Document:

EX-4.03: WKE CORP. BARGAINING EMPLOYEES' SAVINGS PLAN

                             WKE CORP. SAVINGS PLAN

                          Effective as of July 17 1998

                                  INTRODUCTION

         Effective July 17, 1998 the Board of Directors of LG&E Energy Corp.,
authorized the adoption of the WKE Corp. Bargaining Employee's Savings Plan for
the Bargaining Unit Employees of WKE Corp., Western Kentucky Energy Corp., and
WKE Station Two, Inc.

                                    ARTICLE 1

                                   DEFINITIONS

SECTION 1.1       ADJUSTMENT means the net increases and decreases in the market
                  value of the Trust Fund during a Plan Year or other period
                  exclusive of any contribution or distribution during such year
                  or other period. Such increases and decreases shall include
                  such items as realized or unrealized investment gains and
                  losses and investment income, and may include expenses of
                  administering the Trust Fund and the Plan.

SECTION 1.2       ANNUAL ADDITIONS means for any Participant in any Limitation
                  Year, the sum of Employer Contributions, 401(k) Savings
                  Contributions, Thrift Savings Contributions and forfeitures
                  allocated to the Participant's Individual Account. Amounts
                  allocated to an individual medical account, as defined in
                  Section 415(l)(2) of the Code, which is part of an annuity or
                  pension plan maintained by the Employer, are treated as Annual
                  Additions to a Defined Contribution Plan. Also, amounts
                  derived from contributions paid or accrued which are
                  attributable to post-retirement medical benefits allocated to
                  the separate account of a Key Employee, as required by Section
                  419A(d) of the Code, maintained by the Employer, are treated
                  as Annual Additions to a Defined Contribution Plan.

SECTION 1.3       BENEFICIARY means any person designated by a Participant to
                  receive such benefits as may become payable hereunder after
                  the death of such Participant; provided, however, that a
                  married Participant may not name as his Beneficiary someone
                  other than his spouse unless the spouse consents in writing to
                  such designation, which consent shall be acknowledged by a
                  Plan representative or by a notary public.

SECTION 1.4       BOARD means the Board of Directors of the LG&E Energy Corp.
                  (the "Corporation") or its successors or assigns.

SECTION 1.5       BREAK IN SERVICE means a Plan Year during which an employee
                  has not been credited with at least one (1) Hour of Service.

                  Solely to determine whether a Break in Service has occurred,
                  an employee who is absent from work for maternity or paternity
                  reasons, or for family and medical reasons specified in the
                  Family and Medical Leave Act of 1993, shall receive credit for
                  the Hours of Service which would otherwise have been credited
                  to such employee but for such absence, or in any case in which
                  Hours of Service cannot be determined, eight (8) Hours of
                  Service credited to an employee pursuant to the immediately
                  preceding sentence exceed five hundred and one (501). For
                  purposes of this Section, an absence from work for maternity
                  or paternity reasons means an absence (1) by reason of the
                  pregnancy of the employee, (2) by reason of the birth of a
                  child of the employee, (3) by reason of the placement of a
                  child with the

                  employee in connection with the adoption or foster care of
                  such child by the employee, or (4) for purposes of caring for
                  such child for a period beginning immediately following such
                  birth or placement. The Hours of Service credited under this
                  paragraph shall be credited (1) in the Plan Year or other
                  applicable computation period in which the absence begins if
                  the crediting is necessary to prevent a Break in Service in
                  that period, or (2) in all other cases, in the next following
                  Plan Year or other applicable computation period.

SECTION 1.6       CODE means the Internal Revenue Code of 1986, as amended and
                  revised.

SECTION 1.7       COMMITTEE means the Benefits Committee provided for in Article
                  9 hereof.

SECTION 1.8       COMPANY means WKE Corp. and all of the legal entities which
                  are part of a controlled group or affiliated service group
                  with WKE Corp. pursuant to the provisions of Code Sections
                  414(b), (c), (m), or (o).

SECTION 1.9       COMPENSATION, unless otherwise defined by a particular
                  provision of this Plan, means cash remuneration (salary or
                  straight time rate of pay) paid for services rendered to an
                  Employer by an Employee during a Plan Year (exclusive of all
                  forms of extraordinary earnings such as overtime, shift
                  premiums, commissions and bonuses). Compensation shall not
                  include benefits paid under this Plan, severance pay, pensions
                  or other forms of deferred compensation. Where payments not
                  for service, such as payments for travel or expense, are not
                  separately stated, the Committee shall determine and make
                  appropriate reduction for such payments on a uniform and
                  consistent basis. Only remuneration paid in the portion of the
                  Plan Year in which the Employee is a Participant shall be
                  considered Compensation. Compensation shall be limited to one
                  hundred fifty thousand dollars ($150,000) or such other amount
                  as determined pursuant to Code Section 401(a)(17).

SECTION 1.10      DEFINED BENEFIT PLAN means a plan established and qualified
                  under Section 401 of the Code, except and to the extent it is,
                  or is treated as, a Defined Contribution Plan.

SECTION 1.11      DEFINED CONTRIBUTION PLAN means a plan which is established
                  and qualified under Section 401 of the Code, which provides
                  for an individual account for each participant therein and for
                  benefits based solely on the amount contributed to each
                  participant's account and any income, expenses, gains or
                  losses (both realized and unrealized) which may be allocated
                  to such account.

SECTION 1.12      EARLY RETIREMENT DATE means the first day of the month
                  coincident with or next following the Participant's
                  fifty-fifth (55th) birthday.

SECTION 1.13      EFFECTIVE DATE means July 17, 1998, the effective date of the
                  Original Plan.

SECTION 1.14      EMPLOYEE means any hourly paid person employed by the
                  Employer, including those on leave of absence and those
                  employed on a part-time basis, whose terms and conditions of
                  employment are the subject of a collective bargaining
                  agreement between the Employer and a collective bargaining
                  unit providing for coverage hereunder, but the term "Employee"
                  shall exclude any person who is a Leased Employee.

                  When used with an initial lower case letter, the term
                  "employee" shall mean a person employed by the Employer or the
                  Company, as the context requires, without regard to the
                  limitations contained in this Section.

SECTION 1.15      EMPLOYER means (i) WKE Corp., or any successor thereto,
                  and (ii) each of the legal entities, or any successors
                  thereto, which is part of the Company and has adopted the Plan
                  for its Employees with consent of the Board. The Adopting
                  Employers shall be shown on Appendix "A" attached to and made
                  a part of this document.

SECTION 1.16      EMPLOYER CONTRIBUTIONS means Matching 401(k) Savings
                  Contributions made to the Trust Fund by the Employer. 401(k)
                  Savings Contributions shall not be included in the term
                  Employer Contributions when used in this Plan.

SECTION 1.17      ENTRY DATE means the first (1st) day of each calendar month.

SECTION 1.18      ESOP means the Employee Stock Ownership Plan established
                  pursuant to Article 8 of the Plan.

SECTION 1.19      ESOP DIVIDENDS means those amounts distributed during the Plan
                  Year to a Participant as dividends on stock allocated to such
                  Participant's account pursuant to Article 8 of the Plan.

SECTION 1.20      FIDUCIARY means the Employer, the Trustee, the Committee and
                  any individual, corporation, firm or other entity which
                  assumes, in accordance with Article 9, responsibilities of the
                  Employer, the Trustee or the Committee with respect to
                  management of the Plan or the disposition of its assets.

SECTION 1.21      FORMER PARTICIPANT means a Participant whose employment
                  with the Employer has terminated but who has not received
                  payment in full of the amount in his Individual Account to
                  which he is entitled.

SECTION 1.22      401(k) SAVINGS CONTRIBUTIONS means pre-tax contributions
                  made to the Trust Fund by the Employer pursuant to Section
                  3.1.

SECTION 1.23      401(k) SAVINGS CONTRIBUTION ACCOUNT means that portion of
                  a Participant's Individual Account attributable to (i) 401(k)
                  Savings Contributions made on his behalf pursuant to Section
                  3.1 and (ii) the Participant's proportionate share,
                  attributable to his 401(k) Savings Contribution Account, of
                  the Adjustments,

                  reduced by any distributions from such account pursuant to
                  Article 5 and any withdrawals from such account pursuant to
                  Article 6, if withdrawals are allowed pursuant thereto.

SECTION 1.24      HIGHLY COMPENSATED EMPLOYEE means an employee who during
                  the determination year or during the look back year (1) was at
                  any time five percent (5%) owner of the Employer; or (2)
                  received compensation from the Company in excess of eighty
                  thousand dollars ($80,000) (or such higher amount as may be
                  provided under Code Section 414(q)).

SECTION 1.25      HOUR OF SERVICE means any hour for which an employee is paid
                  or entitled to payment by the Company during the Plan Year or
                  other applicable computation period (1) for the performance of
                  duties for the Company; (2) on account of a period of time
                  during which no duties are performed (irrespective of whether
                  the employment relationship has terminated); and (3) as a
                  result of a back pay award which has been agreed to or made by
                  the Company, irrespective of mitigation of damages, to the
                  extent that such hour has not been previously credited under
                  item (1) or item (2) preceding.

(a)               The number of Hours of Service to be credited on account of a
                  period of time during which no duties are performed (including
                  hours resulting from a back pay award) shall be determined as
                  follows. If the payment which is made or due is calculated on
                  the basis of units of time, the number of Hours of Service to
                  be credited shall be the number of regularly scheduled working
                  hours included in the units of time on the basis of which the
                  payment is calculated; if an employee does not have a regular
                  work schedule, the number of Hours of Service to be credited
                  shall be calculated on the basis of an eight (8) hour work
                  day. If the payment which is made or due is not calculated on
                  the basis of units of time, the number of Hours of Service to
                  be credited shall be calculated by dividing the amount of the
                  payment by the employee's most recent hourly rate of
                  compensation before the period during which no duties were
                  performed, determined as follows:

     (1)          If the employee's compensation is determined on the basis of
                  an hourly rate, such hourly rate shall be the employee's most
                  recent hourly rate of compensation.

     (2)          If the employee's compensation is determined on the basis of a
                  fixed rate for a specified period of time other than hours,
                  his hourly rate of compensation shall be his most recent rate
                  of compensation for the specified period of time, divided by
                  the number of hours regularly scheduled for the performance of
                  duties during such period of time; if an employee does not
                  have a regular work schedule, his hourly rate of compensation
                  shall be calculated on the basis of an eight (8) hour work
                  day.

     (3)          If the employee's compensation is not determined on the basis
                  of a fixed rate for a specified period of time, his hourly
                  rate of compensation shall be the

                  lowest hourly rate of compensation paid to employees in
                  his job classification, or, if no employees in his job
                  classification have an hourly rate of compensation, the
                  minimum wage in effect under Section 6(a)(1) of the Fair Labor
                  Standards Act of 1938, as amended.

(b)               In no event shall the application of the terms of this
                  Subsection (a) of this Section result in crediting an employee
                  with a number of Hours of Service during the period which is
                  greater than the number of hours regularly scheduled for the
                  performance of duties. If an employee has no regular work
                  schedule, the number of Hours of Service to be credited to him
                  shall not exceed the number which would be credited calculated
                  on the basis of an eight (8) hour work day.

(c)               No employee shall be credited with more than five hundred and
                  one (501) Hours of Service as a result of the application of
                  Subsection (a) of this Section for any single continuous
                  period during which he performs no duties, regardless of
                  whether such period extends beyond one (1) Plan Year or other
                  applicable computation period.

(d)               The Plan Year or other applicable computation period to which
                  Hours of Service shall be credited shall be determined as
                  follows:

     (1)          Except as hereinafter provided, Hours of Service credited in
                  accordance with item (1) of Subsection (a) of this Section
                  1.25 shall be credited in the Plan Year or other applicable
                  computation period in which the duties were performed.

     (2)          Except as hereinafter provided, Hours of Service credited in
                  accordance with item (2) of Subsection (a) of this Section
                  1.25 shall be credited: if calculated on the basis of units of
                  time, to the Plan Year or Plan Years or other applicable
                  computation periods in which the period during which no duties
                  are performed occurs, beginning with the first unit of time to
                  which the payment relates; otherwise to the Plan Year or other
                  applicable computation period in which the period during which
                  no duties are performed occurs, provided that if the period
                  during which no duties are performed extends beyond one (1)
                  Plan Year or other applicable computation period, such Hours
                  of Service shall be allocated between not more than the first
                  two (2) Plan Years or other applicable computation periods on
                  any reasonable basis consistently applied.

     (3)          Except as hereinafter provided, Hours of Service credited in
                  accordance with item (3) of Subsection (a) of this Section
                  1.25 shall be credited to the Plan Year or other applicable
                  computation period to which the award or agreement for back
                  pay pertains rather than to the Plan Year or other applicable
                  computation period in which the award, agreement, or payment
                  is made.

     (4)          Hours of Service to be credited to an employee in connection
                  with a period of no more than thirty-one (31) days which
                  extends beyond one (1) Plan Year or other applicable
                  computation period may be credited to the first or the second
                  Plan Year or other applicable computation period, provided
                  that such crediting is done on a reasonable and
                  nondiscriminatory basis.

(e)               Nothing in this Section 1.25 shall be construed to alter,
                  amend, modify, invalidate, impair or supersede any law of the
                  United States or any rule or regulation issued under any such
                  law. The nature and extent of any credit for Hours of Service
                  under this Section shall be determined under such law,
                  including Department of Labor Regulations Section 2530.200b-2.

SECTION 1.26      INDIVIDUAL ACCOUNT means the detailed record kept of the
                  amounts credited or charged to each Participant in accordance
                  with the terms hereof. Such Individual Account is comprised of
                  the following accounts: a 401(k) Savings Contribution Account,
                  a Matching 401(k) Savings Contribution Account, and a Rollover
                  Account.

SECTION 1.27      INVESTMENT FUND means a fund established pursuant to Subsection
                  4.2(a).

SECTION 1.28      INVESTMENT MANAGER means such entity appointed to manage all
                  or part of the Trust Fund.

SECTION 1.29      KEY EMPLOYEE means any employee, former employee or
                  beneficiary thereof in an Internal Revenue Service qualified
                  plan adopted by the Company who at any time during the Plan
                  Year or any of the four (4) preceding Plan Years is:

(a)               an officer of the Employer having an annual compensation from
                  the Employer during the Plan Year greater than fifty percent
                  (50%) of the amount in effect under Code Section 415(b)(1)(A)
                  for the calendar year in which such Plan Year ends; or

(b)               one (1) of the ten (10) employees having an annual
                  compensation from the Employer for a Plan Year of more than
                  the limitation in effect under Code Section 415(c)(1)(A) for
                  the calendar year in which such Plan Year ends and owning (or
                  considered as owning within the meaning of Code Section 318)
                  both more than a one-half percent (1/2%) interest, and the
                  largest interest in the Employer; or

(c)               a five percent (5%) owner of the Employer; or

(d)               a one percent (1%) owner of the Employer having an annual
                  compensation from the Employer for a Plan Year of more than
                  one hundred fifty thousand dollars ($150,000).

(e)               For purposes of this Section, compensation means compensation
                  as defined in Code Section 415, but without regard to Code
                  Sections 125, 402(e)(3) and

                  402(h)(1)(B), and in the case of employer contributions made
                  pursuant to a salary reduction agreement, without regard to
                  Code Section 403(b).

(f)               This definition shall be interpreted consistent with Code
                  Section 416 and rules and regulations issued thereunder.
                  Further, such law and regulations shall be controlling in all
                  determinations under this definition, inclusive of any
                  provisions and requirements stated thereunder but hereinabove
                  absent.

SECTION 1.30      LEASED EMPLOYEE shall mean any person (other than such
                  employee of the recipient) who provides services to the
                  recipient if such services are provided pursuant to an
                  agreement between the recipient and any other person ("leasing
                  organization"), such person has performed such services for
                  the recipient (or for the recipient and any related persons
                  determined in accordance with Code Section 414(n)(6)) on a
                  substantially full-time basis for a period of one (1) year,
                  and such services are of a type historically performed by
                  employees in the business field of the recipient.

SECTION 1.31      LG&E ENERGY CORP. COMMON STOCK FUND means the fund invested
                  primarily in shares of common stock of LG&E Energy Corp.

SECTION 1.32      LIMITATION YEAR means the twelve (12) month period beginning
                  on January 1 and ending on December 1.

SECTION 1.33      MATCHING 401(K) SAVINGS CONTRIBUTION ACCOUNT means that
                  portion of a Participant's Individual Account attributable to
                  (i) Matching 401(k) Savings Contributions allocated to such
                  Participant pursuant to Section 3.3 and (ii) the Participant's
                  proportionate share, attributable to his Matching 401(k)
                  Savings Contribution Account, of the Adjustments, reduced by
                  any distributions from such account pursuant to Article 5 and
                  any withdrawals from such account pursuant to Article 6, if
                  withdrawals are allowed pursuant thereto.

SECTION 1.34      MATCHING 401(K) SAVINGS CONTRIBUTIONS means contributions
                  made to the Trust Fund by the Employer pursuant to Section
                  3.3.

SECTION 1.35      MATCHING THRIFT SAVINGS CONTRIBUTION ACCOUNT means that
                  portion of a Participant's Individual Account attributable to
                  the Participant's proportionate share, attributable to his
                  Matching Thrift Savings Contribution Account, of the
                  Adjustments, reduced by any distributions from such account
                  pursuant to Article 5 and any withdrawals from such account
                  pursuant to Article 6, if withdrawals are allowed pursuant
                  thereto.

SECTION 1.36      NORMAL RETIREMENT DATE means the first day of the month
                  coincident with or next following the Participant's
                  sixty-fifth (65th) birthday.

SECTION 1.37      NORMAL RETIREMENT AGE means age sixty-five (65).

SECTION 1.38      PARTICIPANT means any Employee eligible to participate in the
                  Plan pursuant to Article 2 hereof.

SECTION 1.39      PERMISSIVE AGGREGATION GROUP means the Required Aggregation
                  Group and each other plan or plans of the Company that are not
                  required to be included in the Required Aggregation Group, and
                  which, if treated as being part of such group, would not cause
                  such group to fail to meet the requirements of Code Section
                  401(a) and 410.

SECTION 1.40      PLAN means the WKE Corp. Bargaining Employees' Savings Plan.

SECTION 1.41      PLAN YEAR means the twelve (12) month period beginning on
                  January 1 and ending on December 31.

SECTION 1.42      QUALIFIED PRERETIREMENT SURVIVOR ANNUITY means an annuity for
                  the life of a Participant's surviving spouse, which is equal
                  to fifty percent (50%) of the amount of benefit which can be
                  purchased as of the Annuity Starting Date with the
                  Participant's Vested Individual Account. Any security interest
                  held by the Plan by reason of a loan outstanding to a
                  Participant shall be taken into account in determining the
                  amount of the Qualified Preretirement Survivor Annuity. Any
                  annuity contract distributed from the Plan must be
                  nontransferable.

SECTION 1.43      REQUIRED AGGREGATION GROUP means

(a)               Each plan of the Company in which a Key Employee is a
                  participant; and

(b)               Each other plan of the Company which enables any plan in
                  Subsection (a) of this Section to meet the requirements of
                  Code Section 401(a)(4) or 410; and

(c)               Each terminated plan maintained by the Company within the last
                  five (5) years ending on the determination date for the Plan
                  Year in question and which, but for the fact that it
                  terminated, would be part of a Required Aggregation Group for
                  such Plan Year.

SECTION 1.44      ROLLOVER CONTRIBUTION means contributions made to the
                  Trust Fund by an Employee pursuant to Section 3.3.

SECTION 1.45      ROLLOVER CONTRIBUTION ACCOUNT means that portion of an
                  Employee's Individual Account attributable to (i) Rollover
                  Contributions pursuant to Section 3.3, and (ii) the
                  Participant's proportionate share, attributable to his
                  Rollover Contribution Account, of the Adjustments, reduced by
                  any distributions from such Account pursuant to Article 5 and
                  any withdrawals from such account pursuant to Article 6.

SECTION 1.46      SALARY REDIRECTION means contributions made to the Trust Fund
                  by the Employer pursuant to Section 3.1.

SECTION 1.47      SALARY REDIRECTION ACCOUNT means that portion of a
                  Participant's Individual Account attributable to (i) Salary
                  Redirection amounts made on his behalf pursuant to Section
                  3.3, and (ii) the Participant's proportionate share,
                  attributable to his Salary Redirection Account, of the
                  Adjustments, reduced by any distributions from such Account
                  pursuant to Article 5 and any withdrawals from such Account
                  pursuant to Article 6.

SECTION 1.48      SERVICE means the aggregate of an employee's periods of
                  Service under Subsection (a) of this Section, subject to
                  Subsection (b) of this Section.

(a)               A year of Service is each Plan Year during which an employee
                  has been credited with one (1) or more Hours of Service for
                  the Company.

(b)               Service with a predecessor employer will be credited to an
                  employee as Service for the Company as required pursuant to
                  Code Section 414(a).

(c)               Prior service with Big Rivers Electric Corporation.

SECTION 1.49      SPONSORING EMPLOYER means WKE Corp.

SECTION 1.50      THRIFT SAVINGS CONTRIBUTIONS means after-tax contributions
                  made to the Trust Fund by a Participant pursuant to Section
                  3.2.

SECTION 1.51      THRIFT SAVINGS CONTRIBUTION ACCOUNT means that portion of a
                  Participant's Individual Account attributable to (i) Thrift
                  Savings Contributions pursuant to Section 3.2 and (ii) the
                  Participant's proportionate share, attributable to his Thrift
                  Savings Contribution Account, of the Adjustments, reduced by
                  any distributions from such account pursuant to Article 5 and
                  any withdrawals from such account pursuant to Article 6, if
                  withdrawals are allowed pursuant thereto.

SECTION 1.52      TOP HEAVY PLAN means any plan under which, as of any
                  determination date (the last day of the preceding Plan Year),
                  the present value of the cumulative accrued benefits under the
                  plan for Key Employees exceeds sixty percent (60%) of the
                  present value of cumulative accrued benefits under the plan
                  for all employees. For purposes of this definition the
                  following provisions shall apply:

(a)               If such plan is a Defined Contribution Plan, the present value
                  of cumulative accrued benefits shall be deemed to be the
                  market value of all employee accounts under the plan, other
                  than voluntary deductible employee contributions. If such plan
                  is a Defined Benefit Plan, the present value of cumulative
                  accrued benefits shall be the lump sum present value
                  determined pursuant to the plan. Moreover, the present value
                  of the cumulative accrued benefits shall be increased by the
                  amount of all plan distributions made with respect to an
                  employee during the five (5) year period ending on the
                  determination date, including distributions under a terminated
                  plan which, if it had not been terminated, would have been
                  required to be included in a Required Aggregation Group.

(b)               The Plan shall be considered to be a Top Heavy Plan for any
                  Plan Year if, on the last day of the preceding Plan Year, the
                  above rules were met. For the first Plan Year that the Plan
                  shall be in effect, the determination of whether the Plan is a
                  Top Heavy Plan shall be made as of the last day of such Plan
                  Year.

(c)               Each plan of the Company required to be included in a Required
                  Aggregation Group shall be treated as a Top Heavy Plan if such
                  group is a top heavy group. No plan in a Required Aggregation
                  Group shall be treated as a Top Heavy Plan if such group is
                  not a top heavy group.

(d)               With regard to a Participant or Former Participant who (i) has
                  not performed any service for the Employer at any time during
                  the five (5) year period ending on the determination date, or
                  (ii) was formerly a Key Employee, but who is not a Key
                  Employee on the determination date, the present value of the
                  cumulative accrued benefit for such Participant or Former
                  Participant shall not be taken into account for the purposes
                  of determining whether this Plan is a Top Heavy Plan.

(e)               This definition shall be interpreted consistent with Code
                  Section 416 and rules and regulations issued thereunder.
                  Further, such law and regulation shall be controlling in all
                  determinations under this definition inclusive of any
                  provisions and requirements stated thereunder but hereinabove
                  absent.

SECTION 1.53      TOTAL AND PERMANENT DISABILITY or TOTALLY AND PERMANENTLY
                  DISABLED means a physical or mental condition of the
                  Participant which is expected to totally and permanently
                  prevent him from engaging in any occupation or employment for
                  remuneration or profit, except for the purpose of
                  rehabilitation not incompatible with a finding of Total and
                  Permanent Disability. The determination as to whether a
                  Participant is Totally and Permanently Disabled shall be made
                  on evidence that the Participant is eligible for disability
                  benefits under the Social Security Act.

SECTION 1.54      TRUST AGREEMENT means the agreement entered into between
                  LG&E Energy Corp. and Fidelity Trust Company pursuant to
                  Article 7 hereof.

SECTION 1.55      TRUST FUND means the trust fund created in accordance with
                  Article 7 hereof.

SECTION 1.56      TRUSTEE means such individual or corporation as shall be
                  designated in the Trust Agreement to hold in trust any assets
                  of the Plan for the purpose of providing benefits under the
                  Plan, and shall include any successor Trustee designated
                  thereunder.

SECTION 1.57      VALUATION DATE means the date the Trustee values the
                  assets of the Trust Fund. As of each Valuation Date the Trust
                  Fund shall be valued at fair market value. The Committee may
                  direct the Trustee to value the Trust Fund as of any date it
                  deems desirable. To the extent that the Investment Funds are
                  invested with an

                  Investment Manager which values the assets of the Investment
                  Funds, Valuation Date shall mean the date the Investment
                  Manager values such funds.

SECTION 1.58      CONSTRUCTION. Capitalized words and phrases used in this
                  Plan shall have the meanings specified in this Article, unless
                  a different meaning is clearly required by the context. Any
                  words herein used in the masculine shall be read and construed
                  in the feminine where they would so apply. Words in the
                  singular shall be read and construed as though used in the
                  plural in all cases where they would so apply.

                                    ARTICLE 2

                                  PARTICIPATION

SECTION 2.1       ELIGIBILITY REQUIREMENTS

                  Each employee shall be eligible to participate as of the later
                  of (i) the Effective Date, or (ii) the Entry Date coincident
                  with or next following the completion of a twelve (12)
                  consecutive month period during which he has been credited
                  with at least one thousand (1,000) Hours of Service. The first
                  eligibility computation period shall be the twelve (12)
                  consecutive month period beginning on the date he completes
                  his first Hour of Service. Thereafter, the eligibility
                  computation periods shall be Plan Years, beginning with the
                  Plan Year in which occurs the first anniversary of the date
                  the Employee completes his first Hour of Service.

SECTION 2.2       PLAN BINDING

                  Upon becoming a Participant, a Participant shall be bound then
                  and thereafter by the terms of this Plan and the Trust
                  Agreement, including all amendments to the Plan and the Trust
                  Agreement made in the manner herein authorized.

SECTION 2.3       REEMPLOYMENT AND CHANGE IN STATUS

(a)               Termination of employment shall be deemed to occur when an
                  Employee has an interruption in continuity of his employment
                  by the Company. Such termination may have resulted from
                  retirement, death, or voluntary or involuntary termination of
                  employment.

(b)               If an Employee who was not eligible to become a Participant in
                  the Plan during his prior period of employment is reemployed,
                  he shall be eligible to participate in the Plan after he has
                  met eligibility requirements determined pursuant to Section
                  2.1 beginning with the date of his original employment with
                  the Company.

(c)               If an employee who was eligible to become a Participant in the
                  Plan during his prior period of employment is reemployed, he
                  shall again be eligible to become a Participant as of the date
                  he again becomes an Employee.

(d)               If a person employed by the Company becomes an Employee as
                  defined under this Plan because of a change in employment
                  status, and he has met the eligibility requirements of Section
                  2.1 on or before the date of his change in status, he shall be
                  eligible to participate in the Plan as of the date he becomes
                  an Employee. If a Participant ceases to be an Employee as
                  defined under the Plan, he will cease to be eligible to make
                  contributions to the Trust Fund or to have contributions made
                  to the Trust Fund on his behalf, effective as of the beginning
                  of the payroll period coincident with or next following the
                  date he ceases to be an Employee.

SECTION 2.4       BENEFICIARY DESIGNATION

                  Upon commencing participation, each Participant shall
                  designate a Beneficiary in a manner prescribed by the
                  Committee. Such Participant may from time to time change his
                  Beneficiary designation in a manner prescribed by the
                  Committee and, upon such change, the rights of all previously
                  designated Beneficiaries to receive any benefits under this
                  Plan shall cease. A married Participant may not name as his
                  Beneficiary someone other than his spouse unless the spouse
                  consents in writing to such designation, which consent shall
                  be acknowledged by a Plan representative or by a notary
                  public. If the Beneficiary designation consented to by the
                  spouse is not limited to a specific Beneficiary ("general
                  consent"), the consent must acknowledge that the spouse has a
                  right to limit consent to a specific Beneficiary. The consent
                  of the spouse must be obtained each time the Beneficiary is
                  changed, unless a general consent is given. If, at the time of
                  a Participant's death while benefits are still outstanding,
                  his named Beneficiary does not survive him, the benefits shall
                  be paid to his named contingent Beneficiary. If a deceased
                  Participant is not survived by either a named Beneficiary or
                  contingent Beneficiary (or if no Beneficiary was effectively
                  named), the benefits shall be paid in a single sum to the
                  person or persons, in equal shares, in the first of the
                  following classes of successive preference beneficiaries then
                  surviving: the Participant's (i) surviving spouse, (ii)
                  children, (iii) parents, (iv) brothers and sisters, (v)
                  executors and administrators. If the Beneficiary or contingent
                  Beneficiary is living at the death of the Participant, but
                  such person dies prior to receiving the entire death benefit,
                  the remaining portion of such death benefits shall be paid in
                  a single sum to the estate of such deceased Beneficiary or
                  contingent Beneficiary.

SECTION 2.5       NOTIFICATION OF INDIVIDUAL ACCOUNT BALANCE

                  At least once each calendar quarter or more frequently as
                  determined by the Committee, the Committee shall notify each
                  Participant of the amount of his share in the Adjustments and
                  contributions for the period just completed, and the new
                  balance of his Individual Account.

                                    ARTICLE 3

                                  CONTRIBUTIONS

SECTION 3.1       SALARY REDIRECTION

(a)               SALARY REDIRECTION AGREEMENT. Each Employee who satisfies the
                  requirements of Section 2.1 may, but shall not be required to,
                  elect to have a Salary Redirection made to the Trust Fund on
                  his behalf. An eligible Employee shall make such an election
                  by agreeing to have his Employer redirect, and contribute to
                  the Trust Fund on the Employee's behalf, a portion of the
                  Employee's Compensation. The amount shall be a whole
                  percentage of his Compensation, but shall not exceed fifteen
                  percent (15%). The Committee may limit the amount of Salary
                  Redirection Contributions at any time, if such limits are
                  advisable in order for the Plan to Comply with the
                  requirements of Sections 3.4, 3.6 or 4.5. The maximum amount
                  of contributions that can be made during a period pursuant to
                  this Section shall be offset by any Thrift Savings
                  Contributions made during the same period.

(b)               ELECTION TO PARTICIPATE. The election to have the Employer
                  make 401(k) Savings Contributions shall be made in a manner
                  prescribed by the Committee. The contributions shall commence
                  with the first pay in the calendar month beginning at least
                  fifteen (15) days after an election made in the manner
                  prescribed by the Committee, subject to the following:

         (1)      A reemployed Employee who was eligible to participate in the
                  Plan during his prior period of employment may elect on his
                  reemployment date to have the contributions commence with his
                  first pay; and

         (2)      An employee who becomes an Employee as defined under this Plan
                  because of a change in employment status, and who is eligible
                  to participate in the Plan as of the date of his change in
                  status, may elect on his change in status date to have the
                  contributions commence with his first pay after that date. An
                  employee participating in the LG&E Energy Corp. Savings Plan
                  will automatically be enrolled in this Plan upon becoming an
                  Employee as defined under this Plan.

(c)               CHANGE IN SALARY REDIRECTION CONTRIBUTIONS. A Participant
                  electing to have contributions made to the Trust Fund on his
                  behalf pursuant to this Section may, in a manner prescribed by
                  the Committee, increase or decrease his Salary Redirection
                  Contributions amount (within permissible limits) effective
                  with the first pay in the calendar month beginning at least
                  fifteen (15) days after the date the form is received by the
                  Committee. A single application could include a change under
                  both this Subsection and Subsection 3.2(c). If a Participant
                  has both 401(k) Savings Contributions and Thrift Savings
                  Contributions, an election to decrease the amount of one but
                  not the other to zero percent (0%) shall be

                  construed to be a change in contributions and shall not be
                  construed to be a cessation of contributions pursuant to
                  either Subsection 3.1(d) or 3.2(d).]

(d)               CESSATION OF SALARY REDIRECTION CONTRIBUTIONS. A Participant
                  may elect to cease future Salary Redirection Contributions
                  effective with the first pay in the calendar month beginning
                  at least fifteen (15) days after an election is made in a
                  manner prescribed by the Committee. (Contributions will
                  automatically be suspended during an unpaid leave of absence.)
                  In the event the Participant desires thereafter to recommence
                  having Salary Redirection Contributions made on his behalf, he
                  shall be allowed to do so effective with the first pay in the
                  calendar month beginning at least fifteen (15) days after an
                  election is made in a manner prescribed by the Committee,
                  provided that any cessation under this Subsection must be for
                  a period of at least three (3) months. Notwithstanding the
                  preceding sentence, the minimum three (3) month cessation of
                  contributions shall not be required if the cessation is due to
                  a leave of absence, nor in the amount of the deemed dividends
                  deferred pursuant to Section 3.1(g). Cessation of 401(k)
                  Savings Contributions will also result in a cessation of any
                  Thrift Savings Contributions.

(e)               NOTICE REQUIREMENTS. Any notice requirements in this Section
                  may be lengthened or shortened by the Committee if it finds it
                  administratively necessary or feasible to do so, with such
                  discretion being exercised in a nondiscriminatory manner.

(f)               PAYMENT TO TRUSTEE. The Employer shall pay to the Trustee any
                  401(k) Savings Contributions made on behalf of the Participant
                  as of the earliest date on which such Salary Redirection can
                  reasonably be segregated from the Employer's general assets,
                  but no later than the fifteenth (15th) business day of the
                  month following the month in which the Salary Redirection is
                  received by the Employer or the fifteenth (15th) business day
                  of the month following the month in which the Salary
                  Redirection is received by the Employer.

(g)               AMOUNTS OF ESOP DIVIDENDS DEEMED DEFERRED. A Participant will
                  be deemed to have elected to have a Salary Redirection made on
                  his behalf in the amount of the ESOP Dividends paid to him in
                  cash, subject to the limits of Sections 401(k), 402(g) and 415
                  of the Code and the regulations thereunder. Deemed deferrals
                  made pursuant to this Subsection 3.1(g), shall not be taken
                  into account in the calculation of the percentage of salary
                  redirected pursuant to Subsection 3.1(a).

SECTION 3.2       THRIFT SAVINGS CONTRIBUTIONS

(a)               THRIFT SAVINGS CONTRIBUTION AGREEMENT. Each Employee who
                  satisfies the requirements of Section 2.1 may, but shall not
                  be required to, elect to make Thrift Savings Contributions to
                  the Trust fund in an amount that shall be a whole percentage
                  of his Compensation, but shall not exceed fifteen percent
                  (15%). The committee may limit the amount of Thrift Savings
                  Contributions at any time, if

                  such limits are advisable in order for the Plan to comply with
                  the requirements of Sections 3.5 or 4.5. The maximum amount of
                  contributions that can be made during a period pursuant to
                  this Section shall be offset by any 401(k) Savings
                  Contributions made during the same period.

(b)               ELECTION TO PARTICIPATE. The election to make Thrift Savings
                  Contributions shall be made in a manner prescribed by the
                  Committee. The contributions shall commence with the first pay
                  in the calendar month beginning at least fifteen (15) days
                  after an election made in the Manner prescribed by the
                  Committee, subject to the following:

         (1)      A reemployed Employee who was eligible to participate in the
                  Plan during his prior period of employment may elect on his
                  reemployment date to have the contributions commence with his
                  first pay; and

         (2)      An employee who becomes an Employee as defined under this Plan
                  because of a change in employment status, and who is eligible
                  to participate in the Plan as of the date of his change in
                  status, may elect on his change in status date to have the
                  contributions commence with his first pay after that date. An
                  employee participating in the LG&E Energy Corp. Savings Plan
                  will automatically be enrolled in this Plan upon becoming an
                  Employee as defined under this Plan.

(c)               CHANGE IN THRIFT SAVINGS CONTRIBUTIONS. A Participant electing
                  to make contributions to the Trust Fund pursuant to this
                  Section may, in a manner prescribed by the Committee, increase
                  or decrease his Thrift Savings Contributions amount (within
                  permissible limits) effective with the first pay in the
                  calendar month beginning at least fifteen (15) days after the
                  date the form is received by the Committee.

(d)               CESSATION OF THRIFT SAVINGS CONTRIBUTIONS. A Participant may
                  elect to cease future Thrift Savings Contributions effective
                  with the first pay in the calendar month beginning at least
                  twenty (2) days after receipt of written notice by the
                  Committee. (Contributions will automatically be suspended
                  during an unpaid leave of absence.) In the event the
                  Participant desires thereafter to recommence making Thrift
                  Savings Contributions, he shall be allowed to do so effective
                  with the first pay in the calendar month beginning at least
                  (20) days after receipt of an enrollment form by the
                  Committee, provided that any cessation under this Subsection
                  must be for a period of at least three (3) month.
                  Notwithstanding the preceding sentence, the minimum three (3)
                  month cessation of contributions shall not be required if the
                  cessation is due to a leave of absence. Cessation of Thrift
                  Savings Contributions will also result in a cessation of any
                  401(k) Savings Contributions.

(e)               NOTICE REQUIREMENTS. Any notice requirements in this Section
                  may be lengthened or shortened by the Committee if it finds it
                  administratively necessary or feasible to do so, with such
                  discretion being exercised in a nondiscriminatory manner.

(f)               PAYMENT TO TRUSTEE. The Employer shall pay to the Trustee any
                  Thrift Savings Contributions made by the Participant as of the
                  earliest date on which such Salary Redirection can reasonably
                  be segregated from the Employer's general assets, but no later
                  than the fifteenth (15th) business day of the month following
                  the month in which the Salary Redirection is received by the
                  Employer or the fifteenth (15th) business day of the month
                  following the month in which the Salary Redirection is
                  received by the Employer.

SECTION 3.3       MATCHING SALARY REDIRECTION CONTRIBUTIONS

                  The Employer shall make Matching Salary Redirection
                  Contributions to the Trust Fund on behalf of any Participant
                  who elects to have Savings Contributions made to the Trust
                  Fund. The Matching Salary Redirection Contributions will be
                  the amount necessary to match fifty percent (50%) of the
                  Participant's eligible Salary Redirection Contributions.
                  Eligible Salary Redirection Contributions, for purposes of
                  this Section, means Salary Redirection Contributions not to
                  exceed six percent (6%) of Compensation. The Employer shall
                  pay the Matching Salary Redirection Contributions to the
                  Trustee on the same day the 401(k) Savings Contributions are
                  paid pursuant to Subsection 3.1(f).

SECTION 3.4       NONDISCRIMINATION TEST FOR SALARY REDIRECTION CONTRIBUTIONS

(a)               The Employer shall check the actual deferral percentages for
                  the Plan Year against the tests identified below. In the event
                  that neither test is met, the Employer shall reduce the actual
                  deferral percentages of Highly Compensated Employees that are
                  above the maximum deferral percentage allowed under the tests;
                  provided that the initial reductions shall be in unmatched
                  Salary Redirection Contributions, and only if such reductions
                  are not sufficient shall matched Salary Redirection
                  Contributions be reduced. Beginning with the highest actual
                  deferral percentage, each percentage shall be reduced to the
                  next highest percentage, and so forth, until the excess is
                  eliminated. To the extent that it is necessary to reduce
                  matched Salary Redirection Contributions, the corresponding
                  Matching 401(k) Savings Contributions (adjusted for income or
                  loss for the Plan Year) shall be forfeited in accordance with
                  the provisions of Subsection 5.7(i).

(b)               The term "eligible Employee", for purposes of this Section,
                  shall mean any Employee who is eligible to participate in the
                  Plan during the Plan Year for which the tests are being made.
                  An Employee who would be eligible but for a suspension due to
                  a withdrawal from his Individual Account, or an election not
                  to participate in the Plan, is treated as an eligible Employee
                  for purposes of this Section.

(c)               The actual deferral percentage for a specified group of
                  Employees shall be the average of the following ratios
                  (expressed as percentages and calculated separately for each
                  eligible Employee): Contributions made on behalf of each
                  eligible Employee divided by the compensation of the eligible
                  Employee. In calculating the actual deferral percentage of a
                  Highly Compensated Employee who participates in more than one
                  cash or deferred arrangement of the Company, all cash or
                  deferred arrangements ending with or within the same calendar
                  year shall be treated as a single arrangement.

(d)               The term "compensation", for purposes of this Section, shall
                  include all amounts includible in the Employee's gross income
                  that are paid by the Employer to the Employee during the
                  period he is an eligible Employee. For all Plan Years, the
                  Employer shall have the right to increase the Employee's
                  compensation, for purposes of this Section, by the amount of
                  any elections under Code Sections 125 (flexible benefit
                  plans), 402(e)(3) (cash or deferred arrangements), and
                  402(h)(1)(B) (simplified employee plans), or to use such
                  alternate definition of compensation as may be provided under
                  Section 414(s) of the Code. Alternate definitions of
                  compensation under Code Section 414(s) include (i)
                  compensation within the meaning of Code Section 415(c)(3)
                  including or excluding reimbursements or other expense
                  allowances, fringe benefits (cash or non-cash), moving
                  expenses, deferred compensation and welfare benefits, and (ii)
                  any other definition of compensation that is reasonable, does
                  not by design favor Highly Compensated Employees, and
                  satisfies the nondiscrimination requirements of Code Section
                  414(s) and the regulations thereunder. Compensation for
                  purposes of this Section shall be limited to one hundred fifty
                  thousand dollars ($150,000) or such other amount as determined
                  pursuant to Code Section 401(a)(17).

(e)               Only one (1) of the following two (2) tests need be satisfied
                  not to have a reduction in 401(k) Savings Contributions.

        Test I -  The actual deferral percentage for the group of Highly
                  Compensated Employees is not more than the actual deferral
                  percentage for the group of all other eligible Employees
                  multiplied by one and twenty-five hundredths (1.25).

        Test II - The excess of the actual deferral percentage for the group of
                  Highly Compensation Employees over the actual deferral
                  percentage for the group of all other eligible Employees is
                  not more than two (2) percentage points, and the actual
                  deferral percentage for the group of Highly Compensated
                  Employees is not more than the actual deferral percentage for
                  the group of all of the eligible Employees multiplied by two
                  (2). Effective for Plan Years beginning after December 31,
                  1988, if Test II in Subsection 3.5(e) is used in testing other
                  contributions pursuant to Section 3.5, Test II under this
                  Section shall be limited as provided in Code Section 401(m)(9)
                  and the regulations issued by the Secretary of the Treasury or
                  notices issued by the Internal Revenue Service. If a multiple
                  use of Test II occurs, such

                  multiple use shall be corrected by reducing either the actual
                  deferral percentage or actual contribution percentage of the
                  Highly Compensated Employees in an amount calculated in the
                  manner provided in Subsection (a) of this Section or
                  Subsection 3.5(a).

(f)               If neither Test I nor Test II is satisfied for any Plan Year,
                  the Plan shall nevertheless be deemed to comply with the
                  requirements of Section 401(k)(3)(A)(ii) of the Code for such
                  Plan Year if, before the last day of the following Plan Year,
                  the amount of any excess contributions allocable to a
                  Participant (adjusted for income or loss for the Plan Year
                  computed using any reasonable method that satisfies Code
                  Section 401(a)(4), provided it is used consistently for all
                  Participants and for all corrective distributions under the
                  Plan for the Plan Year and provided it is used by the Plan for
                  allocating income or loss to Participants' Individual
                  Accounts) is distributed to the Participant.

(g)               This Section shall be governed by the rules of Code Section
                  401(k), 401(a)(4) and any rules or regulations issued pursuant
                  thereto, including the aggregation rules of Code Section
                  401(k)(3) and the regulations thereunder.

SECTION 3.5       NONDISCRIMINATION TEST FOR OTHER CONTRIBUTIONS

(a)               The Employer shall check the actual contribution percentages
                  for the Plan Year against the tests identified below. In the
                  event that neither test is met, the Employer shall reduce the
                  actual contribution percentages of Highly Compensated
                  Employees that are above the maximum contribution percentage
                  allowed under the tests; provided that the initial reductions
                  shall be in Thrift Savings Contributions, and only if such
                  reductions are not sufficient shall Matching Salary
                  Redirection Contributions be reduced. Beginning with the
                  highest actual contribution percentage, each percentage shall
                  be reduced to the next highest percentage, and so forth, until
                  the excess is eliminated. If it is necessary to reduce
                  Matching 401(k) Savings Contributions, the Participant shall
                  receive from the Plan a distribution equal to the vested
                  portion of such reduction (adjusted for income or loss for the
                  Plan Year). Any non-vested portion of such reduction (adjusted
                  for income or loss for the Plan Year shall be forfeited in
                  accordance with the provisions of Subsection 5.7(i).

(b)               The term "eligible Employee", for purposes of this Section,
                  shall mean any Employee who is eligible to participate in the
                  Plan during the Plan Year for which the tests are being made.
                  An Employee who would be eligible but for a suspension due to
                  a withdrawal from his Individual Account, or an election not
                  to participate in the Plan, is treated as an eligible Employee
                  for purposes of this Section.

(c)               The actual contribution percentage for a specified group of
                  Employees shall be the average of the following ratios
                  (expressed as percentages and calculated

                  separately for each eligible Employee): Matching 401(k)
                  Savings Contributions and Thrift Savings Contributions (and
                  401(k) Savings Contributions to the extent elected by the
                  Employer and permitted by regulations under Code Section
                  401(m) on behalf of each eligible Employee divided by the
                  compensation of the eligible Employee. In calculating the
                  actual contribution percentage of a Highly Compensated
                  Employee who participates in more than one arrange of the
                  Company subject to Code Section 401(m), all arrangements
                  subject to Code Section 401(m) ending with or within the same
                  calendar year shall be treated as a single arrangement.

(d)               The term "compensation", for purposes of this Section, shall
                  include all amounts includible in the Employee's gross income
                  that are paid by the Employer to the Employee during the
                  period he is an eligible Employee. For all Plan Years, the
                  Employer shall have the right to increase the Employee's
                  compensation, for purposes of this Section, by the amount of
                  any elections under Code Sections 125 (flexible benefit
                  plans), 402(e)(3) (cash or deferred arrangements), and
                  402(h)(1)(B) (simplified employee plans), or to use such
                  alternate definition of compensation as may be provided under
                  Section 414(s) of the Code. Alternate definitions of
                  compensation under Code Section 414(s) include (i)
                  compensation within the meaning of Code Section 415(c)(3)
                  including or excluding reimbursements or other expense
                  allowances, fringe benefits (cash or non-cash), moving
                  expenses, deferred compensation and welfare benefits, and (ii)
                  any other definition of compensation that is reasonable, does
                  not by design favor Highly Compensated Employees, and
                  satisfies the nondiscrimination requirements of Code Section
                  414(s) and the regulations thereunder. Compensation for
                  purposes of this Section shall be limited to one hundred fifty
                  thousand dollars ($150,000) or such other amount as determined
                  pursuant to Code Section 401(a)(17).

(e)               Only one (1) of the following two (2) tests need be satisfied
                  not to have a reduction in contributions tested pursuant to
                  this Section.

        Test I -  The actual contribution percentage for the group of Highly
                  Compensated Employees is not more than the actual contribution
                  percentage for the group of all other eligible Employees
                  multiplied by one and twenty-five hundredths (1.25).

        Test II - The excess of the actual contribution percentage for the group
                  of Highly Compensation Employees over the actual contribution
                  percentage for the group of all other eligible Employees is
                  not more than two (2) percentage points, and the contribution
                  deferral percentage for the group of Highly Compensated
                  Employees is not more than the actual contribution percentage
                  for the group of all of the eligible Employees multiplied by
                  two (2). Effective for Plan Years beginning after December 31,
                  1988, if Test II in Subsection 3.4(e) is used in testing
                  401(k) Savings Contributions pursuant to Section 3.4, Test II
                  under this Section shall be limited as

                  provided in code Section 401(m)(9) and the regulations issued
                  by the Secretary of the Treasury or notices issued by the
                  Internal Revenue Service. If a multiple use of Test II occurs,
                  such multiple use shall be corrected by reducing either the
                  actual contribution percentage or actual contribution
                  percentage of the Highly Compensated Employees in an amount
                  calculated in the manner provided in Subsection (a) of this
                  Section or Subsection 3.4(a).

(f)               If neither Test I nor Test II is satisfied for any Plan Year,
                  the Plan shall nevertheless be deemed to comply with the
                  requirements of Section 401(m) of the Code for such Plan Year
                  if, before the last day of the following Plan Year, the amount
                  of any excess aggregate contributions allocable to a
                  Participant (adjusted for income or loss for the Plan Year
                  computed using any reasonable method that satisfies Code
                  Section 401(a)(4), provided it is used consistently for all
                  Participants and for all corrective distributions under the
                  Plan for the Plan Year and provided it is used by the Plan for
                  allocating income or loss to Participants' Individual
                  Accounts) is distributed to the Participant. For purposes of
                  this Section, the term "excess aggregate contributions" means,
                  with respect to any Plan Year, the excess of:

         (1)      the aggregate amount of 401(k) Savings Contributions and
                  Thrift Savings Contributions actually paid to the Trust Fund
                  on behalf of Highly Compensated Employees for the Plan Year,
                  over

         (2)      the maximum amount of such contributions permitted under
                  Subsection (e) of this Section.

(g)               This Section shall be governed by the rules of Code Section
                  401(m), 401(a)(4) and any rules or regulations issued pursuant
                  thereto, including the aggregation rules of Code Section
                  401(m)(2)(B) and the regulations thereunder.

SECTION 3.6       ROLLOVER AMOUNT FROM OTHER PLANS

                  An Employee eligible to participate in the Plan, regardless of
                  whether he has satisfied the participation requirements of
                  Section 2.1, may transfer to the Trust Fund an "eligible
                  rollover distribution," defined in Code Section 402(c)(4),
                  provided that such distribution is from a plan that meets the
                  requirements of Code Section 401(a).

(a)               The procedures approved by the Committee shall provide that
                  such a transfer may be made only if the following conditions
                  are satisfied:

         (1)      The transfer occurs on or before the sixtieth (60th) day
                  following the distribution from the other plan;

         (2)      The amount transferred is equal to any portion of the
                  distribution made from the other plan, subject to the maximum
                  rollover provision of Section 402 of the Code; and

         (3)      Any contribution rolled over pursuant to this provision is
                  entirely in cash.

(b)               Notwithstanding the foregoing, if an Employee had deposited a
                  distribution previously received from another qualified plan
                  into an individual retirement arrangement, as defined in Code
                  Section 408, he may transfer the amount of such distribution,
                  plus earnings thereon, to this plan; provided such rollover
                  amount is deposited with the Trustee on or before the sixtieth
                  (60th) day following the Employee's receipt thereof from the
                  individual retirement arrangement.

(c)               The Committee shall develop such procedure, and may require
                  such information from an employee desiring to make such a
                  rollover or transfer, as it deems necessary or desirable to
                  determine that the rollover or transfer will meet the
                  requirements of this Section. Upon approval by the Committee,
                  the amount rolled over or transferred shall be deposited in
                  the Trust Fund and shall be credited to a Rollover Account.
                  The value of such Account shall be one hundred percent (100%)
                  vested in the Employee and shall share in income allocations
                  in accordance with Section 4.3. Upon the employee's
                  termination of employment with the Company, the total amount
                  of the Rollover Account shall be distributed in accordance
                  with Article 5.

(d)               Upon such a rollover or transfer by an Employee who is
                  otherwise eligible to participate in the Plan but who has not
                  yet completed the participation requirements of Section 2.1,
                  his Rollover Account shall represent his sole interest in the
                  Plan until he becomes a Participant.

SECTION 3.7       MAXIMUM INDIVIDUAL DEFERRAL

                  A Participant shall not be permitted to have his Employer
                  redirect an amount in excess of seven thousand dollar ($7,000)
                  in any calendar year pursuant to the provisions of Section
                  3.1, including contributions to any other plan of the Company
                  which are made pursuant to Code Section 402(e)(3). The seven
                  thousand dollars ($7,000) limitation shall be adjusted in
                  accordance with cost-of-living adjustments made by the
                  Secretary of the Treasury pursuant to Code Section 402(g)(5).
                  If any amount is redirected pursuant to Section 3.1 in excess
                  of seven thousand dollars ($7,000) to all plans pursuant to
                  Code Section 402(e)(3), such amount shall be deemed an "excess
                  deferral" and the Committee shall direct the Trustee to
                  distribute to the Participant (not later than April 15th
                  following the calendar year in which the excess deferral was
                  made) the amount of the excess deferral (adjusted for income
                  or loss for the Plan Year computed using any reasonable method
                  that satisfies Code Section 401(a)(4), provided it is used
                  consistently for all Participants and for all corrective
                  distributions under the Plan for the Plan Year and provided it
                  is sued

                  by the Plan for allocating income or loss to Participants'
                  Individual Accounts, and reduced by any deferrals distributed
                  pursuant to Section 3.4).

SECTION 3.8       MISTAKE OF FACT

                  If due to a mistake of fact, Employer Contributions to the
                  Trust Fund for any Plan Year exceed the amount intended to be
                  contributed, notwithstanding any provision to the contrary,
                  the Employer, as soon as such mistake of fact is discovered,
                  shall notify the Committee. The Committee shall direct that
                  the Trustee return such excess to the Employer, provided such
                  return is made within one (1) year of the date on which the
                  Employer made the contribution. The amount of such excess to
                  be returned will be reduced by any loss allocable to such
                  excess, but will not be increased by any allocable income.

                                    ARTICLE 4

                       ALLOCATIONS TO INDIVIDUAL ACCOUNTS

SECTION 4.1       INDIVIDUAL ACCOUNTS

                  The Committee shall establish and maintain an Individual
                  Account in the name of each Participant to which the Trustee
                  shall credit all amounts allocated to each such Participant
                  pursuant to Article 3 and the following Sections of this
                  Article.

SECTION 4.2       INVESTMENT OF ACCOUNTS

                  The Individual Account shall be invested by the Trustee in
                  accordance with the following:

(a)               There shall be established the following Investment Funds
                  within the Trust Fund:

         (1)      Fidelity Retirement Government Money Market Portfolio,

         (2)      Fidelity Puritan Fund,

         (2)      Fidelity Spartan U.S. Equity Index Portfolio,

         (4)      Fidelity Magellan Fund,

         (5)      Fidelity Contrafund,

         (6)      Fidelity Equity-Income II Fund,

         (7)      Warburg Pincus Emerging Growth,

         (8)      Tempelton Foreign,

         (9)      Fidelity Intermediate Bond Fund,

         (10)     LG&E Energy Corp. Common Stock Fund,

         (11)     Janus Worldwide Fund, effective August 1, 1998.

(b)               The Participant may direct the investments of current
                  contributions to his Individual Account and the cumulative
                  balance of his Individual Account in increments of ten percent
                  (10%).

(c)               A Participant may transfer the cumulative balance of this
                  Individual Account. There shall be no limit on the number of
                  times a Participant can change the direction as to the
                  investment of current contributions to his Individual Account.

(d)               A Participant who does not make any election under this
                  Section shall have the Individual Account and current
                  contributions made on his behalf invested in the Retirement
                  Government Money Market Portfolio.

SECTION 4.3       VALUATION OF ACCOUNTS

(a)               INDIVIDUAL ACCOUNT. As of each Valuation Date, the Committee
                  shall determine the fair market value of the Individual
                  Account of each Participant as follows:

         (1)      The value of the Individual Account of each Participant as of
                  the last Valuation Date;

         (2)      Minus the amount of any withdrawals and distributions made
                  from the Participant's Individual Account since the last
                  Valuation Date;

         (3)      Plus any contributions to the separate account in the
                  Participant's Individual Account established for contributions
                  pursuant to the following Sections since the last Valuation
                  Date: 3.1, 3.2, 3.3.

         (4)      Plus any investment earnings allocated to such Individual
                  Account since the last Valuation Date;

         (5)      Minus any investment losses allocated to such Individual
                  Account since the last Valuation Date.

(b)               INVESTMENT EARNINGS OR LOSSES. The investment earnings (or
                  losses, if such computation is negative) from each Investment
                  Fund shall mean the net gain or loss of each Investment Fund
                  from investments, as reflected by interest payments,
                  dividends, realized and unrealized gains and losses on
                  securities, other investment transactions and expenses paid
                  from the fund. In determining the investment earnings or
                  losses of the Investment Fund as of any date, assets shall be
                  valued on the basis of their fair market value as of said
                  date.

(c)               ALLOCATION OF INVESTMENT EARNINGS OR LOSSES. The investment
                  earnings and losses from each Investment Fund shall be
                  allocated to the Individual Account of each Participant
                  invested in the respective Investment Fund in such reasonable
                  and consistently applied manner as the Trustee shall
                  determine, provided that the allocation is based on the
                  relative market values of the Participant's Individual
                  Account.

SECTION 4.4       TRUSTEE AND COMMITTEE JUDGMENT CONTROLS

                  In determining the fair market value of the Trust Fund and of
                  Individual Accounts, the Trustee and the Committee shall
                  exercise their best judgment, and all such determinations of
                  value (in the absence of bad faith) shall be binding upon all
                  Participants and their Beneficiaries. All allocations shall be
                  deemed to have been made as of the Valuation Date, regardless
                  of when actual allocations were undertaken.

SECTION 4.5       MAXIMUM ADDITIONS

                  Anything herein to the contrary notwithstanding, the total
                  Annual additions of a Participant for any Limitation Year when
                  combined with any similar annual additions credited to the
                  Participant for the same period from another qualified Defined
                  Contribution Plan maintained by the Company, shall not exceed
                  the lesser of the amounts determined pursuant to Subsection
                  (a) or (b) of this Section.

(a)               Thirty thousand dollars ($30,000) or such other amount as
                  determined pursuant to Code Section 415B(1)(a); or

(b)               Twenty-five percent (25%) of the Participant's compensation
                  received from the Company for such Limitation Year, as
                  determined pursuant to Section 415 of the Code.

(c)               In the event a Participant is covered by one or more Defined
                  Contribution Plans maintained by the Company, the maximum
                  annual additions as noted above shall be decreased in any
                  other Defined Contribution Plan as determined necessary by the
                  Company, prior to a reduction of this Plan, to ensure that all
                  such plans will remain qualified under the Code.

SECTION 4.6       CORRECTIVE ADJUSTMENTS

                  In the event that corrective adjustments in the Annual
                  Additions to any Participant's Individual Account are required
                  as the result of allocating forfeitures, a reasonable error in
                  estimating a Participant's compensation, a reasonable error in
                  determining the amount of elective deferrals (within the
                  meaning of Code Section 402(g)(3)) that may be made with
                  respect to an individual under the limits of Code Section 415,
                  or such other facts and circumstances as may be provided for
                  by rules and regulations issued pursuant to Code Section 415,
                  the corrective adjustments shall be made pursuant to and in
                  the order of the Subsections of this Section.

(a)               The Participant's Thrift Savings Contributions shall be
                  reduced to insure compliance with Section 4.5. Any affected
                  Thrift Savings Contributions will be distributed to the
                  Participant.

(b)               The Participant's unmatched 401(k) Savings Contributions shall
                  be reduced to insure compliance with Section 4.5. Any affected
                  401(k) Savings Contributions will be distributed to the
                  Participant.

(c)               The Participant's matched 401(k) Savings Contributions and
                  Matching 401(k) Savings Contributions shall be proportionally
                  reduced to insure compliance with Section 4.5  Any affected
                  401(k) Savings Contributions will be distributed to the
                  Participant. Any affected Matching 401(k) Savings
                  Contributions shall be used to reduce future Matching 401(k)
                  Savings Contributions.

SECTION 4.7       DEFINED CONTRIBUTION AND DEFINED BENEFIT PLAN FRACTION

                  If a Participant is a participant in a Defined Benefit Plan
                  maintained by the Company, the sum of his defined benefit plan
                  fraction and his defined contribution plan fraction for any
                  Limitation year may not exceed one (1.0).

(a)               For purposes of this Section, the term "defined contribution
                  plan fraction" shall mean a fraction the numerator of which is
                  the sum of all of the Annual Additions of the Participant
                  under this Plan and any other Defined Contribution Plan
                  maintained by the Company as of the close of the Limitation
                  Year and the denominator of which the sum of the lesser of the
                  following amounts determined for such Limitation Year and for
                  each prior Limitation Year of employment with the Company:

         (1)      the product of one and twenty-five hundredths (1.25)
                  multiplied by the dollar limitation in effect under Section
                  415(c)(1)(A) of the Code; or

         (2)      the product of one and four tenths (1.4) multiplied by the
                  amount which may be taken into account under Code Section
                  415(c)(1)(B) with respect to the Participant under the Plan
                  for such Limitation Year.

(b)               For purposes of this Section, the term "defined benefit plan
                  fraction" shall mean a fraction the numerator of which is the
                  Participant's projected annual benefit (as defined in the
                  Defined Benefit Plan) determined as of the close of the
                  Limitation Year and the denominator of which is the lesser of:

         (1)      the product of one and twenty-five hundredths (1.25)
                  multiplied by the dollar limitation in effect pursuant to
                  Section 415(b)(1)(A) of the Code for such Limitation Year; or

         (2)      the product of one and four tenths (1.4) multiplied by the
                  amount which may be taken into account pursuant to Section
                  415(b)(1)(B) of the Code with respect to the Participant under
                  the Defined Benefit Plan for such Limitation Year.

(c)               The limitation on aggregate benefits from a Defined Benefit
                  Plan and a Defined Contribution Plan which is contained in
                  Section 2004 of ERISA, as amended,

                  shall be complied with by a reduction (if necessary) in the
                  Participant's benefits under the Defined Benefit Plan.

                                    ARTICLE 5

                                  DISTRIBUTIONS

SECTION 5.1       NORMAL RETIREMENT

                  When a Participant lives to his Normal Retirement Date and
                  retires, he shall become entitled to the full value of his
                  Individual Account as of the Valuation Date coincident with
                  or, otherwise, immediately preceding his date of retirement,
                  plus any 401(k) Savings Contributions, Thrift Savings
                  Contributions, Employer Contributions, forfeitures, and
                  Adjustments allocated to such account since such Valuation
                  Date, plus any payments made by the Participant pursuant to
                  Section 6.4 since such Valuation Date, and less any
                  withdrawals since such Valuation Date.

SECTION 5.2       EARLY RETIREMENT

                  When a Participant lives to his Early Retirement Date and
                  retires, he shall become entitled to the full value of his
                  Individual Account as of the Valuation Date coincident with
                  or, otherwise, immediately preceding his date of retirement,
                  plus any 401(k) Savings Contributions, Thrift Savings
                  Contributions, Employer Contributions, forfeitures, and
                  Adjustments allocated to such account since such Valuation
                  Date, plus any payments made by the Participant pursuant to
                  Section 6.4 since such Valuation Date, and less any
                  withdrawals since such Valuation Date.

SECTION 5.3       LATE RETIREMENT

                  A Participant may continue his employment past his Normal
                  Retirement Date on a year-to-year basis. He shall continue to
                  be a Participant under the Plan. Upon his actual retirement,
                  he shall become entitled to the full value of his Individual
                  Account as of the Valuation Date coincident with or,
                  otherwise, immediately preceding his date of retirement, plus
                  any 401(k) Savings Contributions, Thrift Savings
                  Contributions, Employer Contributions, forfeitures, and
                  Adjustments allocated to such account since such Valuation
                  Date, plus any payments made by the Participant pursuant to
                  Section 6.4 since such Valuation Date, and less any
                  withdrawals since such Valuation Date.

SECTION 5.4       DEATH

                  If a Participant dies, his Beneficiary shall be entitled to
                  the full value of his Individual Account as of the Valuation
                  Date coincident with or, otherwise, immediately preceding his
                  date of retirement, plus any 401(k) Savings Contributions,
                  Thrift Savings Contributions, Employer Contributions,
                  forfeitures, and Adjustments allocated to such account since
                  such Valuation Date, plus any payments made by the Participant

                  pursuant to Section 6.4 since such Valuation Date, and less
                  any withdrawals since such Valuation Date.

SECTION 5.5       DISABILITY

                  When it is determined that a Participant is Totally and
                  Permanently Disabled, the Committee shall certify such fact to
                  the Trustee and such disabled Participant shall be entitled to
                  the full value of his Individual Account as of the Valuation
                  Date coincident with or, otherwise, immediately preceding his
                  date of retirement, plus any 401(k) Savings Contributions,
                  Thrift Savings Contributions, Employer Contributions,
                  forfeitures, and Adjustments allocated to such account since
                  such Valuation Date, plus any payments made by the Participant
                  pursuant to Section 6.4 since such Valuation Date, and less
                  any withdrawals since such Valuation Date.

SECTION 5.6       PERMANENT LAYOFF

                  If a Participant's termination of employment is due to a
                  permanent layoff, he shall be entitled to the full value of
                  his Individual Account as of the Valuation Date coincident
                  with or, otherwise, immediately preceding his date of
                  retirement, plus any 401(k) Savings Contributions, Thrift
                  Savings Contributions, Employer Contributions, forfeitures,
                  and Adjustments allocated to such account since such Valuation
                  Date, plus any payments made by the Participant pursuant to
                  Section 6.4 since such Valuation Date, and less any
                  withdrawals since such Valuation Date.

SECTION 5.7       TERMINATION OF EMPLOYMENT

(a)               Upon termination of employment for any reason other than
                  normal retirement, early retirement, late retirement, death,
                  disability, or permanent layoff, a Participant shall be
                  entitled to the full value of his Individual Account as of the
                  Valuation Date coincident with or, otherwise, immediately
                  preceding his date of retirement, plus any 401(k) Savings
                  Contributions, Thrift Savings Contributions, Employer
                  Contributions, forfeitures, and Adjustments allocated to such
                  account since such Valuation Date, plus any payments made by
                  the Participant pursuant to Section 6.4 since such Valuation
                  Date, and less any withdrawals since such Valuation Date.

(b)               A Participant shall always be one hundred percent (100%)
                  vested in the balance of his 401(k) Savings Contribution
                  Account and Thrift Savings Contribution Account.

(c)               A Participant shall be vested in the balance attributable to
                  his Matching 401(k) Savings Contribution Account and Matching
                  Thrift Savings Contribution Account based on the years of
                  Service as of his date of termination, in accordance with the
                  following schedule:

                   Years of Service                   Vested Percentage
                   ----------------                   -----------------
                   Less than 1 year                            0%
                   1 but less than 2                           20%
                   2 but less than 3                           40%
                   3 but less than 4                           60%
                   4 but less than 5                           80%
                   5 years or more                             100%

(d)               Notwithstanding the above a Participant who attains Normal
                  Retirement Age while employed by the Company shall be fully
                  vested in his Individual Account under the Plan.

(e)               A Participant who terminates employment pursuant to this
                  Section with a zero percent (0%) vested percentage shall be
                  deemed to have received a distribution on the date he
                  terminates employment. If a terminated Participant receives a
                  distribution of any part of the vested portion of his
                  Individual Account prior to incurring five (5) consecutive
                  Breaks in Service or if said terminated Participant is zero
                  percent (0%) vested, the non-vested balance of such terminated
                  Participant's Individual Account shall be forfeited as of the
                  date he receives or is deemed to have received said
                  distribution.

(f)               If a terminated Participant is re-employed prior to incurring
                  five (5) consecutive Breaks in Service, any amount forfeited
                  pursuant to this Section will be restored to his Individual
                  Account if he repays, prior to the date which is five (5)
                  years after the date on which the Participant is subsequently
                  re-employed, the amount previously distributed to him from
                  such account. Restoration of a forfeiture will come from a
                  special employer contribution. For purposes of this Section, a
                  Participant who receives a deemed distribution pursuant to
                  this Section will be deemed to have repaid the distribution
                  upon re-employment.

(g)               The non-vested balance of the Individual Account of a
                  terminated Participant shall be forfeited as of the Valuation
                  Date at the end of the Plan Year in which such terminated
                  Participant incurs five (5) consecutive Breaks in Service if
                  the Participant is vested in any portion of his Individual
                  Account and does not receive a distribution prior to incurring
                  five (5) consecutive Breaks in Service.

(h)               A terminated Participant who is re-employed after incurring
                  five (5) or more consecutive Breaks in Service shall not be
                  allowed to repay any amount distributed to him and shall not
                  have any amount forfeited pursuant to this Section restored to
                  his Individual Account.

(i)               Any Matching 401(k) Savings Contributions or Matching Thrift
                  Savings Contributions forfeited will be used to reduce future
                  Matching 401(k) Savings Contributions.

SECTION 5.8       COMMENCEMENT OF BENEFITS

                  Any benefits payable under this Article shall be paid as soon
                  as reasonably possible following the actual date of severance,
                  subject to the Participant's consent. Unless the Participant
                  elects otherwise, payment shall begin no later than sixty (60)
                  days after the last day of the Plan Year in which occurs the
                  latest of (i) the Participant's reaching Normal Retirement
                  Age; (ii) the tenth (10th) anniversary of the date the
                  Employee became a Participant; or (iii) termination of the
                  Participant's employment. The Participant may defer
                  distribution to a subsequent date unless his benefit may be
                  cashed out without his consent pursuant to Subsection 5.10(a),
                  or unless he is subject to Section 5.9 as a result of
                  attaining age seventy and one-half (70 1/2).

SECTION 5.9       MINIMUM DISTRIBUTIONS

                  The Individual Account of a Participant must be distributed or
                  commence to be distributed no later than April 1 following the
                  calendar year in which such individual attains age seventy and
                  one-half (70 1/2) unless such individual has effectively
                  executed a waiver prior to January 1, 1984, in accordance with
                  the Code and notices and regulations issued thereunder.
                  Notwithstanding the preceding, the distributions to an
                  Participant who attains age seventy and one-half (70 1/2), do
                  not have to commence until April 1 the following calendar year
                  in which the later of age seventy and one-half (70 1/2) or
                  termination of employment occurs; provided that if the
                  Participant was not a five percent (5%) owner of the Employer
                  at any time during or after the Plan Year in which he attained
                  age sixty-six and one-half (66 1/2), distributions must
                  commence no later than April 1 following the calendar year in
                  which the later of the following occurs: (1) he attains age
                  seventy and one-half (70 1/2); or (2) he becomes a five
                  percent (5%) owner.

SECTION 5.10      METHODS OF PAYMENT

(a)               A Participant or Beneficiary shall elect a distribution of the
                  Individual Account as provided hereinafter. Subject to the
                  provisions of Section 5.13, no other manner of distribution
                  shall be provided. The election by the Participant or
                  Beneficiary shall be in writing on an appropriate form to be
                  provided by the Committee and shall be filed with the
                  Committee at least thirty (30) days before distribution is to
                  be made. The Committee may not require an immediate lump sum
                  distribution without the consent of the Participant or
                  Beneficiary, unless the vested value of the Individual Account
                  is not more than five thousand dollars ($5,000). If the vested
                  value of the Participant's Individual Account is not more than
                  five thousand dollars ($5,000), the benefits payable will be
                  paid as soon as reasonably possible following the actual date
                  of severance, notwithstanding lack of consent. If the vested
                  value of the Participant's Individual Account has been more
                  than five thousand ($5,000) at the time of any distribution,
                  the value of the Participant's Individual Account will be
                  deemed to be more than five thousand ($5,000) at the time of
                  any subsequent distribution for purposes of the consent
                  requirements of this paragraph. Notwithstanding the above, no
                  lump sum distribution may be

                  made after periodic payments have commenced without the
                  consent of the Participant or Beneficiary. The alternative
                  forms of distribution are as follows:

         (1)      A lump sum distribution in cash or in kind; or

         (2)      Periodic annual installment payments for a period not to
                  exceed fifteen (15) years as selected by the Participant or
                  Beneficiary, each installment payment to be made on or about
                  December 31 except as otherwise provided in Sections 5.8 and
                  5.9; or

         (3)      Any combination of the above.

(b)               If the Participant dies after periodic installment payments
                  commence but before the Individual Account is fully
                  distributed, the balance remaining in the Individual Account
                  shall be paid out over the periods remaining pursuant to the
                  Participant's election under clause (2) of Subsection (a) of
                  this Section, or, if the Beneficiary elects, such other period
                  as is allowed under this Section.

(c)               Any payment provided for in this Section may not extend beyond
                  the life expectancy of the Participant or the joint and last
                  survivor's life expectancy of the Participant and designated
                  Beneficiary, and in no event, beyond fifteen (15) years.

(d)               If the Participant dies before distribution commences, the
                  Participant's entire interest will be distributed no later
                  than five (5) years after the Participant's death, except to
                  the extent that an election is made to receive distributions
                  in accordance with (1) or (2) below;

         (1)      If any portion of the Participant's interest is payable to a
                  designated Beneficiary, distributions may be made in
                  substantially equal installments over the life expectancy of
                  the designated Beneficiary commencing no later than one (1)
                  year after the Participant's death.

         (2)      If the designated Beneficiary is the Participant's surviving
                  spouse, the date distributions are required to commence shall
                  not be earlier than the date on which the Participant would
                  have attained age seventy and one-half (70 1/2). If the spouse
                  dies before payments begin, any subsequent distribution shall
                  be made as if the spouse had been the Participant.

(e)               Notwithstanding any settlement option contained in this Plan,
                  the benefits payable to the Beneficiary of any Participant
                  must be incidental to the primary purpose of distributing
                  accumulated funds to the Participant, and if the Participant's
                  designated Beneficiary or survivor is other than his spouse,
                  the settlement option shall not violate Code Section
                  401(a)(9).

SECTION 5.11      BENEFITS TO MINORS AND INCOMPETENTS

(a)               In case any person entitled to receive payment under the Plan
                  shall be a minor, the Committee, in its discretion, may direct
                  the Trustee to dispose of such amount in any one or more of
                  the ways specified in items (1) through (3) of this
                  Subsection.

         (1)      By payment thereof directly to such minor;

         (2)      By application thereof for benefit of such minor;

         (3)      By payment thereof to either parent of such minor or to any
                  adult person with whom such minor may at the time be living or
                  to any person who shall be legally qualified and shall be
                  acting as guardian of the person or the property of such
                  minor; provided only that the parent or adult person to whom
                  any amount shall be paid have advised the Committee in writing
                  that he will hold or use such amount for the benefit of such
                  minor.

SECTION 5.12      UNCLAIMED BENEFITS

                  If, after diligent effort, a Participant or Beneficiary who is
                  entitled to a distribution cannot be located within a
                  reasonable period of time after the date such distribution was
                  to commence, the distributable Individual Account balance
                  shall be deposited in such separate account as the Trustee
                  shall determine. The separate account shall be registered in
                  the name of the person entitled to the distribution. The
                  balance in such separate account shall be forfeited on the
                  last day of the Plan Year in which the Participant incurs his
                  fifth (5th) consecutive Break in Service, or such later date
                  as the Committee may determine, and shall be used to reduce
                  future Employer Contributions. If the Participant or
                  Beneficiary subsequently presents a valid claim for the
                  benefit to the Committee, the Committee shall cause the
                  benefit, equal to the amount which was forfeited under this
                  Section, to be restored from a special employer contribution.

SECTION 5.13      PARTICIPANT DIRECTED ROLLOVERS

(a)               This Section applies to distributions made on or after January
                  1, 1993. Notwithstanding any provision of the Plan to the
                  contrary that would otherwise limit a distributee's election
                  under this Section, a distributee may elect, at the time and
                  in the manner prescribed by the Committee, to have any portion
                  of an eligible rollover distribution paid directly to an
                  eligible retirement plan specified by the distributee in a
                  direct rollover.

(b)               For purposes of this Section, an eligible rollover
                  distribution is any distribution of all or any portion of the
                  balance to the credit of the distributee, except that an
                  eligible rollover distribution does not include: any
                  distribution that is one of a series of substantially equal
                  periodic payments (not less frequently than annually) made for
                  the life (or life expectancy) of the distributee or the joint
                  lives (or joint life

                  expectancies) of the distributee and the distributee's
                  designated Beneficiary, or for a specified period of ten (10)
                  years or more; any distribution to the extent such
                  distribution is required under Section 401(a)(9) of the Code;
                  and the portion of any distribution that is not includible in
                  gross income (determined without regard to the exclusion for
                  net unrealized appreciation with respect to employer
                  securities).

(c)               For purposes of this Section, an eligible retirement plan is
                  an individual retirement account described in Section 408(a)
                  of the Code, an individual retirement annuity described in
                  Section 408(b) of the Code, an annuity plan described in
                  Section 403(a) of the Code, or a qualified trust described in
                  Section 401(a) of the Code, that accepts the distributee's
                  eligible rollover distribution. However, in the case of an
                  eligible rollover distribution to the surviving spouse, an
                  eligible retirement plan is an individual retirement account
                  or individual retirement annuity.

                  For purposes of this Section, a distributee includes an
                  Employee or former Employee. In addition, the Employee's or
                  former Employee's surviving spouse and the Employee's or
                  former Employee's spouse or former spouse who is the alternate
                  payee under a qualified domestic relations order, as defined
                  in Section 414(p) of the Code, are distributees with regard to
                  the interest of the spouse or former spouse.

(d)               A direct rollover is a payment by the Plan to the eligible
                  retirement plan specified by the distributee.

                                    ARTICLE 6

                              WITHDRAWALS AND LOANS

SECTION 6.1       HARDSHIP WITHDRAWAL - 401(K) SAVINGS

(a)               Upon proper written application of a Participant made at least
                  thirty (30) days in advance of the withdrawal date, in such
                  manner and in such form as the Committee may specify, the
                  Committee in its sole discretion may permit the Participant to
                  withdraw a portion or all of the balance of his 401(k) Savings
                  Contribution Account and vested Matching 401(k) Savings
                  Contribution Account; provided that earnings allocated to said
                  401(k) Savings Contribution Account may not be withdrawn.

(b)               The reason for a withdrawal pursuant to this Section must be
                  to enable the Participant to meet unusual or special
                  situations in his financial affairs resulting in immediate and
                  heavy financial needs of the Participant. Such needs shall be
                  limited to:

         (1)      expenses for medical care described in Code Section 213(d)
                  previously incurred by the Participant, the Participant's
                  spouse, or any dependents of the Participant (as defined in
                  Code Section 152) or necessary for these persons to obtain
                  medical care described in Code Section 213(d);

         (2)      purchase (excluding mortgage payments) of a principal
                  residence for the Participant;

         (3)      payment of tuition, related educational fees, and room and
                  board expenses for the next twelve (12) months of
                  post-secondary education for the Participant, or the
                  Participant's spouse, children, or dependents (as defined in
                  Code Section 152);

         (4)      the need to prevent the eviction of the Participant from his
                  principal residence or foreclosure on the mortgage of the
                  Participant's principal residence;

         (5)      payment of funeral expenses for the Participant's spouse or
                  any dependents of the Participant (as defined in Code Section
                  152); or

         (6)      any additional items which may be added to the list of deemed
                  immediate and heavy financial needs by the Commissioner of
                  Internal Revenue through the publication of revenue rulings,
                  notices, and other documents of general applicability.

                  Any withdrawal hereunder may not exceed the amount required to
                  meet the financial need, and the amount must not be reasonably
                  available from other resources of the Participant. The amount
                  of an immediate and heavy financial need may include

                  any federal, state, or local taxes or penalties reasonably
                  anticipated to result from the distribution.

(c)               The minimum amount that can be withdrawn pursuant to this
                  Section is the lesser of one hundred dollars ($100) or one
                  hundred percent (100%) of the Participant's 401(k) Savings
                  Contribution Account (excluding earnings) and vested Matching
                  401(k) Savings Contribution Account. Withdrawals shall be made
                  first from the 401(k) Savings Contribution Account and then,
                  if necessary, from the Matching 401(k) Savings Contribution
                  Account.

(d)               The Committee may lengthen or shorten the notice period in
                  this Section if it finds it administratively necessary or
                  feasible to do so. In granting or refusing any request for
                  withdrawal or in changing the notice period, the Committee
                  shall do so on a uniform, equitable and nondiscriminatory
                  basis.

(e)               Withdrawals in accordance with this Section shall not result
                  in an automatic suspension of contributions under this Plan.

(f)               The determination by the Committee that the distribution will
                  be necessary to satisfy an immediate and heavy financial need
                  will be made on the basis of all relevant facts and
                  circumstances. A distribution generally will be treated as
                  necessary to satisfy a financial need if the Committee relies,
                  without actual knowledge to the contrary, on the Participant's
                  written representation that the need cannot reasonably be
                  relieved:

         (1)      through reimbursement or compensation by insurance or
                  otherwise;

         (2)      by liquidation of the Participant's assets, to the extent such
                  liquidation would not itself cause an immediate and heavy
                  financial need;

         (3)      by cessation of 401(k) Savings Contributions or Thrift Savings
                  Contributions under the Plan; or

         (4)      by other distributions or non-taxable loans from the Plan or
                  from plans maintained by the Employer or by any other
                  employer, or by borrowing from commercial terms.

                  For purposes of this Section, the Participant's resources
                  shall be deemed to include those of his spouse and minor
                  children that are reasonably available to the Participant.

SECTION 6.2       HARDSHIP WITHDRAWAL - THRIFT SAVINGS

(a)               Upon proper written application of a Participant made at least
                  thirty (30) days in advance of the withdrawal date, in such
                  manner and in such form as the Committee may specify, the
                  Committee in its sole discretion may permit the Participant to

                  withdraw a portion or all of the balance of his Thrift Savings
                  Contribution Account and vested Matching Thrift Savings
                  Contribution Account.

(b)               The reason for a withdrawal pursuant to this Section must be
                  to enable the Participant to meet unusual or special
                  situations in his financial affairs resulting in immediate and
                  heavy financial needs of the Participant. Such needs shall be
                  limited to:

         (1)      expense for medical care described in Code Section 213(d)
                  previously incurred by the Participant, the Participant's
                  spouse, or any dependents of the Participant (as defined in
                  Code Section 152) or necessary for these persons to obtain
                  medical care described in Code Section 213(d);

         (2)      purchase (excluding mortgage payments) of a principal
                  residence for the Participant;

         (3)      payment of tuition, related educational fees, and room and
                  board expenses for the next twelve (12) months of
                  post-secondary education for the Participant, or the
                  Participant's spouse, children, or dependents (as defined in
                  Code Section 152);

         (4)      the need to prevent the eviction of the Participant from his
                  principal residence or foreclosure on the mortgage of the
                  Participant's principal residence;

         (5)      payment of funeral expenses for the Participant's spouse or
                  any dependents of the Participant (as defined in Code Section
                  152); or

         (6)      any additional items which may be added to the list of deemed
                  immediate and heavy financial needs by the Commissioner of
                  Internal Revenue through the publication of revenue rulings,
                  notices, and other documents of general applicability.

                  Any withdrawal hereunder may not exceed the amount required to
                  meet the financial need. The amount of an immediate and heavy
                  financial need may include any federal, state, or local taxes
                  or penalties reasonably anticipated to result from the
                  distribution.

(c)               The minimum amount that can be withdrawn pursuant to this
                  Section is the lesser of one hundred dollars ($100) or one
                  hundred percent (100%) of the Participant's Thrift Savings
                  Contribution Account and vested Matching Thrift Savings
                  Contribution Account. Withdrawals shall be made first from the
                  Thrift Savings Contribution Account and then, if necessary,
                  from the Matching Thrift Savings Contribution Account.

(d)               The Committee may lengthen or shorten the notice period in
                  this Section if it finds it administratively necessary or
                  feasible to do so. In granting or refusing any

                  request for withdrawal or in changing the notice period, the
                  Committee shall do so on a uniform, equitable and
                  nondiscriminatory basis.

(e)               Withdrawals in accordance with this Section shall not result
                  in an automatic suspension of contributions under this Plan.

SECTION 6.3       REGULAR THRIFT SAVINGS WITHDRAWALS

(a)               Upon proper application made at least thirty (30) days in
                  advance of the withdrawal date, in such manner and in such
                  form as the Committee may specify, a Participant shall be
                  permitted to withdraw a portion or all of the balance of his
                  Thrift Savings Contribution Account.

(b)               Only one (1) withdrawal may be made under this Section during
                  any Plan Year. The minimum amount that can be withdrawn is the
                  lesser of one hundred dollars ($100) or one hundred percent
                  (100%) of the Participant's Thrift Savings Contribution
                  Account.

(c)               Withdrawal in accordance with this Section will result in a
                  suspension of the Participant's Thrift Savings Contributions
                  and 401(k) Savings Contributions, effective with the first pay
                  in the calendar month following the month in which their
                  request for withdrawal is received by the Committee, and
                  lasting for a period of three (3) months. Thrift Savings
                  Contributions and 401(k) Savings Contributions may resume
                  effective with the first pay in the calendar month following
                  or coincident with the completion of the suspension period,
                  provided the Participant submits a new enrollment form to the
                  Committee at least twenty (20) days prior to such effective
                  date. No Employer Contributions shall be made during any
                  cessation of contributions under this Plan, and the
                  Participant shall not be allowed to make up any contributions
                  attributable to any such period.

(d)               The Committee may lengthen or shorten the notice requirements
                  in this Section if it finds it administratively necessary or
                  feasible to do so, with such discretion being exercised in a
                  nondiscriminatory manner.

SECTION 6.4       PARTICIPANT LOANS

(a)               Upon application of a Participant, made in such manner and in
                  such form and in a manner as the Committee may specify, the
                  Committee may direct the Trustee to make a loan to the
                  Participant from his Individual Account. The application, and
                  the resulting loan, must meet the terms and conditions
                  specified in the following provisions of this Section. Any
                  application for a loan under this Section by a Former
                  Participant shall be denied.

(b)               The amount of the loan shall not exceed the lesser of:

         (1)      fifty thousand dollars ($50,000), reduced by the highest
                  outstanding balance of loans from the Plan to the Participant
                  during the one (1) year period ending on the day before the
                  day the loan is made, or

         (2)      one-half (1/2) the present value of the vested accrued benefit
                  of the Participant under the Plan as of the date of the loan,
                  minus the outstanding balance of all other loans from the Plan
                  to the Participant as of the date of the loan.

(c)               The minimum amount of a Participant loan pursuant to this
                  Section is one thousand dollars ($1,000), and no more than two
                  (2) loans shall be made to a Participant during the Plan Year.

(d)               The Trustee shall withdraw the amounts loaned to the
                  Participant from the Participant's Individual Account in the
                  following source order: Salary Reduction Contribution Account,
                  Matching Salary Reduction Contribution Account, Matching
                  Thrift Savings Contribution Account, and Thrift Savings
                  Contribution Account. The loan will be evidenced by a
                  promissory note held as an earmarked asset of the Trust Fund.
                  The Trustee shall credit interest and principal payments made
                  by the Participant to the Participant's Individual Account on
                  a pro rata basis according to the actual sources used for the
                  loan.

(e)               The Participant may choose the Investment Fund(s) from which
                  the loan is to be made. In the event the Participant does not
                  choose the Investment Fund(s) from which the loan is to be
                  made, it shall be made from such Investment Fund(s) as the
                  Committee shall determine. Repayments will be credited on a
                  pro rata basis according to the Participant's latest
                  investment direction for contributions at the time of the
                  repayment.

(f)               The Participant shall authorize the Employer to deduct from
                  his compensation substantially equal installments consisting
                  of interest and principal payable at the end of each regular
                  pay period (but no less frequently than quarterly). The
                  Employer shall transfer such payroll deductions to the Trustee
                  within a reasonable time following the end of each regular pay
                  period. In the event that the Participant ceases to be
                  employed by the Employer, the outstanding principal and any
                  interest due to date on the outstanding principal balance
                  shall be immediately due and payable upon demand.
                  Notwithstanding the preceding, if a Participant is still
                  employed but is on an unpaid leave of absence or is otherwise
                  not receiving compensation from the Employer, repayment shall
                  be made pursuant to the terms of the promissory note (but no
                  less frequently than quarterly).

(g)               A Participant may repay, at any time, all of the then
                  outstanding principal balance of his loan, together with
                  interest due to date on the prepaid portion. Any such
                  prepayments shall be made to the Employer and the Employer
                  shall transfer such prepaid amounts to the Trustee within a
                  reasonable time after receipt. Except as

                  otherwise provided in this Section, such right of prepayment
                  shall be entirely in the discretion of the Participant and
                  shall be without premium or penalty.

(h)               The collateral shall be the assignment of up to fifty percent
                  (50%) of the Participant's vested Individual Account as of the
                  date of the loan, supported by the Participant's promissory
                  note for the amount of such loan, including interest, payable
                  to the order of the Trustee.

(i)               Each loan shall bear interest at a reasonable rate to be fixed
                  by the Committee and shall be based on interest rates
                  currently being charged for similar loans by commercial
                  lending institutions in the same geographical area as the
                  situs of the Trust Fund. The Committee shall not discriminate
                  among Participants in the matter of interest rates; but loans
                  granted at different times may bear different interest rates
                  if, in the opinion of the Committee, different rates are
                  required based on the rates being charged by said commercial
                  lending institutions for similar loans.

(j)               Unless a shorter period is provided in the promissory note, a
                  Participant shall be considered to have defaulted on the
                  promissory note if a payment is not made on the note during a
                  calendar year quarter. The terms of the promissory note shall
                  provide that if the Participant defaults on the loan, the
                  unpaid loan balance and the interest accrued since the last
                  payment shall be due immediately. If the amount due is not
                  paid within ninety (90) days after default, that amount (the
                  unpaid loan balance and the accrued interest as of the default
                  date) will be deemed to be a withdrawal by the Participant as
                  of the date of default.

(k)               No distribution under Article 5 shall be made to any
                  Participant, Former Participant, or Beneficiary unless and
                  until all unpaid loans, including accrued interest, have been
                  repaid. Such Participant, Former Participant or Beneficiary
                  shall have the option of paying the unpaid loan balance and
                  accrued interest directly or of having such amount deemed to
                  be a distribution from the Individual Account.

(l)               In granting or refusing any request for a loan, the Committee
                  shall do so on a uniform, equitable and nondiscriminatory
                  basis.

(m)               Loans under this Section shall be allowed starting at such
                  time as determined by the Committee.

                                    ARTICLE 7

                                     FUNDING

SECTION 7.1       CONTRIBUTIONS

                  Contributions by the Employer and by the Participants as
                  provided for in Article 3 shall be paid over to the Trustee.
                  All contributions by the Employer, and any income therefrom,
                  shall be irrevocable, except as herein provided, and may be
                  used only for the exclusive benefit of the Participants,
                  Former Participants and their Beneficiaries.

SECTION 7.2       TRUSTEE

                  The Sponsoring Employer has entered into an agreement with the
                  Trustee whereunder the Trustee will receive, invest and
                  administer as a trust fund contributions made under this Plan
                  in accordance with the Trust Agreement.

                  Such Trust Agreement is incorporated by reference as a part of
                  the Plan, and the rights of all persons hereunder are subject
                  to the terms of the Trust Agreement. The Trust Agreement
                  specifically provides, among other things, for the investment
                  and reinvestment of the Trust Fund and the income thereof, the
                  management of the Trust Fund, the responsibilities and
                  immunities of the Trustee, removal of the Trustee and
                  appointment of a successor, accounting by the Trustee and the
                  disbursement of the Trust Fund.

                  The Trustee shall, in accordance with the terms of such Trust
                  Agreement, accept and receive all sums of money paid to it
                  from time to time by the Employer, and shall hold, invest,
                  reinvest, manage and administer such moneys and the increment,
                  increase, earnings and income thereof as a trust fund for the
                  exclusive benefit of the Participants, Former Participants and
                  their Beneficiaries or the payment of reasonable expenses of
                  administering the Plan.

                  In the event that affiliated or subsidiary Employers become
                  signatory hereto, completely independent records, allocations,
                  and contributions shall be maintained for each Employer. The
                  Trustee may invest all funds without segregating assets
                  between or among signatory Employers.

                                    ARTICLE 8

                          EMPLOYEE STOCK OWNERSHIP PLAN

SECTION 8.1       PURPOSE AND EFFECTIVE DATE

                  The Company hereby establishes and designates the LG&E Energy
                  Corp. Common Stock Fund as an Employee Stock Ownership Plan to
                  enable eligible Participants to acquire stock ownership
                  interests in the Company.

SECTION 8.2       INVESTMENT IN COMPANY STOCK

                  The ESOP is designed to invest primarily in Company Stock and
                  all accounts under the Article shall be invested in the LG&E
                  Energy Corp. Common Stock Fund.

SECTION 8.3       GENERAL ESOP PROVISIONS

(a)               PAYMENT OF BENEFITS

                  Payments of amounts invested in the LG&E Energy Corp. Common
                  Stock Fund shall be in the form of a lump sum. Unless the
                  Participant elects otherwise, the distribution shall be made
                  no later than one (1) year after the close of the Plan Year in
                  which the Participant terminates the employment due to death,
                  Total and Permanent Disability or Retirement and no later than
                  five (5) years after the close of the Plan Year in which
                  Participant terminates employment for any other reason.

(b)               CONTRIBUTIONS

                  The Company shall contribute to the Trustee cash equal to, or
                  Company Stock having an aggregate fair market value equal to,
                  such amounts required by Section 3.2 of the Plan to the ESOP.
                  Contributions by Participants are not required, but shall be
                  permitted in accordance with Section 3.1.

SECTION 8.4       PUT OPTION

                  If the Company Stock is or becomes not readily tradable on an
                  established market, then any Participant, who is otherwise
                  entitled to a distribution for the Plan, shall have the right
                  (hereinafter referred to as "Put Option") to require that the
                  Corporation repurchase any Company Stock at the price
                  established by a valuation conducted by an independent
                  appraiser (as established in Section 401(a)(28) of the Code).
                  The Put Option shall only be exercisable during the sixty (60)
                  day period, then it can be exercised for an additional period
                  of sixty (60) days in the following Plan

                  Year. This Put Option shall be nonterminable with the meaning
                  of Regulation 54.4975-(11)(a)(ii).

                  The amount paid for the Company Stock under the Put Option
                  shall be paid in substantially equal payments (not less
                  frequently than annually) over a period beginning not later
                  than thirty (30) days after the exercise of the Put Option and
                  not exceeding five (5) years. There shall be adequate security
                  provided and reasonable interest paid on the unpaid balance
                  due under this paragraph.

SECTION 8.5       LOANS

(a)               AUTHORIZATION OF LOAN

                  The Board of Directors may direct the Trustee to incur a loan
                  on behalf of the Trust in a manner and under conditions which
                  will cause the loan to be an "exempt loan" within the meaning
                  of Section 4975(d)(2) of the Code and Regulations thereunder.
                  A loan shall be used primarily for the benefit of Plan
                  Participants and their Beneficiaries. The proceeds of each
                  such loan shall be used, within a reasonable time after the
                  loan is obtained, only to purchase Company Stock, to repay the
                  loan or to repay any prior loan. Any such loan shall provide
                  for a reasonable rate of interest, an ascertainable period of
                  maturity and shall be without recourse against the Plan. Any
                  such loan shall be secured solely by shares of Company Stock
                  acquired with the proceeds of the loan and shares of such
                  stock that were used as collateral on a prior loan which was
                  repaid with the proceeds of the current loan. Such stock
                  pledged as collateral shall be placed in a Suspense Account
                  and released pursuant to Subsection 8.05(b), as the loan is
                  repaid. Company Stock released from the Suspense Account shall
                  be allocated in the ratio that each eligible Participant's
                  Compensation bears to the total Compensation, paid to all
                  Participants during the Plan Year. No person entitled to
                  payment under a loan made pursuant to this Section shall have
                  recourse against any Trust Fund assets other than the stock
                  used as collateral for the loan, Sponsoring Employer
                  contributions of cash that are available to meet obligations
                  under the loan and earnings attributable to such collateral
                  and the investment of such contributions. Employer
                  contributions made with respect to any Plan Year during which
                  the Loan remains unpaid, and earnings on such contributions,
                  shall be deemed available to meet obligations under the loan,
                  unless otherwise provided by the Employer at the time such
                  contributions are made.

(b)               RELEASE OF COMPANY STOCK

                  Any pledge of stock as collateral under this Section shall
                  provide for the release of shares so pledged upon the payment
                  of any portion of the loan. Shares so pledged shall be
                  released in the proportion of the principal and interest,

                  paid on the loan for the Plan Year bears to the aggregate
                  principal and interest, paid for the current Plan Year and
                  each Plan Year thereafter, as provided in Regulations
                  54.4975-7(b)(8).

(c)               REPAYMENT OF THE LOAN

                  Payments of principal and interest on any loan under this
                  Section shall be made by the Trustee at the direction of the
                  committee solely from: (i) employer contributions available to
                  meet obligations under the loan, (ii) earnings from the
                  investment of such contributions, (iii) earnings attributable
                  to stock pledged as collateral for the loan, (iv) other
                  dividends on stock to the extent permitted by law, (v) the
                  proceeds of a subsequent loan made to repay the loan, and (vi)
                  the proceeds of the sale of any stock pledged as collateral
                  for the loan. The contributions and earnings available to pay
                  the loan must be accounted for separately by the Committee
                  until the loan is repaid.

(d)               ALLOCATIONS TO INDIVIDUAL ACCOUNT

                  Subject to the limitations in Section 4.5 on annual additions
                  to a Participant's Individual Account, assets released from a
                  Suspense Account by reason of payment made on a loan shall be
                  allocated immediately upon such payment to the account of all
                  Participants who then would be entitled to an allocation of
                  contributions if such payment had been made on the last day of
                  the Plan Year.

SECTION 8.6       DISPOSITION OF DIVIDENDS ON COMPANY STOCK

(a)               DISTRIBUTION TO DIVIDEND ELIGIBLE PARTICIPANT

                  The Trustee shall distribute dividends paid on Company stock
                  to a Dividend Eligible Participant, no later than ninety (90)
                  days after the end of the Plan Year which said dividends are
                  paid.

(b)               ALLOCATION OF DIVIDEND TO INDIVIDUAL ACCOUNTS

                  The Trustee shall allocate dividends paid on Company Stock,
                  which are not otherwise distributed to Dividend Eligible
                  Participants under Subsection 8.6(a) of this Section, to the
                  Individual Account as provided for in Section 4.3 of the Plan.

SECTION 8.7       VOTING OF STOCK AND OTHER STOCK RIGHTS

(a)               VOTING

                  Common Stock, including fractional shares, held by the Trustee
                  for a Participant's Individual Account and invested in the
                  LG&E Energy Corp. Common Stock Fund, shall be voted by the
                  Trustee at each annual meeting and at each special meeting of
                  the stockholders of the Company at the direction of the
                  Participant to whose Individual Account such stock is credited
                  to the extent such vote would be consistent with the Trustee's
                  duties under ERISA. The Trustee shall cause each Participant
                  to be provided with a copy of a notice of each such
                  stockholder meeting and the proxy statement of the Company,
                  together with the appropriate form for the Participant to
                  indicate his voting instructions. If the instructions are not
                  timely received by the Trustee with respect to such stock, the
                  Trustee shall vote the uninstructed stock in the same
                  proportion as the instructed stock to the extent such vote
                  would be consistent with the Trustee's duties under ERISA.

(b)               TENDER OFFER

                  Common Stock, including fractional shares, held by the Trustee
                  for a Participant's Individual Account and invested in the
                  LG&E Energy Corp. Common Stock Fund, shall be tendered by the
                  Trustee pursuant to a tender offer as directed by the
                  Participant to whose Individual Account such stock is credited
                  to the extent such tender would be consistent with the
                  Trustee's duties under ERISA. The Trustee shall cause each
                  Participant to be provided with notice of any such tender
                  offer as the Trustee receives as a holder of record, and which
                  the Trustee reasonably believes also was received by
                  shareholders generally, as soon as practicable after the
                  Trustee receives such statements or information, together with
                  an appropriate form for the Participant to indicate his
                  instruction regarding any such tender offer. If instructions
                  are not timely received by the Trustee with respect to any
                  such stock or if there is any unallocated stock, the Trustee
                  shall tender the shares of such uninstructed or unallocated
                  stock in the same proportion as the Trustee actually receives
                  timely instruction to tender shares of stock to the extent
                  such tender would be consistent with the Trustee's duties
                  under ERISA.

SECTION 8.8       SECTION 16 COMPLIANCE

                  It is the intention of the Company that the Plan and the
                  administration of the Plan comply in all respects with Section
                  16 of the Securities Exchange Act of 1934 (the "Act"), as
                  amended and the rule and regulation promulgated thereunder. If
                  any Plan provision, or any aspect of the administration of the
                  Plan, is found not to be in compliance with Section 16 of the
                  Act, the provision or administration shall be deemed null and
                  void, and in all events the Plan shall be construed in favor
                  of its meeting the requirements of Rule 16b-3 promulgated
                  under the Act. Notwithstanding anything in the Plan to the
                  contrary, the Committee, in its

                  discretion, may bifurcate the Plan so as to restrict, limit or
                  condition the use of any provision of the Plan to Participants
                  who are subject to Section 16 of the Act without so
                  restricting, limiting or conditioning the Plan with respect to
                  other Participants.

                                    ARTICLE 9

                                   FIDUCIARIES

SECTION 9.1       GENERAL

                  Each Fiduciary who is allocated specific duties or
                  responsibilities under the Plan or any Fiduciary who assumes
                  such a position with the Plan shall discharge his duties
                  solely in the interest of the Participants, Former
                  Participants and Beneficiaries and for the exclusive purpose
                  of providing such benefits as stipulated herein to such
                  Participants, Former Participants and Beneficiaries, or
                  defraying reasonable expense of administering the Plan. Each
                  Fiduciary, in carrying out such duties and responsibilities,
                  shall act with the care, skill, prudence, and diligence under
                  the circumstances then prevailing that a prudent person acting
                  in a like capacity and familiar with such matters would use in
                  exercising such authority or duties.

                  A Fiduciary may serve in more than one Fiduciary capacity and
                  may employ one or more persons to render advice with regard to
                  his Fiduciary responsibilities. If the Fiduciary is serving as
                  such without compensation, all expenses reasonably incurred by
                  such Fiduciary shall be paid from the Trust Fund or by the
                  Employer.

                  A Fiduciary may delegate any of his responsibilities for the
                  operation and administration of the Plan. In limitation of
                  this right, a Fiduciary may not delegate any responsibilities
                  as contained herein relating to the management or control of
                  the Trust Fund except through the employment of an investment
                  manager as provided in Section 9.3 and in the Trust Agreement
                  relating to the Trust Fund.

SECTION 9.2       EMPLOYER

                  The Sponsoring Employer established and maintains the Plan for
                  the benefit of its Employees and for Employees of Adopting
                  Employers and of necessity retains control of the operation
                  and administration of the Plan. The Sponsoring Employer, in
                  accordance with specific provisions of the Plan, has as herein
                  indicated, delegated certain of these rights and obligations
                  to the Trustee and the Committee, and these parties shall be
                  solely responsible for these, and only these, delegated rights
                  and obligations.

                  The Employer shall supply such full and timely information for
                  all matters relating to the Plan as (a) the Committee, (b) the
                  Trustee, and (c) the accountant engaged on behalf of the Plan
                  by the Sponsoring Employer may require for the effective
                  discharge of their respective duties.

SECTION 9.3       TRUSTEE

                  The Trustee, in accordance with the Trust Agreement, shall
                  have exclusive authority and discretion to manage and control
                  the Trust Fund, except that the Sponsoring Employer may in its
                  discretion employ at any time and from time to time an
                  investment manager (as defined in Section 3(38) of ERISA) to
                  direct the Trustee with respect to all or a designated portion
                  of the assets comprising the Trust Fund.

SECTION 9.4       BENEFITS COMMITTEE

(a)               The Board of the Sponsoring Employer shall appoint a Committee
                  of not less than three (3) persons to hold office at the
                  pleasure of the Board, such committee to be known as the
                  Benefits Committee, collectively, the Committee. No
                  compensation shall be paid members of the Committee from the
                  Trust Fund for service on the Committee. The Committee shall
                  choose from among its members a chairperson and a secretary.
                  Any action of the Committee shall be determined by the vote of
                  a majority of its members. Either the chair or the secretary
                  may execute any certificate or written direction on behalf of
                  the Committee.

(b)               Every decision and action of the Committee shall be valid if
                  concurrence is by a majority of the members then in office,
                  which concurrence may be had without a formal meeting.

(c)               In accordance with the provisions hereof, the Committee has
                  been delegated certain administrative functions relating to
                  the Plan with all powers necessary to enable it to properly
                  carry out such duties. Except as provided in Section 10.1, the
                  Committee shall have no power in any way to modify, alter, add
                  to, or subtract from, any provisions of the Plan; provided,
                  however, that the Committee is authorized, acting by a
                  majority of its members then in office, to make certain
                  technical and non-material changes in the Plan. The Committee
                  shall have the power and authority in its sole, absolute and
                  uncontrolled discretion to control and manage the operation
                  and administration of the Plan and shall have all powers
                  necessary to accomplish these purposes. The responsibility and
                  authority of the Committee shall include, but shall not be
                  limited to, (i) determining all questions relating to
                  eligibility of employees to participate; (ii) determining the
                  amount and kind of benefit payable to any Participant, spouse
                  or Beneficiary; (iii) establishing and reducing to writing and
                  distributing to any Participant or Beneficiary a claims
                  procedure and administering that procedure, including the
                  processing and determination of all appeals thereunder; (iv)
                  interpreting the provisions of the Plan including the
                  publication of rules for the regulation of the Plan as in its
                  sole, absolute and uncontrolled discretion are deemed
                  necessary or advisable and which are not inconsistent with the
                  express terms thereof, the Code or the Employee Retirement
                  Income Security Act of 1974, as amended, and (v) execution of
                  amendments in accordance with Section 10.1. All disbursements
                  by the Trustee, except for the ordinary expenses of
                  administration of the Trust Fund or the reimbursement of
                  reasonable expenses at the direction of the Sponsoring
                  Employer, as provided herein, shall be made upon, and in
                  accordance with, the

                  written directions of the Committee. When the Committee is
                  required in the performance of its duties hereunder to
                  administer or construe, or to reach a determination, under any
                  of the provisions of the Plan, it shall do so on a uniform,
                  equitable and nondiscriminatory basis.

(d)               The Committee may employ such counsel, accountants, and other
                  agents as it shall deem advisable. The Sponsoring Employer
                  shall pay, or cause to be paid from the Trust Fund, the
                  compensation of such counsel, accountants, and other agents
                  and any other expenses incurred by the Committee in the
                  administration of the Plan and Trust.

SECTION 9.5       CLAIMS PROCEDURES

(a)               The Committee shall receive all applications for benefits.
                  Upon receipt by the Committee of such an application, it shall
                  determine all facts which are necessary to establish the right
                  of an applicant to benefits under the provisions of the Plan
                  and the amount thereof as herein provided. Upon request, the
                  Committee will afford the applicant the right of a hearing
                  with respect to any finding of fact or determination. The
                  applicant shall be notified in writing of any adverse decision
                  with respect to his claim within ninety (90) days after its
                  submission. The notice shall be written in a manner calculated
                  to be understood by the applicant and shall include the items
                  specified in items (1) through (4) of this Subsection.

         (1)      The specific reason or reasons for the denial;

         (2)      Specific references to the pertinent Plan provisions on which
                  the denial is based;

         (3)      A description of any additional material or information
                  necessary for the applicant to perfect the claim and an
                  explanation why such material or information is necessary; and

         (4)      An explanation of the Plan's claim review procedures.

(b)               If special circumstances require an extension of time for
                  processing the initial claim, a written notice of the
                  extension and the reason therefor shall be furnished to the
                  claimant before the end of the initial ninety (90) day period.
                  In no event shall such extension exceed ninety (90) days.

(c)               In the event a claim for benefits is denied or if the
                  applicant has had no response to such claim within ninety (90)
                  days of its submission (in which case the claim for benefits
                  shall be deemed to have been denied), the applicant or his
                  duly authorized representative, at the applicant's sole
                  expense, may appeal the denial to the Committee within sixty
                  (60) days of the receipt of written notice of denial or sixty
                  (60) days from the date such claim is deemed to be denied. In
                  pursuing such appeal the applicant or his duly authorized
                  representative:

         (1)      May request in writing that the Committee review the denial;

         (2)      May review pertinent documents; and

         (3)      May submit issues and comments in writing.

(d)               The decision on review shall be made within sixty (60) days of
                  receipt of the request for review, unless special
                  circumstances require an extension of time for processing, in
                  which case a decision shall be rendered as soon as possible,
                  but not later than one hundred twenty (120) days after receipt
                  of a request for review. If such an extension of time is
                  required, written notice of the extension shall be furnished
                  to the claimant before the end of the original sixty (60) day
                  period. The decision on review shall be made in writing, shall
                  be written in a manner calculated to be understood by the
                  claimant, and shall include specific references to the
                  provisions of the Plan on which such denial is based. If the
                  decision on review is not furnished within the time specified
                  above, the claim shall be deemed denied on review.

SECTION 9.6       RECORDS

                  All acts and determinations of the Committee shall be duly
                  recorded by the secretary thereof and all such records
                  together with such other documents as may be necessary in
                  exercising his duties under the Plan shall be preserved in the
                  custody of such secretary. Such records and documents shall at
                  all times be open for inspection and for the purpose of making
                  copies by any person designated by the Sponsoring Employer.
                  The Committee shall provide such timely information, resulting
                  from the application of its responsibilities under the Plan,
                  as needed by the Trustee and the accountant engaged on behalf
                  of the Plan by the Sponsoring Employer, for the effective
                  discharge of their respective duties.

SECTION 9.7       INDEMNIFICATION

                  The Employer shall indemnify and hold the Board, officers of
                  the Employer, the Committee and each of its members, and any
                  employee of the Employer acting on behalf of the Board,
                  officers or Committee, harmless from and against any and all
                  expense, claim, cause of action, or liability it or any of
                  them may incur in the administration of the Plan and Trust
                  Fund, unless such expense, claim, cause of action, or
                  liability is the result of fraud or willful breach of his or
                  their fiduciary responsibilities under the Employee Retirement
                  Income Security Act of 1974. This shall include the
                  advancement of any legal or other expenses incurred in
                  connection with the claim, cause of action or liability.

                                   ARTICLE 10

                      AMENDMENT AND TERMINATION OF THE PLAN

SECTION 10.1      AMENDMENT OF THE PLAN

                  The Sponsoring Employer shall have the right at any time by
                  action of the Board to modify, alter or amend the Plan, in
                  whole or in part; the Committee in the case of non-material
                  amendments, provided, however, that the duties, powers and
                  liability of the Trustee hereunder shall not be increased
                  without its written consent; and provided, further, that the
                  amount of benefits which, at the time of such modification,
                  alteration or amendment, shall have accrued for any
                  Participant, Former Participant or Beneficiary hereunder shall
                  not be adversely affected thereby; and provided, further, that
                  no such amendment shall have the effect of reverting to any
                  Employer any part of the principal or income of the Trust
                  Fund. Notwithstanding the terms of the preceding sentence, the
                  401(k) Savings Committee shall have the authority, acting by a
                  majority of its members then in office, to amend the Plan to
                  make technical and non-material changes therein. No amendment
                  to the Plan shall decrease the balance of a Participant's
                  Individual Account or eliminate an optional form of
                  distribution.

SECTION 10.2      TERMINATION OF THE PLAN

                  The Sponsoring Employer expects to continue the Plan
                  indefinitely, but reserves the right at any time by action of
                  the Board to terminate its participation in the Plan, subject
                  to the provisions of the collective bargaining agreement. If
                  the Sponsoring Employer terminates or partially terminates its
                  participation in the Plan or permanently discontinues its
                  contributions at any time, each Participant affected thereby
                  shall then be one hundred percent (100%) vested in the balance
                  of his Individual Account.

SECTION 10.3      RETURN OF CONTRIBUTIONS

                  It is intended that this Plan shall be approved and qualified
                  under the Code and regulations issued thereunder with respect
                  to employees' plans and trusts (1) so as to permit the
                  Employer to deduct for federal income tax purposes the amounts
                  of contributions to the Trust Fund; (2) so that Employer
                  Contributions and 401(k) Savings Contributions and the income
                  of the Trust Fund will not be taxable to Participants as
                  income until received; (3) so that the income of the Trust
                  Fund shall be exempt from federal income tax. Any Employer
                  Contributions and 401(k) Savings Contributions are made to the
                  Plan conditioned on their deductibility under Code Section
                  404. In the event the Commissioner of Internal Revenue or his
                  delegate rules that the deduction for all or a part of any
                  Employer Contribution or 401(k) Savings Contribution is not
                  allowed, the Employer reserves the right to recover that
                  portion or all of its contributions for which no deduction is
                  allowed (reduced

                  by any allocable losses), provided such recovery is made
                  within one (1) year of the disallowance.

                                   ARTICLE 11

                                  MISCELLANEOUS

SECTION 11.1      GOVERNING LAW

                  The Plan shall be construed, regulated and administered
                  according to the laws of the Commonwealth of Kentucky, except
                  in those areas preempted by the laws of the United States of
                  America.

SECTION 11.2      CONSTRUCTION

                  The headings and subheadings in the Plan have been inserted
                  for convenience of reference only and shall not affect the
                  construction of the provisions hereof. In any necessary
                  construction the masculine shall include the feminine and the
                  singular the plural, and vice versa.

SECTION 11.3      ADMINISTRATION EXPENSES

                  The expenses of administering the Trust Fund and the Plan
                  shall be paid from the Trust Fund, unless they are paid by the
                  Sponsoring Employer.

SECTION 11.4      PARTICIPANT'S RIGHTS

                  No Participant in the Plan shall acquire any right to be
                  retained in the Employer's employ by virtue of the Plan, nor,
                  upon his dismissal, or upon his voluntary termination of
                  employment, shall he have any right or interest in and to the
                  Trust Fund other than as specifically provided herein. The
                  Employer shall not be liable for the payment of any benefit
                  provided for herein; all benefits hereunder shall be payable
                  only from the Trust Fund.

SECTION 11.5      SPENDTHRIFT CLAUSE

                  To the extent permitted by law, none of the benefits,
                  payments, proceeds, or distributions under this Plan shall be
                  subject to the claim of any creditor of the Participant,
                  Former Participant or any Beneficiary hereunder or to any
                  legal process by any creditor of such Participant, Former
                  Participant or any such Beneficiary; and neither shall such
                  Participant, Former Participant or any such Beneficiary have
                  any right to alienate, commute, anticipate, or assign (either
                  at law or equity) any of the benefits, payments, proceeds or
                  distributions under this Plan. The preceding sentence shall
                  also apply to the creation, assignment, or recognition of a
                  right to any benefit payable with respect to a Participant
                  pursuant to a domestic relations order, unless such order is
                  determined to be a qualified domestic relations order, as
                  defined in Section 414(p) of the Code, or any domestic
                  relations ordered entered before January 1, 1985, under which
                  payments have commenced prior to

                  such date. The prohibition against assignment or alienation
                  under this Section does not preclude enforcement of a federal
                  tax levy under Code Section 6331. Distribution of any benefit
                  payable with respect to a Participant may be made to an
                  alternate payee, as defined in Code Section 414(p)(8), before
                  the Participant ceases to be an Employee, even if the
                  distribution is to be made prior to the Participant's earliest
                  retirement age as defined in Code Section 414(p)(4)(B),
                  provided that the direction for such distribution is qualified
                  domestic relations order, and provided that the form of
                  distribution is a lump sum payment.

SECTION 11.6      MERGER, CONSOLIDATION OR TRANSFER

                  In the event of the merger or consolidation of the Plan with
                  another plan or transfer of assets or liabilities from the
                  Plan to another plan, each Participant, Former Participant or
                  Beneficiary shall not, as a result of such event, on the day
                  following such merger, consolidation or transfer, be entitled
                  under the termination of the Plan provisions to a lesser
                  benefit than the benefit he was entitled to on the date prior
                  to the merger, consolidation or transfer if the Plan had then
                  terminated.

SECTION 11.7      COUNTERPARTS

                  The Plan and the Trust Agreement may be executed in any number
                  of counterparts, each of which shall constitute but one and
                  the same instrument and may be sufficiently evidenced by any
                  one counterpart.

                                   ARTICLE 12

                            TOP HEAVY PLAN PROVISIONS

SECTION 12.1      GENERAL

                  Notwithstanding anything in the Plan to the contrary, if this
                  Plan when combined with all other plans required to be
                  aggregated pursuant to Code Section 416(g) is deemed to be a
                  Top Heavy Plan for any Plan Year, the following Sections of
                  this Article shall apply to such Plan Year.

SECTION 12.2      MINIMUM CONTRIBUTION

                  Regardless of hours worked or level of compensation, each
                  Participant who is not a Key Employee shall be entitled to a
                  minimum allocation of contributions and forfeitures equal to
                  the lesser of (i) three percent (3%) of the Participant's
                  compensation for the Plan Year; or (ii) provided that the Plan
                  is not part of a Required Aggregation Group with a Defined
                  Benefit Plan because the Plan enables the Defined Benefit Plan
                  to meet the requirements of Code Section 401(a)(4) or 410, the
                  highest percentage of compensation contributed on behalf of,
                  plus forfeitures allocated to, a Key Employee. In the case of
                  a Participant who is also a participant in a Defined Benefit
                  Plan maintained by the Employer, and who is not a Key
                  Employee, the minimum accrued benefit provided in the Defined
                  Benefit Plan pursuant to Code Section 416(c)(1), equal to two
                  percent (2%) of the Participant's average monthly compensation
                  for the five (5) consecutive years when his aggregate
                  compensation was highest multiplied by his years of credited
                  service up to ten (10) years for each Plan Year in which the
                  plan is top heavy, shall be the only minimum benefit for both
                  that plan and this Plan, and the minimum allocation described
                  above shall not apply.

SECTION 12.3      SUPER TOP HEAVY PLANS

                  The multiplier of one and twenty-five hundredths (1.25) in
                  Section 4.7 shall be reduced to one (1.0) unless (i) all plans
                  of the Required Aggregation Group or the Permissive
                  Aggregation Group when aggregated are ninety percent (90%) or
                  less top heavy, and (ii) the minimum allocation referenced in
                  clause (i) of Section 12.2 is modified by substituting three
                  percent (3%) with four percent (4%). In the case of a
                  Participant who is also a participant in a Defined Benefit
                  Plan maintained by the Employer, and who is not a Key
                  Employee, the minimum accrued benefit provided in the Defined
                  Benefit Plan pursuant to Code Sections 416(c)(1) and 416(h),
                  equal to three percent (3%) of the Participant's average
                  monthly compensation for the five (5) consecutive years when
                  his aggregate compensation was highest multiplied by his years
                  of credited service up to ten (10) years for each Plan Year in
                  which the plan is top heavy, shall be the only minimum benefit

                  for both that plan and this Plan, and the minimum allocation
                  described above shall not apply.

SECTION 12.4      COMPENSATION

                  For purposes of this Article, compensation shall have the same
                  meaning as assigned to it by Code Section 415 and shall be
                  limited to one hundred fifty thousand dollars ($150,000) or
                  such other amount as determined pursuant to Code Section
                  401(a)(17).

                          * * * * * * * * * * * * * * *

                                   SIGNATURES

         IN WITNESS WHEREOF, the Corporation has caused this Plan to be executed
this ___ day of ______________, 1998, effective July 17, 1998.

Witness:                                    By _________________________________

____________________________                Title ______________________________<PAGE>

                                                                     EXHIBIT 4.1

                          Certificate Of Designation

                                      Of

                 Series A Junior Participating Preferred Stock

                        (Pursuant to Section 151 of the
                       Delaware General Corporation Law)

     Clarent Corporation, a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Company"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Corporation as required by Section 151 of the General
Corporation Law in an action by unanimous written consent dated February 7,
2001:

               Resolved, that pursuant to the authority granted to and
          vested in the Board of Directors of the Company in accordance
          with the provisions of its Amended and Restated Certificate of
          Incorporation, the Board of Directors hereby creates a series of
          Preferred Stock, par value $.001 per share, of the Company and
          hereby states the designation and number of shares, and fixes the
          relative designations and the powers, preferences and rights, and
          the qualifications, limitations and restrictions thereof (in
          addition to the provisions set forth in the Certificate of
          Incorporation of the Company, which are applicable to the
          Preferred Stock of all classes and series), as follows:

Series A Junior Participating Preferred Stock:

     Section 1.     Designation and Amount. Two Million (2,000,000) shares of
Preferred Stock, $.001 par value, are designated "Series A Junior Participating
Preferred Stock" with the designations and the powers, preferences and rights,
and the qualifications, limitations and restrictions specified herein (the
"Junior Preferred Stock"). Such number of shares may be increased or decreased
by resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Junior Preferred Stock to a number less than the number
of shares then outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon the conversion
of any outstanding securities issued by the Company convertible into Junior
Preferred Stock.

     Section 2.     Dividends and Distributions.

          (A)       Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Junior Preferred Stock with respect

                                      A-1
<PAGE>

to dividends, the holders of shares of Junior Preferred Stock, in preference to
the holders of Common Stock, par value $.001 per share (the "Common Stock"), of
the Company, and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of April,
July, October and January in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a share
of Junior Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $l.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Junior Preferred Stock. In the event the Company shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Junior Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

          (B)       The Company shall declare a dividend or distribution on the
Junior Preferred Stock as provided in paragraph (A) of this Section immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided, that in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.

          (C)       Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Junior Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Junior Preferred

                                      A-2
<PAGE>

Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.

     Section 3.     Voting Rights. The holders of shares of Junior Preferred
Stock shall have the following voting rights:

          (A)       Subject to the provision for adjustment hereinafter set
forth, each share of Junior Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the Company.
In the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Junior
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

          (B)       Except as otherwise provided herein, in any other
Certificate of Designation creating a series of Preferred Stock or any similar
stock, or by law, the holders of shares of Junior Preferred Stock and the
holders of shares of Common Stock and any other capital stock of the Company
having general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the Company.

          (C)       Except as set forth herein, or as otherwise provided by law,
holders of Junior Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.

     Section 4.     Certain Restrictions.

          (A)       Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock as provided in Section 2 are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior Preferred Stock
outstanding shall have been paid in full, the Company shall not:

                    (i)  declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Junior Preferred Stock;

                    (ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Junior
Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and
all such parity stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are then entitled;

                                      A-3
<PAGE>

                    (iii)  redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred Stock, provided
that the Company may at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any stock of the Company ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Junior Preferred Stock; or

                    (iv)   redeem or purchase or otherwise acquire for
consideration any shares of Junior Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.

          (B)       The Company shall not permit any subsidiary of the Company
to purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

     Section 5.     Reacquired Shares. Any shares of Junior Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Amended and
Restated Certificate of Incorporation, or in any other Certificate of
Designation creating a series of Preferred Stock or any similar stock or as
otherwise required by law.

     Section 6.     Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Junior
Preferred Stock unless, prior thereto, the holders of shares of Junior Preferred
Stock shall have received $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, provided that the holders of shares of Junior Preferred Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of shares of Common Stock, or (2)
to the holders of shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Junior Preferred Stock,
except distributions made ratably on the Junior Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Company shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Junior

                                      A-4
<PAGE>

Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

     Section 7.     Consolidation, Merger, Etc. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Junior Preferred Stock shall at the same time be similarly exchanged or changed
into an amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged. In the event the
Company shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Junior Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

     Section 8.     No Redemption. The shares of Junior Preferred Stock shall
not be redeemable.

     Section 9.     Rank. The Junior Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of the Company's Preferred Stock.

     Section 10.    Amendment. The Amended and Restated Certificate of
Incorporation of the Company shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Junior Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of Junior
Preferred Stock, voting together as a single class.

                                      A-5
<PAGE>

     In Witness Whereof, the undersigned have executed this certificate as of
February 7, 2001.

                                  /s/ Jerry Shaw-Yau Chang
                                ------------------------------------------------
                                 Jerry Shaw-Yau Chang
                                 Chief Executive Officer

                                  /s/ Richard Heaps
                                ------------------------------------------------
                                 Richard  Heaps
                                 Chief Operating Officer and Secretary

                                      A-6
<PAGE>

                           Certificate Of Amendment
                                    Of The
                             Amended And Restated
                         Certificate Of Incorporation
                                      Of
                              Clarent Corporation

     Clarent Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the state of Delaware, does hereby
certify:

     First: The name of the corporation is Clarent Corporation.

     Second: The date on which the Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of Delaware was
April 6, 1999. A Certificate of Amendment to the Certificate of Incorporation
was filed with the Secretary of State of the State of Delaware on June 28, 1999.
An Amended and Restated Certificate of Incorporation of the corporation was
filed with the Secretary of State of the State of Delaware on July 7, 1999.

     Third: The Board of Directors of the corporation, acting in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware, adopted resolutions to amend the Amended and Restated Certificate of
Incorporation of the corporation by deleting the first paragraph of Article IV
and substituting therefor a new first paragraph of Article IV in the following
form:

               "This corporation is authorized to issue two classes of
          stock to be designated, respectively, `Common Stock' and
          `Preferred Stock.' The total number of shares which the
          corporation is authorized to issue is two hundred five
          million (205,000,00) shares. Two hundred million
          (200,000,000) shares shall be Common Stock, each having a
          par value of one-tenth of one cent ($.001). Five million
          (5,000,000) shares shall be Preferred Stock, each having a
          par value of one-tenth of one cent ($.001)."

     Fourth: Thereafter, pursuant to a resolution of the Board of Directors,
this Certificate of Amendment was submitted to the stockholders of the
corporation for their approval and was duly adopted in accordance with the
provision of Section 242 of the General Corporation Law of the State of
Delaware.

     In Witness Whereof, Clarent Corporation has caused this Certificate of
Amendment to be signed by its President and Chief Executive Officer and attested
to by its Secretary this 28th day of February, 2000.

                                         Clarent Corporation

                                         /s/ Jerry Shaw-Yau Chang
                                         ---------------------------------------
                                         Jerry Shaw-Yau Chang
                                         President and Chief Executive Officer
ATTEST:

/s/ Richard J. Heaps
--------------------------
Richard J. Heaps
Secretary
<PAGE>

                             AMENDED AND RESTATED
                         CERTIFICATE OF INCORPORATION
                                      OF
                              CLARENT CORPORATION

     Clarent Corporation, a corporation organized and existing under the laws of
the state of Delaware (the "Corporation") hereby certifies that:

     1.  The name of the Corporation is Clarent Corporation.

     2.  The date of filing of the Corporation's original Certificate of
Incorporation was April 6, 1999.

     3.  The Amended and Restated Certificate of Incorporation of the
Corporation as provided in Exhibit A hereto was duly adopted in accordance with
the provisions of Section 242 and Section 245 of the General Corporation Law of
the State of Delaware by the Board of Directors of the Corporation.

     4.  Pursuant to Section 245 of the Delaware General Corporation Law,
approval of the stockholders of the Corporation has been obtained.

     5.  The Amended and Restated Certificate of Incorporation so adopted reads
in full as set forth in Exhibit A attached hereto and is hereby incorporated by
reference.

     In Witness Whereof, the undersigned has signed this certificate this 7th
day of July, 1999, and hereby affirms and acknowledges under penalty of perjury
that the filing of this Amended and Restated Certificate of Incorporation is the
act and deed of Clarent Corporation.

                                   Clarent Corporation

                                   By /s/ Jerry Chang
                                      -------------------------------
                                          Jerry Chang
                                          Chief Executive Officer
<PAGE>

                                                                       Exhibit A

                             AMENDED AND RESTATED
                         CERTIFICATE OF INCORPORATION
                                      OF
                              CLARENT CORPORATION

                                      I.

     The name of this corporation is Clarent Corporation.

                                      II.

     The address of the registered office of the corporation in the State of
Delaware is 9 Loockerman Street, City of Dover, County of Kent and the name of
the registered agent of the corporation in the State of Delaware at such address
is National Registered Agents, Inc.

                                     III.

     The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.

                                      IV.

     This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is Fifty Five Million
(55,000,000) shares. Fifty Million (50,000,000) shares shall be Common Stock,
each having a par value of one tenth of one cent ($.001). Five Million
(5,000,000) shares shall be Preferred Stock, each having a par value of one
tenth of one cent ($.001).

     The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding.  In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.

                                       1
<PAGE>

                                      V.

     A.   For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:

          (1)  The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.

          (2)  Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, and to any
restrictions or limitations of applicable law, following the closing of the
initial public offering pursuant to an effective registration statement under
the Securities Act of 1933, as amended, covering the offer and sale of Common
Stock to the public (the "Initial Public Offering"), the directors shall be
divided into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class I directors shall expire and Class I directors
shall be elected for a full term of three years. At the second annual meeting of
stockholders following the Closing of the Initial Public Offering, the term of
office of the Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following the Closing of the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.

     Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.

          (3)  Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time (i) with cause by the affirmative vote of the holders of a
majority of the voting power of all the then-outstanding shares of voting stock
of the Corporation, entitled to vote at an election of directors (the "Voting
Stock") or (ii) without cause by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of all the then-
outstanding shares of the Voting Stock.

          (4)  Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal

                                       2
<PAGE>

or other causes and any newly created directorships resulting from any increase
in the number of directors, shall, unless the Board of Directors determines by
resolution that any such vacancies or newly created directorships shall be
filled by the stockholders, except as otherwise provided by law, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors, and not by the
stockholders. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the director for which
the vacancy was created or occurred and until such director's successor shall
have been elected and qualified.

          (5)  In the event that Section 2115(a) of the California Corporations
Code is applicable to this corporation, then the following shall apply:

               (a)  Every stockholder entitled to vote in any election of
directors of this corporation may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit;

               (b)  No stockholder, however, may cumulate such stockholder's
votes for one or more candidates unless (i) the names of such candidates have
been properly placed in nomination, in accordance with the Bylaws of the
corporation, prior to the voting, (ii) the stockholder has given advance notice
to the corporation of the intention to cumulative votes pursuant to the Bylaws,
and (iii) the stockholder has given proper notice to the other stockholders at
the meeting, prior to voting, of such stockholder's intention to cumulate such
stockholder's votes; and

               (c)  If any stockholder has given proper notice, all stockholders
may cumulate their votes for any candidates who have been properly placed in
nomination. The candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares shall be declared elected.

     B.   (1)  Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the Voting Stock. The Board of Directors shall
also have the power to adopt, amend, or repeal Bylaws.

          (2)  The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.

          (3)  No action shall be taken by the stockholders of the Corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws and following the closing of the Initial Public Offering no action
shall be taken by the stockholders by written consent.

                                       3
<PAGE>

     (4)  Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.

                                      VI.

     A.   A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.

     B.   Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.

                                     VII.

     A.   The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.

     B.   Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.

                                       4

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