection agents to collect any past-due Charges in accordance with applicable Commission Regulations and Servicer Policies and Practices and the Charge Rider.

(F) The Servicer shall apply Customer deposits to the payment of delinquent accounts in accordance with applicable Commission Regulations and Servicer Policies and Practices and according to the priorities set forth in <u>Section</u> <u>6(b)(ii)</u>, <u>(iii)</u>, <u>(iv)</u> and <u>(v)</u> of this <u>Annex</u> <u>I</u>.

(ii) The Servicer shall not waive any late payment charge or any other fee or charge relating to delinquent payments, if any, or waive, vary or modify any terms of payment of any amounts payable by a Customer, in each case unless such waiver or action: (A) would be in accordance with the Servicer's customary practices or those of any successor Servicer with respect to comparable assets that it services for itself and for others; (B) would not materially adversely affect the rights of the Holders; and (C) would comply with applicable law; <u>provided</u>, <u>however</u>, that notwithstanding anything in this Agreement to the contrary, the Servicer is authorized to write off any Billed Charges, in accordance with its Servicer Policies and Practices, that have remained outstanding for one hundred eighty (180) days or more.

(iii) The Servicer shall accept payment from Customers in respect of Billed Charges in such forms and methods and at such times and places as it accepts for payment of its own charges.

(b) <u>Payment Processing; Allocation; Priority of Payments</u>.

(i) The Servicer shall post all payments received in respect of the Billed Charges to the applicable Customer accounts as promptly as practicable, and, in any event, substantially all such payments shall be posted in no event later than the third (3rd) Business Day after such payments are received by Servicer.

ANNEX I

------

(ii) Subject to <u>clause (iii)</u> below, the Servicer shall apply payments received to each Customer's account in proportion to the charges contained on the outstanding Bill to such Customer.

(iii) So long as the Intercreditor Agreement is in effect, the Servicer shall allocate, or cause to the allocated, amounts owed to the Issuer and to the other recipients of remittances described therein in accordance with the terms of the Intercreditor Agreement. Any amounts collected by the Servicer that represent partial payments of, (A) if the Intercreditor Agreement remains in effect, the portion of the Bill allocable to Charges pursuant to the terms of the Intercreditor Agreement, or (B) otherwise, the total Bill to a Customer, in each case shall be allocated as follows: (1) first to amounts owed to the Issuer, the Servicer and any other affiliate of the Servicer which is owed "securitized surcharges" as defined in Section 278.670(20) of the Act and other fees and charges (excluding any late fees), regardless of age, pro rata in proportion to their respective percentages of the total amount of their combined outstanding charges on such Bill or applicable portion thereof, as applicable; then (2) all late charges shall be allocated to the Servicer; <u>provided</u> that penalty payments owed on late payments of Charges shall be allocated to the Issuer in accordance with the terms of the Charge Rider.

(iv) The Servicer shall hold all over-payments for the benefit of the Issuer and Kentucky Power and shall apply such funds to future Bill charges in accordance with <u>clauses (ii)</u> and <u>(iii)</u> as such charges become due.

(v) For Customers on a Budget Billing Plan, the Servicer shall treat Charge Payments received from such Customers as if such Customers had been billed for their respective Charges in the absence of the Budget Billing Plan; partial payment of a Budget Billing Plan payment shall be allocated according to <u>clause (iii)</u> and overpayment of a Budget Billing Plan payment shall be allocated according to <u>clause (iv)</u>.

(c) <u>Accounts; Records</u>.

The Servicer shall maintain accounts and records as to the Cost Recovery Property accurately and in accordance with its standard accounting procedures and in sufficient detail (i) to permit reconciliation between payments or recoveries with respect to the Cost Recovery Property and the amounts from time to time remitted to the Collection Account in respect of the Cost Recovery Property and (ii) to permit the Charge Collections held by the Servicer to be accounted for separately from the funds with which they may be commingled, so that the dollar amounts of Charge Collections commingled with the Servicer's funds may be properly identified and traced.

(d) <u>Investment of Charge Payments Received</u>.

(i) Prior to each Daily Remittance, the Servicer may invest Charge Payments received as permitted by applicable Commission Regulations. So long as the Servicer complies with its obligations under <u>Section</u> <u>6(c)</u> of this <u>Annex</u> <u>I</u>, neither such investments nor such funds shall be required to be segregated from the other investment and funds of the Servicer.

ANNEX I

------

(ii) The economic benefit of any Servicer interest earnings on such Charge Payments prior to remittance of those collections to the Indenture Trustee, and the Collection Account shall automatically be credited to the benefit of Customers, without the need for any further Commission action, through the Material Remittance Investment Earnings reconciliation process. In furtherance of the foregoing, any Material Remittance Investment Earnings shall be added to the applicable monthly reconciliation amounts remitted to the Indenture Trustee pursuant to <u>Section</u> <u>6.11(c)</u> for the benefit of the Issuer to reduce amounts collected from the Charges.

(e) <u>Calculation of Daily Remittance</u>.

(i) For purposes of calculating the Daily Remittance, (i) all Billed Charges shall be deemed to be collected the same number of days after billing as is equal to the Weighted Average Days Outstanding then in effect and (ii) the Servicer will, on each Servicer Business Day, remit to the Indenture Trustee for deposit in the Collection Account an amount equal to the product of the applicable Billed Charges multiplied by one hundred percent less the system wide charge-off percentage used by the Servicer to calculate the most recent Periodic Billing Requirement. Such product shall constitute the amount of Estimated Collections for such Servicer Business Day. Pursuant to Section 6.11(c) of this Agreement, commencing no later than July 25, 2025, the Servicer shall calculate in each Monthly Servicer's Certificate the amount of Actual Collections for the immediately preceding calendar month as compared to the Estimated Collections forwarded to the Collection Account in respect of such calendar month. No Excess Remittance shall be withdrawn from the Collection Account if such withdrawal would cause the amounts on deposit in the General Subaccount or the Excess Funds Subaccount to be insufficient for the payment of the next installment of interest or principal due at maturity on the next Payment Date or upon acceleration on or before the next Payment Date on the Bonds.

(ii) In accordance with <u>Section</u> <u>4.01(b)</u> of this Agreement, the Servicer shall, in a timely manner so as to perform all required calculations under such <u>Section</u> <u>4.01(b)</u>, update the Weighted Average Days Outstanding and the system-wide charge-off percentage in order to be able to calculate the Periodic Billing Requirement for the next True-Up Adjustment and to calculate any change in the Daily Remittances for the next Calculation Period.

(iii) The Servicer and the Issuer acknowledge that, as contemplated in <u>Section</u> <u>8.01(d)</u> of this Agreement, the Servicer may make certain changes to its current computerized customer information system, which changes, when functional, would affect the Servicer's method of calculating the Charge Payments estimated to have been received by the Servicer during each Collection Period as set forth in this <u>Annex</u> <u>I</u>. Should these changes to the computerized customer information system become functional during the term of this Agreement, the Servicer shall notify Issuer of any proposed change at least 30 days prior to the effective date of such change and the Servicer and the Issuer agree that they shall review the procedures used to calculate the Charge Payments estimated to have been received in light of the capabilities of such new system and shall amend this <u>Annex</u> <u>I</u> in writing to make such modifications and/or substitutions to such procedures as may be appropriate in the interests of efficiency, accuracy, cost and/or system capabilities; <u>provided</u>, <u>however</u>, that the Servicer may not make any modification or substitution that will materially adversely affect the Holders. As soon as practicable, and in no event later than sixty (60) Servicer Business Days after the date on which all Customer accounts are being billed under such new system, the Servicer shall notify in writing the Issuer, the Indenture Trustee, the Rating Agencies and the Commission of the same.

ANNEX I

------

(iv) All calculations of collections, each update of the Weighted Average Days Outstanding or system-wide charge off percentage and any changes in procedures used to calculate the Estimated Collections pursuant to this <u>Section</u> <u>6(e)</u> shall be made in good faith, and in the case of any update pursuant to <u>clause (iii)</u> above or any change in procedures pursuant to <u>clause (iii)</u> above, in a manner reasonably intended to provide estimates and calculations that are at least as accurate as those that would be provided on the Closing Date utilizing the initial procedures.

(f) <u>Remittances</u>.

(i) The Issuer has caused to be established the Collection Account in the name of the Indenture Trustee pursuant to the Indenture.

(ii) The Servicer shall make remittances to the Collection Account in accordance with Section 6.11 of the Agreement.

(iii) In the event of any change of account or change of institution affecting any Collection Account, the Issuer shall provide written notice thereof to the Servicer and the Rating Agencies not later than five (5) Business Days from the effective date of such change.

ANNEX I

## Exhibit 10.2

**Exhibit 10.2** 

**PURCHASE AND SALE AGREEMENT** 

**by and between** 

**KENTUCKY POWER COST RECOVERY LLC,** 

**Issuer** 

**and** 

**KENTUCKY POWER COMPANY,** 

**Seller** 

**Dated as of June 12, 2025** 

------

<u>**TABLE OF CONTENTS**</u> 

<u>Page</u> 

---

| | | |
|:---|:---|:---|
| ARTICLE I | ARTICLE I |  |
|  DEFINITIONS | DEFINITIONS | 1 |
|  SECTION 1.01. | Definitions | 1 |
|  SECTION 1.02. | Other Definitional Provisions | 1 |
| ARTICLE II | ARTICLE II |  |
|  CONVEYANCE OF COST RECOVERY PROPERTY | CONVEYANCE OF COST RECOVERY PROPERTY | 2 |
|  SECTION 2.01. | Conveyance of Cost Recovery Property | 2 |
|  SECTION 2.02. | Conditions to Conveyance of Cost Recovery Property | 3 |
| ARTICLE III | ARTICLE III |  |
|  REPRESENTATIONS AND WARRANTIES OF SELLER | REPRESENTATIONS AND WARRANTIES OF SELLER | 4 |
|  SECTION 3.01. | Organization and Good Standing | 4 |
|  SECTION 3.02. | Due Qualification | 4 |
|  SECTION 3.03. | Power and Authority | 4 |
|  SECTION 3.04. | Binding Obligation | 4 |
|  SECTION 3.05. | No Violation | 5 |
|  SECTION 3.06. | No Proceedings | 5 |
|  SECTION 3.07. | Approvals | 5 |
|  SECTION 3.08. | The Cost Recovery Property | 5 |
|  SECTION 3.09. | Limitations on Representations and Warranties | 9 |
| ARTICLE IV | ARTICLE IV |  |
|  COVENANTS OF THE SELLER | COVENANTS OF THE SELLER | 9 |
|  SECTION 4.01. | Existence | 9 |
|  SECTION 4.02. | No Liens | 10 |
|  SECTION 4.03. | Delivery of Collections | 10 |
|  SECTION 4.04. | Notice of Liens | 10 |
|  SECTION 4.05. | Compliance with Law | 10 |
|  SECTION 4.06. | Covenants Related to Bonds, and Cost Recovery Property | 11 |
|  SECTION 4.07. | Protection of Title | 12 |
|  SECTION 4.08. | Nonpetition Covenants | 12 |
|  SECTION 4.09. | Taxes | 12 |
|  SECTION 4.10. | Issuance Advice Letter | 13 |
|  SECTION 4.11. | Charge Rider | 13 |

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i

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| | | |
|:---|:---|:---|
|  SECTION 4.12. | Notice of Breach to Rating Agencies, Etc. | 13 |
|  SECTION 4.13. | Use of Proceeds | 13 |
|  SECTION 4.14. | Further Assurances | 13 |
| ARTICLE V | ARTICLE V | ARTICLE V |
| THE SELLER | THE SELLER | 13 |
|  SECTION 5.01. | Liability of Seller; Indemnities | 13 |
|  SECTION 5.02. | Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller | 16 |
|  SECTION 5.03. | Limitation on Liability of Seller and Others | 17 |
| ARTICLE VI | ARTICLE VI | ARTICLE VI |
| MISCELLANEOUS PROVISIONS | MISCELLANEOUS PROVISIONS | 17 |
|  SECTION 6.01. | Amendment | 17 |
|  SECTION 6.02. | Notices | 19 |
|  SECTION 6.03. | Assignment | 20 |
|  SECTION 6.04. | Limitations on Rights of Third Parties | 20 |
|  SECTION 6.05. | Severability | 20 |
|  SECTION 6.06. | Separate Counterparts | 20 |
|  SECTION 6.07. | Headings | 21 |
|  SECTION 6.08. | Governing Law | 21 |
|  SECTION 6.09. | Assignment to Indenture Trustee | 21 |
|  SECTION 6.10. | Limitation of Liability | 21 |
|  SECTION 6.11. | Waivers | 21 |
|  SECTION 6.12. | Commission Authority | 21 |

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| | |
|:---|:---|
| EXHIBITS | EXHIBITS |
| Exhibit A | Bill of Sale |

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ii

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**PURCHASE AND SALE AGREEMENT** 

This PURCHASE AND SALE AGREEMENT (this "<u>Agreement</u>"), dated as of June 12, 2025, is between Kentucky Power Cost Recovery LLC, a Delaware limited liability company (the "<u>Issuer</u>"), and Kentucky Power Company, a Kentucky corporation (together with its successors in interest to the extent permitted hereunder, the "<u>Seller</u>").

**RECITALS** 

WHEREAS, the Issuer desires to purchase the Cost Recovery Property created pursuant to the Act and the Financing Order;

WHEREAS, the Seller is willing to sell its rights and interests under the Financing Order to the Issuer whereupon such rights and interests will become the Cost Recovery Property;

WHEREAS, the Issuer, in order to finance the purchase of the Cost Recovery Property, will issue the Bonds under the Indenture; and

WHEREAS, the Issuer, to secure its obligations under the Bonds and the Indenture, will pledge, among other things, all right, title and interest of the Issuer in and to the Cost Recovery Property and this Agreement to the Indenture Trustee for the benefit of the Secured Parties.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

**ARTICLE I** 

**DEFINITIONS** 

SECTION 1.01. <u>Definitions</u>. Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in that certain Indenture (including Appendix A thereto) dated as of the date hereof among the Issuer, U.S. Bank Trust Company, National Association, a national banking association, in its capacity as indenture trustee (the "<u>Indenture Trustee</u>"), and U.S. Bank National Association, a national banking association, in its capacity as securities intermediary (the "<u>Securities Intermediary</u>"), as the same may be amended, restated, supplemented or otherwise modified from time to time.

SECTION 1.02. <u>Other Definitional Provisions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The words "hereof," "herein," "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, Schedule and Exhibit references contained in this Agreement are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the term "including" shall mean "including without limitation".

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Non-capitalized terms used herein which are defined in the Act, as the context requires, have the meanings assigned to such terms in the Act, but without giving effect to amendments to the Act after the date hereof which have a material adverse effect on the Issuer or the Bondholders.

**ARTICLE II** 

**CONVEYANCE OF COST RECOVERY PROPERTY** 

SECTION 2.01. <u>Conveyance of Cost Recovery Property</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) In consideration of the Issuer's payment to the Seller of $475,719,614.04 (the "<u>Purchase Price</u>"), subject to the conditions specified in <u>Section</u> <u>2.02</u>, the Seller does hereby irrevocably sell, assign, and otherwise transfer to the Issuer, without recourse or warranty, except as set forth herein, all right, title and interest of the Seller in and to the Cost Recovery Property (such sale, assignment, and transfer of the Cost Recovery Property includes, to the fullest extent permitted by the Act, the irrevocable right to impose, bill, charge, collect, receive, and adjust Charges and the assignment of the revenues, collections, claims, rights to payments, payments, moneys or proceeds of or arising from the Charges related to the Cost Recovery Property, as the same may be adjusted from time to time). Such sale, assignment, and transfer is hereby expressly stated to be a sale and, pursuant to Section 278.688 of the Act and other applicable law, shall be treated as an absolute transfer and true sale of all of, and not as a pledge of or secured transaction relating to, Seller's right, title and interest in, to and under the Cost Recovery Property. The Seller and the Issuer agree that after giving effect to the sale, assignment, and transfer contemplated hereby the Seller has no right, title or interest in or to the Cost Recovery Property to which a security interest could attach because (i) it has sold, assigned, and transferred all right, title and interest in and to the Cost Recovery Property to the Issuer, (ii) as provided in Section 278.676(3) of the Act, such rights to impose, bill, charge, collect, receive, and adjust Charges are present, intangible property rights which will be created in favor of the Issuer simultaneously when such rights are first transferred to an assignee and pledged in connection with the issuance of the Bonds and (iii) as provided in Sections 278.688(4)(d) of the Act, appropriate notice has been filed in accordance with the rules prescribed by the Secretary of State of the Commonwealth of Kentucky under Section 278.692 of the Act and such transfer of an interest in Cost Recovery Property to an assignee is perfected against all third parties, including subsequent judicial or other lien creditors. If such sale, assignment and transfer is held by any court of competent jurisdiction not to be a true sale as provided in Section 278.688 of the Act, then such sale, assignment and transfer shall be treated as a pledge of the Cost Recovery Property and as the creation of a security interest (within the meaning of the Act and the UCC) in the Cost Recovery Property and, without prejudice to its position that it has absolutely transferred all of its rights in the Cost Recovery Property to the Issuer, the Seller hereby grants a security interest in the Cost Recovery Property to the Issuer and to the Indenture Trustee for the benefit of the Secured Parties to secure their respective rights under the Basic Documents to receive the Charges and all other Cost Recovery Property.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Subject to <u>Section</u> <u>2.02</u>, the Issuer does hereby purchase the Cost Recovery Property from the Seller for the consideration set forth in <u>Section</u> <u>2.01(a)</u>.

SECTION 2.02. <u>Conditions to Conveyance of Cost Recovery Property</u><u> </u>. The obligation of the Issuer to purchase Cost Recovery Property on the Closing Date shall be subject to the satisfaction of each of the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) on or prior to the Closing Date, the Seller shall have delivered to the Issuer a duly executed Bill of Sale identifying the Cost Recovery Property to be conveyed on the Closing Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) on or prior to the Closing Date, the Seller shall have received the Financing Order creating the Cost Recovery Property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) as of the Closing Date, the Seller is not insolvent and will not have been made insolvent by such sale and the Seller is not aware of any pending insolvency with respect to itself;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) as of the Closing Date, the representations and warranties of the Seller set forth in this Agreement shall be true and correct with the same force and effect as if made on the Closing Date (except to the extent that they relate to an earlier date); on and as of the Closing Date no breach of any covenant or agreement of the Seller contained in this Agreement has occurred and is continuing; and no Servicer Default shall have occurred and be continuing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) as of the Closing Date, (A) the Issuer shall have sufficient funds available to pay the purchase price for the Cost Recovery Property to be conveyed on such date and (B) all conditions to the issuance of the Bonds intended to provide such funds set forth in the Indenture shall have been satisfied or waived;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) the Seller shall have delivered to (A) the Rating Agencies and the Issuer any Opinions of Counsel required by the Rating Agencies and (B) the Indenture Trustee any Opinions of Counsel required by the Indenture Trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the Seller shall have received the Purchase Price in funds immediately available on the Closing Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) on and as of the Closing Date, each of the LLC Agreement, the Servicing Agreement, the Administration Agreement, this Agreement, the Indenture, the Financing Order, the Charge Rider and the Act shall be in full force and effect;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) the Bonds shall have received a rating or ratings required by the Financing Order;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) the Seller shall have delivered to the Issuer the Cash Flow Model; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) the Seller shall have delivered to the Indenture Trustee and the Issuer an Officers' Certificate confirming the satisfaction of each condition precedent specified in this <u>Section</u> <u>2.02</u>.

**ARTICLE III** 

**REPRESENTATIONS AND WARRANTIES OF SELLER** 

Subject to <u>Section</u> <u>3.09</u>, the Seller makes the following representations and warranties, as of the Closing Date, and the Seller acknowledges that the Issuer has relied thereon in acquiring the Cost Recovery Property. The Seller also acknowledges that the Commission, on behalf of the Customers, has relied thereon in authorizing the Bonds to be issued. The representations and warranties shall survive the sale and transfer of Cost Recovery Property to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture. The Seller agrees that (i) the Issuer may assign the right to enforce the following representations and warranties to the Indenture Trustee and (ii) the representations and warranties inure to the benefit of the Issuer, the Indenture Trustee and the Commission, on behalf of the Customers.

SECTION 3.01. <u>Organization and Good Standing</u>. The Seller is a corporation duly organized and validly existing and is in good standing under the laws of the state of its organization, with the requisite corporate or other power and authority to own its properties as such properties are owned on the Closing Date and to conduct its business as such business is conducted by it on the Closing Date, and has the requisite corporate or other power and authority to obtain the Financing Order and own the rights and interests under the Financing Order and to sell and assign those rights and interests to the Issuer.

SECTION 3.02. <u>Due Qualification</u>. The Seller is duly qualified to do business and is in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business require such qualifications, licenses or approvals (except where the failure to so qualify or obtain such licenses and approvals would not be reasonably likely to have a material adverse effect on the Seller's business, operations, assets, revenues or properties).

SECTION 3.03. <u>Power and Authority</u>. The Seller has the requisite corporate or other power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Seller under its organizational or governing documents and laws.

SECTION 3.04. <u>Binding Obligation</u>. This Agreement constitutes a legal, valid and binding obligation of the Seller enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors' or secured parties' rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.

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SECTION 3.05. <u>No Violation</u>. The consummation by the Seller of the transactions contemplated by this Agreement and the fulfillment by the Seller of the terms hereof do not: (i) conflict with or result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the Seller's organizational documents, or any indenture or other agreement or instrument to which the Seller is a party or by which it or any of its property is bound; (ii) result in the creation or imposition of any Lien upon any of the Seller's properties pursuant to the terms of any such indenture, agreement or other instrument (other than any Lien that may be granted in the Issuer's favor or any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to the Act or any Lien that may be granted under the Basic Documents); or (iii) violate in any material respect any existing law or any existing order, rule or regulation applicable to the Seller of any Governmental Authority having jurisdiction over the Seller or its properties.

SECTION 3.06. <u>No Proceedings</u>. There are no proceedings pending and, to the Seller's knowledge, there are no proceedings threatened and, to the Seller's knowledge, there are no investigations pending or threatened, before any Governmental Authority having jurisdiction over the Seller or its properties involving or relating to the Seller or the Issuer or, to the Seller's knowledge, any other Person: (i) asserting the invalidity of the Act, the Financing Order, this Agreement, any of the other Basic Documents or the Bonds, (ii) seeking to prevent the issuance of the Bonds or the consummation of any of the transactions contemplated by this Agreement or any of the other Basic Documents, (iii) seeking any determination or ruling that could reasonably be expected to materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of the Act, the Financing Order, this Agreement, any of the other Basic Documents or the Bonds or (iv) seeking to adversely affect the federal income tax or state income or franchise tax classification of the Bonds as debt.

SECTION 3.07. <u>Approvals</u>. Except for UCC financing statement filings under the UCC and the Act, no approval, authorization, consent, order or other action of, or filing with, any Governmental Authority is required in connection with the execution and delivery by the Seller of this Agreement, the performance by the Seller of the transactions contemplated hereby or the fulfillment by the Seller of the terms hereof, except those that have been obtained or made and those that the Seller, in its capacity as Servicer under the Servicing Agreement, is required to make in the future pursuant to the Servicing Agreement.

SECTION 3.08. <u>The Cost Recovery Property</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Information</u>. Subject to <u>subsection</u> <u>(f)</u> below, at the Closing Date, all written information, as amended or supplemented from time to time, provided by the Seller to the Issuer with respect to the Cost Recovery Property (including the Expected Amortization Schedule, the Financing Order and the Issuance Advice Letter relating thereto) is true and correct in all material respects.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Title</u>. It is the intention of the parties hereto that (other than for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes) the transfer and assignment herein contemplated constitute a sale and absolute transfer of the Cost Recovery Property from the Seller to the Issuer and that no interest in, or right or title to, the Cost Recovery Property shall be part of the Seller's estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law. No portion of the Cost Recovery Property has been sold, transferred, assigned or pledged or otherwise conveyed by the Seller to any Person other than the Issuer, and no security agreement, financing statement or equivalent security or lien instrument listing the Seller as debtor covering all or any part of the Cost Recovery Property is on file or of record in any jurisdiction, except such as may have been filed, recorded or made in favor of the Issuer or the Indenture Trustee in connection with the Basic Documents. The Seller has not authorized the filing of and is not aware (after due inquiry) of any UCC financing statement against it that includes a description of collateral including the Cost Recovery Property other than (i) any financing statement filed, recorded or made in favor of the Issuer or the Indenture Trustee in connection with the Basic Documents and (ii) any financing statement being amended in connection with the Intercreditor Agreement to expressly exclude the Cost Recovery Property from the description of collateral. The Seller is not aware (after due inquiry) of any judgment or tax lien filings against either the Seller or the Issuer. At the Closing Date, immediately prior to the sale of the Cost Recovery Property hereunder, the Seller is the original and the sole owner of the Cost Recovery Property free and clear of all Liens and rights of any other Person, and no offsets, defenses or counterclaims exist or have been asserted with respect thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Transfer Filings</u>. On the Closing Date, immediately upon the sale hereunder, the Cost Recovery Property shall be validly transferred, sold, conveyed, and assigned to the Issuer free and clear of all Liens (except for any Lien created in favor of the Indenture Trustee, for the benefit of the Holders, pursuant to the Act or any Lien that may be granted under the Basic Documents) and all filings and action to be made or taken by the Seller (including, without limitation, filings with the Secretary of State of the Commonwealth of Kentucky under the Act) necessary in any jurisdiction to give the Issuer a valid, binding and perfected ownership interest (subject to any Lien created in favor of the Indenture Trustee, for the benefit of the Holders, pursuant to the Act and any Lien that may be granted under the Basic Documents) in the Cost Recovery Property have been made or taken. All filings and action have also been made or taken to perfect the security interest in the Cost Recovery Property granted by the Seller to the Issuer (subject to any Lien in favor of the Indenture Trustee, for the benefit of the Holders, pursuant to the Act and any Lien that may be granted under the Basic Documents) and, to the extent necessary, the Indenture Trustee pursuant to <u>Section</u> <u>2.01</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Financing Order, Issuance Advice Letter and Charge Rider; Other Approvals</u>. On the Closing Date, under the laws of the Commonwealth of Kentucky and the United States in effect on the Closing Date, (i) the Financing Order pursuant to which the rights and interests of the Seller, including the right to impose, bill, charge, collect, receive, and adjust the Charges and, in and to the Cost Recovery Property transferred on such date have been created, is Final and non-appealable and is in full force and effect; (ii) as of the issuance of the Bonds, the Bonds are entitled to the protection of the Act and, accordingly, the Financing Order, the Charges and the Issuance Advice Letter are not revocable by the Commission; (iii) as of the issuance of the

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Bonds, the Charges are in full force and effect and not subject to modification by the Commission except as provided under Section 278.678 of the Act, as implemented by the Financing Order; (iv) the process by which the Financing Order creating the Cost Recovery Property transferred on such date was adopted and approved, and the Financing Order, the Issuance Advice Letter and Charge Rider themselves, comply with all applicable laws, rules and regulations; (v) the Issuance Advice Letter and Charge Rider relating to the Cost Recovery Property transferred on such date have been filed in accordance with the Financing Order creating the Cost Recovery Property transferred on such date and an officer of the Seller has provided the certification to the Commission required by the Issuance Advice Letter; and (vi) no other approval, authorization, consent, order or other action of, or filing with any Governmental Authority is required in connection with the creation of the Cost Recovery Property transferred on such date, except those that have been obtained or made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>State Action</u>. The Commonwealth of Kentucky has pledged pursuant to Section 65.114(2) of the Act that it will not (i) alter the provisions of Sections 278.670 to 278.696 and 65.114 of the Act which authorize the Commission to create the irrevocable contract right or right to sue by the issuance of the Financing Order creating the Cost Recovery Property, making the Charges imposed by the Financing Order irrevocable, binding, or affecting the nonbypassable charges for all existing and future Customers, (ii) take or permit any action that impairs or would impair the value of the Cost Recovery Property or the security for the Bonds or revises the Recovery Costs for which recovery is authorized, (iii) in any way impair the rights and remedies of the Bondholders, assignees and other financing parties, or (iv) except for changes made pursuant to the formula-based true-up mechanism authorized under Section 278.678 of the Act, reduce, alter, or impair the Charges that are to be imposed, billed, charge, collected, and remitted for the benefit of the Bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses or charges incurred, and any contracts to be performed, in connection with the related Bonds have been paid and performed in full. Under the laws of the Commonwealth of Kentucky and the United States, the Commonwealth of Kentucky may not constitutionally take any action of a legislative character including the repeal or amendment of the Act, which would substantially limit, alter or impair the Cost Recovery Property or other rights vested in the Holders pursuant to the Financing Order, or substantially limit, alter, impair or reduce the value or amount of the Cost Recovery Property, unless such action is a reasonable exercise of the sovereign powers of the Commonwealth of Kentucky and of a character reasonable and appropriate to further a legitimate public purpose, and, under the takings clauses of the United States and Kentucky Constitutions, the Commonwealth of Kentucky may not repeal or amend the Act, as implemented by the Financing Order, or take any other action in contravention of its pledge quoted above without paying just compensation to the Holders, as determined by a court of competent jurisdiction if doing so would constitute a permanent appropriation of a substantial property interest of the Holders in the Cost Recovery Property and deprive the Holders of their reasonable expectations arising from their investments in the Bonds. There is no assurance, however, that, even if a court were to award just compensation, it would be sufficient to pay the full amount of principal and interest on the Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>Assumptions</u>. On the Closing Date, based upon the information available to the Seller on such date, the assumptions used in calculating the Charges are reasonable and are made in good faith. Notwithstanding the foregoing, the Seller makes no representation or warranty, express or implied, that amounts actually collected arising from those Charges will in fact be sufficient to meet the payment obligations on the related Bonds or that the assumptions used in calculating such Charges will in fact be realized.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <u>Creation of Cost Recovery Property</u>. Upon the effectiveness of the Financing Order, the Issuance Advice Letter and the Charge Rider with respect to the Cost Recovery Property, the transfer of the Cost Recovery Property pursuant to this Agreement and the filing of the appropriate notice of transfer with the Secretary of State of the Commonwealth of Kentucky: (i) the rights and interests of the Seller under the Financing Order, including the right to impose, bill, charge, collect, receive, and adjust the Charges authorized in the Financing Order, will become "securitized property" as defined in Section 278.670(19) of the Act; (ii) the Cost Recovery Property will constitute an existing, present, and intangible property right or interest therein vested in the Issuer; (iii) the Cost Recovery Property will include (A) the right, title and interest of the Seller in the Financing Order and the Charges and (B) the right to impose, collect and obtain periodic adjustments (with respect to adjustments, in the manner and with the effect provided in Section 4.01(b) of the Servicing Agreement) of such Charges, and the rates and other charges authorized by the Financing Order and all revenues, collections, claims, rights to payments, payments, moneys, or proceeds of or arising from the Charges; (iv) the owner of the Cost Recovery Property will be legally entitled to impose, bill, charge, collect, receive, and adjust Charges in the aggregate sufficient to pay the interest on and principal of the Bonds in accordance with the Indenture, to pay the fees and expenses of servicing the Bonds, to replenish the Capital Subaccount to the Required Capital Level until the Bonds are paid in full and all Ongoing Financing Costs with respect to the Bonds have been paid in full or until the last date permitted for the collection of payments in respect of the Charges under the Financing Order, whichever is earlier, and the Revenue Class allocation percentages in the Financing Order do not prohibit the owner of the Cost Recovery Property from obtaining adjustments and effecting allocations to the Charges which are otherwise permitted by the Act, as implemented by the Financing Order, in order to collect payments of such amounts; and (v) the Cost Recovery Property is not subject to any Lien other than any Lien created in favor of the Indenture Trustee for the benefit of the Holders pursuant to the Act or any Lien that may be granted under the Basic Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>Nature of Representations and Warranties</u>. The representations and warranties set forth in this <u>Section</u> <u>3.08</u>, insofar as they involve conclusions of law, are made not on the basis that the Seller purports to be a legal expert or to be rendering legal advice, but rather to reflect the parties' good faith understanding of the legal basis on which the parties are entering into this Agreement and the other Basic Documents and the basis on which the Holders are purchasing the Bonds and the Commission has authorized the Bonds to be issued, and to reflect the parties' and the Commission's agreement that, if such understanding turns out to be incorrect or inaccurate, the Seller will be obligated to indemnify the Issuer and the Commission (for the benefit of the Customers) and their permitted assigns (to the extent required by and in accordance with <u>Section</u> <u>5.01</u>), and that the Issuer, the Commission (on behalf of the Customers) and their permitted assigns will be entitled to enforce any rights and remedies under the Basic Documents, on account of such inaccuracy to the same extent as if the Seller had breached any other representations or warranties hereunder.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Prospectus</u>. As of the date hereof, the information describing the Seller under the caption "The Depositor, Seller, Initial Servicer and Sponsor" in the prospectus dated June 5, 2025, relating to the Bonds is true and correct in all material respects.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <u>Solvency</u>. After giving effect to the sale of the Cost Recovery Property hereunder, the Seller:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) is solvent and expects to remain solvent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) is adequately capitalized to conduct its business and affairs considering its size and the nature of its business and intended purpose;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) is not engaged in nor does it expect to engage in a business for which its remaining property represents an unreasonably small portion of its capital;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) reasonably believes that it will be able to pay its debts as they come due; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) is able to pay its debts as they mature and does not intend to incur, or believes that it will not incur, indebtedness that it will not be able to repay at its maturity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) <u>No Court Order</u>. There is no order by any court providing for the revocation, alteration, limitation or other impairment of the Act, the Financing Order, the Issuance Advice Letter, the Cost Recovery Property or the Charges or any rights arising under any of them or that seeks to enjoin the performance of any obligations under the Financing Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) <u>Survival of Representations and Warranties</u>. The representations and warranties set forth in this <u>Section</u> <u>3.08</u> shall survive the execution and delivery of this Agreement and may not be waived by any party hereto except pursuant to a written agreement executed in accordance with <u>Article</u> <u>VI</u> and as to which the Rating Agency Condition has been satisfied.

SECTION 3.09. <u>Limitations on Representations and Warranties</u>. Without prejudice to any of the other rights of the parties, the Seller will not be in breach of any representation or warranty, as a result of a change in law by means of any legislative enactment, constitutional amendment or voter initiative. THE SELLER (SOLELY IN ITS CAPACITY AS SELLER) MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, THAT BILLED CHARGES WILL BE ACTUALLY COLLECTED FROM CUSTOMERS.

**ARTICLE IV** 

**COVENANTS OF THE SELLER** 

SECTION 4.01. <u>Existence</u>. Subject to <u>Section</u> <u>5.02</u>, so long as any of the Bonds are Outstanding, the Seller (a) will keep in full force and effect its existence and remain in good standing under the laws of the jurisdiction of its organization, (b) will obtain and preserve its qualification to do business, in each case to the extent that in each such jurisdiction such existence or qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the other Basic Documents to which the Seller is a party and each other instrument

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or agreement necessary or appropriate to the proper administration of this Agreement and the transactions contemplated hereby or to the extent necessary for the Seller to perform its obligations hereunder or thereunder and (c) will continue to operate its electric transmission and distribution system to provide service to its customers (or, if transmission and distribution are split, to provide distribution service directly to its customers) under Commission-approved rate schedules.

SECTION 4.02. <u>No Liens</u>. Except for the conveyance hereunder or any Lien under the Act in favor of the Indenture Trustee for the benefit of the Holders and any Lien that may be granted under the Basic Documents, the Seller will not sell, pledge, assign or transfer, or grant, create, incur, assume or suffer to exist any Lien on, any of the Cost Recovery Property, or any interest therein, and the Seller shall defend the right, title and interest of the Issuer and the Indenture Trustee, on behalf of the Secured Parties, in, to and under the Cost Recovery Property against all claims of third parties claiming through or under the Seller. Kentucky Power, in its capacity as Seller, will not at any time assert any Lien against, or with respect to, any of the Cost Recovery Property.

SECTION 4.03. <u>Delivery of Collections</u>. In the event that the Seller receives collections in respect of the Charges or the proceeds thereof other than in its capacity as the Servicer, the Seller agrees to reallocate or transfer to the Servicer, on behalf of the Issuer, all payments received by it in respect thereof as soon as practicable after receipt thereof, but in no event later than five (5) Business Days after the Seller becomes aware of such receipt. Prior to such remittance to the Servicer by the Seller, the Seller agrees that such amounts are held by it in trust for the Issuer and the Indenture Trustee. If the Seller becomes a party to (a) any future sale agreement selling to the Issuer or any other Affiliate property consisting of charges similar to the Charges sold pursuant to this Agreement, payable by Customers pursuant to the Act or any similar law, or (b) any future trade receivables purchase and sale arrangement or similar arrangement, or an extension to any such existing arrangement, under which Seller sells all or any portion of its accounts receivables, in each case the Seller and the other parties to such arrangement shall enter into an amendment or joinder to the Intercreditor Agreement to acknowledge the rights of the Seller, the Issuer and any future seller and issuer.

SECTION 4.04. <u>Notice of Liens</u>. The Seller shall notify the Issuer and the Indenture Trustee in writing promptly after becoming aware of any Lien on any of the Cost Recovery Property, other than the conveyance hereunder, any Lien under the Basic Documents or any Lien under the Act created in favor of the Indenture Trustee for the benefit of the Holders.

SECTION 4.05. <u>Compliance with Law</u>. The Seller hereby agrees to comply with its organizational or governing documents and all laws, treaties, rules, regulations and determinations of any Governmental Authority applicable to the Seller, except to the extent that failure to so comply would not materially adversely affect the Issuer's or the Indenture Trustee's interests in the Cost Recovery Property or under any of the other Basic Documents to which the Seller is a party or the Seller's performance of its obligations hereunder or under any of the other Basic Documents to which the Seller is a party.

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SECTION 4.06. <u>Covenants Related to Bonds, and Cost Recovery Property</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) So long as any of the Bonds are outstanding, the Seller shall treat the Cost Recovery Property as the Issuer's property for all purposes other than financial reporting, state or federal regulatory or tax purposes, and treat the Bonds as debt for all purposes and specifically as debt of the Issuer, other than for financial reporting, state or federal regulatory or tax purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Solely for the purposes of federal income tax law and, to the extent consistent with applicable state, local and other tax law, for purposes of state, local and other taxes, so long as any of the Bonds are outstanding, the Seller agrees to treat the Bonds as indebtedness of the Seller (as the sole owner of the Issuer) secured by the Collateral unless otherwise required by appropriate taxing authorities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) So long as any of the Bonds are outstanding, the Seller shall disclose in its financial statements that the Issuer and not the Seller is the owner of the Cost Recovery Property and that the assets of the Issuer are not available to pay creditors of the Seller or its Affiliates (other than the Issuer).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) So long as any of the Bonds are outstanding, the Seller shall not own or purchase any Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) So long as the Bonds are outstanding, the Seller shall disclose the effects of all transactions between the Seller and the Issuer in accordance with generally accepted accounting principles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The Seller agrees that, upon the sale by the Seller of the Cost Recovery Property to the Issuer pursuant to this Agreement, (i) to the fullest extent permitted by law, including, as applicable, the Commission's regulations and the Act, the Issuer shall have all of the rights originally held by the Seller with respect to the Cost Recovery Property, including the right (subject to the terms of the Servicing Agreement) to exercise any and all rights and remedies to collect any amounts payable by any Customer in respect of the Cost Recovery Property, notwithstanding any objection or direction to the contrary by the Seller (and the Seller agrees not to make any such objection or to take any such contrary action) and (ii) any payment by any Customer directly to the Issuer shall discharge such Customer's obligations, if any, in respect of the Cost Recovery Property to the extent of such payment, notwithstanding any objection or direction to the contrary by the Seller.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) So long as any of the Bonds are outstanding, (i) in all proceedings relating directly or indirectly to the Cost Recovery Property, the Seller shall affirmatively certify and confirm that it has sold all of its rights and interests in and to such property (other than for financial reporting or tax purposes), (ii) the Seller shall not make any statement or reference in respect of the Cost Recovery Property that is inconsistent with the ownership interest of the Issuer (other than for financial accounting or tax purposes or as required by state or federal regulatory purposes), (iii) the Seller shall not take any action in respect of the Cost Recovery Property except solely in its capacity as the Servicer thereof pursuant to the Servicing Agreement or as otherwise contemplated by the Basic Documents, (iv) the Seller shall not sell "securitized property" under a separate "financing order" in connection with the issuance of additional

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"securitized bonds" (each term as defined in the Act) unless the Rating Agency Condition shall have been satisfied, and (v) neither the Seller nor the Issuer shall take any action, file any tax return, or make any election inconsistent with the treatment of the Issuer, for purposes of federal income tax law and, to the extent consistent with applicable state, local and other tax law, for purposes of state, local and other taxes, as a disregarded entity that is not separate from the Seller (or, if relevant, from another sole owner of the Issuer).

SECTION 4.07. <u>Protection of Title</u>. The Seller shall execute and file such filings, including, without limitation, filings with the Secretary of State of the Commonwealth of Kentucky pursuant to the Act, and cause to be executed (if applicable) and filed such filings, all in such manner and in such places as may be required by law to fully preserve, maintain, protect and perfect the ownership interest of the Issuer and the first priority security interest of the Indenture Trustee in the Cost Recovery Property, including, without limitation, all filings required under the Act and the UCC relating to the transfer of the ownership of the rights and interest in the Cost Recovery Property by the Seller to the Issuer or the pledge of the Issuer's interest in the Cost Recovery Property to the Indenture Trustee. The Seller shall deliver or cause to be delivered to the Issuer and the Indenture Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. The Seller shall institute any action or proceeding necessary to compel performance by the Commission, the Commonwealth of Kentucky or any of their respective agents, of any of their obligations or duties under the Act, the Financing Order or the Issuance Advice Letter. The Seller agrees to take such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, in each case as may be reasonably necessary (i) to protect the Issuer and the Secured Parties from claims, state actions or other actions or proceedings of third parties which, if successfully pursued, would result in a breach of any representation set forth in <u>Article</u> <u>III</u> or any covenant set forth in <u>Article</u> <u>IV</u> and (ii) to block or overturn any attempts to cause a repeal of, modification of or supplement to the Act, the Financing Order, the Issuance Advice Letter or the rights of Holders by legislative enactment or constitutional amendment that would be materially adverse to the Issuer or the Secured Parties or which would otherwise cause an impairment of the rights of the Issuer or the Secured Parties. The costs of any such actions or proceedings will be payable by the Seller.

SECTION 4.08. <u>Nonpetition Covenants</u>. Notwithstanding any prior termination of this Agreement or the Indenture, the Seller shall not, prior to the date which is one year and one day after the termination of the Indenture and payment in full of the Bonds or any other amounts owed under the Indenture, petition or otherwise invoke or cause the Issuer to invoke the process of any Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any federal or state bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of the property of the Issuer, or ordering the winding up or liquidation of the affairs of the Issuer.

SECTION 4.09. <u>Taxes</u>. So long as any of the Bonds are outstanding, the Seller shall, and shall cause each of its subsidiaries to, pay all taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues thereon if the failure to pay any such

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taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the Cost Recovery Property; provided that no such tax need be paid if the Seller or one of its Affiliates is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Seller or such Affiliate has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

SECTION 4.10. <u>Issuance Advice Letter</u>. The Seller hereby agrees not to withdraw the filing of any Issuance Advice Letter with the Commission.

SECTION 4.11. <u>Charge Rider</u>. The Seller hereby agrees to make all reasonable efforts to keep the Charge Rider in full force and effect at all times.

SECTION 4.12. <u>Notice of Breach to Rating Agencies,</u> <u>Etc.</u><u>.</u> Promptly after a Responsible Officer of the Seller obtains actual knowledge thereof, in the event of a breach in any material respect (without regard to any materiality qualifier contained in such representation, warranty or covenant) of any of the Seller's representations, warranties or covenants contained herein (a "<u>Seller</u><u>'</u><u>s Breach</u>"), the Seller shall promptly notify the Issuer, the Indenture Trustee, the Commission and the Rating Agencies in writing of such breach (with prior written notice to the Servicer in order to enable compliance with Section 8.13 of the Servicing Agreement). For the avoidance of doubt, any breach which would adversely affect scheduled payments on the Bonds will be deemed to be a material breach for purposes of this <u>Section</u> <u>4.12</u>.

SECTION 4.13. <u>Use of Proceeds</u>. The Seller shall use the proceeds of the sale of the Cost Recovery Property in accordance with the Financing Order and the Act.

SECTION 4.14. <u>Further Assurances</u>. Upon the request of the Issuer, the Seller shall execute and deliver such further instruments and do such further acts as may be reasonably necessary to carry out more effectually the provisions and purposes of this Agreement.

**ARTICLE V** 

**THE SELLER** 

SECTION 5.01. <u>Liability of Seller; Indemnities</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Seller shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Seller under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Seller shall indemnify the Issuer and the Indenture Trustee (for the benefit of the Secured Parties) and each of their respective officers, directors, employees, trustees, managers and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders as a result of their ownership of a Bond) that may at any time be imposed on or asserted against any such Person as a result of the sale of the Cost Recovery Property to the Issuer, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any Bond; it being understood that the Holders shall be entitled to enforce their rights against the Seller under this <u>Section</u> <u>5.01(b)</u> solely through a cause of action brought for their benefit by the Indenture Trustee.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Seller shall indemnify the Issuer and the Indenture Trustee (for the benefit of the Secured Parties) and each of their respective officers, directors, employees, trustees, managers, and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders as a result of their ownership of a Bond) that may at any time be imposed on or asserted against any such Person as a result of the sale of the Cost Recovery Property to the Issuer, Issuer's ownership and assignment of the Cost Recovery Property, the issuance and sale by the Issuer of the Bonds or the other transactions contemplated in the Basic Documents, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any Bond; it being understood that the Holders shall be entitled to enforce their rights against the Seller under this <u>Section</u> <u>5.01(c)</u> solely through a cause of action brought for their benefit by the Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The Seller shall indemnify the Issuer, the Indenture Trustee (for the benefit of the Secured Parties) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such Person from and against all Losses that may be imposed on, incurred by or asserted against each such Person, in each such case, as a result of a Seller's Breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Indemnification under <u>Section</u> <u>5.01(b)</u>, <u>Section</u> <u>5.01(c)</u>, <u>5.01</u> <u>(d)</u> and <u>5</u><u>.01</u> <u>(f)</u> shall include reasonable and documented out-of-pocket fees and expenses of investigation and litigation (including reasonable attorney's fees and expenses) and any costs or expenses of bringing any claim to enforce such indemnification obligations, except as otherwise expressly provided in this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The Seller shall indemnify the Indenture Trustee (for itself) and each Independent Manager, and any of their respective officers, directors, employees and agents (each, an "<u>Indemnified Person</u>") for, and defend and hold harmless each such Person from and against, any and all Losses incurred by any of such Indemnified Persons as a result of a Seller's Breach, including any costs or expenses of bringing any claim to enforce such indemnification obligation, except to the extent of Losses either resulting from the willful misconduct, bad faith or gross negligence of such Indemnified Person or resulting from a breach of a representation or warranty made by such Indemnified Person in any of the Basic Documents that gives rise to the Seller's Breach. The Seller shall not be required to indemnify an Indemnified Person for any amount paid or payable by such Indemnified Person in the settlement of any action, proceeding or investigation without the prior written consent of the Seller for such settlement, which such consent shall not be unreasonably withheld. Promptly after receipt by an Indemnified Person of notice of the commencement of any action, proceeding or investigation, such Indemnified Person shall, if a claim in respect thereof is to be made against the Seller under this <u>Section</u> <u>5.01(f)</u>, notify the Seller in writing of the commencement thereof. Failure by an Indemnified Person to so notify the Seller shall relieve the Seller from the obligation to indemnify and hold harmless

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such Indemnified Person under this <u>Section</u> <u>5.01(f)</u> only to the extent that the Seller suffers actual prejudice as a result of such failure. With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this <u>Section</u> <u>5.01(f)</u>, the Seller shall be entitled to conduct and control, at its expense and with counsel of its choosing that is reasonably satisfactory to the applicable Indemnified Person(s), the defense of any such action, proceeding or investigation (in which case the Seller shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Person except as set forth below); provided that the Indemnified Person shall have the right to participate in such action, proceeding or investigation through counsel chosen by it and at its own expense. Notwithstanding the Seller's election to assume the defense of any action, proceeding or investigation, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Seller shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the defendants in any such action include both the Indemnified Person and the Seller and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Seller, (ii) the Seller shall not have employed counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action, (iii) the Seller shall authorize the Indemnified Person in writing to employ separate counsel at the expense of the Seller or (iv) in the case of the Indenture Trustee, such action exposes the Indenture Trustee to a material risk of criminal liability or forfeiture or a Servicer Default has occurred and is continuing. Notwithstanding the foregoing, the Seller shall not be obligated to pay for the fees, costs and expenses of more than one separate counsel for the Indemnified Persons other than one local counsel, if appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) The Seller shall indemnify the Servicer (if the Servicer is not the Seller) for the costs of any action instituted by the Servicer pursuant to <u>Section</u> <u>5.02(d)</u> of the Servicing Agreement which are not paid as an Operating Expense in accordance with the priorities set forth in Section 8.02(e) of the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) The Seller shall indemnify the Commission (for the benefit of Customers) for, and defend and hold harmless against, any and all Losses that may be imposed upon, incurred by or asserted against the Customers or the Commission as a result of a Seller's Breach under this Agreement resulting from the Seller's willful misconduct, bad faith or negligence in performance of its duties or observance of its covenants under this Agreement. The indemnification obligation set forth in this paragraph may be enforced by the Commission but is not enforceable by any Customer. Any indemnity payments made to the Commission under this paragraph for the benefit of Customers shall be remitted to the Indenture Trustee promptly for deposit into the Collection Account; provided that, so long as the Seller is also the Servicer, any indemnity payments required to made to the Commission under this paragraph for the benefit of Customers shall be satisfied by Seller in its capacity as Servicer via a credit to Customers on their Bills; provided, further, that any credit to Customers shall not impact the Charges or the Cost Recovery Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The remedies provided in this Agreement are the sole and exclusive remedies against the Seller for breach of its representations and warranties in this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) Indemnification under this <u>Section</u> <u>5.01</u> shall survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Act or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or the termination of this Agreement and will rank on parity with other general, unsecured obligations of the Seller. The Seller shall not indemnify any party under this <u>Section</u> <u>5.01</u> for any changes in law after the Closing Date, whether such changes in law are effected by means of any legislative enactment, constitutional amendment or any final and non-appealable judicial decision.

SECTION 5.02. <u>Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller</u>. Any Person (a) into which the Seller may be merged, converted or consolidated (by operation of law or otherwise), (b) that may result from any merger, conversion or consolidation to which the Seller shall be a party, (c) that may succeed to the properties and assets of the Seller substantially as a whole, (d) which is a successor entity resulting from the division of the Seller into two or more Persons, or (e) which otherwise succeeds to all or substantially all of the electric transmission and distribution business of the Seller (or, if transmission and distribution are not provided by a single entity, which provides wire service directly to Customers), and which Person in any of the foregoing cases executes an agreement of assumption to perform all of the obligations of the Seller hereunder (including the Seller's obligations under <u>Section</u> <u>5.01</u> incurred at any time prior to or after the date of such assumption), shall be the successor to the Seller under this Agreement (a "<u>Permitted Successor</u><u>"</u>) without further act on the part of any of the parties to this Agreement; <u>provided</u>, <u>however</u>, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) immediately after giving effect to such transaction, no representation, warranty or covenant made by the Seller pursuant to <u>Article</u> <u>III</u> or <u>Article</u> <u>IV</u> shall be breached in any material respect and, to the extent the Seller is the Servicer, no Servicer Default, and no event which, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Seller shall have delivered to the Issuer, the Indenture Trustee and each Rating Agency an Officer's Certificate and an Opinion of Counsel from external counsel stating that such consolidation, conversion, merger, division or succession and such agreement of assumption comply with this <u>Section</u> <u>5.02</u> and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Seller shall have delivered to the Issuer, the Indenture Trustee and each Rating Agency (with a copy to the Commission) an Opinion of Counsel from external counsel of the Seller either (A) stating that, in the opinion of such counsel, all filings to be made by the Seller and the Issuer, including filings with the Commission pursuant to the Act, have been authorized, executed (if applicable) and filed that are necessary to fully maintain the respective ownership or security interest, as applicable, of the Issuer and the Indenture Trustee in all of the Cost Recovery Property and reciting the details of such filings, or (B) stating that, in the opinion of such counsel, no such action shall be necessary to maintain such interests,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the Permitted Successor shall been assigned all of Seller's obligations under both the Servicing Agreement and the Administration Agreement (to the extent Seller is no longer required to serve in such respective role or such obligations of Seller can be assigned),

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the Seller shall have delivered to the Issuer, the Indenture Trustee and the Rating Agencies an Opinion of Counsel from independent tax counsel stating that, for federal income tax purposes, such consolidation, conversion, merger, division or succession and such agreement of assumption will not result in a material federal income tax consequence to the Issuer or the Bondholders, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the Seller shall have given the Rating Agencies prior written notice of such transaction (with prior written notice to the Servicer in order to enable compliance with Section 8.13 of the Servicing Agreement).

When any Person (or more than one Person) acquires the properties and assets of the Seller substantially as a whole or otherwise becomes the successor, whether by merger, conversion, consolidation, sale, transfer, lease, management contract or otherwise, to all or substantially all of the electric transmission and distribution business of the Seller (or, if transmission and distribution are not provided by a single entity, provides wire service directly to Customers) in accordance with the terms of this <u>Section</u> <u>5.02</u>, then upon satisfaction of all of the other conditions of this <u>Section</u> <u>5.02</u>, the preceding Seller shall automatically and without further notice be released from all of its obligations hereunder.

SECTION 5.03. <u>Limitation on Liability of Seller and Others</u>. The Seller and any director, officer, employee or agent of the Seller may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising hereunder. Subject to <u>Section</u> <u>4.07</u>, the Seller shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability.

**ARTICLE VI** 

**MISCELLANEOUS PROVISIONS** 

SECTION 6.01. <u>Amendment</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Agreement may be amended in writing by the Seller and the Issuer with ten Business Days' prior written notice given to the Rating Agencies (i) to cure any ambiguity or to correct or supplement any provisions in this Agreement; <u>provided</u>, <u>however</u>, that such action shall not, as evidenced by an Officer's Certificate of the Seller delivered to the Issuer and the Indenture Trustee, adversely affect in any material respect the interests of any Holder, without the consent of the Holders of not less than a majority of the outstanding principal amount of the Bonds; or (ii) to conform the provisions hereof to the description of this Agreement in the Prospectus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In addition, this Agreement may be amended in writing by the Seller and the Issuer with (i) the prior written consent of the Indenture Trustee, (ii) the satisfaction of the Rating Agency Condition and (iii) after the issuance of the Bonds, the satisfaction of the KPSC Condition described in <u>Section</u> <u>6.01(e)</u>; provided that any such amendment may not, as evidenced by an Officer's Certificate of Seller delivered to the Issuer and the Indenture Trustee, adversely affect in any material respect the interest of any Holder of the Bonds, without the

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consent of the Holders of not less than a majority of the outstanding principal amount of the Bonds. In determining whether a majority of Holders have consented, Bonds owned by the Issuer, Seller or any Affiliate of the Issuer or Seller shall be disregarded, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such consent, the Indenture Trustee shall only be required to disregard any Bonds it actually knows to be so owned. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) It shall not be necessary for the consent of Holders pursuant to this <u>Section</u> <u>6.01</u> to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Prior to the execution of any amendment to this Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and rely upon (i) an Opinion of Counsel from external counsel of the Seller stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent have been satisfied and (ii) the Opinion of Counsel referred to in Section 3.01(c)(i) of the Servicing Agreement. The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment which affects the Indenture Trustee's own rights, duties or immunities under this Agreement or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>KPSC Condition</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) With respect to the Commission's consent to any modification or amendment to this Agreement, at least 15 days prior to the effectiveness of any such modification or amendment, the Seller may submit the modification or amendment to the Commission by delivering to the Commission's Executive Director a written request for such consent, which request shall contain:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) a reference to Case No. 2023-00159;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) a statement as to the possible effect of the amendment on Ongoing Financing Costs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) an Officer's Certificate stating that the proposed amendment has been approved by all relevant parties to this Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) a statement identifying the person to whom the Commission or its staff is to address its consent to the proposed amendment or request additional time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Commission or the Commission's Executive Director, within 15 days (subject to extension as provided in clause (e)(iii)) of receiving a notification complying with subparagraph (e)(i), shall have delivered to the office of the person specified in clause (e)(i)(D) a written statement that the Commission might object to the proposed amendment or modification, then, subject to clause (e)(iv) below, such proposed amendment or modification shall not be effective unless and until either (A) the Commission subsequently delivers a written statement that it does not object to such proposed amendment or modification or (B) the Commission is conclusively deemed to not have any objection pursuant to clause (e)(iv) below.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) If the Commission or the Commission's Executive Director, within 15 days of receiving a notification complying with subparagraph (e)(i), shall have delivered to the office of the person specified in clause (e)(i)(D) a written statement requesting an additional amount of time not to exceed 30 days in which to consider such proposed amendment or modification, then such proposed amendment or modification shall not be effective if, within such extended period, the Commission shall have delivered to the office of the person specified in clause (e)(i)(D) a written statement as described in subparagraph (e)(ii), unless and until either (A) the Commission subsequently delivers a written statement that it does not object to such proposed amendment or modification or (B) the Commission is conclusively deemed to not have any objection pursuant to clause (e)(iv) below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) If (A) the Commission or the Commission's Executive Director, has not delivered written notice that the Commission might object to such proposed amendment or modification within the time periods described in subparagraphs (e)(ii) or (e)(iii) above, whichever is applicable, or (B) the Commission or the Commission's Executive Director has delivered such written notice but does not within 45 days of the delivery of the notification in (e)(i) above, provide subsequent written notice confirming that it does in fact object and the reasons therefore or advise that it has initiated a proceeding to determine what action it might take with respect to the matter, then the Commission shall be conclusively deemed not to have any objection to the proposed amendment or modification and such amendment or modification may subsequently become effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Following delivery of a notice to the Commission by the Seller under <u>Section</u> <u>6.01(e)(i)</u> above, the Seller and Issuer may at any time withdraw from the Commission further consideration of any notification of a proposed amendment.

SECTION 6.02. <u>Notices</u>. All demands, notices and communications upon or to the Seller, the Issuer, the Indenture Trustee, the Commission or the Rating Agencies under this Agreement shall be sufficiently given for all purposes hereunder if in writing, and delivered personally, sent by documented delivery service or, to the extent receipt is confirmed telephonically, sent by telecopy or other form of electronic transmission:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) in the case of the Seller, to Kentucky Power Company, at 1 Riverside Plaza, Columbus, Ohio 43215, Attention: Treasurer, Telephone: (614) 716-1000, Email: <u>Treasury_Operations_AEP@aep.com</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) in the case of the Issuer, Kentucky Power Cost Recovery LLC, at 1645 Winchester Avenue, Ashland, Kentucky 41101, Attention: Vice President – Regulatory and Finance, Telephone: (606) 929-1488, Email: <u>Treasury_Operations_AEP@aep.com</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) in the case of the Indenture Trustee, to the Corporate Trust Office;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) in the case of the Commission, to Kentucky Public Service Commission, P.O. Box 615, 211 Sower Boulevard, Frankfort, Kentucky 40602-0615, Telephone: (502) 564-3940, Email: <u>psced@ky.gov</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) in the case of Moody's, to Moody's Investors Service, Inc., ABS/RMBS Monitoring Department, 24<sup>th</sup> Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, Email: <u>ServicerReports@moodys.com</u> (all such notices to be delivered to Moody's in writing by email), and solely for purposes of Rating Agency Condition communications: abscormonitoring@moodys.com;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) in the case of Standard & Poor's, to Standard & Poor's Ratings Group, Inc., Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: <u>servicer_reports@spglobal.com</u> (all such notices to be delivered to Standard & Poor's in writing by email); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) as to each of the foregoing, at such other address as shall be designated by written notice to the other parties.

SECTION 6.03. <u>Assignment</u>. Notwithstanding anything to the contrary contained herein, except as provided in <u>Section</u> <u>5.02</u>, this Agreement may not be assigned by the Seller.

SECTION 6.04. <u>Limitations on Rights of Third Parties</u>. The provisions of this Agreement are solely for the benefit of the Seller, the Issuer, the Indenture Trustee (for the benefit of the Secured Parties), the Commission (for the benefit of the Customers) and the other Persons expressly referred to herein, and such Persons shall have the right to enforce the relevant provisions of this Agreement. Nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Cost Recovery Property or under or in respect of this Agreement or any covenants, conditions or provisions contained herein. Notwithstanding anything to the contrary contained herein, for the avoidance of doubt, any right, remedy or claim to which any Customer may be entitled pursuant to the Financing Order or pursuant to this Agreement may be asserted or exercised only by the Commission (or by an authorized designee in the name of the Commission) for the benefit of such Customer.

SECTION 6.05. <u>Severability</u>. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 6.06. <u>Separate Counterparts</u>. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

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SECTION 6.07. <u>Headings</u>. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

SECTION 6.08. <u>Governing Law</u>. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF KENTUCKY, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 6.09. <u>Assignment to Indenture Trustee</u>. The Seller hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the Secured Parties of all right, title and interest of the Issuer in, to and under this Agreement, the Cost Recovery Property and the proceeds thereof and the assignment of any or all of the Issuer's rights hereunder to the Indenture Trustee for the benefit of the Secured Parties. For the avoidance of doubt, the Indenture Trustee is a third-party beneficiary of this Agreement and is entitled to the rights and benefits hereunder and may enforce the provisions hereof as if it were a party hereto.

SECTION 6.10. <u>Limitation of Liability</u>. It is expressly understood and agreed by the parties hereto that this Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee on behalf of the Secured Parties, in the exercise of the powers and authority conferred and vested in it. The Indenture Trustee in acting hereunder is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.

SECTION 6.11. <u>Waivers</u>. Any default, term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof; <u>provided</u>, <u>however</u>, that no such waiver or extension delivered by the Issuer shall be effective unless both the Commission and the Indenture Trustee (acting at the written direction of the Holders of a majority of the Outstanding Amount of the Bonds) has given its prior written consent thereto. Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if, as to any party, it is authorized in writing by an authorized representative of such party. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

SECTION 6.12. <u>Commission Authority</u>. The Commission also shall be a third-party beneficiary of this Agreement for the benefit of the Customers. In this capacity, so long as a breach constituting a Seller's Breach has occurred and is continuing, the Commission shall be authorized to declare a Seller's Breach under this Agreement.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers as of the day and year first above written.

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| | |
|:---|:---|
| **KENTUCKY POWER COST RECOVERY LLC**, as Issuer | **KENTUCKY POWER COST RECOVERY LLC**, as Issuer |
| By: | /s/ Matthew D. Fransen |
|  | Name: Matthew D. Fransen |
|  | Title: Vice President and Treasurer |
| **KENTUCKY POWER COMPANY**, as Seller | **KENTUCKY POWER COMPANY**, as Seller |
| By: | /s/ Matthew D. Fransen |
|  | Name: Matthew D. Fransen |
|  | Title: Vice President and Treasurer |

---

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| | |
|:---|:---|
| **<u>ACKNOWLEDGED AND ACCEPTED:</u>** | **<u>ACKNOWLEDGED AND ACCEPTED:</u>** |
| **U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION**,<br> as Indenture Trustee | **U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION**,<br> as Indenture Trustee |
| By: | /s/ Matthew M. Smith |
|  | Name: Matthew M. Smith |
|  | Title: Vice President |

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*Signature Page to* 

*Securitized Property Purchase and Sale Agreement* 

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**<u>EXHIBIT A</u>**

**BILL OF SALE** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. This Bill of Sale is being delivered pursuant to the Purchase and Sale Agreement, dated as of June 12, 2025 (the "<u>Sale Agreement</u>"), by and between Kentucky Power Company (the "<u>Seller</u>") and Kentucky Power Cost Recovery LLC (the "<u>Issuer</u>"). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Sale Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. In consideration of the Issuer's delivery to or upon the order of the Seller of $475,719,614.04, the Seller does hereby irrevocably sell, assign and transfer to the Issuer, without recourse or warranty, except as set forth in the Sale Agreement, all right, title and interest of the Seller in and to the Cost Recovery Property identified on Schedule 1 hereto (such sale, transfer, assignment, setting over and conveyance of the Cost Recovery Property includes, to the fullest extent permitted by the Act, the right to impose, bill, charge, collect, receive, and adjust Charges and the assignment of all revenues, collections, claims, rights to payments, payments, moneys or proceeds of or arising from the Charges related to the Cost Recovery Property, as the same may be adjusted from time to time). Such sale, assignment, and transfer is hereby expressly stated to be a sale and, pursuant to Section 278.688 of the Act and other applicable law, shall be treated as an absolute transfer and true sale of all of, and not a pledge of or secured transaction relating to, the Seller's right, title and interest in, to, and under the Cost Recovery Property. The Seller and the Issuer agree that after giving effect to the sale, assignment, and transfer contemplated hereby the Seller has no right, title or interest in or to the Cost Recovery Property to which a security interest could attach because (i) it has sold, assigned and transferred all right, title and interest in and to the Cost Recovery Property to the Issuer and (ii) as provided in the Act, appropriate notice has been filed and such transfer is perfected against all third parties, including subsequent judicial or other lien creditors. If such sale, assignment and transfer is held by any court of competent jurisdiction not to be a true sale as provided in the Act, then such sale, assignment and transfer shall be treated as a pledge of the Cost Recovery Property and as the creation of a security interest (within the meaning of the Act and the UCC) in the Cost Recovery Property and, without prejudice to its position that it has absolutely transferred all of its rights in the Cost Recovery Property to the Issuer, the Seller hereby grants a security interest in the Cost Recovery Property to the Issuer (and, to the extent necessary to qualify the grant as a security interest under the Act and the UCC, to the Indenture Trustee for the benefit of the Secured Parties to secure the right of the Issuer under the Basic Documents to receive the Charges and all other Cost Recovery Property).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The Issuer does hereby purchase the Cost Recovery Property from the Seller for the consideration set forth in the preceding paragraph.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Seller and the Issuer each acknowledge and agree that the purchase price for the Cost Recovery Property sold pursuant to this Bill of Sale and the Sale Agreement is equal to its fair market value at the time of sale.

EXHIBIT A

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The Seller confirms that (i) each of the representations and warranties on the part of the Seller contained in the Sale Agreement are true and correct in all respects on the date hereof as if made on the date hereof and (ii) each condition precedent that must be satisfied under Section 2.02 of the Sale Agreement has been satisfied upon or prior to the execution and delivery of this Bill of Sale by the Seller.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. This Bill of Sale may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. THIS BILL OF SALE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF KENTUCKY, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

EXHIBIT A

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IN WITNESS WHEREOF, the Seller and the Issuer have duly executed this Bill of Sale as of the 12th day of June, 2025.

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| | |
|:---|:---|
| **KENTUCKY POWER COST RECOVERY LLC** | **KENTUCKY POWER COST RECOVERY LLC** |
| By: |  |
|  | Name: Matthew D. Fransen |
|  | Title: Vice President and Treasurer |
| **KENTUCKY POWER COMPANY** | **KENTUCKY POWER COMPANY** |
| By: |  |
|  | Name: Matthew D. Fransen |
|  | Title: Vice President and Treasurer |

---

EXHIBIT A

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SCHEDULE 1

to

BILL OF SALE

COST RECOVERY PROPERTY

All Cost Recovery Property created or arising under the Financing Order dated as of April 11, 2025, issued by the Commission in Case No. 2023-00159 pursuant to the Act, which amends, restates and supersedes the Financing Order issued by the Commission on January 10, 2024, in Case No. 2023-00159.

## Exhibit 10.3

**Exhibit 10.3** 

**ADMINISTRATION AGREEMENT** 

This ADMINISTRATION AGREEMENT, dated as of June 12, 2025 (this "<u>Administration Agreement</u>"), is entered into by and between KENTUCKY POWER COMPANY ("<u>Kentucky Power</u>"), as administrator (in such capacity, the "<u>Administrator</u>"), and KENTUCKY POWER COST RECOVERY LLC, a Delaware limited liability company (the "<u>Issuer</u>"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in <u>Appendix A</u> to the Indenture (as defined below).

W I T N E S S E T H:

WHEREAS, the Issuer is issuing the Bonds pursuant to that certain Indenture (including Appendix A thereto) dated as of June 12, 2025 (as amended and supplemented by the Series Supplement dated as of June 12, 2025, the "<u>Indenture</u>"), by and between the Issuer and U.S. Bank Trust Company, National Association, a national banking association, in its capacity as indenture trustee (the "<u>Indenture Trustee</u>"), and U.S. Bank National Association, a national banking association, in its capacity as a securities intermediary (the "<u>Securities Intermediary</u>"), as the same may be amended, restated, supplemented or otherwise modified from time to time;

WHEREAS, the Issuer has entered into certain agreements in connection with the issuance of the Bonds, including (i) the Indenture, (ii) the Servicing Agreement, dated as of June 12, 2025 (the "<u>Servicing Agreement</u>"), by and between the Issuer and Kentucky Power, as Servicer, (iii) the Purchase and Sale Agreement, dated as of June 12, 2025 (the "<u>Sale Agreement</u>"), by and between the Issuer and Kentucky Power, as Seller, and (iv) the other Basic Documents to which the Issuer is a party, relating to the Bonds (the Indenture, the Servicing Agreement, the Sale Agreement and the other Basic Documents to which the Issuer is a party, as such agreements may be amended and supplemented from time to time, being referred to hereinafter collectively as the "<u>Initial Related Agreements</u>");

WHEREAS, pursuant to the Initial Related Agreements, the Issuer is required to perform certain duties in connection with the Initial Related Agreements, the Bonds and the Collateral pledged to the Indenture Trustee pursuant to the Indenture;

WHEREAS, the Issuer may from time to time enter into and be required to perform certain duties under additional agreements similar to the Initial Related Agreements (together with the Initial Related Agreements, the "<u>Related Agreements</u>");

WHEREAS, the Issuer has no employees, other than its officers and Managers, and does not intend to hire any employees, and consequently desires to have the Administrator perform certain of the duties of the Issuer referred to in the preceding clauses and to provide such additional services consistent with the terms of this Administration Agreement and the Related Agreements as the Issuer may from time to time request;

WHEREAS, the Administrator has the capacity to provide the services and the facilities required thereby and is willing to perform such services and provide such facilities for the Issuer on the terms set forth herein; and

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WHEREAS, the Commission, or its counsel, will enforce this Administration Agreement for the benefit of Customers to the extent permitted by law;

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Duties of the Administrator – Management Services</u>. The Administrator hereby agrees to provide the following corporate management services to the Issuer and to cause third parties to provide professional services required for or contemplated by such services in accordance with the provisions of this Administration Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) furnish the Issuer with ordinary clerical, bookkeeping and other corporate administrative services necessary and appropriate for the Issuer, including, without limitation, the following services:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) maintain at the Premises (as defined below) general accounting records of the Issuer (the "<u>Account Records</u>"), subject to year-end audit, in accordance with generally accepted accounting principles, separate and apart from its own accounting records, prepare or cause to be prepared such quarterly and annual financial statements as may be necessary or appropriate and arrange for year-end audits of the Issuer's financial statements by the Issuer's independent accountants;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) prepare and, after execution by the Issuer, file with the Securities and Exchange Commission (the "<u>SEC</u>") and any applicable state agencies documents required to be filed by the Issuer with the SEC and any applicable state agencies, including, without limitation, periodic reports required to be filed under the Securities Exchange Act of 1934, as amended;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) prepare for execution by the Issuer and cause to be filed such income, franchise or other tax returns of the Issuer as shall be required to be filed by applicable law (the "<u>Tax Returns</u>") and cause to be paid on behalf of the Issuer from the Issuer's funds any taxes required to be paid by the Issuer under applicable law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) prepare or cause to be prepared for execution by the Issuer's managers (the "<u>Managers</u>") minutes of the meetings of the Managers and such other documents deemed appropriate by the Issuer to maintain the separate limited liability company existence and good standing of the Issuer (the "<u>Company Minutes</u>") or otherwise required under the Related Agreements (together with the Account Records, the Tax Returns, the Company Minutes, the LLC Agreement, and the Certificate of Formation, the "<u>Issuer Documents</u>"); and any other documents deliverable by the Issuer thereunder or in connection therewith; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) hold, maintain and preserve at the Premises (or such other place as shall be required by any of the Related Agreements) executed copies (to the extent applicable) of the Issuer Documents and other documents executed by the Issuer thereunder or in connection therewith;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) take such actions on behalf of the Issuer, as are necessary or desirable for the Issuer to keep in full effect its existence, rights and franchises as a limited liability company under the laws of the state of Delaware and obtain and preserve its qualification to do business in each jurisdiction in which it becomes necessary to be so qualified;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) take such actions on behalf of the Issuer as are necessary for the issuance and delivery of the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) provide for the performance by the Issuer of its obligations under each of the Related Agreements, and prepare, or cause to be prepared, all documents, reports, filings, instruments, notices, certificates and opinions that it shall be the duty of the Issuer to prepare, file or deliver pursuant to the Related Agreements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) to the full extent allowable under applicable law, enforce each of the rights of the Issuer under the Related Agreements, at the direction of the Indenture Trustee (acting at the written direction of Holders representing at least a majority of the Outstanding Amount of the Bonds);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) provide for the defense, at the direction of the Managers, of any action, suit or proceeding brought against the Issuer or affecting the Issuer or any of its assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) provide office space (the "<u>Premises</u>") for the Issuer and such reasonable ancillary services as are necessary to carry out the obligations of the Administrator hereunder, including telecopying, duplicating and word processing services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) undertake such other administrative services as may be appropriate, necessary or requested by the Issuer; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) provide such other services as are incidental to the foregoing or as the Issuer and the Administrator may agree.

In providing the services under this <u>Section</u> <u>1</u> and as otherwise provided under this Administration Agreement, the Administrator will not knowingly take any actions on behalf of the Issuer which (i) the Issuer is prohibited from taking under the Related Agreements, or (ii) would cause the Issuer to be in violation of any U.S. federal, state or local law or the LLC Agreement.

In performing its duties hereunder, the Administrator shall use the same degree of care and diligence that the Administrator exercises with respect to performing such duties for its own account and, if applicable, for others.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Compensation</u>. As compensation for the performance of the Administrator's obligations under this Administration Agreement (including the compensation of Persons serving as Manager(s), other than the Independent Manager(s), and officers of the Issuer, but, for the avoidance of doubt, excluding the performance by Kentucky Power of its obligations in its capacity as Servicer), the Administrator shall be entitled to $50,000 annually (the "<u>Administration Fee</u>"), payable by the Issuer in semi-annual installments of $25,000 on each Payment Date, which amount will be pro-rated for the first and final Payment Dates. In addition, the Administrator shall be entitled to be reimbursed by the Issuer for all costs and expenses of services performed by unaffiliated third parties and actually incurred by the Administrator in connection with the

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performance of its obligations under this Administration Agreement in accordance with <u>Section</u> <u>3</u> (but, for the avoidance of doubt, excluding any such costs and expenses incurred by Kentucky Power in its capacity as Servicer), to the extent that such costs and expenses are supported by invoices or other customary documentation and are reasonably allocated to the Issuer ("<u>Reimbursable Administrative Expenses</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Third Party Services</u>. Any services required for or contemplated by the performance of the above-referenced services by the Administrator to be provided by unaffiliated third parties (including independent auditor's fees and counsel fees) may, if provided for or otherwise contemplated by the Financing Order and if the Issuer deems it necessary or desirable, be arranged by the Issuer or by the Administrator at the direction (which may be general or specific) of the Issuer. Costs and expenses associated with the contracting for such third-party professional services may be paid directly by the Issuer or paid by the Administrator and reimbursed by the Issuer in accordance with <u>Section</u> <u>2</u>, or otherwise as the Administrator and the Issuer may mutually arrange.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Additional Information to be Furnished to the Issuer</u>. The Administrator shall furnish to the Issuer from time to time such additional information regarding the Collateral as the Issuer shall reasonably request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Independence of the Administrator</u>. For all purposes of this Administration Agreement, the Administrator shall be an independent contractor and shall not be subject to the supervision of the Issuer with respect to the manner in which it accomplishes the performance of its obligations hereunder. Unless expressly authorized by the Issuer or in this Administration Agreement, the Administrator shall have no authority, and shall not hold itself out as having the authority, to act for or represent the Issuer in any way and shall not otherwise be deemed an agent of the Issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>No Joint Venture</u>. Nothing contained in this Administration Agreement (a) shall constitute the Administrator and the Issuer as partners or co-members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (b) shall be construed to impose any liability as such on either of them or (c) shall be deemed to confer on either of them any express, implied or apparent authority to incur any obligation or liability on behalf of the other.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <u>Other Activities of Administrator</u>. Nothing herein shall prevent the Administrator or any of its directors, members, managers, officers, employees, subsidiaries or affiliates from engaging in other businesses or, in its sole discretion, from acting in a similar capacity as an Administrator for any other person or entity even though such person or entity may engage in business activities similar to those of the Issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <u>Term of Agreement; Resignation and Removal of Administrator</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Administration Agreement shall continue in force until the payment in full of the Bonds and any other amount which may become due and payable under the Indenture, upon which event this Administration Agreement shall automatically terminate.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Subject to Sections <u>8(e)</u> and <u>8(f)</u>, the Administrator may resign its duties hereunder by providing the Issuer with at least sixty (60) days' prior written notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Subject to <u>Sections</u> <u>8(e)</u> and <u>8(f)</u>, the Issuer may remove the Administrator without cause by providing the Administrator with at least sixty (60) days' prior written notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Subject to <u>Sections</u> <u>8(e)</u> and <u>8(f)</u>, at the sole option of the Issuer, the Administrator may be removed immediately upon written notice of termination from the Issuer to the Administrator if any of the following events shall occur:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Administrator shall default in the performance of any of its duties under this Administration Agreement and, after notice of such default, shall fail to cure such default within ten (10) days (or, if such default cannot be cured in such time, shall (A) fail to give within ten (10) days such assurance of cure as shall be reasonably satisfactory to the Issuer and (B) fail to cure such default within thirty (30) days thereafter);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a court of competent jurisdiction shall enter a decree or order for relief, and such decree or order shall not have been vacated within sixty (60) days, in respect of the Administrator in any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or such court shall appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Administrator or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due.

The Administrator agrees that if any of the events specified in <u>clauses</u> <u>(ii)</u> or <u>(iii)</u> of this <u>Section</u> <u>8(d)</u> (an "<u>Administrator Event of Default</u>") shall occur, it shall give written notice thereof to the Issuer and the Indenture Trustee as soon as practicable but in any event within seven (7) days after the happening of such event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) No resignation or removal of the Administrator pursuant to this <u>Section</u> <u>8</u> shall be effective until a successor Administrator has been appointed by the Issuer, and such successor Administrator has agreed in writing to be bound by the terms of this Administration Agreement in the same manner as the Administrator is bound hereunder, and until the KPSC Condition described in <u>Section</u> <u>13(b)</u> hereof has been met.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The appointment of any successor Administrator shall be effective only after satisfaction of the Rating Agency Condition with respect to the proposed appointment and after the KPSC Condition described in <u>Section</u> <u>13(b)</u> hereof has been met.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. <u>Action upon Termination, Resignation or Removal</u>. Promptly upon the effective date of termination of this Administration Agreement pursuant to <u>Section</u> <u>8(a)</u>, the resignation of the Administrator pursuant to <u>Section</u> <u>8(b)</u> or the removal of the Administrator pursuant to <u>Section</u> <u>8(c)</u> or <u>8(d)</u>, the Administrator shall be entitled to be paid a pro-rated portion of the annual fee described in <u>Section</u> <u>2</u> hereof through the date of termination and all Reimbursable Administrative Expenses incurred by it through the date of such termination, resignation or removal. The Administrator shall forthwith upon such termination pursuant to <u>Section</u> <u>8(a)</u> deliver to the Issuer all property and documents of or relating to the Collateral then in the custody of the Administrator. In the event of the resignation of the Administrator pursuant to <u>Section</u> <u>8(b)</u> or the removal of the Administrator pursuant to <u>Section</u> <u>8(c)</u> or <u>8(d)</u>, the Administrator shall cooperate with the Issuer and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties of the Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. <u>Administrator</u><u>'</u><u>s Liability</u>. Except as otherwise provided herein, the Administrator assumes no liability other than to render or stand ready to render the services called for herein, and neither the Administrator nor any of its directors, members, managers, officers, employees, subsidiaries or affiliates shall be responsible for any action of the Issuer or any of the members, managers, officers, employees, subsidiaries or affiliates of the Issuer (other than the Administrator itself). The Administrator shall not be liable for, nor shall it have any obligation with regard to any of the liabilities, whether direct or indirect, absolute or contingent of the Issuer or any of the members, managers, officers, employees, subsidiaries or affiliates of the Issuer (other than the Administrator itself).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. <u>INDEMNITY</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) SUBJECT TO THE PRIORITY OF PAYMENTS SET FORTH IN THE INDENTURE, THE ISSUER SHALL INDEMNIFY THE ADMINISTRATOR, ITS DIRECTORS, MEMBERS, MANAGERS, OFFICERS, EMPLOYEES AND AFFILIATES AGAINST ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL EXPENSES OF LITIGATION OR PREPARATION THEREFOR WHETHER OR NOT THE ADMINISTRATOR IS A PARTY THERETO) WHICH ANY OF THEM MAY PAY OR INCUR ARISING OUT OF OR RELATING TO THIS ADMINISTRATION AGREEMENT AND THE SERVICES CALLED FOR HEREIN; <u>PROVIDED</u>, <u>HOWEVER</u>, THAT SUCH INDEMNITY SHALL NOT APPLY TO ANY SUCH LOSS, CLAIM, DAMAGE, PENALTY, JUDGMENT, LIABILITY OR EXPENSE RESULTING FROM THE ADMINISTRATOR'S NEGLIGENCE OR WILLFUL MISCONDUCT IN THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) THE ADMINISTRATOR SHALL INDEMNIFY THE COMMISSION (FOR THE BENEFIT OF THE CUSTOMERS), THE ISSUER, ITS MEMBERS, MANAGERS, OFFICERS AND EMPLOYEES AGAINST ALL LOSSES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL EXPENSES OF LITIGATION OR PREPARATION THEREFOR WHETHER OR NOT THE ISSUER IS A PARTY THERETO, AND ANY LOSS RESULTING FROM HIGHER COMPENSATION PAYABLE TO A SUCCESSOR ADMINISTRATOR AS PROVIDED IN THE FINANCING ORDER) WHICH ANY OF THEM MAY INCUR AS A RESULT OF THE ADMINISTRATOR'S NEGLIGENCE OR WILLFUL MISCONDUCT IN THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER. THE INDEMNIFICATION OBLIGATION SET FORTH IN THIS PARAGRAPH MAY BE ENFORCED BY THE COMMISSION BUT IS NOT ENFORCEABLE BY ANY CUSTOMER.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. <u>Notices</u>. Any notice, report or other communication given hereunder shall be in writing and addressed as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) if to the Issuer, to:

Kentucky Power Cost Recovery LLC

1645 Winchester Avenue

Ashland, Kentucky 41101

Attention: Vice President – Regulatory and Finance

Telephone: (606) 929-1488

Email: Treasury_Operations_AEP@aep.com

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) if to the Administrator, to:

Kentucky Power Company

1 Riverside Plaza

Columbus, Ohio 43215

Attention: Treasurer

Telephone: (614) 716-1000

Email: Treasury_Operations_AEP@aep.com

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) if to the Indenture Trustee, to the Corporate Trust Office;

or to such other address as any party shall have provided to the other parties in writing. In the case of the Issuer or the Administrator, any notice required to be in writing hereunder shall be deemed given if such notice is mailed by certified mail, postage prepaid, or hand-delivered to the address of such party as provided above. In the case of the Indenture Trustee, any notice required hereunder shall be in writing and shall be effective pursuant to the terms of Section 10.04 of the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. <u>Amendments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>General</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) This Administration Agreement may be amended from time to time by a written amendment duly executed and delivered by each of the Issuer and the Administrator, with ten (10) Business Days' prior written notice given to the Rating Agencies, but without the consent of any of the Holders, (A) to cure any ambiguity or to correct or supplement any provisions in this Administration Agreement; <u>provided</u>, <u>however</u>, that the Issuer and the Indenture Trustee shall receive an Officer's Certificate of the Administrator stating that the execution of such amendment shall not adversely affect in any material respect the interests of any Holder, that such amendment is authorized and permitted and that all conditions precedent have been satisfied; or (B) to conform the provisions hereof to the description of this Administration Agreement in the Prospectus.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) In addition, this Administration Agreement may be amended from time to time by a written amendment duly executed and delivered by each of the Issuer and the Administrator with (A) the prior written consent of the Indenture Trustee, (B) the satisfaction of the Rating Agency Condition and (C) after the issuance of the Bonds, the satisfaction of the KPSC Condition described in <u>Section</u> <u>13(b)</u>; <u>provided</u> that the Issuer and the Indenture Trustee shall receive an Officer's Certificate of the Administrator stating that the execution of such amendment shall not adversely affect in any material respect the interests of any Holder without the consent of the Holders of a majority of the outstanding principal amount of the Bonds, that such amendment is authorized and permitted and that all conditions precedent have been satisfied. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>KPSC Condition</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) With respect to the Commission's consent to any amendment or modification (including but not limited to the resignation or replacement of the Administrator or the waiver of an Event of Default under the Administration Agreement) to this Administration Agreement, at least 15 days prior to the effectiveness of any such amendment, the Administrator may submit the amendment to the Commission by delivering to the Commission's Executive Director a written request for such consent, which request shall contain:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) a reference to Case No. 2023-00159;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) a statement as to the possible effect of the amendment on Ongoing Financing Costs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) an Officer's Certificate stating that the proposed amendment has been approved by all parties to this Administration Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) a statement identifying the person to whom the Commission or its staff is to address its consent to the proposed amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Commission or the Commission's Executive Director, within 15 days (subject to extension as provided in clause (b)(iii)) of receiving a notification complying with subparagraph (b)(i), shall have delivered to the office of the person specified in clause (b)(i)(D) a written statement that the Commission might object to the proposed amendment or modification, then, subject to clause (b)(iv) below, such proposed amendment or modification shall not be effective unless and until either (A) the Commission subsequently delivers a written statement that it does not object to such proposed amendment or modification or (B) the Commission is conclusively deemed to not have any objection pursuant to clause (b)(iv) below.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) If the Commission or the Commission's Executive Director, within 15 days of receiving a notification complying with subparagraph (b)(i), shall have delivered to the office of the person specified in clause (b)(i)(D) a written statement requesting an additional amount of time not to exceed 30 days in which to consider such proposed amendment or modification, then such proposed amendment or modification shall not be effective if, within such extended period, the Commission shall have delivered to the office of the person specified in clause (b)(i)(D) a written statement as described in subparagraph (b)(ii), unless and until either (A) the Commission subsequently delivers a written statement that it does not object to such proposed amendment or modification or (B) the Commission is conclusively deemed to not have any objection pursuant to clause (b)(iv) below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) If (A) the Commission or the Commission's Executive Director, has not delivered written notice that the Commission might object to such proposed amendment or modification within the time periods described in subparagraphs (b)(ii) or (b)(iii) above, whichever is applicable, or (B) the Commission or the Commission's Executive Director has delivered such written notice but does not within 45 days of the delivery of the notification in (b)(i) above, provide subsequent written notice confirming that it does in fact object and the reasons therefore or advise that it has initiated a proceeding to determine what action it might take with respect to the matter, then the Commission shall be conclusively deemed not to have any objection to the proposed amendment or modification and such amendment or modification may subsequently become effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Following delivery of a notice to the Commission by the Administrator under <u>Section</u> <u>13(b)(i)</u> above, the Administrator and Issuer may at any time withdraw from the Commission further consideration of any notification of a proposed amendment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. <u>Successors and Assigns</u>. This Administration Agreement may not be assigned by the Administrator unless such assignment is previously consented to in writing by the Issuer and the Indenture Trustee (acting at the written direction of the Holders representing at least a majority of the Outstanding Amount of the Bonds) and subject to the satisfaction of the KPSC Condition and the Rating Agency Condition in connection therewith. Any assignment with such consent and satisfaction, if accepted by the assignee, shall bind the assignee hereunder in the same manner as the Administrator is bound hereunder. Notwithstanding the foregoing, this Administration Agreement may be assigned by the Administrator without the consent of the Issuer or the Indenture Trustee and without satisfaction of the Rating Agency Condition or the KPSC Condition to a corporation or other organization that is a successor (by merger, reorganization, consolidation or purchase of assets) to the Administrator, including without limitation any Permitted Successor; <u>provided</u> that such successor or organization executes and delivers to the Issuer an agreement in which such corporation or other organization agrees to be bound hereunder by the terms of said assignment in the same manner as the Administrator is bound hereunder. Subject to the foregoing, this Administration Agreement shall bind any successors or assigns of the parties hereto. Upon satisfaction of all of the conditions of this <u>Section</u> <u>14</u>, the preceding Administrator shall automatically and without further notice be released from all of its obligations hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. <u>Governing Law</u>. This Administration Agreement shall be construed in accordance with the laws of the State of Kentucky, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16. <u>Headings</u>. The Section headings hereof have been inserted for convenience of reference only and shall not be construed to affect the meaning, construction or effect of this Administration Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17. <u>Counterparts</u>. This Administration Agreement may be executed in counterparts, each of which when so executed shall be an original, but all of which together shall constitute but one and the same Administration Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18. <u>Severability</u>. Any provision of this Administration Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19. <u>Nonpetition</u> <u>Covenant</u>. Notwithstanding any prior termination of this Administration Agreement, the Administrator covenants that it shall not, prior to the date which is one year and one day after payment in full of the Bonds, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any U.S. federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20. <u>Assignment to Indenture Trustee</u>. The Administrator hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee for the benefit of the Secured Parties pursuant to the Indenture of any or all of the Issuer's rights hereunder and the assignment of any or all of the Issuer's rights hereunder to the Indenture Trustee for the benefit of the Secured Parties. For the avoidance of doubt, the Indenture Trustee is a third-party beneficiary of this Administration Agreement and is entitled to the rights and benefits hereunder and may enforce the provisions hereof as if it were a party hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21. <u>Commission Authority</u>. The Commission also shall be a third-party beneficiary of this Administration Agreement for the benefit of the Customers. In this capacity, so long as an event constituting an Administrator Event of Default has occurred and is continuing, the Commission shall be authorized to declare an Administrator Event of Default under this Administration Agreement.

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

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IN WITNESS WHEREOF, the parties have caused this Administration Agreement to be duly executed and delivered as of the day and year first above written.

---

| | |
|:---|:---|
| **KENTUCKY POWER COST RECOVERY LLC**,<br> as Issuer | **KENTUCKY POWER COST RECOVERY LLC**,<br> as Issuer |
| By: | /s/ Matthew D. Fransen |
| Name: | Matthew D. Fransen |
|  Title: | Vice President and Treasurer |
| **KENTUCKY POWER COMPANY**,<br> as Administrator | **KENTUCKY POWER COMPANY**,<br> as Administrator |
| By: | /s/ Matthew D. Fransen |
| Name: | Matthew D. Fransen |
|  Title: | Vice President and Treasurer |

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*Signature Page to* 

*Administration Agreement*

## Exhibit 10.4

**Exhibit 10.4** 

**JOINDER TO INTERCREDITOR AGREEMENT** 

**RELATING TO** 

**SERIES 2025 SENIOR SECURED RECOVERY BONDS –** 

**KENTUCKY POWER COST RECOVERY LLC** 

This JOINDER TO INTERCREDITOR AGREEMENT (this "<u>Joinder</u>"), dated as of June 12, 2025, is entered into by each of the following Persons, in its capacity(ies) specified below (each, an "<u>Additional Party</u>"), AEP CREDIT, INC., a Delaware limited liability company (the "<u>Receivables Buyer</u>"), and JPMorgan Chase Bank, N.A., as Administrative Agent for the Receivables Purchasers and as Control Agent under the Intercreditor Agreement (in such capacities, the "<u>Agent</u>"):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Kentucky Power Company, a Kentucky corporation, as a "Company", "Securitization Property
Servicer" and "Receivables Sub-Servicer";

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Kentucky Power Cost Recovery LLC, a Delaware limited liability company, as a "Bond Issuer"; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• U.S. Bank Trust Company, National Association, a national banking association, not in its individual capacity
but solely in its capacity as an "Indenture Trustee".

Reference is made to the Intercreditor Agreement, dated as of September 7, 2022, as amended and restated as of December 9, 2024 (the "<u>Intercreditor Agreement</u>"), by and among the Receivables Buyer, the Agent, each Company from time to time party thereto, each Bond Issuer from time to time party thereto and each Indenture Trustee from time to time party thereto. The defined terms contained in the Intercreditor Agreement are incorporated herein.

Each Additional Party hereby agrees (a) to become a party to the Intercreditor Agreement for all purposes thereof on the terms set forth therein in the capacity specified above; (b) to be bound by the terms of the Intercreditor Agreement as if such Additional Party had executed and delivered the Intercreditor Agreement as an original party thereto in such capacity; (c) the "Agency Agreement", "Commission", "Indenture", "Purchase Agreement", "Sale Agreement", "Securitization Property", "Securitization Charges" and "Servicing Agreement" specified on <u>Schedule 1</u> to this Joinder shall constitute an Agency Agreement, Commission, Indenture, Purchase Agreement, Sale Agreement, Securitization Property, Securitization Charges and Servicing Agreement, respectively, for all purposes under the Intercreditor Agreement; and (d) any communications, including notices and instructions, with respect to such Additional Party may be given at the address for such Additional Party specified on <u>Schedule 1</u> hereto.

The Indenture Trustee as an Additional Party under this Intercreditor Agreement and pursuant to Section 16 of the Intercreditor Agreement, is entitled to all the rights, benefits, protection, immunities, and indemnities afforded to it under the Indenture.

The provisions of Section 9 (*Governing Law; Jurisdiction; Waiver of Jury Trial*) of the Intercreditor Agreement will apply with like effect to this Joinder.

------

IN WITNESS WHEREOF, the parties have caused this Joinder to be executed by their respective officers thereunto duly authorized, as of the date first above written.

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| | |
|:---|:---|
| **KENTUCKY POWER COMPANY,** | **KENTUCKY POWER COMPANY,** |
| as a Company, a Securitization Property Servicer and a Receivables Sub-Servicer | as a Company, a Securitization Property Servicer and a Receivables Sub-Servicer |
| By: | /s/ Matthew D. Fransen |
|  | Name: Matthew D. Fransen |
|  | Title: Treasurer and Vice President |
| **KENTUCKY POWER COST RECOVERY LLC,** as a Bond Issuer | **KENTUCKY POWER COST RECOVERY LLC,** as a Bond Issuer |
| By: | /s/ Matthew D. Fransen |
|  | Name: Matthew D. Fransen |
|  | Title: Treasurer and Vice President |
| **U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,** as an Indenture Trustee | **U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,** as an Indenture Trustee |
| By: | /s/ Matthew M. Smith |
|  | Name: Matthew M. Smith |
|  | Title: Vice President |
| **AEP CREDIT, INC.,** | **AEP CREDIT, INC.,** |
| as Receivables Buyer | as Receivables Buyer |
| By: | /s/ Matthew D. Fransen |
|  | Name: Matthew D. Fransen |
|  | Title: Treasurer and Vice President |
| **JPMORGAN CHASE BANK, N.A.,** | **JPMORGAN CHASE BANK, N.A.,** |
| as Administrative Agent and Control Agent | as Administrative Agent and Control Agent |
| By: | /s/ Josh Harraka |
|  | Name: Josh Harraka |
|  | Title: Vice President |

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*Signature Page to* 

*Joinder to Intercreditor Agreement* 

(*Kentucky Power Cost Recovery LLC*)

------

<u>Schedule 1 to Joinder</u> 

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| | |
|:---|:---|
| **Company, Securitization Property Servicer and Receivables Sub-Servicer** | Kentucky Power Company |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notice Address | One Riverside Plaza<br> Columbus, Ohio 43215<br> Attention: Treasurer<br> Telephone: (614) 716-1000<br> Email: Treasury_Operations_AEP@aep.com |
| **Bond Issuer** | Kentucky Power Cost Recovery LLC |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notice Address | 1645 Winchester Avenue<br> Ashland, Kentucky 41101<br> Attention: Vice President – Regulatory and Finance<br> Telephone: (606) 929-1488<br> Email: Treasury_Operations_AEP@aep.com |
| **Indenture Trustee** | U.S. Bank Trust Company, National Association |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notice Address | 190 South LaSalle Street, 7th Floor, MK-IL-SL7R<br> Chicago, Illinois 60603<br> Attention: Corporate Trust Services / Kentucky Power Cost Recovery LLC<br> Telephone: (312) 332-7496<br> Email: matthew.smith2@usbank.com; melissa.rosal@usbank.com; and maryann.turbak@usbank.com |
| **Agency Agreement** | Third Amended and Restated Agency Agreement, dated as of August 25, 2004, by and between Receivables Buyer and the Company, as amended, restated or modified from time to time |
| **Commission** | Kentucky Public Service Commission (including any governmental authority succeeding to the duties of such agency) |
| **Financing Order** | The Financing Order, issued on April 11, 2025, in Case No. 2023-00159, by the Commission pursuant to the Securitization Act, which amends, restates and supersedes the Financing Order issued by the Commission on January 10, 2024 |
| **Indenture** | Indenture, dated as of June 12, 2025, by and between the Bond Issuer, the Indenture Trustee and U.S. Bank National Association, as securities intermediary, as amended, restated or modified from time to time |
| **Purchase Agreement** | Third Amended and Restated Purchase Agreement, dated as of August 25, 2004, by and between Receivables Buyer and the Company, as amended, restated or modified from time to time |
| **Sale Agreement** | Purchase and Sale Agreement, dated as of June 12, 2025, by and between the Bond Issuer and the Company, as amended, restated or modified from time to time |
| **Securitization Act** | Collectively, Chapter 278 of Title XXIV Public Utilities (KRS §§ 278.010, 278.670-.696) and Chapter 65 Counties, Cities, and Other Local Units of the act relating to investor-owned utilities (KRS § 65.114), as amended from time to time |
| **Securitization Charges** | The "securitized surcharges" (as defined in Section 278.670(20) of Title XXIV Public Utilities of the Kentucky Revised Statutes) approved by the Commission in the Financing Order |

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Schedule 1 to Joinder

------

---

| | |
|:---|:---|
| **Securitization Property** | The "securitized property" (as defined in Section 278.670(19) of Title XXIV Public Utilities of the Kentucky Revised Statutes) created pursuant to the Financing Order |
| **Servicing Agreement** | Servicing Agreement, dated as of June 12, 2025, by and between the Bond Issuer and the Company, as amended, restated or modified from time to time |

---

Schedule 1 to Joinder

## Exhibit 99.2

**Exhibit 99.2** 

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| | |
|:---|:---|
| ![LOGO](g30122g0610030905772.jpg)  | SIDLEY AUSTIN LLP<br> 787 SEVENTH AVENUE<br> NEW YORK, NY 10019<br> +1 212 839 5300<br> +1 212 839 5599 FAX<br>AMERICA • ASIA PACIFIC • EUROPE |

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June 12, 2025

To Each of the Persons Listed

on Schedule A Attached Hereto

Re: <u>Federal Constitutional Issues Related to</u> <u>Kentucky Power Cost Recovery LLC Series</u> <u>2025 Senior Secured Recovery Bonds</u>

Ladies and Gentlemen:

We have served as special counsel to Kentucky Power Company, a Kentucky corporation ("<u>Kentucky Power</u>"), in connection with the issuance and sale on the date hereof by Kentucky Power Cost Recovery LLC, a Delaware limited liability company (the "<u>Issuer</u>"), of $477,749,000 aggregate principal amount of the Issuer's Series 2025 Senior Secured Recovery Bonds (the "<u>Bonds</u>"), which are more fully described in the Prospectus dated June 5, 2025. The Bonds are being sold pursuant to the provisions of the Underwriting Agreement dated June 5, 2025 among Kentucky Power, the Issuer and Jefferies LLC, as representative of the underwriters named in Schedule I to the Underwriting Agreement (the "<u>Underwriters</u>"). The Bonds are being issued pursuant to the provisions of the Indenture dated as of the date hereof, as supplemented by the Series Supplement dated as of the date hereof (together with the Indenture, the "<u>Indenture</u>"), among the Issuer, U.S. Bank Trust Company, National Association, as indenture trustee (the "<u>Indenture Trustee</u>"), and U.S. Bank National Association, as securities intermediary. Under the Indenture, the Indenture Trustee holds, among other things, Cost Recovery Property as described below as collateral security for the payment of the Bonds. All capitalized terms used herein and not otherwise defined shall have the meaning specified in Appendix A to the Indenture unless the context clearly indicates otherwise.

"<u>Cost Recovery Property</u>" means the "securitized property" as defined in Chapter 278 of Kentucky's Title XXIV Public Utilities law (collectively, with Chapter 65 of Kentucky's Title IX Counties, Cities, and Other Local Units, the "<u>Securitization Act</u>"), at Section 278.670(19), that was created in favor of Kentucky Power, pursuant to a financing order (the "<u>Financing Order</u>") issued by the Public Service Commission of the Commonwealth of Kentucky (the "<u>Commission</u>") on April 11, 2025, in Case No. 2023-00159. The Cost Recovery Property was assigned to the Issuer pursuant to the provisions of the Sale Agreement dated as of the date hereof between Kentucky Power and the Issuer in consideration for the payment by the Issuer to Kentucky Power of the proceeds of the sale of the Bonds, net of certain issuance costs. The Cost Recovery Property includes the right to impose, bill, charge, collect and receive certain "nonbypassable" "securitized surcharges" (each as defined in the Securitization Act) described in the Financing Order (the "<u>Charges</u>"), in an amount sufficient to repay, finance or refinance the Bonds.

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The Charges may be periodically adjusted, in the manner authorized in the Financing Order, in order to enhance the probability that the revenues received by the Issuer from the Charges are sufficient to (i) amortize the Bonds pursuant to the amortization schedule to be followed in accordance with the provisions of the Bonds and the Indenture, (ii) pay interest thereon and related fees and expenses, and (iii) maintain the required reserves for the payment of the Bonds.

The Financing Order was issued in response to an application for its issuance that was filed by Kentucky Power with the Commission pursuant to the provisions of the Securitization Act. The Financing Order became final and not subject to further appeal on May 15, 2025.

**Questions Presented and Opinions** 

You have requested our opinion as to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) whether the State Pledge (as defined below) creates a contractual relationship between the Commonwealth of Kentucky (the "<u>State</u>") and the holders of the Bonds (the "<u>Holders</u>") that falls within the scope of the "contract clause" of the U.S. Constitution (Article I, Section 10 (the "<u>Federal Contract Clause</u>"));

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) whether the Holders could challenge successfully under the Federal Contract Clause the constitutionality of either any legislation passed by the Kentucky legislature (the "<u>Legislature</u>") which becomes law, or any action of the Commission related to its exercise of powers granted by the Legislature, including rescission or amendment of the Financing Order (all referred to herein as "<u>Legislative Action</u>") that in each case impairs the value of the Cost Recovery Property or the Charges (other than as contemplated under the formula-based true-up mechanism authorized by the Securitization Act and the Financing Order) so as to impair (i) the terms of the Indenture or the Bonds or (ii) the rights and remedies of the Holders (or the Indenture Trustee acting on their behalf) (any impairment described in clause (i) or (ii) being referred to herein as an "<u>Impairment</u>") prior to the time that the Bonds are fully paid and discharged;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) whether preliminary injunctive relief would be available under federal law to delay implementation of Legislative Action that impairs the value of the Cost Recovery Property or otherwise cause an Impairment pending final adjudication of a claim challenging such Legislative Action in U.S. federal court and, assuming a favorable final adjudication of such claim, whether relief would be available to enjoin permanently the implementation of the challenged Legislative Action; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) whether, under the Fifth Amendment to the United States Constitution (made applicable to the Commonwealth by the Fourteenth Amendment to the United States Constitution), which provides in part "nor shall private property be taken for public use, without just compensation" (the "<u>Federal T</u><u>akings Clause</u>"), the Commonwealth could repeal or amend the Securitization Act or take any other action in contravention of the State Pledge without paying just compensation to the Holders, as determined by a court of competent jurisdiction, if doing so (a) constituted a permanent appropriation of a substantial property interest of the Holders in the Cost Recovery Property or denied all economically productive use of the Cost Recovery Property; (b) destroyed the Cost Recovery Property other than in response to emergency conditions; or (c) substantially impaired the value of the Cost Recovery Property or the Charges (other than as contemplated under the formula-based true-up mechanism authorized by the Securitization Act and the Financing Order) so as to unduly interfere with the reasonable expectations of the Holders arising from their investments in the Bonds (a "<u>Substantial Taking</u>").

As discussed in more detail in the opinion letter of Stites & Harbison PLLC ("<u>Stites</u>") of even date herewith, the Securitization Act authorizes the Commission "to create an irrevocable contract right," KRS 65.114(2)(a), and the Commission has acknowledged in the Financing Order that the Commission is bound by the State Pledge and that "the Commission's obligations under [the] Financing Order relating to the [Bonds] … are legally enforceable against the Commission."<sup>1</sup> The State Pledge further contemplates that features of the State Pledge may be incorporated into the Bonds. KRS 65.114(3).

Based on the foregoing, and supported by the conclusion in the opinion letter of Stites of even date herewith, that the Commission is contractually bound by the State Pledge as a matter of Kentucky law, based upon our review of relevant judicial authority, as set forth in this letter, but subject to the qualifications, limitations and assumptions (including the assumption that any Impairment would be "substantial") set forth herein and in the Stites opinion, it is our opinion that a reviewing court of competent jurisdiction, applying the decisions and analysis used in federal courts, in a properly prepared and presented case:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) would conclude that the State Pledge creates a contractual relationship between the Holders and the Commonwealth that falls within the scope of the Federal Contract Clause;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) would conclude that, absent a demonstration by the Commonwealth that an Impairment is necessary to further a significant and legitimate public purpose, the Holders (or the Indenture Trustee acting on their behalf) could successfully challenge under the Federal Contract Clause the constitutionality of any Legislative Action determined by such court to limit, alter, impair or reduce the value of the Cost Recovery Property or otherwise cause an Impairment prior to the time that the Bonds are fully paid and discharged;

<sup>1</sup> See Conclusion of Law No. 42 in the Financing Order.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) with respect to the questions presented above in (b), although sound and substantial arguments support the granting of preliminary injunctive relief, the decision to do so will be in the discretion of the court requested to take such action, which will be exercised on the basis of the considerations discussed in Part II below; and a federal court should conclude that permanent injunctive relief is available under federal law to prevent implementation of Legislative Action hereafter taken and determined by such court to limit, alter, impair or reduce the value of the Cost Recovery Property or otherwise cause an Impairment in violation of the Federal Contract Clause; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) would conclude under the Federal Takings Clause that the Commonwealth would be required to pay just compensation to Holders if the Commonwealth's repeal or amendment of the Securitization Act or taking of any other action in contravention of the State Pledge constituted a Substantial Taking.

We also note, with respect to the opinion in (ii), that existing case law indicates that the Commonwealth would have to establish that any Impairment is necessary and reasonably tailored to address a significant public purpose, such as remedying or providing relief for a broad, widespread economic or social problem. The cases also indicate that the Commonwealth's justification would be subjected to a higher degree of scrutiny, and that the Commonwealth would bear a more substantial burden, if the Legislative Action impairs a contract to which the Commonwealth is a party (which we believe to be the case here), as contrasted to a contract solely between private parties.

We are not aware of any reported controlling judicial precedents that are directly on point with respect to the questions raised above. Accordingly, our analysis is necessarily a reasoned application of judicial decisions involving similar or analogous circumstances. Moreover, the application of equitable principles (including the availability of injunctive relief or the issuance of a stay pending appeal) is subject to the discretion of the court that is asked to apply them. We cannot predict the facts and circumstances that will be present in the future and may be relevant to the exercise of such discretion. Consequently, there can be no assurance that a court will follow our reasoning or reach the conclusions that we believe current judicial precedent supports.

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This letter is limited to the federal laws of the United States of America. Our opinions are based upon our evaluation of existing judicial decisions and arguments related to the factual circumstances likely to exist at the time of a Federal Contract Clause or Federal Takings Clause challenge to Legislative Action or other State action; such precedents and such circumstances could change materially from those discussed below in this letter. Accordingly, such opinions are intended to express our belief as to the result that should be obtainable through the proper application of existing judicial decisions in a properly prepared and presented case. It is our and your understanding that none of the foregoing opinions is intended to be a guaranty as to what a particular court would actually hold; rather each such opinion is only an expression as to the decision a court ought to reach if the issue were properly prepared and presented to it and the court followed what we believe to be the applicable legal principles under existing judicial precedent. The recipients of this letter should take these considerations into account in analyzing the risks associated with the subject transaction.

We are not aware of any reported judicial decision which we believe would provide a basis on which a court would declare the provisions of the Securitization Act to be invalid under the United States Constitution and it is our opinion that under existing case law, a reviewing court of competent jurisdiction would hold that the Securitization Act is constitutional in all material respects under the United States Constitution.

**Discussion** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***I.***  ***Protection of State Pledge Under the Federal Contract Clause*** 

KRS 65.114(2)–(3) provides:

"(2) Any determination of the commission made in connection with any financing order and any financing order of the commission issued pursuant to this subsection shall be a binding, irrevocable, and final order of the commission, and binding on the commission and the Commonwealth. The Commonwealth and its agencies, including the commission, pledge and agree with bondholders, the owners of the securitized property, and other financing parties that the Commonwealth and its agencies shall not undertake any of the prohibited actions listed in this subsection. This subsection shall not preclude limitation or alteration, if full compensation is made by law for the full protection of the securitized surcharges collected pursuant to a financing order and of the bondholders, any assignee, or financing party entering into a contract with the electric utility. The Commonwealth and its agencies, including the commission, shall not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Alter the provisions of KRS 278.670 to 278.696 and 65.114 which authorize the commission to create an irrevocable contract right or right to sue by the issuance of a financing order creating securitized property, making the securitized surcharges imposed by a financing order irrevocable, binding, or affecting the nonbypassable charges for all existing and future retail customers of the electric utility;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Take or permit any action that impairs or would impair the value of securitized property or the security for the securitized bonds or revises the securitized costs for which recovery is authorized;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In any way impair the rights and remedies of the bondholders, assignees, and other financing parties; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Except for changes made pursuant to the formula-based true-up mechanism authorized under KRS 278.678, reduce, alter, or impair securitized surcharges that are to be imposed, billed, charge, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related securitized bonds have been paid and performed in full.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Any person or entity that issues securitized bonds may include the language specified in this subsection in the securitized bonds and related documentation."

KRS 65.114. This language, including paragraph (2) in the block quote above, is referred to in this letter as the "State Pledge." As authorized by the foregoing statutory provision and the Financing Order, the language of the State Pledge has been included in the Indenture and in the Bonds. Based on our analysis of relevant judicial authority, it is our opinion, subject to all of the qualifications, limitations and assumptions (including the assumption that any Impairment would be "substantial") set forth in this letter, that, absent a demonstration by the Commonwealth that an Impairment is necessary to further a significant and legitimate public purpose, a reviewing court of competent jurisdiction would conclude that the State Pledge provides a basis upon which the Holders (or the Indenture Trustee acting on their behalf) could challenge successfully, under the Federal Contract Clause, the constitutionality of any Legislative Action determined by such court to impair the value of the Cost Recovery Property or otherwise to cause an Impairment prior to the time that the Bonds are fully paid and discharged.

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Article I, Section 10 of the United States Constitution, known as the Federal Contract Clause, prohibits any state from impairing the "[o]bligation of [c]ontracts," whether among private parties or among such state and private parties. The general purpose of the Federal Contract Clause is "to encourage trade and credit by promoting confidence in the stability of contractual obligations."<sup>2</sup> The law is well-settled that "the [Federal] Contract Clause limits the power of the States to modify their own contracts as well as to regulate those between private parties."<sup>3</sup> Although the text of the Federal Contract Clause appears to proscribe any impairment, the United States Supreme Court has made it clear that the proscription is not absolute: "Although the appears literally to proscribe 'any' impairment, […] 'the prohibition is not an absolute one and is not to be read with literal exactness like a mathematical formula.'"<sup>4</sup>

The United States Supreme Court has applied a three-part analysis to determine whether a particular legislative action violates the Federal Contract Clause:<sup>5</sup>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) whether the legislative action operates as a substantial impairment of a contractual relationship;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) assuming such an impairment, whether the legislative action is justified by a significant and legitimate
public purpose; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) whether the adjustment of the rights and responsibilities of the contracting parties is reasonable and
appropriate given the public purpose behind the legislative action.

The first inquiry contains three components: "whether there is a contractual relationship, whether a change in law impairs that contractual relationship, and whether the impairment is substantial."<sup>6</sup> In addition, to succeed with a Federal Contract Clause claim involving a contract with the state itself, a party must show that the contractual relationship is not an invalid attempt by the state under the "reserved powers" doctrine to "surrender an essential attribute of its sovereignty."<sup>7</sup>

<sup>2</sup> <u>See</u> <u>U</u><u>.S. Tr. Co. of N.Y. v. New Jersey</u>, 431 U.S. 1, 15 (1977).

<sup>3</sup> <u>I</u><u>d</u>. at 17.

<sup>4</sup> <u>Id.</u> at 21 (citation omitted); <u>see also</u> <u>E</u><u>nergy Reserves Grp., Inc. v. Kan. Power</u> <u>& Light Co.</u>, 459 U.S. 400, 410 (1983) ("Although the language of the Contract Clause is facially absolute, its prohibition must be accommodated to the inherent police power of the State 'to safeguard the vital interests of its people.'") (citing <u>H</u><u>ome Bldg. & Loan Ass</u><u>'</u><u>n v. Blaisdell</u>, 290 U.S. 398, 434 (1934)). 

<sup>5</sup> <u>E</u><u>nergy Reserves</u>, 459 U.S. at 411-13. <u>See also</u>, e.g., <u>Kaminski v. Coulter</u>, 865 F.3d 339, 344-45 (6th Cir. 2017).

<sup>6</sup> <u>G</u><u>en. Motors Corp. v. Romein</u>, 503 U.S. 181, 186 (1992).

<sup>7</sup> <u>See</u> <u>U</u><u>.S. Trust</u>, 431 U.S. at 23.

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As described above, the opinion of Stites concludes that the State Pledge unambiguously indicates the Commonwealth of Kentucky's intent to be bound with the Holders and, subject to all of the qualifications, limitations and assumptions set forth in such opinion, supports the conclusion that the State Pledge constitutes a binding contractual relationship between the Commonwealth of Kentucky and the Holders for purposes of Kentucky state law.<sup>8</sup>

On that premise, the following three subparts address: (i) whether such a contract that falls within the scope of the Federal Contract Clause exists between the Commonwealth and the Holders as a result of State Pledge; (ii) if so, whether such contract violates the "reserved powers" doctrine, which would render such contract unenforceable; and (iii) the Commonwealth's burden in justifying an impairment. The determination of whether particular Legislative Action constitutes a substantial impairment of a particular contract is a fact-specific analysis, and nothing in this letter expresses any opinion as to how a court would resolve the issue of "substantial impairment" with respect to the Financing Order, the Cost Recovery Property or the Bonds vis-à-vis a particular Legislative Action. Therefore, we have assumed for purposes of this letter that any Impairment resulting from the Legislative Action being challenged under the Federal Contract Clause would be substantial.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***A.***  ***Existence of a Contractual Relationship*** 

The courts have recognized the general presumption that, "absent some clear indication that a legislature intends to bind itself contractually, …'a law is not intended to create private contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise.'"<sup>9</sup> This presumption is based on the fact that the legislature's principal function "is not to make contracts, but to make laws that establish the policy of the state."<sup>10</sup> Thus, a person asserting the creation of a contract with the Commonwealth must overcome this presumption.

<sup>8</sup> **Note to Draft**: Subject to alignment with language from Kentucky constitutional law opinion. 

<sup>9</sup> <u>Nat</u><u>'</u><u>l R.R. Passenger Corp. v. Atchison, Topeka</u> <u>& Santa Fe Ry.</u>, 470 U.S. 451, 465-66 (1985) (quoting <u>D</u><u>odge v. Bd. of Educ.</u>, 302 U.S. 74, 79 (1937)). 

<sup>10</sup> <u>See</u> <u>id.</u> at 466 (citing <u>Ind. ex rel. Anderson v. Brand</u>, 303 U.S. 95, 104-05 (1938)).

<sup>11</sup> <u>D</u><u>odge</u>, 302 U.S. at 78.

<sup>12</sup> <u>See</u> <u>I</u><u>nd. ex rel. Anderson</u>, 303 U.S. at 104-05 (1938) (noting "the cardinal inquiry is as to the terms of the statute supposed to create such a contract"); <u>U</u><u>.S. Trust</u>, 431 U.S. at 17-18 & n.14. 

<sup>13</sup> <u>U</u><u>.S.</u> <u>Trust</u>, 431 U.S. at 17 n.14.

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In <u>U</u><u>.S. Trust v. New Jersey</u>, the United States Supreme Court affirmed the trial court's finding, which was not contested on appeal, that a statutory covenant of two states for the benefit of the holders of certain bonds gave rise to a contractual obligation between such states and the bondholders.<sup>14</sup> The covenant at issue limited the ability of the Port Authority of New York and New Jersey to subsidize rail passenger transportation from revenues and reserves pledged as security for such bonds. In finding the existence of a contract between such states and bondholders, the Court stated "[t]he intent to make a contract is clear from the statutory language: 'The 2 States covenant and agree with each other and with the holders of any affected bonds. . . .'"<sup>15</sup> In that case, the statute used the words "covenant and agree with each other and with the holders of any affected bonds."<sup>16</sup> Later, in <u>National Railroad Passenger Corp. v. Atchison, Topeka</u> <u>& Santa Fe</u> <u>Railway Co.</u>, the Court discussed the <u>U</u><u>.S. Trust</u> covenant and noted: "[r]esort need not be had to a dictionary or case law to recognize the language of contract" in such covenant.<sup>17</sup>

Similarly, in <u>Indiana ex rel. Anderson v. B</u><u>rand</u>, the United States Supreme Court determined that the Indiana Teachers' Tenure Act created a contract between the state and specified teachers because the statutory language demonstrated a clear legislative intent to contract. The Court based its decision, in part, on the legislature's use of the word "contract" throughout the statute to describe the legal relationship between the state and such teachers.<sup>18</sup>

<sup>14</sup> <u>I</u><u>d</u>. at 17-18.

<sup>15</sup> <u>I</u><u>d</u>. at 18. Although the issue of whether a contract existed between such states and the bondholders was never disputed on appeal, the Court reviewed the language of the covenant and the circumstances surrounding the covenant, and stated, "[w]e therefore have no doubt that the 1962 covenant has been properly characterized as a contractual obligation of the two States." <u>I</u><u>d</u>. 

<sup>16</sup> <u>Id.</u> at 18 (quoting 1962 N.J. Laws, c.8, § 6, 1962 N.Y.Laws, c. 209, § 6).

<sup>17</sup> <u>See</u> <u>Nat</u><u>'</u><u>l R.R.</u>, 470 U.S. at 470.

<sup>18</sup> <u>B</u><u>rand</u>, 303 U.S. at 105. However, the mere use of the word "contract" in a statute will not necessarily evince the requisite legislative intent. As the Court cautioned in <u>National Railroad</u>, the use of the word "contract" alone would not signify the existence of a contract *with the government*. <u>Nat</u><u>'</u><u>l R.R.</u>, 470 U.S. at 470. In <u>National Railroad</u>, the Court found that use of the word "contract" in the Rail Passenger Service Act defined only the relationship between the newly-created nongovernmental corporation (Amtrak) and the railroads, not the relationship between the United States and the railroads. The Court determined that "[l]egislation outlining the terms on which private parties may execute contracts does not on its own constitute a statutory contract." <u>I</u><u>d</u>. at 467. 

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Like the language of the covenant considered in <u>U</u><u>.S. Trust</u>, the language of the State Pledge unambiguously indicates the Legislature's intent to bind the Commonwealth by providing in pertinent part that the Commonwealth does "pledge and agree with bondholders, the owners of the securitized property, and other financing parties that the Commonwealth and its agencies shall not undertake any of the prohibited actions listed in this subsection." KRS 65.114(2). Indeed, the most evident difference between such language and the <u>U</u><u>.S. Trust</u> statute is the use of the verb "pledge," rather than "covenant," but that difference is not, in our view, material.<sup>19</sup> Indeed, much like the terms "covenant" and "agree" quoted in <u>U.S. Trust</u>, the phrase "pledge and agree" evinces a legislative intent to create private rights of a contractual nature enforceable against the Commonwealth. The provisions, also consistent with contract language and like the statute quoted in U.S. Trust names the beneficiaries of the Commonwealth's pledge and agreement. Further, the definition of the Legislature's term — "pledge" — is "to bind by a promise."<sup>20</sup> Unlike the statute construed in <u>National Railroad</u>, the Securitization Act expressly includes language indicating the Commonwealth's obligation with respect to securitized bond transactions. <u>See</u> KRS 65.114(2) ("The <u>Commonwealth</u> and its agencies, including the commission, pledge and agree . . . that the Commonwealth and its agencies shall not undertake any of the prohibited actions listed in this subsection … [t]he Commonwealth and its agencies, including the commission shall not: Take or permit any action that impairs or would impair the value of securitized property or the security for the securitized bonds or revises the securitized costs for which recovery is authorized" (emphasis added). Finally, it is important to note that the Commonwealth also authorizes an issuer of securitized bonds to include the State Pledge in

<sup>19</sup> It could be contended that the factual situation in the <u>U</u><u>.S. Trust</u> case is distinguishable from the factual situation surrounding the issuance of the Bonds. In <u>U</u><u>.S. Trust</u>, the bonds were issued by the Port Authority — a governmental agency — while the Bonds are being issued by a private entity, and the Securitization Act states that the Bonds "shall not be a: debt or a general obligation of the Commonwealth." KRS 278.694(2)(a). However, the Securitization Act dictates that a utility <u>must</u> obtain a financing order before any "securitized bonds" such as the Bonds are issued. KRS 278.676. The authority to issue such an order rests with the State, acting through the Commission, and therefore the issuance of the Bonds is state-sanctioned in a manner closely analogous to the situation in <u>U</u><u>.S. Trust</u>. In addition, and most significantly, the Securitization Act pledges that the State shall not "take or permit any action that impairs or would impair the value of securitized property" and it expressly states that "[t]he Commonwealth and its agencies, including the commission, pledge and agree with bondholders, the owners of the securitized property, and other financing parties that the Commonwealth and its agencies shall not undertake any prohibited actions listed in this subsection." KRS 65.114(2). This pledge not to permit or take action that would impair the value of securitized property is thus like the covenant in <u>U.S. Trust</u> because it is directed to the bond holders and is intended "as security against repeal" in order to enhance the marketability of the securitized bonds. <u>See</u> <u>U.S. Trust</u>, 431 U.S. at 18. 

<sup>20</sup> WEBSTER'S NEW WORLD DICTIONARY 573 (2d ed. 1982).

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contracts with the holders of securitized bonds (such as the Bonds). <u>I</u><u>d</u>. § 65.114(3). While the Kentucky Securitization Act also states that neither the Commonwealth of Kentucky nor its agencies shall be liable on the Bonds and that the Bonds shall not be considered a debt or general obligation of the Commonwealth of Kentucky or its agencies, that does not mean that no promise has been made for the purpose of impairment of contracts.

In summary, supported by the conclusion, subject to the qualifications, limitations and assumptions therein, in the opinion of Stites that the State Pledge constitutes a binding contractual relationship between the Commonwealth of Kentucky and the Holders for purposes of Kentucky state law<sup>21</sup>, the language of the State Pledge supports the conclusion that the Commonwealth of Kentucky meant, through the State Pledge, to create a contractual relationship between the Commonwealth of Kentucky and the Holders that falls within the scope of the Federal Contract Clause.<sup>22</sup>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***B.***  ***Reserved Powers Doctrine*** 

The "reserved powers" doctrine limits the Commonwealth's ability to bind itself contractually in a manner which surrenders an essential attribute of its sovereignty.<sup>23</sup> Under this doctrine, if a contract purports to surrender a state's "reserved powers" – powers that cannot be contracted away – such contract is void.<sup>24</sup> Although the scope of the "reserved powers" doctrine has not been precisely defined by the courts, case law has established that a state cannot enter into contracts that forbid future exercises of its police powers or its power of eminent domain.<sup>25</sup> In contrast, the United States Supreme Court has stated that a state's "power to enter into effective financial contracts cannot be questioned."<sup>26</sup>

<sup>21</sup> **Note to Draft**: Subject to alignment with language from Kentucky constitutional law opinion. 

<sup>22</sup> In addition to the State Pledge, the Commission's Financing Order contains the following language in Conclusions of Law (36): "Pursuant to KRS 65.114, the Commonwealth of Kentucky has pledged for the benefit and protection of all financing parties and Kentucky Power, that the Commonwealth of Kentucky and its agencies, including the Commission shall not: (1) alter the provisions of KRS 278.670 through KRS 278.696 and KRS 65.114 which authorize the Commission to create an irrevocable contract right or right to sue by the issuance of a financing order creating securitized property, making the securitized surcharges imposed by a financing order irrevocable, binding, or affecting the nonbypassable charges for all existing and future retail customers of the electric utility; (2) take or permit any action that impairs or would impair the value of securitized property or the security for the securitized bonds or revises the securitized costs for which recovery is authorized; (3) in any way impair the rights and remedies of the bondholders, assignees, and other financing parties; and (4) except for changes made pursuant to the formula-based true-up mechanism authorized under KRS 278.678, reduce, alter, or impair securitized surcharges that are to be imposed, billed, charge, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related securitized bonds have been paid and performed in full." 

<sup>23</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 23.

<sup>24</sup> <u>I</u><u>d</u>*.* <u>See generally</u> <u>United States v. Winstar Corp.</u>, 518 U.S. 839, 888-90 (1996) (plurality opinion).

<sup>25</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 23-24 & nn.20-21 (citing <u>S</u><u>tone v. Mississippi</u>, 101 U.S. 814, 817 (1880), and <u>W</u><u>. River Bridge Co. v. Dix</u>, 47 U.S. (6 How.) 507, 525-26 (1848)). 

<sup>26</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 24. <u>See also Cont</u><u>'</u><u>l Ill. Nat</u><u>'</u><u>l Bank</u> <u>& Tr. Co. v. Washington</u>, 696 F.2d 692, 699 (9th Cir. 1983) ("Thus, insofar as the purely financial aspects of the agreement are concerned, reservations are not to be lightly inferred."). 

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Under existing case law, the State Pledge does not, in our view, purport to surrender any "reserved powers" of the Commonwealth. Although the Commonwealth's commitment not to "[t]ake or permit any action that impairs or would impair the value of securitized property" is broader than the commitment in <u>U</u><u>.S. Trust</u> that revenues and reserves securing bonds would not be depleted beyond a certain level,<sup>27</sup> we do not believe courts, in applying the applicable federal case law, would construe the State Pledge as purporting to contract away, or forbid future exercises of, the Commonwealth's power of eminent domain or its police power to protect the public health and safety. Through "financing orders" (such as the Financing Order), to be adopted by the Commission in order to create securitization property, as defined in the Securitization Act. Through the Securitization Act, the Commonwealth has authorized the Commission to issue "securitized bonds" (such as the Bonds) and pledge not to impair the value of the "securitized property" (such as the Cost Recovery Property) securing such instruments. As discussed above, in the absence of any contrary indication under Kentucky law, federal courts would find that the Securitization Act and the State Pledge constitute a contractual obligation undertaken by the Commonwealth akin to the type of "financial contract" involved in <u>U</u><u>.S. Trust</u>, and would not be viewed as an impermissible surrender of an essential attribute of State sovereignty.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***C.***  ***Commonwealth's Burden to Justify an Impairment*** 

To survive scrutiny under the Federal Contract Clause, a substantial impairment by a state of a valid state contract must be justified by "a significant and legitimate public purpose . . . such as the remedying of a broad and general social or economic problem,"<sup>28</sup> and the state action causing that impairment must be both "reasonable and necessary to serve" such a public purpose.<sup>29</sup>

<sup>27</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 25.

<sup>28</sup> <u>E</u><u>nergy Reserves</u>, 459 U.S. at 411-12.

<sup>29</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 25. <u>See also</u> <u>Puckett v. Lexington-Fayette Urb. Cnty. Gov</u><u>'</u><u>t</u>, 833 F.3d 590, 599 (6th Cir. 2016) (articulating two-part test). 

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The contours of this test are illustrated by several decisions of the United States Supreme Court. In <u>Home Building</u> <u>& Loan Ass</u><u>'</u><u>n v. B</u><u>laisdell,</u><sup>30</sup> which the Court has described as "the leading case in the modern era of [Federal] Contract Clause interpretation,"<sup>31</sup> the Court addressed a Contract Clause challenge to a Minnesota law that, in response to economic conditions caused by the Great Depression, (i) authorized county courts to extend the period of redemption from foreclosure sales on mortgages previously made "for such additional time as the court may deem just and equitable," subject to certain limitations, and (ii) limited actions for deficiency judgments.<sup>32</sup> The Court stated that the "reserved powers" doctrine could not be construed to "permit the State to adopt as its policy the repudiation of debts or the destruction of contracts or the denial of means to enforce them." On the other hand, the Court also indicated that the Federal Contract Clause could not be construed to prevent limited and temporary interpositions with respect to the enforcement of contracts if made necessary by a great public calamity such as fire, flood, or earthquake. The reservation of state power appropriate to such extraordinary conditions may be deemed to be as much a part of all contracts, as is the reservation of state power to protect the public interest in the other situations to which we have referred. And if state power exists to give temporary relief from the enforcement of contracts in the presence of disasters due to physical causes such as fire, flood or earthquake, that power cannot be said to be nonexistent when the urgent public need demanding such relief is produced by other and economic causes.<sup>33</sup>

<sup>30</sup> <u>B</u><u>laisdell</u>, 290 U.S. 398.

<sup>31</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 15.

<sup>32</sup> The mortgagor was required to continue to pay the reasonable income or rental value of the property, as determined by the court, toward payment of taxes, insurance, interest and principal. The law stated that it was to remain in effect only during the current emergency and no later than May 1, 1935; no redemption period could be extended beyond the expiration of the law. <u>B</u><u>laisdell</u>, 290 U.S. at 415-18. 

<sup>33</sup> <u>Id</u>. at 439-40 (citation omitted).

<sup>34</sup> <u>I</u><u>d</u>. at 444-47.

<sup>35</sup> <u>See</u> <u>T</u><u>reigle v. Acme Homestead Ass'n</u>, 297 U.S. 189 (1936); <u>W</u><u>.B.</u> <u>Worthen Co. v. Kavanaugh</u>, 295 U.S. 56 (1935); <u>W</u><u>.B. Worthen Co. v. Thomas</u>, 292 U.S. 426 (1934). 

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The deference to be given by a court to a legislature's determination of the need for a particular impairment depends on whether the contract is purely private or the state is a contracting party. Although courts ordinarily defer to legislative judgment as to the necessity and reasonableness of a particular action,<sup>36</sup> the Supreme Court has noted that such deference "is not appropriate" when a state is a contracting party.<sup>37</sup> In that circumstance, a "stricter standard" of justification should apply.<sup>38</sup> Indeed, in <u>E</u><u>nergy Reserves Group v. Kansas Power</u> <u>& Light Co.</u> the Court noted that "[i]n almost every case, the Court has held a governmental unit to its contractual obligations when it enters financial or other markets."<sup>39</sup>

The leading case addressing impairment of contracts to which the state is a party is <u>U</u><u>.S. Trust</u>. As noted above, there the state had covenanted that revenues and reserves securing certain bonds would not be depleted below a certain level.<sup>40</sup> The state thereafter repealed that promise in order to finance new mass transit projects, claiming that the repeal was justified by the need to promote, and encourage additional use of, mass transportation in response to energy shortages and environmental concerns.<sup>41</sup> The Court ruled that the state's action was nevertheless invalid under the Contract Clause because repeal of the covenant was "neither necessary to achievement of the plan nor reasonable in light of the circumstances."<sup>42</sup> The Court stated that a modification less drastic than total repeal would have permitted the states to achieve their plan to improve commuter rail service, and, in fact, the states could have achieved that goal without modifying the covenant at all.<sup>43</sup> For example, the states "could discourage automobile use through taxes on gasoline or parking . . . and use the revenues to subsidize mass transit projects."<sup>44</sup>

<sup>36</sup> <u>K</u><u>eystone Bituminous Coal Ass</u><u>'</u><u>n v. DeBenedictis</u>, 480 U.S. 470 (1987) (upholding against Federal Contract Clause challenge a law authorizing revocation of a coal mine operator's mining permit as a reasonable and necessary response to the "devastating effects" of subsidence caused by underground mining). 

<sup>37</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 25-26.

<sup>38</sup> <u>E</u><u>nergy Reserves</u>, 459 U.S. at 400, 412-13 n.14. <u>See also</u> <u>A</u><u>llied Structural Steel Co. v. Spannaus</u>, 438 U.S. 234, 244 n.15 (1978) ("impairments of a State's own contracts would face more stringent examination under the Contract Clause"). 

<sup>39</sup> 459 U.S. at 412 n.14.

<sup>40</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 25.

<sup>41</sup> <u>I</u><u>d</u>. at 28-29. The Court noted that when the bills to repeal the covenant were pending "a national energy crisis was developing." <u>I</u><u>d</u>. at 13-14.

<sup>42</sup> <u>I</u><u>d</u>. at 29.

<sup>43</sup> <u>I</u><u>d</u>. at 30.

<sup>44</sup> <u>I</u><u>d</u>. at 30 n.29.

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The Court in <u>U</u><u>.S. Trust</u> contrasted the legislation under consideration with the statute challenged in <u>City of E</u><u>l Paso v. Simmons</u>,<sup>45</sup> which limited to five years the reinstatement rights of defaulting purchasers of land from the state. For many years prior to the enactment of this statute, defaulting purchasers had been allowed to reinstate their claims upon written request and payment of delinquent interest, unless the rights of third parties had intervened. In <u>U</u><u>.S. Trust</u>, the Court stated that this older (19th century) statute "had effects that were unforeseen and unintended by the legislature when originally adopted," *i.e.*, "speculators were placed in a position to obtain windfall benefits," and therefore adoption of a statute of limitations was reasonable to restrict parties to gains reasonably expected from the contract when the original statute was adopted.<sup>46</sup> In contrast, the need for mass transportation was not a new development and the likelihood that publicly owned commuter railroads would produce substantial deficits was well known when the covenant was adopted.<sup>47</sup> Although, the Court noted, public perception of the importance of mass transit undoubtedly grew between 1962, when the covenant was adopted, and 1974, when it was repealed, "these concerns were not unknown in 1962, and the subsequent changes were of degree and not of kind . . . and [did not] cause the covenant to have a substantially different impact in 1974 than when it was adopted in 1962."<sup>48</sup>

The Court in <u>U</u><u>.S. Trust</u> also distinguished its earlier decision in <u>F</u><u>aitoute Iron</u> <u>& Steel Co. v. City of Asbury Park</u>,<sup>49</sup> which, according to the Court, was the "only time in this century that alteration of a municipal bond contract has been sustained."<sup>50</sup> <u>F</u><u>aitoute</u> involved a state municipal reorganization act under which bankrupt local governments could be placed in receivership by a state agency. Pursuant to that act, the holders of certain municipal revenue bonds received new securities bearing lower interest rates and later maturities. According to the Court in <u>U</u><u>.S. Trust</u>, the earlier decision rejected the dissenting bondholders' Federal Contract Clause claims on the theory that the "old bonds represented only theoretical rights; as a practical matter the city could not raise its taxes enough to pay off its creditors under the old contract terms," and thus the plan "enabled the city to meet its financial obligations more effectively."<sup>51</sup> The <u>U</u><u>.S. Trust</u> Court further quoted <u>F</u><u>aitoute</u> to the effect that the obligation in that case was "discharged, not impaired" by the plan.<sup>52</sup>

<sup>45</sup> <u>City of E</u><u>l Paso v. Simmons</u>, 379 U.S. 497 (1965).

<sup>46</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 31.

<sup>47</sup> <u>I</u><u>d</u>. at 31-32.

<sup>48</sup> <u>I</u><u>d</u>. at 32.

<sup>49</sup> <u>F</u><u>aitoute Iron</u> <u>& Steel Co. v. City of Asbury Park</u>, 316 U.S. 502 (1942).

<sup>50</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 27.

<sup>51</sup> <u>I</u><u>d</u>. at 28.

<sup>52</sup> <u>I</u><u>d</u>.

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Thus, the relevant case law demonstrates that a state bears a substantial burden when attempting to justify an impairment of a contract to which it is a party. As noted by the Supreme Court, "[i]n almost every case, the Court has held a governmental unit to its contractual obligations when it enters financial or other markets."<sup>53</sup> A mere recitation that the impairment is in the public interest is thus insufficient. Instead, a state action that impairs contracts to which it is a party must further a significant, legitimate and broad public purpose, not the interests of a narrow group; that public purpose must be served by a reasonable, necessary and carefully tailored measure, as "a State is not free to impose a drastic impairment when an evident and more moderate course would serve its purposes equally well."<sup>54</sup>

Subject to the qualifications, limitations and assumptions set forth in this letter, and supported by the conclusion, subject to the qualifications, limitations and assumptions therein, in the opinion of Stites that the State Pledge unambiguously indicates the Commonwealth of Kentucky's intent to be bound with the Holders and that the State Pledge constitutes a binding contractual relationship between the Commonwealth of Kentucky and the Holders for purposes of

<sup>53</sup> <u>E</u><u>nergy Reserves</u>, 459 U.S. at 412 n.14 (citing <u>U</u><u>.S. Trust</u>, 431 U.S. at 25-28; <u>Kavanaugh</u>, 295 U.S. 56 (1935); and <u>M</u><u>urray v. Charleston</u>, 96 U.S. 432 (1878)). In <u>Kavanaugh</u>, the United States Supreme Court reversed a decision of the Arkansas Supreme Court upholding the validity of legislative enactments which, in the words of the former, take "from the mortgage [securing bonds issued by municipal improvement districts pursuant to state law] the quality of an acceptable investment for a rational investor" by making it much more difficult and time consuming to foreclose upon the collateral posted as security for the mortgage. 295 U.S. at 60. Such enactments were accompanied by a legislative "declaration of an emergency, which was stated to endanger the peace, health and safety of a multitude of citizens." 295 U.S. at 59. In <u>M</u><u>urray</u>, the United States Supreme Court reversed a judgment of the Supreme Court of South Carolina upholding an ordinance of the City of Charleston which permitted the City to withhold, as a tax, a portion of the interest that was otherwise payable with respect to bonds issued by the City. This "tax" was held to violate the Federal Contract Clause: "no municipality of a State can, by its own ordinances, under the guise of taxation, relieve itself from performing to the letter all that it has expressly promised to its creditors." 96 U.S. at 448. 

<sup>54</sup> <u>U</u><u>.S. Trust</u>, 431 U.S. at 31. In <u>United Auto., Aerospace, Agr. Implement Workers of Am. Int</u><u>'</u><u>l Union v. Fortu</u><u>ñ</u><u>o</u>, 633 F.3d 37, 43-44 (1st Cir. 2011), the First Circuit held that the plaintiff bears the burden of proving that the state actions causing a substantial impairment are not reasonable or necessary. The First Circuit acknowledged that its position is in "some tension with the Supreme Court's instruction" in <u>U.S. Trust</u>, and that "many courts have concluded that this burden rests with the state." <u>Id.</u> at 43. <u>See also</u> <u>Sullivan v. Nassau County Interim Finance Authority</u>, 959 F.3d 54, 66 (2d Cir. 2020) (noting issue but declining to address it). 

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Kentucky state law<sup>55</sup>, it is our opinion that a reviewing court of competent jurisdiction, in a properly prepared and presented case applying federal precedent, would conclude that the State Pledge constitutes a contractual relationship between the Holders and the Commonwealth that falls within the scope of the Federal Contract Clause, and that, absent a demonstration by the Commonwealth that an Impairment is necessary to further a significant and legitimate public purpose, the Holders could successfully challenge under the Federal Contract Clause the constitutionality of any Legislative Action determined by such court to impair the value of the Cost Recovery Property or otherwise cause an Impairment prior to the time that the Bonds are fully paid and discharged.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***II.***  ***Availability of Injunctive Relief in a Federal Court*** 

In a challenge to Legislative Action alleged to cause an Impairment, the remedies the plaintiff would be expected to seek would include an order enjoining State officials from enforcing the provisions of such Legislative Action.<sup>56</sup>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***A.***  ***Preliminary Injunctive Relief*** 

Under federal law, a federal court would assess the following matters in determining whether (in its discretion) to grant preliminary injunctive relief: (a) whether the party seeking an injunction is likely to succeed on the merits; (b) whether the party is likely to suffer irreparable harm in the absence of preliminary relief; (c) whether the balance of equities tips in favor of the party seeking the injunction; and (d) whether an injunction is in the public interest.<sup>57</sup>

<sup>55</sup> **Note to Draft**: Subject to alignment with language from Kentucky constitutional law opinion. 

<sup>56</sup> If plaintiffs also seek money damages in federal court, the State defendants could claim immunity. The Eleventh Amendment bars federal courts from granting money damages against the State unless the State waives that immunity. <u>WCI, Inc. v. Ohio Dep't of Pub. Safety</u>, 18 F.4th 509, 513 (6th Cir. 2021) ("State governments are immune from suits for money damages absent consent. . . . Therefore, to the extent WCI seeks monetary relief based on alleged violations of its constitutional rights, sovereign immunity bars the claims."); <u>see also id.</u> ("The Eleventh Amendment removes from federal jurisdiction 'any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State[.]'"). 

<sup>57</sup> <u>Winter v. Nat. Res. Def. Council, Inc.</u>, 555 U.S. 7, 20 (2008). <u>Online Merchants Guild v. Cameron</u>, 995 F.3d 540, 546-47 (6th Cir. 2021); <u>RECO Equip., Inc. v. Jeffrey S. Wilson</u>, No. 20-4312, 2021 WL 5013816, at \*2 (6th Cir. Oct. 28, 2021) ("Although we balance these factors, the movant must show at least some likelihood of success on the merits and that it likely will suffer irreparable harm absent the injunction.") (citing <u>D.T. v. Sumner Cnty. Schs.</u>, 942 F.3d 324, 326–27 (6th Cir. 2019)); <u>S. Glazer's Distribs. of Ohio, L.L.C. v. Great Lakes Brewing Co.</u>, 860 F.3d 844, 849 (6th Cir. 2017)). 

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*Success on the Merits*. For purposes of our opinion regarding the availability of injunctive relief, we have assumed that a reviewing court of competent jurisdiction will find a strong likelihood of success on the merits, *i.e.* that the Legislative Action is likely an Impairment. As explained above, applying applicable federal precedent, in the absence of any contrary precedent under Kentucky law, the Securitization Act and State Pledge would be viewed as constituting a contractual relationship between the Holders and the Commonwealth that falls within the scope of the Federal Contract Clause. Thus, we examine only the three remaining portions of the test.

*Irreparable Harm*. In considering irreparable harm, courts evaluate whether (1) there is a sufficient causal connection between the alleged injury and the conduct sought to be enjoined;<sup>58</sup> (2) irreparable injury is likely in the absence of an injunction;<sup>59</sup> (3) the threat of harm to plaintiff is immediate;<sup>60</sup> and (4) litigation can offer monetary compensation instead.<sup>61</sup>

*<u>Causation</u>*. Holders would have to prove that enforcement of the Legislative Action would cause detriment to them, such as loss of expected payments or loss of bond value. Given that a fundamental premise of an Impairment is Legislative Action to the detriment of Holders, Holders should be able to show causation.

*<u>Likelihood</u>.* Holders would have to prove that harm is likely absent an injunction. Likely harm is a premise that makes the Legislative Action an Impairment in the first place. Thus, we assume Holders could prove likely harm absent an injunction.

*<u>Immediacy</u>*. If scheduled payments are disrupted by Legislative Action before a trial on the merits, immediate harm could be proven. If, however, a trial on the merits is possible before such harm will occur, the harm is not immediate enough to support a preliminary injunction.<sup>62</sup> In addition, depressed bond values may be experienced before trial. The fact that diminished credit quality due to the Legislative Action leads to diminished Bond value also should be provable.

<sup>58</sup> <u>Perfect 10, Inc. v. Google, Inc.</u>, 653 F.3d 976, 982 (9th Cir. 2011); <u>see</u> <u>Garcia v. Google, Inc.</u>, 786 F.3d 733, 745 (9th Cir. 2015).

<sup>59</sup> <u>Winter</u>, 555 U.S. at 22.

<sup>60</sup> <u>D.T. v. Sumner Cnty. Schs.</u>, 942 F.3d 324, 327 (6th Cir. 2019); <u>Caribbean Marine Servs. Co. v. Baldrige</u>, 844 F.2d 668, 674 (9th Cir. 1988).

<sup>61</sup> <u>Sampson v. Murray</u>, 415 U.S. 61, 90 (1974); <u>see also, e.g.</u>, <u>Babler v. Fuhey</u>, 618 F.3d 514, 523–24 (6th Cir. 2010) ("Mere injuries, however substantial in terms of money, time and energy necessarily expended in the absence of a [preliminary injunction], are not enough. The possibility that adequate compensatory or other corrective relief will be available at a later date, in the ordinary course of litigation, weighs heavily against a claim of irreparable harm."). 

<sup>62</sup> <u>Roland Mach. Co. v. Dresser Indus., Inc.</u>, 749 F.2d 380, 386 (7th Cir. 1984) (only if plaintiff will suffer irreparable harm in period before final judgment following trial can preliminary injunction issue).

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*<u>Alternative remedies</u>.* Unless the Commonwealth waives immunity, the Eleventh Amendment bars federal courts from granting money damages against the Commonwealth.<sup>63</sup> Absent a Commonwealth waiver of immunity, money damages would be unavailable to redress the harm to Holders from the Legislative Action, supporting the inadequacy of relief available in a federal court.<sup>64</sup>

*Balance of Equities*. Before issuing a preliminary injunction, a court identifies the harm that a preliminary injunction might cause the defendant and weighs it against plaintiff's threatened injury,<sup>65</sup> and can also consider the equities of nonparties.<sup>66</sup> Here, a court will likely consider the balance of harm in the next stage of the analysis instead because assessing the harm to the opposing party and weighing the public interest merge when the government is the opposing party.<sup>67</sup>

<sup>63</sup> <u>Frew ex rel. Frew v. Hawkins</u>, 540 U.S. 431, 437 (2004) (federal courts may not award retrospective relief, for instance, money damages or its equivalent, if state invokes its immunity).

<sup>64</sup> <u>See</u> Commonwealth v. Biden, 57 F.4th 545, 556 (6th Cir. 2023) (explaining that governmental sovereign immunity "typically makes monetary losses … irreparable"); <u>Chamber of Com. of U.S. v. Edmondson</u>, 594 F.3d 742, 756, 770–71 (10th Cir. 2010) (associations' members were likely to suffer irreparable harm from compliance costs related to state law that might total more than $1,000 per business per year because such costs were unrecoverable as damages due to sovereign immunity); <u>Entergy Nuclear Vt. Yankee, LLC v. Shumlin</u>, 733 F.3d 393, 423 (2d Cir. 2013) (injunction supported in part because money damages unavailable to movant because of state immunity under Eleventh Amendment); <u>KPMG LLP v. United States</u>, 139 Fed.Cl. 533, 537 (Fed. Cl. 2018) ("[a]s a general principle, where plaintiff has no ability to recoup lost profits against the United States, the harm to the plaintiff is irreparable"); <u>E. Bay Sanctuary Covenant v. Biden</u>, 993 F.3d 640, 677 (9th Cir. 2021) (where parties cannot typically recover monetary damages flowing from their injury economic harm can be considered irreparable); <u>Odebrecht Const., Inc. v. Secretary, Florida Dept. of Transp.</u> 715 F3d 1268, 1289 (11th Cir. 2013); <u>Entergy, Arkansas, Inc. v. Nebraska</u>, 210 F3d 887, 899–900 (8th Cir. 2000) (chances for a preliminary injunction may be "heightened" where relief in the form of money damages is barred by the government's sovereign immunity); <u>but see</u> <u>Black United Fund of N.J., Inc. v. Kean</u>, 763 F.2d 156, 161 (3d Cir. 1985) ("[t]hat the Eleventh Amendment may pose an obstacle to recovery of damages in the federal court does not transform money loss into irreparable injury for equitable purposes"). 

<sup>65</sup> <u>Scotts Co. v. United Indus. Corp.</u>, 315 F.3d 264, 284 (4th Cir. 2002); <u>see</u> <u>Winter</u>, 555 U.S. at 24; <u>Earth Island Inst. v. Carlton</u>, 626 F.3d 462, 475 (9th Cir. 2010) (assignment of weight to particular harms is matter for district courts to decide). 

<sup>66</sup> <u>Horwitz v. Southwest Forest Indus., Inc.</u>, 604 F. Supp. 1130, 1136 (D Nev. 1985); <u>see</u> <u>Publications Int'l, Ltd. v. Meredith Corp.</u>, 88 F.3d 473, 478 (7th Cir. 1996).

<sup>67</sup> Assessing the harm to the opposing party and weighing the public interest "merge when the Government is the opposing party." <u>Nken v. Holder</u>, 556 U.S. 418, 435 (2009); Daunt v. Benson, 956 F.3d 396, 422 (6th Cir. 2020); <u>Drakes Bay Oyster Co. v. Jewell</u>, 747 F.3d 1073, 1092 (9th Cir. 2014); <u>Minard Run Oil Co. v. United States Forest Serv.</u>, 670 F.3d 236, 256 (3rd Cir. 2011). 

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*Public Interest*. In exercising their discretion, courts of equity "pay particular regard for the public consequences in employing the extraordinary remedy of injunction."<sup>68</sup> And, "[a]ny time a State is enjoined by a court from effectuating statutes enacted by representatives of its people, it suffers a form of irreparable injury."<sup>69</sup> However, there is no "blanket presumption in favor of the government in all preliminary injunction cases."<sup>70</sup> The government does not have an interest in enforcing unconstitutional laws.<sup>71</sup> And financial concerns are not a paramount public interest.<sup>72</sup>

The function of preliminary injunctive relief is to preserve the latest uncontested status quo prior to the action which is the subject of the legal challenge.<sup>73</sup> The latest uncontested status quo with respect to the Bonds prior to the challenged Legislative Action would appear to be the continued effectiveness of the Financing Order and the validity of the Cost Recovery Property and Charges.

As discussed above, the likely primary harm to Holders would come from delinquent Bond payments or diminished Bond value. If the legislation merely targets the State Pledge, without pursuing some larger public policy goal, a court would more likely view the Commonwealth as merely seeking to advance its own pecuniary interests (coinciding, likely, with actions prohibited by constitutional restrictions against impairment of contracts) and would likely see little public interest advanced. But if the Legislative Action is part of a larger public policy aim, and the modification or elimination of the State Pledge is an important and integrated part of the statutory scheme, the court may weigh the public interest advanced by that Legislative Action to disfavor issuing the injunction.

<sup>68</sup> <u>Winter</u>, 555 U.S. at 24; <u>Salazar v. Buono</u>, 559 U.S. 700, 714 (2010); <u>see also</u> <u>Charter Twp. of Huron, Mich. v. Richards</u>, 997 F.2d 1168, 1175 (6th Cir. 1993) ("Before resorting to this extraordinary remedy, a court must balance the interests of the parties giving particular attention to the public consequences of a decree."). 

<sup>69</sup> <u>Maryland v. King</u>, 567 U.S. 1301, 1303 (2012) (Roberts, Circuit Justice) (internal quotes omitted); <u>Planned Parenthood of Greater Tex. Surgical Health Servs. v. Abbott</u>, 734 F.3d 406, 419 (5th Cir. 2013).

<sup>70</sup> <u>Rodriguez v. Robbins</u>, 715 F.3d 1127, 1145–46 (9th Cir. 2013).

<sup>71</sup> <u>See, e.g.</u>, <u>Washington v. Reno</u>, 35 F.3d 1093, 1103 (6th Cir. 1994) ("[E]ntry of a limited injunction to prevent the use of [public] monies to finance the security functions of the federal penal institutions will not in any way harm the public interest. Although forcing the Bureau of Prisons to fund security monitoring of telephone calls through proper appropriations channels may result in a greater drain on the government's finances, the responsibility for such security features does in fact rest with the government. Moreover, the relatively minor increase in Congressional appropriations necessary to replace the monies improperly diverted from the Commissary Fund does not outweigh the greater public interest in having governmental agencies abide by the federal laws that govern their existence and operations."); <u>Chamber of Com. of U.S. v. Edmondson</u>, 594 F.3d 742, 771 (10th Cir. 2010); <u>N. Y. Progress</u> <u>& Prot. PAC v. Walsh</u>, 733 F.3d 483, 488 (2nd Cir. 2013). 

<sup>72</sup> See <u>Pashby v. Delia</u>, 709 F.3d 307, 331 (4th Cir. 2013) (rejecting state's proffered financial concerns as relevant public interest).

<sup>73</sup> <u>Univ. of Tex. v. Camenisch</u>, 451 U.S. 390, 395 (1981) ("The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held.")

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We cannot offer more than the framework above for assessing this element of the test of issuance of an injunction because much will depend on the particulars of the Legislative Action. But we strain to conceive of legislation that seeks broad public policy aims that cannot be achieved without modifying or eliminating the State Pledge favoring Holders. Thus, we assume here that the public interest will not prevent a court from issuing an injunction.

Based on the foregoing, the Holders likely could satisfy these standards for temporary injunctive relief, and a temporary injunction to prevent an unconstitutional Impairment should be an available remedy.<sup>74</sup>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***B.***  ***Availability of Permanent Injunctive Relief in Federal Court*** 

The requirements for a permanent injunction are essentially the same as for a preliminary injunction, except that the moving party must demonstrate actual success on the merits (prevailing at trial).<sup>75</sup> On that basis, we hold the same views regarding a permanent injunction as those we expressed above for a preliminary injunction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***III.***  ***Protections Afforded by Takings Clauses*** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***A.***  ***Federal Takings Clause Protections*** 

The Takings Clause of the Fifth Amendment of the United States Constitution—"nor shall private property be taken for public use, without just compensation"—is made applicable to state action via the Fourteenth Amendment.<sup>76</sup> The Federal Takings Clause covers both tangible and intangible property.<sup>77</sup> Rights under contracts can be property for purposes of the

<sup>74</sup> <u>See</u> <u>Dahl v. Bd. of Trustees of W. Michigan Univ.</u>, 15 F.4th 728, 736 (6th Cir. 2021) ("Proper application of the Constitution, moreover, serves the public interest, …. as 'it is always in the public interest to prevent the violation of a party's constitutional rights[.]") (internal citations omitted). 

<sup>75</sup> <u>Jolivette v. Husted</u>, 694 F.3d 760, 765 (6th Cir. 2012) ("In general, the standard for a preliminary injunction is essentially the same as for a permanent injunction with the exception that for a preliminary injunction, the plaintiff must show a likelihood of success on the merits rather than actual success.") (cleaned up); <u>New York Civil Liberties Union v. New York City Transit Auth.</u>, 684 F.3d 286, 294 (2nd Cir. 2012); <u>Perfect 10</u>, 653 F.3d at 979–80. 

<sup>76</sup> <u>Webb's Fabulous Pharmacies, Inc. v. Beckwith</u>, 449 U.S. 155, 160 (1980).

<sup>77</sup> <u>Ruckelshaus v. Monsanto Co.</u>, 467 U.S. 986, 1003-04 (1984).

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Federal Takings Clause,<sup>78</sup> but legislation that "disregards or destroys" contract rights does not always constitute a taking.<sup>79</sup> Where intangible property is at issue, state law will determine whether a property right exists. If a court determines that an intangible asset is property, a court will next look to whether the owner of the property interest had a "reasonable investment-backed expectation" that the property right would be protected.<sup>80</sup>

The United States Supreme Court has suggested that the Federal Takings Clause may be implicated by a diverse range of government actions, including when the government (a) permanently appropriates or denies all economically productive use of property;<sup>81</sup> (b) destroys property other than in response to emergency conditions;<sup>82</sup> or (c) reduces, alters or impairs the

<sup>78</sup> <u>Lynch v. United States</u>, 292 U.S. 571, 577 (1934).

<sup>79</sup> <u>Connolly v. Pension Benefit Guar. Corp.</u>, 475 U.S. 211, 224 (1986).

<sup>80</sup> 2 Ronald D. Rotunda & John E. Nowak, TREATISE ON CONSTITUTIONAL LAW: SUBSTANCE AND PROCEDURE § 15.12(a)(iii), at 971 (5th ed. 2012).

<sup>81</sup> <u>C</u><u>onnolly</u>, 475 U.S. at 225 (noting that in that case the government did not "permanently appropriate" any of the employer's assets for its own use); <u>P</u><u>alazzolo v. Rhode Island</u>, 533 U.S. 606, 617 (2001) ("regulation which 'denies all economically beneficial or productive use of 'land' will require compensation under the Takings Clause") (citing <u>L</u><u>ucas v. S.C. Coastal Council</u>, 505 U.S. 1003, 1015 (1992), which notes that for personal property, however, some regulations that limit use of personal property may not be compensable takings given the state's "traditionally high degree of [economic] control over commercial dealings," <u>id.</u> at 1027-28); <u>United States v. Sec. Indus. Bank</u>, 459 U.S. 70, 77 (1982) ("The total destruction by the government of all compensable value of these liens, which constitute compensable property, has every possible element of a Fifth Amendment 'taking' and is not a mere 'consequential incidence' of a valid regulatory measure.") (quoting <u>Armstrong v. United States</u>, 364 U.S. 40, 48 (1960)). 

<sup>82</sup> The emergency exception to the just compensation requirement of the Federal Takings Clause appears in several Supreme Court decisions. <u>S</u><u>ee generally</u> 2 Rotunda & Nowak, <u>supra</u>, § 15.12(C), at 1013-1015. Several of these decisions involve the government's activities during military hostilities. <u>See, e.g., United States v. Caltex (Phil.), Inc.</u>, 344 U.S. 149 (1952) (no compensable taking when Army destroys property to prevent enemy forces from obtaining it); <u>United States v. Cent. Eureka Mining Co.</u>, 357 U.S. 155 (1958) (no compensable taking when government forces gold mines to cease operations to conserve resources for war effort); <u>N</u><u>at</u><u>'</u><u>l Bd. of Young Men</u><u>'</u><u>s Christian Ass</u><u>'</u><u>ns v. United States</u>, 395 U.S. 85 (1969) (no compensable taking where private property destroyed when U.S. troops take shelter there). <u>Compare</u> <u>U</u><u>nited States v. Pewee Coal Co.</u>, 341 U.S. 114 (1951) (plurality opinion) (compensable taking when occupation is physical rather than regulatory, emergency notwithstanding). The emergency exception is not limited to wartime activities, however. <u>See, e.g., M</u><u>iller v. Schoene</u>, 276 U.S. 272 (1928) (no compensable taking where trees destroyed to prevent disease from spreading to other trees); <u>D</u><u>ames</u> <u>& Moore v. Regan</u>, 453 U.S. 654 (1981) (no compensable taking resulting from executive order nullifying attachments on Iranian assets and permitting those assets to be transferred out of the country). The emergency exception is not limited to the physical destruction of property by the government, <u>see</u> <u>C</u><u>ent. Eureka Mining</u>, 357 U.S. at 168, but the Supreme Court has suggested it does not apply to physical occupation of property, <u>see P</u><u>ewee</u>, 341 U.S. at 116-17 (plurality opinion), or permanent appropriation, <u>see</u> <u>L</u><u>ingle v. Chevron U.S.A., Inc.</u>, 544 U.S. 528, 538 (2005), both of which constitute a per se taking. Moreover, we believe that a permanent appropriation of property by the government would be generally inconsistent with the concept of an "emergency." <u>See C</u><u>ent. Eureka Mining</u>, 357 U.S. at 168 (describing wartime restrictions as "temporary in character"). 

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value of property so as to unduly interfere with reasonable investment-backed expectations.<sup>83</sup> In determining what is an undue interference, a court would consider the nature of the governmental action and weigh the public purpose served thereby against the degree to which it interferes with legitimate property interests and distinct investment-backed expectations of bondholders.

The Supreme Court has identified two categories where regulatory action constitutes a per se taking—when the government by regulation "has physically taken property for itself or someone else,"<sup>84</sup>or deprived the owner of all economically beneficial use of the property.<sup>85</sup> Outside of these two narrow categories, challenges to regulations that interfere with protected property interests are governed by the three-part test set forth in <u>P</u><u>enn Central Transportation Co. v. City of New York</u>.<sup>86</sup> Under that test, a regulation constitutes a taking if it denies a property owner "economically viable use" of that property, which is determined by three factors: (i) the character of the governmental action; (ii) the economic impact of the regulation on the claimant; and (iii) the extent to which the regulation has interfered with distinct investment-backed expectations.<sup>87</sup>

The first factor requires the court to examine "the purpose and importance of the public interest underlying a regulatory imposition."<sup>88</sup>

The second factor incorporates the principle enunciated by Justice Holmes: "Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law."<sup>89</sup> "Not every destruction or injury to property by governmental action has been held to be a 'taking' in the constitutional sense."<sup>90</sup> Diminution in property value alone, thus, does not constitute a taking; there must be serious economic harm.

<sup>83</sup> <u>C</u><u>onnolly</u>, 475 U.S. at 224-25 (noting that one point of Federal Takings Clause analysis is "the extent to which the regulation has interfered with distinct investment-backed expectations") (quoting <u>P</u><u>enn Cent. Transp. Co. v. New York</u>, 438 U.S. 104, 124 (1978)); <u>C</u><u>ent. Eureka Mining</u>, 357 U.S. 155 (no compensable taking when government forces gold mines to cease operations to conserve resources for war effort). 

<sup>84</sup> <u>Cedar Point Nursery v. Hassid</u>, 141 S. Ct. 2063, 2072 (2021).

<sup>85</sup> <u>Lingle v. Chevron U.S.A., Inc.</u>, 544 U.S. 528, 538 (2005); <u>Lucas</u>, 505 U.S. at 1019.

<sup>86</sup> <u>Penn Central</u>, 438 U.S. 104, 124 (1978).

<sup>87</sup> *Id.*

<sup>88</sup> <u>Maritrans Inc. v. United States</u>, 342 F.3d 1344, 1356 (Fed. Cir. 2003); <u>see also</u> <u>Keystone Bituminous Coal Ass'n v. DeBenedictis</u>, 480 U.S. 470 (1987).

<sup>89</sup> <u>Penn. Coal Co. v. Mahon</u>, 260 U.S. 393, 413 (1922).

<sup>90</sup> <u>Armstrong v. United States</u>, 364 U.S. 40, 48 (1960).

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Under the third factor, the burden of showing interference with reasonable investment-backed expectations is a heavy one.<sup>91</sup> Thus, a reasonable investment-backed expectation "must be more than a 'unilateral expectation or an abstract need.'"<sup>92</sup> Further, "legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations."<sup>93</sup> "[T]he fact that legislation disregards or destroys existing contractual rights does not always transform the regulation into an illegal taking. . . . This is not to say that contractual rights are never property rights or that the Government may always take them for its own benefit without compensation."<sup>94</sup> In order to sustain a claim under the Federal Takings Clause, the private party must show that it had a "reasonable expectation" at the time the contract was entered that it "would proceed without possible hindrance" arising from changes in government policy.<sup>95</sup>

We are not aware of any case law that addresses the applicability of the Federal Takings Clause in the context of exercise by a state of its police power to abrogate or impair contracts otherwise binding on the Commonwealth. The outcome of any claim that interference by the Commonwealth with the value of the Cost Recovery Property without compensation is unconstitutional, would likely depend on factors such as the Commonwealth interest furthered by that interference, per the first factor, and the extent of financial loss to Holders caused by that interference, per the second factor, as well as the extent to which courts would consider that Holders had a reasonable expectation that changes in government policy and regulation would not interfere with their investment, per the third factor.

With respect to the third factor, we note that the Securitization Act expressly provides for the creation of securitized property in connection with the issuance of the Bonds, and further provides that any related financing order shall remain in effect and the securitization property shall continue to exist until the maturity of securitization bonds approved in such financing order. Moreover, through the State Pledge, the Commonwealth promised to "not take" a series of actions that would impair the value of the Cost Recovery Property, make certain reductions in the Charges, or impair the rights and remedies of the Holders. <u>See</u> <u>supra</u> (quoting KRS 65.114(2)). Given the foregoing, and, as discussed above, in the absence of any contrary precedent under Kentucky law that courts applying Federal Contracts Clause analysis would conclude that the State Pledge constitutes a contractual relationship between the Holders and the Commonwealth, we believe it would be hard to dispute that Holders have reasonable investment expectations with respect to their investments in the Bonds.

<sup>91</sup> <u>DeBenedictis</u>, 480 U.S. at 493.

<sup>92</sup> <u>Monsanto</u>, 467 U.S. at 1005-06 (quoting <u>Webb's Fabulous Pharmacies</u>, 449 U.S. at 161).

<sup>93</sup> <u>Usery v. Turner Elkhorn Mining Co.</u>, 428 U.S. 1, 16 (1976).

<sup>94</sup> <u>Connolly</u>, 475 U.S. at 224.

<sup>95</sup> <u>Chang v. United States</u>, 859 F.2d 893, 897 (Fed. Cir. 1988).

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Based on our analysis of judicial authority discussed above, it is our opinion that, as set forth above, subject to all of the qualifications, limitations and assumptions set forth in this letter, including that the Securitization Act and the State Pledge created a contractual obligation of the Commonwealth under state law, under the Federal Takings Clause, a reviewing court of competent jurisdiction would hold that the Commonwealth is required to pay just compensation to Holders if the Commonwealth's repeal or amendment of the Securitization Act or taking of any other action by the Commonwealth in contravention of the State Pledge constituted a Substantial Taking. As noted earlier, in determining what is an undue interference, a court would consider the nature of the governmental action and weigh the public purpose served thereby against the degree to which it interferes with the legitimate property interests and distinct investment-backed expectations of the Holders. There can be no assurance, however, that any such award of just compensation would be sufficient to pay the full amount of principal of and interest on the Bonds.<sup>96</sup>

\* \* \* \* \*

This opinion letter may not be relied on in any manner or for any purpose by any person other than the addressees listed on <u>S</u><u>chedule</u> <u>A</u> hereto nor may this opinion letter be relied on by you for any purpose other than for the transactions described herein without our prior written consent. This opinion letter may not be quoted, published, communicated or otherwise made available in whole or in part to any person (including, without limitation, any person who acquires a Bond or any interest therein from an Underwriter) other than the addressees listed on <u>S</u><u>chedule</u> <u>A</u>

<sup>96</sup> A takings claim is generally not ripe until the government has made a final decision as to how a regulation will be applied to the property at issue. <u>Pakdel v. City and County of San Francisco</u>, 141 S. Ct. 2226, 2228, 2230 (2021). Although federal courts used to find a taking claim not ripe unless the owner had also sought and been denied compensation through whatever mechanisms state law provides, <u>Williamson Cty. Reg'l Planning Comm'n v. Hamilton Bank of Johnson City</u>, 473 U.S. 172, 186 (1985), the Supreme Court overruled that precedent in <u>Knick v. Twp. of Scott</u>, 139 S. Ct. 2162 (2019). There, the Court held that if a state or local government takes property without compensation, a property owner "*can* bring a federal suit" under 42 U.S.C. § 1983 (emphasis added), "without first bringing any sort of state lawsuit[.]" 139 S. Ct. at 2172–73 (quoting David A. Dana & Thomas W. Merrill, PROPERTY: TAKINGS 262 (2002)). The Court added, however, that if the state has an adequate procedure for obtaining compensation for the taking, there typically will be "no basis to enjoin the government's action effecting a taking," so equitable relief will be "generally unavailable" in federal court in takings cases. 139 S. Ct. at 2172–73. We express no opinion as to whether Kentucky provides any administrative or judicial procedures for seeking just compensation for a taking of the type of contract rights the Holders possess, or whether such procedures are "adequate." To the extent that there is a taking and state procedures for seeking just compensation are inadequate, Holders (or the Indenture Trustee on their behalf) or the Commission could seek to enjoin enforcement of the State action by suing individual officers under <u>Ex Parte Young</u>, 209 U.S. 123, 155–56 (1908) and 42 U.S.C. § 1983. 

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hereto without our specific prior written consent, except that (x) each of the Underwriters may furnish copies of this letter (i) to any of its accountants or attorneys, (ii) in order to comply with any subpoena, order, regulation, ruling or request of any judicial, administrative, governmental, supervisory or legislative body or committee or any self-regulatory body (including any securities or commodities exchange or the Financial Industry Regulatory Authority, Inc.), (iii) to any other person for the purpose of substantiating an Underwriter's due diligence defense and (iv) as otherwise required by law; provided, that none of the foregoing persons is entitled to rely hereon unless an addressee hereof, (y) a copy of this opinion letter may be posted by or at the direction of Kentucky Power or the Issuer to an internet website required under Rule 17g-5 promulgated under the Securities Exchange Act of 1934, as amended, and maintained in connection with the ratings on the Bonds solely for the purpose of compliance with such rule or undertakings pursuant thereto made by Kentucky Power or the Issuer. Such permission to post a copy of this letter to such website shall not be construed to entitle any person, including any credit rating agency, who is not an addressee hereof to rely on this opinion letter.

We hereby consent to the filing of this letter as an exhibit to the registration statement filed on Form SF-1 (Registration Nos. 333-284112 and 333-284112-01) filed by Kentucky Power and the Issuer on January 2, 2025 (as amended, the "Registration Statement"), and to all references to our firm included in or made a part of the Registration Statement. In giving the foregoing consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the related rules and regulations of the Securities and Exchange Commission.

This opinion letter is being given as of the date hereof, and we assume no obligation to update or supplement this opinion letter to reflect any facts or circumstances which may hereafter come to our attention with respect to the matters discussed herein, including any changes in applicable law which may hereafter occur.

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| |
|:---|
|  Very truly yours, |
|  /s/ Sidley Austin LLP |

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SCHEDULE A

U.S. Bank Trust Company, National Association

as Indenture Trustee

190 S. LaSalle Street, 7th Floor

Chicago, Illinois 60603

U.S. Bank National Association

as Securities Intermediary

190 S. LaSalle Street

Chicago, Illinois 60603

Moody's Investors Service, Inc.

7 World Trade Center at

250 Greenwich Street, 24th Floor

New York, New York 10007

Standard & Poor's Ratings Group, Inc.

Structured Credit Surveillance

55 Water Street, 40th Floor

New York, New York 10041

Kentucky Power Company

1 Riverside Plaza

Columbus, Ohio 43215

Kentucky Power Cost Recovery LLC

1645 Winchester Avenue

Ashland, Kentucky 41101

Jefferies LLC

520 Madison Avenue

New York, New York 10022

## Exhibit 99.3

**Exhibit 99.3**![LOGO](g30122g02t02.jpg)

400 West Market Street<br>Suite 1800<br> Louisville, KY 40202-3352 (502) 587-3400 (502) 587-6391 FAX

June 12, 2025

To Each of the Persons Listed

on Schedule A Attached Hereto

RE: Kentucky State Constitutional Issues Related to Kentucky Power Cost Recovery

LLC Series 2025 Senior Secured Recovery Bonds

Ladies and Gentlemen:

We have served as special counsel to Kentucky Power Company, a Kentucky corporation ("<u>Kentucky Power</u>"), in connection with the issuance and sale on the date hereof by Kentucky Power Cost Recovery LLC, a Delaware limited liability company (the "<u>Issuer</u>"), of $477,749,000 aggregate principal amount of the Issuer's Series 2025 Senior Secured Recovery Bonds (the "<u>Bonds</u>"), which are more fully described in the Prospectus dated June 5, 2025. The Bonds are being sold pursuant to the provisions of the Underwriting Agreement dated June 5, 2025 among Kentucky Power, the Issuer, and Jefferies LLC, as representative of the underwriters named in Schedule I to the Underwriting Agreement (the "<u>Underwriters</u>"). The Bonds are being issued pursuant to the provisions of the Indenture (the "<u>Original Indenture</u>") dated as of the date hereof, as supplemented by the Series Supplement dated as of the date hereof (together with the Original Indenture, the "<u>Indenture</u>"), among the Issuer, U.S. Bank Trust Company, National Association, as indenture trustee (the "<u>Indenture Trustee</u>"), and U.S. Bank National Association, as securities intermediary. Under the Indenture, the Indenture Trustee holds, among other things, Cost Recovery Property as described below as collateral security for the payment of the Bonds. All capitalized terms used herein and not otherwise defined shall have the meaning specified in Appendix A to the Indenture unless the context clearly indicates otherwise.

"<u>Cost Recovery Property</u>" means the "securitized property" as defined in Chapter 278 of Kentucky's Title XXIV Public Utilities law at KRS 278.670(19), that was created in favor of Kentucky Power, pursuant to a financing order dated January 10, 2024 (the "<u>Initial Financing Order</u>") and a restated financing order dated April 11, 2025 (the "<u>Financing Order</u>") issued by the Public Service Commission of Kentucky (the "<u>Commission</u>") in Case No. 2023-00159. The Cost Recovery Property was assigned to the Issuer pursuant to the provisions of the Purchase and Sale Agreement (the "<u>Sale Agreement</u>") dated as of the date hereof between Kentucky Power and the Issuer in consideration for the payment by the Issuer to Kentucky Power of the proceeds of the sale of the Bonds, net of certain issuance costs. The Cost Recovery Property includes the right to impose, bill, charge, collect and receive certain "nonbypassable" "securitized surcharges" (each as defined in the Securitization Act) described in the Financing Order (the "<u>Charges</u>"), in an amount sufficient to repay, finance, or refinance the Bonds.

www.stites.com

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The Charges may be periodically adjusted, in the manner authorized in the Financing Order, in order to enhance the probability that the revenues received by the Issuer from the Charges are sufficient to (i) amortize the Bonds pursuant to the amortization schedule to be followed in accordance with the provisions of the Bonds and the Indenture, (ii) pay interest thereon and related fees and expenses, and (iii) maintain the required reserves for the payment of the Bonds.

Kentucky Power, on March 28, 2025, filed a motion in Case No. 2023-00159 to "address changes in guidance from the United States Securities and Exchange Commission and the nature of the advisors assisting the Commission with the securitization process."<sup>1</sup> On April 11, 2025, the Commission issued the Financing Order in response to Kentucky Power's motion in Case No. 2023-00159.<sup>2</sup>

The period for seeking rehearing of the Financing Order expired on May 5, 2025. In the absence of a timely motion for rehearing, the Financing Order became final and nonappealable on May 15, 2025.

"<u>Securitization Act</u>" is defined for purposes of this Opinion as the provisions of KRS 278.670 to KRS 278.696 and KRS 65.114.

In connection with the Securitization Act, KRS 65.114(2)—(3) provides:

"(2) Any determination of the commission made in connection with any financing order and any financing order of the commission issued pursuant to this subsection shall be a binding, irrevocable, and final order of the commission, and binding on the commission and the Commonwealth. The Commonwealth and its agencies, including the commission, pledge and agree with bondholders, the owners of the securitized property, and other financing parties that the Commonwealth and its agencies shall not undertake any of the prohibited actions listed in this subsection. This subsection shall not preclude limitation or alteration, if full compensation is made by law

<sup>1</sup> The Initial Financing Order provided that "[p]ursuant to 278.678(8), the Commission is prohibited from taking any action that would amend, modify, or terminate this Financing Order by any subsequent action ...." The limitations imposed by KRS 278.678(8) on the Commission's authority to "amend, modify, or terminate" the Initial Financing Order arise upon the earlier of "the time of any transfer of securitized property to an assignee or the issuance of securitized bonds authorized thereby...." We have assumed for purposes of this Opinion that there has been no transfer of securitized property or issuance of securitized bonds. 

<sup>2</sup> KRS 278.672(3) prohibits the Commission from accepting an application for a financing order under the Securitization Act after December 31, 2024. Kentucky Power filed its motion for the Financing Order on March 28, 2025, in the proceeding giving rise to the Initial Financing Order. The motion was not styled an application pursuant to KRS 278.672 nor was it deemed an application by the Commission. We are unaware of any published Kentucky precedent indicating whether the motion should have been treated as an application by the Commission and, therefore, have assumed for purposes of this Opinion that the date of the Initial Financing Order is controlling and that the Financing Order is not as a result barred by KRS 278.672(3). 

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for the full protection of the securitized surcharges collected pursuant to a financing order and of the bondholders, any assignee, or financing party entering into a contract with the electric utility. The Commonwealth and its agencies, including the commission, shall not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Alter the provisions of KRS 278.670 to 278.696 and 65.114 which authorize the commission to create an irrevocable contract right or right to sue by the issuance of a financing order creating securitized property, making the securitized surcharges imposed by a financing order irrevocable, binding, or affecting the nonbypassable charges for all existing and future retail customers of the electric utility;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Take or permit any action that impairs or would impair the value of securitized property or the security for the securitized bonds or revises the securitized costs for which recovery is authorized;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In any way impair the rights and remedies of the bondholders, assignees, and other financing parties; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Except for changes made pursuant to the formula-based true-up mechanism authorized under KRS 278.678, reduce, alter, or impair securitized surcharges that are to be imposed, billed, charge[d], collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, financing costs, and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related securitized bonds have been paid and performed in full.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Any person or entity that issues securitized bonds may include the language specified in this subsection in the securitized bonds and related documentation."

The language immediately above, including paragraph (2) in the block quote above, is referred to in this Opinion as the "<u>State Pledge.</u>" As authorized by the foregoing statutory provision and the Financing Order, the language of the State Pledge has been included in the Indenture and in the Bonds. The term "<u>Prohibited Actions</u>" is used to refer to the actions listed in KRS 65.114(2)(a)-(d).

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Excepted from the pledge and agreement of the Commonwealth and its agencies, including the Commission, are an alteration or limitation arising in connection with any Prohibited Action "if full compensation is made by law for the full protection of the securitized surcharges collected pursuant to a financing order" issued pursuant to the Securitization Act and full protection of "the bondholders, any assignee, or financing party entering into a contract with the electric utility."<sup>3</sup>

In connection with rendering the opinions set forth below, we have examined and relied upon originals or copies, certified or otherwise identified to our satisfaction, of: (i) the Sale Agreement; (ii) the Indenture; (iii) the Registration Statement on Amendment 1 to Form SF-1 of the Issuer; (iv) the Securitization Act and related public records referenced herein; (v) the Financing Order, (vi) the Servicing Agreement by and between the Issuer and Kentucky Power dated as of the date hereof; and (vii) such other documents relating to the transactions contemplated thereby as we have deemed necessary or advisable as the basis for such opinions. For purposes of this opinion letter (this "<u>Opinion</u>"), "<u>Transaction Documents</u>" means the above referenced documents and "<u>Transaction</u>" means the transactions contemplated by the Transaction Documents.

**Assumptions** 

For purposes of rendering this Opinion, we assumed the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. In making our examination of documents, for purposes of this Opinion we have assumed (a) that the parties to such documents have the power, corporate or other, to enter into and perform all obligations thereunder, and (b) the due authorization by all requisite action, corporate or other, and the execution and delivery by such parties of such documents, including the Transaction Documents, and the validity and binding effect thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. In accordance with our separate legal opinion of even date herewith as to the Financing Order, the Financing Order was duly authorized and issued by the Commission in accordance with applicable Kentucky statutes, rules and regulations; the Financing Order and the process by which it was issued comply with applicable Kentucky statutes, rules, and regulations; and that the Financing Order is in full force and effect and is final and nonappealable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The parties to the Transaction Documents and their successors and assigns will (i) act in good faith and in a commercially reasonable manner in the exercise of any rights or enforcement of any remedies under the Transaction Documents; (ii) not engage in any conduct in the exercise of such rights or enforcement of such remedies that would constitute other than fair dealing; and (iii) comply with the requirements of applicable procedural and substantive law in exercising any rights or enforcing any remedies under the Transaction Documents.

<sup>3</sup> KRS 65.114(2).

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The exercise of any rights or enforcement of any remedies under the Transaction Documents would not be unconscionable, result in a breach of the peace or otherwise be contrary to public policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The Issuer and all parties to the Transaction Documents are operating, and will continue to operate, in accordance with all applicable federal, state and local laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. The Transaction Documents accurately reflect the complete understanding of the parties with respect to the transactions contemplated thereby and the rights and obligations of the parties thereunder and the Transaction Documents have not been amended, modified, or supplemented, directly or indirectly, by any other agreement or understanding of the parties or waiver of any of the material provisions of the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. That any legislation enacted by the General Assembly of the Commonwealth of Kentucky (the "<u>General Assembly</u>"), or supplemental order adopted by the Commission, impairing the value of the Bonds would constitute a "substantial" modification of the provisions of the Securitization Act or the Financing Order that provide support for the Bonds (and is done without providing full compensation for the Bondholders). The determination of whether particular governmental action of a legislative character constitutes a substantial impairment of a particular contract is a fact-specific analysis, and nothing in this Opinion expresses any opinion as to how a court would resolve the issue of "substantial impairment" with respect to the Bonds in relation to any particular action of a legislative character by the General Assembly or the Commission being challenged.

In addition, we have made no independent investigation of the facts referred to herein, and with respect to such facts we have relied, for purposes of rendering this Opinion, and except as otherwise expressly stated herein, exclusively on the statements contained and matters provided for in the Transaction Documents and such other documents relating to the Transaction as we have deemed advisable, including the factual representations, warranties and covenants contained therein as made by the respective parties thereto.

**Opinions Requested** 

You have requested our opinion as to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Whether the Securitization Act was duly enacted by the General Assembly in accordance with applicable Kentucky laws and is in full force and effect; whether we are aware of any constitutional infirmities with respect to the Securitization Act; and whether, to our knowledge, the validity of the Securitization Act (insofar as it relates to the Transaction) is the subject of any pending appeal or litigation.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Whether State Pledge unambiguously indicates the intent of the Commonwealth of Kentucky (the "<u>Commonwealth</u>") to be bound with the Holders and supports the conclusion that, for purposes of the Contracts Clause of the Kentucky Constitution<sup>4</sup> (the "<u>Kentucky Contracts Clause</u>"), the State Pledge constitutes a binding contractual relationship between the Commonwealth and the Holders. Further, whether (subject to the assumption that any impairment be "substantial"), a reviewing court of competent jurisdiction would hold that the Commonwealth and its agencies, including the Kentucky Public Service Commission, could not constitutionally repeal or amend the Securitization Act or take any other action contravening the State Pledge and creating an impairment (without, as the Securitization Act requires, providing full compensation by law for the full protection of the Charges to be collected pursuant to the Financing Order and full protection of the Holders).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Whether a reviewing court of competent jurisdiction would hold that the Cost Recovery Property is protected by the Takings Clause of the Kentucky Constitution<sup>5</sup> (the "<u>Kentucky Takings Clause</u>"), and that therefore the Commonwealth would be required to pay just compensation to Holders, as determined by such court, if the General Assembly repealed or amended the Securitization Act or took any other action contravening the State Pledge, if doing so constituted a permanent appropriation of a substantial property interest of the Holders in the Cost Recovery Property and deprived the Holders of their reasonable expectations arising from their investments in the Bonds (a "<u>Substantial Taking</u>").

**Confirmation** 

We confirm that, to our knowledge, based solely on our discussion below and our review of the public records and inquiries described below, and subject to the other qualifications, limitations, and assumptions set forth in this Opinion:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Securitization Act was enacted by the General Assembly in accordance with the Kentucky Constitution.
Further, we are not aware of any Kentucky constitutional infirmities with respect to the Securitization Act. Finally, the validity of the Securitization Act (insofar as it relates to the Transaction), is not the subject of any pending appeal or
litigation.

**Opinions** 

Based on our discussion below and our review of the relevant judicial authority cited below, and subject to the qualifications, limitations, and assumptions set forth in this Opinion (including the assumption that any impairment would be "substantial"), it is our opinion that a reviewing court of competent jurisdiction in Kentucky, in a properly prepared and presented case applying Kentucky law:

<sup>4</sup> KY. CONST. § 19.

<sup>5</sup> KY. CONST. § 13.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Would conclude the State Pledge unambiguously indicates the Commonwealth's intent to be bound to the Bondholders, and further, for purposes of the Kentucky Contracts Clause, the State Pledge constitutes a binding contractual relationship between the Commonwealth and the Holders. Further, a reviewing court of competent jurisdiction in Kentucky would hold that the Commonwealth and its agencies, including the Commission, could not constitutionally repeal or amend the Securitization Act or take any other action contravening the State Pledge and creating a substantial impairment (without, as the Securitization Act requires, providing full compensation by law for the full protection of the Charges to be collected pursuant to the Financing Order and full protection of the Holders), unless, notwithstanding the barriers to such a finding described below, such court determines that such impairment clearly is a reasonable and necessary exercise of the Commonwealth's sovereign powers based upon reasonable conditions and of a character reasonable and appropriate to the significant and legitimate public purpose justifying such action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The Cost Recovery Property is protected by the Kentucky Takings Clause, and that the Commonwealth would be required to pay just compensation to Holders, as determined by such court, if the General Assembly repealed or amended the Securitization Act or took any other action contravening the State Pledge, if such action constituted a Substantial Taking. Takings of financial interests can be particularly difficult to establish in a manner that distinguishes them from constitutionally permissible economic regulation. In examining whether action of the General Assembly or the Commission amounts to a regulatory taking, Kentucky courts will consider the character of the governmental action, the economic impact of the governmental action on the Holders, and the extent to which the governmental action interferes with distinct investment-backed expectations. There is no assurance, however, that any such award of compensation would be sufficient to pay the full amount of principal of and interest on the Bonds.

We note, with respect to the opinion in (1) above, that existing case law indicates that any impairment must necessarily and reasonably be tailored to address a significant public purpose, such as remedying or providing relief for a broad, widespread economic or social problem. The cases also indicate that the justification for any impairment would be subjected to a higher degree of scrutiny if the action by the General Assembly impairs a contract to which the Commonwealth is a party and involves the financial or other self-interest of the Commonwealth, as contrasted to a contract solely between private parties.

We are not aware of any reported controlling judicial precedents that are directly on point with respect to the questions raised above. Accordingly, our analysis is necessarily a reasoned application of judicial decisions involving similar or analogous circumstances. We cannot predict the facts and circumstances that will be present in the future and may be relevant to the resolution of the issues embodied in the opinions above. Consequently, there can be no assurance that a court will follow our reasoning or reach the conclusions that we believe current judicial precedent supports.

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This Opinion is limited to the state laws of the Commonwealth and does not address issues of federal law. Our opinions are based upon our evaluation of existing judicial decisions and arguments related to the factual circumstances in the Transaction Documents and as described in our discussion below; such precedents and such circumstances could change materially from those discussed below in this Opinion. Accordingly, such opinions are intended to express our belief as to the result that should be obtainable through the proper application of existing judicial decisions in a properly prepared and presented case. It is our and your understanding that none of the foregoing opinions within this Opinion is intended to be a guaranty as to what a particular court would actually hold; rather each such opinion is only an expression as to the decision a court ought to reach if the issue were properly prepared and presented to it and the court followed what we believe to be the applicable legal principles under existing judicial precedent. The recipients of this Opinion should take these considerations into account in analyzing the risks associated with the Transaction.

**Discussion** 

**A. Background—The Securitization Act and Financing Order** 

The Securitization Act expressly characterizes the cost recovery property specified in a financing order as "an existing, present, intangible property right or interest therein...."<sup>6</sup> It further provides that the cost recovery property specified in a financing order "exists until the securitized bonds issued pursuant to the financing order are paid in full and all financing costs and other costs have been recovered in full."<sup>7</sup>

KRS 278.694(2) provides that securitized bonds are not a debt, general obligation, or special obligation of the Commonwealth or its political subdivisions, agencies, or instrumentalities. Securitized bonds also do not obligate the Commonwealth or its political subdivisions, agencies, or instrumentalities to levy a tax or make an appropriation for payment of securitized bonds other than in their capacity as consumers of electric energy.<sup>8</sup> All securitized bonds are required to carry a legend on their face to the effect that "[n]either the full faith and credit nor the taxing power of the Commonwealth is pledged to the payment of the principal of, or interest on, this bond."<sup>9</sup>

KRS 278.678(8) provides that upon the occurrence of the earlier of the transfer of cost recovery property to an assignee, or the issuance of securitized bonds pursuant to the Securitization Act, a financing order issued pursuant to the Securitization Act "shall be irrevocable and, except for changes made pursuant to a formula-based true-up mechanism" in accordance with the Securitization Act, the Commission shall not:

<sup>6</sup> KRS 278.684(1).

<sup>7</sup> KRS 278.684(2).

<sup>8</sup> KRS 278.694(3).

<sup>9</sup> *Id.*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Amend, modify, or terminate the financing order by any subsequent action; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Reduce, impair, postpone, terminate, or otherwise adjust securitized surcharges approved in the financing order.

The Financing Order found that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Commission's obligations under this Financing Order relating to the securitized bonds, including the specific actions the Commission guarantees to take, are direct, explicit, irrevocable, and unconditional upon issuance of the securitized bonds, and are legally enforceable against the Commission, a United States public sector entity.<sup>10</sup>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The approval of this Financing Order, including the true-up provisions, by the Commission constitutes a guarantee of state regulatory action to ensure repayment of the securitized bonds and associated costs.<sup>11</sup>

**B.** **Enactment and Facial Constitutionality of the Securitization Act; Confirmation of Absence of Litigation as to Validity** 

This section of this Opinion addresses three matters: (i) whether the Securitization Act, as contained in Senate Bill ("<u>SB</u>") 192, was enacted in conformity with the Kentucky Constitution; (ii) whether we are aware of any infirmities under the Kentucky Constitution with respect to the Securitization Act; and (iii) whether we are aware of any pending appeal or litigation as to the validity of the Securitization Act (insofar as it relates to the Transaction).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Enactment of the Securitization Act under Kentucky's Constitution</u>

The proceedings of the 2023 General Assembly and actions of Governor Andy Beshear detailed below are based upon our review of the Kentucky Legislative Research Commission's online "2023 Regular Session Record" for SB 192.<sup>12</sup> We did not independently review any other extrinsic evidence of the proceedings of the 2023 General Assembly or Governor Beshear's actions.

We are informed by the Kentucky Legislative Research Commission, the administrative arm of the General Assembly, that the journals of the Kentucky Senate and the Kentucky House of Representatives, as provided for by Section 40 of the Kentucky Constitution, have yet to be published.<sup>13</sup> The House and Senate Journals comprise the official daily records of the proceedings in each chamber during a session of the General Assembly, including roll call votes on all bills, motions, and referral.

<sup>10</sup> Financing Order, Conclusions of Law, at ¶ 42.

<sup>11</sup> "Financing Order, Conclusions of Law, at ¶ 43.

<sup>12</sup> https://apps.legislature.ky.gov/record/23rs/sb192.html.

<sup>13</sup> The most recent publicly available Senate and House Journals relate to the 2017 Session of the General Assembly.

https://legislature.ky.gov/LRC/Publications/Pages/default.aspx#:~:text=%E2%80%8BHouse%20Journal%20and%20Senate,bills%2C%20motions% 2C%20and%20referrals.&text=%E2%80%8BKentucky%20Administrative%20Regulations%20Service,into%20action%20by%20administrative% 20agencies. <br>

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SB 192 was filed in the Senate during the 2023 Regular Session of the General Assembly on February 21, 2023. It was entitled "An Act relating to investor-owned electric utilities." Sections 1-13 and Section 15 of SB 192 created those new sections of Chapter 278 of the Kentucky Revised Statutes comprising the Securitization Act. Section 14 of SB 192 embodied the State Pledge.

SB 192 was assigned to the Senate Committee on Committees on February 21, 2023. On February 23, 2023, SB 192 was assigned to the Senate Natural Resources and Energy Committee. It was reported favorably out of the Natural Resources and Energy Committee on March 1, 2023, in accordance with Section 46 of the Kentucky Constitution and received its first reading before the Senate that day. SB 192 received its Second Reading before the Senate on March 2, 2023. The following day it was posted for passage by the Senate for March 7, 2023.

Floor Amendment 1 to SB 192 was filed on March 7, 2023 prior to SB 192 receiving its Third Reading or being considered by the Kentucky Senate for passage. Floor Amendment 1 to SB 192 amended Sections 1-6, Sections 9-11, and Section 14 of SB 192.

SB 192, as amended by Floor Amendment 1 received its Third Reading on March 8, 2023, in accordance with Section 46 of the Kentucky Constitution. It was presented on March 8, 2023, for vote by the Senate with a quorum present as calculated in accordance with Section 37 of the Kentucky Constitution. SB 192 as amended by Floor Amendment 1 received 35 "yea" votes and zero "no" votes. The vote satisfied Section 46 of the Kentucky Constitution which mandates that any bill must receive two-fifths of the 38 members<sup>14</sup> elected to the Senate and a majority of the members voting.

SB 192, as amended by Floor Amendment 1, was received by the Kentucky House of Representatives on March 8, 2023, in the House Committee on Committees. SB 192 as amended by Floor Amendment 1 was assigned to the House Natural Resources and Energy Committee on March 10, 2023. It was taken from the House Natural Resources and Energy Committee and received its First Reading before the House on March 13, 2023. It received its Second Reading before the House on March 14, 2023. SB 192, as amended by Floor Amendment 1 was placed on the House Orders of the Day on March 15, 2023. SB 192 as amended by Floor Amendment 1 on March 16, 2023, received 97 "yea" votes and zero "no" votes. The House vote satisfied Section 46 of the Kentucky Constitution which mandates that any bill must receive two-fifths of the 100 members<sup>15</sup> elected to the House and a majority of the members voting.

<sup>14</sup> KY. CONST. § 35.

<sup>15</sup> *1d.*

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SB 192 as amended by Floor Amendment 1 was received by the Kentucky Senate on March 16, 2023 and enrolled there in accordance with the procedure specified in Section 56 of the Kentucky Constitution. The President of the Senate thereafter affixed his signature to the bill as amended that day. That same day, SB 192 as amended by Floor Amendment 1 was delivered to the Kentucky House of Representatives, where it was enrolled in accordance with the procedure specified in Section 56 of the Kentucky Constitution. It was signed by the Speaker of the Kentucky House of Representatives on March 16, 2023.

The Clerk of the House of Representatives presented SB 192 as amended by Floor Amendment 1 to the Governor on that same day in accordance with Section 56 of the Kentucky Constitution. The Governor signed SB 192 as amended by Floor Amendment 1 on March 23, 2023, in accordance with Section 88 of the Kentucky Constitution, and within the ten days provided for by Section 88 of the Constitution.

The 2023 Regular Session of the General Assembly adjourned *sine die* on March 30, 2023.<sup>16</sup> SB 192 as amended by Floor Amendment 1 became effective on June 29, 2023, in accordance with Section 55 of the Kentucky Constitution.<sup>17</sup>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Absence of Kentucky Constitutional Infirmities of the Securitization Act</u>

The constitutionality of acts of the General Assembly have been challenged for a variety of reasons under Kentucky law, including, but not limited to, issues relating to due process, equal protection, open courts, and separation of powers. Although two Kentucky constitutional challenges—the first relating to the legislation's subject and title and the second relating to whether it constitutes "special legislation"—could apply to the Securitization Act, it is our opinion that it is unlikely a Kentucky court would find the Securitization Act unconstitutional on either of those bases.

The Kentucky Constitution provides that "[n]o law enacted by the General Assembly shall relate to more than one subject, and that shall be expressed in the title."<sup>18</sup> The purpose of Section 51 "was to prevent the evil that had grown up of legislating in one act upon as many distinct and wholly disconnected subjects as the legislative body saw fit, without any indication in the title of the act as to what its contents might be."<sup>19</sup> Before the adoption of Section 51, the General Assembly "legislate[d] upon a multiplicity of unrelated subjects which were neither remotely germane to, or in any wise connected with, the one or ones named in the title."<sup>20</sup> "As

<sup>16</sup> Op. Att'y Gen. 23-3 (April 4, 2023).

<sup>17</sup> *Id.*

<sup>18</sup> KY. CONST. § 51.

<sup>19</sup> *Talbott v. Laffoon,* 79 S.W.2d 244, 246 (Ky. 1934).

<sup>20</sup> *Id.*

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long as the title of the act is not false or misleading, then it is constitutional."<sup>21</sup> "The title need only furnish general notification of the general subject in the act. If the title furnishes a 'clue' to the act's contents, it passes constitutional muster."<sup>22</sup> Here, the only subject of the legislation creating the Securitization Act was the financing of extraordinary or deferred costs by investor-owned electric utilities, including the State Pledge required to implement that financing, while the title of the legislation was "AN ACT relating to investor-owned utilities."<sup>23</sup>

Sections 59<sup>24</sup> and 60<sup>25</sup> of the Kentucky Constitution prohibit "local" or "special" legislation. "A 'local law' is one whose operation is confined within territorial limits other than those of the whole state, or any properly constituted class or locality therein."<sup>26</sup> Here, because the Securitization Act's application is statewide, it is not a local act. "Special legislation is defined as arbitrary and irrational legislation that favors the economic self-interest of the one or the few over that of the many."<sup>27</sup> "The distinction between a general and a special law" is that a "statute which relates to persons or things as a class is a general law, while a statute which relates to particular persons or things of a class is special."<sup>28</sup>

"The primary purpose of Kentucky Constitution Section 59 [and 60] is to prevent special privileges, favoritism and discrimination, and assure equality under the law."<sup>29</sup> "A special law is legislation which arbitrarily or beyond reasonable justification discriminates against some persons or objects and favors others"<sup>30</sup> or which favors a special interest to the detriment of the rest of society."<sup>31</sup> In order for a law in its constitutional sense to be general rather than "special": "(1) it must apply equally to all in a class, and (2) there must be distinctive and natural reasons inducing and supporting the classification."<sup>32</sup> Here, the Securitization Act applies equally to the entire class—all investor-owned utilities—and there are distinctive and natural reasons supporting the classification. These include eliminating the need for rates to cover the associated return on equity

<sup>21</sup> *Yeoman v. Com., Health Pol'y Bd.,* 983 S.W.2d 459, 476 (Ky. 1998).

<sup>22</sup> *Com. ex rel. Armstrong v. Collins,* 709 S.W.2d 437, 443 (Ky. 1986).

<sup>23</sup> 2023 Kentucky Laws Ch. 72 (SB 192).

<sup>24</sup> KY. CONST. § 59 provides, in pertinent part: "The General Assembly shall not pass local or special acts concerning any of" various enumerated "subjects" or "purposes." Subsection 29 provides: "In all other cases where a general law can be made applicable, no special law shall be enacted." 

<sup>25</sup> KY. CONST. § 60 provides, in pertinent part: "The General Assembly shall not indirectly enact any special or local act by the repeal in part of a general act . . . . No law shall be enacted granting powers or privileges in any case where the granting of such powers or privileges shall have been provided for by a general law, nor where the courts have jurisdiction to grant the same or to give the relief asked for. . . ." 

<sup>26</sup> *Ravitz v. Steurele,* 77 S.W.2d 360, 364 (Ky. 1934).

<sup>27</sup> *Zuckerman v. Bevin,* 565 S.W.3d 580, 599 (Ky. 2018).

<sup>28</sup> *Johnson v. Commonwealth ex rel. Meredith,* 165 S.W.2d 820, 825 (Ky. 1942).

<sup>29</sup> *Kentucky Harlan Coal Co. v. Holmes,* 872 S.W.2d 446, 452 (Ky. 1994) (overruled on other grounds).

<sup>30</sup> *Bd. of Educ. of Jefferson Cnty. v. Bd. of Educ. of Louisville,* 472 S.W.2d 496, 498 (Ky. 1971).

<sup>31</sup> *Yeoman v. Com., Health Policy Bd.,* 983 S.W.2d 459, 468 (Ky. 1998).

<sup>32</sup> *Id* at 466.

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and income tax expenses not paid by electric cooperatives and municipal utilities. A Kentucky court is unlikely to sustain a challenge to the Securitization Act under Kentucky Constitution Sections 59 or 60.

It is our opinion that the Securitization Act, as embodied in SB 192 as amended by Floor Amendment 1, were enacted in accordance with the applicable provisions of the Constitution of Kentucky.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>No Knowledge of Legal Challenges to the Validity of the Securitization Act</u>

Based upon our limited inquiry described below, we are unaware of any pending appeal or litigation challenging the validity of the Securitization Act. The subject matter of pending or concluded Kentucky trial court actions, and whether they involve legal challenges to the Securitization Act in the 57 Kentucky judicial circuits, cannot be discerned from the Kentucky Court of Justice and Administrative Office of the Courts' CourtNet database. We further reviewed, on April 30, 2025, the Thomson Reuters Westlaw Edge data base for decisions of the Kentucky Court of Appeals, the Kentucky Supreme Court, the United States District Court for the Eastern and Western Districts of Kentucky, and the Court of Appeals for the Sixth Circuit. Based upon these limited inquiries, we did not identify any opinions or orders of those courts challenging the validity of the Securitization Act.

We also contacted an Executive Advisor Attorney for the Commission on April 30, 2025. The Commission's Executive Advisor Attorney was unaware of any past or pending challenges to the Securitization Act.

**C.** **The Kentucky Contract Clause** 

Section 19(1) of the Kentucky Constitution provides in pertinent part that "[n]o . . . law impairing the obligation of contracts, shall be enacted." "The strength of every contract lies in the right of the promisee to rely upon the constitutional security against impairment of its obligations by legislation and in the right to resort to courts of public justice for the redress of its violation."<sup>33</sup>

<sup>33</sup> *Bd. of Education of Louisville v. City of Louisville,* 157 S.W.2d 337, 343 (Ky. 1941) ("[Pensioners] had a contract with an agency of the Commonwealth of Kentucky entitling them to the benefits for which they had paid.").

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Although the language of Kentucky Contract Clause contains no exceptions, the Kentucky Supreme Court, like federal law, has recognized that the Kentucky Contract clause "does not prevent a state from enacting regulations or statutes which are reasonably necessary to safeguard the vital interests of its people."<sup>34</sup> The Kentucky Contract Clause limits the power of the Commonwealth to modify its own contracts, as well as those between private parties.<sup>35</sup>

The Kentucky Supreme Court held in *Maze v. Bd. of Dir. for the Common. Postsecondary Educ. Prepaid Tr. Fund,* 559 S.W.3d 354, 372 (Ky. 2018) "that Kentucky jurisprudence takes a more restrictive view of the General Assembly's power to impose changes to existing contractual benefits than the pronouncements of the federal courts [regarding the federal Contract Clause.]"<sup>36</sup>

The Kentucky Supreme Court generally follows federal precedent, most recently a three-part test fashioned from the United States Supreme Court's decision in *U.S. Trust Co. v. New Jersey,*<sup>37</sup> in assessing whether legislation violates the Kentucky Contracts Clause:<sup>38</sup>

"(1) whether the legislation operates as a substantial impairment of a contractual relationship; (2) if so, then the inquiry turns to whether there is a significant and legitimate public purpose behind the regulation, such as the remedying of a broad and general social or economic problem; and (3) if as in this case, the government is a party to the contract, we examine 'whether that impairment is nonetheless permissible as a legitimate exercise of the state's sovereign powers," and we determine whether if the impairment is "upon reasonable conditions and of a character appropriate to the public purpose justifying its adoption."<sup>39</sup>

In resolving the third part of the analysis, the *Maze* Court explained "the reasonableness of the impairment is judged on whether the existing contractual obligation of the state 'had effects that were unseen and unintended by the legislature' at the time the contract creating those obligations were created."<sup>40</sup> The appropriateness of the legislation creating the impairment in turn is weighed by "whether a less drastic modification could be implemented," and "whether the state could have achieved its goals without modification."<sup>41</sup>

<sup>34</sup> *Maze v. Bd. of Dir. for the Common. Postsecondary Educ. Prepaid Tr. Fund,* 559 S.W.3d 354, 369 (Ky. 2018) (internal quotation marks omitted) ("*Maze*").

<sup>35</sup> *See id.* at 373 (holding that legislation limiting benefits available under existing Kentucky prepaid tuition plan contracts violated state and federal Contract Clauses.).

<sup>36</sup> *Id.*

<sup>37</sup> 431 U.S. 1 (1977) ("*U.S. Trust*").

<sup>38</sup> *See Maze,* 559 S.W.3d at 369.

<sup>39</sup> *Id.*

<sup>40</sup> *Id.* at 373 (internal quotation marks omitted) (quoting *Md. State Teachers Ass'n v. Hughes,* 594 F.Supp. 1353, 1362 (D. Md. 1984)).

<sup>41</sup> *Id*. (internal quotation marks omitted).

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The following Kentucky Contract Clause analysis comprises four subparts: (i) whether the State Pledge indicates the Commonwealth's intent to be bound to the Holders and supports the conclusion that the State Pledge constitutes a binding contractual relationship between the Commonwealth and the Holders for purposes of the Kentucky Contract Clause; (ii) whether any such binding contract violates the reserved powers doctrine and thus is void; (iii) whether there is a significant and legitimate public purpose for the impairment of the State Pledge; and (iv) the reasonableness of the impairment and whether it is appropriate to the public purpose justifying its adoption.

Under *Maze*, a party asserting a claim under the Kentucky Contract Clause also is required to demonstrate that any impairment<sup>42</sup> constitutes a substantial impairment. As indicated above, that is a fact-specific inquiry and not addressed in this Opinion. Therefore, we assume for purposes of this Opinion that any impairment resulting from a challenged action of the General Assembly would be substantial under the Kentucky Contract Clause.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>The Existence Under the Kentucky Contract Clause of a Binding Contract Between the Commonwealth and the Holders</u>

Kentucky law recognizes that the Commonwealth through legislation<sup>43</sup> and executive branch action, if authorized by legislation,<sup>44</sup> may bind itself by contract. Whether a contract exists is a matter of state law.<sup>45</sup> A contract between the Commonwealth and a counterparty will be found to exist under Kentucky law only where the General Assembly's intent to create a contractual right is clear and unmistakable.<sup>46</sup>

The party claiming the existence of a contract bears the burden of "overcom[ing] the presumption that a law is not intended to create private contractual or vested rights."<sup>47</sup> In determining the General Assembly's intent to create a contractual relationship, Kentucky courts first look to the legislative language while giving the words employed their "plain and ordinary

<sup>42</sup> "Any law which changes the intention and legal effect of the original parties, giving one greater or the other a less interest or benefit in the contract impairs its obligation. The extent of the change is immaterial...." *Ky. Utilities Co. v. Carlisle Ice Co.,* 131 S.W.2d 499, 504 (Ky. 1939). 

<sup>43</sup> *Kentucky Emp. Ret. Sys. v. Seven Cntys. Serv., Inc.,* 580 S.W.3d 530 (Ky. 2019) ("*Seven Cntys*.").

<sup>44</sup> *See id*. at 539.

<sup>45</sup> *Id.* at 542.

<sup>46</sup> *Id*. at 543. The Kentucky Supreme Court in *Seven Cntys*. followed the United States Supreme Court's "unmistakability doctrine" *See U.S. v. Winstar Corp.,* 518 U.S. 839, 871 (1996). The unmistakability doctrine serves "to avoid unnecessarily infringing on a state legislature's ability to legislate regarding state sovereign rights unless it is clear beyond any doubt that the legislature meant to give up that right." *Seven Cntys.,* 580 S.W.3d at 543 (internal quotation marks omitted) (quoting *Puckett v. Lexington-Fayette Urb. Cnty. Gov't*, 833 F.3d 590, 600-01(6<sup>th</sup> Cir. 2016)). 

<sup>47</sup> *Id*.

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meaning."<sup>48</sup> A court may also consider "the circumstances surrounding its enactment or amendment—such as its apparent purpose, context, legislative history, or any other evidence of actual intent."<sup>49</sup>

KRS 65.114(2) on its face provides clear evidence that, in enacting the statutes, the General Assembly intended to create a contractual relationship, binding the "Commonwealth and its agencies, including the Commission," on the one hand, and the "bondholders, the owners of the securitized property, and other financing parties" on the other.<sup>50</sup> Specifically, KRS 65.114(2) employs language couched in the terms of a contract such as "pledge and agree with the bondholders ...," and describes the provisions of the Securitization Act as authorizing the Commission to "create an irrevocable contract right or right to sue..." through issuance of a financing order.<sup>51</sup>

The language employed by the General Assembly in KRS 65.114(2) appears consistent with an intent to create a contractual relationship between the Bondholders and the Commonwealth with respect to the State Pledge.<sup>52</sup> Indeed, the presence of similar language in KRS 164A.705(1) was relied upon by the Kentucky Supreme Court in *Maze* to support its conclusion that the General Assembly intended to bind itself in contract through the prepaid tuition agreements at issue in that case.<sup>53</sup> Conversely, in *Seven Cntys.* the Kentucky Supreme Court pointed to the absence of any such contract-like language in concluding that the relationship between the retirement system and Seven Counties was not contractual.<sup>54</sup>

A second aspect of KRS 65.114 underscores the contractual nature of the State Pledge. The statute excepts from the promise on behalf of the Commonwealth not to undertake any of the Prohibited Actions "if full compensation is made by law for the full protection of the securitized

<sup>48</sup> *Seven Cntys.* 580 S.W.3d at 539.

<sup>49</sup> *Id.*

<sup>50</sup> KRS 65.114(2).

<sup>52</sup> KRS 65.114(2) ("any financing order of the commission ... shall be ... binding on the commission and the Commonwealth.").

<sup>53</sup> *Maze,* 559 S.W.3d at 361, 366.

<sup>54</sup> *Seven Cntys*., 580 S.W.3d 539.

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surcharges collected pursuant to a financing order and of the bondholders...."<sup>55</sup> An agreement to protect both the securitized surcharges and Bondholders in full upon the taking of any of the Prohibited Actions arguably appears more consistent with a contractual as opposed to regulatory framework.

The *Maze* Court also indicated that "the circumstances surrounding ... [the] enactment ... [of the State Pledge]—such as its apparent purpose, context, legislative history, or any other evidence of actual intent"<sup>56</sup> also are indicative of the General Assembly's intent to create a contractual relationship through enactment of KRS 65.114. The State Pledge was enacted as part of the same bill establishing the Securitization Act.<sup>57</sup> The Securitization Act provides an alternative financing mechanism whereby investor-owned electric utilities may recover in full large "extraordinary or other deferred costs."<sup>58</sup> Utility customers receive two corresponding benefits under the Securitization Act. First, the statute requires that the recovery of the large extraordinary or other deferred costs must be "fair, just, and reasonable, in the public interest, and expected to provide quantifiable net present value benefits to customers as compared with the recovery of the components of securitized costs that would have been incurred absent the issuance of securitized bonds."<sup>59</sup> Second, securitized bonds must be structured and priced so as to produce "the lowest securitized surcharges consistent with market conditions at the time the securitized bonds are priced ...."<sup>60</sup> Fundamental to utility customers receiving these benefits is the ability of the issuer to market securitized bonds, which in turn requires that the bondholders reasonable investment-based expectations must be fixed and not subject to later legislative or regulatory action.<sup>61</sup>

The Securitization Act contains multiple contract-like protections providing these guarantees. These protections include the provision that upon the earlier of the transfer of cost recovery property or the issuance of securitized bonds, the statute provides that a financing order "shall be irrevocable."<sup>62</sup> The Securitization Act further protects the Bondholders by prohibiting the Commission, except through the formula-based true-up mechanism, from altering, modifying,

<sup>55</sup> KRS 65.114(2).

<sup>56</sup> *Id.*

<sup>57</sup> 2023 KY. ACTS, ch. 72.

<sup>58</sup> KRS 278.672(1).

<sup>59</sup> KRS 278.676(1)(c).

<sup>60</sup> KRS 278.676(1)(d).

<sup>61</sup> See *U.S. Trust Co.,* 431 U.S. at 18 ("the purpose of the covenant was to invoke the constitutional protection of the Contract Clause as security against repeal. In return for their promise, the States received the benefit they bargained for: public marketability of ... [the bonds]."). 

<sup>62</sup> KRS 278.678(8).

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or terminating the Financing Order<sup>63</sup> or reducing, impairing, postponing, terminating, or adjusting the securitized surcharges established in the Financing Order<sup>64</sup> thereby protecting Bondholders' reasonable investment-based expectations.

In sum, there is sufficient evidence to overcome the presumption against statutory contracts and to conclude that the State Pledge creates a binding contractual relationship between the Commonwealth and its agencies, including the Commission, on the one hand, and the Bondholders on the other, for purposes of this Kentucky Contract Clause analysis. We are unaware of any circumstances surrounding the enactment of the Securitization Act suggesting that the General Assembly did not intend to bind contractually the Commonwealth and its agencies through the State Pledge.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Not an Impermissible Attempt by the General Assembly to Contract Away Its Police Powers</u> 

Under federal law, the reserved powers doctrine provides that a state may not contract away "the essential attributes of sovereign power necessarily reserved by the States to safeguard the welfare of their citizens."<sup>65</sup> Although no relevant Kentucky authority is identified that expressly employs the term "reserved powers doctrine" or like terms in connection with the Kentucky Contract Clause, Kentucky Contract Clause decisions recognize that notwithstanding the Kentucky Contract Clause, the Commonwealth "cannot contract away its police power or its right to abrogate or annul contracts it has made in contravention of this power."<sup>66</sup> Thus, we believe that Kentucky courts would apply a reserved powers doctrine akin to that under federal law. The reserved powers doctrine would go to the General Assembly's ability to enact the State Pledge.<sup>67</sup>

<sup>63</sup> KRS 278.678(8)(a).

<sup>64</sup> KRS 278.678(8)(b).

<sup>65</sup> *U.S. Trust,* 431 U.S. at 20.

<sup>66</sup> *Commonwealth v. Clark Cnty. Nat'l Bank,* 219 S.W. 175, 182 (Ky. 1919) ("although the state may have entered into a contract that would ordinarily be binding upon it, and beyond its power to impair, it may yet avoid a contract so entered into if by the contract the state undertook to part with its police power."); *German Ins. Co. v. Commonwealth,* 133 S.W. 793, 795 (Ky. 1911). But see *Great-West Life Assurance Co. v. Courier-Journal Printing Co.,* 288 S.W.2d 639, 642 (Ky. 1956) (characterizing the discussion in *German American* of the Commonwealth's inability to contract its police power as *"obiter dicta* and ... not to be regarded as decisive"). 

<sup>67</sup> *See U.S. Trust,* 431 U.S. at 23-24.

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Not every exercise of the police power trumps under the reserved power doctrine the limitations of the Kentucky Contract Clause on the Commonwealth's subsequent legislative efforts to amend or abrogate the contract, particularly where the Commonwealth is a party to the contract.<sup>68</sup> Thus, the former Kentucky Court of Appeals, now the Kentucky Supreme Court, explained that although "some values are enjoyed under an implied limitation, and must yield to the police power, ... the implied limitation must have its limits or the contract and due processes clauses are emasculated.... The limits are that the police power may be used so as to invade private property rights only if the legislation bears a real and substantial relation to the public health, safety, morality or some other phase of the general welfare."<sup>69</sup>

Little further express guidance exists in Kentucky case law as to the limitations imposed by the reserved powers doctrine on the General Assembly's ability to enter into contracts such as the State Pledge. In *Maze,* the Kentucky Supreme Court examined the limitations imposed by the reserved powers doctrine on the Kentucky Contract Clause as part of its analysis under the third prong of its formulation of the *U.S. Trust* test, as discussed below.<sup>70</sup> That analysis, similar to that identified in *No. 8 Ltd.,* looks at whether the Commonwealth in creating the impairment acted pursuant to its police powers to advance a significant and legitimate public purpose and whether it is appropriate to that public purpose.<sup>71</sup>

Based on limited existing Kentucky case law, and as addressed below, and as further subject to the limitations described in that discussion, it is our opinion that a Kentucky court would find that the State Pledge does not improperly surrender any reserved powers of the Commonwealth.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Justification for Substantial Impairment</u>

If the impairment of the State Pledge is deemed substantial, a Kentucky court should next examine whether the impairment can be justified by "a significant and legitimate public purpose."<sup>72</sup> Efforts to remedy "broad and general social or economic problem[s],"<sup>73</sup> including the elimination of unanticipated windfall profits, can qualify as a significant and legitimate public purpose.<sup>74</sup> Moreover, courts typically defer to legislative judgment regarding the necessity and reasonableness for economic and social legislation.<sup>75</sup> Conversely, less deference is accorded legislative judgement regarding the necessity and reasonableness of the challenged legislation

<sup>68</sup> *Maze v. Bd. of Dir. for the Common. Postsecondary Educ. Prepaid Tr. Fund,* 559 S.W.3d 354, 372 (Ky. 2018) ("When the State is a party to the contract, 'complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State's self-interest is at stake.'" (quoting *U.S. Trust,* 431 U.S. at 26)). 

<sup>69</sup> *Dep't for Natural Res. & Envtl. Prot. v. No. 8 Ltd.,* 528 S.W2d 684, 686 (Ky. 1975).

<sup>70</sup> 559 S.W.3d at 371.

<sup>71</sup> *Id.* at 372.

<sup>72</sup> *Id.* at 371.

<sup>73</sup> *Id.*

<sup>74</sup> *Id.*

<sup>75</sup> *U.S. Trust,* 431 U.S. at 22-23.

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where the Commonwealth is a party to the contract.<sup>76</sup> This is particularly the case where the legislation is designed to protect the public finances,<sup>77</sup> or otherwise intended to guard the sovereign's self-interest.<sup>78</sup> Finally, the breadth of the class affected by the impairment may be relevant; legislation impairing the rights and obligations of a narrow class may not qualify as implementing a significant public purpose.<sup>79</sup>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Reasonableness and Appropriateness of an Exercise by the Commonwealth</u> <u>of its Sovereign Powers to Substantially Impair the State Pledge</u> 

<sup>76</sup> *Maze,* 559 S.W.3d at 372.

<sup>77</sup> *Id.*

<sup>78</sup> *U.S. Trust,* 431 U.S. at 26.

<sup>79</sup> *Allied Structural Steel,* 438 U.S. at 248 ("[W]hether or not the legislation was aimed largely at a single employer, it clearly has a narrow focus.... Thus, this law can hardly be characterized, like the law at issue in the *Blaisedell* case, as one enacted to protect a broad societal interest rather than a narrow class."). 

<sup>80</sup> KRS 65.114(2) (emphasis supplied).

<sup>81</sup> 438 U.S. 234 (1978) *("Allied Structural Steel").*

<sup>82</sup> 438 U.S. at 248.

<sup>83</sup> 278.672(3) ("The commission shall not accept for filing an application tendered pursuant to this section after December 31, 2024.").

<sup>84</sup> *Allied Structural Steel,* 438 U.S. at 248.

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Where, as here, the Commonwealth is a party to the contract, a Kentucky court examining the State Pledge under the Kentucky Contract Clause will finally look to whether the subsequent legislation impairing State Pledge constitutes a legitimate exercise of the Commonwealth's authority as a sovereign.<sup>85</sup> That determination depends on whether "the adjustment of 'the rights and responsibilities of contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the legislation's adoption]."'<sup>86</sup>

The determination of the reasonableness of the conditions imposed by the subsequent legislation looks to whether "the existing contractual obligations of the state 'had effects that were unforeseen and unintended by the legislature' at the time the contract creating those obligations were [*sic*] created."<sup>87</sup> The appropriateness of the subsequent impairment is judged based on "'whether a less drastic modification could have been implemented' and second, 'whether the state could have achieved its goals with [the less drastic] modification."'<sup>88</sup>

Lesser deference again is provided the General Assembly's judgment of the reasonableness and appropriateness of the subsequent adjustment of contractual rights and obligations where the Commonwealth is a party to the contract, at least where the adjustment lessens the Commonwealth's financial obligation under the original agreement.<sup>89</sup> Finally, the *Maze* Court indicated that an alternative to the subsequent legislative impairment need not fully remedy the unforeseen or unintended consequences of the original terms of its agreement for a Kentucky court to conclude that the impairment was unreasonable or inappropriate.<sup>90</sup>

Although there is no Kentucky authority addressing what constitutes an unintended or unforeseen effect in a context analogous to the Securitization Act, the Court in *Maze* indicated that where the Commonwealth's contract was intended to provide certain financial benefits to the non-Commonwealth contract counterparty, in this instance analogous to the Bondholders' recovery in full of the Securitized Costs in accordance with the original and unmodified formula-based true-up mechanism, it would be "self-contradictory"<sup>91</sup> for the Commonwealth to claim that the provision of those promised financial benefits was unforeseen.

Further, while the character and extent of any legislative or regulatory impairment of the State Pledge cannot be known at this time, we can reasonably assume that there would exist at the time of any such impairment, less drastic remedies other than some future modification or repeal of the Securitization Act or the Financing Order that constitutes a "substantial" modification of the provisions of the Securitization Act or the Financing Order that provide support for the Bonds.

<sup>85</sup> *Maze,* 559 S.W.3d at 372.

<sup>86</sup> *Id.*(quoting *U.S. Trust,* 431 U.S. at 22).

<sup>87</sup> *Id.* at 373 (quoting *Md. State Teachers Ass'n v. Hughes,* 594 F. Supp. 1353, 1362 (D. Md. 1984)).

<sup>88</sup> *Id.*

<sup>89</sup> *Id.*

<sup>90</sup> *Id.* ("While it is likely true that the Commonwealth could not have achieved the same level of savings, $20.1 million dollars, without modification of the KAPT agreements, there are, in fact, other last drastic modifications which could have been made...."). 

<sup>91</sup> *Maze,* 559 S.W.3d at 373 ("[T]he fundamental purpose of the KAPT program was to protect against tuition inflation at state universities, and so, it is self-contradictory to claim that tuition inflation was unforeseen at the time of the creation of the program."). 

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Accordingly, we conclude a reviewing court in of competent jurisdiction in Kentucky would hold that the Commonwealth and its agencies, including the Commission, could not constitutionally repeal or amend the Securitization Act or take any other action contravening the State Pledge and creating a substantial impairment (without, as the Securitization Act requires, providing full compensation by law for the full protection of the Charges to be collected pursuant to the Financing Order and full protection of the Holders), unless, overcoming the foregoing barriers to such a finding, the court found that the impairment clearly is a reasonable and necessary exercise of the Commonwealth's sovereign powers based upon reasonable conditions and of a character reasonable and appropriate to the significant and legitimate public purpose justifying such action.

**D. Kentucky Takings Clause** 

The Kentucky Takings Clause provides that no man's property shall "be taken or applied to public use without the consent of his representatives, and without just compensation being previously made to him."<sup>92</sup> The Kentucky Constitution further provides that any person or corporation who has "the privilege of taking private property for public use, shall make just compensation for property taken, injured or destroyed by them; which compensation shall be paid before such taking."<sup>93</sup> Kentucky courts utilize federal takings jurisprudence in analyzing whether an interference with someone's property interests amounts to a constitutional taking.<sup>94</sup>

Parties claiming a taking must show they have a property interest compensable under the Kentucky Takings Clause.<sup>95</sup> That interest may be tangible or intangible, including, for example contract rights under a franchise.<sup>96</sup> The existence of property interests is often determined by reference to sources such as state law,<sup>97</sup> and in Kentucky, a "protected property interest" is "defined by existing rules or understandings that stem from an independent source such as state law—rules or understandings that secure certain benefits and that support claims of entitlement to those benefits."<sup>98</sup> KRS 278.684(1) explicitly provides: "All securitized property that is specified in a financing order constitutes an existing, present, intangible property right or interest therein . . . ."

<sup>92</sup> KY. CONST., Bill of Rights, § 13.

<sup>93</sup> KY. CONST. § 242.

<sup>94</sup> *Doe v. Dean,* 699 S.W.3d 185 (Ky. 2024); *Com., Nat. Res. & Env't Prot. Cabinet v. Stearns Coal & Lumber Co.,* 678 S.W.2d 378 (Ky. 1984).

<sup>95</sup> *Bobbie Preece Facility v. Com., Dep't of Charitable Gaming,* 71 S.W.3d 99 (Ky. App. 2001).

<sup>96</sup> *Bloxton v. State Highway Comm'n,* 8 S.W.2d 392, 394 (Ky. 1928); *Ruckelshaus v. Monsanto Co.,* 467 U.S. 986, 1003 (1984).

<sup>97</sup> *Bd. of Regents of Kentucky Cmty. & Tech. Coll. Sys. v. Farrell,* 443 S.W.3d 12, 22 (Ky. App. 2014).

<sup>98</sup> *Kentucky Cent. Life Ins. Co. v. Stephens,* 897 S.W.2d 583, 590 (Ky. 1995) (quoting *Bd. of Regents of State Colls. v. Roth,* 408 U.S. 564 (1972)).

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Kentucky courts have recognized that "the concept of 'taking' has evolved over the years to include regulatory interference with one's use or enjoyment of his property," such as when a property owner "has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking."<sup>99</sup> Regulatory takings challenges are generally governed by the test set forth in *Penn Central Transportation Co. v. City of New York,* 438 U.S. 104 (1978).<sup>1</sup><sup>0</sup><sup>0</sup> "[A]mong the factors of particular significance in the inquiry are the economic impact of the challenged action and the extent to which it interferes with reasonable investment-backed expectations.<sup>"101</sup>

The first *Penn Central* factor examines the economic impact of the regulation on the claimant. The proposition that "a diminution in property value, standing alone, can establish a taking" has been "uniformly rejected."<sup>102</sup>

The purpose of the second *Penn Central* factor—consideration of investment-backed expectations—is to limit recoveries to property owners who can demonstrate that they invested in their property in reliance on a state of affairs that did not include the challenged regulation.<sup>103</sup> The burden under this factor of showing interference with reasonable, investment-backed expectations is a heavy one.<sup>1</sup><sup>0</sup><sup>4</sup> "[U]nilateral expectations and abstract needs are not sufficient to raise takings concerns,"<sup>105</sup> and "legislation readjusting rights and burdens is not unlawful solely because it upsets otherwise settled expectations."<sup>106</sup> "[I]n other words, to sustain a takings claim, the claimant must show that it had a "reasonable expectation" at the time the contract was entered into that the contract "would proceed without possible hindrance" arising from changes in government

<sup>99</sup> *Bobbie Preece*, 71 S.W.3d at 103 (quoting *Lucas,* 505 U.S. at 1019); *see also Stearns Coal,* 678 S.W.2d at 381.

<sup>100</sup> *Stearns Coal*, 678 S.W.2d at 381; *Doe v. Dean,* 699 S.W.3d at 196.

<sup>101</sup> *Corn. v. DLX, Inc.,* 42 S.W.3d 624, 626 (Ky. 2001) (quoting *Williamson Cnty. Reg'l Planning Comm'n v. Hamilton Bank,* 473 U.S. 172, 190-91 (1985) (overruled by *Knick v. Twp. of Scott,* 588 U.S. 180 (2019)). 

<sup>102</sup> *Nettles v. Energy & Env't Cabinet,* 2018-CA-1382, 2020 WL 1816000, at \*3 (Ky. App. Apr. 10, 2020) (quoting *Penn Central,* 438 U.S. at 131).

<sup>103</sup> *Doe,* 699 S.W.3d at 196.

<sup>104</sup> *Keystone Bituminous Coal Ass'n v. DeBenedictis,* 480 U.S. 470, 493 (1987); *Bobbie Preece Facility,* 71 S.W.3d at 102 ("A party challenging a governmental action as amounting to an unconstitutional taking bears a rather hefty burden."). 

<sup>105</sup> *Tenn. Scrap Recyclers Ass'n v. Bredesen,* 556 F.3d 442, 456-57 (6th Cir. 2009) (citing *Ruckelshaus v. Monsanto Co.,* 467 U.S. 986, 1005-06 (1984)).

<sup>106</sup> *Usery v. Turner Elkhorn Mining Co.,* 428 U.S. 1, 16 (1976).

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policy.<sup>107</sup> The property "owner must be deprived of a portion of the 'bundle of rights' in the property that existed when he obtained title to the property.<sup>"108</sup>

The third *Penn Central* factor requires the court to "analyze the character of the government action, specifically, whether "the action is a physical invasion versus a public program adjusting the benefits and burdens of economic life to promote the common good."<sup>109</sup> For example, if a government action is functionally equivalent to an eminent domain action, in which government directly appropriates private property or ousts the owner from all or part of his domain, a taking may more readily be found.<sup>110</sup> Where, however, the regulation promotes a "common good" through regulations "reasonably related 'to the public health, safety, morals, or general welfare,'" then a taking is less likely to be found.<sup>111</sup>

We are not aware of any case law that addresses the applicability of the Kentucky Takings Clause in the context of a purported exercise by Kentucky of its police power to abrogate or impair contracts otherwise binding on the Commonwealth. The Kentucky Supreme Court has, however, recognized a distinction between the Commonwealth's exercise of eminent domain and its exercise of the police power. "The state may in the valid exercise of its police power incidentally restrict the property rights of individuals for the common good without payment. Yet the state is limited in the proper use of its power. The crux of that limitation is the notion that the action taken must bear a real and substantial relationship to the public health, safety, morality or some other phase of the general welfare," which means the "purpose of the legislation and the policy behind it must be examined."<sup>112</sup> "Regulation via the police power "is authorized only if it does not go too far, then it will be recognized as a taking."<sup>113</sup> While the "valid exercise of police power is not unconstitutional merely because it deprives a property owner of the most beneficial use of the property," a "strong public desire to improve society is not enough to avoid the payment to property owners who are deprived of their property.<sup>"114</sup> "The legislative authority may not, under the guise of promoting public interest, arbitrarily interfere, and police power is not without

<sup>107</sup> *Chang v. United States,* 859 F.2d 893, 897 (Fed. Cir. 1988).

<sup>108</sup> *Bobbie Preece Facility,* 71 S.W.3d at 104 (citing *Lucas,* 505 U.S. at 1027) (emphasis omitted). *<sup></sup>*

<sup>109</sup> *Stearns Coal,* 678 S.W.2d at 381 (citing *Penn Central,* 438 U.S. 104).

<sup>110</sup> *See, e.g., Com.*, *Dep't of Transp., Bureau of Highways v. Knieriem,* 707 S.W.2d 340,341 (Ky. 1986); *Com. v. Tate,* 181 S.W.2d 418, 419 (Ky. 1944).

<sup>111</sup> *Doe v. Dean,* 699 S.W.3d at 197 (quoting *Sebastian-Voor Properties, LLC v. Lexington-Fayette Urb. Cnty. Gov't,* 265 S.W.3d 190, 193 (Ky. 2008) (citing *Village of Euclid v. Ambler Realty Co.,* 272 U.S. 365, 395 (1926))). 

<sup>112</sup> *Dep't for Nat. Res. & Env't Prot. v. Stearns Coal & Lumber Co.,* 563 S.W.2d 471, 473 (Ky. 1978) (citing *Pennsylvania Coal Co. v. Mahon,* 260 U.S. 393 (1922)).

<sup>113</sup> *Stearns Coal,* 678 S.W.2d at 382; *see also Com. v. R.J. Corman R.R. Co./Memphis Line,* 116 S.W.3d 488, 493 (Ky. 2003).

<sup>114</sup> *Stearns Coal,* 678 S.W.2d at 382.

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limitations"; the government may not operate "unreasonably or arbitrarily beyond the occasion and necessity of the situation."<sup>115</sup>

These concepts under Kentucky law generally follow the concepts in *Penn Central.* The outcome, thus, of any claim that interference by the Commonwealth with the value of the Bonds without compensation is unconstitutional would likely depend on factors such as the Commonwealth's interest furthered by that interference, per the first *Penn Central* factor, and the extent of financial loss to the Bondholders caused by that interference, per the second *Penn Central* factor. Also relevant to a court's inquiry would be the extent to which the Bondholders had a reasonable expectation that changes in government policy and regulation would not interfere with their investment, per the third *Penn Central* factor.

With respect to the third factor, we note that the Securitization Act expressly provides that, upon issuance of securitized bonds pursuant to the Securitization Act, a financing order issued pursuant to the Securitization Act is "irrevocable."<sup>116</sup> Moreover, through the State Pledge, the Commonwealth has "pledge[d] and agree[d] with [the] bondholders" not to take various Prohibited Actions, including taking or permitting "any action that impairs or would impair the value of securitized property (e.g., the Cost Recovery Property) or the security for the securitized bonds or revises the securitized costs for which recovery is authorized" or "[i]n any way impair[ing] the rights and remedies of the bondholders, assignees, and other financing parties."<sup>117</sup> Given the foregoing, we believe that a Kentucky court very likely would find that Bondholders have reasonable investment-backed expectations in their investments in the Bonds.

In sum, based on our analysis of relevant judicial authority, it is our opinion, as set forth above and subject to the qualifications, limitations, and assumptions in this Opinion, that under the Kentucky Takings Clause, a reviewing Kentucky court of competent jurisdiction would hold that the Commonwealth is required to pay just compensation to the Bondholders if the Commonwealth's repeal or amendment of the Securitization Act or any other action by the Commonwealth in contravention of the State Pledge constituted a Substantial Taking. As noted earlier, in determining whether there is an undue interference, a Kentucky court would consider the nature of the governmental action and weigh the public purpose served by that action against the degree to which the action interferes with the legitimate property interests and distinct investment-backed expectations of the Bondholders. There can be no assurance, however, that any such award of just compensation would be sufficient to pay the full amount of principal and interest on the Bonds.

<sup>115</sup> *Kentucky Cent. Life Ins. Co. v. Stephens,* 897 S.W.2d 583, 590-91 (Ky. 1995).

<sup>116</sup> KRS 278.678(8) provides: "At the time of any transfer of securitized property to an assignee or the issuance of securitized bonds authorized thereby, whichever is earlier, a financing order shall be irrevocable and, except for changes made pursuant to the formula-based true-up mechanism authorized in this section, the commission shall not: (a) Amend, modify, or terminate the financing order by any subsequent action; or (b) Reduce, impair, postpone, terminate, or otherwise adjust securitized surcharges approved in the financing order." 

<sup>117</sup> KRS 65.114(2).

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**Conclusions and Limitations on Opinions** 

As there is no Kentucky case law directly on point with respect the Securitization Act, this Opinion is not a guaranty that a court considering the issues will not hold contrary to this Opinion. We undertake no responsibility to advise you of any new developments in the application or interpretation of Kentucky law as the same may impact this Opinion. Furthermore, in the event any one of the factual statements, representations, warranties or assumptions upon which we have relied to issue this Opinion is incorrect, this Opinion might be adversely affected and if so adversely affected may not be relied upon.

In basing this Opinion and other matters set forth herein on "our knowledge," the words "our knowledge" signify that, in the course of our representation of Kentucky Power in connection with the Transaction, no information has come to our attention that would give us actual knowledge or actual notice that this Opinion or other matters are not accurate or that any of the Transaction Documents and information on which we have relied are not accurate and complete or that would, under the circumstance, warrant additional investigation or verification. Except as otherwise stated herein, we have not undertaken any independent investigation or verification of such matters. The words "our knowledge" and similar language used herein are intended to be limited to the knowledge of the lawyers currently within our firm, primarily Katie Glass and Mark Overstreet, who have worked on this Transaction.

We are counsel licensed to practice law in the Commonwealth and no opinion is expressed with respect to the laws of any other jurisdiction, including federal law. This Opinion addresses only the specific three issues listed in the "Opinions" section of this Opinion under the laws of the Commonwealth of Kentucky. This Opinion does not address any federal law or any other state law issues or the consequences under the laws of any state, city or other local jurisdiction or of any foreign country. We express no opinion as to the effect of local law, including charters, ordinances, administrative opinions, and rules and regulations of cities, counties, towns, municipalities and special political subdivisions, on the Transaction.

This Opinion may not be relied upon in any manner or for any purpose by any person other than the addressees listed on <u>Schedule A</u> hereto nor may this Opinion be relied on by you for any purpose other than for the Transactions without our prior written consent. This Opinion may not be quoted, published, communicated or otherwise made available in whole or in part to any person (including, without limitation, any person who acquires a Bond or any interest therein from an Underwriter) other than the addressees listed on <u>Schedule A</u> hereto without our specific prior written consent, except that (x) each of the Underwriters may furnish copies of this Opinion (i) to any of its accountants or attorneys, (ii) in order to comply with any subpoena, order, regulation, ruling or request of any judicial, administrative, governmental, supervisory or legislative body or committee or any self-regulatory body (including any securities or commodities exchange or the

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Financial Industry Regulatory Authority, Inc.), (iii) to any other person for the purpose of substantiating an Underwriter's due diligence defense and (iv) as otherwise required by law; provided, that none of the foregoing persons is entitled to rely hereon unless an addressee hereof, (y) a copy of this Opinion may be posted by or at the direction of Kentucky Power or the Issuer to an internet website required under Rule 17g-5 promulgated under the Securities Exchange Act of 1934, as amended, and maintained in connection with the ratings on the Bonds solely for the purpose of compliance with such rule or undertakings pursuant thereto made by Kentucky Power or the Issuer. Such permission to post a copy of this letter to such website shall not be construed to entitle any person, including any credit rating agency, who is not an addressee hereof to rely on this Opinion.

We hereby consent to the filing of this Opinion as an exhibit to the registration statement filed on Form SF-1 (Registration Nos. 333-284112 and 333-284112-01) filed by Kentucky Power and the Issuer on January 2, 2025 (as amended, the "<u>Registration Statement</u>"), and to all references to our firm included in or made a part of the Registration Statement. In giving the foregoing consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the related rules and regulations of the Securities and Exchange Commission.

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| Very truly yours, |
| STITES & HARBISON PLLC |
| /s/ Stites & Harbison, PLLC |

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MSO/BAB/RSO/APH/do

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**Schedule A** 

U.S. Bank Trust Company, National Association, as Indenture Trustee

190 South LaSalle Street, 7th Floor

Chicago, Illinois 60603

U.S. Bank National Association, as Securities Intermediary

190 South LaSalle Street

Chicago, Illinois 60603

Moody's Investors Service, Inc.

7 World Trade Center at

250 Greenwich Street, 24<sup>th</sup> Floor

New York, New York 10007

Standard & Poor's Ratings Group, Inc.

55 Water Street, 40th Floor

New York, New York 10041

The following, for itself and as Representative of the

Underwriters of the Bonds:

Jefferies LLC

520 Madison Avenue

New York, New York 10022

Kentucky Power Company

1 Riverside Plaza

Columbus, Ohio 43215

Kentucky Power Cost Recovery LLC

1645 Winchester Avenue

Ashland, Kentucky 41101