LOAN AGREEMENT IN CONNECTION WITH POLLUTION CONTROL FACILITIES

Exhibit 10.1

LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT, KENTUCKY

AND

LOUISVILLE GAS AND ELECTRIC COMPANY

A Kentucky Corporation

*   *  *  *  *

LOAN AGREEMENT IN CONNECTION
WITH POLLUTION CONTROL FACILITIES

*   *   *   *   *

Dated as February 1, 2005

*   *   *   *   *

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

TABLE OF CONTENTS

i

ii

LOAN AGREEMENT IN CONNECTION
WITH POLLUTION CONTROL FACILITIES

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

W I T N E S S E T H :

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

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voter approval in accordance with laws now codified as Chapter 67C of the Kentucky Revised Statutes and replaced and superceded the prior governments of both the City of Louisville, Kentucky and the County of Jefferson, Kentucky (the “Predecessor County”) and pursuant to law has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

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

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

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

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

1

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

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

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

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

2

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

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

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

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

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

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

ARTICLE I

DEFINITIONS

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

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

3

“Act”
“Agreement”
“Bond Counsel”
“Bond Fund”
“Business Day”
“Code”
“Company”
“Company Representative”
“Cost of Construction”
“Excess Earnings”
“First Mortgage Bonds”
“First Mortgage Indenture”
“First Mortgage Trustee”
“Governmental Obligations”
“Indenture”
“Interest Payment Date”
“Issuer”
“Issuer Representative”
“Loan”
“Net Proceeds”
“Paying Agent”
“Permitted Investments”
“Plans and Specifications”
“Pollution Control Facilities”
“Project”
“Project Site”
“Purchase Fund”
“Rebate Fund”
“Redemption Date”
“Redemption Demand”
“Refunded 1995 Series A Bonds”
“Release Date”
“2005 Series A Bonds”
“1995 Series A Indenture”
“Supplemental Indenture”
“Tender Agent”
“Trustee”

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

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

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

4

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

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

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

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

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

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

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

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

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

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

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

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

5

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

ARTICLE II

REPRESENTATIONS, WARRANTIES AND COVENANTS

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

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

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

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

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

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

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

6

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

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

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

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

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

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

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

7

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

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

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

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

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

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

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

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

8

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

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

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

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

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

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

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

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

9

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

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

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

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

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

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

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

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

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

10

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

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

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

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

ARTICLE III

COMPLETION AND OWNERSHIP OF PROJECT

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

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

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

ARTICLE IV

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

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

11

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

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

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

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

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

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

12

Section 4.4.             Special Arbitrage Certifications .

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

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

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

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

13

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

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

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

Section 4.6.             First Mortgage Bonds .  Company covenants and agrees with Issuer that it will, for the purpose of providi