Document:

Exhibit 4.1

 

SUPPLEMENTAL INDENTURE

 

FROM

 

LOUISVILLE GAS AND ELECTRIC COMPANY

 

TO

 

BNY MIDWEST TRUST COMPANY

TRUSTEE

 

 

 

DATED APRIL 1, 2005

 

 

SUPPLEMENTAL TO TRUST INDENTURE

 

DATED NOVEMBER 1, 1949

 

 

Table of Contents

 

	
  Parties

  	
   

  
	
  Recitals

  	
   

  
	
  Form of
  Bonds of Pollution Control Series HH

  	
   

  
	
  Further Recitals

  	
   

  
	
   

  	
   

  
	
  ARTICLE I.

  SPECIFIC SUBJECTION OF PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  1.01.

  	
  Grant
  of certain property, including all personal property to comply with Uniform
  Commercial Code of the Commonwealth of Kentucky, subject to permissible
  encumbrances and other exceptions contained in the Original Indenture

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II.

  PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES HH

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.01.

  	
  Terms
  of Bonds of Pollution Control Series HH

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.02.

  	
  Payment
  of principal and interest-Bonds of Pollution Control Series HH

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.03.

  	
  Bonds
  of Pollution Control Series HH deemed fully paid upon payment of
  corresponding Pollution Control Revenue Bonds

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.04.

  	
  Interchangeability
  of bonds

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.05.

  	
  Charges
  upon exchange or transfer of bonds

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III.

  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.01.

  	
  Recitals
  of fact, except as stated, are statements of the Company

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.02.

  	
  Supplemental
  Indenture to be construed as a part of the Original Indenture

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.03.

  	
  (a) Trust Indenture Act to control

  	
   

  
	
   

  	
  (b) Severability of provisions contained in
  Supplemental Indenture and bonds

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.04.

  	
  Word
  “Indenture” as used herein includes in its meaning the Original Indenture and
  all indentures supplemental thereto

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  3.05.

  	
  References
  to either party in Supplemental Indenture include successors or assigns

  	
   

  

 

i

 

	
  Section 3.06.

  	
  (a) Provision for execution in counterparts

  	
   

  
	
   

  	
  (b) Table of contents and descriptive headings
  of Articles not to affect meaning

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule
  A

  	
   

  	
   

  

 

ii

 

Supplemental Indenture, made as of the 1st day of April, 2005, by
and between Louisville Gas And Electric
Company, a corporation duly organized and existing under and by virtue
of the laws of the Commonwealth of Kentucky, having its principal office in the
City of Louisville, County of Jefferson, in said Commonwealth of Kentucky (the
“Company”), the party of the first part, and BNY
Midwest Trust Company, an Illinois trust company duly organized and
existing under and by virtue of the laws of the State of Illinois, having its
principal office at Two North LaSalle Street, City of Chicago, County of Cook,
State of Illinois 60602, as Trustee (the “Trustee”), party of the second part;

 

WITNESSETH:

 

WHEREAS, the Company has
heretofore executed and delivered its Trust Indenture (the “Original
Indenture”), made as of November 1, 1949, whereby the Company granted,
bargained, sold, warranted, released, conveyed, assigned, transferred,
mortgaged, pledged, set over and confirmed unto the Trustee under said
Indenture and to its respective successors in trust, all property, real,
personal and mixed then owned or thereafter acquired or to be acquired by the
Company (except as therein excepted from the lien thereof) and subject to the
rights reserved by the Company in and by the provisions of the Original
Indenture, to be held by said Trustee in trust in accordance with the
provisions of the Original Indenture for the equal pro rata benefit and
security of all and each of the bonds issued and to be issued thereunder in
accordance with the provisions thereof, and

 

WHEREAS, Section 2.01 of the
Original Indenture provides that bonds may be issued thereunder in one or more
series, each series to have such distinctive designation as the Board of
Directors of the Company may select for such series; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture,
bonds of a series designated “First Mortgage Bonds, Series due November 1,
1979,” bearing interest at the rate of 2 3/4% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated February 1, 1952, bonds of
a series designated “First Mortgage Bonds, Series due February 1, 1982,”
bearing interest at the rate of 3 1/8% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated February 1, 1954, bonds of
a series designated “First Mortgage Bonds, Series due February 1, 1984,”
bearing interest at the rate of 3 1/8% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated September 1, 1957, bonds of
a series designated “First Mortgage Bonds, Series due September 1, 1987,”
bearing interest at the rate of 4 7/8% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated October 1, 1960, bonds 

 

 

of a series designated “First Mortgage Bonds,
Series due October 1, 1990,” bearing interest at the rate of 4 7/8% per annum;
and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated June 1, 1966, bonds of a
series designated “First Mortgage Bonds, Series due June 1, 1996,” bearing
interest at the rate of 5 5/8% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated June 1, 1968, bonds of a
series designated “First Mortgage Bonds, Series due June 1, 1998,” bearing
interest at the rate of 6 3/4% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated June 1, 1970, bonds of a
series designated “First Mortgage Bonds, Series due July 1, 2000,” bearing
interest at the rate of 9 1/4% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated August 1, 1971, bonds of a
series designated “First Mortgage Bonds, Series due August 1, 2001,” bearing
interest at the rate of 8 1/4% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated June 1, 1972, bonds of a
series designated “First Mortgage Bonds, Series due July 1, 2002,” bearing
interest at the rate of 7 1/2% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated February 1, 1975, bonds of
a series designated “First Mortgage Bonds, Series due March 1, 2005,” bearing
interest at the rate of 8 7/8% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated September 1, 1975, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series A,” bearing
interest as provided therein and maturing September 1, 2000; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated September 1, 1976, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series B,” bearing
interest as provided therein and maturing September 1, 2006; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated October 1, 1976, bonds 

 

2

 

of a series designated “First Mortgage Bonds,
Series due November 1, 2006,” bearing interest at the rate of 8 1/2% per annum;
and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated June 1, 1978, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series C,” bearing
interest as provided therein and maturing June 1, 1998/2008; and

 

WHEREAS, the Company has
heretofore executed and delivered to the Trustee a Supplemental Indenture dated
February 15, 1979, setting forth duly adopted modifications and alterations to
the Original Indenture and all Supplemental Indentures thereto; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated September 1, 1979, bonds of
a series designated “First Mortgage Bonds, Series due October 1, 2009,” bearing
interest at the rate of 10 1/8% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated September 15, 1979, bonds
of a series designated “First Mortgage Bonds, Pollution Control Series D,”
bearing interest as provided therein and maturing October 1, 2004/2009; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated September 15, 1981, bonds
of a series designated “First Mortgage Bonds, Pollution Control Series E,”
bearing interest as provided therein and maturing September 15, 1984; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated March 1, 1982, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series F,” bearing
interest as provided therein and maturing March 1, 2012; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated March 15, 1982, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series G,” bearing
interest as provided therein and maturing March 1, 2012; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated September 15, 1982, bonds
of a series designated “First Mortgage Bonds, Pollution Control Series H,”
bearing interest as provided therein and maturing September 15, 1992; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated February 15, 1984, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series I,” bearing
interest 

 

3

 

as provided therein and
maturing February 15, 2011; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated July 1, 1985, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series J,” bearing
interest as provided therein and maturing July 1, 1995/2015; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated November 15, 1986, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series K,” bearing
interest as provided therein and maturing December 1, 2016; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated November 16, 1986, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series L,” bearing
interest as provided therein and maturing December 1, 2016; and

 

WHEREAS, the Company has heretofore
issued in accordance with the provisions of the Original Indenture as
supplemented by the Supplemental Indenture dated August 1, 1987, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series M,” bearing
interest as provided therein and maturing August 1, 1997; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated February 1, 1989, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series N,” bearing
interest as provided therein and maturing February 1, 2019; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated February 2, 1989, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series O,” bearing
interest as provided therein and maturing February 1, 2019; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated June 15, 1990, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series P,” bearing
interest as provided therein and maturing June 15, 2015; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated November 1, 1990, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series Q” and
bonds of a series designated “First Mortgage Bonds, Pollution Control Series
R,” each series bearing interest as provided therein and maturing November 1,
2020; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated September 1, 1992, 

 

4

 

bonds of a series designated
“First Mortgage Bonds, Pollution Control Series S,” bearing interest as
provided therein and maturing September 1, 2017; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated September 2, 1992, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series T,” bearing
interest as provided therein and maturing September 1, 2017; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated August 15, 1993, bonds of a
series designated “First Mortgage Bonds, Series due August 15, 2003,” bearing
interest at the rate of 6% per annum; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated August 16, 1993, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series U,” bearing
interest as provided therein and maturing August 15, 2013 and bonds of a series
designated “First Mortgage Bonds, Pollution Control Series V,” bearing interest
as provided therein and maturing August 15, 2019; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated October 15, 1993, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series W,” bearing
interest as provided therein and maturing October 15, 2020, and bonds of a
series designated “First Mortgage Bonds, Pollution Control Series X,” bearing
interest as provided therein and maturing April 15, 2023; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated May 1, 2000, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series Y,” bearing
interest as provided therein and maturing May 1, 2027; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated August 1, 2000, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series Z,” bearing
interest as provided therein and maturing August 1, 2030; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated September 1, 2001, bonds of
a series designated “First Mortgage Bonds, Pollution Control Series AA,”
bearing interest as provided therein and maturing September 1, 2027; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated March 1, 2002, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series BB,” bearing
interest as 

 

5

 

provided therein and maturing
September 1, 2026, and bonds of a series designated “First Mortgage Bonds,
Pollution Control Series CC,” bearing interest as provided therein and maturing
September 1, 2026; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated March 15, 2002, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series DD,” bearing
interest as provided therein and maturing November 1, 2027, and bonds of a
series designated “First Mortgage Bonds, Pollution Control Series EE,” bearing
interest as provided therein and maturing November 1, 2027; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated October 1, 2002, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series FF,” bearing
interest as provided therein and maturing October 1, 2032; and

 

WHEREAS, the Company has
heretofore issued in accordance with the provisions of the Original Indenture
as supplemented by the Supplemental Indenture dated October 1, 2003, bonds of a
series designated “First Mortgage Bonds, Pollution Control Series GG,” bearing
interest as provided therein and maturing October 1, 2033; and

 

WHEREAS, the
Louisville/Jefferson County Metro Government in the Commonwealth of Kentucky
(the “Issuer”) has agreed to issue $40,000,000 principal amount of its
Pollution Control Revenue Bonds, 2005 Series A (Louisville Gas and Electric
Company Project) (the “Pollution Control Revenue Bonds”) pursuant to the
provisions of the Indenture of Trust, dated as of February 1, 2005 (the
“Pollution Control Indenture”), between and among the Issuer and Deutsche Bank
Trust Company Americas, as Trustee, Paying Agent and Bond Registrar (said
Trustee or any successor trustee under the Pollution Control Indenture being hereinafter
referred to as the “Pollution Control Trustee”); and

 

WHEREAS, the proceeds of the
Pollution Control Revenue Bonds (other than any accrued interest, if any,
thereon) will be loaned by the Issuer to the Company pursuant to the provisions
of a Loan Agreement, dated as of February 1, 2005, between the Issuer and the
Company (the “Agreement”), to legally defease and discharge $40,000,000 in
outstanding principal amount of “County of Jefferson, Kentucky, Pollution
Control Revenue Bonds, 1995 Series A (Louisville Gas and Electric Company
Project),” dated
April 15, 1995 (the “1995 Bonds”) on the date of issuance of the Pollution
Control Revenue Bonds.  The 1995 Bonds
were issued to finance or refinance the cost of construction of certain air
pollution control facilities at the Mill Creek and Cane Run Generating Stations
of the Company, which facilities are hereinafter sometimes referred to as the
“Project,” which Project is located in Jefferson County, Kentucky, and which
Project is more fully described in Exhibit A to the Agreement; and

 

WHEREAS, payments by the
Company under and pursuant to the Agreement have been assigned by the Issuer to
the Pollution Control Trustee in order to secure the payment of the 

 

6

 

Pollution Control Revenue
Bonds; and

 

WHEREAS, in order to further
secure the payment of the Pollution Control Revenue Bonds, the Company desires
to provide for the issuance under the Original Indenture to the Pollution
Control Trustee of a new series of bonds designated “First Mortgage Bonds,
Pollution Control Series HH” (sometimes called “Bonds of Pollution Control
Series HH”), in a principal amount equal to the principal amount of the
Pollution Control Revenue Bonds, and with corresponding terms and maturity, the
Bonds of Pollution Control Series HH to be issued as registered bonds without
coupons in denominations of a multiple of $1,000; and the Bonds of Pollution
Control Series HH are to be substantially in the form and tenor following,
to-wit:

 

(Form
of Bonds of Pollution Control Series HH)

 

This Bond has not been
registered under the Securities Act of 1933, as amended, and may not be offered
or sold in contravention of said Act and is not transferable except to a
successor Trustee under the Indenture of Trust dated as of February 1, 2005,
from the Louisville/Jefferson County Metro Government, Kentucky, to Deutsche
Bank Trust Company Americas, as Trustee, Paying Agent and Bond Registrar.

 

Louisville Gas And Electric Company

(Incorporated under the laws of the Commonwealth of Kentucky)

First Mortgage Bond

Pollution Control Series HH

 

	
  No.

  	
   

  	
  $

  

 

Louisville Gas and Electric
Company, a corporation organized and existing under and by virtue of the laws
of the Commonwealth of Kentucky (herein called the “Company”), for value
received, hereby promises to pay to Deutsche Bank Trust Company Americas, as
Trustee under the Indenture of Trust (the “Pollution Control Indenture”) dated
as of February 1, 2005, from the Louisville/Jefferson County Metro Government, Kentucky,
to Deutsche Bank Trust Company Americas, or any successor trustee under the
Pollution Control Indenture (the “Pollution Control Trustee”) and at the office
of BNY Midwest Trust Company, Chicago, Illinois (the “Trustee”) the sum of                      
Dollars in lawful money of the United States of America on the Demand
Redemption Date, as hereinafter defined, and to pay on the Demand Redemption
Date to the Pollution Control Trustee, interest hereon from the Initial
Interest Accrual Date, as hereinafter defined, to the Demand Redemption Date at
the same rate or rates per annum then and thereafter from time to time borne by
the Pollution Control Revenue Bonds, in like money, said interest being payable
at the office of the Trustee in Chicago, Illinois, subject to the provisions
hereinafter set forth in the event of a rescission of a Redemption Demand, as
hereinafter defined.

 

This bond is one of a duly
authorized issue of bonds of the Company, known as its First Mortgage Bonds,
unlimited in aggregate principal amount, which issue of bonds consists, or may
consist of several series of varying denominations, dates and tenors, all
issued and to be issued 

 

7

 

under and equally secured
(except in so far as a sinking fund, or similar fund, established in accordance
with the provisions of the Indenture may afford additional security for the
bonds of any specific series) by a Trust Indenture dated November 1, 1949 (the
“Original Indenture”), and Supplemental Indentures thereto dated February 1,
1952, February 1, 1954, September 1, 1957, October 1, 1960, June 1, 1966, June
1, 1968, June 1, 1970, August 1, 1971, June 1, 1972, February 1, 1975,
September 1, 1975, September 1, 1976, October 1, 1976, June 1, 1978, February
15, 1979, September 1, 1979, September 15, 1979, September 15, 1981, March 1,
1982, March 15, 1982, September 15, 1982, February 15, 1984, July 1, 1985,
November 15, 1986, November 16, 1986, August 1, 1987, February 1, 1989,
February 2, 1989, June 15, 1990, November 1, 1990, September 1, 1992, September
2, 1992, August 15, 1993, August 16, 1993, October 15, 1993, May 1, 2000,
August 1, 2000, September 1, 2001, March 1, 2002, March 15, 2002, October 1,
2002, October 1, 2003 and April 1, 2005 (all of which instruments are herein
collectively called the “Indenture”), executed by the Company to the Trustee,
to which Indenture reference is hereby made for a description of the property
mortgaged and pledged, the nature and extent of the security, the rights of the
holders of the bonds as to such security, and the terms and conditions upon
which the bonds may be issued under the Indenture and are secured.  The principal hereof may be declared or may
become due on the conditions, in the manner and at the time set forth in the
Indenture, upon the happening of a completed default as in the Indenture
provided.  The Indenture provides that
such declaration may in certain events be waived by the holders of a majority
in principal amount of the bonds outstanding.

 

This bond is one of a series
of bonds of the Company issued under the Indenture and designated as First
Mortgage Bonds, Pollution Control Series HH. 
The bonds of this Series have been issued to the Pollution Control Trustee
under the Pollution Control Indenture to secure payment of the Pollution
Control Revenue Bonds, 2005 Series A (Louisville Gas and Electric Company
Project) (the “Pollution Control Revenue Bonds”) issued by the
Louisville/Jefferson County Metro Government, Kentucky (the “Issuer”) under the
Pollution Control Indenture, the proceeds of which have been or are to be
loaned to the Company pursuant to the provisions of the Loan Agreement dated as
of February 1, 2005 (the “Agreement”) between the Company and the Issuer.  The maturity of the obligation represented by
the bonds of this Series is February 1, 2035. 
The date of maturity of the obligation represented by the bonds of this
Series is hereinafter referred to as the Final Maturity Date.  The bonds of this Series shall bear interest
from the Initial Interest Accrual Date, as hereinafter defined, at the same
rate or rates per annum then and thereafter from time to time borne by the
Pollution Control Revenue Bonds.

 

With the consent of the
Company and to the extent permitted by and as provided in the Indenture, the
rights and obligations of the Company and/or of the holders of the bonds,
and/or the terms and provisions of the Indenture and/or of any instruments
supplemental thereto may be modified or altered by affirmative vote of the
holders of at least seventy percent in principal amount of the bonds then
outstanding under the Indenture and any instruments supplemental thereto
(excluding bonds disqualified from voting by reason of the interest of the
Company or of certain related persons therein as provided in the Indenture),
and by the affirmative vote of at least seventy percent in principal amount of
the bonds of any series entitled to vote then outstanding under the Indenture
and any instruments supplemental thereto (excluding bonds 

 

8

 

disqualified from voting as
aforesaid) and affected by such modification or alteration, in case one or more
but less than all of the series of bonds then outstanding are so affected;
provided that no such modification or alteration shall permit the extension of
the maturity of the principal of this bond or the reduction in the rate of
interest, if any, hereon or any other modification in the terms of payment of
such principal or interest, if any, or the taking of certain other action as
more fully set forth in the Indenture, without the consent of the holder
hereof.

 

Except as provided in the
next succeeding paragraph, in the event of a default under Section 9.1 of the
Agreement or in the event of a default in the payment of the principal of,
premium, if any, or interest (and such default in the payment of interest
continues for the full grace period, if any, permitted by the Pollution Control
Indenture and the Pollution Control Revenue Bonds) on the Pollution Control
Revenue Bonds, whether at maturity, by tender for purchase, by acceleration, by
sinking fund, redemption or otherwise, as and when the same becomes due, the
bonds of this Series shall be redeemable in whole upon receipt by the Trustee
of a written demand (hereinafter called a “Redemption Demand”) from the
Pollution Control Trustee stating that there has been such a default, stating
that it is acting pursuant to the authorization granted by Section 9.02(c) of
the Pollution Control Indenture, specifying the last date to which interest on
the Pollution Control Revenue Bonds has been paid (such date being hereinafter
referred to as the “Initial Interest Accrual Date”) and demanding redemption of
the bonds of this Series.  The Trustee
shall, within 10 days after receiving such Redemption Demand, mail a copy
thereof to the Company marked to indicate the date of its receipt by the
Trustee.  Promptly upon receipt by the
Company of such copy of a Redemption Demand, the Company shall fix a date on
which it will redeem the bonds of this Series so demanded to be redeemed
(hereinafter called the “Demand Redemption Date”).  Notice of the date fixed as and for the
Demand Redemption Date shall be mailed by the Company to the Trustee at least
30 days prior to such Demand Redemption Date. 
The date to be fixed by the Company as and for the Demand Redemption
Date may be any date up to and including the earlier of (i) the 120th day after
receipt by the Trustee of the Redemption Demand or (ii) the Final Maturity
Date, provided that if the Trustee shall not have received such notice fixing
the Demand Redemption Date within 90 days after receipt by it of the Redemption
Demand, the Demand Redemption Date shall be deemed to be the earlier of (i) the
120th day after receipt by the Trustee of the Redemption Demand or (ii) the
Final Maturity Date.  The Trustee shall
mail notice of the Demand Redemption Date (such notice being hereinafter called
the “Demand Redemption Notice”) to the Pollution Control Trustee not more than
10 nor less than five days prior to the Demand Redemption Date.  Notwithstanding the foregoing, if a default
to which this paragraph is applicable is existing on the Final Maturity Date,
such date shall be deemed to be the Demand Redemption Date without further
action (including actions specified in this paragraph) by the Pollution Control
Trustee, the Trustee or the Company.  The
bonds of this Series shall be redeemed by the Company on the Demand Redemption
Date, upon surrender thereof by the Pollution Control Trustee to the Trustee,
at a redemption price equal to the principal amount thereof, plus accrued
interest thereon at the rate per annum set forth in the third paragraph of this
Bond, from the Initial Interest Accrual Date to the Demand Redemption Date.  If a Redemption Demand is rescinded by the
Pollution Control Trustee by written notice to the Trustee prior to the Demand
Redemption Date, no Demand Redemption Notice shall be given, or, if already 

 

9

 

given, shall be automatically
annulled, and interest on the bonds of this Series shall cease to accrue, all
interest accrued thereon shall be automatically rescinded and cancelled and the
Company shall not be obligated to make any payments of principal of or interest
on the bonds of this Series; but no such rescission shall extend to or affect
any subsequent default or impair any right consequent thereon.

 

In the event that all of the
bonds outstanding under the Indenture shall have become immediately due and
payable, whether by declaration or otherwise, and such acceleration shall not
have been annulled, the bonds of this Series shall bear interest at the rate
per annum set forth in the third paragraph of this bond, from the Initial
Interest Accrual Date, as specified in a written notice to the Trustee from the
Pollution Control Trustee, and the principal of and interest on the bonds of
this Series from the Initial Interest Accrual Date shall be payable in
accordance with the provisions of the Indenture.

 

Upon payment of the principal
of and premium, if any, and interest on the Pollution Control Revenue Bonds,
whether at maturity or prior to maturity by redemption or otherwise, and the
surrender thereof to and cancellation thereof by the Pollution Control Trustee
(other than any Pollution Control Revenue Bond that was cancelled by the
Pollution Control Trustee and for which one or more other Pollution Control
Revenue Bonds were delivered and authenticated pursuant to the Pollution
Control Indenture in lieu of or in exchange or substitution for such cancelled
Pollution Control Revenue Bond), or upon provision for the payment thereof
having been made in accordance with the Pollution Control Indenture, bonds of
this Series in a principal amount equal to the principal amount of the Pollution
Control Revenue Bonds so surrendered and cancelled or for the provision for
which payment has been made shall be deemed fully paid and the obligations of
the Company thereunder shall be terminated, and such bonds of this Series shall
be surrendered by the Pollution Control Trustee to the Trustee and shall be
cancelled by the Trustee.  From and after
the Release Date (as defined below), the bonds of this Series shall be deemed
fully paid, satisfied and discharged and the obligations of the Company hereunder
and thereunder shall be terminated.  The
Release Date shall be the date that the Bond Insurer (as such term is defined
in the Pollution Control Indenture), at the request of the Company, consents to
the release of the bonds of this Series as security for the Pollution Control
Revenue Bonds, provided that in no event shall that date be later than the date
as of which all bonds issued under the Indenture prior to the date of initial
issuance of this bond (and excluding bonds of this Series and First Mortgage
Bonds, Pollution Control Series Y, Z, AA, BB, CC, DD, EE, FF and GG) have been
retired through payment, redemption or otherwise (including those bonds “deemed
to be redeemed” within the meaning of that term as used in Article X of the
Original Indenture) at, before or after the maturity thereof.  On the Release Date, the bonds of this Series
shall be surrendered by the Pollution Control Trustee to the Trustee whereupon
the bonds of said Series so surrendered shall be cancelled by the Trustee.

 

No recourse shall be had for
the payment of principal of, or interest, if any, on this bond, or any part
thereof, or of any claim based hereon or in respect hereof or of the Indenture,
against any incorporator, or any past, present or future stockholder, officer
or director of the Company or of any predecessor or successor corporation,
either directly or through the Company, or through 

 

10

 

any such predecessor or
successor corporation, or through any receiver or trustee in bankruptcy,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released, as more fully provided in the Indenture.

 

This bond shall not be valid
or become obligatory for any purpose unless and until the certificate of
authentication hereon shall have been signed by or on behalf of BNY Midwest Trust
Company, as Trustee under the Indenture, or its successor thereunder.

 

In
Witness Whereof, Louisville Gas And Electric Company has caused this instrument to be signed in
its name by its President or a Vice President or with the facsimile signature
of its President, and its corporate seal, or a facsimile thereof, to be hereto
affixed and attested by its Secretary or Assistant Secretary or with the
facsimile signature of its Secretary.

 

 

	
  Dated
  

  	
  Louisville
  Gas And Electric Company

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
  By 

  	
   

  	
   

  
	
   

  	
   

  	
  Vice
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  

 

and

 

WHEREAS, Sections 4.01 and
21.03 of the Original Indenture provide in substance that the Company and the
Trustee may enter into indentures supplemental thereto for the purposes, among
others, of creating and setting forth the particulars of any new series of
bonds and of providing the terms and conditions of the issue of the bonds of
any series not expressly provided for in the Original Indenture and of
assigning, conveying, mortgaging, pledging and transferring unto the Trustee
additional property of the Company, and for any other purpose not inconsistent
with the terms of the Original Indenture; and

 

WHEREAS, the execution and
delivery of this Supplemental Indenture have been duly authorized by a
resolution adopted by the Board of Directors of the Company;

 

11

 

Now, Therefore, This Indenture Witnesseth:

 

Louisville Gas and Electric
Company, in consideration of the premises and of one dollar to it duly paid by
the Trustee at or before the ensealing and delivery of these presents, the
receipt whereof is hereby acknowledged, and other good and valuable
considerations, does hereby covenant and agree to and with BNY Midwest Trust
Company, as Trustee, and its successors in the trust under the Indenture for
the benefit of those who hold or shall hold the bonds issued or to be issued
thereunder, as follows:

 

ARTICLE I.

 

SPECIFIC SUBJECTION OF PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE

 

Section 1.01.  The
Company in order better to secure the payment, both of principal and interest,
of all bonds of the Company at any time outstanding under the Indenture,
according to their tenor and effect, and the performance of and compliance with
the covenants and conditions in the Indenture contained, has granted,
bargained, sold, warranted, released, conveyed, assigned, transferred,
mortgaged, pledged, set over and confirmed and by these presents does grant,
bargain, sell, warrant, release, convey, assign, transfer, mortgage, pledge, set
over and confirm unto BNY Midwest Trust Company, as Trustee and to its
respective successors in said trust forever, subject to the rights reserved by
the Company in and by the provisions of the Indenture, all the property
described and mentioned or enumerated in a schedule hereto annexed and marked
Schedule A, reference to said schedule being hereby made with the same force
and effect as if the same were incorporated herein at length; together with all
and singular the tenements, hereditaments and appurtenances belonging or in any
wise appertaining to the aforesaid property or any part thereof with the
reversion and reversions, remainder and remainders, tolls, rents and revenues,
issues, income, product and profits thereof;

 

Also, in order to subject
all of the personal property and chattels of the Company to the lien of the
Indenture in conformity with the provisions of the Uniform Commercial Code of
the Commonwealth of Kentucky, all steam, hydro and other electric generating
plants, including buildings and other structures, turbines, generators,
boilers, condensing equipment, and all other equipment; substations; electric
transmission and distribution systems, including structures, poles, towers,
fixtures, conduits, insulators, wires, cables, transformers, services and
meters; steam and heating mains and equipment; gas generating and coke plants,
including buildings, holders and other structures, boilers and other boiler
plant equipment, benches, retorts, coke ovens, water gas sets, condensing and
purification equipment, piping and other accessory works equipment; facilities
for gas storage whether above or below surface; gas transmission and
distribution systems, including structures, mains, compressor stations,
purifier stations, pressure holders, governors, services and meters; office,
shop, garage and other general buildings and structures, furniture and
fixtures; and all municipal and other franchises and all leaseholds, licenses,
permits, easements, and privileges; all as now owned or hereafter acquired by
the Company pursuant to the provisions of the Original Indenture; and

 

All the estate, right, title
and interest and claim whatsoever, at law as well as in equity, 

 

12

 

which the Company now has or
may hereafter acquire in and to the aforesaid property and franchises and every
part and parcel thereof;

 

Excluding, however, (1) all
shares of stock, bonds, notes, evidences of indebtedness and other securities
other than such as may be or are required to be deposited from time to time
with the Trustee in accordance with the provisions of the Indenture; (2) cash
on hand and in banks other than such as may be or is required to be deposited
from time to time with the Trustee in accordance with the provisions of the
Indenture; (3) contracts, claims, bills and accounts receivable and chooses in
action other than such as may be or are required to be from time to time
assigned to the Trustee in accordance with the provisions of the Indenture; (4)
motor vehicles; (5) any stock of goods, wares and merchandise, equipment,
materials and supplies acquired for the purpose of sale or lease in the usual
course of business or for the purpose of consumption in the operation,
construction or repair of any of the properties of the Company; and (6) the
properties described in Schedule B annexed to the Original Indenture.

 

To have and to hold all said
property, real, personal and mixed, mortgaged, pledged or conveyed by the
Company as aforesaid, or intended so to be, unto the Trustee and its successors
and assigns forever, subject, however, to permissible encumbrances as defined
in Section 1.09 of the Original Indenture and to the further reservations,
covenants, conditions, uses and trusts set forth in the Indenture, in trust
nevertheless for the same purposes and upon the same conditions as are set
forth in the Indenture.

 

ARTICLE
II.

 

PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES HH

 

Section 2.01.  There
is hereby created, for issuance under the Original Indenture, a series of bonds
designated Pollution Control Series HH, each of which shall bear the
descriptive title “First Mortgage Bonds, Pollution Control Series HH” and the
form thereof shall contain suitable provisions with respect to the matters
specified in this section.  The Bonds of
Pollution Control Series HH shall be printed, lithographed or typewritten and
shall be substantially of the tenor and purport previously recited.  The Bonds of Pollution Control Series HH
shall be issued as registered bonds without coupons in denominations of a
multiple of $1,000 and shall be registered in the name of the Pollution Control
Trustee.  The Bonds of Pollution Control
Series HH shall be dated as of the date of their authentication.

 

The Bonds of Pollution
Control Series HH shall be payable, both as to principal and interest, at the
office of the Trustee in Chicago, Illinois, in lawful money of the United
States of America.  The maturity of the
obligation represented by the Bonds of Pollution Control Series HH is February
1, 2035.  The date of maturity of the
obligation represented by the Bonds of Pollution Control Series HH is
hereinafter referred to as the Final Maturity Date.  The Bonds of Pollution Control Series HH
shall bear interest from the Initial Interest Accrual Date, as hereinafter
defined, at the same rate or rates then and thereafter from time to time borne
by the Pollution Control Revenue Bonds.

 

13

 

Section 2.02.          Except as provided in the next
succeeding paragraph of this Section 2.02, in the event of a default under
Section 9.1 of the Agreement or in the event of a default in the payment of the
principal of, premium, if any, or interest (and such default in the payment of
interest continues for the full grace period, if any, permitted by the
Pollution Control Indenture and the Pollution Control Revenue Bonds) on the
Pollution Control Revenue Bonds, whether at maturity, by tender for purchase,
by acceleration, by sinking fund, redemption or otherwise, as and when the same
becomes due, the Bonds of Pollution Control Series HH shall be redeemable in
whole upon receipt by the Trustee of a written demand (hereinafter called a
“Redemption Demand”) from the Pollution Control Trustee stating that there has
been such a default, stating that it is acting pursuant to the authorization
granted by Section 9.02(c) of the Pollution Control Indenture, specifying the
last date to which interest on the Pollution Control Revenue Bonds has been
paid (such date being hereinafter referred to as the “Initial Interest Accrual
Date”) and demanding redemption of the Bonds of Pollution Control Series
HH.  The Trustee shall, within 10 days
after receiving such Redemption Demand, mail a copy thereof to the Company
marked to indicate the date of its receipt by the Trustee.  Promptly upon receipt by the Company of such
copy of a Redemption Demand, the Company shall fix a date on which it will
redeem the Bonds of Pollution Control Series HH so demanded to be redeemed
(hereinafter called the “Demand Redemption Date”).  Notice of the date fixed as the Demand
Redemption Date shall be mailed by the Company to the Trustee at least 30 days
prior to such Demand Redemption Date. 
The date to be fixed by the Company as and for the Demand Redemption
Date may be any date up to and including the earlier of (i) the 120th day after
receipt by the Trustee of the Redemption Demand or (ii) the Final Maturity
Date, provided that if the Trustee shall not have received such notice fixing
the Demand Redemption Date within 90 days after receipt by it of the Redemption
Demand, the Demand Redemption Date shall be deemed to be the earlier of (i) the
120th day after receipt by the Trustee of the Redemption Demand or (ii) the
Final Maturity Date.  The Trustee shall
mail notice of the Demand Redemption Date (such notice being hereinafter called
the “Demand Redemption Notice”) to the Pollution Control Trustee not more than
10 nor less than five days prior to the Demand Redemption Date.  Notwithstanding the foregoing, if a default
to which this paragraph is applicable is existing on the Final Maturity Date,
such date shall be deemed to be the Demand Redemption Date without further
action (including actions specified in this paragraph) by the Pollution Control
Trustee, the Trustee or the Company.  The
Bonds of Pollution Control Series HH shall be redeemed by the Company on the
Demand Redemption Date, upon surrender thereof by the Pollution Control Trustee
to the Trustee, at a redemption price equal to the principal amount thereof,
plus accrued interest thereon at the rate per annum set forth in Section 2.01
hereof, from the Initial Interest Accrual Date to the Demand Redemption
Date.  If a Redemption Demand is
rescinded by the Pollution Control Trustee by written notice to the Trustee
prior to the Demand Redemption Date, no Demand Redemption Notice shall be
given, or, if already given, shall be automatically annulled, and interest on
the Bonds of Pollution Control Series HH shall cease to accrue, all interest
accrued thereon shall be automatically rescinded and cancelled and the Company
shall not be obligated to make any payments of principal of or interest on the
Bonds of Pollution Control Series HH; but no such rescission shall extend to or
affect any subsequent default or impair any right consequent thereon.

 

14

 

In the event that all of the
bonds outstanding under the Indenture shall have become immediately due and
payable, whether by declaration or otherwise, and such acceleration shall not
have been annulled, the Bonds of Pollution Control Series HH shall bear
interest at the rate per annum set forth in Section 2.01 hereof, from the
Interest Accrual Date, as specified in a written notice to the Trustee from the
Pollution Control Trustee, and the principal of and interest on the Bonds of
Pollution Control Series HH from the Initial Interest Accrual Date shall be
payable in accordance with the provisions of the Indenture.

 

Anything herein contained to
the contrary notwithstanding, the Trustee is not authorized to take any action
pursuant to a Redemption Demand or a rescission thereof or a written notice
required by this Section 2.02, and such Redemption Demand, rescission or notice
shall be of no force or effect, unless it is executed in the name of the Pollution
Control Trustee by one of its Vice Presidents.

 

Section 2.03.  Upon payment of the principal of and premium,
if any, and interest on the Pollution Control Revenue Bonds, whether at
maturity or prior to maturity by redemption or otherwise, and the surrender
thereof to and cancellation thereof by the Pollution Control Trustee (other
than any Pollution Control Revenue Bond that was cancelled by the Pollution
Control Trustee and for which one or more other Pollution Control Revenue Bonds
were delivered and authenticated pursuant to the Pollution Control Indenture in
lieu of or in exchange or substitution for such cancelled Pollution Control
Revenue Bond), or upon provision for the payment thereof having been made in
accordance with the Pollution Control Indenture, Bonds of Pollution Control
Series HH in a principal amount equal to the principal amount of the Pollution
Control Revenue Bonds so surrendered and cancelled or for the provision for
which payment has been made shall be deemed fully paid and the obligations of
the Company thereunder shall be terminated, and such Bonds of Pollution Control
Series HH shall be surrendered by the Pollution Control Trustee to the Trustee
and shall be cancelled and disposed of by the Trustee.  From and after the Release Date (as defined
below), the bonds of this Series shall be deemed fully paid, satisfied and
discharged and the obligations of the Company hereunder and thereunder shall be
terminated.  The Release Date shall be
the date that the Bond Insurer (as such term is defined in the Pollution
Control Indenture), at the request of the Company, consents to the release of
the bonds of this Series as security for the Pollution Control Revenue Bonds,
provided that in no event shall that date be later than the date as of which
all bonds issued under the Indenture prior to the date of initial issuance of
this bond (and excluding bonds of this Series and First Mortgage Bonds,
Pollution Control Series Y, Z, AA, BB, CC, DD, EE, FF and GG) have been retired
through payment, redemption or otherwise (including those bonds “deemed to be
redeemed” within the meaning of that term as used in Article X of the Original
Indenture) at, before or after the maturity thereof.  On the Release Date, the bonds of this Series
shall be surrendered by the Pollution Control Trustee to the Trustee whereupon
the Bonds of said Series so surrendered shall be cancelled by the Trustee.

 

Section 2.04.  Prior to the Release Date, the Pollution
Control Trustee as the registered holder of the Bonds of Pollution Control
Series HH at its option may surrender the same at the office of the Trustee, in
Chicago, Illinois, or elsewhere, if authorized by the Company, for 

 

15

 

cancellation, in exchange for
other bonds of the same series of the same aggregate principal amount.  Thereupon, and upon receipt of any payment
required under the provisions of Section 2.05 hereof, the Company shall execute
and deliver to the Trustee and the Trustee shall authenticate and deliver such other
registered bonds to such registered holder at its office or at any other place
specified as aforesaid.

 

Section 2.05.  No charge shall be made by the Company for any
exchange or transfer of Bonds of Pollution Control Series HH other than for
taxes or other governmental charges, if any, that may be imposed in relation
thereto.

 

ARTICLE
III.

 

MISCELLANEOUS

 

Section 3.01.  The
recitals of fact herein and in the bonds (except the Trustee’s Certificate)
shall be taken as statements of the Company and shall not be construed as made
or warranted by the Trustee.  The Trustee
makes no representations as to the value of any of the property subject to the
lien of the Indenture, or any part thereof, or as to the title of the Company
thereto, or as to the security afforded thereby and hereby, or as to the
validity of this Supplemental Indenture and the Trustee shall incur no
responsibility in respect of such matters.

 

Section 3.02.  This
Supplemental Indenture shall be construed in connection with and as a part of
the Original Indenture.

 

Section 3.03.  (a) If any provision of this Supplemental Indenture limits, qualifies or
conflicts with another provision of the Original Indenture or this Supplemental
Indenture required to be included in indentures qualified under the Trust
Indenture Act of 1939, as amended (as enacted prior to the date of this
Supplemental Indenture) by any of the provisions of Sections 310 to 317,
inclusive, of the said Act, such required provision shall control.

 

(b)   In case any one or more of the
provisions contained in this Supplemental Indenture or in the bonds issued
hereunder shall be invalid, illegal, or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected, impaired, prejudiced or
disturbed thereby.

 

Section 3.04.  Wherever
in this Supplemental Indenture the word “Indenture” is used without either
prefix, “Original” or “Supplemental,” such word was used intentionally to
include in its meaning both the Original Indenture and all indentures
supplemental thereto.

 

Section 3.05.  Wherever
in this Supplemental Indenture either of the parties hereto is named or
referred to, this shall be deemed to include the successors or assigns of such
party, and all the covenants and agreements in this Supplemental Indenture
contained by or on behalf of the Company or by or on behalf of the Trustee
shall bind and inure to the benefit of the respective successors and assigns of
such parties, whether so expressed or not.

 

16

 

Section 3.06.  (a) This Supplemental Indenture may be simultaneously executed in several
counterparts, and all said counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.

 

(b)   The Table of Contents and the
descriptive headings of the several Articles of this Supplemental Indenture
were formulated, used and inserted in this Supplemental Indenture for
convenience only and shall not be deemed to affect the meaning or construction
of any of the provisions hereof.

 

17

 

In
Witness Whereof, the
party of the first part has caused its corporate name and seal to be hereunto
affixed and this Supplemental Indenture to be signed by its Treasurer and
attested by its Executive Vice President, General Counsel and Corporate
Secretary for and in its behalf, and the party of the second part to evidence
its acceptance of the trust hereby created, has caused this Supplemental
Indenture to be signed by one of its authorized officers for and in its behalf,
all done as of the 1st day of April, 2005.

 

 

	
   

  	
  Louisville
  Gas And Electric Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Daniel K. Arbough

  	
   

  
	
   

  	
   

  	
  Daniel
  K. Arbough

  	
   

  
	
   

  	
   

  	
  Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Corporate Seal) 

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
  /s/
  John R. McCall

  	
   

  	
   

  
	
   

  	
  John
  R. McCall

  	
   

  	
   

  
	
   

  	
  Executive Vice President,

  	
   

  	
   

  
	
   

  	
  General Counsel and

  Corporate Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BNY
  Midwest Trust Company 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  L Garcia

  	
   

  
	
   

  	
   

  	
  Linda
  Garcia

  	
   

  
	
   

  	
   

  	
  Assistant Vice President

  	
   

  
								

 

 

	
  Commonwealth
  of

  	
  )

  	
   

  
	
  Kentucky

  	
  )

  	
  SS:

  
	
   

  	
  )

  	
   

  
	
  County
  of Jefferson

  	
  )

  	
   

  

 

Be
It Remembered that on
this 1st day of April, 2005, before me, a Notary Public duly
commissioned in and for the County and Commonwealth aforesaid, personally
appeared Daniel K. Arbough and John R. McCall, respectively, Treasurer
and Executive Vice President, General Counsel and Corporate Secretary of
Louisville Gas and Electric Company, a corporation organized and existing under
and by virtue of the laws of the Commonwealth of Kentucky, who are personally
known to me to be such officers, respectively, and who are personally known to
me to be the same persons who executed as officers the foregoing instrument of
writing, and such persons duly acknowledged before me the execution of the
foregoing instrument of writing to be their act and deed and the act and deed
of said corporation.

 

Witness
my hand and notarial seal
this 1st day of April, 2005.

 

	
   

  	
   

  	
  /s/
  Kathy L Wilson

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public

  	
   

  
	
   

  	
   

  	
  Kentucky, Commonwealth at Large

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Notarial
  Seal)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  My Commission Expires: 

  	
  Jan. 22, 2009

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KATHY L. WILSON

  
	
   

  	
   

  	
  Notary Public, State at
  Large, KY

  
	
   

  	
   

  	
  My Commission Expires:
  January 22, 2009

  
							

 

 

	
  State
  of Illinois

  	
  )

  	
  SS:

  
	
   

  	
  )

  	
   

  
	
  County
  of Cook

  	
  )

  	
   

  

 

Be
It Remembered that on
this 5th day of April, 2005, before me, a Notary Public duly
commissioned in and for the County and State aforesaid, personally appeared Linda Garcia, Assistant Vice President
of BNY Midwest Trust Company, a trust company organized and existing under and
by virtue of the laws of the State of Illinois, who is personally known to me
to be such officer and who is personally known to me to be the same person who
executed as an officer the foregoing instrument of writing, and such person
duly acknowledged before me the execution of the foregoing instrument of
writing to be such officer’s act and deed and the act and deed of said
corporation.

 

Witness
my hand and notarial seal
this 5th day of April, 2005.

 

	
   

  	
   

  	
  /s/
  T. Mosterd

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public in and for the County of

  Cook and State of Illinois

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Notarial
  Seal)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  My Commission Expires:

  	
  1/22/09

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OFFICIAL SEAL

  
	
   

  	
   

  	
  T. MOSTERD

  
	
   

  	
   

  	
  NOTARY PUBLIC – STATE OF
  ILLINOIS

  
	
   

  	
   

  	
  MY COMMISSION EXPIRES
  JANUARY 22, 2009

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  This Instrument Prepared
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  James Dimas

  	
   

  	
   

  
	
  LG&E Energy LLC

  	
   

  	
   

  
	
  220 W. Main Street

  	
   

  	
   

  
	
  Louisville, Kentucky  40202

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   /s/ Jim Dimas

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  James Dimas

  	
   

  	
   

  
	
   

  	
   

  	
  (502) 627-3712

  	
   

  	
   

  
										

 

 

SCHEDULE A

 

The following property
situated, lying and being in the County of Jefferson, Commonwealth of Kentucky,
to wit:

 

Beginning at the southwest
property corner of the Bettie C. Davis tract as described in Deed Book 3555,
Page 104, 94.09 feet left (east) of the Jefferson County Floodwall centerline
Station 784+86.45 thence North 35°11’21” East, along the west property line of
said tract 647.98 feet to a point 105.68 feet left (east) of said centerline
Station 777+47.73; thence South 14°12’10” East 221.56 feet, to a point 284.10
feet left (east) of said centerline Station 778+79.08; thence South 12°19’22”
West, 391.16 feet to a point 289.74 feet left (north) of said centerline
Station 789+21.91; thence South 41°56’20” East, 171.59 feet to a point 241.12
feet left (north) of said centerline Station 790+86.47; thence South 16°44’20”
East 170.52 to a point in the South property line of said tract 127.78 feet
left (north) of said centerline Station 792+13.87; thence North 54°48’32” West
along said south property line 621.71 feet back to the point of beginning.
Containing 3.992 acres more or less.

 

Being part of the same
property acquired from LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT by
LOUISVILLE GAS and ELECTRIC COMPANY by Deed recorded on April 8, 2004, in Deed
Book 8387, Page 471, in the Office of the Clerk of Jefferson County, Kentucky.Exhibit
10.1

 

LOUISVILLE/JEFFERSON
COUNTY METRO GOVERNMENT, KENTUCKY

 

AND

 

LOUISVILLE GAS
AND ELECTRIC COMPANY

 

A Kentucky
Corporation

 

*   * 
*  *  *

 

LOAN AGREEMENT
IN CONNECTION 

WITH POLLUTION CONTROL FACILITIES

 

*   *  
*   *   *

 

Dated as
February 1, 2005

 

*   *  
*   *   *

 

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

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE I DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.1.

  	
  USE OF DEFINED TERMS

  	
   

  
	
  SECTION 1.2.

  	
  INCORPORATION
  OF CERTAIN TERMS BY REFERENCE

  	
   

  
	
  SECTION 1.3.

  	
  ADDITIONAL DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II REPRESENTATIONS, WARRANTIES AND
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.1.

  	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS BY ISSUER

  	
   

  
	
  SECTION 2.2.

  	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS BY COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III COMPLETION AND OWNERSHIP OF
  PROJECT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.1.

  	
  COMPLETION AND
  EQUIPPING OF PROJECT

  	
   

  
	
  SECTION 3.2.

  	
  AGREEMENT AS TO
  OWNERSHIP OF PROJECT

  	
   

  
	
  SECTION 3.3.

  	
  USE OF PROJECT

  	
   

  
	
   

  	
   

  	
   

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

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.1.

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

  	
   

  
	
  SECTION 4.2.

  	
  PAYMENT
  AND DISCHARGE OF REFUNDED 1995 SERIES A BONDS

  	
   

  
	
  SECTION 4.3.

  	
  INVESTMENT
  OF BOND FUND AND REBATE FUND MONEYS

  	
   

  
	
  SECTION 4.4.

  	
  SPECIAL ARBITRAGE
  CERTIFICATIONS

  	
   

  
	
  SECTION 4.5.

  	
  OPINION OF BOND COUNSEL

  	
   

  
	
  SECTION 4.6.

  	
  FIRST MORTGAGE BONDS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V PROVISIONS FOR PAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.1.

  	
  LOAN PAYMENTS
  AND OTHER AMOUNTS PAYABLE

  	
   

  
	
  SECTION 5.2.

  	
  PAYMENTS ASSIGNED

  	
   

  
	
  SECTION 5.3.

  	
  TAXES AND OTHER
  GOVERNMENTAL CHARGES

  	
   

  
	
  SECTION 5.4.

  	
  OBLIGATIONS OF
  COMPANY UNCONDITIONAL

  	
   

  
	
  SECTION 5.5.

  	
  REBATE FUND

  	
   

  
	
  SECTION 5.6.

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

  	
   

  
	
  SECTION 5.7.

  	
  CANCELLATION OF
  2005 SERIES A BONDS

  	
   

  
	
   

  	
   

  	
   

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

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.1.

  	
  MAINTENANCE

  	
   

  
	
  SECTION 6.2.

  	
  INSURANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII SPECIAL COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.1.

  	
  NO
  WARRANTY OF CONDITION OR SUITABILITY BY ISSUER

  	
   

  
	
  SECTION 7.2.

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

  	
   

  
	
  SECTION
  7.3.

  	
  FINANCIAL STATEMENTS

  	
   

  
	
  SECTION
  7.4.

  	
  FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS

  	
   

  
	
  SECTION
  7.5.

  	
  ISSUER REPRESENTATIVE

  	
   

  
	
  SECTION
  7.6.

  	
  COMPANY REPRESENTATIVE

  	
   

  
	
  SECTION
  7.7.

  	
  FINANCING STATEMENTS

  	
   

  
	
  SECTION
  7.8.

  	
  COMPANY’S PERFORMANCE UNDER INDENTURE

  	
   

  
	
  SECTION
  7.9.

  	
  NEGATIVE PLEDGE

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII ASSIGNMENT; INDEMNIFICATION;
  REDEMPTION

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION
  8.1.

  	
  ASSIGNMENT

  	
   

  
	
  SECTION
  8.2.

  	
  RELEASE AND INDEMNIFICATION COVENANTS

  	
   

  
	
  SECTION
  8.3.

  	
  ASSIGNMENT OF INTEREST IN AGREEMENT
  BY ISSUER

  	
   

  
	
  SECTION
  8.4.

  	
  REDEMPTION OF 2005 SERIES A BONDS

  	
   

  
	
  SECTION
  8.5.

  	
  REFERENCE TO 2005 SERIES A BONDS
  INEFFECTIVE AFTER 2005 SERIES A BONDS PAID

  	
   

  

 

i

 

	
  ARTICLE IX EVENTS OF DEFAULT AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION
  9.1.

  	
  EVENTS OF DEFAULT DEFINED

  	
   

  
	
  SECTION
  9.2.

  	
  REMEDIES ON DEFAULT

  	
   

  
	
  SECTION
  9.3.

  	
  NO REMEDY EXCLUSIVE

  	
   

  
	
  SECTION
  9.4.

  	
  AGREEMENT TO PAY REASONABLE
  ATTORNEYS’ FEES AND EXPENSES

  	
   

  
	
  SECTION
  9.5.

  	
  WAIVER OF EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X PREPAYMENT OF LOAN

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.1.

  	
  OPTIONS TO PREPAY LOAN

  	
   

  
	
  SECTION 10.2.

  	
  ADDITIONAL OPTION TO PREPAY LOAN

  	
   

  
	
  SECTION 10.3.

  	
  OBLIGATIONS TO PREPAY LOAN

  	
   

  
	
  SECTION
  10.4.

  	
  NOTICE OF PREPAYMENT; REDEMPTION
  PROCEDURES

  	
   

  
	
  SECTION
  10.5.

  	
  RELATIVE POSITION OF THIS ARTICLE AND
  INDENTURE

  	
   

  
	
  SECTION 10.6.

  	
  CONCURRENT DISCHARGE OF FIRST
  MORTGAGE BONDS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION
  11.1.

  	
  TERM OF AGREEMENT

  	
   

  
	
  SECTION 11.2.

  	
  NOTICES

  	
   

  
	
  SECTION
  11.3.

  	
  BINDING EFFECT; BOND COUNSEL OPINIONS

  	
   

  
	
  SECTION 11.4.

  	
  SEVERABILITY

  	
   

  
	
  SECTION
  11.5.

  	
  AMOUNTS REMAINING IN BOND FUND,
  REBATE FUND AND PRIOR BOND FUND

  	
   

  
	
  SECTION
  11.6.

  	
  AMENDMENTS, CHANGES AND MODIFICATIONS

  	
   

  
	
  SECTION
  11.7.

  	
  EXECUTION IN COUNTERPARTS

  	
   

  
	
  SECTION
  11.8.

  	
  APPLICABLE LAW

  	
   

  
	
  SECTION 11.9.

  	
  CAPTIONS

  	
   

  
	
  SECTION 11.10.

  	
  NO PECUNIARY LIABILITY OF ISSUER

  	
   

  
	
  SECTION 11.11.

  	
  PAYMENTS DUE ON OTHER THAN BUSINESS
  DAYS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  A - DESCRIPTION OF PROJECT

  	
   

  

 

ii

 

LOAN
AGREEMENT IN CONNECTION 

WITH POLLUTION CONTROL FACILITIES

 

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

 

W
I  T  N  E  S  S  E  T  H:

 

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

 

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

 

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

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE I

DEFINITIONS

 

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

 

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

 

3

 

“Act”

“Agreement”

“Bond Counsel”

“Bond Fund”

“Business Day”

“Code”

“Company”

“Company Representative”

“Cost of Construction”

“Excess Earnings”

“First Mortgage Bonds”

“First Mortgage Indenture”

“First Mortgage Trustee”

“Governmental Obligations”

“Indenture”

“Interest Payment Date”

“Issuer”

“Issuer Representative”

“Loan”

“Net Proceeds”

“Paying Agent”

“Permitted Investments”

“Plans and Specifications”

“Pollution Control Facilities”

“Project”

“Project Site”

“Purchase Fund”

“Rebate Fund”

“Redemption Date”

“Redemption Demand”

“Refunded 1995 Series A Bonds”

“Release Date”

“2005 Series A Bonds”

“1995 Series A Indenture”

“Supplemental Indenture”

“Tender Agent”

“Trustee”

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

ARTICLE II

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

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

 

(a)           Issuer
is a public body corporate and politic duly created and existing as a de jure
political subdivision under the Constitution and laws of the Commonwealth of
Kentucky and, pursuant to the Act, Issuer, the de jure governmental successor
by operation of law to the Predecessor County, has the power and duty to issue
the 2005 Series A Bonds, to enter into this Agreement and the Indenture and the
transactions contemplated hereby and to carry out its obligations hereunder and
thereunder.  Issuer is not in default
under or in violation of the Constitution or any of the laws of the
Commonwealth of Kentucky relevant to the issuance of the 2005 Series A Bonds or
the consummation of the transactions contemplated hereby or in connection with
such issuance, and has been duly authorized to issue the 2005 Series A Bonds
and to execute and deliver this Agreement and the Indenture.  Issuer agrees that it will do or cause to be
done in timely manner all things necessary to preserve and keep in full force
and effect its existence, and to carry out the terms of this Agreement.

 

(b)           Issuer
agrees to loan funds derived from the sale of the 2005 Series A Bonds to
Company to provide for the refunding, payment and discharge of the outstanding
principal amount of the Refunded 1995 Series A Bonds, to the end that air
pollution be abated and controlled in the Commonwealth.

 

(c)           To
accomplish the foregoing, Issuer agrees to issue $40,000,000 aggregate
principal amount of its 2005 Series A Bonds following the execution of this
Agreement on such terms and conditions as are set forth in the Indenture.  The proceeds from the sale of the 2005 Series
A Bonds shall be applied exclusively and in whole to refund, pay and discharge
the outstanding principal amount of the Refunded 1995 Series A Bonds on or
prior to the 90th day after the date of issuance of the 2005 Series A Bonds.

 

(d)           Issuer
will cooperate with Company and take all actions necessary for Company to
comply with Section 2.2(n), (r) and (u) hereof and take other actions
reasonably requested by Company in furtherance of this Agreement.

 

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

 

(a)           Company
(i) is a corporation duly incorporated, validly existing and in good standing
under the laws of the Commonwealth of Kentucky, (ii) is duly qualified,
authorized and licensed to transact business in each jurisdiction wherein
failure to qualify would have a material adverse effect on the conduct of its
business and (iii) is not in violation of any provision of its Articles of
Incorporation, its By-Laws or any laws of the Commonwealth of Kentucky relevant

 

6

 

to the transactions contemplated hereby or in
connection with the issuance of the 2005 Series A Bonds.

 

(b)           Company
has full and complete legal power and authority to execute and deliver this
Agreement, the Supplemental Indenture and the First Mortgage Bonds to be issued
pursuant thereto, and has by proper corporate action duly authorized the
execution and delivery of this Agreement, the Supplemental Indenture and the
First Mortgage Bonds.

 

(c)           The
Project currently refinanced by application of the proceeds of the Refunded 1995
Series A Bonds was designed and constructed to collect, contain, reduce and
abate air pollution at the Project Site. 
The Project was and is necessary for the public health and welfare, and
has been designed for no material purpose except to control and abate atmospheric
pollutants and contaminants at the Project Site.  The Project constitutes air pollution control
facilities under Section 103(b)(4)(F) of the Internal Revenue Code of 1954, as
amended, and the Act.

 

(d)           All
of the proceeds of the 2005 Series A Bonds, exclusive of accrued interest, if
any, shall be used on or prior to the 90th day after the date of issuance of
the 2005 Series A Bonds exclusively and only to redeem, pay and discharge the
principal of the Refunded 1995 Series A Bonds, which currently refunded the
Original Bonds, not less than substantially all of the net proceeds of the Original
Bonds (i.e., at least 90% of the net proceeds thereof, including investment
income thereon) were used to finance the Cost of Construction of air pollution
control facilities, together with facilities functionally related and
subordinate to such facilities, and all of such air pollution control facilities
consist either of land or of property of a character subject to the allowance
for depreciation provided in Section 167 of the Code.

 

(e)           The
Project, as designed, has been previously certified by the Department for
Natural Resources and Environmental Protection of Kentucky (now the Natural
Resources and Environmental Protection Cabinet of the Commonwealth of Kentucky)
and the Air Pollution Control District of Jefferson County, Kentucky, the
agencies exercising jurisdiction in the premises, to be in furtherance of the
purpose of abating or controlling atmospheric pollutants or contaminants.

 

(f)            The
Project is of the type authorized and permitted by the Act, and the Cost of
Construction of the Project was not less than $40,000,000.

 

(g)           No
event of default, and no event of the type described in clauses (a) through (e)
of Section 9.1 hereof,  has
occurred and is continuing and no condition exists which, with the giving of
notice or the lapse of time, or both, would constitute an event of default or a
default under any agreement or instrument to which the Company is a party or by
which the Company is or may be bound or to which any of the property or assets
of the Company is or may be subject which would impair in any material respect
its ability to carry out its obligations under this Agreement, the Supplemental
Indenture, the First Mortgage Bonds or the transactions contemplated hereby or
thereby.  Neither the execution and
delivery of this Agreement, the Supplemental Indenture, the First Mortgage
Bonds, the consummation of the transactions contemplated hereby or by the
Indenture, nor the fulfillment of or compliance with the terms and conditions
hereof or thereof conflicts with or results in a breach of the terms,
conditions or provisions of any corporate restriction or any agreement or
instrument to which Company is now 

 

7

 

a party or by which it is bound, or
constitutes a default under any of the foregoing, or results in the creation or
imposition of any prohibited lien, charge or encumbrance whatsoever upon any of
the property or assets of Company under the terms of any instrument or
agreement.

 

(h)           Company
intends to continue to operate or cause the Project to be operated as air pollution
control facilities and facilities functionally related and subordinate to such
facilities until all of the 2005 Series A Bonds are paid and discharged.

 

(i)            No
portion of the proceeds of 2005 Series A Bonds will be invested at a yield in
excess of the yield on the 2005 Series A Bonds except (i) during any permitted
temporary period provided by the Code, (ii) proceeds of a reasonably required
reserve or replacement fund and (iii) as part of a minor portion of the
proceeds of the 2005 Series A Bonds, not in excess of the lesser of 5% of the
proceeds of the 2005 Series A Bonds or $100,000.  As used herein, “yield” shall have the
meaning assigned to it for purposes of Section 148 of the Code and applicable
tax regulations.

 

(j)            No
portion of the proceeds from the sale of the 2005 Series A Bonds will be deposited
to the account of any reasonably required reserve or replacement fund or used
to pay (i) any costs of issuance of the 2005 Series A Bonds or (ii) any
redemption premium or accrued interest on the Refunded 1995 Series A Bonds, but
such proceeds will be applied and used solely and exclusively to refund, pay
and discharge the outstanding principal amount of the Refunded 1995 Series A
Bonds on or prior to the 90th day after the issuance of the 2005 Series A
Bonds.

 

(k)           Company
will provide any additional moneys, including investment proceeds of the 2005 Series
A Bonds, required for the payment and discharge of the Refunded 1995 Series A
Bonds, payment of redemption premium, if any, and accrued interest in respect
thereto and payment of all underwriting discount and costs of issuance of the 2005
Series A Bonds.  Any investment proceeds
of the 2005 Series A Bonds shall be used exclusively to pay interest or
redemption premium due, if any, on the Refunded 1995 Series A Bonds on the
Redemption Date.

 

(l)            Company
will cause no investment of 2005 Series A Bond proceeds to be made and will
make no other use of or omit to take any action with respect to the proceeds of
the 2005 Series A Bonds or any funds reasonably expected to be used to pay the 2005
Series A Bonds which will cause the 2005 Series A Bonds or any of them to be
arbitrage bonds within the meaning of Section 148 of the Code or would
otherwise result in the loss or impairment of the exclusion of the interest on
such 2005 Series A Bonds from gross income for federal income tax purposes.

 

(m)          The
average maturity of the 2005 Series A Bonds does not exceed one hundred twenty
percent (120%) of the average reasonably expected remaining economic life (as
of the date of issuance of the 2005 Series A Bonds) of the Pollution Control Facilities
refinanced by the proceeds of the 2005 Series A Bonds.

 

(n)           Company
will provide all information requested by the Issuer necessary to evidence
compliance with the requirements of the Code, including the information in
United States Internal Revenue Service Form 8038 filed by Issuer with respect
to the 2005 Series A 

 

8

 

Bonds and the air pollution control facilities
constituting the Project, and such information will be true and correct in all
material respects.

 

(o)           Within
the meaning of Section 149 of the Code, no portion of the payment of the
principal or interest on the 2005 Series A Bonds or the Refunded 1995 Series A
Bonds was or shall be guaranteed directly or indirectly by the United States or
any agency or instrumentality thereof.

 

(p)           All
of the proceeds of the Refunded 1995 Series A Bonds have been fully expended
and the Project has been completed and placed in service.  All of the actual Cost of Construction of the
Project represents amounts paid or incurred which were chargeable to the
capital account of the Project or would be so chargeable either with a proper
election by the Company or but for a proper election by the Company to deduct
such amounts.  Substantially all (i.e. at
least 90%) of the net allocable proceeds of the sale of the Original Bonds
(including investment income therefrom), were used to finance Cost of
Construction of the Project as described above, pay costs and expenses of
issuing the Original Bonds, within then applicable Code limits, and pay
interest and carrying charges on the Original Bonds during the period of
construction of the Project and prior to its in-service date.

 

(q)           All
of the depreciable properties which were taken into account in determining the
qualifying costs of the Project constitute properties either (i) used for the control,
containment, reduction and abatement of atmospheric pollutants and contaminants
or (ii) facilities which are functionally related and subordinate to such facilities
constituting the Project.  All of such
functionally related and subordinate facilities are of a size and character
commensurate with the character and size of the air pollution control facilities
constituting the Project.

 

(r)            The
Company will cause the Issuer to comply in all respects with the requirements
of Section 148 of the Code in respect of the rebate of Excess Earnings with
respect to the 2005 Series A Bonds to the United States of America.

 

(s)           None
of the proceeds of the 2005 Series A Bonds will be applied and none of the
proceeds of the Original Bonds were applied to provide any: (i) working
capital, (ii) office space (other than office space located on the premises of
the Project where not more than a de minimis amount of the functions to be
performed are not directly related to the day-to-day operations of the Project),
(iii) airplane, (iv) skybox or other private luxury box, (v) health club
facility, (vi) facility primarily used for gambling or (vii) store, the
principal business of which is the sale of alcoholic beverages for consumption
off premises.

 

(t)            Less
than twenty-five percent (25%) of the net proceeds of the Original Bonds were
used directly or indirectly to acquire land or any interest therein and no
portion of such land, if acquired, was or is to be used for farming
purposes.  No portion of the proceeds of
the Original Bonds was used to acquire existing property or any interest
therein with respect to which the Company was not the first user for federal
income tax purposes.

 

(u)           Upon
the date of issuance of the 2005 Series A Bonds, the Company will have caused
the Issuer to comply with the public approval requirements of Section 147 of
the Code and at or following the issuance of the 2005 Series A Bonds the
Company will cause the Issuer 

 

9

 

to comply with the information reporting
requirements of Section 149 of the Code by the filing of Internal Revenue
Service Form 8038 with the United States Internal Revenue Service.

 

(v)           All
of the documents, instruments and written information furnished by Company on
behalf of Company to Issuer or Trustee in connection with the issuance of the
Bonds are true and correct in all material respects as of the date of delivery
thereof and did not, as of the date of delivery thereof, omit or fail to state
any material facts necessary to be stated therein to make the information
provided not misleading.

 

(w)          The
Refunded 1995 Series A Bonds were issued on April 18, 1995.

 

(x)            No
construction, reconstruction or acquisition of the Project was commenced prior
to the taking of official action by the Predecessor County with respect thereto
except for preparation of plans and specifications and other preliminary
engineering work.

 

(y)           Acquisition,
construction and installation of the Project has been accomplished and the Project
is being utilized substantially in accordance with the purposes of the Project
and in conformity with all applicable zoning, planning, building, environmental
and other applicable governmental regulations and all permits, variances and
orders issued or granted pursuant thereto, which permits, variances and orders
have not been withdrawn or otherwise suspended, and consistently with the Act.

 

(z)            The
Company has used, is currently using and presently intends to use or operate
the Project in a manner consistent with the purposes of the Project and the Act
until the date on which the 2005 Series A Bonds have been fully paid and knows
of no reason why the Project will not be so operated

 

(aa)         The
proceeds derived from the sale of the 2005 Series A Bonds (other than any
accrued interest thereon) will be used exclusively and solely to refund the
principal of the Refunded 1995 Series A Bonds. 
The principal amount of the 2005 Series A Bonds does not exceed the
principal amount of the Refunded 1995 Series A Bonds.  The redemption of the outstanding principal
amount of the Refunded 1995 Series A Bonds with such proceeds of the 2005 Series
A Bonds will occur not later than 90 days after the date of issuance of the 2005
Series A Bonds.  Any earnings derived
from the investment of such proceeds of the 2005 Series A Bonds will be fully
needed and used on such redemption date to pay a portion of the interest
accrued and payable on the Refunded 1995 Series A Bonds on such date.

 

(bb)         It
is not anticipated, as of the date hereof, that there will be created any “replacement
proceeds”, within the meaning of Section 1.148-1(c) of the Treasury
Regulations, with respect to the 2005 Series A Bonds; however, in the event
that any such replacement proceeds are deemed to have been created, such
amounts will be invested in compliance with Section 148 of the Code.

 

(cc)         On
the date of issuance and delivery of the Original Bonds, the Company reasonably
expected that at least 85% of the proceeds of the Original Bonds would be used
to carry out the governmental purposes of such issue within the 3-year period
beginning on the date such issue was issued, which was accomplished and none of
the proceeds of such issue, if any, 

 

10

 

was invested in nonpurpose investments having
a substantially guaranteed yield for 3 years or more.

 

(dd)         Company
will use its best efforts to maintain at least two ratings on the 2005 Series A
Bonds.

 

(ee)         Company
covenants to perform and observe all provisions of the Indenture required to be
performed or observed by it.

 

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

 

ARTICLE
III

COMPLETION AND OWNERSHIP OF PROJECT

 

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

 

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

 

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

 

ARTICLE IV

 

ISSUANCE OF 2005 SERIES A BONDS; APPLICATION OF PROCEEDS; 

COMPANY TO ISSUE FIRST MORTGAGE BONDS

 

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

 

11

 

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

 

(a)           Into
the Bond Fund, a sum equal to the accrued interest, if any, to be paid by the
initial purchasers of the 2005 Series A Bonds.

 

(b)           Into
the Prior Bond Fund held by the Prior Trustee, for the benefit of and payment
of the Refunded 1995 Series A Bonds, an amount not less than all of the balance
of all such proceeds, being the principal amount of the 2005 Series A Bonds.

 

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

 

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

 

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

 

12

 

Section 4.4.            Special
Arbitrage Certifications.

 

(a)           Company
covenants and agrees that it, will not take, authorize or permit any action to
be taken and has not taken or authorized or permitted any action to be taken
which results or would result in interest paid on any of the 2005 Series A
Bonds being included in gross income of any owner thereof for purposes of
federal income taxation (other than an owner who is a “substantial user” of the
Project or a “related person” within the meaning of Section 147(a) of the Code)
or adversely affects the validity of the 2005 Series A Bonds.

 

(b)           Company
warrants, represents and certifies to Issuer that the proceeds of the 2005 Series
A Bonds will not be used in any manner that would cause the 2005 Series A Bonds
to be “arbitrage bonds” under Sections 103(b)(2) and 148 and other applicable
sections of the Code.  To the best
knowledge and belief of Company, there are no facts, estimates or circumstances
that would materially change the foregoing conclusion.

 

(c)           Company
hereby covenants that it will at all times comply and cause Issuer to comply
with the provisions of Section 148 and other applicable sections of the Code
and will restrict the use of the proceeds of the 2005 Series A Bonds, in such
manner and to such extent, if any, as may be necessary, and remit Excess
Earnings with respect to all of the 2005 Series A Bonds, if any, to the United
States of America pursuant to Section 148(f)(2) of the Code and carry out such
actions so that the 2005 Series A Bonds will not constitute “arbitrage bonds”
under Sections 103(b)(2) and 148 of the Code. 
An officer or officers of Issuer having responsibility with respect to
the issuance of the 2005 Series A Bonds is or are hereby authorized and
directed to give an appropriate certificate of Issuer, for inclusion in the
transcript of proceedings for the 2005 Series A Bonds, setting forth the
reasonable expectations of Issuer regarding the amount and use of the proceeds
of the 2005 Series A Bonds and the facts, estimates and circumstances on which
they are based and related matters, all as of the date of delivery of and
payment for the 2005 Series A Bonds pursuant to said Section 148 of the
Code.  Company shall provide the Issuer,
and Issuer’s certificate may be expressly based on, a certificate of Company
setting forth the facts, estimates and circumstances and reasonable
expectations of Company on the date of delivery of and payment for the 2005 Series
A Bonds regarding the amount and use of the proceeds of the 2005 Series A Bonds
and related matters.  In the event any
such representation of Company relied upon by the Issuer is untrue or
inaccurate and Issuer thereby suffers costs or damages, Company shall indemnify
Issuer for any such costs or damages.

 

(d)           Consistent
with the foregoing, Company covenants and certifies to the Issuer and to and
for the benefit of the purchasers of the 2005 Series A Bonds, that no use will
be made of the proceeds of the sale of the 2005 Series A Bonds which would
cause the 2005 Series A Bonds to be classified as “arbitrage bonds” within the
meaning of Sections 103(b)(2) and 148 of the Code and that Company and Issuer
will, after issuance of the 2005 Series A Bonds, comply with the provisions of
the Code at all times, including after the 2005 Series A Bonds are discharged,
to the extent Excess Earnings with respect to the 2005 Series A Bonds are
required to be rebated to the United States of America pursuant to Section
148(f)(2) of the Code.  Pursuant to such
covenant, Issuer and Company obligate themselves throughout the term of this
Agreement and thereafter not to violate the requirements of Section 148 of the
Code.

 

13

 

(e)           Company
warrants, represents and certifies to Issuer that the proceeds of the Refunded 1995
Series A Bonds were applied and invested in compliance with the current requirements
of Section 149(g) of the Code and that consequently the 2005 Series A Bonds
will not be “hedge bonds” under such Section 149(g) of the Code.

 

(f)            Company
hereby covenants and agrees that it will at all times comply with the
provisions of Section 148, including Section 148(f) of the Code and with Section
6.06 of the Indenture.  Specifically,
Company shall carry out, do and perform all acts stipulated to be performed by
Company pursuant to such Section 6.06 of the Indenture.  Company shall further undertake to assure and
cause rebate payments to be calculated and made to the United States of America
in accordance with Section 148(f)(2) of the Code from moneys on deposit in the
Rebate Fund from time to time after the end of each Computation Period, as defined
in the Indenture, and following discharge of the 2005 Series A Bonds.  Company also covenants to take all necessary
acts and steps as required to cause Issuer to comply with the provisions of Section
7.03 of the Indenture.

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

ARTICLE V

PROVISIONS FOR PAYMENT

 

Section 5.1.            Loan
Payments and Other Amounts Payable.

 

(a)           Company
hereby covenants and agrees to repay the Loan, as follows:  on or before any Interest Payment Date for
the 2005 Series A Bonds or any other date that any payment of interest,
premium, if any, purchase price or principal is required to be made in respect
of the 2005 Series A Bonds at the times specified in accordance with the more
specific provisions and requirements of the Indenture, until the principal of,
premium, if any, and interest on the 2005 Series A Bonds shall have been fully
paid or provision for the payment thereof shall have been made in accordance
with the Indenture, it will pay to the Trustee, for disbursement by the
Trustee, as Paying Agent, or for disbursement by any Paying Agent such sums
which will enable the Paying Agent to pay the amounts payable on such date, in
immediately available funds, as principal of (whether at purchase, maturity or
upon redemption or acceleration or otherwise), premium, if any, and interest on
the 2005 Series A Bonds as provided in the Indenture; provided that such
payments by Company to enable the Tender Agent to pay the purchase price of
Bonds shall be made within the times required by Section 3.05 of the
Indenture.

 

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

 

15

 

(b)           Company
will also pay the reasonable expenses of the Issuer related to the issuance of
the 2005 Series A Bonds and incurred upon the request of Company.

 

(c)           Company
will also pay the agreed upon fees and expenses of Trustee (including those
referred to in Section 10.02 of the Indenture), the Bond Registrar, the
Market Agent, the Auction Agent, the Tender Agent and the Paying Agent, as may
be applicable, under the Indenture and all other amounts which may be payable
to the Trustee, the Bond Registrar, the Paying Agent, the Market Agent, the
Auction Agent and the Tender Agent, as applicable from time to time, under the
Indenture, such amounts to be paid directly to Trustee, the Bond Registrar, the
Market Agent, the Auction Agent, the Paying Agent and Tender Agent for their
respective own accounts as and when such amounts become due and payable.

 

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

 

(d)           The
Company covenants, for the benefit of the Bondholders, to pay or cause to be
paid, to the Tender Agent for deposit in the Purchase Fund, such amounts as
shall be necessary to enable the Tender Agent to pay the purchase price of 2005
Series A Bonds delivered to it for purchase, all as more particularly described
in Sections 3.03 and 3.05 of the Indenture, and, in that regard, it will
maintain an account with the Tender Agent and will pay in immediately available
funds, a sum which will enable the Tender Agent to pay the purchase price of 2005
Series A Bonds delivered to it for purchase, as provided in the Indenture.

 

(e)           In
the event Company should fail to make any of the payments required in this Section
5.1, the item or installment so in default shall continue as an obligation
of Company until the amount in default shall have been fully paid, and Company
agrees to pay the same with interest thereon, to the extent permitted by law,
from the date when such payment was due to the date of payment.

 

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

 

16

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

ARTICLE VI

MAINTENANCE; DAMAGE, DESTRUCTION AND 

CONDEMNATION; USE OF NET PROCEEDS; INSURANCE

 

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

 

18

 

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

 

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

 

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

 

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

 

ARTICLE
VII

SPECIAL COVENANTS

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

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

 

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

 

20

 

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

 

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

 

Section 7.9.            Negative Pledge.

 

(a)           The Company agrees
that, subsequent to the Release Date (as defined in the Indenture) and so long
as any 2005 Series A Bonds remain outstanding, the Company will not issue,
assume or guarantee any Debt secured by any mortgage, security interest, pledge
or lien (herein referred to as a “mortgage”) of or upon any Operating Property
of the Company, whether owned at the date of the Indenture or thereafter
acquired, and will not permit to exist any Debt secured by a mortgage on any Operating
Property created on or prior to the Release Date, without in any such case
effectively securing, on the later to occur of the issuance, assumption or
guaranty of any such Debt or the Release Date, the 2005 Series A Bonds equally
and ratably with such Debt; provided, however, that the foregoing restriction
shall not apply to Debt secured by any of the following:

 

(i)            mortgages
on any property existing at the time of acquisition thereof;

 

(ii)           mortgages
on property of a corporation existing at the time such corporation is merged
into or consolidated with the Company, or at the time of a sale, lease or other
disposition of the properties of such corporation or a division thereof as an
entirety or substantially as an entirety to the Company, provided that such
mortgage as a result of such merger, consolidation, sale, lease or other
disposition is not extended to property owned by the Company immediately prior
thereto;

 

(iii)          mortgages
on property to secure all or part of the cost of acquiring, substantially
repairing or altering, constructing, developing or substantially improving such
property, or to secure indebtedness incurred to provide funds for any such
purpose or for reimbursement of funds previously expended for any such purpose,
provided such mortgages are created or assumed contemporaneously with, or
within 18 months after, such acquisition or completion of substantial repair or
alteration, construction, development or substantial improvement or within six
months thereafter pursuant to a commitment for financing arranged with a lender
or investor within such 18 month period;

 

21

 

(iv)          mortgages
in favor of the United States of America or any State thereof, or any
department, agency or instrumentality or political subdivision of the United
States of America or any state thereof, or for the benefit of holders of
securities issued by any such entity, to secure any Debt incurred for the
purpose of financing all or any part of the purchase price or the cost of
substantially repairing or altering, constructing, developing or substantially
improving the property subject to such mortgages; or

 

(v)           any
extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any mortgage referred to in the
foregoing clauses (1) to (4), inclusive; provided, however, that the principal
amount of indebtedness secured thereby and not otherwise authorized by said
clauses (1) to (4), inclusive, shall not exceed the principal amount of
indebtedness, plus any premium or fee payable in connection with any such
extension, renewal or replacement, so secured at the time of such extension,
renewal or replacement.

 

(b)           Notwithstanding the
provisions of Section 7.9(a) from and after the Release Date and so
long as any 2005 Series A Bonds remain outstanding, the Company may issue,
assume or guarantee Debt, or permit to exist Debt, secured by mortgages which
would otherwise be subject to the restrictions of this Section up to an
aggregate principal amount that, together with the principal amount of all
other Debt of the Company secured by mortgages (other than mortgages permitted
by Section 7.9(a) that would otherwise be subject to the foregoing
restrictions) does not at the time exceed the greater of 10% of Net Tangible
Assets or 10% of Capitalization.

 

(c)           Notwithstanding the
provisions of Section 7.9(a) and Section 7.9(b), the
Company will not, from and after the Release Date, issue, assume, guarantee or
permit to exist any debt of the Company secured by a mortgage, the creditor of
which controls, is controlled by, or is under common control with, the Company.

 

(d)           If at any time the
Company shall issue, assume or guarantee any Debt secured by any mortgage and
if Section 7.9(a) requires that the 2005 Series A Bonds be secured
equally and ratably with such Debt, the Company will promptly execute, at its
expense, any instruments necessary to so equally and ratably secure such 2005
Series A Bonds.

 

ARTICLE VIII

ASSIGNMENT; INDEMNIFICATION; REDEMPTION

 

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

 

(a)           No assignment (other
than pursuant to Section 7.2 hereof) shall relieve Company from
primary liability for any of its obligations hereunder, and in the event of any
such assignment Company shall remain primarily liable for payments of the
amounts specified in Section 5.1 hereof and for performance and
observance of the other covenants or agreements on its part herein provided to
be performed and observed to the same extent as though no assignment had been
made;

 

22

 

(b)           The assignee shall
assume the obligations of Company hereunder to the extent of the interest
assigned;

 

(c)           Company shall, within
thirty days after the delivery thereof, furnish or cause to be furnished to
Issuer and to Trustee a true and complete copy of each such assignment and
assumption of obligation; and

 

(d)           prior to such
assignment, the Company shall have obtained an opinion of Bond Counsel to the
effect that such assignment will not adversely affect the exclusion of interest
on the 2005 Series A Bonds from gross income for Federal income tax purposes
under Section 103(a) of the Code.

 

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

 

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

 

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

 

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

 

23

 

ARTICLE IX

EVENTS OF DEFAULT AND REMEDIES

 

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

 

(a)           Failure by the Company
to pay any amount required to be paid under subsections (a) and (d) of Section 5.1
hereof which results in failure to pay principal of, premium or interest on or
the purchase price of the 2005 Series A Bonds, and such failure shall cause an
event of default under the Indenture.

 

(b)           Failure by Company to
observe and perform any covenant, condition or agreement on its part to be
observed or performed, other than as referred to in subsection (a) of this
Section, for a period of thirty days after written notice, specifying such
failure and requesting that it be remedied, is given to Company by Issuer or
Trustee, unless Issuer and Trustee shall agree in writing to an extension of
such time prior to its expiration; provided, however, if the failure stated in
the notice cannot be corrected within the applicable period, Issuer and Trustee
will not unreasonably withhold their consent to an extension of such time if
such failure is capable of being cured and corrective action is instituted by
Company within the applicable period and is being diligently pursued.

 

(c)           All bonds outstanding
under the First Mortgage Indenture shall, if not already due, have become
immediately due and payable whether by declaration of the First Mortgage
Trustee or otherwise, and such acceleration shall not have been rescinded or
annulled by the First Mortgage Trustee.

 

(d)           An involuntary
proceeding shall be commenced or an involuntary petition shall be filed in a
court of competent jurisdiction seeking (i) relief in respect of Company, or of
a substantial part of the property or assets of Company, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
federal or state bankruptcy, insolvency, receivership or similar law, (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for Company or for a substantial part of the property or assets of
Company or (iii) the winding-up or liquidation of Company; and such proceeding
or petition shall continue undismissed or unstayed for 90 days or an order or
decree approving or ordering any of the foregoing shall be entered.

 

(e)           Company shall (i)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other federal or state bankruptcy, insolvency, receivership or similar law,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
(d) above, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for Company
or for a substantial part of the property or assets of Company, (iv) file an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors, (vi)
become unable, admit in writing its inability or fail generally to 

 

24

 

pay its debts
as they become due or (vii) take any action for the purpose of effecting any of
the foregoing.

 

(f)            The occurrence of an
Event of Default under the Indenture.

 

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

 

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

 

(a)           By written notice to
Company, the Trustee, on behalf of the Issuer at the direction of the Bond
Insurer, may declare an amount equal to the principal and accrued interest on
the 2005 Series A Bonds then Outstanding, as defined in the Indenture, to be
immediately due and payable under this Agreement, whereupon the same shall
become immediately due and payable.

 

(b)           The Trustee, on behalf
of the Issuer at the direction of the Bond Insurer, may have access to and
inspect, examine and make copies of the books and records and any and all
accounts, data and income tax and other tax returns of Company.

 

(c)           The Trustee, on behalf
of the Issuer at the direction of the Bond Insurer, may take whatever action at
law or in equity may appear necessary or desirable to collect the amounts then
due and thereafter to become due, or to enforce performance and observance of
any obligation, agreement or covenant of Company under this Agreement,
including, until the Release Date, any remedies available in respect of the
First Mortgage Bonds.

 

25

 

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

 

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

 

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

 

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

 

26

 

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

 

ARTICLE X

PREPAYMENT OF LOAN

 

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

 

(a)           If in the judgment of
Company, unreasonable burdens or excessive liabilities shall have been imposed
after the issuance of the 2005 Series A Bonds upon Company with respect to the
Project or the operation thereof, including without limitation federal, state
or other ad valorem, property, income or other taxes not imposed on the date of
this Agreement other than ad valorem taxes presently levied upon privately
owned property used for the same general purpose as the Project;

 

(b)           If the Project or a
portion thereof or other property of Company in connection with which the
Project is used shall have been damaged or destroyed to such an extent so as,
in the judgment of the Company, to render the Project or other property of
Company in connection with which the Project is used unsatisfactory to Company
for its intended use and such condition shall continue for a period of six
months;

 

(c)           There shall have
occurred condemnation of all or substantially all of the Project or the taking
by eminent domain of such use or control of the Project or other property of
Company in connection with which the Project is used so as, in the judgment of
the Company, to render the Project or other property of Company in connection
with which the Project is used unsatisfactory to Company for its intended use;

 

27

 

(d)           In the event changes,
which the Company cannot reasonably control, in the economic availability of
materials, supplies, labor, equipment, or other properties or things necessary
for the efficient operation of either of the Mill Creek and Cane Run Generating
Stations of the Company shall have occurred which, in the judgment of the
Company, render the continued operation of either of the Mill Creek or Cane Run
Generating Stations or any generating unit at either such station uneconomical;
or changes in circumstances, after the issuance of the 2005 Series A Bonds
including but not limited to changes in clean air or other air pollution
control requirements, shall have occurred such that the Company shall determine
that use of the Project is no longer required or desirable;

 

(e)           In the event this
Agreement shall become void or unenforceable or impossible of performance by
reason of any changes in the Constitution of the Commonwealth of Kentucky or
the Constitution of the United States of America or by reason of legislative or
administrative action, whether state or federal, or any final decree, judgment
or order of any court or administrative body, whether state or federal; or

 

(f)            A final order or
decree of any court or administrative body after the issuance of the 2005
Series A Bonds shall require the Company to cease a substantial part of its
operations at the Mill Creek and Cane Run Generating Stations to such extent
that the Company will be prevented from carrying on its normal operations at
such location for a period of six months.

 

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

 

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

 

28

 

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

 

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

 

29

 

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

 

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

 

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

 

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

 

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

 

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

 

30

 

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

 

ARTICLE XI

 

MISCELLANEOUS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

31

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

32

 

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

 

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

 

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

 

 

(remainder of page left blank
intentionally)

 

33

 

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

 

	
   

  	
  LOUISVILLE/JEFFERSON
  COUNTY

  METRO GOVERNMENT, KENTUCKY

  
	
   

  	
   

  
	
   

  	
   

  
	
  (SEAL)

  	
   

  
	
   

  	
  By 

  	
  /s/ JERRY E. ABRAMSON

  	
   

  
	
   

  	
   

  	
  JERRY E. ABRAMSON

  	
   

  
	
   

  	
   

  	
  Mayor

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
  APPROVED AS
  TO FORM AND LEGALITY:

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Kathleen J. Herron

  	
   

  	
  /s/ James T. Carey

  	
   

  
	
  KATHLEEN J. HERRON

  	
   

  	
  JAMES T. CAREY

  	
   

  
	
  Metro Council Clerk

  	
   

  	
  Assistant County Attorney

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LOUISVILLE
  GAS AND ELECTRIC

  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
  (SEAL)

  	
   

  
	
   

  	
  By 

  	
  /s/ Daniel K. Arbough

  	
   

  
	
   

  	
   

  	
  DANIEL K. ARBOUGH

  	
   

  
	
   

  	
   

  	
  Treasurer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ John R. McCall

  	
   

  	
   

  
	
  JOHN R. McCALL

  Secretary

  	
   

  	
   

  
						

 

 

	
  COMMONWEALTH OF KENTUCKY

  	
  )

  	
   

  
	
   

  	
  )  SS

  	
   

  
	
  COUNTY OF JEFFERSON

  	
  )

  	
   

  

 

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

 

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

 

 

	
   

  	
  /s/
  Marsha F. Martin

  
	
   

  	
  Notary
  Public

  State at Large, Kentucky

  

 

	
  COMMONWEALTH OF KENTUCKY

  	
  )

  	
   

  
	
   

  	
  )  SS

  	
   

  
	
  COUNTY OF JEFFERSON

  	
  )

  	
   

  

 

 

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

 

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

(SEAL)

 

 

	
   

  	
  /s/
  Kathy L Wilson

  
	
   

  	
  Notary
  Public

  State at Large, Kentucky

  
	
   

  	
   

  
	
   

  	
  KATHY
  L WILSON

  
	
   

  	
  Notary
  Public, State at Large, KY

  
	
   

  	
  My
  Commission Expires: January 22, 2009

  

 

This Instrument Prepared by the

Undersigned, Attorney at Law of

Harper, Ferguson & Davis

(Division of Ogden Newell & Welch PLLC)

500 West Jefferson Street, 17th Floor

Louisville, Kentucky 40202

 

 

	
   

  	
  /s/ Spencer
  E. Harper, JR.

  	
   

  
	
   

  	
  SPENCER
  E. HARPER, JR.

  	
   

  

 

 

EXHIBIT A 

DESCRIPTION OF PROJECT

 

 

EXHIBIT NO. 1

 

Description of Air Pollution Control Facilities

to be Acquired and Constructed by Application of the

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

Pollution Control Revenue Bonds, 1985
Series A

(Louisville Gas and Electric Company Project)”

 

MILL CREEK AND CANE RUN GENERATING STATIONS

 

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

 

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

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