Document:

EXHIBIT 4.1

 

 

Supplemental Indenture

 

Dated June 15, 2005

 

 

KENTUCKY UTILITIES COMPANY

 

TO

 

U.S. BANK NATIONAL ASSOCIATION

AND RICHARD PROKOSCH,

AS TRUSTEES

 

 

(SUPPLEMENTAL TO THE INDENTURE OF MORTGAGE OR DEED OF
TRUST DATED MAY 1, 1947, AS AMENDED, HERETOFORE EXECUTED BY KENTUCKY
UTILITIES COMPANY TO CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST COMPANY OF
CHICAGO AND EDMOND B. STOFFT, AS TRUSTEES.)

 

 

(PROVIDING FOR FIRST MORTGAGE BONDS,

POLLUTION CONTROL SERIES NO. 18

DUE JUNE 1, 2035)

 

 

 

THIS SUPPLEMENTAL
INDENTURE, dated June 15, 2005, made and entered into by and between
KENTUCKY UTILITIES COMPANY, a corporation organized and existing under the laws
of the Commonwealths of Kentucky and Virginia (hereinafter commonly referred to
as the “Company”), and U.S. BANK NATIONAL ASSOCIATION, a national banking
association having its office or place of business in the City of Chicago, Cook
County, State of Illinois, formerly named First Trust of Illinois, National
Association, successor to Bank of America Illinois, formerly named Continental
Bank, National Association and Continental Illinois National Bank and Trust
Company of Chicago (hereinafter commonly referred to as the “Trustee”), and
Richard Prokosch (successor Co-Trustee), of the City of St. Paul, County of
Ramsey, State of Minnesota, as Trustees under the Indenture of Mortgage or Deed
of Trust dated May 1, 1947, as modified and amended by the several
indentures supplemental thereto heretofore executed by and between the Company
and the Trustees from time to time under said Indenture of Mortgage or Deed of
Trust; said Indenture of Mortgage or Deed of Trust, as so modified and amended,
being hereinafter commonly referred to as the “Indenture”; and said Trustees
under the Indenture being hereinafter commonly referred to as the “Trustees” or
the “Trustees under the Indenture”; Witnesseth:

 

WHEREAS, the Company, by
resolution of its Board of Directors or the Pricing Committee thereof duly
adopted, has determined to issue forthwith an additional series of its bonds to
be secured by the Indenture, as hereby modified and amended, such bonds to be
known and designated as First Mortgage Bonds, Pollution Control Series No. 18
(hereinafter sometimes referred to as the “bonds of Series No. 18” or
the “bonds of said Series”), and to be authorized, authenticated and issued
only as registered bonds without coupons; and

 

WHEREAS, the County of Carroll in the Commonwealth of
Kentucky (the “County”) has agreed to issue $13,266,950 in principal amount of
its Environmental Facilities Revenue Bonds, 2005 Series A (Kentucky
Utilities Company Project) (the “Revenue Bonds”), which will be issued pursuant
to the provisions of the Indenture of Trust dated as of May 1, 2005 (the “County
Indenture”), between the County and Deutsche Bank Trust Company Americas, as
Trustee, Paying Agent and Bond Registrar (said Trustee or any successor trustee
under the County Indenture, hereinafter mentioned, being hereinafter referred
to as the “County Trustee”); and

 

WHEREAS, the proceeds of the Revenue Bonds (other than
any accrued interest, if any, thereon) will be loaned by the County to the
Company pursuant to the provisions of the Loan Agreement, dated as of May 1,
2005, between the County and the Company (the “Agreement”), to finance a
portion of the costs of construction, acquisition, installation and equipping
of certain solid waste disposal facilities to serve the Ghent Generating
Station of the Company, which facilities
are hereinafter sometimes referred to as the “Project,” which Project is located
in the County 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 County to the County Trustee in order
to secure the payment of the Revenue

 

 

Bonds; and in order to further
secure the payment of the Revenue Bonds, the Company desires to issue its bonds
of Series No. 18 to the County Trustee as provided in the Agreement;
and

 

WHEREAS, the Company
desires, in accordance with the provisions of Article I, Section 6(e) of
Article II and Article XVI of the Indenture, to execute this
supplemental indenture for the purpose of creating and authorizing its bonds of
Series No. 18 and
modifying or amending certain provisions of the Indenture in the particulars
and to the extent hereinafter in this supplemental indenture specifically
provided; and

 

WHEREAS, the execution
and delivery by the Company of this supplemental indenture have been duly
authorized by the Board of Directors of the Company or the Pricing Committee
thereof, and the Company has requested, and hereby requests, the Trustees to
enter into and join with the Company in the execution and delivery of this
supplemental indenture; and

 

WHEREAS, the bonds of Series No. 18 are to be authorized,
authenticated and issued only in the form of registered bonds without coupons,
and each of such bonds shall be substantially in the following form, to wit:

 

(Form of face of bond of Series No. 18)

 

This bond is
nontransferable except as may be required to effect a transfer to any successor
trustee under the Indenture of Trust dated as of May 1, 2005, hereinafter
referred to.

 

	
  No.                             

  	
   

  	
   

  	
  $                                                 

  

 

Kentucky Utilities Company

First Mortgage Bond, Pollution Control Series No. 18

Due June 1, 2035

 

Kentucky Utilities
Company, a Kentucky and Virginia corporation (hereinafter referred to as the “Company”),
for value received, hereby promises to pay to Deutsche Bank Trust Company
Americas, as Trustee under the Indenture of Trust (the “County Indenture”)
dated as of May 1, 2005, from the County of Carroll, Kentucky (the “County”)
to Deutsche Bank Trust Company Americas, or any successor trustee under the
County Indenture (the “County Trustee”), the principal sum of Thirteen Million
Two Hundred Sixty-Six Thousand Nine Hundred Fifty Dollars on the Demand
Redemption Date, as hereinafter defined, and to pay on the Demand Redemption
Date to the County Trustee interest on said sum from the Initial Interest
Accrual Date, as hereinafter defined, to the Demand Redemption Date, at the
interest rate or rates determined for the “Interest Rate Mode” (as described in
Section 2.02 of the County Indenture) applicable to the Revenue Bonds
referred to on the reverse hereof as selected from time to time by the Company,
subject to the provisions hereinafter set forth in the event of a rescission of
a Redemption Demand, as hereinafter defined. 
Both the principal of and the interest on this bond shall be payable at
the office or agency of the Company in Chicago, Illinois, in any coin or

 

2

 

currency of the United States of America which at the
time of payment is legal tender for public and private debts.

 

The provisions of this
bond are continued on the reverse side hereof and such continued provisions
shall have the same effect, for all purposes, as though fully set forth at this
place.  This bond shall not be valid or
become obligatory for any purpose unless and until it shall have been
authenticated by the execution by the Trustee or its successor in trust under
the Indenture of the Trustee’s Certificate endorsed hereon.

 

IN WITNESS WHEREOF,
Kentucky Utilities Company has caused this bond to be executed in its name by
the manual or facsimile signature of its President or one of its
Vice-Presidents, and its corporate seal or a facsimile thereof to be hereto
affixed or imprinted hereon and attested by the manual or facsimile signature
of its Secretary or one of its Assistant Secretaries.

 

Dated as of                ,
2005

 

	
   

  	
  KENTUCKY UTILITIES COMPANY

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  

 

(Form of reverse side of bond of Series No. 18)

 

This bond is one of the
bonds of the Company issued and to be issued from time to time under and in
accordance with and all secured by the indenture of mortgage or deed of trust
dated May 1, 1947, executed and delivered by the Company to U.S. Bank
National Association (formerly named First Trust of Illinois, National
Association, successor to Bank of America Illinois, formerly Continental Bank,
National Association and formerly Continental Illinois National Bank and Trust
Company of Chicago, and hereinafter referred to as the “Trustee”) and Edmond B.
Stofft, as Trustees, and the indentures supplemental thereto heretofore
executed and delivered by the Company to the Trustees under said indenture of
mortgage, including the indenture supplemental thereto dated June 15,
2005, executed and delivered by the Company to said U.S. Bank National
Association and Richard Prokosch (successor Co-Trustee), as Trustees
(collectively the “Trustees”), prior to the authentication of this bond (said
indenture of mortgage and said supplemental indentures being hereinafter
referred to, collectively, as the “Indenture”). 
Reference to the Indenture and to all supplemental indentures, if any,
hereafter executed pursuant to the Indenture is hereby made for a description
of the property mortgaged and pledged, the nature and extent of the security
and the rights of the holders and registered owners of said bonds and of the
Trustees and of the Company in respect of such security.  By the terms of the Indenture, the bonds to
be secured thereby are issuable in series which may vary as to date,

 

3

 

amount, date of maturity, rate of interest, redemption
provisions, medium of payment and in other respects as in the Indenture
provided.

 

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 No. 18 (hereinafter
called the “bonds of Series No. 18” or the “bonds of said Series”).  The bonds of Series No. 18 have
been issued to the County Trustee under the County Indenture to secure payment
of the Environmental Facilities Revenue Bonds, 2005 Series A (Kentucky
Utilities Company Project) (the “Revenue Bonds”), issued by the County under
the County Indenture, the proceeds of which (other than any accrued interest
thereon) have been loaned to the Company pursuant to the provisions of the Loan
Agreement dated as of May 1, 2005 (the “Agreement”), between the Company
and the County.

 

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 County Indenture
and the Revenue Bonds) on the 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 Series No. 18  shall
be redeemable in whole upon receipt by the Trustee of a written demand
(hereinafter called a “Redemption Demand”) from the County 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 County Indenture,
specifying the last date to which interest on the Revenue Bonds has been paid
(such date being hereinafter referred to as the “Initial Interest Accrual Date”)
and demanding redemption of the bonds of Series No. 18.  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 Series No. 18 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) June 1,
2035, 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) June 1,
2035.  The Trustee shall mail notice of
the Demand Redemption Date (such notice being hereinafter called the “Demand
Redemption Notice”) to the County 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 June 1, 2035, such date shall be deemed to be
the Demand Redemption Date without further action (including actions specified
in this paragraph) by the County Trustee, the Trustee or the Company.  The bonds of Series No. 18 shall be
redeemed by the Company on the Demand Redemption Date, upon surrender thereof
by the County Trustee to the Trustee, at a redemption price equal to the
principal amount thereof plus accrued interest thereon at the rate or rates
then applicable to the Revenue Bonds or determined under the provisions of the
County Indenture from the Initial Interest Accrual Date to

 

4

 

the Demand Redemption Date.  If a Redemption Demand is rescinded by the
County 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 Series No. 18
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 said 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 Series No. 18 shall bear interest at
the rate or rates applicable to the Revenue Bonds from the Initial Interest
Accrual Date, as specified in a written notice to the Trustee from the County
Trustee, and the principal of and interest on the bonds of said Series from
the Initial Interest Accrual Date shall be payable in accordance with the
provisions of Article X of the Indenture.

 

Upon payment of the
principal of and premium, if any, and interest on the Revenue Bonds, whether at
maturity or prior to maturity by redemption or otherwise, and the surrender
thereof to and cancellation thereof by the County Trustee (other than any Revenue
Bond that was cancelled by the County Trustee and for which one or more other
Revenue Bonds were delivered and authenticated pursuant to the County Indenture
in lieu of or in exchange or substitution for such cancelled Revenue Bond), or
upon provision for the payment thereof having been made in accordance with the
County Indenture, bonds of Series No. 18 in a principal amount equal
to the principal amount of the 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 Series No. 18 shall be surrendered by the County Trustee to
the Trustee and shall be cancelled by the Trustee.  From and after the Release Date (as defined
below), the bonds of Series No. 18 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 County Indenture), at the request of the Company, consents to the release
of the bonds of this Series, as security for the 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 Series Nos. 11, 12, 13, 14, 15, 16, 17 and 18)
have been retired through payment, redemption or otherwise (including those
bonds “deemed to be paid” within the meaning of that term as used in Article XII
of the Indenture) at, before or after the maturity thereof.  On the Release Date, the bonds of Series No. 18
shall be surrendered by the County Trustee to the Trustee whereupon the bonds
of Series No. 18 so surrendered shall be cancelled by the Trustee.

 

No recourse shall be had
for the payment of the principal of or interest on this bond, or for any claim
based hereon, or otherwise in respect hereof or of the Indenture or any
indenture supplemental thereto, to or against any incorporator, stockholder,
officer or director, past, present or future, of the Company, or of any
predecessor or successor corporation, either directly or through the Company or
such predecessor or successor corporation, under any constitution or statute or
rule of law, or by the enforcement of any assessment or penalty, or
otherwise, all such

 

5

 

liability of incorporators, stockholders, directors
and officers being waived and released by the registered owner hereof by the
acceptance of this bond and being likewise waived and released by the terms of
the Indenture.

 

This bond is
nontransferable except as may be required to effect a transfer to any successor
trustee under the County Indenture.  Any
such transfer may be made by the registered owner hereof, in person or by
attorney duly authorized, at the principal office or place of business of the
Trustee under the Indenture, upon the surrender and cancellation of this bond
and the payment of any stamp tax or other governmental charge, and upon any
such transfer a new registered bond or bonds without coupons, of the same
series and for the same aggregate principal amount, will be issued to the
transferee in exchange herefor.

 

AND WHEREAS, there is to
be endorsed on each of the bonds of Series No. 18 (whether in
temporary or definitive form) a certificate of the Trustee substantially in the
following form, to-wit:

 

Trustee’s Certificate

 

This bond is one of the
bonds of the series designated therein, described in the within mentioned
Indenture.

 

	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Officer

  	
   

  

 

NOW, THEREFORE, in
consideration of the premises and of the sum of One Dollar ($1.00) duly paid by
the Trustee to the Company, and of other good and valuable considerations, the
receipt whereof is hereby acknowledged, and for the purpose of further assuring
to the Trustees under the Indenture their title to, or lien upon, the property
hereinafter described, under and pursuant to the terms of the Indenture and for
the purpose of further securing the due and punctual payment of the principal
of and interest and the premium, if any, on all bonds which have been
heretofore or shall be hereafter issued under the Indenture and indentures
supplemental thereto and which shall be at any time outstanding thereunder and
secured thereby, and for the purpose of securing the faithful performance and
observance of all the covenants and conditions set forth in the Indenture
and/or in any indenture supplemental thereto, the Company has given, granted,
bargained, sold, transferred, assigned, pledged, mortgaged, warranted the title
to and conveyed, and by these presents does give, grant, bargain, sell,
transfer, assign, pledge, mortgage, warrant the title to and convey unto U.S.
BANK NATIONAL ASSOCIATION AND RICHARD PROKOSCH, as Trustees under the Indenture
as therein provided, and the successors in the trusts thereby created, and to
their assigns, all the right, title and interest of the Company in and to any
and all premises, plants, property, leases and leaseholds, franchises, permits,
rights and powers, of every kind and description, real and personal (1) which
have been acquired by the Company through construction, purchase, consolidation
or merger, or otherwise, and which at

 

6

 

the date hereof are owned by the Company, and (2) which
shall be acquired by the Company, through construction, purchase,
consolidation, merger, or otherwise, on or subsequent to the date hereof,
together, in each case, with the rents, issues, products and profits therefrom,
excepting, however, and there is hereby expressly
reserved and excluded from the lien and effect of the Indenture and of this
supplemental indenture, all right, title and interest of the
Company, now owned, or hereinafter acquired, in and to (a) all cash,
bonds, shares of stock, obligations and other securities not deposited with the
Trustee or Trustees under the Indenture, and (b) all accounts and bills
receivable, judgments (other than for the recovery of real property or
establishing a lien or charge thereon or right therein) and choses in action
not specifically assigned to and pledged with the Trustee or Trustees under the
Indenture, and (c) all lamps and supplies, machinery, appliances, goods,
wares, merchandise, commodities, equipment, apparatus, materials and/or
supplies acquired or held by the Company for sale, lease, rental or consumption
in the ordinary course of business, and (d) the last day of each of the
demised terms created by any lease of property leased to the Company and under
each and every renewal of any such lease, the last day of each and every such
demised term being hereby expressly reserved to and by the Company, and (e) all
gas, oil, ore, copper and other minerals now or hereafter existing upon, within
or under any real estate of the Company subject to, or hereby subjected to, the
lien of the Indenture and (f) the real estate expressly excepted from the
lien and operation of the Indenture.

 

TO HAVE AND TO HOLD all
said property, right and interests hereinabove described or referred to and
conveyed, assigned, pledged or mortgaged, or intended to be conveyed, assigned,
pledged or mortgaged, together with the rents, issues, products and profits
therefrom unto said U.S. BANK NATIONAL ASSOCIATION AND RICHARD PROKOSCH, as
Trustees under the Indenture, as hereby modified and amended, and unto their
successor or successors in trust forever, BUT IN TRUST NEVERTHELESS, upon the
trusts, for the purposes and subject to all the terms, conditions, provisions
and restrictions of the Indenture, as hereby modified and amended.

 

And upon the
considerations and for the purposes aforesaid, and in order to provide,
pursuant to the terms of the Indenture, for the issuance under the Indenture,
as hereby modified and amended, of bonds of Series No. 18 and to fix
the terms, provisions and characteristics of the bonds of said Series, and to
modify and amend the Indenture in the particulars and to the extent hereinafter
in this supplemental indenture specifically provided, the Company hereby
covenants and agrees with the Trustees as follows:

 

ARTICLE I.

 

Section 1.  A series of bonds issuable under the
Indenture, as hereby modified and amended, and to be known and designated as “First
Mortgage Bonds, Pollution Control Series No. 18” (hereinafter
sometimes referred to as the “bonds of Series No. 18” or the “bonds
of said Series”), and which shall be executed, authenticated and issued only in
the form of registered bonds without coupons, in denominations of $5,000 and
integral multiples thereof, is hereby created and authorized.  The bonds of said Series shall be
payable as provided in Section 3 of this Article and shall be
substantially in the form thereof hereinbefore recited.  Each bond of said Series shall be issued
to and registered in the name of the County Trustee and shall be
nontransferable except as required to effect any transfer of bonds of said Series to
any successor

 

7

 

trustee under the
County Indenture.  Each bond of said Series shall
be dated as of the date of issuance of the Revenue Bonds.

 

Section 2.  The bonds of Series No. 18 shall
bear interest, and the principal thereof and interest thereon shall be payable,
only to the extent and in the manner provided in Section 3 of this
Article.  The bonds of said Series shall
mature on June 1, 2035.  The bonds
of said Series shall be payable, both as to principal and interest, at the
office or agency of the Company in Chicago, Illinois in any coin or currency of
the United States of America which at the time of payment is legal tender for
public and private debts.

 

The bonds of said Series shall
be deemed fully paid, and the obligations of the Company thereunder shall be
terminated, to the extent and in the manner provided in Section 4 of this
Article.

 

Section 3.  (a)  Except as provided in
paragraph (b) of this Section 3, 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 County Indenture
and the Revenue Bonds) on the 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 Series No. 18 shall be
redeemable in whole upon receipt by the Trustee of a written demand
(hereinafter in this Article called a “Redemption Demand”) from the County
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
County Indenture, specifying the last date to which interest on the Revenue
Bonds has been paid (such date being hereinafter referred to in this Article as
the “Initial Interest Accrual Date”) and demanding redemption of the bonds of Series No. 18.  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 Series No. 18 so demanded to be redeemed
(hereinafter in this Article 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) June 1, 2035,
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) June 1,
2035.  The Trustee shall mail notice of
the Demand Redemption Date (such notice being hereinafter in this Article called
the “Demand Redemption Notice”) to the County 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 June 1, 2035, such
date shall be deemed to be the Demand Redemption Date without further action
(including actions specified in this paragraph) by the County Trustee, the Trustee
or the Company.  The bonds of Series No. 18
shall be redeemed by the Company on the Demand Redemption Date, upon surrender
thereof by the County Trustee to the Trustee, at a redemption price equal to
the principal amount thereof, plus accrued interest

 

8

 

thereon at the
rate or rates then applicable to the Revenue Bonds or determined under the
provisions of the County Indenture from the Initial Interest Accrual Date to
the Demand Redemption Date.  If a
Redemption Demand is rescinded by the County 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 Series No. 18 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.

 

(b)           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 Series No. 18
shall bear interest at the rate or rates applicable to the Revenue Bonds from
the Initial Interest Accrual Date, as specified in a written notice to the
Trustee from the County Trustee, and the principal of and interest on the bonds
of said Series from the Initial Interest Accrual Date shall be payable in
accordance with the provisions of Article X of the Indenture.

 

(c)           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 paragraph (b) of this Section 3, and such
Redemption Demand, rescission or notice shall be of no force or effect, unless
it is executed in the name of the County Trustee by one of its Vice-Presidents.

 

Section 4.  Upon payment of the principal of and premium,
if any, and interest on the Revenue Bonds, whether at maturity or prior to
maturity by redemption or otherwise, and the surrender thereof to and
cancellation thereof by the County Trustee, or upon provision for the payment
thereof having been made in accordance with Article VIII of the County
Indenture, bonds of Series No. 18 in a principal amount equal to the
principal amount of the Revenue Bonds so surrendered and cancelled shall be
surrendered by the County Trustee to the Trustee, whereupon the bonds of said Series so
surrendered shall be deemed fully paid and the obligations of the Company
thereunder shall be terminated, and such bonds of said Series shall be
cancelled and destroyed by the Trustee by shredding, compacting or other
suitable means and a certificate of such cancellation and destruction shall be
delivered to the Company.  From and after
the Release Date (as defined below), the bonds of Series No. 18 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 County Indenture), at the request
of the Company, consents to the release of the bonds of this Series, as
security for the 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 the bonds
of said Series (and excluding bonds of said Series and First Mortgage
Bonds, Pollution Control Series Nos. 11, 12, 13, 14, 15, 16 and 17)
have been retired through payment, redemption or otherwise (including those
Bonds “deemed to be paid” within the meaning of that term used in Article XII
of the Indenture) at, before or after the maturity thereof.  On the Release Date, the bonds of said Series shall
be surrendered by the County Trustee to the Trustee whereupon the bonds of Series No. 18
so surrendered shall be cancelled by the Trustee.

 

9

 

ARTICLE II.

 

Section 1.  The bonds of Series No. 18 shall be
executed on behalf of the Company and sealed with the corporate seal of the
Company, all in the manner provided in or permitted by Section 6 of Article I
of the Indenture, as follows:

 

(a)           bonds of said Series executed on
behalf of the Company by its President or a Vice-President and by its Secretary
or an Assistant Secretary may be so executed by the manual or facsimile
signature of such President or Vice-President and of such Secretary or
Assistant Secretary, as the case may be, of the Company, or of any person or
persons who shall have been such officer or officers, as the case may be, of
the Company on or subsequent to the date of this supplemental indenture,
notwithstanding that he or they may have ceased to be such officer or officers
of the Company at the time of the actual execution, authentication, issue or
delivery of any of such bonds, and any such manual or facsimile signature or
signatures of such officer or officers of the Company, as above provided, on
any such bonds shall constitute execution of such bonds on behalf of the
Company by such officer or officers of the Company for the purposes of the
Indenture, as hereby modified and amended, and shall be valid and effective for
all purposes, provided that all bonds of said Series shall
always be executed on behalf of the Company by the manual or facsimile
signature of its President or a Vice-President and of its Secretary or an
Assistant Secretary, as above provided, and provided, further, that
none of such bonds shall be executed on behalf of the Company by the manual or
facsimile signature of the same officer or person acting in more than one
capacity; and

 

(b)           such corporate seal of the Company
may be facsimile, and the bonds of said Series on which such facsimile
seal of the Company shall be affixed, impressed, imprinted or reproduced shall
be deemed to be sealed with the corporate seal of the Company for the purposes
of the Indenture as hereby modified and amended, and such facsimile seal shall
be valid and effective for all purposes.

 

ARTICLE III.

 

Section 10 of Article III
of the Indenture is hereby further amended to provide that the Company agrees
to observe and comply with the provisions of said section as so amended
hereby so long as the bonds of Series No. 18 are outstanding.  The bonds outstanding on the date hereof to
which said Section 10 applies are Series P, Nos. 10 and 11, Series S,
and Nos. 12, 13, 14, 15, 16 and 17.

 

No covenant to provide a
maintenance and renewal fund is made in respect of the bonds of Series No. 18.  The absence of such a covenant shall not,
however, limit the right of the Company to use, apply or certify bonds of Series No. 18
to comply with, or to satisfy its obligations under, any provision of the
Indenture (including, without limitation, the provisions of Section 1 of Article VII
of the Indenture).

 

The bonds of Series No. 18
are intended to be used as collateral for and to secure payment of the Revenue
Bonds, as hereinabove provided, and, accordingly, the bonds of Series

 

10

 

No. 18 shall be dated as of the date of issuance
of the Revenue Bonds and shall bear interest from the Initial Interest Accrual
Date, as hereinabove provided, notwithstanding anything to the contrary
contained in the Indenture with respect to the dating of bonds and the date
from which interest on bonds shall accrue.

 

ARTICLE IV.

 

Section 1.  Capitalized terms used in this Article IV
and not otherwise defined in this Indenture shall have the meanings set forth
in the County Indenture.

 

Section 2.  Subsequent to the issuance of the Revenue
Bonds, the Company shall not be required to establish compliance with the net
earnings requirements of Section 5 of Article II of the Indenture in
connection with any Conversion of Interest Rate Mode on the Revenue Bonds or
any change in length of Long Term Rate Period. 
So long as the Revenue Bonds operate in any Interest Rate Mode other
than the Long Term Rate where the Long Term Rate Period ends on the day prior
to the final maturity of the Revenue Bonds, the Company shall include, for
purposes of any required calculation of such net earnings requirement (as such
requirement shall then be in effect), interest on the bonds of said Series at
an annual rate of 14%.  If at any time
the interest rate on the Revenue Bonds is a Long Term Rate where the Long Term
Rate Period ends on the day prior to the final maturity of the Revenue Bonds,
the Company may include, for purposes of any calculation of such net earnings
requirement, interest on the bonds of said Series at the Long Term Rate
then borne by the Revenue Bonds.

 

ARTICLE V.

 

Section 1.  The provisions of this supplemental indenture
shall be effective from and after the execution hereof; and the Indenture, as
hereby modified and amended, shall remain in full force and effect.

 

Section 2.  Each holder or registered owner of a bond of
any series not now outstanding which shall be authenticated by the Trustee and
issued by the Company under the Indenture (as hereby amended) subsequent to the
execution of this supplemental indenture and of any coupon pertaining to any
such bond, by the acquisition, holding or ownership of such bond and coupon,
thereby consents and agrees to, and shall be bound by, the provisions of this
supplemental indenture.

 

Section 3.  Each reference in the Indenture, or in this
supplemental indenture, to any article, section, term or provision of the
Indenture shall mean and be deemed to refer to such article, section, term or
provision of the Indenture, as hereby modified and amended, except where the
context otherwise indicates.

 

Section 4.  All the covenants, provisions, stipulations
and agreements in this supplemental indenture contained are and shall be for
the sole and exclusive benefit of the parties hereto, their successors and
assigns, and of the holders and registered owners from time to time of the
bonds and of the coupons issued and outstanding from time to time under and
secured by the Indenture, as hereby modified and amended.

 

11

 

This supplemental
indenture has been executed in a number of identical counterparts, each of
which so executed shall be deemed to be an original.

 

At the time of the
execution of this supplemental indenture, the aggregate principal amount of all
indebtedness outstanding, or to be outstanding, under and secured by the
Indenture, as hereby modified and amended, is $348,296,950, consisting of and
represented by First Mortgage Bonds, Pollution Control Series P, Series No. 10,
Series S and Series No. 11, No. 12, No. 13, No. 14,
No. 15, No. 16, No. 17 and No. 18 of the Company, as
follows:

 

	
  Series

  	
   

  	
  Interest

  Rate

  	
   

  	
  Maturity Date

  	
   

  	
  Principal

  Amount

  	
   

  
	
  P

  	
   

  	
  7.92

  	
   

  	
  May 15, 2007

  	
   

  	
  $

  	
  53,000,000

  	
   

  
	
  No. 10

  	
   

  	
  Variable

  	
   

  	
  November l,
  2024

  	
   

  	
  54,000,000

  	
   

  
	
  S

  	
   

  	
  5.99

  	
   

  	
  January 15,
  2006

  	
   

  	
  36,000,000

  	
   

  
	
  No. 11

  	
   

  	
  Variable

  	
   

  	
  May 1, 2023

  	
   

  	
  12,900,000

  	
   

  
	
  No. 12

  	
   

  	
  Variable

  	
   

  	
  February 1,
  2032

  	
   

  	
  20,930,000

  	
   

  
	
  No. 13

  	
   

  	
  Variable

  	
   

  	
  February 1,
  2032

  	
   

  	
  2,400,000

  	
   

  
	
  No. 14

  	
   

  	
  Variable

  	
   

  	
  February 1,
  2032

  	
   

  	
  2,400,000

  	
   

  
	
  No. 15

  	
   

  	
  Variable

  	
   

  	
  February 1,
  2032

  	
   

  	
  7,400,000

  	
   

  
	
  No. 16

  	
   

  	
  Variable

  	
   

  	
  October 1,
  2032

  	
   

  	
  96,000,000

  	
   

  
	
  No. 17

  	
   

  	
  Variable

  	
   

  	
  October 1,
  2034

  	
   

  	
  50,000,000

  	
   

  
	
  No. 18

  	
   

  	
  Variable

  	
   

  	
  June 1,
  2035

  	
   

  	
  13,266,950

  	
  (a)

  
									

 

(a)                                  To
be presently issued by the Company under the Indenture, as hereby modified and
amended.

 

All of said bonds of Series P
and Series S, respectively, were sold by the Company to, and upon the
issue thereof were owned and held by, the corporations and partnerships whose
names and residences are stated in the Supplemental Indentures dated May 15,
1992 and January 15, 1996, respectively, executed by the Company to the
Trustees under said Indenture as heretofore modified and amended.

 

All of said bonds of Series No. 10
were heretofore issued and delivered by the Company to, and upon the issuance
thereof were held by, Bank One, Kentucky, N.A., 201 East Main Street,
Lexington, Fayette County, Kentucky 40507, as trustee.

 

12

 

All of said bonds of Series No. 11
were heretofore issued and delivered by the Company to, and upon the issuance
thereof were held by, The Bank of New York, 101 Barclay Street, 21st Floor,
New York, New York 10286, as trustee.

 

All of said bonds of Series Nos.
12, 13, 14, 15 and 16, respectively, were heretofore issued and delivered by
the Company to, and upon the issuance thereof were held by, Deutsche Bank Trust
Company Americas, Corporate Trust & Agency Services, c/o DB Services
New Jersey, Inc., 100 Plaza One, 6th Floor, Jersey City, New Jersey 07310,
as trustee.

 

All of said bonds of Series No. 17
were heretofore issued and delivered by the Company to, and upon the issuance
thereof were held by, Wachovia Bank of Delaware, National Association, 9300
Shelbyville Road, Suite 507, Louisville, Kentucky 40222, as trustee.

 

The Thirteen Million Two
Hundred Sixty-Six Thousand Nine Hundred Fifty Dollars ($13,266,950) in
principal amount of bonds of Series No. 18 proposed to be issued by
the Company under the Indenture as hereby modified and amended, are to be
issued and delivered by the Company to, and upon the issuance thereof held by,
Deutsche Bank Trust Company Americas, Corporate Trust & Agency
Services, c/o DB Services New Jersey, Inc., 100 Plaza One, 6th Floor, Jersey
City, New Jersey 07310, as County Trustee.

 

Section 5.  The Company hereby expressly gives, grants,
bargains, sells, transfers, assigns, pledges, mortgages, warrants the title to
and conveys unto the Trustees under the Indenture, upon the trusts and for the
purposes of the Indenture, as hereby modified and amended, the following
described properties:

 

FIRST.  The following described real estate of the
Company situated in Pulaski County, Kentucky:

 

ITEM 1.  BEGINNING at an iron pin found on
the south edge of right-of-way of KY Hwy 635 near the community of Science Hill
in Pulaski County, Kentucky approximately 261’ East of the intersection of
KY Hwy 635 and US Hwy 27, said pin being the Northeast Corner of the Parent
Tract and the Northwest Corner of Thomas Poynter (D.B. 479, Pg. 267), and being
20.83’ Right of Sta. 42+70.98 (as based upon Kentucky D.O.T. proposed
right-of-way plans for proposed US Hwy 27, as will be typical for all
Stationing); Thence leaving the South edge of right-of-way and with the division
line of the parent tract and Poynter S09°09’23”W - 21.16 feet to an iron pin
set, (5/8” x 18” iron pin with orange plastic survey cap bearing P.L.S. #3623
set as will be typical for all set corner monuments) being Sta. 50.05’ Right of
Sta. 42+81.59 of KY Hwy 635, said pin being the Northeast Corner of the Parcel
being created and being on the south edge of the proposed right-of-way of KY
Hwy 635, said point also being the POINT OF BEGINNING for this description;
Thence continuing with the line of Poynter S09°09’23”W - 132.15 feet to an iron
pin set, said pin being the Southeast Corner of the Parcel being created and
being on the line of Poynter and also being the Northeast Corner of Gladys
Lovell Taylor (D.B. 678, Pg. 513); Thence leaving the line of Poynter  and with the line of Taylor, N82°51’09”W -
101.53 feet to an iron pin set, said pin being the

 

13

 

Southwest corner of the
Parcel being created and being 141.74 feet Right of Sta. 4465+03.12 of Proposed
US Hwy 27 and being on the east edge of the proposed right-of-way; Thence with
a new line to the parent tract and being the east edge of the proposed
right-of-way of US Hwy 27, N13°48’37”E - 147.71 feet to an iron pin set, said
pin being the Northwest Corner of the Parcel being created and being 70.00’ Rt.
of Sta. 41+93.67 of proposed KY Hwy 635; Thence leaving the east edge of
Proposed right-of-way of US Hwy 27 and with the Proposed right-of-way of KY Hwy
635, S73°30’54”E - 90.22 feet to the point of beginning and containing 0.307
acres by survey.

 

All bearings are referred to the bearing of
reference.  Being that tangent section of
Centerline along the proposed alignment of Hwy 635, north of the property being
surveyed and taken to be S60°44’01”E as shown on KY D.O.T. Right-of-way plans
for US Hwy 27 (File: R0110pl.dgn, Date 16-DEC-02).

 

Being the remainder of that parcel of property
acquired by Kentucky Utilities Company, a Kentucky corporation, by General
Warranty Deed from Ronnie James Wesley and Geneva Wesley, husband and wife, and
Steven Denton and Roseanna Denton, husband and wife, dated 6th day
of October, 2004, and being of record in Deed Book 747, Page 214, in the
Office of the Clerk of Pulaski County, Kentucky.

 

SECOND.  The following described real estate of the
Company situated in Trimble County, Kentucky:

 

ITEM 1.  Beginning at a point in the
centerline of Cutshaw Lane, said point being S16°25’46”E 13.57 feet from an
iron pin found at the Southwest Corner of East Kentucky Power Coop. (D.B. 104,
Pg. 696), said pin also being the Southeast Corner of Shelby Rural Electric
Cooperative (D.B. 38, Pg. 454), said point being approximately 0.5 miles east
of the intersection of Cutshaw Lane and Ky Hwy 42, near the City of
Bedford, in Trimble County, Kentucky; Thence with the centerline of Cutshaw
Lane, S73°34’14”W — 150.00 feet to point in said centerline; Thence leaving the
centerline of Cutshaw Lane, N16°25’47”W — 15.00 feet to an iron pin set (5/8” x
18” steel rebar with aluminum survey cap bearing, Douglas G. Gooch PLS #3118,
set as will be typical for all set corner monuments), said pin being the
Southwest Corner of Shelby Rural Electric Cooperative (D.B. 38, Pg. 454) and
being the POINT OF BEGINNING for this description; Thence leaving the line of Shelby
Rural Electric Cooperative (D.B. 38, Pg. 454) and with the north edge of
right-of-way of Cutshaw Lane (right-of-way is assumed to be 15’ from and
parallel to centerline of Cutshaw Lane) S73°34’14”W - 125.00 feet to an iron
pin set; Thence with new lines across the parent tract of Callis, N15°59’01”W
125.00 feet to an iron pin set and N73°34’14”E 
125.00 feet to an iron pin set, said pin being on the line of Shelby
Rural Electric Cooperative (D.B. 38, Pg. 454); Thence leaving the new corner of
Callis and with the line of Shelby Rural Electric Cooperative (D.B. 38, Pg.
454), S15°59’01”E — 125.00 feet to the Point of Beginning for this description
and containing 0.358 acres by survey.

 

14

 

Being the same property conveyed to Kentucky Utilities
Company by deed dated April 4, 2005 and recorded in Deed Book 111, Page 155
in the office of the Trimble County Clerk.

 

15

 

IN WITNESS WHEREOF, said
Kentucky Utilities Company has caused this instrument to be executed in its
corporate name by its President, Vice-President or its Treasurer and its
corporate seal to be hereunto affixed and to be attested and countersigned by
its Executive Vice President, General Counsel and Corporate Secretary, and said
U.S. Bank National Association, for the purpose of entering into and joining
with the Company in the execution of this supplemental indenture, has caused
this instrument to be executed in its corporate name by one of its Vice Presidents
and to be attested by one of its Assistant Vice Presidents, and said Richard
Prokosch for the purpose of entering into and joining with the Company in the
execution of this supplemental indenture, has signed this instrument; all as of
the day and year first above written.

 

	
   

  	
  KENTUCKY UTILITIES COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Daniel K. Arbough

  	
   

  
	
   

  	
   

  	
  Daniel K. Arbough

  	
   

  
	
   

  	
   

  	
  Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
    /s/ John R. McCall

  	
   

  	
   

  
	
   

  	
  John R. McCall

  	
   

  	
   

  
	
   

  	
  Executive Vice President,

  	
   

  	
   

  
	
   

  	
  General Counsel and

  	
   

  	
   

  
	
   

  	
  Corporate Secretary

  	
   

  	
   

  
	
   

  	
  (CORPORATE SEAL)

  
	
   

  	
   

  
	
   

  	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ Richard
  Prokosch

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Richard Prokosch

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
    /S/ BENJAMIN J. KRUEGER

  	
   

  	
   

  	
   

  
	
   

  	
  Benjamin J. Krueger

  	
   

  	
   

  	
   

  
	
   

  	
  Assistant Vice President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ Richard
  Prokosch

  	
   

  
	
   

  	
   

  	
   

  	
  RICHARD PROKOSCH

  	
   

  
										

 

 

	
  COMMONWEALTH OF
  KENTUCKY

  

  COUNTY OF JEFFERSON

  	
  }

  	
  SS:

  

 

I, Betty Brinly, a Notary
Public in and for said County in the Commonwealth aforesaid, do hereby certify
that Daniel K. Arbough, Treasurer of Kentucky Utilities Company, a Kentucky and
Virginia corporation, and John R. McCall, Executive Vice President, General
Counsel and Corporate Secretary of said corporation, who are both personally
known to me to be the same persons whose names are subscribed to the foregoing
instrument as such officers of said corporation, and who are both personally
known to me to be such officers, appeared before me this day in person and
severally acknowledged before me that they signed, sealed and delivered said
instrument as their free and voluntary act as such officers, and as the free
and voluntary act and deed of said corporation, for the uses and purposes
therein set forth; and said Daniel K. Arbough, upon oath, acknowledged himself
to be Treasurer of said corporation and that, as such officer, being authorized
so to do, he executed said instrument for the purposes therein contained, by
signing the name of said corporation thereto by himself as such officer.

 

Given under my hand and
official seal this 21st day of June, 2005.

 

 

	
   

  	
   /s/ Betty Brinly

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
   

  	
  My commission expires: 6/21/06

  

 

(NOTARIAL SEAL)

 

 

	
  STATE OF
  MINNESOTA

  

  COUNTY OF RAMSEY

  	
  }

  	
  SS:

  

 

I, Mary R. McCarthy, a
Notary Public in and for said County in the State aforesaid, do hereby certify
that:

 

(a)           Richard Prokosch, a Vice President of
U.S. Bank National Association, a national banking association, and Benjamin J.
Krueger, an Assistant Vice President of said corporation, who are both
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument as such Vice President and Assistant Vice President of
said corporation, and who are both personally known to me to be such officers,
appeared before me this day in person and severally acknowledged before me that
they signed and delivered said instrument as their free and voluntary act as
such officers, and as the free and voluntary act and deed of said corporation,
for the uses and purposes therein set forth; and said Vice President upon oath,
acknowledged himself to be a Vice President of said corporation and that, as
such officer, being authorized so to do, he executed said instrument for the
purposes therein contained, by signing the name of said corporation thereto by
himself as such officer; and

 

(b)           Richard Prokosch, personally known to
me to be the same person described in, and whose name is subscribed to, the
foregoing instrument, appeared before me this day in person and acknowledged
before me that he executed, signed and delivered said instrument as his free and
voluntary act and deed, for the uses and purposes therein set forth.

 

Given under my hand and official seal this 17th day of
June, 2005.

 

 

	
   

  	
   /s/ Mary R. McCarthy

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
   

  	
  My commission expires: January 31, 2010

  

 

(NOTARIAL SEAL)

 

This
instrument prepared by:

 

	
     /s/ James Dimas

  	
   

  
	
  James Dimas, Esq.

  
	
  220 West Main Street

  
	
  Louisville, Kentucky 40202EXHIBIT 4.2

 

COUNTY OF CARROLL, KENTUCKY

 

AND

 

KENTUCKY UTILITIES COMPANY

 

A Kentucky and Virginia Corporation

 

*   *  * 
*  *

 

LOAN AGREEMENT IN CONNECTION 

WITH ENVIRONMENTAL FACILITIES

 

*   *   *  
*   *

 

Dated as May 1, 2005

 

*   *   *  
*   *

 

NOTICE:        The interest of the County
of Carroll, 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 May 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.

  	
  ESTABLISHMENT
  OF COMPLETION DATE

  	
   

  
	
  SECTION 3.3.

  	
  AGREEMENT
  AS TO OWNERSHIP OF PROJECT

  	
   

  
	
  SECTION 3.4.

  	
  USE
  OF PROJECT

  	
   

  
	
  SECTION 3.5.

  	
  FINANCING
  OF ADDITIONAL SOLID WASTE DISPOSAL FACILITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  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.

  	
  DISBURSEMENTS
  FROM CONSTRUCTION FUND

  	
   

  
	
  SECTION 4.3.

  	
  FURNISHING
  DOCUMENTS TO THE TRUSTEE

  	
   

  
	
  SECTION 4.4.

  	
  COMPANY
  REQUIRED TO PAY IN EVENT CONSTRUCTION FUND INSUFFICIENT

  	
   

  
	
  SECTION 4.5.

  	
  INVESTMENT
  OF CONSTRUCTION FUND, BOND FUND AND REBATE FUND MONEYS

  	
   

  
	
  SECTION 4.6.

  	
  SPECIAL
  ARBITRAGE CERTIFICATIONS

  	
   

  
	
  SECTION 4.7.

  	
  OPINION
  OF BOND COUNSEL

  	
   

  
	
  SECTION 4.8.

  	
  FIRST
  MORTGAGE BONDS

  	
   

  
	
  SECTION 4.9.

  	
  CONSTRUCTION
  FUND PLEDGED AS FURTHER SECURITY

  	
   

  
	
   

  	
   

  	
   

  
	
  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

  	
   

  

 

i

 

	
  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

  	
   

  
	
   

  	
   

  	
   

  
	
  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 CONSTRUCTION FUND, BOND FUND AND REBATE 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  ENVIRONMENTAL FACILITIES

 

This LOAN AGREEMENT, dated as of May 1, 2005, by and
between the COUNTY OF CARROLL, KENTUCKY, a public body corporate and
politic duly created and existing as a County and political subdivision under
the Constitution and laws of the Commonwealth of Kentucky, and KENTUCKY
UTILITIES COMPANY, a corporation organized and existing under the laws of
Kentucky and Virginia;

 

W I  T  N  E  S
S  E  T  H:

 

WHEREAS, the County
of Carroll, Kentucky is a public body corporate and politic duly created and
existing as a county and political subdivision under the Constitution and laws
of the Commonwealth of Kentucky (“Issuer”), and pursuant to the provisions of
Sections 103.200 to 103.285, inclusive, of the Kentucky Revised Statutes (“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 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 of solid waste disposal facilities, one of the categories of “pollution
control facilities,” as defined by the Act for the collection, storage,
treatment, processing and final disposal of solid wastes; 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 solid waste
disposal facilities, including the pledge of direct securities of a utility
company; and

 

WHEREAS, the Act
further provides that title to solid waste disposal facilities shall not be
acquired by Issuer in the case of a loan transaction; and

 

WHEREAS, Kentucky
Utilities Company, a Kentucky and Virginia corporation (“Company”), is desirous
of financing the qualified costs of acquisition, construction, installation and
equipping of certain solid waste disposal facilities to serve the Ghent
Generating Station of Company, which facilities constitute the Project, as
defined in the Indenture and as described in Exhibit A hereto (the “Project”),
which Project is located within the corporate boundaries of Issuer and consists
of certain solid waste disposal facilities and which Project qualifies for
financing within the meaning of the Act; and

 

WHEREAS, the Project
is described and has been previously approved for tax-exempt bond financing in
a preliminary resolution adopted by the Fiscal Court of Issuer on February 22,
2005; and

 

WHEREAS, pursuant to
and in accordance with the provisions of the Act, a Memorandum of Agreement
between the Issuer and Company dated February 22, 2005 and an

 

1

 

Ordinance duly
adopted by the Fiscal Court of Issuer on May 24, 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 “County of
Carroll, Kentucky, Environmental Facilities Revenue Bonds, 2005 Series A
(Kentucky Utilities Company Project)” (the “2005 Series A Bonds”), the
proceeds of which will be lent to Company to finance the acquisition,
construction, installation and equipping of the Project; and

 

WHEREAS, the Project
will provide for the collection, storage, treatment, processing and final disposal
of solid wastes in the Commonwealth of Kentucky; 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  May 1,
2005 (the “Indenture”); 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 finance the
acquisition, construction, installation and equipping of the Project;

 

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 1.2and 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:

 

“Act”

“Agreement”

“Authorized Denomination”

“Bond Counsel”

“Bond Insurer”

“Bond Fund”

“Bond Year”

“Business Day”

“Code”

“Company”

“Company Bonds”

“Company Representative”

“Construction Fund”

 

2

 

“Cost of Construction”

“Cumulative Excess Earnings”

“Excess Earnings”

“First Mortgage Bonds”

“First Mortgage Indenture”

“First Mortgage Trustee”

“Governmental Obligations”

“Indenture”

“Interest Payment Date”

“Issuer”

“Issuer Representative”

“Loan”

“Net Proceeds”

“No Auction Rate”

“Paying Agent”

“Permitted Investments”

“Plans and Specifications”

“Pollution Control Facilities”

“Prevailing Rating”

“Project”

“Project Site”

“Purchase Date”

“Purchase Fund”

“Rating Service”

“Rebate Fund”

“Redemption Date”

“Redemption Demand”

“Release Date”

“2005 Series A Bonds”

“Solid Waste Disposal Facilities”

“Supplemental Indenture”

“Tender Agent”

“Thirty-Day ‘AA’ Composite Commercial Paper Rate”

“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

 

3

 

(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.

 

“Completion Date” means the date of completion of the
construction of the Project, as that date shall be certified as provided in Section 3.2
of this Agreement.

 

“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.

 

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.

 

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.

 

4

 

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 county and de jure
political subdivision under the Constitution and laws of the Commonwealth of
Kentucky and, pursuant to the Act, Issuer 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 financing of the construction, acquisition, installation and
equipping of the Project, which Project shall provide for solid wastes to be
collected, stored, treated, processed and disposed of at the Project Site.

 

(c)           To accomplish the
foregoing, Issuer agrees to issue $13,266,950 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 to finance the Cost of Construction of the Project.

 

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

 

(e)           Issuer has received its
allocation from the Commonwealth for the issuance of the 2005 Series A
Bonds, as prescribed by Section 146 of the Code.

 

(f)            The Project Site is
located within the boundaries of Issuer.

 

(g)           Each of  Resolution No. 2005-0222 of the Fiscal
Court of the Issuer adopted February 22, 2005 in respect of approval of
the Project and its financing, the Memorandum of Agreement between Issuer and
Company, dated February 22, 2005, and Ordinance No. 2005-0524 of the
Fiscal Court of the Issuer adopted on second reading on May 24, 2005 has
been in continuous effect since the respective dates of adoption thereof.

 

5

 

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 Commonwealths of Kentucky and Virginia, (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 Commonwealths of
Kentucky and Virginia relevant 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 financed by
application of the proceeds of the 2005 Series A Bonds has been designed
and will be constructed to collect, store, treat, process and dispose of solid
wastes at the Project Site.  The Project
was and is necessary for the public health and welfare, and has been designed
and will be constructed solely for the purposes of solid waste collection, storage,
treatment, processing and final disposal of solid wastes, consisting of
contaminated gypsum sludge solid wastes created by operation of
desulphurization facilities at the Project Site.  The Project constitutes solid waste disposal
facilities and facilities functionally related and subordinate to such
facilities under Section 142(a)(6) of the Code and the Act.

 

(d)           Not less than
substantially all of the net proceeds of the 2005 Series A Bonds (i.e., at
least 95% of the net proceeds thereof, including investment earnings thereon) will
be applied and used to finance the Cost of Construction of the Project, and all
of such Solid Waste Disposal 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 Company will not
use or cause to be used any of the funds provided by the Issuer hereunder
(including the earnings on any of such funds) in such a manner as to, or take
or omit to take any action with respect to the use of such funds which would,
impair the exclusion of the interest on any of the 2005 Series A Bonds
from gross income for federal income tax purposes.  Except for certain environmental or building
permits which will be required from time to time in connection with the
construction, occupation and use of the Project (which the Company has no
reason to believe will not be received in the ordinary course as and when
required), no consent, approval, authorization or other order of any federal,
state or local governmental authority (other than the Issuer), not previously
obtained or given is required in connection with the acquisition, construction,
installation or equipping of the Project or the consummation of the
transactions contemplated thereby.

 

(f)            The Project is of the
type authorized and permitted by the Act, and the Cost of Construction of the Project
is not less than $13,226,950.

 

6

 

(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 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
operate or cause the Project to be operated as Solid Waste Disposal 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 part or component
of the Project to be financed with proceeds of the 2005 Series A Bonds was
acquired, constructed or installed by Company prior to February 22, 2005;
and no part of the proceeds of the 2005 Series A Bonds will be used by
Company, directly or indirectly, as working capital or to finance inventory.

 

(k)           At least 95% of the net
proceeds of the 2005 Series A Bonds (including investment earnings
thereon) will be used to pay costs of the Project incurred after the date which
is 60 days prior to February 22, 2005; and the facilities constituting the
Project constitute and will constitute (i) land or property of a character
subject to the allowance for depreciation under Section 167 of the Code
and (ii) Solid Waste Disposal Facilities.

 

(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.

 

7

 

(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 Solid Waste Disposal
Facilities.

 

(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 Bonds and the Solid Waste Disposal 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 shall be guaranteed directly or indirectly by the United
States or any agency or instrumentality thereof.

 

(p)           The Project financed by
the proceeds of the 2005 Series A Bonds will not have been placed in
operation at substantially its design level, pursuant to and within the meaning
of Section 1.150-2(c)(2) of the Treasury Regulations, more than 18
months prior to the date of the issuance of the 2005 Series A Bonds.

 

(q)           For purposes of Section 147(c) of
the Code, the allocable cost of the land portion of the Project, if any, to be
financed with the proceeds of the 2005 Series A Bonds shall be less than
25% of the proceeds of the 2005 Series A Bonds, and none of the 2005 Series A
Bond proceeds shall be used to finance land to be used for farming.

 

(r)            Within the meaning of Section 147(e) of
the Code, no portion of the proceeds of the 2005 Series A Bonds shall be
used to provide any airplane, skybox or other private luxury box, any health
club facility, any facilities used primarily for gambling, or any store the
principal business of which is the sale of alcoholic beverages for consumption
off the premises.

 

(s)           The costs of the
issuance of the 2005 Series A Bonds paid from the proceeds of the 2005 Series A
Bonds, if any, shall not exceed 2% of the proceeds of the 2005 Series A
Bonds to the public (less accrued interest).

 

(t)            None of the proceeds
of the 2005 Series A Bonds will be used to acquire, construct or install
any property or interest therein unless the first use of such property shall be
pursuant to such acquisition, construction or installation.

 

(u)           No portion of the
proceeds of the 2005 Series A Bonds will be deposited to the account of
any reserve or replacement fund.

 

(v)           Company shall not cause
an amount less than 95% of the net proceeds, as defined in the Code and Treasury
Regulations, of the 2005 Series A Bonds (including all investment income
therefrom) to be expended for the Solid Waste Disposal Facilities constituting
the Project to be financed by the 2005 Series A Bonds and will direct the
Trustee to make payments and transfers of 2005 Series A Bond proceeds to
the extent necessary to satisfy such covenant. 
In furtherance of such covenant, moneys may not be withdrawn from the
Construction Fund until there has been filed with the Trustee prior to each drawing
a written requisition as required by Section 4.2 hereof.  For purposes of foregoing provisions of this
subsection (v) the portion of the

 

8

 

proceeds used to finance the costs of issuing
the 2005 Series A Bonds, including underwriter’s discount or underwriting
compensation, is not considered used to provide Solid Waste Disposal
Facilities.

 

(w)          Except for Company or
any “related person” or group of “related persons”, no person has (i) guaranteed,
arranged, participated in, assisted with or paid any portion of the cost of the
issuance of, the 2005 Series A Bonds, or (ii) provided any property
or any franchise, trademark or trade name (within the meaning of Section 1253
of the Code) which is to be used in connection with the solid waste disposal
facilities constituting the Project financed with the 2005 Series A Bonds.

 

(x)            Company reasonably
expects that (i) all of the spendable proceeds of the 2005 Series A
Bonds will be used for the governmental purpose of the issue within three years
from date of issuance of such 2005 Series A Bonds and (ii) none of
the proceeds of such 2005 Series A Bonds will be invested in nonpurpose
obligations having a substantially guaranteed yield for three years or more.

 

(y)           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 collection, storage,
treatment, processing and final disposal of solid waste or (ii) facilities
which are functionally related and subordinate to the solid waste disposal 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 solid waste disposal facilities
constituting the Project.

 

(z)            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.

 

(aa)         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 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.

 

(bb)         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.

 

(cc)         The solid waste which is
to be collected, stored, treated, processed and 
disposed of by the Project is and will be useless, unused and unwanted
and constitute discarded solid waste materials which have no market or other
value at the place where it is located.  
To the best knowledge of the Company, no person is or would be willing
to purchase such solid waste material in its condition when disposed of in
waste pits at any price.  Such solid
waste, being sludge created by sulphur dioxide removal facilities at the Ghent
Generating Station of the

 

9

 

Company will be disposed of by placing such
SO2 scrubber sludge into solid waste landfills, as required by law.

 

(dd)         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.

 

(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 will cause or has
caused the Project to be constructed as herein provided on the Project Site in
accordance with the Plans and Specifications as the same may be amended from
time to time.

 

(b)           it will make, execute,
acknowledge and deliver any contracts, orders, receipts, writings and
instructions with any other persons, firms or corporations and in general do
all  things which may be requisite or
proper, all for acquiring, constructing, installing and equipping the Project.

 

(c)           It will ask, demand,
sue for, levy and use its best efforts to recover and receive such sums of
money, debts or other demands whatsoever in connection with the Project, to
which it may be entitled under any contract, order, guaranty, warranty, writing
or instruction in connection with any of the foregoing, and it will enforce the
provisions of any contract, agreement, obligation, bond or other security in
connection with the Project.  Any amounts
received in connection with the foregoing, after deduction of expenses incurred
in such recovery, prior to the Completion Date and full disposition of the
Construction Fund in accordance with this Agreement and the Indenture, shall be
paid into the Construction Fund.

 

(d)           It will promptly
commence and thereafter diligently pursue and continue the acquisition,
construction, installation and equipping of the Project to completion and
placement in service.

 

Section 3.2.            Establishment
of Completion Date.  The Completion
Date of the Project shall be evidenced to the Trustee by a certificate signed
by Company Representative stating that, except for amounts retained by the
Trustee at the Company’s direction for any amount of the

 

10

 

Cost of Construction not then
due and payable or the liability for payment of which is being contested or
disputed by Company, (i) construction of the Project has been completed in
accordance with the Plans and Specifications and all labor, services, materials
and supplies used in such construction, installation and equipping have been
paid for, (ii) all other facilities necessary in connection with the
Project have been acquired, constructed, installed and equipped in accordance
with the Plans and Specifications and all costs and expenses incurred in
connection therewith have been paid, and (iii) to the best of Company’s
knowledge and belief and based upon reasonable inquiry, the Project is suitable
and sufficient for its intended purposes. 
Notwithstanding the foregoing, such certificate shall state that it is
given without prejudice to any rights against third parties which exist at the
date of such certificate or which may subsequently come into being.  Upon receipt of such certificate, the Trustee
shall retain in the Construction Fund a sum (specified in writing to it by
Company) equal to the amounts necessary for payment of any portion of the Cost
of Construction of the Project not then due and payable or the liability for
payment of which is being contested or disputed by Company.  The remaining amounts in the Construction
Fund shall be applied by the Trustee as provided in Section 6.06 of the
Indenture.

 

Section 3.3.            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 3.4.            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.

 

Section 3.5.            Financing
of Additional Solid Waste Disposal Facilities.  Company and Issuer hereby recognize that
additional Solid Waste Disposal Facilities at the Project Site (other than
those Solid Waste Disposal Facilities which constitute the Project) have in the
past been and may in the future be acquired, constructed, installed and
equipped at the Project Site, and that same may be financed with proceeds of
one or more series of Issuer’s solid waste disposal facility revenue bonds
issued in addition to the 2005 Series A Bonds issued pursuant to the
Indenture, to the extent permitted by law.

 

11

 

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 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 Construction
Fund, the balance of the proceeds of the 2005 Series A Bonds for
application as provided in the Indenture.

 

Section 4.2.            Disbursements
from Construction Fund.  The Issuer
has, in the Indenture, authorized and directed Trustee to make payments from
the Construction Fund to pay the Cost of Construction or to reimburse Company
for any amount of the Cost of Construction paid or incurred by it.  Except for requisitions for costs of issuance
of the 2005 Series A Bonds  (which
costs shall not be considered to be qualifying), requisitions made in the form
and manner described below shall be made initially exclusively for expenditures
which qualify as solid waste disposal facilities and none, except for the
requisitions for such costs of issuance, shall be made for expenditures which
do not so qualify until such time as the ratio of qualifying expenditures to
nonqualifying expenditures can be maintained at not less than 95% qualifying to
5% nonqualifying.  Notwithstanding the
foregoing exception for costs of issuance of the 2005 Series A Bonds,
amounts requisitioned for such purposes shall not exceed two percent (2%) of
the proceeds of the 2005 Series A Bonds and shall be considered part of
the 5% nonqualifying portion.  Payments
for Cost of Construction shall be made upon receipt in the case of every
disbursement of a requisition signed by the Company Representative stating with
respect to each payment to be made: (i) the requisition number, (ii) the
name and address of the person, firm or corporation to whom payment has been
made or is due, (iii) the amount paid or to be paid, (iv) that each
obligation mentioned therein has been properly incurred, is a proper charge
against the Construction Fund, is unpaid or unreimbursed, and has not been the
basis of any previous withdrawal, and (v) that either (a) the
expenditures qualify exclusively as Solid Waste Disposal Facilities or (b) the
95%-5% ratio as required above has been satisfied and the payment of the amount
shown in such requisition will not result in less than 95% of the proceeds of
the 2005 Series A Bonds expended at such time being used for the
acquisition, construction or installation of Solid Waste Disposal Facilities.

 

Section 4.3.            Furnishing
Documents to the Trustee.  Company
agrees to cause such requisitions to be directed to the Trustee as may be
necessary to effect payments out of the Construction Fund in accordance with Section 4.2
hereof.

 

Section 4.4.            Company
Required to Pay in Event Construction Fund Insufficient.  In the event the moneys in the Construction
Fund available for payment of the Cost of Construction should not be sufficient
to pay such Cost of Construction in full, Company agrees to pay such

 

12

 

portion of the Cost of
Construction in excess of the moneys available therefor in the Construction
Fund.  Issuer does not make any warranty,
either express or implied, that the moneys paid into the Construction Fund and
available for payment of the Cost of Construction will be sufficient to pay all
of such Cost of Construction.  Company
agrees that if, after exhaustion of such moneys in the Construction Fund,
Company should directly pay any portion of the Cost of Construction pursuant to
the provisions of this Section, it shall not be entitled to any diminution or abatement
of the amounts payable under Section 5.1 hereof.

 

Section 4.5.            Investment
of Construction Fund, Bond Fund and Rebate Fund Moneys.  Subject to the provisions of Section 148
of the Code, any moneys held as a part of the Construction Fund, Bond Fund or
the Rebate Fund, 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 Construction Fund or 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.

 

Section 4.6.            Special
Arbitrage Certifications.

 

(a)           Company covenants and
agrees that it will not take or 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

 

13

 

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.

 

(e)           Company warrants,
represents and certifies to Issuer that the proceeds of the 2005 Series A
Bonds will be 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 6.07
of the Indenture.  Specifically, Company
shall carry out, do and perform all acts stipulated to be performed by Company
pursuant to such Section 6.07 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 Sections 7.02 and  7.03
of the Indenture.

 

Section 4.7.            Opinion
of Bond Counsel.  Company need not
comply with the covenants or representations in Section 4.6 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

 

14

 

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 4.8.            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, and principal and
interest thereon will be payable 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 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 and the Trustee 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.

 

15

 

Section 4.9.            Construction
Fund Pledged as Further Security. 
Pending complete disbursement of all moneys in the Construction Fund
pursuant to the provisions of this Agreement, pursuant to the Indenture all of
such moneys or investments of such moneys are pledged to the Trustee and the
holders of the 2005 Series A Bonds for the further security of the 2005 Series A
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.

 

(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 Tender Agent and the Paying Agent
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 Paying Agent, the
Tender Agent, the Market Agent and the Auction Agent for their respective own
accounts as and when such amounts become due and payable.

 

16

 

(d)           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.

 

(e)           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.

 

(f)            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.

 

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

 

17

 

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 6.07
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 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 6.07 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.

 

18

 

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 Solid Waste Disposal Facilities;
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 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 Solid Waste Disposal Facilities.

 

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

 

19

 

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 Commonwealths of
Kentucky and Virginia or qualified and admitted to do business in the
Commonwealths of Kentucky and Virginia, 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

 

20

 

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
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.

 

21

 

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;

 

(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.

 

22

 

(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;

 

(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,

 

23

 

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 4.6 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.

 

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 (e) 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,

 

24

 

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 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 4.6, Section 4.8
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;

 

25

 

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.

 

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

 

26

 

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.

 

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.

 

27

 

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;

 

(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 the Ghent Generating Station of the Company
shall have occurred which, in the judgment of the Company, render the continued
operation of the Ghent Generating Station or any generating unit at such
station uneconomical; or changes in circumstances, after the issuance of the 2005
Series A Bonds including but not limited to changes in solid waste abatement,
control and disposal 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 Ghent Generating Station to such extent that the Company will be
prevented from carrying on its normal operations at such location for a period
of six months.

 

28

 

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 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

 

29

 

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 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.

 

30

 

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.

 

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 June 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 Bond Insurer, 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,

 

31

 

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 440 Main Street, Carrollton, Kentucky 41008,
Attention: County Judge/ Executive;

 

If to Company, at its corporate headquarters, One Quality Street,
Lexington, Kentucky 40507, Attention: 
Treasurer, with a copy to LG&E Energy LLC, 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: Trust & Securities Services
(Municipal Group).

 

If to Bond Insurer, at One State Street Plaza, New York, New York 10004,
Attn: Surveillance Department, Global Utilities.

 

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

 

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; Bond Counsel Opinions.  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 Construction Fund, Bond Fund and Rebate Fund.  It is agreed by the parties hereto that any
amounts remaining in the Construction Fund and 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 6.07
of the Indenture.

 

32

 

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.

 

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.

 

	
   

  	
  COUNTY OF
  CARROLL, KENTUCKY

  
	
   

  	
   

  
	
   

  	
   

  
	
  (SEAL)

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
    /s/
  Harold Tomlinson

  	
   

  
	
   

  	
   

  	
  HAROLD TOMLINSON

  	
   

  
	
   

  	
   

  	
   County Judge/Executive

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
    /s/ Traci Courtney

  	
   

  	
   

  
	
  Fiscal Court
  Clerk

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KENTUCKY
  UTILITIES 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 CARROLL

  	
  )

  	
   

  

 

I,
the undersigned Notary Public in and for the State and County aforesaid, do
hereby certify that on the 30th day of June, 2005, the foregoing instrument was
produced to me in said County by Harold Tomlinson and Traci Courtney, personally
known to me and personally known by me to be the County Judge/Executive and
Fiscal Court Clerk, respectively, of the COUNTY OF CARROLL, KENTUCKY, and
acknowledged before me by them and each of them to be their free act and deed
as County Judge/Executive and Fiscal Court Clerk of such County, and the act
and deed of said County as authorized by an Ordinance of the Fiscal Court of
such County.

 

Witness
my hand and seal this 30th day of June, 2005. 
My commission expires June 28, 2009.

 

(SEAL)

 

	
   

  	
    /s/ Debra Lynn
  Ewen

  	
   

  
	
   

  	
  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 22 day of June, 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 KENTUCKY UTILITIES
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 22 day of June, 2005. 
My commission expires 6/21/06.

 

(SEAL)

 

	
   

  	
    /s/ 
  Betty Brinly

  	
   

  
	
   

  	
  Notary
  Public

  	
   

  
	
   

  	
  State at Large, Kentucky

  	
   

  

 

This
Instrument Prepared by the

Undersigned, Attorney at Law of

Harper, Ferguson & Davis

(Division of Ogden Newell & Welch PLLC)

1700 PNC Plaza

500 West Jefferson Street

Louisville, Kentucky 40202

 

 

	
   

  	
    /s/
  Spencer E. Harper, Jr.

  	
   

  
	
   

  	
    SPENCER
  E. HARPER, JR.

  	
   

  

 

 

EXHIBIT A

 

DESCRIPTION OF PROJECT

 

 

DESCRIPTION OF ENVIRONMENTAL FACILITIES

 

FOR

 

COLLECTION, STORAGE, TREATMENT, PROCESSING 

AND FINAL DISPOSAL OF SOLID WASTES

 

AT

 

GHENT GENERATING STATION

UNIT 3

 

KENTUCKY UTILITIES COMPANY

 

JULY 7, 2005

 

Prepared by

 

R. S. Straight, P.E. , Director-Project Engineering, LG&E Energy,
LLC

Joe F. Strickland, P.E., Senior Mechanical Engineer, Project Engineering,
LG&E Energy, LLC

 

 

Introduction

 

This report discusses the scope and costs (“qualifying
costs”) of certain solid waste disposal facilities consisting of flue gas
desulfurization (“FGD”) systems for the collection, storage, treatment, processing
and final disposal of solid wastes (the “Project”) to be constructed as part of
and to serve, Unit 3 of the Company’s Ghent Generating Station in Carrollton,
Kentucky (the “Station”). The Station is owned by Kentucky Utilities Company
(the “Company”).   This report was
prepared on the basis of estimated cost data and other information furnished by
the Company.  For the purpose of this
report, all costs shown as qualifying, in whole or in part, are assumed, on the
basis of information provided by or on behalf of the Company, to be properly
chargeable to the capital account of the facilities described herein for
federal income tax purposes.

 

1.0          General Description

 

The Station is a coal fired steam electric generating station located
in Carroll County, Kentucky.  Air
emission control regulations require removal of particulates and sulfur dioxide
(SO2) from the flue gas exhaust and solid waste disposal regulations
require the disposal of combustion by-products including FGD waste reagent
slurry (calcium sulfite, a.k.a. lime mud sludge).

 

FGD systems are required for removal of SO2 from the flue
gas exhaust of the generating units at the Station.  This is accomplished using FGDs, which mix
limestone with flue gas to remove sulfur dioxide (SO2).  Operation of the FGD using calcium carbonate
(a limestone reagent), for desulfurization, produces a solid waste in the form
of calcium sulfite.

 

The large quantity of FGD-produced solid sludge wastes requires large
scale solid waste sludge handling and disposal facilities.  The disposal costs for collection, storage,
treatment, processing and final disposal of such solid wastes are very
significant and the Company has an indefinite responsibility to maintain the
solid waste storage facilities.

 

Exhibit 1 is an
arrangement of the Unit 3 FGD general area.

 

2.0          Classification as
Solid Wastes

 

FGD sludge wastes are solid wastes at the Station.  These wastes have no use and no value in
their original form and are required to be disposed of in a solid waste
disposal facility.  This is necessary to
comply with solid waste disposal regulations. 
Exhibit 2 illustrates the sources and disposition of the
solid wastes.

 

3.0          FDG and the Solid
Waste Facilities

 

3.1          The General FGD
Project

 

On December 20, 2004, Kentucky Utilities Company (KU) filed with
the Public Service Commission of Kentucky a petition for approval of a
certificate of public convenience and necessity for construction of FGD systems
to be constructed and installed to serve the Ghent

 

A-1

 

Generating
Station Units 2, 3 & 4.  Ghent
is a 4-unit, 2,100 MW plant.  An FGD was
installed on Ghent Unit 1 in 1994 and has been in continuous operation since
its completion.  Estimated completion
years for the three FGD additions will be: Ghent Unit 3, May 1, 2007;
Ghent Unit 2, 2008; and Ghent Unit 4, 2009. 
The FGDs include all necessary equipment for FGD solid waste reagent
sludge collection, storage, treatment, processing and final disposal in
off-site waste dumps.

 

The Unit 3, 2007 Project is the subject of this report, together with
certain common elements of the other FGD systems to be constructed.  A complete new FGD will be installed to serve
Unit 3 and will be connected to the stack that was constructed for the
1994 FGD (located between Ghent Unit 2 and Unit 3) since it was designed and
has the capacity to serve two FGD units. 
Solid waste sludge from Unit 3 will be conveyed to the existing sludge
waste gypsum settling pond.  The pumps
and piping connecting with the settling pond will be added to and upgraded, as
will the decant pumps and piping that return carrier water to the FGD.

 

3.2          Solid Waste
Processing

 

In the FGD process, SO2 is removed from the flue gas by
reacting it with calcium carbonate (limestone). 
The calcium carbonate is mixed with water (a carrier) to create a slurry
that can be sprayed into the flue gas within the FGD absorber vessel.  The initial step of the process chemically
substitutes SO2 for the carbonate in limestone to create a solid
sludge waste, primarily calcium sulfite, a sludge which must be removed from
the reagent solution circulating through the FGD.  Calcium sulfite is useless, unused, unwanted,
or discarded solid waste material and has no market or other value at the place
where it is located.

 

SO2    +  
CaCO3    +   1⁄2 H2O   à  
CaSO3  *   1⁄2 H2O   +      CO2

 

(gas)        (limestone)   (water)      
(calcium sulfite with water) 
(gas)

 

Further treatment and processing of the solid waste with the
introduction of oxygen (“forced oxidation”) promotes the dewatering and
handling characteristics of the solid waste by reacting oxygen with the solid
waste calcium sulfite and creating calcium sulfate.

 

     2 (CaSO3  *   1⁄2 H2O)   +   O2   +   3
H2O   à  
2 CaSO4   +   4 H2O

 

     2 (calcium sulfite with
water)                             2
(calcium sulfate)

 

This further treatment and processing of the solid waste enables the
waste by-product to be dewatered more readily and to be disposed of more
efficiently.

 

Exhibit 3 shows
the process flow schematic.

 

The calcium sulfate solids (impure gypsum) that are produced after
forced oxidation are suspended in water and will settle out if left
undisturbed.  However, for efficient
operation, water is required as a means of transport to solid waste disposal
facilities constituting landfills and solid waste dumps.  This is the current practice for Ghent Unit
1, where water, as a carrier, transports the waste gypsum to an on-site
settling pond.  This same method of
operation is

 

A-2

 

planned and is
being implemented for the 2007, Unit 3 Project. 
Impure gypsum transfer pumps and piping currently transport the solid
waste gypsum to on-site settling sludge disposal ponds.  Additions and upgrades will be required to increase
the solid waste handling capabilities of the pumps and piping to handle and
process the additional solid wastes to be created.  A mixture of approximately 20% solids is
maintained for efficient transport of the impure gypsum to the settling and disposal
ponds.  Decant pumps currently are used
to reclaim carrier water from the settling ponds and send it back to the Unit 1
FGD.  Additions and upgrades will be
required to increase the handling capabilities of the decant pumps and return
piping.

 

4.0          FGD Process Equipment

 

The FGD includes equipment to clean flue gas of sulfur dioxide
generated by the combustion of coal.  The
cleaning process in turn produces the calcium sulfite, which itself is
contaminated by inert particulates and unreacted limestone.  Additional solid waste treatment and
processing of the calcium sulfite produces an impure gypsum material, which
although more easily transported to waste disposal dumps, is useless, unwanted
and discarded solid waste having no market or value at the place where it is
located.  Further cleaning, dewatering,
processing and purification would be required to convert the impure gypsum into
a form which has any commercial value or uses.

 

The sludge processing equipment includes the recycle tanks, forced
oxidation blowers, mechanical equipment, electrical components, pumps, controls
and instrumentation.

 

The sludge processing equipment also includes a recirculation loop with
sludge recirculation pumps, associated piping, valves, and auxiliary equipment.
In a conventional FGD process, which does not recirculate the solid waste, the
recirculation loop would require smaller capacity pumps, piping and
auxiliaries.  This loop is smaller when
calcium sulfite is the primary constituent in the sludge as is typical of FGDs
without forced oxidation.  This
requirement was determined to be 25% for the 1994 FGD, which is quite similar
in size, design and function to the 2007 project.  Accordingly, 75% of the recirculation loop
scope and cost and 100% of the FGD reaction tanks scope and cost can be
attributable to the solid waste disposal process.

 

The components of the FGD process located in the sludge processing area
include:

 

•      FGD
absorber reaction tank

 

•      FGD
absorber recirculation pumps

 

•      FGD
absorber recirculation piping

 

•      Oxidation
air blowers

 

•      Mechanical
and electrical auxiliaries

 

•      Instrumentation
and controls

 

•      Foundation
and structure

 

A-3

 

•      Site
development

 

5.0          Dewatering  and Purification Area

 

The existing dewatering and storage area to serve Unit 3 consists of
sludge settling ponds together with associated pumps, piping, sumps, controls
and mechanical equipment.  These
components remove excess water from the oxidized waste sludge.  The solid waste sludge (impure gypsum) is
dewatered and stored in a holding facility for transport offsite  and water removed from the gypsum is returned
to the FGD for reuse.

 

The components of the FGD process already located in the dewatering and
storage area include:

 

•      Settling
pond

 

•      Decant
pumps

 

•      Sludge
transfer piping

 

•      Piping
supports and foundations (additions, as necessary)

 

•      Instrumentation
and controls

 

•      Mechanical
and electrical auxiliaries

 

•      Site
redevelopment, as necessary.

 

6.0          Allocation of
Environmental Facilities

 

Exhibit No. 4 is a block diagram of
the FGD and dewatering facilities.  The
Ghent FGD process equipment consists of systems and subsystems that, for
purposes of this report, are divided into four categories:

 

•      Dedicated
Solid Waste Management – systems for the treatment, storage, handling or
disposal of qualifying solid waste or functionally related and subordinate
systems

 

•      Dual
Function – the portion of the cost of property allocable to solid waste is
determined by allocating the cost of such property between the property’s solid
waste disposal function and any other functions by a method which reasonably
reflects a separation of costs for each function of the property.

 

•      Non-Qualifying
Systems – systems that perform a function other than solid waste management

 

•      Balance
of Plant or Common Facilities – functionally related and subordinate
systems, services and equipment that support solid waste disposal and non-

 

A-4

 

qualifying
functions on an allocable basis, including mechanical, electrical and control
facilities dedicated to the Project and other like environmental facilities and
engineering, design and similar support facilities.

 

In this report, 100% of the capital expenditures for dedicated solid
waste management systems are included as qualifying costs; an allocable
percentage of dual function expenditures are included as qualifying costs; and
0% of non-qualifying facilities.  The
balance of plant expenditures are weighted based upon the overall percent of
qualified costs that exist for the three previous categories.  Common facilities are expected to be
allocated among three planned FGD systems on a one-third basis for each system.

 

Exhibit No. 5
provides an analysis of certain estimated qualified costs for the Unit 3, 2007
project.

 

7.0          Average Remaining
Economic Life

 

The class life asset guideline range of the Unit 3, 2007 Project, as
provided by Section 167(m) of the Code, is 49.13 (electric steam
production plant) with a mid-range asset guideline range of at least 28
years.  The Company has elected to use
the safe harbor of at least 28 years for the current funding.

 

A-5

 

 

EXHIBIT 1. GHENT UNIT 3 FGD GENERAL AREA

 

 

EXHIBIT 2

 

 

 

 

 

 

EXHIBIT NO.
5

 

Kentucky
Utilities Company

Ghent
Generating Station (Carroll County, Kentucky)

Solid
Waste Environmental Facilities; Unit 3*

 

	
   

  	
   

  	
  Equipment 

  Cost

  	
   

  	
  Material 

  Cost

  	
   

  	
  Labor 

  Cost

  	
   

  	
  Total 

  Cost

  	
   

  	
  Percent 

  Qualified

  	
   

  	
  Qualified 

  Cost

  	
   

  
	
  Major Components

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Absorber Vessel

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  $

  	
  15,000,000

  	
   

  	
  75

  	
  %

  	
  $

  	
  11,250,000

  	
   

  
	
  Absorber Reaction Tank

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  $

  	
  13,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  13,000,000

  	
   

  
	
  Absorber Recirulation Loop

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  11,000,000

  	
   

  	
  75

  	
  %

  	
  $

  	
  8,250,000

  	
   

  
	
  Oxidation Air Blowers

  	
   

  	
  $

  	
  5,000,000

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  6,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  6,000,000

  	
   

  
	
  Sludge Transfer Piping/Pumps

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
  2,500,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  2,500,000

  	
   

  
	
  Decant Pumps & Return Piping

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  3,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  3,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common Facilities

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Engineering & Design

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
  Estimates Not

  	
   

  
	
  Site Preparation/Development

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
  Available; 33.3%

  	
   

  
	
  Foundations & Structures

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
  Will Be Allocated

  	
   

  
	
  Mechanical, Electrical & Controls

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
  To Project

  	
   

  
	
  TOTAL QUALIFIED

  	
   

  	
  $

  	
  44,000,000

  	
   

  

 

*Costs Estimated

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}]]