-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rheR1apzd/Ua9O+qrLZ2OOpJ36VUvWVfrhxF7EGcrNYjdWPUILXZAjtUAok4MvHn dfefFAjtlL48G9jMp66lTg== 0000060549-94-000006.txt : 19940330 0000060549-94-000006.hdr.sgml : 19940330 ACCESSION NUMBER: 0000060549-94-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOUISVILLE GAS & ELECTRIC CO /KY/ CENTRAL INDEX KEY: 0000060549 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 610264150 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-02893 FILM NUMBER: 94518473 BUSINESS ADDRESS: STREET 1: 220 W MAIN ST STREET 2: P O BOX 32010 CITY: LOUISVILLE STATE: KY ZIP: 40232 BUSINESS PHONE: 5026272000 10-K 1 LG&E'S 1993 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ---------------------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the fiscal year ended December 31, 1993 Commission file number 2-26720 ----------------- LOUISVILLE GAS AND ELECTRIC COMPANY ------------------------------------------------------ (Exact name of registrant as specified in its charter) Kentucky 61-0264150 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 220 West Main Street P.O. Box 32010 Louisville, Kentucky 40232 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (502) 627-2000 2 Securities registered pursuant to Section 12(b) of the Act: - ----------------------------------------------------------- Name of each exchange on Title of each class which registered ------------------- ------------------------ First Mortgage Bonds, Series due July 1, 2002, 7 1/2% New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: - ----------------------------------------------------------- 5% Cumulative Preferred Stock, $25 Par Value 7.45% Cumulative Preferred Stock, $25 Par Value $5.875 Cumulative Preferred Stock, Without Par Value Auction Rate Series A Preferred Stock, Without Par Value (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -- -- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of February 28, 1994, the aggregate market value of the registrant's voting stock held by non-affiliates was $37,310,812 and the number of outstanding shares of the registrant's common stock, without par value, was 21,294,223 all of which were held by LG&E Energy Corp. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- The proxy statement of Louisville Gas and Electric Company filed with the Commission on March 28, 1994, is incorporated by reference into Part III of this Form 10-K. 3 TABLE OF CONTENTS PART I PAGE - ------ ---- Item 1. Business................................................ 4 General............................................... 4 Electric Operations................................... 7 Gas Operations........................................ 9 Regulation and Rates.................................. 10 Construction Program and Financing.................... 11 Coal Supply........................................... 12 Gas Supply............................................ 12 Environmental Matters................................. 14 Labor Relations....................................... 14 Employees............................................. 14 Item 2. Properties.............................................. 15 Item 3. Legal Proceedings....................................... 16 Item 4. Submission of Matters to a Vote of Security Holders..... 18 Executive Officers of the Company................................. 18 PART II - ------- Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters................................... 20 Item 6. Selected Financial Data................................. 20 Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition.................... 20 Item 8. Financial Statements and Supplementary Data............. 29 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 56 PART III - -------- Item 10. Directors and Executive Officers of the Registrant (a).. 57 Item 11. Executive Compensation (a).............................. 57 Item 12. Security Ownership of Certain Beneficial Owners and Management (a).................................... 57 Item 13. Certain Relationships and Related Transactions (a)...... 57 PART IV - ------- Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................... 57 Signatures........................................................ 84 (a) Incorporated by reference. 4 PART I ------ ITEM 1. Business. - ------------------ General Incorporated July 2, 1913, Louisville Gas and Electric Company (the Company) is an operating public utility that supplies natural gas to approximately 258,000 customers and electricity to approximately 336,000 customers in Louisville and adjacent areas in Kentucky. The Company's service area covers approximately 700 square miles in 17 counties and has an estimated population of 800,000. Included in this area is the Fort Knox Military Reservation, to which the Company provides both gas and electric service, but which maintains its own distribution systems. The Company also provides gas service in limited additional areas. The Company's coal fired generating plants, which are all equipped with systems to remove sulfur dioxide, produce most of the Company's electricity; the remainder is generated by a hydroelectric power plant and combustion turbines. Underground gas storage fields help the Company provide economical and reliable gas service to customers. In August 1990, the Company and LG&E Energy Corp. (Energy Corp.) implemented a corporate reorganization pursuant to a mandatory share exchange whereby each share of outstanding common stock of the Company was exchanged on a share-for-share basis for the common stock of Energy Corp. The reorganization created a corporate structure that gives the holding company the flexibility to take advantage of opportunities to expand into other businesses while insulating the Company's utility customers and senior security holders from any risks associated with such businesses. The Company's preferred stock and first mortgage bonds were not exchanged and remained securities of the Company. The Company's Trimble County Unit 1 (Trimble County or the Unit), a 495-megawatt, coal-fired electric generating unit, which the Company began constructing in 1979, was placed in commercial operation on December 23, 1990. The Unit has been subject to numerous reviews by the Public Service Commission of Kentucky (the "Kentucky Commission" or "Commission"). In July 1988, the Kentucky Commission issued an order stating that 25% of the total cost of the Unit would not be allowed for ratemaking purposes. For a more detailed discussion of the proceedings relating to Trimble County Unit 1, see Note 8 of the Notes to Financial Statements under Item 8. In February 1993, the Company sold a 12.88% ownership interest in the Unit to Indiana Municipal Power Agency, completing the Company's plan to sell the 25% not allowed for ratemaking. The Company had previously sold a 12.12% ownership interest in the Unit to the Illinois Municipal Electric Agency in 1991. See Note 9 of the Notes to Financial Statements, Jointly Owned Electric Utility Plant, under Item 8 for a further discussion. 5 The Clean Air Act Amendments of 1990 impose stringent limits on emissions of sulfur dioxide and nitrogen oxides by electric utility generating plants. The legislation is extremely complex and its effect will substantially depend on regulations issued by the U.S. Environmental Protection Agency. The Company is closely monitoring the continuing rule-making process, in order to assess the precise impact of the legislation on the Company. All of the Company's coal-fired boilers are equipped with sulfur dioxide "scrubbers" and already achieve the final sulfur dioxide emission rates required by the year 2000 under the legislation. However, as part of its ongoing capital construction program, the Company anticipates incurring capital expenditures during the next four years of approximately $40 million for remedial measures necessary to meet the Act's requirements for nitrogen oxides. The overall impact of the legislation on the Company is expected to be minimal. The Company is well-positioned in the market to be a "clean" power provider without the large capital expenditures which are expected to be incurred by many other utilities. For a more detailed discussion of the Clean Air Act and other environmental issues, see Environmental Matters under this Item, Item 3, Item 7, and Note 7 of the Notes to Financial Statements under Item 8. Competition among energy suppliers is increasing. In particular, competition for off-system sales, which is based primarily on price and availability of energy, has become much more intense in recent years. The addition of electric generating capacity by other utilities in the Midwest has reduced the opportunities for the Company to make interchange sales and has heightened price competition for such sales. However, such additional capacity has made lower cost power available for purchase by the Company which, in certain instances, is at a cost lower than the variable cost of generating power from the generating stations owned by the Company. In addition, the 1992 Energy Policy Act provides utilities a wider choice of sources for their electrical supply than previously available. The Act also creates generating supply options that did not exist under previous legislation and is expected to increase competition for wholesale electric sales. (See Energy Policy Act of 1992 under Item 7 for a further discussion.) The Company is responding to increased competition in a number of ways designed to lower its costs and increase sales. One such response has been for the Company's parent, LG&E Energy Corp., to realign into new business units effective January 1, 1994. Under the realignment, Energy Corp. formed a national business unit, LG&E Energy Services, to develop and manage all of its utility and non-utility electric power generation and concentrate on the marketing and brokering of electric power on a regional and national basis. The realignment will allow the Company to increase its focus on customer service and to develop more customer options as the utility industry becomes more competitive. The realignment does not affect the regulation of the Company by the Commission. In addition to the realignment, the Company is re-evaluating its regulatory strategy to pursue full cost recovery of certain deferred expenses which are recorded as a regulatory asset. See Notes 1, 2, and 7 of Notes to Financial Statements under Item 8, for a discussion of these regulatory assets. On May 24, 1993, the Federal Energy Regulatory Commission (FERC) gave final approval for a market-based rate tariff and two transmission service tariffs that were filed by the Company. The market-based rate tariff enables the Company to sell up to 75 Mw of firm generation capacity at market-based rates. It also enables the Company to sell an unlimited amount of non-firm power at market-based rates, as long as the power is from the Company's own generation resources. 6 Under the two transmission service tariffs that were approved by FERC, utilities, independent power producers, and qualifying co-generation or small power production facilities may obtain firm or coordination transmission service from the Company. These tariffs provide open access to the Company's transmission system and enable parties requesting either type of transmission service to transmit wholesale power across the Company's system. However, service under these tariffs is not available to ultimate consumers of electric utility service. In responding to competition in the gas distribution business, the Company has upgraded gas storage facilities and invested in new equipment. By using the storage fields strategically, the Company can buy gas when prices are low, store it, and retrieve the gas when demand is high. Accessing least cost gas was made easier in November 1993 when FERC's Order No. 636 went into effect. Previously, the Company and other utilities purchased most of their gas services from pipeline companies. The order "unbundled" gas services, allowing utilities to purchase gas, transportation, and storage services separately from many different sources. Currently, the Company buys competitively priced gas from several large producers under contracts of varying duration. By purchasing from multiple suppliers, and storing any excess gas, the Company is able to secure favorably priced gas for its customers. Without storage capacity, the Company would be forced to buy gas when customer demand increases, which is usually when the price is highest. (See FERC Order No. 636 under Item 7 for a further discussion.) The Company is experiencing some of the issues common to electric and gas utility companies, namely, increased competition for customers, delays and uncertainties in the regulatory process and costs of compliance with environmental laws and regulations. For the year ended December 31, 1993, 74% of total operating revenues was derived from electric operations and 26% from gas operations. Electric and gas operating revenues and the percentages by classes of service on a combined basis for this period were as follows: (Thousands of $) ----------------------------- Electric Gas Combined % Combined -------- --- -------- ---------- Residential................. $195,273 $112,508 $307,781 44% Commercial.................. 154,337 43,568 197,905 28 Industrial.................. 104,506 28,310 132,816 19 Public authorities.......... 52,183 13,846 66,029 9 ------- ------- ------- --- Total-ultimate consumers.. 506,299 198,232 704,531 100% --- --- Other utilities............. 58,959 - 58,959 Gas transportation-net...... - 5,147 5,147 Miscellaneous............... 4,952 1,536 6,488 ------- ------- ------- Total.................... $570,210 $204,915 $775,125 ------- ------- ------- ------- ------- ------- See Note 10 of the Notes to Financial Statements under Item 8 for financial information concerning segments of business for the three years ended December 31, 1993. 7 Electric Operations The sources of electric operating revenues and the volumes of sales for the three years ended December 31, 1993, were as follows: 1993 1992 1991 ---- ---- ---- ELECTRIC OPERATING REVENUES (Thousands of $): Residential........................ $195,273 $174,559 $193,923 Small commercial and industrial.... 70,106 66,183 68,332 Large commercial................... 84,231 80,041 81,171 Large industrial................... 104,506 101,699 102,558 Public authorities................. 52,183 49,599 51,390 ------- ------- ------- Total-ultimate consumers.......... 506,299 472,081 497,374 Other electric utilities........... 58,959 45,698 40,745 Miscellaneous...................... 4,952 3,890 4,296 ------- ------- ------- Total............................. $570,210 $521,669 $542,415 ------- ------- ------- ------- ------- ------- ELECTRIC SALES (Thousands of kwh): Residential.......................... 3,230,463 2,923,517 3,229,153 Small commercial and industrial...... 1,056,977 1,010,830 1,042,543 Large commercial..................... 1,696,686 1,624,441 1,650,894 Large industrial..................... 2,736,269 2,671,212 2,625,915 Public authorities................... 1,053,928 1,004,911 1,046,035 ---------- ---------- ---------- Total-ultimate consumers............ 9,774,323 9,234,911 9,594,540 Other electric utilities............. 3,299,510 3,234,758 2,476,921 ---------- ---------- ---------- Total............................... 13,073,833 12,469,669 12,071,461 ---------- ---------- ---------- ---------- ---------- ---------- At December 31, 1993, the Company had 336,124 electric customers. The Company uses efficient coal-fired boilers that are fully equipped with sulfur dioxide removal systems to generate electricity. The Company's system wide emission rate for sulfur dioxide in 1993 was approximately .78 lbs./MMBtu of heat input, which is significantly below the Phase II limit of 1.2 lbs./MMBtu established by the Clean Air Act Amendments for the year 2000. On Monday, August 30, 1993, the Company set a record local peak load of 2,239 Mw, when the temperature at the time of peak reached 94 degrees Fahrenheit (average for the day was 84 degrees Fahrenheit). The record system peak of 3,223 Mw (which included purchases from and short-term sales to other electric utilities) occurred on Thursday, May 30, 1991. The reliability criterion for generation capacity planning is to provide a minimum reserve margin of 18%. At February 28, 1994, the Company owned steam and combustion turbine generating facilities with a capacity of 2,613 Mw and an 80 Mw hydroelectric facility on the Ohio River. See Item 2, Properties. 8 The Company is a participating owner with 14 other electric utilities of Ohio Valley Electric Corporation (OVEC) whose primary customer is the Portsmouth Area uranium-enrichment complex of the U.S. Department of Energy at Piketon, Ohio. The Company has electric transmission interconnections and/or interconnection/interchange agreements with PSI Energy, Kentucky Utilities Company, Southern Indiana Gas and Electric Company, The Cincinnati Gas & Electric Company, Indiana Michigan Power Company, OVEC, Big Rivers Electric Corporation, Tennessee Valley Authority, Wabash Valley Power Association, Indiana Municipal Power Agency, East Kentucky Power Cooperative (East Kentucky), Illinois Municipal Electric Agency, Jacksonville Electric Authority, and Ogelthorpe Power Corporation providing for various interchanges, emergency services, and other working arrangements. The Company and East Kentucky have an agreement that allows East Kentucky to purchase power during its peak season, that period during which the utility's customers use the greatest amount of power, and the Company to sell power during its off-peak season. The agreement entitles East Kentucky to buy from the Company 30 to 145 megawatts from mid-December to mid-February through 1994-95. On February 28, 1991, the Company sold a 12.12% ownership interest in Trimble County Unit 1 to the Illinois Municipal Electric Agency (IMEA), based in Springfield, Illinois, which is an agency of 30 municipalities that own and operate their own electric systems. On February 1, 1993, the Indiana Municipal Power Agency (IMPA), based in Carmel, Indiana, purchased a 12.88% interest in the Trimble County Unit. IMPA is composed of 31 municipalities that have joined together to meet their long-term electric power needs. Both IMEA and IMPA pay their proportionate share for operation and maintenance expenses of the Unit and for fuel and reactant used. They are also responsible for their proportionate share of incremental capital assets acquired. Electric and magnetic fields (sometimes referred to as EMF) surround electric wires or conductors of electricity such as electrical tools, household wiring and appliances, and high voltage electric transmission lines such as those owned by the Company. Certain studies have suggested a possible association between electric and magnetic fields and adverse health effects. The Electric Power Research Institute, of which the Company is a participating member, has expended approximately $65 million since 1987 in its investigation and research with regard to possible health effects posed by exposure to electric and magnetic fields. 9 Gas Operations The sources of gas operating revenues and the volumes of sales for the three years ended December 31, 1993, were as follows: 1993 1992 1991 ---- ---- ---- GAS OPERATING REVENUES (Thousands of $): Residential........................ $112,508 $ 96,175 $ 92,142 Commercial......................... 43,568 36,801 34,913 Industrial......................... 28,310 26,156 18,683 Public authorities................. 13,846 13,884 13,107 ------- ------- ------- Total-ultimate consumers.......... 198,232 173,016 158,845 Gas transportation-net............. 5,147 4,169 5,886 Miscellaneous...................... 1,536 1,341 1,560 ------- ------- ------- Total............................. $204,915 $178,526 $166,291 ------- ------- ------- ------- ------- ------- GAS SALES (Millions of cu. ft.): Residential........................ 24,330 22,465 21,795 Commercial......................... 10,308 9,527 9,160 Industrial......................... 7,817 8,077 5,945 Public authorities................. 3,515 3,864 3,721 ------- ------- ------- Total-ultimate consumers.......... 45,970 43,933 40,621 Gas transported.................... 5,249 4,155 6,231 ------- ------- ------- Total............................. 51,219 48,088 46,852 ------- ------- ------- ------- ------- ------- At December 31, 1993, the Company had 258,185 gas customers. The Company has extensive underground natural gas storage fields that help provide economical and reliable gas service to ultimate consumers. Reflecting the changing nature of the gas business, a number of industrial customers purchase their natural gas requirements directly from producers or brokers for delivery through the Company's distribution system. Transportation of natural gas for the Company's customers does not have an adverse effect on earnings because of the offsetting decrease in gas supply expenses. The transportation rates are designed to make the Company economically indifferent as to whether gas is sold or merely transported. The all-time maximum day gas sendout of 545,000 Mcf occurred on Sunday, January 20, 1985, when the average temperature for the day was -11 degrees Fahrenheit. During 1993, the maximum day gas sendout was 447,000 Mcf, occurring on February 18, when the average temperature for the day was 11 degrees Fahrenheit. Supply on that day consisted of 171,000 Mcf from purchases, 238,000 Mcf delivered from underground storage, and 38,000 Mcf transported for industrial customers. For further discussion, see Gas Supply. 10 On November 1, 1993, the Company began purchasing and transporting its natural gas supplies under the new requirements created by FERC Order No. 636 which was issued in 1992. While the Company had previously been able to purchase natural gas and pipeline transportation services from Texas Gas Transmission Corporation (Texas Gas), the Company now purchases only transportation services from Texas Gas pursuant to its FERC-approved tariff and acquires its supply of natural gas from several other sources. Throughout 1993, the Company undertook a review to evaluate and select the pipeline services and gas supplies needed. As a result of this review, the Company entered into several distinct transportation and purchase agreements. The Company should benefit from FERC Order No. 636 through enhanced access to competitively priced natural gas supplies as well as more flexible transportation services. The Company has made the necessary modifications to its operations and to its gas supply clause to reflect these Order No. 636 changes. (For further discussion see Gas Supply.) Regulation and Rates The Kentucky Commission has regulatory jurisdiction over the rates and service of the Company and over the issuance of certain of its securities. The Company is a "public utility" as defined in the Federal Power Act, and is subject to the jurisdiction of the Department of Energy and the FERC with respect to the matters covered in such Act, including the sale of electric energy at wholesale in interstate commerce. In addition, the FERC has sole jurisdiction over the issuance by the Company of short-term securities. For a discussion of the most recent rate order of the Kentucky Commission, see Rates and Regulation under Item 7 and Note 8 of the Notes to Financial Statements under Item 8. Increases and decreases in the cost of fuel for electric generation are reflected in the rates charged to all of the Company's electric customers by means of the Company's fuel adjustment clause. The Kentucky Commission requires public hearings at six-month intervals to examine past fuel adjustments, and at two-year intervals for the purpose of additional examination and transfer of the then current fuel adjustment charge or credit to the base charges. The Commission also requires that electric utilities, including the Company, file certain documents relating to fuel procurement and the purchase of power and energy from other utilities. The Company's gas rates contain a gas supply clause (GSC), whereby increases or decreases in the cost of gas supply are reflected in the Company's rates, subject to approval of the Kentucky Commission. The GSC procedure prescribed by order of the Commission provides for quarterly rate adjustments to reflect the expected cost of gas supply in that quarter. In addition, the GSC contains a mechanism whereby any over- or under-recoveries of gas supply cost from prior quarters will be refunded to or recovered from customers through the adjustment factor determined for subsequent quarters. 11 In November 1993, the Commission approved a comprehensive agreement on demand side management (DSM) programs. The agreement contains a rate mechanism that provides for the recovery of DSM program costs, allows the Company to recover revenues due to lost sales associated with the DSM programs and provides the Company an incentive for implementing DSM programs. See Rates and Regulation under Item 7 for a further discussion of DSM. As part of the corporate reorganization whereby the Company became the subsidiary of LG&E Energy Corp., the Company obtained the approval of the Kentucky Commission. The order of the Kentucky Commission authorizing the Company to reorganize into a holding company structure contains certain provisions, which, among other things, ensure the Kentucky Commission access to books and records of Energy Corp. and its affiliates which relate to transactions with the Company; require Energy Corp. and its subsidiaries to employ accounting and other procedures and controls to protect against subsidization of non-utility activities by the Company's customers; and preclude the Company from guaranteeing any obligations of Energy Corp. without prior written consent from the Kentucky Commission. In addition, such order provides that the Company's board of directors has the responsibility to use its dividend policy consistent with preserving the financial strength of the Company and that the Kentucky Commission, through its authority over the Company's capital structure, can protect the Company's ratepayers from the financial effects resulting from non-utility activities. Construction Program and Financing The Company's construction program is designed to assure that there will be adequate capacity to meet the future electric and gas needs of its service area. These needs are continually being reassessed and appropriate revisions are made, when necessary, in construction schedules. The Company's estimates of its construction expenditures can vary substantially due to numerous items beyond the Company's control, such as changes in rates, economic conditions, construction costs, and new environmental or other governmental laws and regulations. At December 31, 1993, the Company's embedded cost of long-term debt was 6.4% and its ratio of earnings to fixed charges was 3.87. See Exhibit 12. For a further discussion of construction expenditures and financing, see Construction Expenditures and Capitalization and Liquidity under Item 7. During the five years ended December 31, 1993, gross property additions amounted to $580 million. Funds for about 97% of these gross additions were generated internally. The gross additions during this period amounted to approximately 24% of total utility plant at December 31, 1993, and consisted of $480 million for electric properties and $100 million for gas properties. Gross retirements during the same period were $40 million, consisting of $29 million for electric properties and $11 million for gas properties. 12 Coal Supply Ninety percent of the Company's present electric generating capacity is coal-fired, the remainder being made up of a hydroelectric plant and combustion turbine peaking units fueled by natural gas and oil. Coal will be the predominant fuel used by the Company in the foreseeable future, with natural gas and oil being used for peaking capacity and flame stabilization in coal-fired boilers or in emergencies. The Company has no nuclear generating units and has no plans to build any in the foreseeable future. In 1992, the Company entered into coal supply agreements with various suppliers for coal deliveries for 1993 and beyond. The Company normally augments its coal supply agreements with spot market purchases which, during 1993, were about 10% of total purchases. The Company has a coal inventory policy, which is in compliance with the Kentucky Commission's directives and which the Company believes provides adequate protection under most contingencies. The Company had on hand at December 31, 1993, a coal inventory of approximately 433,000 tons, or a 28 day supply. The Company expects, for the foreseeable future, to continue purchasing most of its coal from western Kentucky and southwest Indiana, which has a sulfur content in the 2%-3.5% range. The abundant supply of this relatively low priced coal, combined with present and future desulfurization technologies, is expected to enable the Company to continue to provide adequate electric service in a manner acceptable under existing environmental laws and regulations. Coal for the Company's Mill Creek plant is delivered by rail and barge, whereas deliveries to the Cane Run plant are primarily by rail and also by truck. Deliveries to the Trimble County plant are by barge only. The average delivered cost of coal purchased by the Company, per ton and per million Btu, for the periods shown were as follows: 1993 1992 1991 ---- ---- ---- Per ton.............................. $26.58 $25.17 $24.51 Per million Btu...................... 1.14 1.09 1.06 Gas Supply During 1993, the Company continued to purchase natural gas from and transport other natural gas supplies through Texas Gas at rates and terms regulated by the FERC. The Company also continued purchasing a portion of its natural gas supplies on the spot-market and transporting those supplies under various transportation agreements with Texas Gas pursuant to applicable FERC-approved tariffs. The Company received standby service from Texas Gas until its implementation of FERC Order No. 636. 13 As a result of FERC Order No. 636 and effective November 1, 1993, the Company entered into new transportation service agreements with Texas Gas. These agreements provide for 30,000 MMBtu (29,268 Mcf) per day in Firm Transportation (FT) throughout the year. This FT agreement expires October 31, 1997. During the winter months, the Company also has 184,900 MMBtu (180,390 Mcf) per day in No-Notice Service (NNS); during the summer months that NNS level is 135,000 MMBtu (131,707 Mcf) per day. The Company's NNS agreements with Texas Gas incorporate terms of 2, 5, and 8 years, and include unilateral roll-over provisions at the Company's option. These transportation services are provided by Texas Gas pursuant to its FERC-approved tariff. Contemporaneously with the conclusion of its transportation arrangements with Texas Gas, the Company also entered into a series of long-term firm supply arrangements with various suppliers in order to meet its firm sales obligations. The gas supply arrangements include pricing provisions which are market-responsive. These firm supplies, in tandem with pipeline transportation services, provide the reliable and flexible supply needed to replace the bundled sales service formerly supplied by the pipeline. During 1994, the Company will be participating in several regulatory proceedings at FERC. Particularly, the Company will be involved in reviewing Texas Gas' most recent rate filing, and Texas Gas' filing to recover certain transition costs associated with the FERC-mandated implementation of FERC Order No. 636. As a separate matter, the Kentucky Commission has indicated in an order issued in its Administrative Case No. 346 that transition costs, which are clearly identified as being related to the cost of the commodity itself, are appropriately recovered as a gas cost through the Company's purchased gas adjustment. The Company operates five underground gas storage fields with a current working gas capacity of 14.6 million Mcf. Gas is purchased and injected into storage during the summer season and is then withdrawn to supplement pipeline supplies to meet the gas-system load requirements during the winter heating season. The estimated maximum deliverability from storage during the early part of the 1992-1993 heating season was approximately 373,000 Mcf per day. Deliverability decreases during the latter portion of the heating season as the storage inventory is reduced by seasonal withdrawals. The average cost per Mcf of natural gas purchased by the Company was $2.91 in 1993, $2.77 in 1992, and $2.39 in 1991. Although upcoming regulatory changes may alter the ways in which the Company contracts for natural gas supplies, it is expected that the Company will continue to have adequate access to natural gas supplies at market sensitive prices. 14 Environmental Matters Protection of the environment is a major priority for the Company. The Company engages in a variety of activities within the jurisdiction of federal, state, and local regulatory agencies. Those agencies have issued the Company permits for various activities subject to air quality, water quality, and waste management laws and regulations. For the five year period ending with 1993, expenditures for pollution control facilities represented $128 million or 22% of total construction expenditures. The cost of operating and maintaining these facilities amounted to $22 million in both 1993 and 1992. The Company's anticipated capital expenditures for 1994 to comply with environmental laws are approximately $22 million. See Item 3 and Note 7 of Notes to Financial Statements under Item 8 for a discussion of specific environmental proceedings affecting the Company. Labor Relations The Company's 1,652 operating, maintenance and construction employees are members of the International Brotherhood of Electrical Workers (IBEW) Local 2100. On May 31, 1992, the IBEW voted to ratify a new three-year collective bargaining agreement. The new agreement became effective in November 1992 and will expire in November 1995. Employees The Company had 2,749 full-time employees at December 31, 1993. During the last quarter of 1993 and early 1994, the Company eliminated a number of full-time positions, and made early retirement available to a number of other employees. See Note 2 of Notes to Financial Statements under Item 8 for a further discussion of this matter. 15 ITEM 2. Properties. - -------------------- At February 28, 1994, the Company owned and operated the following electric generating stations: Year in Steam Stations: Service Capability Rating (Kw) ------- ---------------------- Mill Creek-Kosmosdale, Ky. Unit 1.......................... 1972 303,000 Unit 2.......................... 1974 301,000 Unit 3.......................... 1978 386,000 Unit 4.......................... 1982 466,000 1,456,000 ------- Cane Run-near Louisville, Ky. Unit 3.......................... 1958 115,000 Unit 4.......................... 1962 155,000 Unit 5.......................... 1966 168,000 Unit 6.......................... 1969 240,000 678,000 ------- Trimble County-Bedford, Ky. Unit 1.......................... 1990 371,000 (1) Combustion Turbine Generators (Peaking capability): Zorn............................ 1969 16,000 Paddy's Run..................... 1968 43,000 Cane Run........................ 1968 16,000 Waterside....................... 1964 33,000 108,000 ------- --------- 2,613,000 --------- --------- (1) Amount shown represents the Company's 75% interest in the Unit. See Note 9 of the Notes to Financial Statements, Jointly Owned Electric Utility Plant, under Item 8 for a discussion of the sale of 25% of the Unit to IMEA and IMPA. The Company is responsible for operation of the Unit and is reimbursed by IMEA and IMPA for expenditures related to the Unit based on their proportionate share of ownership interest. The Company's steam stations consist mainly of coal-fired units except for Cane Run Unit 3 which must use natural gas because of restrictions mandated by environmental regulations. The Company also owns an 80 Mw hydroelectric generating station located in Louisville, operated under license issued by the FERC. At December 31, 1993, the Company's electric transmission system included 20 substations with a total capacity of approximately 10,518,897 Kva and approximately 645 structure miles of lines. The electric distribution system included 84 substations with a total capacity of approximately 2,948,768 Kva, 3,499 structure miles of overhead lines, 231 miles of underground conduit, and 5,170 miles of underground conductors. 16 The Company's gas transmission system includes 177 miles of transmission mains, and the gas distribution system includes 3,226 miles of distribution mains. The Company operates underground gas storage facilities with a current working gas capacity of approximately 14.6 million Mcf. See Gas Supply under Item 1. In 1990, the Company entered into an operating lease for its corporate office building located in downtown Louisville, Kentucky. The lease is for a period of 15 years and is scheduled to expire June 30, 2005. Other properties owned by the Company include office buildings, service centers, warehouses, garages, and other structures and equipment, the use of which is common to both the electric and gas departments. The trust indenture securing the Company's First Mortgage Bonds constitutes a direct first mortgage lien upon substantially all property owned by the Company. ITEM 3. Legal Proceedings. - --------------------------- Rate Case and Trimble County Station For a discussion of the most recent rate order of the Public Service Commission of Kentucky and a detailed discussion of the orders of the Kentucky Commission and rulings of the Franklin Circuit Court and the Kentucky Court of Appeals concerning Trimble County Unit 1, see Item 7 and Note 8 of Notes to Financial Statements under Item 8. Statewide Power Planning As required by the regulations of the Kentucky Commission, on November 15, 1993, the Company filed its 1993 biennial Integrated Resource Plan with the Kentucky Commission. The plan which updates the Company's first Integrated Resource Plan filed in 1991, proposes to meet customers' future demand through 2007 by adding resources in small increments such as short-term power purchases (1996-1999), a customer-owned standby generation program (1997), two combustion turbines (1999-2000), an air conditioner load controls program (2001-2003), an upgrade to the Company's existing hydroelectric plant (2003), and a compressed air energy storage plant (2004). The Kentucky Commission staff is in the process of reviewing the Company's plan, and is not expected to issue its report and recommendations concerning the plan until late 1994 at the earliest. The Kentucky Commission's regulations do not require it to hold any hearings or issue any formal orders regarding the Plan. 17 Environmental The Clean Air Act Amendments of 1990 impose stringent limits on emissions of sulfur dioxide and nitrogen oxides by electric utility generating plants. This legislation is extremely complex and its effect will substantially depend on regulations issued by the U.S. Environmental Protection Agency. While the Company will incur some capital expenditures to comply with the Act's requirements, the overall impact of the Act on the Company is expected to be minimal. The Company is closely monitoring the continuing rule-making process in order to assess the precise impact of the legislation on the Company. For a complete discussion of the Company's environmental issues concerning its Mill Creek and Cane Run generating plants, manufacturing gas plant sites, and certain other environmental issues, see Note 7 of the Notes to Financial Statements under Item 8. Based upon prior precedents established by the Kentucky Commission and the Environmental Cost Recovery legislation, the Company expects to have an opportunity to recover through future ratemaking proceedings, its costs associated with remedial measures required to comply with environmental laws and regulations. Other The Company is a defendant in lawsuits seeking compensatory and, in certain instances, punitive damages for injuries purportedly incurred by individuals coming into contact with the Company's electric or gas facilities and/or services. To the extent that damages are assessed in any of these lawsuits, the Company believes that its insurance coverage is adequate and that the effect of any such damages will not be material. 18 ITEM 4. Submission of Matters to a Vote of Security Holders. - ------------------------------------------------------------- None Executive Officers of the Company. Effective Date of Election Name Age Position to Present Position - ---- --- -------- -------------------------- Roger W. Hale 50 Chairman of the Board and Chief Executive Officer January 1, 1992 Victor A. Staffieri 38 President January 1, 1994 David R. Carey 40 Senior Vice President, Operations January 1, 1994 Raymond A. Bennett 60 Vice President, Gas Service Business January 1, 1994 M. Lee Fowler 57 Vice President and Controller September 1, 1988 Wendy C. Heck 40 Vice President, Information Services January 1, 1994 Chris Hermann 46 Vice President and General Manager, Wholesale Electric Business January 1, 1993 Charles A. Markel III 46 Treasurer January 1, 1993 19 The present term of office of each of the above executive officers extends to the meeting of the Board of Directors following the Annual Meeting of Stockholders, scheduled to be held May 24, 1994. There are no family relationships between executive officers of the Company. Mr. Fowler, Ms. Heck, Mr. Hermann, and Mr. Markel have been employed for more than five years in executive or management positions with the Company. Prior to election to the position shown in the table, the following executive officers held other positions with the Company since January 1, 1989: Ms. Heck was Manager-Internal Audit prior to January 1990, Vice President-Internal Auditing prior to January 1, 1992, Vice President-Fuels and Operating Services prior to January 1, 1993, and Vice President-Fuels and Information Services thereafter; Mr. Hermann was Manager-Administration, Power Production prior to November 1989, General Manager-Power Production prior to January 1992 and General Manager-Wholesale Electric thereafter; Mr. Markel was Vice President and Treasurer prior to March 1, 1990, Vice President-Finance and Treasurer prior to January 1, 1992, and Senior Vice President and Chief Financial Officer thereafter. Effective January 1, 1993, Mr. Markel was named Corporate Vice President-Finance and Treasurer of the parent company, LG&E Energy Corp. Prior to election to his current position, Mr. Hale was Chairman of the Board, President and Chief Executive Officer of the Company, and prior to February 1, 1990, President and Chief Executive Officer. Prior to June 1, 1989, Mr. Hale was employed by BellSouth Enterprises, Inc. and held the position of Executive Vice President. Prior to election to his current position, Mr. Staffieri was Senior Vice President-Public Policy, and General Counsel of the Company, and prior to November 15, 1992, Senior Vice President, General Counsel and Corporate Secretary. Prior to March 15, 1992, Mr. Staffieri was employed by Long Island Lighting Company and held the position of General Counsel and Secretary from April 1989 to March 1992, and Deputy General Counsel prior to April 1989. Prior to election to his current position, Mr. Carey was Vice President and General Manager, Retail Electric Business of the Company, prior to January 1, 1993, Vice President-Marketing and General Manager, Electric Service, prior to January 1, 1992, Vice President-Marketing and Planning, and prior to July 14, 1990, Vice President-Marketing and Sales. Prior to January 1990, Mr. Carey was employed by AT&T General Business Systems and held the position of Director-Strategic and Business Planning. Prior to election to his current position, Mr. Bennett was Vice President and General Manager, Gas Service Business of the Company, and prior to January 1, 1992, General Manager, Gas Operations. Prior to May 1990, Mr. Bennett was employed by the Railroad Commission of Texas and held the position of Director of Transportation-Gas Utility Division. 20 PART II ------- ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters. - -------------------------------------------------------------------------- All Louisville Gas and Electric Company common stock, 21,294,223 shares, is held by LG&E Energy Corp. Therefore, there is no public trading market for the Company's common stock. The following table sets forth the cash distributions on common stock paid to LG&E Energy Corp. for the periods indicated: 1993 1992 ---- ---- (Thousands of $) First Quarter................................ $17,000 $16,000 Second Quarter............................... 16,500 16,000 Third Quarter................................ 16,500 17,000 Fourth Quarter............................... 17,000 17,500 ITEM 6. Selected Financial Data. - --------------------------------- Years Ended December 31 (Thousands of $) ----------------------------------------------------- 1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Operating Revenues.... $775,125 $700,195 $708,706 $698,758 $686,996 Net Operating Income.. 136,118 125,829 142,730 137,717 127,560 Net Income............ 90,535 73,793 94,643 101,686 76,091 Net Income Available for Common Stock.... 84,554 66,620 85,179 92,221 66,625 Total Assets.......... 2,072,910 1,973,039 1,948,410 1,995,782 1,905,306 Long-Term Obligations (including amounts due within one year)............... 662,800 686,262 687,662 688,250 629,500 ITEM 7. Management's Discussion and Analysis of Results of Operations and Financial Condition. - -------------------------------------------------------------------------- OVERVIEW The Company's financial condition improved during 1993. Net income increased $16.7 million or 23% over 1992 due primarily to higher electric sales which resulted from the warmer summer weather experienced in 1993. The Company also maintained its strong credit ratings throughout 1993. 21 Effective January 1, 1994, the Company's parent, LG&E Energy Corp., announced a major realignment of its business units to reflect its outlook for rapidly emerging competition in all segments of the energy services industry. In addition to the organizational change implemented by the parent, the Company is presently re-evaluating its regulatory strategy to pursue full cost recovery of certain deferred expenses which the Company has recorded as regulatory assets. See Future Outlook for a further discussion of this matter. The following discussion and analysis by management focuses on those factors that had a material effect on the Company's financial results of operations and financial condition during 1993 and 1992 and should be read in connection with the financial statements and notes thereto. RESULTS OF OPERATIONS Net Income Available for Common Stock The $17.9 million increase in earnings for 1993 over 1992 resulted primarily from increased electric sales attributable to warmer summer weather experienced in 1993, higher sales to other utilities, reduced costs for debt and preferred stock attributable to favorable refinancing activities, and a gain recognized on the sale of the remaining disallowed portion of the Trimble County plant to the Indiana Municipal Power Agency (IMPA). These items were partially offset by a higher level of operation and maintenance expense. The decrease in earnings for 1992 from 1991 resulted primarily from decreased electric sales to residential customers as a result of the cooler summer weather experienced in 1992, the gain recognized in 1991 on the sale of a portion of the Trimble County plant to the Illinois Municipal Electric Agency (IMEA), higher depreciation and operation expenses and decreased interest earned on temporary cash investments. These decreases were partially offset by favorable financing activities and decreased maintenance expenses. Rates and Regulation The Company is subject to the jurisdiction of the Public Service Commission of Kentucky (Commission) in virtually all matters related to electric and gas utility regulation. The Company last filed for a rate increase with the Commission in June 1990 based on the test-year ended April 30, 1990. The request was for a general rate increase of $34.9 million ($31.0 million electric and $3.9 million gas). A final order was issued in September 1991 that effectively granted the Company an annual increase in rates of $6.8 million ($6.1 million electric and $.7 million gas). The Commission's order authorized a rate of return on common equity of 12.5%. 22 On April 21, 1993, the Company, the Kentucky Attorney General, the Jefferson County Attorney, and representatives of several customer-interest groups filed with the Commission a request for approval of a comprehensive agreement on demand side management (DSM) programs. Under the agreement, the Company will commit up to $3.3 million over three years (from 1994 through 1996) for initial programs that include a residential energy conservation and education program and a commercial conservation audit program. Future programs will be developed through a formal collaborative process. The agreement contains a rate mechanism that will (1) provide the Company concurrent recovery of DSM program costs, (2) provide the Company an incentive for implementing DSM programs, and (3) allow the Company to recover revenues due to lost sales associated with the DSM programs. On November 12, 1993, the Commission approved the agreement. Revenues from lost sales to residential customers are collected through a "decoupling mechanism". The Company's residential decoupling mechanism breaks the link between the level of the Company's residential kilowatt-hour and Mcf sales and its non-fuel revenues. Under traditional regulation, a utility's revenue varies with changes in its level of kilowatt-hour or Mcf sales. The residential decoupling mechanism will allow the Company to recover a predetermined level of revenue per customer based on the rate set in the Company's last rate case, which will not vary with the level of kilowatt-hour or Mcf sales. Residential revenues will be adjusted to reflect (1) changes in the number of residential customers and (2) a pre-established annual growth factor in residential revenue per customer. Decoupling, in effect, removes the impact on the Company's non-fuel revenues from changes in kilowatt-hour or Mcf sales due to weather, fluctuations in the economy, and conservation efforts. Under this mechanism, if actual sales produce lower revenues than are produced by the predetermined per-customer amount, the difference is deferred for recovery from customers through an adjustment in rates over a period that will not exceed two years. Conversely, if actual sales produce more revenues than would be realized using the predetermined per-customer amount, the difference will be returned to customers through subsequent rate adjustments over a period not to exceed two years. Residential revenues reported in the financial statements for 1994 through 1996 will be determined in accordance with the agreed upon predetermined amount per-customer plus growth, and recovery of fuel and gas costs. The difference between the revenues shown in the financial statements and the amounts billed to customers will be recorded on the balance sheet and deferred for future recovery from or return to customers. As more fully discussed in Note 8 of Notes to Financial Statements under Item 8, the Commission has set a procedural schedule to determine the appropriate ratemaking treatment to exclude 25% of the Trimble County plant from customer rates. On May 24, 1993, the Federal Energy Regulatory Commission (FERC) gave final approval for a market-based rate tariff and two transmission service tariffs that were filed by the Company. This tariff enables the Company to sell up to 75 Mw of firm generation capacity at market-based rates. It also enables the Company to sell an unlimited amount of non-firm power at market- based rates, as long as the power is from the Company's own generation resources. 23 Under the two transmission service tariffs that were approved by FERC, utilities, independent power producers, and qualifying co-generation or small power production facilities may obtain firm or coordination transmission service from the Company. These tariffs provide open access to the Company's transmission system and enable parties requesting either type of transmission service to transmit wholesale power across the Company's system. However, service under these tariffs is not available to ultimate consumers of electric utility service. Revenues A comparison of operating revenues for the years 1993 and 1992 with the immediately preceding years reflects both increases and decreases which have been segregated by the following principal causes (in thousands of $): Increase (Decrease) From Prior Period ---------------------------------------- Electric Revenues Gas Revenues ------------------ ------------------- Cause 1993 1992 1993 1992 ----- ---- ---- ---- ---- Sales to Ultimate Consumers: Rate increases effective in 1991. $ - $ 748 $ - $ 173 Fuel and gas supply adjustments, etc............... 6,832 313 19,479 1,044 Variation in sales volumes....... 27,385 (26,354) 5,736 12,954 ------ ------ ------ ------ Total.......................... 34,217 (25,293) 25,215 14,171 Sales to other utilities........... 13,261 4,953 - - Gas transportation-net............. - - 978 (1,717) Other.............................. 1,063 (406) 196 (219) ------ ------ ------ ------- Total.......................... $48,541 $(20,746) $26,389 $12,235 ------ ------ ------ ------ ------ ------ ------ ------ Electric revenues increased in 1993 primarily because of the warmer summer weather. Sales of electricity to other utilities increased over 1992 levels due to the Company's aggressive efforts in marketing off-system sales of energy. The increase in gas sales for 1993 is largely attributable to cooler winter weather in the region and customer growth. Expenses Fuel for electric generation and gas supply expenses account for a large segment of the Company's total operating costs. The Company's electric and gas rates contain a fuel adjustment clause and a gas supply clause, respectively, whereby increases or decreases in the cost of fuel and gas supply may be reflected in the Company's rates, subject to the approval of the Commission. 24 Fuel expenses increased in 1993 primarily because of an increase in generation and the higher cost of coal purchased. The average delivered cost per ton of coal purchased was $26.58 in 1993, $25.17 in 1992, and $24.51 in 1991. The increase in power purchased expense reflects an increase in the quantity of power purchased mainly because of wheeling arrangements with other utilities. Gas supply expenses increased in 1993 and 1992 largely because of an increase in both the cost and the volume of gas purchased. The average unit cost per Mcf of purchased gas was $2.91 in 1993, $2.77 in 1992, and $2.39 in 1991. Other operation and maintenance expenses increased $7.4 million in 1993. This increase is primarily attributable to increased expenses for the operation and maintenance of electric generating plants and higher administrative and general costs. The increase in 1992 over 1991 resulted primarily from costs associated with legal settlements relating to personal injury claims and storm damage expenses. General increases in labor and material costs are also reflected in operation and maintenance expenses. Variations in income tax expenses are largely attributable to changes in pre-tax income and an increase in the corporate Federal income tax rate from 34% to 35% effective January 1, 1993. Other income and (deductions) increased in 1993 primarily because of a $3.2 million after-tax gain recorded on the sale of a 12.88% ownership interest in the Trimble County plant to IMPA in February 1993. A decrease in 1992 from 1991 resulted primarily from a $4.2 million after-tax gain recorded in 1991 on the sale of a 12.12% ownership interest in Trimble County to IMEA and decreased interest income of $1.1 million from temporary cash investments. Interest charges decreased in 1993 and 1992 primarily because of an aggressive program to refinance at lower interest rates. The Company refinanced approximately $205 million of its outstanding debt in 1993. The embedded cost of long-term debt at December 31, 1993, was 6.4%; at December 31, 1992, 7.0%. Preferred dividends reflect the lower dividend rates that resulted from the Company's refunding of the $25 million, $8.90 Series with a $5.875 Series in May 1993. In February 1992, the Company refunded the $8.72 and $9.54 Series with $50 million of Auction Rate Series. The weighted average preferred dividend rate at December 31, 1993, was 4.72%; at December 31, 1992, 5.36%. The rate of inflation may have a significant impact on the Company's operations, its ability to control costs, and the need to seek timely and adequate rate adjustments. However, relatively low rates of inflation in the past few years have moderated the impact on current operating results. 25 Reference is made to Note 2 of Notes to Financial Statements under Item 8 for a discussion of SFAS No. 112, Employers' Accounting for Post-Employment Benefits which will be effective in 1994. Reference is also made to Notes 1 and 2 which refer to the adoption of SFAS No. 106, Employers' Accounting for Post-Retirement Benefits Other Than Pensions and SFAS No. 109, Accounting for Income Taxes. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company's need for capital funds is primarily related to the construction of plant and equipment necessary to meet electric and gas customers' needs and protection of the environment. The Company's capital needs, earnings and cash flow are somewhat dependent on events beyond the Company's control, such as weather, regulatory actions, the state of the economy, and changes in existing governmental and environmental regulations. Based on current conditions, the Company expects to have sufficient cash flow and the ability to raise sufficient capital in 1994 and 1995 to meet its capital requirements and operating expenses. Construction Expenditures New construction expenditures for 1993 were $99 million compared with $101 million in 1992 and $88 million in 1991. Internally generated funds provided for 100% of the construction expenditures in 1993, 87% in 1992, and 100% in 1991. Construction expenditures for the calendar years 1994 and 1995 are estimated to total approximately $200 million. The Company presently expects to fund its construction expenditures for the two years mainly from internal cash generation. Capitalization and Liquidity The Company maintains a strong capital structure. Reference is made to Notes 4 and 5 of Notes to Financial Statements under Item 8 for a discussion of preferred stock and long-term debt refinancings during the year which have produced significant savings from lower interest and preferred dividend rates. The Company has outstanding interest rate swap agreements totaling $30 million. Under the agreements, which were entered into in 1992, the Company pays a fixed rate of 4.35% on $15 million for a five-year period and 4.74% on $15 million for a seven-year period. In return, the Company receives a floating rate based on the weighted average JJ Kenny index. At December 31, 1993, the rate on the JJ Kenny index was 3.25%. At December 31, 1993, the Company had unused lines of credit of $145 million for which it pays commitment fees. The lines are scheduled to expire at various periods during 1994 and the Company intends to renegotiate such lines when they expire. 26 Environmental Matters The Clean Air Act Amendments of 1990 impose stringent limits on emissions of sulfur dioxide and nitrogen oxides by electric utility generating plants. The Company is closely monitoring the continuing rule-making process in order to assess the precise impact of the legislation on the Company. All of the Company's coal-fired boilers are equipped with sulfur dioxide "scrubbers" and already achieve the final sulfur dioxide emission rates required by the year 2000 under the legislation. However, as part of its ongoing construction program, the Company anticipates incurring capital expenditures during the next four years of approximately $40 million for remedial measures necessary to meet the Act's requirements for nitrogen oxides. The overall financial impact of the legislation on the Company is expected to be minimal. The Company is well-positioned in the market to be a "clean" power provider without the large capital expenditures that are expected to be incurred by many other utilities. Reference is made to Note 7 of Notes to Financial Statements, Environmental, under Item 8 for a complete discussion of the Company's environmental issues concerning its Mill Creek and Cane Run generating plants, manufactured gas plant sites, and certain other environmental issues. Based upon prior precedents established by the Commission and the Environmental Cost Recovery legislation, the Company expects to have an opportunity to recover through future ratemaking proceedings, its costs associated with remedial measures required to comply with environmental laws and regulations. Energy Policy Act of 1992 The Energy Policy Act of 1992 (EPA92), passed by Congress and signed into law on October 24, 1992, outlines standards for utility industry structure, competition in wholesale power generation and energy conservation. It represents a thorough overhaul of legislation and related regulations that, for the most part, have guided the industry since the 1930s -- the Public Utility Holding Company Act (PUHCA) and the Federal Power Act. EPA92 eliminates the statutory barriers to increased participation by non-utility generators in wholesale power markets. PUHCA was amended to allow qualifying non-utility generators (called "Exempt Wholesale Generators") to operate without the Act's restrictions and to permit utilities subject to PUHCA to invest in non-utility generators. The legislation grants FERC authority to order transmission access and directs FERC to use certain guidelines in establishing transmission rates. The transmission tariffs that FERC approved for the Company provide the type of open access mandated in EPA92. 27 The Act is designed to give utilities a wider choice of sources for their electrical supply than previously available, while creating generating supply options that did not exist under the old law. In passing this legislation, Congress also anticipated that greater competition among electric supply options should result in lower consumer rates. Although the Company cannot predict the exact impact of this legislation, the Company is planning to be a competitive supplier of electric energy. FERC Order No. 636 On November 1, 1993, the Company began purchasing and transporting its natural gas supplies under the new requirements created by FERC Order No. 636 issued in 1992. Whereas the Company had previously been able to purchase natural gas and pipeline transportation services from Texas Gas Transmission Corporation (Texas Gas), the Company now purchases only transportation services from Texas Gas pursuant to its FERC-approved tariff and acquires its supply of natural gas from several other sources. Throughout 1993, the Company undertook a review to evaluate and select the pipeline services and gas supplies needed. As a result of this review, the Company entered into the appropriate transportation and purchase agreements. The Company should benefit from Order No. 636 through enhanced access to competitively priced natural gas supplies as well as more flexible transportation services. The Company has made the necessary modifications to its operations and to its gas supply clause to reflect these Order No. 636 changes. Certain aspects of Order No. 636 have yet to be resolved by the courts, and still others await resolution at FERC. Issues still to be resolved at FERC include the determination and recovery of pipeline costs associated with the transition to and implementation of Order No. 636. Based on pipeline filings to date, the Company estimates that its share of transition costs, which must be approved by FERC, will be approximately $2 million to $3 million a year for both 1994 and 1995. The Commission issued an order, based on proceedings that were held to investigate the impact of Order No. 636 on utilities and ratepayers in Kentucky, providing that transition costs assessed on utilities by the pipelines, which are clearly identified as being related to the cost of the commodity itself, are appropriate to be recovered from customers through the gas supply clause. FUTURE OUTLOOK Work Force Reduction In the fourth quarter of 1993, the Company announced it was reducing its construction, warehouse, and janitorial work force primarily because no new major construction projects are expected in the near future. The Company also offered voluntary separation, primarily through early retirement, to various other employees. This reduction in work force of about 350 employees is projected to cost approximately $11.5 million. The Company will realize significant savings in future years as a result of this work force reduction. 28 Business Realignment In November 1993, LG&E Energy Corp. announced a major realignment and formation of new business units, effective January 1, 1994, to reflect its outlook for rapidly emerging competition in all segments of the energy service industry. The realignment does not affect the regulation of the Company by the Commission. Under the realignment, LG&E Energy Corp. is forming a national business unit, LG&E Energy Services, to develop and manage all of its utility and non-utility electric power generation and concentrate on the marketing and brokering of wholesale electric power on a regional and national basis. The realignment will allow the Company to increase its focus on customer service and to develop more customer options as the local utility industry becomes more competitive in the future. Other In addition to the business realignment mentioned above, the Company is currently in the process of re-evaluating its regulatory strategy to pursue full cost recovery of certain deferred expenses which are recorded as regulatory assets. Depending on the results of this re-evaluation, which should be completed in early 1994, all or part of such regulatory assets may be immediately expensed. See Notes 1, 2, and 7 of Notes to Financial Statements under Item 8 for a discussion of these regulatory assets. The Board of Directors of the Company recently approved the formation of a tax-exempt charitable foundation which will make local, regional, and national charitable contributions to qualified persons and entities. The Board has authorized an initial contribution to the foundation of up to $15 million. The effect of this contribution will be an after-tax charge against income of up to $9 million for the first quarter of 1994. The Company believes this action to be beneficial because it will provide a vehicle to make contributions in support of community needs on a consistent basis. It will also reduce charges against income in future years as contributions will be made by the foundation, rather than directly by the Company. The Company anticipates that funding will occur following the receipt of exempt status for the foundation under the Internal Revenue Code. 29 Item 8. Financial Statements and Supplementary Data - --------------------------------------------------- LOUISVILLE GAS AND ELECTRIC COMPANY STATEMENTS OF INCOME (Thousands of $) Years Ended December 31 ------------------------------ 1993 1992 1991 ---- ---- ---- Operating Revenues Electric................................. $570,210 $521,669 $542,415 Gas...................................... 204,915 178,526 166,291 ------- ------- ------- Total operating revenues (Note 1)...... 775,125 700,195 708,706 ------- ------- ------- Operating Expenses Fuel for electric generation............. 149,436 132,551 132,392 Power purchased.......................... 17,228 12,044 11,478 Gas supply expenses...................... 139,054 115,521 104,212 Other operation expenses................. 136,693 130,740 126,842 Maintenance.............................. 48,414 46,931 49,079 Depreciation and amortization............ 79,655 76,903 73,273 Federal and State income taxes (Note 3)......................... 52,334 43,840 53,195 Property and other taxes................. 16,193 15,836 15,505 ------- ------- ------- Total operating expenses............... 639,007 574,366 565,976 ------- ------- ------- Net Operating Income....................... 136,118 125,829 142,730 Other Income and (Deductions).............. 1,913 (2,203) 4,593 ------- ------- ------- Income before Interest Charges............. 138,031 123,626 147,323 Interest Charges........................... 47,496 49,833 52,680 ------- ------- ------- Net Income................................. 90,535 73,793 94,643 Preferred Stock Dividends.................. 5,981 7,173 9,464 ------- ------- ------- Net Income Available for Common Stock...... $ 84,554 $ 66,620 $ 85,179 ------- ------- ------- ------- ------- ------- The accompanying notes are an integral part of these financial statements. 30 LOUISVILLE GAS AND ELECTRIC COMPANY STATEMENTS OF RETAINED EARNINGS (Thousands of $) Years Ended December 31 ------------------------------ 1993 1992 1991 ---- ---- ---- Balance January 1.......................... $178,667 $181,694 $219,515 Add net income............................. 90,535 73,793 94,643 ------- ------- ------- 269,202 255,487 314,158 ------- ------- ------- Deduct: Cash dividends declared on stock: 5% cumulative preferred........... 1,075 1,076 1,076 7.45% cumulative preferred........ 1,598 1,598 1,598 $8.72 cumulative preferred........ - 454 2,180 $8.90 cumulative preferred........ 1,113 2,225 2,225 $9.54 cumulative preferred........ - 497 2,385 Auction rate cumulative preferred. 1,322 1,323 - $5.875 cumulative preferred....... 873 - - Common............................ 67,500 67,500 123,000 Preferred stock redemption expense. 818 2,147 - ------- ------- ------- 74,299 76,820 132,464 ------- ------- ------- Balance December 31........................ $194,903 $178,667 $181,694 ------- ------- ------- ------- ------- ------- The accompanying notes are an integral part of these financial statements. 31 LOUISVILLE GAS AND ELECTRIC COMPANY BALANCE SHEETS (Thousands of $) ASSETS December 31 ----------------------------- 1993 1992 ---- ---- Utility Plant, at original cost Electric................................... $2,019,139 $1,976,206 Gas........................................ 260,485 240,818 Common..................................... 132,692 121,105 --------- --------- 2,412,316 2,338,129 Less: Reserve for depreciation............ 823,141 754,429 --------- --------- 1,589,175 1,583,700 Construction work in progress.............. 51,785 35,367 --------- --------- 1,640,960 1,619,067 --------- --------- Other Property and Investments - less reserve (Note 1)...................... 22,067 98,832 --------- --------- Current Assets Cash and temporary cash investments........ 44,105 946 Accounts receivable - less reserve of $1,474 in 1993 and $1,109 in 1992........ 104,397 92,719 Materials and supplies - at average cost Fuel (predominantly coal)................ 12,075 21,360 Gas stored underground................... 33,370 34,079 Other.................................... 40,357 41,034 Prepayments................................ 360 467 --------- --------- 234,664 190,605 --------- --------- Deferred Debits and Other Assets Unamortized debt expense................... 24,698 17,282 Accumulated deferred income taxes (Notes 1 and 3)................................... 58,675 12,179 Regulatory asset-income taxes (Note 1)..... 39,651 - Other...................................... 52,195 35,074 --------- --------- 175,219 64,535 --------- --------- $2,072,910 $1,973,039 --------- --------- --------- --------- The accompanying notes are an integral part of these financial statements. 32 LOUISVILLE GAS AND ELECTRIC COMPANY CAPITAL AND LIABILITIES (Thousands of $) December 31 ----------------------------- 1993 1992 ---- ---- Capitalization (see Statements of Capitalization) Common equity.............................. $ 619,237 $ 603,001 Cumulative preferred stock................. 116,716 116,740 Long-term debt............................. 662,879 686,119 --------- --------- 1,398,832 1,405,860 --------- --------- Current Liabilities Long-term debt due within one year......... - 400 Notes payable (Note 6)..................... - 8,000 Accounts payable........................... 93,551 72,452 Dividends declared......................... 18,878 18,522 Accrued taxes.............................. 9,494 7,151 Accrued interest........................... 12,864 12,107 Other...................................... 11,127 11,494 --------- --------- 145,914 130,126 --------- --------- Deferred Credits and Other Credits Accumulated deferred income taxes (Notes 1 and 3)................................... 340,235 295,677 Investment tax credit, in process of amortization............... 91,572 104,623 Customers' advances for construction....... 7,384 6,849 Regulatory liability-income taxes (Note 1). 46,528 - Other...................................... 42,445 29,904 --------- --------- 528,164 437,053 --------- --------- Commitments and Contingencies (Notes 7 and 8) $2,072,910 $1,973,039 --------- --------- --------- --------- The accompanying notes are an integral part of these financial statements. 33 LOUISVILLE GAS AND ELECTRIC COMPANY STATEMENTS OF CASH FLOWS (Thousands of $) Years Ended December 31 -------------------------------- 1993 1992 1991 ---- ---- ---- Cash Flows from Operating Activities Net income............................. $ 90,535 $ 73,793 $ 94,643 Items not requiring cash currently: Depreciation and amortization........ 79,887 79,686 76,431 Deferred income taxes - net.......... 4,938 28,911 23,292 Investment tax credit - net.......... (7,821) (5,033) (11,472) Gain on sale of capital asset........ (3,869) - (7,908) Other................................ 5,877 3,768 3,548 (Increase) decrease in certain net current assets: Accounts receivable.................. (11,678) (7,494) (4,629) Materials and supplies............... 10,671 (8,014) 5,390 Accounts payable..................... 21,099 4,546 (2,963) Accrued taxes........................ 2,343 1,967 (6,353) Accrued interest..................... 757 (1,716) 471 Prepayments and other................ (260) 538 71 Other.................................. (15,587) (11,321) (1,928) ------- ------- ------- Net cash provided from operating activities............... 176,892 159,631 168,593 ------- ------- ------- Cash Flows from Investing Activities Sale of capital asset.................. 91,076 - 94,164 Long-term investment in securities..... (11,097) (10,441) - Construction expenditures.............. (98,787) (101,175) (88,052) ------- ------- ------- Net cash provided from (used for) investing activities............... (18,808) (111,616) 6,112 ------- ------- ------- Cash Flows from Financing Activities Issuance of preferred stock............ 24,716 49,099 - Issuance of first mortgage bonds and pollution control bonds.............. 198,918 88,462 4,233 Redemption of preferred stock.......... (25,558) (51,443) - Retirement of first mortgage bonds and pollution control bonds.......... (231,876) (92,400) (5,088) Decrease in notes payable.............. (8,000) (4,000) (13,000) Payment of dividends................... (73,125) (74,517) (131,662) ------- ------- ------- Net cash used for financing activities......................... (114,925) (84,799) (145,517) ------- ------- ------- The accompanying notes are an integral part of these financial statements. 34 LOUISVILLE GAS AND ELECTRIC COMPANY STATEMENTS OF CASH FLOWS (Thousands of $) Years Ended December 31 -------------------------------- 1993 1992 1991 ---- ---- ---- Net Increase (Decrease) in Cash and Temporary Cash Investments............. $ 43,159 $(36,784) $ 29,188 Cash and Temporary Cash Investments at Beginning of Year...................... 946 37,730 8,542 ------- ------- ------- Cash and Temporary Cash Investments at End of Year............................ $ 44,105 $ 946 $ 37,730 ------- ------- ------- ------- ------- ------- Supplemental Disclosures of Cash Flow Information Cash paid during the year for: Income taxes......................... $ 54,686 $ 19,741 $ 46,481 Interest on borrowed money........... 45,360 50,508 50,744 The accompanying notes are an integral part of these financial statements. 35 LOUISVILLE GAS AND ELECTRIC COMPANY STATEMENTS OF CAPITALIZATION (Thousands of $) December 31 ----------------------------- 1993 1992 ---- ---- Common Equity Common stock, without par value - Authorized 75,000,000 shares, outstanding 21,294,223 shares........... $ 425,170 $ 425,170 Common stock expense...................... (836) (836) Retained earnings......................... 194,903 178,667 --------- --------- $ 619,237 $ 603,001 --------- --------- Cumulative Preferred Stock (Note 4) Redeemable on 30 days notice by the Company Shares Current Outstanding Redemption Price ----------- ---------------- $25 par value, 1,720,000 shares authorized - 5% series........ 860,287 $ 28.00 $ 21,507 $ 21,507 7.45% series..... 858,128 25.75 21,453 21,453 Without par value, 6,750,000 shares authorized - $8.90 series..... - - - 25,000 Auction Rate..... 500,000 100.00 50,000 50,000 $5.875 series.... 250,000 Not Redeemable 25,000 - Preferred stock expense..................... (1,244) (1,220) --------- --------- $ 116,716 $ 116,740 --------- --------- The accompanying notes are an integral part of these financial statements. 36 LOUISVILLE GAS AND ELECTRIC COMPANY STATEMENTS OF CAPITALIZATION (Thousands of $) December 31 ----------------------------- 1993 1992 ---- ---- Long-Term Debt (Note 5) First mortgage bonds - Series due June 1, 1996, 5 5/8%......... $ 16,000 $ 16,000 Series due June 1, 1998, 6 3/4%......... 20,000 20,000 Series due August 1, 2001, 8 1/4%....... - 19,700 Series due July 1, 2002, 7 1/2%......... 20,000 20,000 Series due August 15, 2003, 6%.......... 42,600 - Series due November 1, 2006, 8 1/2%..... - 21,362 Pollution control series: B due September 1, 2006, 6 1/8%....... - 35,200 C due June 1, 1998, 6 1/8%............ - 7,000 C due June 1, 2008, 6 3/8%............ - 35,000 D due October 1, 2004, 6.6%........... - 20,000 D due October 1, 2009, 6.7%........... - 40,000 I due February 15, 2011, 9 3/4%....... - 26,000 J due July 1, 2015, 9 1/4%............ 40,000 40,000 K due December 1, 2016, 7 1/4%........ 27,500 27,500 L due December 1, 2016, 7 1/4%........ 22,500 22,500 N due February 1, 2019, 7 3/4%........ 35,000 35,000 O due February 1, 2019, 7 3/4%........ 35,000 35,000 P due June 15, 2015, 7.45%............ 25,000 25,000 Q due November 1, 2020, 7 5/8%........ 83,335 100,000 R due November 1, 2020, 6.55%......... 41,665 50,000 S due September 1, 2017, variable..... 31,000 31,000 T due September 1, 2017, variable..... 60,000 60,000 U due August 15, 2013, variable....... 35,200 - V due August 15, 2019, 5 5/8%......... 102,000 - W due October 15, 2020, 5.45%......... 26,000 - --------- --------- Total bonds outstanding................. 662,800 686,262 Less long-term debt due within one year. - 400 --------- --------- Long-term first mortgage bonds.......... 662,800 685,862 Unamortized premium on bonds.............. 79 257 --------- --------- 662,879 686,119 --------- --------- Total Capitalization........................ $1,398,832 $1,405,860 --------- --------- --------- --------- The accompanying notes are an integral part of these financial statements. 37 LOUISVILLE GAS AND ELECTRIC COMPANY ----------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- Note 1 - Summary of Significant Accounting Policies - --------------------------------------------------- Louisville Gas and Electric Company (the Company) completed a corporate restructuring on August 17, 1990, pursuant to which the Company became the primary subsidiary of LG&E Energy Corp. All of the Company's Common Stock is held by LG&E Energy Corp. The Company conforms with generally accepted accounting principles as applied to regulated public utilities and as prescribed by the Federal Energy Regulatory Commission (FERC) and the Public Service Commission of Kentucky (Commission). The Company is subject to Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of Regulation. The Company has recorded certain regulatory assets at December 31, 1993, totaling approximately $31 million. See Note 2, Post-Retirement Benefits and Early Retirement/Work Force Reduction, and Note 7, Environmental, for a discussion of these regulatory assets. See Future Outlook under Item 7, Management's Discussion and Analysis, for a discussion of the Company's re-evaluation of its current regulatory strategy in regards to these assets. Utility Plant. The Company's plant is stated at original cost, which includes payroll-related costs such as taxes, fringe benefits, and administrative and general costs. Construction work in progress has been included in the rate base, and, accordingly, the Company has not recorded any allowance for funds used during construction. The cost of plant retired or disposed of in the normal course of business is deducted from plant accounts and such cost plus removal expense less salvage value is charged to the reserve for depreciation. When complete operating units are disposed of, appropriate adjustments are made to the reserve for depreciation and gains and losses, if any, are recognized. In December 1990, the 25% portion of the construction costs of the Trimble County Generating Station (Trimble County), which the Commission disallowed in setting customer rates, was reclassified from the Utility Plant section on the balance sheet to Other Property and Investments. In February 1991, the Company sold a 12.12% undivided interest in Trimble County to the Illinois Municipal Electric Agency (IMEA). In February 1993, the remaining 12.88% of Trimble County not allowed in rates was sold to the Indiana Municipal Power Agency (IMPA). See Notes 8 and 9, Trimble County Generating Plant and Jointly Owned Electric Utility Plant, respectively, for a further discussion. 38 Depreciation. Depreciation is provided on the straight-line method over the estimated service lives of depreciable plant. The amounts provided for 1993 were approximately 3.3% (3.2% electric, 3.2% gas, and 5% common); for 1992, 3.3% (3.2% electric, 3.2% gas, and 5.4% common); and for 1991, 3.3% (3.2% electric, 3% gas, and 6.3% common) of average depreciable plant. Cash and Temporary Cash Investments. The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Temporary cash investments are carried at cost, which approximates fair value. Deferred Income Taxes. Deferred income taxes have been provided for all book-tax temporary differences. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, effective January 1, 1993. SFAS No. 109 adopts the liability method of accounting for income taxes, requiring deferred income tax assets and liabilities to be computed using tax rates that will be in effect when the book and tax temporary differences reverse. For the Company, the change in tax rates applied to accumulated deferred income taxes was not immediately recognized in operating results because of ratemaking treatment. At December 31, 1993, the deferred tax asset, which resulted primarily from unamortized investment tax credits, amounted to approximately $47 million. The deferred tax liability, which resulted primarily from book/tax utility property basis differences, totaled approximately $40 million. Regulatory assets and liabilities were established to recognize the future revenue requirement impact from these deferred taxes. The adoption of SFAS No. 109 did not have a material impact on the results of operations or financial position. The deferred tax balances and related regulatory assets and liabilities have been adjusted to reflect the increase in the corporate income tax rate from 34% to 35%. Investment Tax Credits. Investment tax credits resulted from provisions of the tax law which permitted a reduction of the Company's tax liability based on credits for certain construction expenditures. Investment tax credits deferred and charged to income in prior years are being amortized to income over the estimated lives of the related property that gave rise to the credits. Debt Premium and Expense. Debt premium and expense are amortized over the lives of the related debt issues, consistent with regulatory practices. Revenue Recognition. Revenues are recorded based on service rendered to customers through month end. The Company accrues an estimate for unbilled revenues from the date of each meter reading date to the end of the accounting period. See Management's Discussion and Analysis, Rates and Regulation, under Item 7, for changes in recording residential revenues effective January 1, 1994. Fuel and Gas Costs. The cost of fuel for electric generation is charged to expense as used, and the cost of gas supply is charged to expense as delivered to the distribution system. 39 Revenues and Customer Receivables. The Company is an operating public utility that supplies natural gas to approximately 258,000 customers and electricity to approximately 336,000 customers in Louisville and adjacent areas in Kentucky. Customer receivables and gas and electric revenues arise from deliveries of natural gas and electric energy to a diversified base of residential, commercial and industrial customers and to public authorities and other utilities. For the year ended December 31, 1993, 74% of total operating revenues was derived from electric operations and 26% from gas operations. Fair Value of Financial Instruments. Pursuant to the Financial Accounting Standards Board SFAS No. 107, Disclosures about Fair Value of Financial Instruments, the Company is required to disclose the fair value of financial instruments where practicable. The fair value for certain of the Company's investments and debt are estimated based on quoted market prices for those or similar instruments. Investments for which there are no quoted market prices are stated at cost because a reasonable estimate of fair value cannot be made without incurring excessive costs. The cost and estimated fair value of the Company's financial instruments as of December 31, 1993 and 1992, are as follows (in thousands of $): 1993 1992 ------------------ ------------------ Fair Fair Cost Value Cost Value ---- ----- ---- ----- Long-term investments: Practicable to estimate fair value................. $ 21,538 $ 21,538 $ 10,441 $ 10,441 Not practicable.............. 490 490 557 557 Preferred stock subject to mandatory redemption......... 25,000 24,750 - - Long-term debt................. 662,800 706,078 686,262 726,801 Note 2 - Pension Plans and Retirement Benefits - ---------------------------------------------- Pension Plans. The Company has two non-contributory, defined-benefit pension plans, covering all eligible employees. Retirement benefits are based on the employee's years of service and compensation. The Company's policy is to fund annual actuarial costs, up to the maximum amount deductible for income tax purposes, as determined under the frozen entry age actuarial cost method. In addition, the Company has a supplemental executive retirement plan that covers officers of the Company. The plan provides retirement benefits based on average earnings during the final three years prior to retirement, reduced by social security benefits, any pension benefits received from plans of prior employers, and by amounts received under the pension plans referred to above. 40 Pension cost was $2,669,000 for 1993, $2,598,000 for 1992, and $2,245,000 for 1991, of which approximately $425,000, $241,000, and $306,000, respectively, were charged to construction. The components of periodic pension expense are shown below (in thousands of $): 1993 1992 1991 ---- ---- ---- Service cost-benefits earned during the period.................. $ 4,516 $ 5,459 $ 4,098 Interest cost on projected benefit obligation................. 12,117 11,006 9,340 Actual return on plan assets......... (13,602) (8,850) (26,805) Amortization of transition asset..... (1,112) (1,076) (1,076) Net amortization and deferral........ 750 (3,941) 16,688 ------ ------ ------ Net pension cost..................... $ 2,669 $ 2,598 $ 2,245 ------ ------ ------ ------ ------ ------ The assets of the plans consist primarily of common stocks, corporate bonds, United States government securities, and interests in a pooled real estate investment fund. The funded status of the pension plans at December 31 is shown below (in thousands of $): 1993 1992 ---- ---- Actuarial present value of accumulated plan benefits: Vested.............................................. $137,655 $102,980 Non-Vested.......................................... 17,158 12,900 ------- ------- Accumulated benefit obligation...................... 154,813 115,880 Effect of projected future compensation............. 25,234 31,336 ------- ------- Projected benefit obligation........................ 180,047 147,216 Plan assets at fair value........................... 165,088 155,937 ------- ------- Plan assets (less than) in excess of projected benefit obligation...................... (14,959) 8,721 Unrecognized net transition asset................... (13,636) (14,403) Unrecognized prior service cost..................... 28,671 25,863 Unrecognized net gain............................... (23,860) (41,703) ------- ------- Accrued pension liability............................. $(23,784) $(21,522) ------- ------- ------- ------- The projected benefit obligation was determined using an assumed discount rate of 7.5% for 1993 and 8.5% for 1992. An assumed annual rate of increase in future compensation levels ranged from 3.5% to 4.5% for 1993 and 3.5% to 6.5% for 1992. The assumed long-term rate of return on plan assets was 8.5% for both periods. Transition assets and prior service costs are being amortized over the average remaining service period of active participants. 41 Post-Retirement Benefits. The Company adopted Statement of Financial Accounting Standards No. 106, Employers' Accounting for Post-Retirement Benefits Other Than Pensions (SFAS No. 106) January 1, 1993. SFAS No. 106 requires the accrual of the expected cost of retiree benefits other than pensions during the employee's years of service with the Company. The Company is amortizing the discounted present value of the post-retirement benefit obligation at the date of adoption over 20 years. The Company provides certain health care and life insurance benefits for eligible retired employees. Post-retirement health care benefits are subject to a maximum amount payable by the Company. Prior to January 1, 1993, the cost of retiree health care and life insurance benefits was generally recognized when paid. Beginning in 1993, the Company began to account for post-retirement benefits according to the provisions of SFAS No. 106. The Company, based on an order from the Commission, has created a regulatory asset and is deferring the level of SFAS No. 106 expense in excess of the previous level of pay-as-you-go expense. The Commission's generic order stated that the proper level of expense for SFAS No. 106 would be determined in each utility's next general rate case. The components of the net periodic post-retirement benefit cost for 1993 as calculated under SFAS No. 106 are as follows (in thousands of $): Service cost .............................................. $ 701 Interest cost.............................................. 2,614 Amortization of transition obligation...................... 1,395 ------ Post-retirement benefit cost............................... $ 4,710 ------ ------ The accumulated post-retirement benefit obligation as calculated under SFAS No. 106 at December 31, 1993, is shown below (in thousands of $): Retirees................................................... $(17,826) Fully eligible active employees............................ (4,001) Other active employees..................................... (15,945) ------ Accumulated post-retirement benefit obligation............. (37,772) Unrecognized net loss...................................... 4,966 Unrecognized transition obligation......................... 26,508 Previously recognized amount............................... 3,696 ------ Accrued post-retirement benefit liability.................. $ (2,602) ------ ------ The annual service cost was calculated using an assumed discount rate of 8.5% at January 1, 1993, and 7.5% at December 31, 1993. A medical cost increase factor that ranged between 6% and 11% was also used. 42 A 1% increase in the health care cost trend rate would increase the Accumulated Post-Retirement Benefit Obligation by approximately $1.8 million and the annual service and interest cost by approximately $200,000. No funding has been established by the Company for post-retirement benefits. Post-Employment Benefits. The Financial Accounting Standards Board issued SFAS No. 112, Employers' Accounting for Post-Employment Benefits, which requires the accrual of the expected cost of benefits to former or inactive employees after employment but before retirement. The Company adopted the new standard effective January 1, 1994, as required. Adoption of SFAS No. 112 will not have a material adverse impact on the financial position or results of operation of the Company. Early Retirement/Work Force Reduction. During the last quarter of 1993 and early 1994, the Company eliminated approximately 350 full-time positions. The cost of the employee reduction program, approximately $11.5 million, consists primarily of separation payments, enhanced early retirement benefits, and health care benefits. In 1992, an early retirement program was made available to all the Company union employees who had reached age 55, or who had 35 years or more of continuous service regardless of age. The cost of the program was approximately $7 million and consisted primarily of enhanced early retirement and post-retirement health care benefits. Thrift Savings Plan. The Company has a Thrift Savings Plan under Section 401(k) of the Internal Revenue Code. The plan covers all regular full-time employees with one year or more of service at the Company. Under the plan, eligible employees may defer and contribute to the plan a portion of current compensation in order to provide future retirement benefits. The Company makes contributions to the plan by matching a portion of employee contributions according to a formula established by the plan. These costs were approximately $1,795,000 for 1993, $767,000 for 1992, and $584,000 for 1991. The increase in 1993 401(k) expenses is due to the expansion of the program to the Company's union employees. 43 Note 3 - Federal and State Income Taxes - --------------------------------------- Components of income tax expense are shown in the table below (in thousands of $): 1993 1992 1991 ---- ---- ---- Included in Operating: Current - Federal.................... $31,082 $20,756 $33,727 - State...................... 8,920 6,354 8,126 Deferred - Federal-net................ 13,185 15,771 16,642 - State-net.................. 3,933 5,774 5,939 Deferred investment tax credit........ - - (6,385) Amortization of investment tax credit. (4,786) (4,815) (4,854) ------ ------ ------ Total............................... $52,334 $43,840 $53,195 ------ ------ ------ Included in Other Income and (Deductions): Current - Federal.................... $11,009 $(6,971) $ 1,763 - State...................... 4,034 (3,214) 299 Deferred - Federal-net................ (8,473) 4,670 565 - State-net.................. (3,707) 2,696 146 Deferred investment tax credit........ - 390 26 Amortization of investment tax credit. (3,035) (608) (259) ------ ------ ------ Total............................... $ (172) $(3,037) $ 2,540 ------ ------ ------ Total Income Tax Expense................ $52,162 $40,803 $55,735 ------ ------ ------ ------ ------ ------ Variations in the 1993 income tax expense from 1992 and 1991 are largely attributable to changes in pre-tax income and an increase in the corporate Federal income tax rate from 34% to 35%, effective January 1, 1993. Provisions for deferred income taxes consist of the tax effects of the following temporary differences (in thousands of $): 1993 1992 1991 ---- ---- ---- Depreciation and amortization........... $ (255) $33,839 $23,440 Alternative minimum tax................. 5,387 (5,387) - Other................................... (194) 459 (148) ----- ------ ------ Total................................. $4,938 $28,911 $23,292 ----- ------ ------ ----- ------ ------ 44 Depreciation and amortization fluctuations for 1993 are primarily attributable to the reversal of prior years' accumulated taxes as a result of the sale of a portion of Trimble County Unit 1 to IMPA. See Note 8, Trimble County Generating Plant, for a further discussion of the sale. The following are the tax effects of book-tax temporary differences resulting in deferred tax assets and liabilities as of December 31, 1993 (in thousands of $): Deferred Tax Assets: Investment tax credit................................. $ 36,961 Income taxes due to customers......................... 14,361 Other assets.......................................... 7,353 ------- $ 58,675 ------- ------- Deferred Tax Liabilities: Depreciation and other plant related items............ $322,544 Income taxes due from customers....................... 10,233 Other liabilities..................................... 7,458 ------- $340,235 ------- ------- The Company's effective income tax rate is computed by dividing the aggregate of current income taxes, deferred income taxes-net, and the investment tax credit-net, by net income before the deduction of such taxes. Reconciliation of the statutory Federal income tax rate to the effective income tax rate is shown in the table below: 1993 1992 1991 ---- ---- ---- Statutory Federal income tax rate........ 35.0% 34.0% 34.0% State income taxes net of Federal benefit. 6.0 6.7 6.4 Amortization of investment tax credit..... (5.5) (4.7) (3.4) Other differences-net..................... 1.1 (.4) .1 ---- ---- ---- Effective Income Tax Rate................. 36.6% 35.6% 37.1% ---- ---- ---- ---- ---- ---- Note 4 - Preferred Stock - ------------------------ In May 1993, the Company issued $25 million of $5.875 Cumulative Preferred Stock. The proceeds from the sale were used to redeem the outstanding $8.90 Cumulative Preferred Stock. 45 Note 5 - First Mortgage Bonds - ----------------------------- Annual requirements for the sinking funds of the Company's First Mortgage Bonds (other than the First Mortgage Bonds issued in connection with the Pollution Control Bonds) are the amounts necessary to redeem 1% of the highest principal amount of each series of bonds at any time outstanding. Property additions (166 2/3% of principal amounts of bonds otherwise required to be so redeemed) have been applied in lieu of cash. It is the intent of the Company to apply property additions to meet 1994 sinking fund requirements of the First Mortgage Bonds. The trust indenture securing the First Mortgage Bonds constitutes a direct first mortgage lien upon substantially all property owned by the Company. The indenture, as supplemented, provides in substance that, under certain specified conditions, portions of retained earnings will not be available for the payment of dividends on common stock. No portion of retained earnings is presently restricted by this provision. Pollution Control Bonds (Louisville Gas and Electric Company Projects) issued by Jefferson and Trimble Counties, Kentucky, are secured by the assignment of loan payments by the Company to the Counties pursuant to loan agreements, and further secured by the delivery from time to time of an equal amount of the Company's First Mortgage Bonds, Pollution Control Series. First Mortgage Bonds so delivered are summarized in the Statements of Capitalization. No principal or interest on these First Mortgage Bonds is payable unless default on the loan agreements occurs. The interest rate reflected in the Statements of Capitalization applies to the Pollution Control Bonds. In March 1993, due to the sale of 12.88% of Trimble County Unit 1, the Company completed the defeasance of $25 million of its Pollution Control Bonds ($16.665 million of the 7.625% Series and $8.335 million of the 6.55% Series). The Company issued several series of lower interest bearing First Mortgage and Pollution Control Bonds in 1993 to refinance bonds with higher interest rates. In August, the Company issued two separate series of Pollution Control Bonds (a $35.2 million, Variable Rate Series, which had an interest rate of 2.586% at December 31, 1993, and a $102 million, 5.625% Series) and redeemed five series of Pollution Control Bonds totaling $137.2 million with interest rates ranging from 6.125% to 6.7%. In August, the Company also issued $42.6 million of 6% First Mortgage Bonds and redeemed two series of First Mortgage Bonds ($19.7 million at 8.25% and $21.362 million at 8.5%). In November, the Company issued $26 million of Pollution Control Bonds, 5.45% Series and redeemed the $26 million, 9.75% Series. The Company also entered into an agreement in November 1993 with Goldman, Sachs & Co. to issue $40 million of tax-exempt Pollution Control Bonds in 1995 at a 5.9% rate. The issuance of the bonds in 1995 is subject to certain conditions. If issued, the proceeds will be used to redeem, in 1995, the outstanding 9.25% Series of Pollution Control Bonds due July 1, 2015. 46 The Company has outstanding interest rate swap agreements totaling $30 million. Under the agreements, which were entered into in 1992, the Company pays a fixed rate of 4.35% on $15 million for a five-year period and 4.74% on $15 million for a seven-year period. In return, the Company receives a floating rate based on the weighted average JJ Kenny index. At December 31, 1993, the rate on the JJ Kenny index was 3.25%. The Company's First Mortgage Bonds, 5.625% Series of $16 million is scheduled to mature in 1996 and the 6.75% Series of $20 million is scheduled to mature in 1998. There are no scheduled maturities of Pollution Control Bonds for the five years subsequent to December 31, 1993. Note 6 - Notes Payable - ---------------------- The Company had no notes payable at December 31, 1993. At December 31, 1992, trust demand notes amounted to $8 million on which the composite interest rate was 3.45%. At December 31, 1993, the Company had unused lines of credit of $145 million, for which it pays commitment fees. The credit lines are scheduled to expire at various periods throughout 1994. Management intends to renegotiate these lines when they expire. Note 7 - Commitments and Contingencies - -------------------------------------- Construction Program. The Company had commitments, primarily in connection with its construction program, aggregating approximately $6 million at December 31, 1993. Construction expenditures for the calendar years 1994 and 1995 are estimated to total approximately $200 million. FERC Order No. 636. Order No. 636, which was issued by FERC in 1992, required the Company and all other local distribution companies to revise their practices for purchasing and transporting gas. Whereas the Company had previously purchased natural gas and pipeline transportation services from Texas Gas Transmission Corporation (Texas Gas), the Company now purchases only transportation services from Texas Gas and purchases natural gas from other sources. Under Order No. 636 pipelines may recover costs associated with the transition to and implementation of this order from pipeline customers, including the Company. Based on pipeline filings to date, the Company estimates that its share of transition costs, which must be approved by FERC, will be approximately $2 million to $3 million a year for both 1994 and 1995. The Commission issued an order, based on proceedings that were held to investigate the impact of Order No. 636 on utilities and ratepayers in Kentucky, providing that transition costs assessed on utilities by the pipelines, which are clearly identifiable as being related to the cost of the commodity itself, are appropriate to be recovered from customers through the gas supply clause. 47 Operating Lease. The Company has an operating lease for its corporate office building that is scheduled to expire in June 2005. Total expense in connection with this lease for 1993, 1992, and 1991 was $2,436,000, $2,478,000, and $2,471,000, respectively. The future minimum annual lease payments under the lease agreement for years subsequent to December 31, 1993, are as follows (in thousands of $): 1994.............................. $ 2,148 1995.............................. 2,499 1996.............................. 2,850 1997.............................. 2,850 1998.............................. 2,850 Thereafter........................ 21,810 ------ Total.......................... $35,007 ------ ------ Environmental. The Clean Air Act Amendments of 1990 impose stringent limits on emissions of sulfur dioxide and nitrogen oxides by electric utility generating plants. The legislation is extremely complex and its effect will substantially depend on regulations issued by the U.S. Environmental Protection Agency (USEPA). The Company is closely monitoring the continuing rule-making process in order to assess the precise impact of the legislation on the Company. All of the Company's coal-fired boilers are equipped with sulfur dioxide "scrubbers" and already achieve the final sulfur dioxide emission rates required by the year 2000 under the legislation. However, as part of its ongoing capital construction program, the Company anticipates incurring capital expenditures during the next four years of approximately $40 million for remedial measures necessary to meet the Act's requirements for nitrogen oxides. The overall financial impact of the legislation on the Company is expected to be minimal. The Company is well-positioned in the market to be a "clean" power provider without the large capital expenditures that are expected to be incurred by many other utilities. In 1992, the Company entered two agreed orders with the Air Pollution Control District (APCD) of Jefferson County in which the Company committed to undertake remedial measures to address certain particulate emissions and excess sulfur dioxide emissions from its Mill Creek generating plant. The Company is currently conducting work in compliance with the agreed-upon schedule for remedial measures and has incurred total capital expenditures of approximately $24 million through 1993. Based on current remedial designs, the Company anticipates incurring additional capital costs of approximately $14 million for this project in 1994 as part of its ongoing capital construction program. 48 In an effort to resolve property damage claims relating to particulate emissions from the Mill Creek plant, in July 1993, the Company commenced extensive negotiations and property damage settlements with adjacent residents. The Company currently estimates that property damage claims for the particulate emissions should be settled for an aggregate amount of approximately $12 million. Accordingly, the Company has recorded an accrual of this amount. In August 1993, 34 persons filed a complaint in Jefferson Circuit Court against the Company in which they are seeking certification of a class consisting of all persons within 2.5 miles of the Mill Creek plant. The court has not acted on the request for certification of a class. The plaintiffs seek compensation for alleged personal injury and property damage attributable to the particulate emissions from the Mill Creek plant, injunctive relief, a fund to finance future medical monitoring of area residents, and other relief. The Company intends to vigorously defend itself in the pending litigation. In response to a notification from the APCD that the Company's Cane Run plant may be the source of a potential exceedance of the National Ambient Air Quality Standards for sulfur dioxide, the Company retained a contractor to conduct certain air dispersion modeling. In 1992, the Company submitted a draft action plan and modeling schedule to the APCD and USEPA. The APCD and USEPA have approved the submittals and the Company's contractor is currently conducting additional modeling activities. Although it is expected that corrective action will be accomplished through capital improvements, until the contractor completes its modeling activities, the Company cannot determine the precise impact of this matter. The Company owns or formerly owned three primary sites where manufactured gas plant operations were located. Such manufactured gas plant operations, conducted in the 1838 to 1960 time period, typically produced coal tar byproducts and other constituents that may necessitate cleanup measures. The Company commenced site investigations at the two Company owned sites to determine if significant levels of contaminants are present. The Company has commenced discussions with the current owner of the third site regarding joint performance of a site investigation. The Company anticipates spending a total of approximately $1.3 million on site investigations expected to be completed by 1995. Preliminary testing at all three sites has identified contaminants typical of manufactured gas plant operations. Until an investigation and associated regulatory review is completed for each site, the Company will be unable to predict what, if any, cleanup activities may be necessary. In November 1993, the Company was served with a third-party complaint filed in federal district court in Illinois by three third-party plaintiffs. The third-party plaintiffs allege that the Company and 31 other parties are liable for contributions under the Comprehensive Environmental Response, Compensation, and Liability Act as amended (CERCLA) for $1.4 million in costs allegedly incurred by USEPA in conducting cleanup activities at the M.T. Richards site in Crossville, Illinois. A number of de minimis third-party defendants, including the Company, have commenced preliminary discussions with the third-party plaintiffs. In the Company's opinion, the resolution of the issue will not have a material adverse impact on its financial position or results of operations. 49 In February 1993, the Company was served with an amended complaint filed in federal district court in West Virginia by three potentially responsible parties (PRPs) against the Company and 39 other parties. The plaintiffs alleged that the parties were liable under CERCLA for in excess of $3 million in costs allegedly incurred by the plaintiffs in conducting cleanup activities at the Spencer Transformer Site located in Roane County, West Virginia. In November 1993, the federal court approved a consent decree that resolved the case as to the Company and nine other de minimis parties. Under the terms of the consent decree, the Company reimbursed the plaintiffs for $10,000 in cleanup costs. No further involvement of the Company is anticipated. In June 1992, USEPA identified the Company as a PRP allegedly liable under CERCLA for $1.6 million in costs allegedly incurred by USEPA in cleanup of the Sonora Site and Carlie Middleton Burn Site located in Hardin County, Kentucky. In November 1992, USEPA demanded immediate payment from the PRPs. To date, USEPA has identified nine PRPs for the site. The Company and several other parties have commenced discussions with USEPA. In the Company's opinion, the resolution of this issue will not have a material adverse impact on its financial position or results of operations. In 1987, USEPA identified the Company as one of the numerous PRPs allegedly liable under CERCLA for the Smith's Farm site in Bullitt County, Kentucky. In March 1990, USEPA issued an administrative order requiring the Company and 35 other PRPs to conduct certain cleanup activities. In February 1992, four PRPs filed a complaint in federal district court in Kentucky against the Company and 52 other PRPs. Under the law, each PRP could be held jointly and severally liable for the cost of site cleanup, but would have the right to seek contributions from other PRPs. In July 1993, upon motion of the plaintiffs, the federal court dismissed the Company and a number of others from the litigation in order to facilitate settlement negotiations among the parties. Cleanup costs for the site are currently estimated at approximately $70 million. The Company and several other parties have shared certain cleanup costs in the interim until a voluntary allocation of liability can be reached among the parties. It is not possible at this time to predict the outcome or precise impact of this matter. However, management believes that this matter should not have a material adverse impact on the financial position or results of operations of the Company as other financially viable PRPs appear to have primary liability for the site. Based upon prior precedents established by the Commission and the Environmental Cost Recovery legislation, the Company expects to have an opportunity to recover, through future ratemaking proceedings, its costs associated with remedial measures required to comply with environmental laws and regulations. Charitable Foundation. The Board of Directors of the Company has approved the formation of a tax-exempt charitable foundation with an initial contribution of up to $15 million. See Future Outlook under Item 7, Management's Discussion and Analysis, for a further discussion of this matter. Note 8 - Trimble County Generating Plant - ---------------------------------------- Trimble County Unit 1, a 495-megawatt, coal-fired electric generating unit, was placed in commercial operation on December 23, 1990. 50 This Unit, which during its first three years of commercial operations has operated more reliably than projected, has been the subject of numerous regulatory and legal proceedings. The current regulatory process involving Trimble County is related to an order issued by the Commission on July 1, 1988, which stated that 25% of the total cost of the Unit would not be allowed for ratemaking purposes. In a rehearing order issued in April 1989, the Commission reaffirmed its decision that the Company would not be allowed to include 25% of the cost of the Unit in customer rates; however, this order stated that "the disallowed portion of Trimble County remains with the Company and stockholders for their use." In 1989, the Commission initiated a proceeding to determine the appropriate ratemaking treatment to carry out the order that disallowed rate recovery for 25% of the Unit. Prior to the start of the hearings in this proceeding, the Company filed a motion requesting the Commission to adopt a proposed plan to settle all of the issues surrounding Trimble County. Settlement discussions ensued between the Company, intervenors, and the Commission staff. On October 2, 1989, the Commission approved the settlement agreement reached between the Company and the Commission staff and, in accordance with the terms of the agreement, the Company refunded $2.5 million to its customers in 1989 and reduced its electric rates by $8.5 million for the year beginning January 1, 1990. Certain intervenors, who participated in the proceedings but did not agree to the settlement, appealed the Commission's order approving the settlement to Franklin Circuit Court, claiming, among other things, that the Commission lacked the statutory authority to approve the agreement and that the intervenors who refused to sign the agreement were deprived of due process rights. In February 1991, the Franklin Circuit Court vacated the October 2, 1989 order of the Commission approving the settlement agreement. On September 27, 1991, the Court issued an opinion requiring a refund to ratepayers in excess of $100 million as a result of the Commission's order that disallowed 25% of the total cost of Trimble County from customer rates. The Court further ordered the Company to post a bond if it appealed the Circuit Court's decision. The Company posted a bond of $107 million and appealed all orders of the Circuit Court to the Kentucky Court of Appeals. On April 23, 1993, the Kentucky Court of Appeals overturned the Franklin Circuit Court ruling previously entered in the case. Although the decision upheld the Circuit Court's order vacating the 1989 settlement agreement approved by the Commission, the appeals court ruled that the Franklin Circuit Court order of September 27, 1991, improperly set utility rates in ordering refunds. The intervenor parties requested the Kentucky Supreme Court to review the case, and their request for review was denied on October 20, 1993. Under Kentucky procedural rules, this ruling makes final the Court of Appeals decision and returns the case to the Commission for further proceedings. The Commission has issued orders which set a portion of the procedural schedule for the case. Pursuant to the Commission's orders, the Company filed direct testimony on January 7, 1994. Intervenor parties are scheduled to file testimony on March 28, 1994. No date has been set for a hearing. 51 The Company anticipates that the focus of Commission proceedings will be the determination of the appropriate ratemaking treatment to insulate ratepayers from 25% of Trimble County's costs and the amount of additional refunds, if any, that the Company should return to ratepayers. In previous proceedings in 1988, the Commission had authorized rate increases, subject to refund, of $11.4 million on an annual basis, pending a determination of the appropriate ratemaking treatment for the disallowance. The order remained in effect from May 1988 through December 1990, resulting in an amount subject to refund of approximately $30 million. The Company, through refunds and rate reductions, has already returned to its customers approximately $11 million of the total amount subject to refund. The Company's position is that no additional refunds are needed to carry out the Commission's objective of reflecting the disallowance of 25% of Trimble County in customer rates and the Company may be entitled to recover a portion, or all, of the amounts previously returned to customers. However, the Company is unable to predict the outcome of the Commission proceedings, the amount of additional refunds or recoveries, if any, that may be ordered or whether the Commission will revise its earlier position. Sale of Portion of Trimble County. On February 28, 1991, the Company sold a 12.12% ownership interest in the Trimble County Unit to the Illinois Municipal Electric Agency, based in Springfield, Illinois, which is an agency of 30 municipalities that own and operate their own electric systems. The sale price was $94.2 million and a book gain of $4.2 million, after-tax, was recognized in 1991 as a result of this sale. On February 1, 1993, the Indiana Municipal Power Agency (IMPA), based in Carmel, Indiana, purchased a 12.88% interest in the Trimble County plant. IMPA is composed of 31 municipalities that have joined together to meet their long-term electric power needs. The sale price was $91.1 million and an after-tax book gain of $3.2 million was recorded in 1993 as a result of this sale. The Company has now completed the sale of the entire 25% of Trimble County that the Commission disallowed from customer rates. 52 Note 9 - Jointly Owned Electric Utility Plant - --------------------------------------------- As of December 31, 1993, the Company owned a 75% undivided interest in Trimble County Unit 1. Accounting for the 75% portion of the Unit, which the Commission has allowed to be reflected in customer rates, is similar to the Company's accounting for other wholly owned utility plants. Of the remaining 25% of the Unit: . Illinois Municipal Electric Agency (IMEA) purchased a 12.12% undivided interest in the Unit on February 28, 1991. IMEA pays for 12.12% of the operation and maintenance expenses, their proportionate share of incremental assets acquired and for fuel used. . Indiana Municipal Power Agency (IMPA) purchased a 12.88% undivided interest in the Unit on February 1, 1993. IMPA is responsible for 12.88% of the operation and maintenance expenses, their proportionate share of incremental assets acquired and for fuel used. The following data represent shares of the jointly owned property: Trimble County -------------------------------------- LG&E IMPA IMEA Total ---- ---- ---- ----- Ownership interest.......... 75% 12.88% 12.12% 100% Mw capacity................. 371.25 63.75 60 495 53 Note 10 - Segments of Business - ------------------------------ The Company is an operating public utility engaged in the generation, transmission, distribution, and sale of electricity and the transmission, distribution, and sale of natural gas. 1993 1992 1991 ---- ---- ---- (Thousands of $) Operating Information Operating Revenues Electric........................ $ 570,210 $ 521,669 $ 542,415 Gas............................. 204,915 178,526 166,291 --------- --------- --------- Total......................... $ 775,125 $ 700,195 $ 708,706 --------- --------- --------- --------- --------- --------- Pre-tax Operating Income Electric........................ $ 171,016 $ 154,547 $ 182,349 Gas............................. 17,436 15,122 13,576 --------- --------- --------- Total......................... $ 188,452 $ 169,669 $ 195,925 --------- --------- --------- --------- --------- --------- Other Information Depreciation and Amortization Electric........................ $ 69,753 $ 67,869 $ 65,236 Gas............................. 9,902 9,034 8,037 Non-Jurisdictional.............. 232 2,783 3,158 --------- --------- --------- Total......................... $ 79,887 $ 79,686 $ 76,431 --------- --------- --------- --------- --------- --------- Construction Expenditures Electric........................ $ 74,165 $ 75,630 $ 69,514 Gas............................. 24,622 25,545 18,538 --------- --------- --------- Total......................... $ 98,787 $ 101,175 $ 88,052 --------- --------- --------- --------- --------- --------- Investment Information-December 31 Identifiable Assets Electric........................ $1,616,595 $1,537,219 $1,524,018 Gas............................. 261,048 226,041 195,251 --------- --------- --------- Total......................... $1,877,643 $1,763,260 $1,719,269 Trimble County (a)................ - 87,794 89,824 Other Assets (b).................. 195,267 121,985 139,317 --------- --------- --------- Total Assets.................... $2,072,910 $1,973,039 $1,948,410 --------- --------- --------- --------- --------- --------- (a) Represents the portion of Trimble County not allowed in customer rates. (b) Includes cash and temporary cash investments, accounts receivable, unamortized debt expense, and other property and investments. 54 REPORT OF MANAGEMENT The management of Louisville Gas and Electric Company is responsible for the preparation and integrity of the financial statements and related information included in this Annual Report. These statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis and, necessarily, include amounts that reflect the best estimates and judgment of management. The Company's financial statements have been audited by Arthur Andersen & Co., independent public accountants whose report follows this Report of Management. Management has made available to Arthur Andersen & Co. all the Company's financial records and related data as well as the minutes of shareholders' and directors' meetings. Management has established and maintains a system of internal controls that provide reasonable assurance that transactions are completed in accordance with management's authorization, that assets are safeguarded and that financial statements are prepared in conformity with generally accepted accounting principles. Management believes that an adequate system of internal controls is maintained through the selection and training of personnel, appropriate division of responsibility, establishment and communication of policies and procedures and by regular reviews of internal accounting controls by the Company's internal auditors. Management reviews and modifies its system of internal controls in light of changes in conditions and operations, as well as in response to recommendations from the internal auditors and the independent public accountants. These recommendations for the year ended December 31, 1993 did not identify any significant deficiencies in the design and operation of the Company's internal control structure. The Audit Committee of the Board of Directors is composed entirely of outside directors. In carrying out its oversight role for the financial reporting and internal controls of the Company, the Audit Committee meets regularly with the Company's independent public accountants, internal auditors and management. The Audit Committee reviews the results of the independent accountants' audit of the financial statements and their audit procedures, and discusses the adequacy of internal accounting controls. The Audit Committee also approves the annual internal auditing program, and reviews the activities and results of the internal auditing function. Both the independent public accountants and the internal auditors have access to the Audit Committee at any time. Louisville Gas and Electric Company maintains and internally communicates a written code of business conduct that addresses, among other items, potential conflicts of interest, compliance with laws, including those relating to financial disclosure, and the confidentiality of proprietary information. 55 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO LOUISVILLE GAS AND ELECTRIC COMPANY: We have audited the accompanying balance sheets and statements of capitalization of Louisville Gas and Electric Company (a Kentucky corporation and a wholly owned subsidiary of LG&E Energy Corp.) as of December 31, 1993 and 1992, and the related statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1993. These financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Louisville Gas and Electric Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As further discussed in Note 8, the potential amount of future rate refunds that may be required, if any, once the outcome of the legal and regulatory process is known, is uncertain at this time. As discussed in Notes 1 and 2 to the financial statements, effective January 1, 1993, the Company changed its methods of accounting for income taxes and post-retirement benefits other than pensions. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed under Item 14(a)2 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Louisville, Kentucky, Arthur Andersen & Co. January 28, 1994 -------------------------------------- 56 SELECTED QUARTERLY FINANCIAL DATA (Unaudited) Operating revenues, net operating income, net income and net income available for common stock for the four quarters of 1993 and 1992 are shown below. Because of seasonal fluctuations in temperature and other factors, results for quarters may fluctuate throughout the year. Quarters Ended ---------------------------------------------- (Thousands of $) March June September December ----- ---- --------- -------- 1993 Operating Revenues...... $208,631 $166,906 $200,408 $199,180 Net Operating Income.... 32,754 28,395 47,786 27,183 Net Income.............. 20,786 16,566 36,447 16,736 Net Income Available for Common Stock.......... 19,199 14,898 35,099 15,358 1992 Operating Revenues...... $182,699 $150,908 $179,491 $187,097 Net Operating Income.... 28,985 27,849 41,850 27,145 Net Income.............. 15,915 15,301 29,050 13,527 Net Income Available for Common Stock.......... 13,510 13,676 27,474 11,960 -------------------------------------- ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. - --------------------------------------------------------------------- None. 57 PART III -------- ITEMS 10, 11, 12 and 13 are omitted pursuant to General Instruction G, inasmuch as the Company filed copies of a definitive proxy statement with the Commission on March 28, 1994, pursuant to Regulation 14A under the Securities Exchange Act of 1934. Such proxy statement is incorporated herein by this reference. In accordance with General Instruction G of Form 10-K, the information required by Item 10 relating to executive officers has been included in Part I of this Form 10-K. The Louisville Gas and Electric Company (LG&E) is a subsidiary of LG&E Energy Corp. At December 31, 1993, LG&E Energy Corp. controlled 100% of the common stock of LG&E. There are situations where LG&E Energy Corp. interacts with its affiliated companies through the use of shared facilities, common employees, and other business relationships. In these situations, LG&E receives payment in accordance with regulatory requirements for the services provided to affiliated companies. PART IV ------- ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. - ---------------------------------------------------------------------------- (a) 1. Financial Statements (included in Item 8): Statements of Income for the three years ended December 31, 1993 (page 29). Statements of Retained Earnings for the three years ended December 31, 1993 (page 30). Balance Sheets - December 31, 1993, and 1992 (page 31-32). Statements of Cash Flows for the three years ended December 31, 1993 (page 33-34). Statements of Capitalization - December 31, 1993, and 1992 (page 35-36). Notes to Financial Statements (pages 37-53). Report of Management (page 54). Report of Independent Public Accountants (page 55). Selected Quarterly Financial Data for 1993, and 1992 (page 56). 2. Financial Statement Schedules (included in Part IV): Schedule V - Property, Plant and Equipment for the three years ended December 31, 1993 (pages 72-77). Schedule VI - Accumulated Depreciation, Depletion, and Amortization of Property, Plant and Equipment for the three years ended December 31, 1993 (pages 78-80). Schedule VIII - Valuation and Qualifying Accounts for the three years ended December 31, 1993 (page 81). Schedule IX - Short-Term Borrowings for the three years ended December 31, 1993 (page 82). Schedule X - Supplementary Income Statement Information for the three years ended December 31, 1993 (page 83). All other schedules have been omitted as not applicable or not required or because the information required to be shown is included in the Financial Statements or the accompanying Notes to Financial Statements. 58 3. Exhibits: Exhibit No. Description -------- ----------- 3.01 Copy of Restated Articles of Incorporation, as amended. [Filed as Exhibit 4.01 to Registration Statement 33-18302 and incorporated by reference herein] 3.02 Copy of Amendment to Articles of Incorporation, effective May 25, 1989. [Filed as Exhibit 3.01 to the Company's Form 10-Q for the quarter ended June 30, 1989 and incorporated by reference herein] 3.03 Copy of Amendment to Articles of Incorporation, effective February 6, 1992. [Filed as Exhibit 3.03 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991, and incorporated by reference herein] 3.04 Copy of Amendment to Articles of Incorporation, effective April 8, 1993. [Filed as Exhibit 3.01 to the Company's Form 10-Q for the quarter ended March 31, 1993, and incorporated by reference herein] 3.05 Copy of Amendment to Articles of Incorporation, effective May 19, 1993. 3.06 Copy of Bylaws, as amended through May 13, 1993. [Filed as Exhibit 3.01 to the Company's Form 10-Q for the quarter ended June 30, 1993, and incorporated by reference herein] 4.01 Copy of Trust Indenture dated November 1, 1949, from the Company to Harris Trust and Savings Bank, Trustee. [Filed as Exhibit 7.01 to Registration Statement 2-8283 and incorporated by reference herein] 4.02 Copy of Supplemental Indenture dated February 1, 1952, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.05 to Registration Statement 2-9371 and incorporated by reference herein] 4.03 Copy of Supplemental Indenture dated February 1, 1954, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.03 to Registration Statement 2-11923 and incorporated by reference herein] 59 4.04 Copy of Supplemental Indenture dated September 1, 1957, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.04 to Registration Statement 2-17047 and incorporated by reference herein] 4.05 Copy of Supplemental Indenture dated October 1, 1960, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.05 to Registration Statement 2-24920 and incorporated by reference herein] 4.06 Copy of Supplemental Indenture dated June 1, 1966, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.06 to Registration Statement 2-28865 and incorporated by reference herein] 4.07 Copy of Supplemental Indenture dated June 1, 1968, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.07 to Registration Statement 2-37368 and incorporated by reference herein] 4.08 Copy of Supplemental Indenture dated June 1, 1970, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.08 to Registration Statement 2-37368 and incorporated by reference herein] 4.09 Copy of Supplemental Indenture dated August 1, 1971, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.09 to Registration Statement 2-44295 and incorporated by reference herein] 4.10 Copy of Supplemental Indenture dated June 1, 1972, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.10 to Registration Statement 2-52643 and incorporated by reference herein] 4.11 Copy of Supplemental Indenture dated February 1, 1975, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.11 to Registration Statement 2-57252 and incorporated by reference herein] 4.12 Copy of Supplemental Indenture dated September 1, 1975, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.12 to Registration Statement 2-57252 and incorporated by reference herein] 60 4.13 Copy of Supplemental Indenture dated September 1, 1976, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.13 to Registration Statement 2-57252 and incorporated by reference herein] 4.14 Copy of Supplemental Indenture dated October 1, 1976, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.14 to Registration Statement 2-65271 and incorporated by reference herein] 4.15 Copy of Supplemental Indenture dated June 1, 1978, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.15 to Registration Statement 2-65271 and incorporated by reference herein] 4.16 Copy of Supplemental Indenture dated February 15, 1979, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 2.16 to Registration Statement 2-65271 and incorporated by reference herein] 4.17 Copy of Supplemental Indenture dated September 1, 1979, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1980, and incorporated by reference herein] 4.18 Copy of Supplemental Indenture dated September 15, 1979, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1980, and incorporated by reference herein] 4.19 Copy of Supplemental Indenture dated September 15, 1981, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1981, and incorporated by reference herein] 4.20 Copy of Supplemental Indenture dated March 1, 1982, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 1982, and incorporated by reference herein] 61 4.21 Copy of Supplemental Indenture dated March 15, 1982, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1982, and incorporated by reference herein] 4.22 Copy of Supplemental Indenture dated September 15, 1982, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 1982, and incorporated by reference herein] 4.23 Copy of Supplemental Indenture dated February 15, 1984, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1984, and incorporated by reference herein] 4.24 Copy of Supplemental Indenture dated July 1, 1985, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1985, and incorporated by reference herein] 4.25 Copy of Supplemental Indenture dated November 15, 1986, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1986, and incorporated by reference herein] 4.26 Copy of Supplemental Indenture dated November 16, 1986, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 1986, and incorporated by reference herein] 4.27 Copy of Supplemental Indenture dated August 1, 1987, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.27 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated by reference herein] 4.28 Copy of Supplemental Indenture dated February 1, 1989, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 1988, and incorporated by reference herein] 62 4.29 Copy of Supplemental Indenture dated February 2, 1989, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 1988, and incorporated by reference herein] 4.30 Copy of Supplemental Indenture dated June 15, 1990, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990, and incorporated by reference herein] 4.31 Copy of Supplemental Indenture dated November 1, 1990, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990, and incorporated by reference herein] 4.32 Copy of Supplemental Indenture dated September 1, 1992, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, and incorporated by reference herein] 4.33 Copy of Supplemental Indenture dated September 2, 1992, which is a supplemental instrument to Exhibit 4.01 hereto. [Filed as Exhibit 4.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, and incorporated by reference herein] 4.34 Copy of Supplemental Indenture dated August 15, 1993, which is a supplemental instrument to Exhibit 4.01 hereto. 4.35 Copy of Supplemental Indenture dated August 16, 1993, which is a supplemental instrument to Exhibit 4.01 hereto. 4.36 Copy of Supplemental Indenture dated October 15, 1993, which is a supplemental instrument to Exhibit 4.01 hereto. 10.01 Copy of Agreement dated September 1, 1970, between Texas Gas Transmission Corporation and the Company covering the purchase of natural gas. [Filed as Exhibit 4.01 to Registration Statement 2-40985 and incorporated by reference herein] 63 10.02 Copies of Agreement between Sponsoring Companies re: Project D of Atomic Energy Commission, dated May 12, 1952, Memorandums of Understanding between Sponsoring Companies re: Project D of Atomic Energy Commission, dated September 19, 1952 and October 28, 1952, and Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission, dated October 15, 1952. [Filed as Exhibit 13(y) to Registration Statement 2-9975 and incorporated by reference herein] 10.03 Copy of Modification No. 1 dated July 23, 1953, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibit 4.03(b) to Registration Statement 2-24920 and incorporated by reference herein] 10.04 Copy of Modification No. 2 dated March 15, 1964, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibit 5.02c to Registration Statement 2-61607 and incorporated by reference herein] 10.05 Copy of Modification No. 3 and No. 4 dated May 12, 1966 and January 7, 1967, respectively, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibits 4(a)(13) and 4(a)(14) to Registration Statement 2-26063 and incorporated by reference herein] 10.06 Copy of Modification No. 5 dated August 15, 1967, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibit 13(c) to Registration Statement 2-27316 and incorporated by reference herein] 10.07 Copies of (i) Inter-Company Power Agreement, dated July 10, 1953, between Ohio Valley Electric Corporation and Sponsoring Companies (which Agreement includes as Exhibit A the Power Agreement, dated July 10, 1953, between Ohio Valley Electric Corporation and Indiana-Kentucky Electric Corporation); (ii) First Supplementary Transmission Agreement, dated July 10, 1953, between Ohio Valley Electric Corporation and Sponsoring Companies; (iii) Inter-Company Bond Agreement, dated July 10, 1953, between Ohio Valley Electric Corporation and Sponsoring Companies; (iv) Inter-Company Bank Credit Agreement, dated July 10, 1953, between Ohio Valley Electric Corporation and Sponsoring Companies. [Filed as Exhibit 5.02f to Registration Statement 2-61607 and incorporated by reference herein] 64 10.08 Copy of Modification No. 1 and No. 2 dated June 3, 1966 and January 7, 1967, respectively, to Inter-Company Power Agreement dated July 10, 1953. [Filed as Exhibits 4(a)(8) and 4(a)(10) to Registration Statement 2-26063 and incorporated by reference herein] 10.09 Copies of Amendments to Agreements (iii) and (iv) referred to under 10.07 above as follows: (i) Amendment to Inter-Company Bond Agreement and (ii) Amendment to Inter-Company Bank Credit Agreement. [Filed as Exhibit 5.02h to Registration Statement 2-61607 and incorporated by reference herein] 10.10 Copy of Modification No. 1, dated August 20, 1958, to First Supplementary Transmission Agreement, dated July 10, 1953, among Ohio Valley Electric Corporation and the Sponsoring Companies. [Filed as Exhibit 5.02i to Registration Statement 2-61607 and incorporated by reference herein] 10.11 Copy of Modification No. 2, dated April 1, 1965, to the First Supplementary Transmission Agreement, dated July 10, 1953, among Ohio Valley Electric Corporation and the Sponsoring Companies. [Filed as Exhibit 5.02j to Registration Statement 2-6l607 and incorporated by reference herein] 10.12 Copy of Modification No. 3, dated January 20, 1967, to First Supplementary Transmission Agreement, dated July 10, 1953, among Ohio Valley Electric Corporation and the Sponsoring Companies. [Filed as Exhibit 4(a)(7) to Registration Statement 2-26063 and incorporated by reference herein] 10.13 Copy of Modification No. 6 dated November 15, 1967, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibit 4(g) to Registration Statement 2-28524 and incorporated by reference herein] 10.14 Copy of Modification No. 3 dated November 15, 1967, to the Inter-Company Power Agreement dated July 10, 1953. [Filed as Exhibit 4.02m to Registration Statement 2-37368 and incorporated by reference herein] 10.15 Copy of Modification No. 7 dated November 5, 1975, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibit 5.02n to Registration Statement 2-56357 and incorporated by reference herein] 65 10.16 Copy of Modification No. 4 dated November 5, 1975, to the Inter-Company Power Agreement dated July 10, 1953. [Filed as Exhibit 5.02o to Registration Statement 2-56357 and incorporated by reference herein] 10.17 Copy of Modification No. 4 dated April 30, 1976, to First Supplementary Transmission Agreement, dated July 10, 1953, among Ohio Valley Electric Corporation and the Sponsoring Companies. [Filed as Exhibit 5.02p to Registration Statement 2-6l607 and incorporated by reference herein] 10.18 Copy of Modification No. 8 dated June 23, 1977, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibit 5.02q to Registration Statement 2-61607 and incorporated by reference herein] 10.19 Copy of Modification No. 9 dated July 1, 1978, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibit 5.02r to Registration Statement 2-63149 and incorporated by reference herein] 10.20 Copy of Modification No. 10 dated August 1, 1979, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibit 2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1979, and incorporated by reference herein] 10.21 Copy of Modification No. 11 dated September 1, 1979, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibit 3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1979, and incorporated by reference herein] 10.22 Copy of Modification No. 5 dated September 1, 1979, to Inter-Company Power Agreement dated July 5, 1953, among Ohio Valley Electric Corporation and Sponsoring Companies. [Filed as Exhibit 4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1979, and incorporated by reference herein] 66 10.23 Copy of Agreement dated December 16, 1966, between Peabody Coal Company and the Company covering the purchase of coal. [Filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1980, and incorporated by reference herein] 10.24 Copy of Amendments to Coal Supply Agreement referred to in 10.23 above as follows: (i) Amendment effective July 1, 1970, (ii) effective January 1, 1975, and (iii) effective December 1, 1976. [Filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1980, and incorporated by reference herein] 10.25 Copy of Modification No. 12 dated August 1, 1981, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. [Filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1981, and incorporated by reference herein] 10.26 Copy of Modification No. 6 dated August 1, 1981, to Inter-Company Power Agreement dated July 5, 1953, among Ohio Valley Electric Corporation and Sponsoring Companies. [Filed as Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 1981, and incorporated by reference herein] 10.27 Copy of Agreement dated December 20, 1985, between Shawnee Coal Company and the Company covering the purchase of coal. [Filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year ended December 31, 1985, and incorporated by reference herein] 10.28 Copy of Diversity Power Agreement dated September 9, 1987, between East Kentucky Power Cooperative and the Company covering the purchase and sale of power between the two companies from 1988 through 1995. [Filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987, and incorporated by reference herein] 10.29 Copy of Supplemental Executive Retirement Plan as amended through January 3, 1990, covering all officers of the Company. [Filed as Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated by reference herein] 67 10.30 Copy of Termination Agreement and Release dated February 1, 1989, between Peabody Coal Company and the Company canceling the Coal Supply Agreement dated December 16, 1966 referred to in Exhibit Nos. 10.23 and 10.24. [Filed as Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 1988, and incorporated by reference herein] 10.31 Copy of Agreements dated February 1 and February 15, 1989, between Peabody Development Company and the Company covering the purchase of coal. [Filed as Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 1988, and incorporated by reference herein] 10.32 Copy of Omnibus Long-Term Incentive Plan effective January 1, 1990, covering officers and key employees of the Company. [Filed as Exhibit 4.01 to the Company's Registration Statement 33-38557 and incorporated by reference herein] 10.33 Copy of Key Employee Incentive Plan effective January 1, 1990, covering officers and key employees of the Company. [Filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated by reference herein] 10.34 Copy of LG&E Energy Corp. Deferred Stock Compensation Plan effective January 1, 1992, covering non-employee directors of LG&E Energy Corp. and its subsidiaries. [Filed as Exhibit 10.34 to LG&E Energy Corp.'s Annual Report on Form 10-K for the year ended December 31, 1991, and incorporated by reference herein] 10.35 Copy of Agreement dated August 1, 1991, between Texas Gas Transmission Corporation and the Company covering the purchase of natural gas. [Filed as Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991, and incorporated by reference herein] 10.36 Copy of Sales Service Agreement between Texas Gas Transmission Corporation and the Company effective February 1, 1992. [Filed as Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, and incorporated by reference herein] 68 10.37 Copy of Sales Service Agreement between Texas Gas Transmission Corporation and the Company effective November 1, 1992. [Filed as Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, and incorporated by reference herein] 10.38 Copy of form of change in control agreement for officers of Louisville Gas and Electric Company. [Filed as Exhibit 10.38 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, and incorporated by reference herein] 10.39 Copy of Employment Agreement between Roger W. Hale and Louisville Gas and Electric Company, effective June 1, 1989, as amended. [Filed as Exhibit 10.39 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, and incorporated by reference herein] 10.40 Copy of Supplemental Executive Retirement Plan for R. W. Hale, effective June 1, 1989. [Filed as Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, and incorporated by reference herein] 10.41 Copy of Nonqualified Savings Plan covering officers of the Company, effective January 1, 1992. [Filed as Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992, and incorporated by reference herein] 10.42 Copy of Modification No. 13 dated September 1, 1989, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. 10.43 Copy of Modification No. 14 dated January 15, 1992, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. 10.44 Copy of Modification No. 7 dated January 15, 1992, to Inter-Company Power Agreement dated July 10, 1953, among Ohio Valley Electric Corporation and Sponsoring Companies. 10.45 Copy of Modification No. 15 dated February 15, 1993, to the Power Agreement between Ohio Valley Electric Corporation and Atomic Energy Commission. 69 10.46 Firm Transportation Agreement, dated November 1, 1993, between Texas Gas Transmission Corporation and the Company covering the transmission of natural gas. 10.47 Firm No Notice Transportation Agreement effective November 1, 1993, between Texas Gas Transmission Corporation and the Company (8-year term) covering the transmission of natural gas. Firm No Notice Transportation Agreement effective November 1, 1993, between Texas Gas Transmission Corporation and the Company (2-year term) covering the transmission of natural gas. Firm No Notice Transportation Agreement effective November 1, 1993, between Texas Gas Transmission Corporation and the Company (5-year term) covering the transmission of natural gas. 10.48 Employment Contract between LG&E Energy Corp. and Roger W. Hale effective November 3, 1993. [Filed as Exhibit 10.50 to LG&E Energy Corp.'s Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated by reference herein] 10.49 Copy of LG&E Energy Corp. Stock Option Plan for Non-Employee Directors. [Filed as Exhibit 10.51 to LG&E Energy Corp.'s Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated by reference herein] 12 Computation of Ratio of Earnings to Fixed Charges 23 Consent of Independent Public Accountants 24 Power of Attorney 70 (b) Executive Compensation Plans and Arrangements: Supplemental Executive Retirement Plan as amended through January 3, 1990, covering all officers of the Company. [Filed as Exhibit 10.29 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated by reference herein] Omnibus Long-Term Incentive Plan effective January 1, 1990, covering officers and key employees of the Company. [Filed as Exhibit 4.01 to the Company's Registration Statement 33-38557 and incorporated by reference herein] Key Employee Incentive Plan effective January 1, 1990, covering officers and key employees of the Company. [Filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989, and incorporated by reference herein] LG&E Energy Corp. Deferred Stock Compensation Plan effective January 1, 1992, covering non-employee directors of LG&E Energy Corp. and its subsidiaries. [Filed as Exhibit 10.34 to LG&E Energy Corp.'s Annual Report on Form 10-K for the year ended December 31, 1991, and incorporated by reference herein] Form of change in control agreement for officers of Louisville Gas and Electric Company. [Filed as Exhibit 10.38 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992] Employment Agreement between Roger W. Hale and Louisville Gas and Electric Company, effective June 1, 1989, as amended. [Filed as Exhibit 10.39 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992] Supplemental Executive Retirement Plan for R. W. Hale, effective June 1, 1989. [Filed as Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992] Nonqualified Savings Plan covering officers of the Company effective January 1, 1992. [Filed as Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992] Employment Contract between LG&E Energy Corp. and Roger W. Hale effective November 3, 1993. [Filed as Exhibit 10.50 to LG&E Energy Corp.'s Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated by reference herein] LG&E Energy Corp. Stock Option Plan for Non-Employee Directors. [Filed as Exhibit 10.51 to LG&E Energy Corp.'s Annual Report on Form 10-K for the year ended December 31, 1993, and incorporated by reference herein] 71 (c) Reports on Form 8-K: The following 8-K reports were filed during the fourth quarter of 1993: (i) On October 27, 1993, a report on Form 8-K was filed announcing the following: Trimble County Generating Plant. On October 20, 1993, the Kentucky Supreme Court declined to review a Kentucky Court of Appeals order overturning a lower court's order that had improperly directed the Company to refund approximately $150 million to its customers in a case involving the Company's Trimble County electric generating station. Management Change. Walter M. Higgins, III, President and Chief Operating Officer of the Company resigned to accept the position of President and Chief Operating Officer of Sierra Pacific Resources. Sierra Pacific Resources indicated plans for Mr. Higgins to become Chief Executive Officer early in 1994. (ii) On November 23, 1993, a report on Form 8-K was filed announcing that LG&E Energy Corp., of which the Company is the principal subsidiary, would undergo a major realignment and formation of new business units effective January 1, 1994, to reflect its outlook for rapidly emerging competition in all segments of the energy services industry. 72 LOUISVILLE GAS AND ELECTRIC COMPANY SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (INCLUDING INTANGIBLES) FOR THE YEAR ENDED DECEMBER 31, 1993 (Thousands of $)
Column A Column B Column C Column D Column E Column F -------- ---------- ---------- ----------- ---------- ---------- Other Balance Changes Balance Beginning Additions Retirements Add End of Classification of Year at Cost at Cost (Deduct) Year -------------- ---------- ---------- ----------- ---------- ---------- Electric Department: Intangible..................... $ 2 $ 2 Steam production............... 1,371,584 $ 10,904 $ 2,024 $ (615) 1,379,849 Hydraulic production........... 8,222 40 19 8,243 Other production............... 11,147 39 2 11,184 Transmission................... 163,407 9,817 291 { 1,020 173,837 { (116) Distribution................... 406,046 25,483 2,392 { 116 429,252 { (1) General........................ 15,799 1,640 628 (39) 16,772 Construction work in progress.. 30,948 17,084 48,032 --------- --------- --------- --------- --------- Total electric department.... 2,007,155 65,007 5,356 365 2,067,171 --------- --------- --------- --------- --------- Gas Department: Intangible..................... 1 1 Storage: Land rights and leaseholds... 568 568 Other........................ 32,282 628 60 32,850 Transmission................... 11,783 4 37 11,750 Distribution................... 186,007 20,217 1,839 204,385 General........................ 8,037 1,407 624 (29) 8,791 Construction work in progress.. 3,090 (851) 2,239 Gas stored underground- noncurrent................... 2,140 2,140 --------- --------- --------- --------- --------- Total gas department......... 243,908 21,405 2,560 (29) 262,724 --------- --------- --------- --------- --------- Common Utility: Intangible..................... 17,498 4,025 98 21,425 General........................ 103,606 8,165 458 { 68 111,267 { (114) Construction work in progress.... 1,329 185 1,514 --------- --------- --------- --------- --------- Total common utility......... 122,433 12,375 556 (46) 134,206 --------- --------- --------- --------- --------- Total utility plant at original cost.............. $2,373,496 $ 98,787 $ 8,472 $ 290 $2,464,101 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- 73 NOTES: Transfer between functional groups. Transfer from Nonutility Property. Sale of land. Transfer to LG&E Energy Corp. Transfer to Nonutility Property.
74 LOUISVILLE GAS AND ELECTRIC COMPANY SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (INCLUDING INTANGIBLES) FOR THE YEAR ENDED DECEMBER 31, 1992 (Thousands of $)
Column A Column B Column C Column D Column E Column F -------- ---------- ---------- ----------- ---------- ---------- Other Balance Changes Balance Beginning Additions Retirements Add End of Classification of Year at Cost at Cost (Deduct) Year -------------- ---------- ---------- ----------- ---------- ---------- Electric Department: Intangible..................... $ 2 $ 2 Steam production............... 1,364,349 $ 8,224 $ 1,000 $ 11 1,371,584 Hydraulic production........... 8,204 18 8,222 Other production............... 11,147 11,147 Transmission................... 160,904 2,957 419 (35) 163,407 Distribution................... 378,582 29,804 2,386 { 47 406,046 { (1) General........................ 2,246 3,729 1,532 11,356 15,799 Construction work in progress.. 15,729 16,084 { (853) 30,948 { (12) --------- --------- --------- --------- --------- Total electric department.... 1,941,163 60,816 5,337 10,513 2,007,155 --------- --------- --------- --------- --------- Gas Department: Intangible..................... 1 1 Storage: Land rights and leaseholds... 568 568 Other........................ 31,412 1,089 219 32,282 Transmission................... 11,902 (2) 117 11,783 Distribution................... 170,878 16,853 1,724 186,007 General........................ 1,454 1,804 449 5,228 8,037 Construction work in progress.. 2,494 596 3,090 Gas stored underground- noncurrent................... 2,140 2,140 --------- --------- --------- --------- --------- Total gas department......... 220,849 20,340 2,509 5,228 243,908 --------- --------- --------- --------- --------- Common Utility: Intangible..................... 6,573 10,925 17,498 General........................ 105,498 19,169 4,444 { (16,595) 103,606 { (22) Construction work in progress.... 11,405 (10,075) (1) 1,329 --------- --------- --------- --------- --------- Total common utility......... 123,476 20,019 4,444 (16,618) 122,433 --------- --------- --------- --------- --------- Total utility plant at original cost.............. $2,285,488 $ 101,175 $ 12,290 $ (877) $2,373,496 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- 75 NOTES: Transfer between functional groups. Transfer 25% of Trimble County to Nonutility Property. Sale of land. Transfer to LG&E Energy Corp.
76 LOUISVILLE GAS AND ELECTRIC COMPANY SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (INCLUDING INTANGIBLES) FOR THE YEAR ENDED DECEMBER 31, 1991 (Thousands of $)
Column A Column B Column C Column D Column E Column F -------- ---------- ---------- ----------- ---------- ---------- Other Balance Changes Balance Beginning Additions Retirements Add End of Classification of Year at Cost at Cost (Deduct) Year -------------- ---------- ---------- ----------- ---------- ---------- Electric Department: Intangible..................... $ 3 $ 1 $ $ 2 Steam production............... 1,343,270 $ 21,407 2,318 { 2,568 1,364,349 { (578) Hydraulic production........... 8,049 156 1 8,204 Other production............... 11,155 8 11,147 Transmission................... 157,662 3,685 423 { (18) 160,904 { (2) Distribution................... 353,842 27,369 2,647 18 378,582 General........................ 2,076 181 11 2,246 Construction work in progress.. 18,272 798 (3,341) 15,729 --------- --------- --------- --------- --------- Total electric department.... 1,894,329 53,596 5,409 (1,353) 1,941,163 --------- --------- --------- --------- --------- Gas Department: Intangible..................... 1 1 Storage: Land rights and leaseholds... 568 568 Other........................ 29,850 1,676 114 31,412 Transmission................... 10,622 1,290 10 11,902 Distribution................... 161,192 10,663 976 (1) 170,878 General........................ 1,255 250 51 1,454 Construction work in progress.. 2,590 (96) 2,494 Gas stored underground- noncurrent................... 2,140 2,140 --------- --------- --------- --------- --------- Total gas department......... 208,218 13,783 1,151 (1) 220,849 --------- --------- --------- --------- --------- Common Utility: Intangible..................... 4,968 1,605 6,573 General........................ 89,472 21,382 2,717 { (2,568) 105,498 { (71) Construction work in progress.... 18,169 (2,314) (4,450) 11,405 --------- --------- --------- --------- --------- Total common utility......... 112,609 20,673 2,717 (7,089) 123,476 --------- --------- --------- --------- --------- Total utility plant at original cost.............. $2,215,156 $ 88,052 $ 9,277 $ (8,443) $2,285,488 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- 77 NOTES: Transfer between functional groups. Transfer 25% of Trimble County to Nonutility Property. Sale of land. Transfer to LG&E Energy Corp. Transfer to Preliminary Survey and Investigation Charges.
78 LOUISVILLE GAS AND ELECTRIC COMPANY SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1993 (Thousands of $)
Column A Column B Column C Column D Column E Column F -------- ---------- ------------------------- ---------- ---------- ---------- Additions Charged to Costs and Expenses ------------------------- Provisions Charged Other Balance Provisions to Clearing Changes Balance Beginning Charged and Other Retire- Add End of Classification of Year to Income Accounts ments (Deduct) Year -------------- ---------- ---------- ----------- ---------- ---------- ---------- Electric Department: Steam production............... $ 401,102 $ 43,449 $ 503 $ 2,818 $ 442,236 Hydraulic production........... 7,794 154 25 7,923 Other production............... 10,668 1 2 $ 10,667 Transmission................... 73,981 4,098 356 { (79) 77,695 { 51 Distribution................... 131,883 14,258 3,212 79 143,008 General........................ 8,719 89 1,353 615 (11) 9,535 --------- --------- --------- --------- --------- --------- Total electric department.... 634,147 62,049 1,856 7,028 40 $ 691,064 --------- --------- --------- --------- --------- --------- Gas Department: Intangible..................... 1 1 Storage: Land rights and leaseholds... 397 21 418 Other........................ 16,660 1,247 79 17,828 Transmission................... 8,343 275 37 8,581 Distribution................... 60,711 5,574 2,791 63,494 General........................ 3,181 72 853 623 (29) 3,454 --------- --------- --------- --------- --------- --------- Total gas department......... 89,293 7,189 853 3,530 (29) 93,776 --------- --------- --------- --------- --------- --------- Common Utility: Intangible..................... 4,462 2,528 98 6,892 General........................ 26,527 4,978 297 422 { 40 31,409 { (11) --------- --------- --------- --------- --------- --------- Total common utility......... 30,989 7,506 297 520 29 38,301 --------- --------- --------- --------- --------- --------- Totals....................... $ 754,429 $ 76,744 $ 3,006 $ 11,078 $ 40 $ 823,141 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- NOTES: Net of gross retirements, salvage, and removal expense. Transfer of depreciation reserve between functional groups. Transfer from Nonutility Property. Transfer of depreciation reserve to LG&E Energy Corp.
79 LOUISVILLE GAS AND ELECTRIC COMPANY SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1992 (Thousands of $)
Column A Column B Column C Column D Column E Column F -------- ---------- ------------------------- ---------- ---------- ---------- Additions Charged to Costs and Expenses ------------------------- Provisions Charged Other Balance Provisions to Clearing Changes Balance Beginning Charged and Other Retire- Add End of Classification of Year to Income Accounts ments (Deduct) Year -------------- ---------- ---------- ----------- ---------- ---------- ---------- Electric Department: Steam production............... $ 359,701 $ 43,502 $ 504 $ 2,606 $ 1 $ 401,102 Hydraulic production........... 7,661 150 17 7,794 Other production............... 10,667 1 10,668 Transmission................... 70,639 3,927 568 (17) 73,981 Distribution................... 121,322 13,397 2,853 17 131,883 General........................ 551 70 1,104 1,533 8,527 8,719 --------- --------- --------- --------- --------- --------- Total electric department.... 570,541 61,047 1,608 7,577 8,528 634,147 --------- --------- --------- --------- --------- --------- Gas Department: Intangible..................... 1 1 Storage: Land rights and leaseholds... 376 21 397 Other........................ 15,709 1,223 271 (1) 16,660 Transmission................... 8,183 277 117 8,343 Distribution................... 58,526 5,118 2,933 60,711 General........................ 300 55 567 441 2,700 3,181 --------- --------- --------- --------- --------- --------- Total gas department......... 83,095 6,694 567 3,762 2,699 89,293 --------- --------- --------- --------- --------- --------- Common Utility: Intangible..................... 2,909 1,553 4,462 General........................ 36,695 4,704 886 4,528 { (11,226) 26,527 { (4) --------- --------- --------- --------- --------- --------- Total common utility......... 39,604 6,257 886 4,528 (11,230) 30,989 --------- --------- --------- --------- --------- --------- Totals....................... $ 693,240 $ 73,998 $ 3,061 $ 15,867 $ (3) $ 754,429 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- NOTES: Net of gross retirements, salvage, and removal expense. Transfer of depreciation reserve between functional groups. Transfer to Nonutility Property. Transfer of depreciation reserve to LG&E Energy Corp.
80 LOUISVILLE GAS AND ELECTRIC COMPANY SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED DECEMBER 31, 1991 (Thousands of $)
Column A Column B Column C Column D Column E Column F -------- ---------- ------------------------- ---------- ---------- ---------- Additions Charged to Costs and Expenses ------------------------- Provisions Charged Other Balance Provisions to Clearing Changes Balance Beginning Charged and Other Retire- Add End of Classification of Year to Income Accounts ments (Deduct) Year -------------- ---------- ---------- ----------- ---------- ---------- ---------- Electric Department: Steam production............... $ 316,739 $ 43,000 $ 504 $ 2,596 $ 2,054 $ 359,701 Hydraulic production........... 7,514 148 1 7,661 Other production............... 11,091 1 425 10,667 Transmission................... 67,386 3,862 574 (35) 70,639 Distribution................... 111,484 12,511 2,708 35 121,322 General........................ 496 66 11 551 --------- --------- --------- --------- --------- --------- Total electric department.... 514,710 59,588 504 6,315 2,054 570,541 --------- --------- -------- --------- --------- --------- Gas Department: Intangible..................... 1 1 Storage: Land rights and leaseholds... 354 22 376 Other........................ 14,734 1,183 208 15,709 Transmission................... 7,932 264 13 8,183 Distribution................... 55,771 4,775 2,020 58,526 General........................ 311 48 59 300 --------- --------- --------- --------- --------- --------- Total gas department......... 79,103 6,292 2,300 83,095 --------- --------- --------- --------- --------- --------- Common Utility: Intangible..................... 2,121 788 2,909 General........................ 35,477 3,708 2,312 2,735 { (13) 36,695 { (2,054) --------- --------- --------- --------- --------- --------- Total common utility......... 37,598 4,496 2,312 2,735 (2,067) $ 39,604 --------- --------- --------- --------- --------- --------- Totals....................... $ 631,411 $ 70,376 $ 2,816 $ 11,350 $ (13) $ 693,240 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- NOTES: Net of gross retirements, salvage, and removal expense. Transfer of depreciation reserve between functional groups and LG&E Energy Corp. Transfer of depreciation reserve to LG&E Energy Corp.
81 LOUISVILLE GAS AND ELECTRIC COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 1993 (Thousands of $)
Reserves Deducted from Assets in Balance Sheet -------------------------------------- Other Accounts Property Receivable and (Uncollectible Investments Accounts) ----------- -------------- Balance January 1, 1991..................................... $ 190 $ 1,596 Additions: Charged to costs and expenses........................... Trimble County - non-jurisdictional depreciation...... 3,158 Other................................................. 2,000 Deductions: Net charges of nature for which reserves were created... 2,183 Other................................................... 486 ----- ----- Balance December 31, 1991................................... 2,862 1,413 Additions: Charged to costs and expenses Trimble County - non-jurisdictional depreciation...... 2,783 Other................................................. 2,158 Deductions: Net charges of nature for which reserves were created... 2,462 Other................................................... ----- ----- Balance December 31, 1992................................... 5,645 1,109 Additions: Charged to costs and expenses Trimble County - non-jurisdictional depreciation...... 233 Other................................................. 2,500 Deductions: Net charges of nature for which reserves were created... 2,135 Other................................................... 5,815 ----- ----- Balance December 31, 1993................................... $ 63 $ 1,474 ----- ----- ----- -----
82 LOUISVILLE GAS AND ELECTRIC COMPANY SCHEDULE IX - SHORT-TERM BORROWINGS FOR THE THREE YEARS ENDED DECEMBER 31, 1993 (Thousands of $)
Column A Column B Column C Column D Column E Column F -------- ---------- ------------- --------------- ----------- -------------- Weighted Maximum Average Weighted Average Amount Amount Average Short-Term Balance at Interest Rate Outstanding Outstanding Interest Rate Bank End of at End at Month-End During the During the Borrowings Year of Year During the Year Year Year --------------- ---------- ------------- --------------- ----------- ------------- 1993 Trust Demand Notes........... $ - - Other Notes.................. - - --------- ------------- Total $ - - $16,000 $2,000 3.73% --------- ------------- --------------- ----------- ------------- --------- ------------- --------------- ----------- ------------- 1992 Trust Demand Notes........... $ 8,000 3.45% Other Notes.................. - - --------- ------------- Total $ 8,000 3.45% $12,800 $11,358 3.89% --------- ------------- --------------- ----------- ------------- --------- ------------- --------------- ----------- ------------- 1991 Trust Demand Notes........... $ 12,000 4.21% Other Notes.................. - - --------- ------------- Total $ 12,000 4.21% $28,200 $20,933 6.32% --------- ------------- --------------- ----------- ------------- --------- ------------- --------------- ----------- ------------- NOTES: See Note 6 of Notes to Financial Statements under Item 8. Computed on average monthly balances. Computed on a daily weighted average basis.
83 LOUISVILLE GAS AND ELECTRIC COMPANY SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE THREE YEARS ENDED DECEMBER 31, 1993 (Thousands of $)
Charged to Operating Expenses ------------------ Years Ended December 31 ----------------------------------------- 1993 1992 1991 ---- ---- ---- Taxes other than income taxes: Real estate and personal property (including franchise)..... $ 7,580 $ 7,525 $ 7,344 Payroll..................................................... 7,301 7,189 7,156 Other....................................................... 1,312 1,122 1,005 ------ ------ ------ Total taxes other than income taxes per statements of income.................................... $16,193 $15,836 $15,505 ------ ------ ------ ------ ------ ------
The amounts of royalties and advertising costs charged to operating expenses were each less than one percent of total operating revenues. 84 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LOUISVILLE GAS AND ELECTRIC COMPANY ----------------------------------- Registrant March 28, 1994 By M. L. Fowler - -------------- ----------------------------------- Vice President and Controller Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title Date --------- ----- ---- ROGER W. HALE Chairman of the Board and Chief Executive Officer (Principal Executive Officer); CHARLES A. MARKEL III Treasurer (Principal Financial Officer); M. L. FOWLER Vice President and Controller (Principal Accounting Officer); WILLIAM C. BALLARD, JR. Director; OWSLEY BROWN II Director; S. GORDON DABNEY Director; GENE P. GARDNER Director; DAVID B. LEWIS Director; ANNE H. MCNAMARA Director; T. BALLARD MORTON, JR. Director; and DR. DONALD C. SWAIN Director. By M. L. FOWLER March 28, 1994 - ------------------------------------------------ (Attorney-In-Fact) EX-3.05 2 ARTICLE OF AMENDMENT TO ARTICLES OF INCORPORATION ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF LOUISVILLE GAS AND ELECTRIC COMPANY To the Secretary of State of Kentucky: Pursuant to the provisions of Chapter 271B of the Kentucky Revised Statutes, the undersigned corporation hereby amends its Articles of Incorporation, and for that purpose, submits the following statement: 1. The name of the corporation is Louisville Gas and Electric Company. 2. On May 13, 1993, the Executive Committee of the Board of Directors, acting on behalf of the corporation, duly adopted the following Amendments to its Articles of Incorporation. A copy of the text is attached hereto as Exhibit A and incorporated by reference herein as the text of a new subarticle B of Article Thirteenth. 3. If not contained in the amendment itself, the manner in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be implemented as follows: 4. The amendment is to be effective upon the filing of these articles by the Secretary of State. 5. The amendment was duly adopted by the Executive Committee of the Board of Directors without shareholder approval pursuant to 271B.10-020 and 271B.6-020 of the Kentucky Revised Statutes, and shareholder action was not required. Dated: May 19, 1993 LOUISVILLE GAS AND ELECTRIC COMPANY s/C.A. Markel Charles A. Markel, III Treasurer AMENDMENT The Restated Articles of Incorporation are hereby amended by adding thereto a new subarticle B to Article Thirteenth which subarticle B shall read in its entirety as follows: B. Terms of $5.875 Cumulative Preferred Stock (without par value). The Company has classified 250,000 shares of the Preferred Stock (without par value) as a series of such Preferred Stock designated as "$5.875 Cumulative Preferred Stock (without par value)." The preferences, rights, qualifications and restrictions of the shares of the "$5.875 Cumulative Preferred Stock (without par value)," shall be as follows: (1) The annual dividend payable in respect of each share of said series shall be $5.875; and the initial dividend in respect of each share of said series shall be payable on July 15, 1993, when and as declared by the Board of Directors of this Company, to holders of record on June 30, 1993, and will accrue from the date of original issuance of said series; thereafter, such dividends shall be payable on January 15, April 15, July 15 and October 15 in each year (or the next business date thereafter in each case), when and as declared by the Board of Directors of this Company, for the quarter- yearly period ending on the last business day of the preceding month. (2) The shares of said series are not subject to redemption prior to July 1, 1998. On and after July 1, 1998, the shares of said series shall be subject to redemption, in whole or in part, in the manner and with the effect provided in these Articles; and the redemption price or prices applicable to shares of said series shall be $105.875 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 1998, and prior to July 1, 1999; $104.700 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1,1999, and prior to July 1, 2000; $103.525 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 2000, and prior to July 1, 2001; $102.350 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 2001, and prior to July 1, 2002; $101.175 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 2002, and prior to July 1, 2003; and $100.000 per share plus accrued and unpaid dividends thereafter. 1 Notice of every such redemption shall be mailed at least thirty (30) days prior to redemption to the holders of record of the $5.875 Cumulative Preferred Stock (without par value) so to be redeemed, at their respective addresses as the same shall appear on the books of the Company, but no failure to mail a particular notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of those shares of $5.875 Cumulative Preferred Stock (without par value) for which proper notice has been given. (3) So long as any shares of said series shall remain outstanding, the Company shall on or before July 15, 2003, and on or before July 15 of each year thereafter to and including July 15, 2007, set aside, separate and apart from its other funds, an amount equal to $1,250,000 (or such lesser amount as may be sufficient to redeem all of the shares of said series then outstanding) and shall on or before July 15, 2008 (each such July 15 being hereinafter in this Section 3 called a "Sinking Fund Redemption Date"), set aside, separate and apart from its other funds, an amount equal to $18,750,000 (or such lesser amount as may be sufficient to redeem all the shares of said series then outstanding) as a mandatory sinking fund payment for the exclusive benefit of shares of said series, plus such further amount as shall equal the accrued and unpaid dividends on the shares of said series to be redeemed out of such payment (as hereinafter in this Section 3 provided) through the day preceding the applicable Sinking Fund Redemption Date. The obligation of the Company to make such payment shall be cumulative, so that if for any reason the full amount thereof shall not be set aside for any year, the amount of the deficiency from time to time shall be added to the amount due from the Company on subsequent Sinking Fund Redemption Dates (or, if such deficiency exists on July 15, 2008, on subsequent quarterly dividend payment dates thereafter for such series) until the deficiency shall have been fully satisfied. The Company shall be entitled to credit against any such mandatory sinking fund payment shares of said series redeemed by the Company at the Company's option, purchased by the Company in the open market or otherwise acquired by the Company, except through application of any sinking fund payment, and not theretofore so credited, at the sinking fund redemption price hereinafter specified in this Section 3. 2 Any amounts set aside by the Company pursuant to this Section 3 shall be applied on the date of such setting aside if a Sinking Fund Redemption Date or otherwise on the first Sinking Fund Redemption Date occurring thereafter to the redemption of shares of said series at $100.000 per share, plus accrued and unpaid dividends through the day preceding the applicable Sinking Fund Redemption Date, in the manner and upon the notice provided in Section 2 of this sub article B. If any Sinking Fund Redemption Date shall be a Saturday, Sunday or other day on which banking institutions in Louisville, Kentucky are authorized or obligated to remain closed, such term shall be construed to refer to the next preceding business day. Notwithstanding anything to the contrary set forth above, no sinking fund payments on the shares of said series of $5.875 Cumulative Preferred Stock shall be made: (i) unless the full dividends on all shares of Preferred Stock and Preferred Stock (without par value) at the time outstanding for all past dividend periods shall have been paid or declared and set apart for payment or (ii) if such sinking fund payment would be contrary to applicable law. (4) The preferential amounts to which the holders of shares of such series shall be entitled upon any liquidation, dissolution or winding up of the Company, in addition to dividends accumulated but unpaid thereon, shall be $100.000 per share, in the event of any voluntary liquidation, dissolution or winding up of the Company, except that if such voluntary liquidation, dissolution or winding up of the Company shall have been approved by the vote in favor thereof given at a meeting called for that purpose or by the written consent of the holders of a majority of the total shares of the $5.875 Cumulative Preferred Stock (without par value) then outstanding, the amount so payable on such voluntary liquidation, dissolution or winding up shall be $100.000 per share; or $100.000 per share, in the event of any involuntary liquidation, dissolution or winding up of the Company. 3 (5) The shares of said series of $5.875 Cumulative Preferred Stock (without par value) shall be subject to all other terms, provisions and restrictions set forth in these Articles with respect to the shares of the Preferred Stock (without par value) and, excepting only as to the rates of dividend payable in respect of the shares of said series, the dividend periods and dividend payment dates, the redemption price or prices applicable to the shares of said series, the sinking fund provisions applicable to the shares of said series, and the liquidation price applicable to shares of said series, shall have the same relative rights and preferences as, shall be of equal rank with, and shall confer rights equal to those conferred by, all other shares of the Preferred Stock (without par value) of the Company. (6) The stated value of the shares of said series shall be $100.000 per share. 4 RESTATED ARTICLES OF INCORPORATION OF LOUISVILLE GAS AND ELECTRIC COMPANY These Restated Articles of Incorporation of Louisville Gas and Electric Company correctly set forth without change the corresponding provisions of the Articles of Incorporation as theretofore amended of Louisville Gas and Electric Company and supersede the original Articles of Incorporation and all amendments thereto of Louisville Gas and Electric Company. The Articles of Incorporation of Louisville Gas and Electric Company, as originally filed and as thereafter amended from time to time, are hereby restated to read as follows: FIRST. The corporate name is LOUISVILLE GAS AND ELECTRIC COMPANY. SECOND. The principal office or place of business of the Company is in the City of Louisville, County of Jefferson, State of Kentucky. THIRD. The purpose of the Company is the transaction of any or all lawful business for which corporations may be incorporated under the Business Corporation Law of Kentucky, as amended. FOURTH. The Capital stock of the Company shall be divided into (a) one million, seven hundred twenty thousand (1,720,000) shares of Preferred Stock of the par value of $25 each, (b) six million, seven hundred fifty thousand (6,750,000) shares of Preferred Stock (without par value) (the aggregate stated value thereof not to exceed $225,000,000), and (c) seventy-five million (75,000,000) shares of Common Stock without par value. The Preferred Stock and Preferred Stock (without par value) shall be issued in series having the preferences, rights, qualifications and restrictions hereinafter provided for. PREFERRED STOCK AND PREFERRED STOCK (WITHOUT PAR VALUE) (1) In addition to the series of Cumulative Preferred Stock, described in paragraphs (10) through (13) hereof, the Board of Directors is hereby authorized, subject to and in accordance with the provisions of paragraphs (1) through (9), inclusive, to cause Preferred Stock (without par value) to be issued in series, each such series to have such variations in respect thereof as may be determined by the Board of Directors prior to the issuance thereof. The shares of the Preferred Stock of different series may vary as to: (a) The distinctive serial designations and number of shares of such series; (b) The rate of dividends (within such limits as shall be permitted by law not exceeding 8% per annum) payable on the shares of the particular series; (c) The prices (not less than the amount limited by law) and terms upon which the shares of the particular series may be redeemed; and (d) The amount or amounts which shall be paid to the holders of the shares of the particular series in case of voluntary or involuntary dissolution or any distribution of assets. The shares of the Preferred Stock (without par value) of different series may vary as to: (a) The distinctive serial designations and number of shares of such series; (b) The stated value thereof; (c) The rate of dividends (within such limits as shall be permitted by law) payable on the shares of the particular series; (d) The prices (not less than the amount limited by law) and terms (including sinking fund provisions) upon which the shares of the particular series may be redeemed; and (e) The amount or amounts which shall be paid to the holders of the shares of the particular series in case of voluntary or involuntary dissolution or any distribution of assets. The shares of all series of Preferred Stock and Preferred Stock (without par value) shall in all other respects be identical, except that the Preferred Stock (without par value) shall not have the voting rights of the Preferred Stock provided by paragraph 9(A) hereof. (2) The holders of each series of the Preferred Stock and the Preferred Stock (without par value) at the time outstanding shall be entitled, pari passu with the holders of every other series of the Preferred Stock and the Preferred Stock (without par value), to receive, but only when and as declared by the Board of Directors, out of funds legally available for the payment of dividends, cumulative preferential dividends, at the annual dividend rate for the particular series fixed therefore as herein provided, payable quarter-yearly in substantially equal amounts, on dates to be fixed 2 in the by-laws, to stockholders of record on the respective dates, not exceeding thirty (30) days and not less than ten (10) days preceding such dividend payment dates, fixed for the purpose by the Board of Directors. No dividends shall be declared on any series of the Preferred Stock or the Preferred Stock (without par value) in respect of any quarter-yearly dividend period unless there shall likewise be declared on all shares of all other series of the Preferred Stock and the Preferred Stock (without par value) at the time outstanding, like proportionate dividends, ratably, in proportion to the respective annual dividend rates fixed therefore, in respect of the same quarter-yearly dividend period, to the extent that such shares are entitled to receive dividends for such quarter-yearly dividend period. The dividends on shares of all series of the Preferred Stock and the Preferred Stock (without par value) shall be cumulative. In the case of all shares of each particular series, the dividends on shares of such series shall be cumulative from the date of issue thereof unless the Company shall have established regular quarter-yearly dividend periods with respect to such series, in which case such dividends shall be cumulative from the first day of the current quarter-yearly dividend period in which shares of such series shall have been issued, so that unless dividends on all outstanding shares of each series of the Preferred Stock and the Preferred Stock (without par value), at the annual dividend rate and from the dates for accumulation thereof fixed as herein provided shall have been paid for all past quarter-yearly dividend periods, but without interest on cumulative dividends, no dividends shall be paid or declared and no other distribution shall be made on the Common Stock and no Common Stock shall be purchased or otherwise acquired for value. The holders of the Preferred Stock and the Preferred Stock (without par value) of any series shall not be entitled to receive any dividends thereon other than the dividends referred to in this paragraph (2). (3) The Company, by action of its Board of Directors, may redeem the whole or any part of any series of the Preferred Stock or the Preferred Stock (without par value), at any time or from time to time, by paying in cash the redemption price of the shares of the particular series, fixed therefore as herein provided, together with a sum in the case of each share of each series so to be redeemed, computed at the annual dividend rate for the series of which the particular share is a part, from the date from which dividends on such share became cumulative to the date fixed for such redemption, less the aggregate of the dividends theretofore or on such redemption date paid thereon. Notice of every such redemption shall be given by publication at least once in one daily newspaper printed in the English language and of general circulation in Louisville, Kentucky, the first publication in such newspaper to be at least thirty (30) days prior to the date fixed for such redemption. At least thirty (30) days' previous notice of every such redemption shall also be mailed to the holders of record of the shares of the Preferred Stock or the Preferred Stock 3 (without par value) so to be redeemed, at their respective addresses as the same shall appear on the books of the Company; but no failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of the Preferred Stock or the Preferred Stock (without par value) so to be redeemed. In case of redemption of a part only of any series of the Preferred Stock or the Preferred Stock (without par value) at the time outstanding, the Board of Directors shall fix and determine the stock to be so redeemed either by lot or by redemption pro rata or by designation of particular shares for redemption or in any other manner the Board of Directors may see fit. The Board of Directors shall have full power and authority, subject to the limitations and provisions herein contained, to prescribe the manner in which, and the terms and conditions upon which, the shares of the Preferred Stock or the Preferred Stock (without par value) shall be redeemed from time to time. If such notice of redemption shall have been duly given by publication, and if on or before the redemption date specified in such notice all funds necessary for such redemption shall have been set aside by the Company, separate and apart from its other funds, in trust for the account of the holders of the shares to be redeemed, so as to be and continue to be available therefore, then, notwithstanding that any certificate for such shares so called for redemption shall not have been surrendered for cancellation, from and after the date fixed for redemption, the shares represented thereby shall no longer be deemed outstanding, the right to receive dividends thereon shall cease to accrue and all rights with respect to such shares so called for redemption shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive out of the funds so set aside in trust, the amount payable upon redemption thereof, without interest; provided, however, that the Company may, after giving notice by publication of any such redemption as hereinbefore provided or after giving to the bank or trust company hereinafter referred to irrevocable authorization to give such notice by publication, and at any time prior to the redemption date specified in such notice, deposit in trust, for the account of the holders of the shares to be redeemed, so as to be and continue to be available therefore, funds necessary for such redemption with a bank or trust company in good standing, organized under the laws of the United States of America or of the Commonwealth of Kentucky or of the State of New York doing business in the City of Louisville, or in the Borough of Manhattan, The City of New York, and having capital, surplus and undivided profits aggregating at least $1,000,000, designated in such notice of redemption, and, upon such deposit in trust, all shares with respect to which such deposit shall have been made shall no longer be deemed to be outstanding, and all rights with respect to such shares shall forthwith cease and terminate, except only the right of the holders thereof to receive at any time from and after the date of such deposit, the amount payable upon the redemption thereof, without interest. 4 (4) Before any amount shall be paid to, or any assets distributed among, the holders of the Common Stock or any other stock ranking junior to the Preferred Stock and the Preferred Stock (without par value) of each series, upon any liquidation, dissolution or winding up of the Company, and after paying or providing for the payment of all creditors of the Company, the holders of each series of the Preferred Stock and the Preferred Stock (without par value) at the time outstanding shall be entitled, pari passu with the holders of every other series of the Preferred Stock and the Preferred Stock (without par value), to be paid in cash the amount for the particular series fixed therefore as herein provided, together with a sum in the case of each share of each series, computed at the annual dividend rate for the series of which the particular share is a part, from the date from which dividends on such share became cumulative to the date fixed for the payment of such distributive amount, less the aggregate of the dividends theretofore or on such date paid thereon; but no payments on account of such distributive amounts shall be made to the holders of any series of the Preferred Stock or the Preferred Stock (without par value) unless there shall likewise be paid at the same time to the holders of each other series of the Preferred Stock and the Preferred Stock (without par value) at the time outstanding, like proportionate distributive amounts, ratably, in proportion to the full distributive amounts to which they are respectively entitled as herein provided. The holders of the Preferred Stock and the Preferred Stock (without par value) of any series shall not be entitled to receive any amounts with respect thereto upon any liquidation, dissolution or winding up of the Company other than as provided in this paragraph. Neither the consolidation or merger of the Company with any other corporation or corporations, nor the sale or transfer by the Company of all or any part of its assets, shall be deemed to be a liquidation, dissolution or winding up of the Company. (5) Whenever the full dividends on all series of the Preferred Stock and the Preferred Stock (without par value) at the time outstanding for all past quarter-yearly dividend periods shall have been paid or declared and set apart for payment, then such dividends as may be determined by the Board of Directors may be declared and paid on the Common Stock or any other stock ranking junior to the Preferred Stock and the Preferred Stock (without par value) of each series, but only out of funds legally available for the payment of dividends; provided, however, that no dividend shall be declared or paid and no other distributions shall be made on the Common Stock or on any such other stock and no shares of the Common Stock or of any such other stock shall be purchased or otherwise acquired for value out of capital surplus arising from a reduction in capital. (6) In the event of any liquidation, dissolution or winding up of the Company, all assets and funds of the Company remaining after paying or providing for the payment of all creditors of the 5 Company and after paying or providing for the payment to the holders of all series of the Preferred Stock and the Preferred Stock (without par value) of the full distributive amounts to which they are respectively entitled as herein provided, shall be divided among and paid to the holders of the Common Stock or any other stock ranking junior to the Preferred Stock and the Preferred Stock (without par value) of each series, according to their respective rights and interests. (7)(A) So long as any shares of the Preferred Stock or the Preferred Stock (without par value) of any series are outstanding, the Company shall not, without the affirmative vote or written consent of the holders of at least two-thirds of the total number of shares of such Preferred Stock and Preferred Stock (without par value) then outstanding: Amend, alter, change or repeal any of the express terms of any series of the Preferred Stock or the Preferred Stock (without par value) then outstanding in a manner prejudicial to the holders thereof; provided, however, that if any such amendment, alteration, change or repeal shall be prejudicial to the holders of one or more, but not all, of the series of Preferred Stock or the Preferred Stock (without par value) at the time outstanding, only such consent of the holders of two- thirds of the total number of shares of all series so affected shall be required. (B) So long as any shares of the Preferred Stock or the Preferred Stock (without par value) of any series are out- standing, the Company shall not, without the affirmative vote or written consent of the holders of a majority of the total number of shares of such Preferred Stock and Preferred Stock (without par value) then outstanding: (a) Create or authorize any class of stock ranking prior to or (other than a series of the 1,720,000 authorized shares of Preferred Stock or 6,750,000 authorized shares of Preferred Stock (without par value)) ranking on a parity with any series of the Preferred Stock and the Preferred Stock (without par value) as to dividends or distributions, or create or authorize any obligation or security convertible into shares of stock of any such class; or (b) Issue, sell or otherwise dispose of any shares of the Preferred Stock or the Preferred Stock (without par value), or of any class of stock ranking prior to or on a parity with the Preferred Stock and the Preferred Stock (without par value) of each series as to dividends or distributions, unless the net income of the Company, determined in accordance with generally accepted accounting practices, to be available for the payment of 6 dividends on the Preferred Stock, the Preferred Stock (without par value) and any class of stock ranking prior thereto or on a parity therewith as aforesaid, for a period of twelve (12) consecutive calendar months within the fifteen (15) calendar months immediately preceding the issuance, sale or disposition of such stock, is at least equal to twice the annual dividend requirements on the entire amount of all Preferred Stock, all Preferred Stock (without par value), and of all such other classes of stock ranking prior thereto or on a parity therewith, as to dividends or distributions to be outstanding immediately after the issuance, sale or disposition of such additional shares; or (c) Merge or consolidate with or into any other corporation or corporations, unless such merger or consolidation, or the issuance or assumption of all securities, to be issued or assumed in connection with any such merger or consolidation, shall have been ordered, approved, or permitted by the Securities and Exchange Commission under the provisions of the Public Utility Holding Company Act of 1935 or by any successor commission or regulatory authority of the United States of America having jurisdiction in the premises; provided that the provisions of this clause (c) shall not apply to a purchase or other acquisition by the Company of franchises or assets of another corporation in any manner which does not involve a merger or consolidation. (C) So long as any shares of the Preferred Stock or Preferred Stock (without par value) of any series are outstanding, the Company shall not without written consent of the holders of a majority of the total number of shares of such Preferred Stock and Preferred Stock (without par value) then outstanding or, in the alternative and subject to the proviso hereinafter set forth in this subdivision 7(C), the affirmative vote of the holders of a majority of the total number of the shares of such Preferred Stock and Preferred Stock (without par value) which are represented, by the attendance of the holders thereof in person or by proxy, at a meeting duly called for the purpose: Issue or assume any unsecured notes, debentures or other securities representing unsecured indebtedness for any purpose other than (1) the refunding of outstanding unsecured securities theretofore issued or assumed by the Company, (2) the financing of pollution control facilities (as defined in the Internal Revenue Code, as amended or as hereafter amended, and the regulations and rulings thereunder) through the issuance or assumption of unsecured notes, debentures or other securities representing unsecured indebtedness the receipt of interest on which is exempt from federal income 7 tax at the time of such issuance or assumption, or (3) the redemption or other retirement of outstanding shares of one or more series of the Preferred Stock or Preferred Stock (without par value) if, immediately after such issuance or assumption, the total principal amount of all unsecured notes, debentures or other unsecured securities representing unsecured indebtedness issued or assumed by the Company and then outstanding (including unsecured securities then to be issued or assumed but excluding unsecured securities theretofore consented to by the holders of such Preferred Stock and Preferred Stock (without par value)) will exceed 20% of the sum of (i) the total principal amount of all bonds or other securities representing secured indebtedness issued or assumed by the Company and then to be outstanding, and (ii) the capital and surplus of the Company as then to be stated on the books of account of the Company. Provided, however, that if, at any such meeting, at least one-third of all shares of such Preferred Stock and Preferred Stock (without par value) then outstanding shall be voted against the action then proposed, of the character aforesaid, such action may be taken only with the affirmative vote of a majority of all shares of such Preferred Stock and Preferred Stock (without par value) then outstanding. If at any meeting of such Preferred Stock and Preferred Stock (without par value) for the purpose of taking action on matters set forth in this subdivision 7(C), the presence in person or by proxy of the holders of a majority of such stock shall not have been obtained and shall not be obtained for a period of thirty days from the date of such meeting, the presence in person or by proxy of the holders of one-third of such stock then outstanding shall be sufficient to constitute a quorum. (8) No holder of shares of Preferred Stock or Preferred Stock (without par value) shall be entitled as such as a matter of right to subscribe for or purchase any part of any new or additional issue of stock, or securities convertible into stock, of any class whatsoever, whether now or hereafter authorized, and whether issued for cash, property, services, by way of dividends, or otherwise. (9)(A)Every holder of Preferred Stock of any series shall have one vote for each share of such Preferred Stock held by him, and every holder of the Common Stock shall have one vote for each share of Common Stock held by him, for the election of Directors and upon all other matters, except as otherwise provided in this paragraph (9) hereof. At all elections of directors, any stockholder may vote cumulatively. The foregoing shall not modify or affect the special votes and consents provided for in paragraph (7) hereof. 8 (B) If and when dividends shall be in default in an amount equivalent to six (6) full quarter-yearly dividends on all shares of all series of the Preferred Stock and the Preferred Stock (without par value) at the time outstanding, and until all dividends in default on such Preferred Stock and such Preferred Stock (without par value) shall have been paid, the holders of all shares of the Preferred Stock and all shares of the Preferred Stock (without par value), voting separately as one class, shall be entitled to elect the smallest number of Directors necessary to constitute a majority of the full Board of Directors, and the holders of the Common Stock, voting separately as a class, shall be entitled to elect the remaining Directors of the Company. At all elections of directors held pursuant to this subdivision 9(B), any stockholder may vote cumulatively. The terms of office of all persons who may be Directors of the Company at the time shall terminate upon the election of a majority of the Board of Directors by the holders of the Preferred Stock and the Preferred Stock (without par value), whether or not the holders of the Common Stock shall then have elected the remaining Directors of the Company. (C) If and when all dividends then in default on the Preferred Stock and the Preferred Stock (without par value) at the time outstanding shall be paid (and such dividends shall be declared and paid, or declared and funds set aside for that purpose out of any funds legally available therefore as soon as reasonably practicable), the Preferred Stock and the Preferred Stock (without par value) shall thereupon be divested of any special right with respect to the election of Directors provided in subparagraph (B) hereof, and the voting power of the Preferred Stock, the Preferred Stock (without par value) and the Common Stock shall revert to the status existing before the occurrence of such default; but always subject to the same provisions for vesting such special rights in the Preferred Stock and the Preferred Stock (without par value) in case of further like default or defaults in dividends thereon. (D) In case of any vacancy in the Board of Directors occurring among the Directors elected by the holders of the Preferred Stock and the Preferred Stock (without par value), as a class, pursuant to subparagraph (B) hereof, a majority of the remaining Directors elected by the holders of the Preferred Stock and the Preferred Stock (without par value) (including, as elected by such holders, any Directors then in office who were chosen by other Directors as successor Directors to fill vacancies as provided in this sentence) may elect a successor to hold office for the unexpired term of the Director whose place shall be vacant. In case of a vacancy in the Board of Directors occurring among the Directors elected by the holders of the Common Stock, as a 9 class, pursuant to subparagraph (B) hereof, a majority of the remaining Directors elected by the holders of the Common Stock (including, as elected by such holders, any Directors then in office who were chosen by other directors as successor directors to fill vacancies as provided in this sentence) may elect a successor to hold office for the unexpired term of the Director whose place shall be vacant. In all other cases, any vacancy occurring among the Directors shall be filled by the vote of a majority of the remaining Directors. (E) At all meetings of stockholders held for the purpose of electing directors during such times as the holders of shares of the Preferred Stock and the Preferred Stock (without par value) shall have the special right, voting separately as one class, to elect directors pursuant to subparagraph (B) hereof, the presence in person or by proxy of the holders of a majority of the outstanding shares of the Common Stock shall be required to constitute a quorum of such class for the election of directors, and the presence in person or by proxy of the holders of Preferred Stock and Preferred Stock (without par value) entitled to cast a majority of all the votes to which the holders of the Preferred Stock and the Preferred Stock (without par value) are entitled, shall be required to constitute a quorum of such class for the election of directors; provided, however, that the absence of a quorum (according to votes, as aforesaid) of the holders of stock of any such class shall not prevent the election at any such meeting or adjournment thereof of directors by the other such class if such quorum of the holders of stock of such other class is present in person or by proxy at such meeting; and provided further that in the absence of such quorum of the holders of stock of any such class, a majority (according to votes, as aforesaid) of those holders of the stock of such class who are present in person or by proxy shall have power to adjourn the election of the directors to be elected by such class from time to time without notice other than announcement at the meeting until the holders of the requisite number of shares of such class shall be present in person or by proxy. (F) Except when some mandatory provision of law shall be controlling and except as otherwise provided in paragraph (7) hereof whenever shares of two or more series of the Preferred Stock or of the Preferred Stock (without par value) are outstanding, no particular series shall be entitled to vote as a separate series on any matter and all shares of the Preferred Stock and the Preferred Stock (without par value) shall be deemed to constitute but one class for any purpose for which a vote of the stockholders of the Company by classes may now or hereafter be required. 10 5% CUMULATIVE PREFERRED STOCK, $25 PAR VALUE (10) The Company has classified $21,519,300 par value of the Preferred Stock as a series of such Preferred Stock designated as "5% Cumulative Preferred Stock, $25 Par Value," consisting of 860,772 shares of the par value of $25 per share. (11) The preferences, rights, qualifications and restric- tions of the shares of the "5% Cumulative Preferred Stock, $25 Par Value," shall be as follows: (a) The annual dividend rate for such series shall be 5% per annum; (b) The redemption price for such series shall be $28.00 per share; and (c) The preferential amounts to which the holders of shares of such series shall be entitled upon any liquidation, dissolution or winding up of the Company, in addition to dividends accumulated but unpaid thereon, shall be: $27.25 per share, in the event of any voluntary liquidation, dissolution or winding up of the Company, except that if such voluntary liquidation, dissolution or winding up of the Company shall have been approved by the vote in favor thereof given at a meeting called for that purpose or by the written consent of the holders of a majority of the total shares of the 5% Cumulative Preferred Stock, $25 Par Value then outstanding, the amount so payable on such voluntary liquidation, dissolution, or winding up shall be $25 per share; or $25 per share, in the event of any involuntary liqui- dation, dissolution or winding up of the Company. 7.45% CUMULATIVE PREFERRED STOCK, PAR VALUE $25 PER SHARE (12) The Company has classified $21,480,700 Par Value of the Preferred Stock as a series of such Preferred Stock designated as "7.45% Cumulative Preferred Stock, Par Value $25 per share," consisting of 859,228 shares with par value of $25 per share. (13) The preferences, rights, qualifications and restric- tions of shares of the "7.45% Cumulative Preferred Stock, Par Value $25 per share," shall be as follows: (a) The annual dividend rate for such series shall be 7.45% per annum; (b) The redemption price for such series will be $27.50 per share prior to April 15, 1978; $26.75 per share 11 thereafter and prior to April 15, 1983; $26.00 per share thereafter and prior to April 15, 1988; and $25.75 per share thereafter. However, no shares of such series may be redeemed prior to April 15, 1978 from proceeds received through the incurring of debt, or through the issuance of preferred stock ranking equal or prior to the stock of such series as to dividends or on liquidation, where such debt has an effective interest cost or such preferred stock has an effective dividend cost to the Company of less than the effective dividend cost to the Company of the stock of such series; and (c) The preferential amounts to which the holders of shares of such series shall be entitled upon any liquida- tion, dissolution or winding up of the Company, in addition to dividends accumulated but unpaid thereon, shall be: $25.50 per share, in the event of any voluntary liqui- dation, dissolution or winding up of the Company, except that if such voluntary liquidation, dissolution or winding up of the Company shall have been approved by the vote in favor thereof given at a meeting called for that purpose or by the vote in favor thereof given at a meeting called for that purpose or by the written consent of the holders of a majority of the total shares of the 7.45% Cumulative Preferred Stock, Par Value $25 per share, then outstanding, the amount so payable on such voluntary liquidation, dissolution, or winding up shall be $25 per share; or $25 per share, in the event of any involuntary liquidation, dissolution or winding up of the Company. COMMON STOCK (Without par value) The Board of Directors is hereby authorized to cause shares of Common Stock, without par value, to be issued from time to time for such consideration as may be fixed from time to time by the Board of Directors, or by way of stock split pro rata to the holders of the Common Stock. The Board of Directors may also determine the proportion of the proceeds received from the sale of such stock which shall be credited upon the books of the Company to Capital or Capital Surplus. Each share of the Common Stock shall be equal in all respects to every other share of the Common Stock. No holder of shares of Common Stock shall be entitled as such as a matter of right to subscribe for or purchase any part of any new or additional issue of stock, or securities convertible into 12 stock, of any class whatsoever, whether now or hereafter authorized, and whether issued for cash, property, services or otherwise. FIFTH. The Company shall commence business as soon as authorized as provided by law and shall continue for a period of nine hundred ninety-nine (999) years from July 2, 1913. SIXTH. The private property of the stockholders of the Company shall not be subject to the payment of corporate debts. SEVENTH. A. CERTAIN DEFINITIONS. For purposes of this Article Seventh: (1) "Affiliate," including the term "affiliated person," means a person who directly, or indirectly through one (1) or more intermediaries, controls, or is controlled by, or is under common control with, a specified person. (2) "Associate," when used to indicate a relationship with any person, means: (a) Any corporation or organization (other than the Company or a Subsidiary), of which such person is an officer, director or partner or is, directly or indirectly, the Beneficial Owner of ten percent (10%) or more of any class of Equity Securities; (b) Any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (c) Any relative or spouse of such person, or any relative of such spouse, any one (1) of whom has the same home as such person or is a director or officer of the corporation or any of its Affiliates. (3) "Beneficial Owner," when used with respect to any Voting Stock, means a person: (a) Who, individually or with any of its Affiliates or Associates, beneficially owns Voting Stock, directly or indirectly; or (b) Who, individually or with any of its Affiliates or Associates has: 1. The right to acquire Voting Stock, whether such right is exercisable immediately or only after the passage of time and whether or not such right is exercisable only after specified conditions are met, pursuant to any agreement, arrangement, or understanding 13 or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; 2. The right to vote Voting Stock pursuant to any agreement, arrangement, or understanding; or 3. Any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting or disposing of Voting Stock with any other person who beneficially owns, or whose Affiliates or Associates beneficially own, directly or indirectly, such shares of Voting Stock. (4) "Business Combination" means: (a) Any merger or consolidation of the Company or any Subsidiary with any Interested Shareholder, or any other corporation, whether or not itself an Interested Shareholder, which is, or after the merger or consolidation would be, an Affiliate of an Interested Shareholder who was an Interested Shareholder prior to the transaction; (b) Any sale, lease, transfer, or other disposition, other than in the ordinary course of business, in one (1) transaction or a series of transactions in any twelve-month period, to any Interested Shareholder or any Affiliate of any Interested Shareholder, other than the Company or any Subsidiary, of any assets of the Company or any Subsidiary having, measured at the time the transaction or transactions are approved by the Board of Directors of the Company, an aggregate book value as of the end of the Company's most recently ended fiscal quarter of five percent (5%) or more of the total Market Value of the outstanding stock of the Company or of its net worth as of the end of its most recently ended fiscal quarter; (c) The issuance or transfer by the Company, or any Subsidiary, in one transaction or a series of transactions in any twelve-month period, of any Equity Securities of the Company or any Subsidiary which have an aggregate Market Value of five percent (5%) or more of the total Market Value of the outstanding stock of the Company, determined as of the end of the Company's most recently ended fiscal quarter prior to the first such issuance or transfer, to any Interested Shareholder or any Affiliate of any Interested Shareholder, other than the Company or any of its Subsidiaries, except pursuant to the exercise of warrants or rights to purchase securities offered pro rata to all holders of the Company's Voting Stock or any other method affording substantially proportionate treatment to the holders of Voting Stock; 14 (d) The adoption of any plan or proposal for the liquidation or dissolution of the Company in which any thing other than cash will be received by an Interested Shareholder or any Affiliate of any Interested Shareholder; or (e) Any reclassification of securities, including any reverse stock split; or recapitalization of the Company; or any merger or consolidation of the Company with any of its Subsidiaries; or any other transaction which has the effect, directly or indirectly, in one transaction or a series of transactions, of increasing by five percent (5%) or more the proportionate amount of the outstanding shares of any class of Equity Securities of the Company or any Subsidiary which is directly or indirectly beneficially owned by any Interested Shareholder or any Affiliate of any Interested Shareholder. (5) "Common Stock" means any stock of the Company other than preferred or preference stock of the Company. (6) "Continuing Director" means any member of the Company's Board of Directors who is not an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder or any of its Affiliates, other than the Company or any of its Subsidiaries, and who was a director of the Company prior to the time the Interested Shareholder became an Interested Shareholder, and any successor to such Continuing Director who is not an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder or any of its Affiliates, other than the Company or any of its Subsidiaries, and was recommended or elected by a majority of the Continuing Directors at a meeting at which a quorum consisting of a majority of the Continuing Directors is present. (7) "Control," including the terms "controlling," "controlled by" and "under common control with," means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise, and the beneficial ownership of ten percent (10%) or more of the votes entitled to be cast by a corporation's Voting Stock creates a presumption of control. (8) "Equity Security" means: (a) Any stock or similar security, certificate of interest, or participation in any profit-sharing agreement, voting trust certificate, or certificate of deposit for the foregoing; 15 (b) Any security convertible, with or without consid- eration, into an Equity Security, or any warrant or other security carrying any right to subscribe to or purchase an Equity Security; or (c) Any put, call, straddle, or other option, right or privilege of acquiring an Equity Security from or selling an Equity Security to another without being bound to do so. (9) "Interested Shareholder" means any person, other than the Company or any of its Subsidiaries, who: (a) Is the Beneficial Owner, directly or indirectly, of ten percent (10%) or more of the voting power of the outstanding Voting Stock of the Company; or is an Affiliate of the Company and at any time within the two-year period immediately prior to the date in question was the Beneficial Owner directly or indirectly, of ten percent (10%) or more of the voting power of the then outstanding Voting Stock of the Company. (b) For the purpose of determining whether a person is an Interested Shareholder, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned by the person through application of Subsection (3) of this Paragraph A of Article Seventh but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants or options or otherwise. (10) "Market Value" means: (a) In the case of stock, the highest closing sale price during the thirty-day period immediately preceding the date in question of a share of such stock on the composite tape for New York Stock Exchange listed stocks, or, if such stock is not quoted on the composite tape, on the New York Stock Exchange, or if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the thirty-day period preceding the date in question on the National Association of Securities Dealers, Inc., Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors at a meeting of the Board of Directors at which a quorum consisting of at least a majority of the Continuing Directors is present; and 16 (b) In the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Continuing Directors at a meeting of the Board of Directors at which a quorum consisting of at least a majority of the Continuing Directors is present. (11) "Subsidiary" means any corporation of which Voting Stock having a majority of the votes entitled to be cast is owned, directly or indirectly, by the Company. (12) "Voting Stock" means shares of capital stock of a corporation entitled to vote generally in the election of its directors. B. MINIMUM SHARE VOTE REQUIREMENTS FOR APPROVAL OF BUSINESS COMBINATIONS. (1) In addition to any vote otherwise required by law or these Articles of Incorporation, a Business Combination shall be recommended by the Board of Directors of the Company and approved by the affirmative vote of at least: (a) Eighty percent (80%) of the votes entitled to be cast by outstanding shares of Voting Stock of the Company, voting together as a single voting group; and (b) Two-thirds of the votes entitled to be cast by holders of Voting Stock other than Voting Stock beneficially owned by the Interested Shareholder who is, or whose Affiliate is, a party to the Business Combination or by an Affiliate or Associate of such Interested Shareholder, voting together as a single voting group. (2) Unless a Business Combination is exempted from the operation of this Paragraph B in accordance with Paragraph C of this Article Seventh, the failure to comply with the voting requirements of Subsection (1) of this Paragraph B shall render such Business Combination void. C. EXEMPTIONS FROM MINIMUM SHARE VOTE REQUIREMENTS. (1) For purposes of Section (2) of this Paragraph C: (a) "Announcement Date" means the first general public announcement of the proposal or intention to make a proposal of the Business Combination or its first communication generally to stockholders of the Company, whichever is earlier; 17 (b) "Determination Date" means the date on which an Interested Shareholder first became an Interested Shareholder; and (c) "Valuation Date" means 1. For a Business Combination voted upon by stockholders, the latter of the day prior to the date of the stockholders' vote or the date twenty (20) days prior to the consummation of the Business Combination; and 2. For a Business Combination not voted upon by stockholders, the date of the consummation of the Business Combination. (2) The vote required by Section B of this Article Seventh does not apply to a Business Combination if each of the following conditions is met: (a) The aggregate amount of the cash and the Market Value as of the Valuation Date of consideration other than cash to be received per share by holders of Common Stock in such Business Combination is at least equal to the highest of the following: 1. The highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of Common Stock of the same class or series acquired by it: a. Within the two-year period immediately prior to the Announcement Date of the proposal of the Business Combination; or b. In the transaction in which it became an Interested Shareholder, whichever is higher; or 2. The Market Value per share of Common Stock of the same class or series on the Announcement Date or on the Determination Date, whichever is higher; or 3. The price per share equal to the Market Value per share of Common Stock of the same class or series determined pursuant to clause 2 of this Subsection (a), multiplied by the fraction of: a. The highest per share price, including any brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the Interested Shareholder for any shares of Common Stock of the 18 same class or series acquired by it within the two- year period immediately prior to the Announcement Date, over b. The Market Value per share of Common Stock of the same class or series on the first day in such two-year period on which the Interested Shareholder acquired any shares of Common Stock. (b) The aggregate amount of the cash and the Market Value as of the Valuation Date of consideration other than cash to be received per share by holders of shares of any class or series of outstanding stock other than Common Stock is at least equal to the highest of the following, whether or not the Interested Shareholder has previously acquired any shares of a particular class or series of stock: 1. The highest per share price, including any brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the Interested Shareholder for any shares of such class of stock acquired by it: a. Within the two-year period immediately prior to the Announcement Date of the proposal of the Business Combination; or b. In the transaction in which it became an Interested Shareholder, whichever is higher; or 2. The highest preferential amount per share to which the holders of shares of such class of stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company; or 3. The Market Value per share of such class of stock on the Announcement Date or on the Determination Date, whichever is higher; or 4. The price per share equal to the Market Value per share of such class of stock determined pursuant to clause 3 of this Subsection (b), multiplied by the fraction of: a. The highest per share price, including any brokerage commissions, transfer taxes and soliciting dealers' fees, paid by the Interested Shareholder for any shares of any class of Voting Stock acquired by it within the two-year period immediately prior to the Announcement Date, over 19 b. The Market Value per share of the same class of Voting Stock on the first day in such two-year period on which the Interested Shareholder acquired any shares of the same class of Voting Stock. (c) In making any price calculation under Section (2) of this Paragraph C, appropriate adjustments shall be made to reflect any reclassification, including any reverse stock split; recapitalization; reorganization; or any similar transaction which has the effect of reducing the number of outstanding shares of the stock. The consideration to be received by holders of any class or series of outstanding stock is to be in cash or in the same form as the Interested Shareholder has previously paid for shares of the same class or series of stock. If the Interested Shareholder has paid for shares of any class of stock with varying forms of consideration, the form of consideration for such class of stock shall be either cash or the form used to acquire the largest number of shares of such class or series of stock previously acquired by it. (d) 1. After the Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: a. There shall have been no failure to declare and pay at the regular date therefore any full periodic dividends, whether or not cumulative, on any outstanding preferred stock of the Company; b. There shall have been no reduction in the annual rate of dividends paid on any class or series of stock of the Company that is not pre- ferred stock, except as necessary to reflect any subdivision of the stock; and an increase in such annual rate of dividends as necessary to reflect any reclassification, including any reverse stock split; recapitalization; reorganization; or any similar transaction which has the effect of reducing the number of outstanding shares of the stock; and c. The Interested Shareholder shall not become the Beneficial owner of any additional shares of stock of the Company except as part of the transaction which resulted in such Interested Shareholder becoming an Interested Shareholder or by virtue of proportionate stock splits or stock dividends. 2. The provisions of subclauses a and b of clause 1 do not apply if no Interested Shareholder or an Affiliate or Associate of the Interested Shareholder 20 voted as a director of the Company in a manner inconsistent with such subclauses and the Interested Shareholder, within ten (10) days after any act or failure to act inconsistent with such subclauses, notifies the Board of Directors of the Company in writing that the Interested Shareholder disapproves thereof and requests in good faith that the Board of Directors rectify such act or failure to act. (e) After the Interested Shareholder has become an Interested Shareholder, the Interested Shareholder may not have received the benefit, directly or indirectly, except proportionately as a stockholder, of any loans, advances, guarantees, pledges or other financial assistance provided by the Company or any Subsidiary, whether in anticipation of or in connection with such Business Combination or otherwise. (3) (a) The vote required by Section B of this Article Seventh does not apply to any Business Combination that is approved by a majority of Continuing Directors at a meeting of the Board of Directors at which a quorum consisting of at least a majority of the Continuing Directors is present. (b) Unless by its terms a resolution adopted under the foregoing subsection (a) of this Section (3) is made irrevocable, it may be altered or repealed by the Board of Directors, but this shall not affect any Business Combinations that have been consummated, or are the subject of an existing agreement entered into, prior to the alteration or repeal. D. Powers of the Board of Directors. A majority of the Continuing Directors of the Company shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Seventh, including without limitation, (a) whether a person is an Interested Shareholder, (b) the number of shares of Voting Stock beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another, (d) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Company or any Subsidiary in any Business Combination has, an aggregate book value or Market Value of five percent (5%) or more of the total Market Value of the outstanding stock of the Company or of its net worth, and (e) whether the requirements of Paragraph C of this Article Seventh have been met. 21 E. No Effect on Fiduciary Obligations of Interested Shareholders. Nothing contained in this Article Seventh shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. F. Amendment or Repeal. Notwithstanding any other provisions of this Article Seventh or of any other Article hereof, or of the By-Laws of the Company (and notwithstanding the fact that a lesser percentage may be specified from time to time by law, this Article Seventh, any other Article hereof, or the By-Laws of the Company), the provisions of this Article Seventh may not be altered, amended or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such alteration, amendment, repeal or adoption is approved by the affirmative vote of the holders of at least: (i) 80% of the combined voting power of the then outstanding Voting Stock of the Company, voting together as a single class and (ii) 66-2/3% of the combined voting power of the then outstanding Voting Stock (which is not beneficially owned by any Interested Shareholder), voting together as a single class. EIGHTH. A. Number, Election and Terms of Directors. The business of the Company shall be managed by a Board of Directors. The number of directors of the Company shall be fixed from time to time by or pursuant to the By-Laws of the Company. Except as otherwise provided in or fixed by or pursuant to the provisions of Article Fourth hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, the directors shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as shall be provided in the manner specified in the By-Laws of the Company, one class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1988, another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1989, and another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1990, with each member of each class to hold office until his successor is elected and qualified. At each annual meeting of stockholders of the Company and except as otherwise provided in or fixed by or pursuant to the provisions of Article Fourth hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, the successors of the class of directors whose term expires at that meeting shall be elected 22 to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. B. Stockholder Nomination of Director Candidates and Introduction of Business. Advance notice of stockholder nominations for the election of directors, and advance notice of business to be brought by stockholders before an annual meeting of stockholders, shall be given in the manner provided in the By-Laws of the Company. C. Newly Created Directorships and Vacancies. Except as otherwise provided in or fixed by or pursuant to the provisions of Article Fourth hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances: (i) newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors; (ii) any director elected in accordance with the preceding clause (i) shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified; and (iii) no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. D. Removal. Except as otherwise provided in or fixed by or pursuant to the provisions of Article Fourth hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office, with or without cause, only by the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of the Company's stock entitled to vote generally, voting together as a single class. Notwithstanding the foregoing provisions of this Paragraph D, if at any time any stockholders of the Company have cumulative voting rights with respect to the election of directors and less than the entire Board of Directors is to be removed, no director may be removed from office if the votes cast against his removal would be sufficient to elect him as a director if then cumulatively voted at an election of the class of directors of which he is a part. Whenever in this Article Eighth or in Article Ninth hereof or in Article Tenth hereof, the phrase, "the then outstanding shares of the 23 Company's stock entitled to vote generally" is used, such phrase shall mean each then outstanding share of any class or series of the Company's stock that is entitled to vote generally in the election of the Company's directors. E. Amendment or Repeal. Notwithstanding any other provisions of this Article Eighth or of any other Article hereof or of the By-Laws of the Company (and notwithstanding the fact that a lesser percentage may be specified from time to time by law, this Article Eighth, any other Article hereof, or the By-Laws of the Company), the provisions of this Article Eighth may not be altered, amended or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such alteration, amendment, repeal or adoption is approved by the affirmative vote of at least 80% of the combined voting power of the then outstanding shares of the Company's stock entitled to vote generally, voting together as a single class. NINTH. Any action required or permitted to be taken by the stockholders of the Company at a meeting of such holders may be taken without such a meeting only if a consent in writing setting forth the action so taken shall be signed by all of the stockholders entitled to vote with respect to the subject matter thereof. Except as otherwise mandated by Kentucky law and except as otherwise provided in or fixed by or pursuant to the provisions of Article Fourth hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, special meetings of stockholders of the Company may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors or by the President of the Company. Notwithstanding any other provisions of this Article Ninth or of any other Article hereof or of the By-Laws of the Company (and notwithstanding the fact that a lesser percentage may be specified from time to time by law, this Article Ninth, any other Article hereof, or the By-Laws of the Company), the provisions of this Article Ninth may not be altered, amended or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such alteration, amendment, repeal or adoption is approved by the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of the Company's stock entitled to vote generally, voting together as a single class. TENTH. The Board of Directors shall have power to adopt, amend and repeal the By-Laws of the Company to the maximum extent permitted from time to time by Kentucky law; provided, however, that any By-Laws adopted by the Board of 24 Directors under the powers conferred hereby may be amended or repealed by the Board of Directors or by the holders of at least a majority of the combined voting power of the then outstanding shares of the Company's stock entitled to vote generally, voting together as a single class, except that, and notwithstanding any other provisions of this Article Tenth or of any other Article hereof or of the By-Laws of the Company (and notwithstanding the fact that a lesser percentage may be specified from time to time by law, this Article Tenth, any other Article hereof or the By-Laws of the Company), no provision of Section 2, Section 4 or Section 5 of Article I of the By-Laws or of Section 1 of Article II of the By-Laws or of Section 2 of Article IV of the By-Laws or of Article IX of the By-Laws may be altered, amended or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such alteration, amendment, repeal or adoption is approved by the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of the Company's stock entitled to vote generally, voting together as a single class. Notwithstanding any other provisions of this Article Tenth or of any other Article hereof or of the By-Laws of the Company (and notwithstanding the fact that a lesser percentage may be specified from time to time by law, this Article Tenth, any other Article hereof or the By-Laws of the Company), the provisions of this Article Tenth may not be altered, amended or repealed in any respect, nor may any provision inconsistent therewith be adopted, unless such alteration, amendment, repeal or adoption is approved by the affirmative vote of the holders of at least 80% of the combined voting power of the then outstanding shares of the Company's stock entitled to vote generally, voting together as a single class. [The following are resolutions that were duly adopted by the Company's Board of Directors and that set forth in accordance with the Kentucky Business Corporation Act certain of the terms of several series of the Company's Preferred Stock (without par value).] PREFERRED STOCK RESOLUTIONS RESOLVED, By the Board of Directors of Louisville Gas and Electric Company, a Kentucky corporation, (1) That a series consisting of 250,000 shares of the Preferred Stock (without par value) of the Company is hereby created and established out of the authorized and unissued shares of the Preferred Stock (without par value) of the Company; said series, and each share thereof, shall be designated "$8.72 25 Cumulative Preferred Stock (without par value)"; and all of said two hundred and fifty thousand (250,000) shares of said series are hereby authorized to be issued by the Company; (2) That the annual dividend payable in respect of each share of said series shall be $8.72; the initial dividend in respect of such share of said series shall be payable on October 15, 1976, when and as declared by the Board of Directors of this Company, to holders of record on September 30, 1976, and will accrue from the date of original issuance of said series; thereafter, such dividends shall be payable on January 15, April 15, July 15, and October 15 in each year (or the next business date thereafter in each case), when and as declared by the Board of Directors of this Company, for the quarter-yearly period ending on the last business day of the preceding month; (3) That the shares of said series shall be subject to redemption, in whole at any time or in part from time to time, upon the notice and in the manner and with the effect provided in the Articles of Incorporation (as amended) of the Company; and the redemption price or prices applicable to shares of said series shall be $108.72 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is prior to July 1, 1981; $105.00 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 1981, and prior to July 1, 1986; $103.00 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 1986, and prior to July 1, 1991; and $101.00 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 1991; provided, that none of the shares of said series may be redeemed by the Company prior to July 1, 1981, from the proceeds received through the incurring of debt, or through the issuance of preferred stock ranking equally with or prior to said series as to dividends or on liquidation, where such debt has an effective interest cost or such preferred stock has an effective dividend cost to the Company of less than the effective dividend cost to the Company of said series. (4) That the preferential amounts to which the holders of shares of such series shall be entitled upon any liquidation, dissolution or winding up of the Company, in addition to dividends accumulated but unpaid thereon, shall be $100 per share, in the event of any voluntary liquidation, dissolution or winding up of the Company, except that if such voluntary liquidation, dissolution or winding up of the Company shall have been approved by the vote in favor thereof given at a meeting called for that purpose or by the written consent of the holders of a majority of the total shares of the $8.72 Cumulative Preferred Stock (without par value) 26 then outstanding, the amount so payable on such voluntary liquidation, dissolution or winding up shall be $100 per share; or $100 per share, in the event of any involuntary liquidation, dissolution or winding up of the Company. (5) That the shares of said series shall be subject to all the terms, provisions and restrictions set forth in the Articles of Incorporation (as amended) of the Company with respect to shares of the Preferred Stock (without par value) of the Company and, excepting only as to the rate of dividend per annum payable in respect of the shares of said series, the redemption price or prices applicable to the shares of said series, and the liquidation price applicable to shares of said series, shall have the same relative rights and preferences as, shall be of equal rank with, and shall confer rights equal to those conferred by, all other shares of the Preferred Stock (without par value) of the Company. (6) That the stated value of the shares of said series shall be $100 per share. AND FURTHER RESOLVED: That prior to the issuance by the Company of any shares of said $8.72 Cumulative Preferred Stock (without par value), the Company shall execute and file in the office of the Secretary of State of the State of Kentucky such statement or certificate with respect to said shares as is required by statutes of the State of Kentucky; and, after such filing of said statement or certificate, the officers of the Company shall cause the duplicate original thereof, when returned to the Company by the Secretary of State, to be filed for record in the office of the Clerk of the County Court of Jefferson County being the county in which the registered office of the Company is situated. ____________________________ RESOLVED, By the Board of Directors of Louisville Gas and Electric Company, a Kentucky corporation, (1) That a series consisting of 250,000 shares of the Preferred Stock (without par value) of the Company is hereby created and established out of the authorized and unissued shares of the Preferred Stock (without par value) of the Company; said series, and each share thereof, shall be designated "$8.90 Cumulative Preferred Stock (without par value)"; and all of said two hundred and fifty thousand (250,000) shares of said series are hereby authorized to be issued by the Company; (2) That the annual dividend payable in respect of each share of said series shall be $8.90; the initial dividend in respect of such share of said series shall be payable on October 16, 1978, when and as declared by the Board of Directors of this Company, to holders of record on September 29, 1978, and will accrue from the date of original issuance of said series; 27 thereafter, such dividends shall be payable on January 15, April 15, July 15, and October 15 in each year (or the next business date thereafter in each case), when and as declared by the Board of Directors of this Company, for the quarter-yearly period ending on the last business day of the preceding month; (3) That the shares of said series shall be subject to redemption, in whole at any time or in part from time to time, upon the notice and in the manner and with the effect provided in the Articles of Incorporation (as amended) of the Company; and the redemption price or prices applicable to shares of said series shall be $108.90 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is prior to July 1, 1983; $106.68 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 1983, and prior to July 1, 1988; $104.45 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 1988, and prior to July 1, 1993; and $102.23 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 1993; provided, that none of the shares of said series may be redeemed by the Company prior to July 1, 1983, from the proceeds received through the incurring of debt, or through the issuance of preferred stock ranking equally with or prior to said series as to dividends or on liquidation, where such debt has an effective interest cost or such preferred stock has an effective dividend cost to the Company of less than the effective dividend cost to the Company of said series. (4) That the preferential amounts to which the holders of shares of such series shall be entitled upon any liquidation, dissolution or winding up of the Company, in addition to dividends accumulated but unpaid thereon, shall be $100 per share, in the event of any voluntary liquidation, dissolution or winding up of the Company, except that if such voluntary liquidation, dissolution or winding up of the Company shall have been approved by the vote in favor thereof given at a meeting called for that purpose or by the written consent of the holders of a majority of the total shares of the $8.90 Cumulative Preferred Stock (without par value) then outstanding, the amount so payable on such voluntary liquidation, dissolution or winding up shall be $100 per share; or $100 per share, in the event of any involuntary liquidation, dissolution or winding up of the Company. (5) That the shares or said series shall be subject to all the terms, provisions and restrictions set forth in the Articles of Incorporation (as amended) of the Company with respect to shares of the Preferred Stock (without par value) of the Company and, excepting only as to the rate of dividend per annum payable in respect of the shares of said series, the redemption price or prices applicable to the shares of said series, and the liquidation price applicable to shares of said series, shall have the same 28 relative rights and preferences as, shall be of equal rank with, and shall confer rights equal to those conferred by, all other shares of the Preferred Stock (without par value) of the Company. (6) That the stated value of the shares of said series shall be $100 per share. AND FURTHER RESOLVED: That prior to the issuance by the Company of any shares of said $8.90 Cumulative Preferred Stock (without par value), the Company shall execute and file in the office of the Secretary of State of the State of Kentucky such statement or certificate with respect to said shares as is required by statutes of the State of Kentucky; and, after such filing of said statement or certificate, the officers of the Company shall cause the duplicate original thereof, when returned to the Company by the Secretary of State, to be filed for record in the office of the Clerk of the County Court of Jefferson County being the county in which the registered office of the Company is situated. __________________________ RESOLVED, By the Board of Directors of Louisville Gas and Electric Company, a Kentucky corporation, (1) That a series consisting of 250,000 shares of the Preferred Stock (without par value) of the Company is hereby created and established out of the authorized and unissued shares of the Preferred Stock (without par value) of the Company; said series, and each share thereof, shall be designated "$9.54 Cumulative Preferred Stock (without par value)"; and all of said two hundred and fifty thousand (250,000) shares of said series are hereby authorized to be issued by the Company; (2) That the annual dividend payable in respect of each share of said series shall be $9.54, the initial dividend in respect of such share of said series shall be payable on January 15, 1980, when and as declared by the Board of Directors of this Company, to holders of record on December 31, 1979, and will accrue from the date of original issuance of said series; thereafter, such dividends shall be payable on January 15, April 15, July 15, and October 15 in each year (or the next business date thereafter in each case), when and as declared by the Board of Directors of this Company, for the quarter-yearly period ending on the last business day of the preceding month; (3) That the shares of said series shall be subject to redemption, in whole at any time or in part from time to time, upon the notice and in the manner and with the effect provided in the Articles of Incorporation (as amended) of the Company; and the redemption price or prices applicable to shares of said series shall be $109.54 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is prior to October 1, 1984; $107.16 per share plus accrued and unpaid dividends to the 29 date of redemption if such date of redemption is on or subsequent to October 1, 1984, and prior to October 1, 1989; $104.77 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to October 1, 1989, and prior to October 1, 1994; and $102.39 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to October 1, 1994; provided, that none of the shares of said series may be redeemed by the Company prior to October 1, 1984, from the proceeds received through the incurring of debt, or through the issuance of preferred stock ranking equally with or prior to said series as to dividends or on liquidation, where such debt has an effective interest cost or such preferred stock has an effective dividend cost to the Company of less than the effective dividend cost to the Company of said series. (4) That the preferential amounts to which the holders of shares of such series shall be entitled upon any liquidation, dissolution or winding up of the Company, in addition to dividends accumulated but unpaid thereon, shall be $100 per share, in the event of any voluntary liquidation, dissolution or winding up of the Company, except that if such voluntary liquidation, dissolution or winding up of the Company shall have been approved by the vote in favor thereof given at a meeting called for that purpose or by the written consent of the holders of a majority of the total shares of the $9.54 Cumulative Preferred Stock (without par value) then outstanding, the amount so payable on such voluntary liquidation, dissolution or winding up shall be $100 per share; or $100 per share, in the event of any involuntary liquidation, dissolution or winding up of the Company. (5) That the shares of said series shall be subject to all the terms, provisions and restrictions set forth in the Articles of Incorporation (as amended) of the Company with respect to shares of the Preferred Stock (without par value) of the Company and, excepting only as to the rate of dividend per annum payable in respect of the shares of said series, the redemption price or prices applicable to the shares of said series, and the liquidation price applicable to shares of said series, shall have the same relative rights and preferences as, shall be of equal rank with, and shall confer rights equal to those conferred by, all other shares of the Preferred Stock (without par value) of the Company. (6) That the stated value of the shares of said series shall be $100 per share. AND FURTHER RESOLVED: That prior to the issuance by the Company of any shares of said $9.54 Cumulative Preferred Stock (without par value), the Company shall execute and file in the office of the Secretary of State of the State of Kentucky such statement or certificate with respect to said shares as is required by statutes of the State of Kentucky; and, after such filing of 30 said statement or certificate, the officers of the Company shall cause the duplicate original thereof, when returned to the Company by the Secretary of State, to be filed for record in the office of the Clerk of the County Court of Jefferson County being the county in which the registered office of the Company is situated. STATE OF KENTUCKY COUNTY OF JEFFERSON I, C.M. HAYS, a notary public, do hereby certify that on this 7th day of October, 1987, personally appeared before me R. L. Royer and W. W. Hancock, Jr., who, being by me first duly sworn, severally declared and acknowledged before me that they are President and Secretary, respectively, of Louisville Gas and Electric Company, that they signed foregoing document as President and Secretary, respectively, of the Corporation and that the statements therein contained are true. My Commission Expires: September 20, 1988 C. M. HAYS Notary Public This instrument prepared by: ______________________________ Charles G. Middleton, III MIDDLETON & REUTLINGER 2500 Brown & Williamson Tower Louisville, Kentucky 40242 (502) 584-1135 IN WITNESS WHEREOF, Louisville Gas and Electric Company has caused these Restated Articles of Incorporation to be duly executed by its President and its Secretary this 7th day of October 1987. LOUISVILLE GAS AND ELECTRIC COMPANY By: R. L. ROYER President By: W. W. HANCOCK, JR. Secretary 31 ARTICLES OF AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION OF LOUISVILLE GAS AND ELECTRIC COMPANY Pursuant to the provisions of Kentucky Revised Statutes 271B.10-060, et seq., the undersigned Corporation adopts the following Articles of Amendment to its Restated Articles of Incorporation: 1. The name of the Corporation is Louisville Gas and Electric Corporation. 2. The following Amendment to the Restated Articles of Incorporation of Louisville Gas and Electric Company was recommended by the Board of Directors and adopted at its Annual Meeting of Shareholders on May 9, 1989 by its shareholders in the manner prescribed by the Kentucky Business Corporation Act: The Restated Articles of Incorporation of Louisville Gas and Electric Company shall be amended by adding the following as Article Eleventh and Twelfth: ELEVENTH. A director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of his duties as a director, except for liability (i) for any transaction in which the director's personal financial interest is in conflict with the financial interests of the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or are known to the director to be a violation of law, (iii) under Kentucky Revised Statutes 271B.8-330, or (iv) for any transaction from which the director derived any improper personal benefit. If the Kentucky Business Corporation Act is amended after approval by the stockholders of this Article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by the Kentucky Business Corporation Act, as so amended. Any repeal or modification of the foregoing 1 paragraph by the stockholders of the Company shall not adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification. TWELFTH. A. RIGHT TO INDEMNIFICATION. Each person who was or is a director of the Company and who was or is made a party or is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director or officer of the Company or is or was serving at the request of the Company as a director, officer, partner, trustee, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "Indemnified Director"), whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the Company to the fullest extent permitted by the Kentucky Business Corporation Act, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than such law permitted the Company to provide prior to such amendment), against all liability, all reasonable expense and all loss (including, without limitation, judgments, fines, reasonable attorneys' fees, ERISA excise taxes or penalties and amounts paid in settlement) incurred or suffered by such Indemnified Director in connection therewith and such indemnification shall continue as to an Indemnified Director who has ceased to be a director and shall inure to the benefit of the Indemnified Director's heirs, executors and administrators. Each person who was or is an officer of the Company and not a director of the Company and who was or is made a party or is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any proceeding, by reason of the fact that he or she is or was an officer of the Company or is or was serving at the request of the Company as a director, officer, partner, trustee, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "Indemnified Officer"), whether the basis of such proceeding is alleged action in an official capacity as an officer or in any other capacity while serving as an officer, shall be indemnified and held harmless by the Company against all liability, all reasonable expense and all loss (including, without limitation, judgments, fines, reasonable attorneys' fees, ERISA excise taxes or penalties and amounts paid in settlement) incurred or suffered by such Indemnified Officer to the same extent and under the same conditions that the Company must indemnify an Indemnified Director pursuant to the immediately preceding sentence and to such further extent as is not contrary to public policy and 2 such indemnification shall continue as to an Indemnified Officer who has ceased to be an officer and shall inure to the benefit of the Indemnified Officer's heirs, executors and administrators. Notwithstanding the foregoing and except as provided in Paragraph B of this Article Twelfth with respect to proceedings to enforce rights to indemnification, the Company shall indemnify any Indemnified Director or Indemnified Officer in connection with a proceeding (or part thereof) initiated by such Indemnified Director or Indemnified Officer only if such proceeding (or part thereof) was authorized by the Board of Directors of the Company. As hereinafter used in this Article Twelfth, the term "indemnitee" means any Indemnified Director or Indemnified Officer. Any person who is or was a director or officer of a subsidiary of the Company shall be deemed to be serving in such capacity at the request of the Company for purposes of this Article Twelfth. The right to indemnification conferred in this Article shall include the right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the Kentucky Business Corporation Act requires, an advancement of expenses incurred by an indemnitee who at the time of receiving such advance is a director of the Company shall be made only upon: (i) delivery to the Company of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter, a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Article or otherwise; (ii) delivery to the Company of a written affirmation of the indemnitee's good faith belief that he or she has met the standard of conduct that makes indemnification by the Company permissible under the Kentucky Business Corporation Act; and (iii) determination that the facts then known to those making the determination would not preclude indemnification under the Kentucky Business Corporation Act. The right to indemnification and advancement of expenses conferred in this Paragraph A shall be a contract right. B. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Paragraph A of this Article Twelfth is not paid in full by the Company within sixty days after a written claim has been received by the Company (except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days), the indemnitee may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim. If successful in whole or in part in any such suit or in a suit brought by the Company to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee also shall be entitled to be paid the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (other than a suit to enforce a right to an advancement of expenses brought by an indemnitee who will not 3 be a director of the Company at the time such advance is made) it shall be a defense that, and in (ii) any suit by the Company to recover an advancement of expenses pursuant to the terms of an undertaking the Company shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met the standard that makes it permissible hereunder or under the Kentucky Business Corporation Act (the "applicable standard") for the Company to indemnify the indemnitee for the amount claimed. Neither the failure of the Company (including its Board of Directors, a committee of the Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard, nor an actual determination by the Company (including its Board of Directors, a committee of the Board of Directors, independent legal counsel or its stockholders) that the indemnitee has not met the applicable standard, shall create a presumption that the indemnitee has not met the applicable standard or, in the case of such a suit brought by the indemnitee, shall be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Company to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified or to such advancement of expenses under this Article Twelfth or otherwise shall be on the Company. C. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to the advancement of expenses conferred in this Article Twelfth shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, these Articles of Incorporation, any By-Law, any agreement, any vote of stockholders or disinterested directors or otherwise. D. INSURANCE. The Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Kentucky Business Corporation Act. E. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Company may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Company and to any person serving at the request of the Company as an agent or employee of another corporation or of a joint venture, trust or other enterprise to the fullest extent of the provisions of this Article Twelfth with respect to the indemnification and advancement of expenses of either directors or officers of the Company. 4 F. REPEAL OR MODIFICATION. Any repeal or modification of any provision of this Article Twelfth shall not adversely affect any rights to indemnification and to advancement of expenses that any person may have at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification. G. SEVERABILITY. In case any one or more of the provisions of this Article Twelfth, or any application thereof, shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions in this Article Twelfth, and any other application thereof, shall not in any way be affected or impaired thereby. 3. The only voting group entitled to vote on the foregoing amendment was owners of record on March 24, 1989 of the Corporation's Common Stock (without par value) and Preferred Stock ($25 par value), voting together as one class. 4. The designation, number of outstanding shares, number of votes entitled to be cast by the voting group entitled to vote on the amendments and number of votes of the voting group indisputably represented at the meeting were as follows: Number of votes Designation Number of Number of indisputably (voting together outstanding votes represented at as one class) shares entitled to the meeting be cast Common Stock (without par value) and Preferred Stock ($25 par value) 22,442,261 22,442,261 19,098,496 5. The total number of votes cast for the amendment, against the amendment and abstaining regarding the amendment by the voting group entitled to vote on the amendment was as follows: 17,726,543 votes for, 960,522 votes against and 411,431 votes abstaining. Therefore, the amendment passed by a favorable vote of 78.9%. 5 IN TESTIMONY WHEREOF, witness the signatures of the duly qualified officers of Louisville Gas and Electric Company this 25th day of May 1989. LOUISVILLE GAS AND ELECTRIC COMPANY By:________________________________ R. L. Royer President By:________________________________ W. W. Hancock, Jr. Secretary STATE OF KENTUCKY COUNTY OF JEFFERSON I, C.M. HAYS, a notary public, do hereby certify that on this 25th day of May, 1989, personally appeared before me R. L. Royer and W. W. Hancock, Jr., who, being by me first duly sworn, severally declared and acknowledged before me that they are President and Secretary, respectively, of Louisville Gas and Electric Company, that they signed foregoing document as President and Secretary, respectively, of the Corporation and that the statements therein contained are true. My Commission Expires: September 20, 1988 C. M. HAYS Notary Public This instrument prepared by: ______________________________ Charles G. Middleton, III MIDDLETON & REUTLINGER 2500 Brown & Williamson Tower Louisville, Kentucky 40242 (502) 584-1135 6 ARTICLE OF AMENDMENT TO ARTICLES OF INCORPORATION OF LOUISVILLE GAS AND ELECTRIC COMPANY To the Secretary of State of Kentucky: Pursuant to the provisions of Chapter 271B of the Kentucky Revised Statutes, the undersigned corporation hereby amends its Articles of Incorporation, and for that purpose, submits the following statement: 1. The name of the corporation is Louisville Gas and Electric Company. 2. On February 5, 1992, the Board of Directors, acting on behalf of the corporation, duly adopted the Amendment to the Company's Articles of Incorporation attached hereto as Exhibit A. 3. If not contained in the Amendment itself, the manner in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be implemented as follows: Not Applicable 4. The Amendment is to be effective upon the filing of these articles by the Secretary of State. 5. The amendment was duly adopted by the Board of Directors without shareholder approval pursuant to 271B.10-020 and 271B.6-020 of the Kentucky Revised Statutes, and shareholder action was not required. Dated: February 5, 1992 LOUISVILLE GAS AND ELECTRIC COMPANY Charles A. Markel, III Senior Vice President and Chief Financial Officer 7 EXHIBIT A AMENDMENT The Restated Articles of Incorporation are hereby amended by adding thereto a new Article Thirteenth which shall read in its entirety as follows: THIRTEENTH. A. Terms of Preferred Stock, Auction Series A (without par value). The Company has classified 500,000 shares of the Preferred Stock (without par value) as a series of such Preferred Stock designated as "Preferred Stock, Auction Series A (without par value)." The preferences, rights, qualifications and restrictions of the shares of the "Preferred Stock, Auction Series A (without par value)" shall be as follows: (1) Authorized Shares: Units. The shares of Preferred Stock, Auction Series A (without par value) (hereinafter referred to as the "Series A Stock") shall be purchased, sold, transferred and redeemed only in Units of 1,000 shares per unit (a "Unit"), except as provided in subsection (d) of Section (5). (2) Dividends. (a) The Holders shall be entitled to receive, when and as declared by the Board of Directors of the Company, out of funds legally available therefor, cumulative cash dividends at the dividend rate per annum, determined as, and payable on the respective dates, set forth below. (b) The dividend rate on shares of Series A Stock shall be 3.30% per annum during the period (the "Initial Dividend Period") from February 11, 1992 (the "Date of Original Issue") and ending on April 14, 1992 and shall be payable on April 15, 1992 (the "Initial Dividend Payment Date"). Subsequent dividends shall be equal to the rate per annum that results from implementation of the Auction Procedures, except in the case of a Payment Failure. Notwithstanding the results of any Auction, however, and subject to subsection (1) of this Section (2), the dividend rate on the Series A Stock will not exceed 25% per annum for any Dividend Period (as hereinafter defined). Dividends on shares of Series A Stock shall accrue from February 11, 1992. (c) As of the end of the Initial Dividend Period and any subsequent Dividend Period, the Board of Directors of the Company may designate either (i) a Dividend Period of three months which shall commence on the day imme- 1 diately following the last day of the preceding Dividend Period and shall end on the fourteenth day of January, April, July or October next succeeding (a "Quarterly Period") or (ii) a Dividend Period of either 49 days or 13 weeks (in either case, subject to adjustment for non- Business Days and to meet the Minimum Holding Period, as provided in subsection (g) of this Section (2)) (a "Short-Term Period"). (The Initial Dividend Period, each subsequent Quarterly Period and any Short-Term Period, individually, is referred to herein as a "Dividend Period".) If and when the Board of Directors designates a Short-Term Period, each subsequent Dividend Period shall be a Short-Term Period. In the event of a change in law altering the minimum holding period (currently found in Section 246(c) of the Internal Revenue Code of 1986, as amended (the "code")) (the "Minimum Holding Period") required for taxpayers to be entitled to the Dividends-Received Deduction, the length of each Short- Term Period commencing after the effective date of such change in law shall be adjusted so that the number of days in such Short-Term Periods shall exceed the then- current Minimum Holding Period; provided that, (i) the Short-Term Period that originally was a 49-day Short- Term Period shall not exceed by more than nine days the length of the then-current Minimum Holding Period, (ii) the number of days in any Short Term Period shall be evenly divisible by seven, and (iii) the maximum number of days in any Short-Term Period shall in no event exceed 98 days. Upon any such change in the number of days in a Short-Term Period, the Company shall give notice of such change to the Trust Company, the Securities Depository and each Existing Holder. Notwithstanding the provisions of this subsection (c), designation of a Short-Term Period shall be permitted only after such amendments to these Articles as are necessary to accommodate the payment of dividends for a Short-Term Period have been duly adopted. (d) The initial Short-Term Period shall end on a Wednesday designated by the Board of Directors of the Company which will be no earlier than the 46th day and no later than the 98th day after the last day of the preceding Quarterly Period (in any case, subject to adjustment for non-Business Days and to meet the Minimum Holding Period, as provided in subsection (g) of this Section (2)). Each subsequent Short-Term Period will commence on the day immediately following the last day of the preceding Short-Term Period and will end (i) on the seventh Wednesday thereafter, in the case of a 49-day Short-Term Period or (ii) on the thirteenth Wednesday thereafter, in the case of a 13-week Short-Term Period (in each case, subject to adjustment for non-Business 2 Days and to meet the Minimum Holding Period as provided in subsection (g) of this Section (2)). In the absence of a designation by the Board of Directors of the Company to the contrary, each 49-day Short-Term Period will be followed by a 49-day Short-Term Period and each 13-week Short Term Period will be followed by a 13-week Short-Term Period. (e) Following any amendment of these Articles to permit dividend payments on a basis other than quarterly, and without regard to the designation by the Board of Directors of the Company of the duration of the next succeeding Dividend Period, (i) if Sufficient Clearing Bids do not result from an Auction, then the Dividend Period to which such Auction relates will be a 49-day Short-Term Period or (ii) if a Payment Failure has occurred, then the Dividend Period during which such Payment Failure has occurred, and each subsequent Dividend Period until such Payment Failure has been cured, will be a 49-day Short-Term Period (in each case, subject to adjustment for non-Business Days and to meet the Minimum Holding Period, as described in subsection (g) of this Section (2)). (f) Dividends with respect to any Quarterly Period will be payable in arrears, when and as declared, on the fifteenth day of each January, April, July and October, unless such day is not a Business Day, in which case they shall be payable on the next succeeding Business Day (each a "Quarterly Dividend Payment Date"). Dividends with respect to any Short-Term Period shall be payable in arrears, when and as declared, on the Thursday next following the last day of the Short-Term Period (a "Short-Term Dividend Payment Date"), except as provided in subsection (g) of this Section (2). (Each Quarterly Dividend Payment Date and Short-Term Dividend Payment Date, individually, is referred to herein as a "Dividend Payment Date.") (g) Notwithstanding the provisions of subsections (c), (d), (e) and (f), with respect to the Short-Term Dividend Payment Date: 1. If the Thursday is not a Business Day, then the Short-Term Dividend Payment Date shall be the preceding Tuesday if both such Tuesday and the Wednesday following such Tuesday are Business Days; or 2. If the Friday following such Thursday is not a Business Day, then the Short-Term Dividend Payment Date will be the Wednesday preceding such Thursday 3 if both such Wednesday and such Thursday are Business Days; or 3. If either (a) such Thursday is not a Business Day and either the preceding Tuesday or Wednesday is not a Business Day or (b) such Thursday is a Business Day and the Friday following such Thursday and such preceding Wednesday are not Business Days, then the Short-Term Dividend Payment Date shall be the first Business Day preceding such Thursday that is next succeeded by a Business Day. Even though any particular Short-Term Dividend Payment Date may not occur on the originally scheduled Short-Term Dividend Payment Date because of the adjustments provided for in this subsection (g), the next succeeding Short- Term Dividend Payment Date shall occur, subject to such adjustments, on the seventh or the thirteenth Thursday, as applicable, following the originally scheduled Short- Term Dividend Payment Date. Notwithstanding the foregoing, if any Short-Term Dividend Payment Date set pursuant to this subsection (g) would occur in a number of days after the immediately preceding Short-Term Dividend Payment Date that is less than the number of days in the then-current Minimum Holding Period, the Short-Term Dividend Payment Date shall instead be the next Business Day that (i) is at least a number of days after the preceding Dividend Payment Date as to include the then-current Minimum Holding Period and (ii) is next succeeded by a Business Day. After any such adjustment pursuant to this subsection (g) to the Dividend Payment Date for any Short-Term Period, the last day of such Short-Term Period shall also be adjusted so as to be the day immediately preceding such Dividend Payment Date. (h) Any designation by the Board of Directors of a Short Term Period following a Quarterly Period shall be effective upon written notice thereof given by the Company to the Trust Company and to the Securities Depository prior to 1:00 P.M., New York City time, on the fifth Business Day prior to the Auction Date. Any designation by the Board of Directors of a change in the duration of the Short- Term Period shall be effective upon written notice thereof given by the Company to the Trust Company and to the Securities Depository prior to 1:00 P.M., New York City time, on the third Business Day prior to the Auction Date. (i) Dividends shall be payable to the Holders as their names appear on the stock books of the Company or of the registrar of the Series A Stock on the Business Day next preceding the Dividend Payment Date in the case of a 4 Short-Term Period and on such date, not more than 30 days and not less than 10 days, as may be fixed by the Board of Directors, next preceding the Dividend Payment Date in the case of a Quarterly Period; provided that, if a Payment Failure exists, then such dividends shall be paid to the Holders as their names appear on the stock books on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors. (j) Dividend rates for the shares of Series A Stock for each Dividend Period (other than the Initial Dividend Period) shall be equal to the rate per annum that results from the Auction with respect to such Dividend Period; provided that, (i) if a Payment Failure shall have occurred, the dividend rate for all Dividend Periods commencing on or after such Dividend Payment Date or redemption date and until such Payment Failure has been cured shall be a rate per annum equal to 250% of the Applicable AA Composite Commercial Paper Rate on the Business Day next preceding the commencement-of each such Dividend Period (notwithstanding the results of any Auction for any such Dividend Period); and (ii) if a Payment Failure is remedied by reason of the Company having paid all dividends accrued and unpaid, and all unpaid redemption payments, on all shares of Series A Stock, the dividend rate for each Dividend Period commencing after the date on which the Payment Failure is remedied shall again be determined by an Auction. Notwithstanding the foregoing, and subject to subsection (1) of this Section (2), the dividend rate for any Dividend Period shall not exceed 25% per annum. The rate per annum at which dividends are payable on shares of Series A Stock for any Dividend Period (other than the Initial Dividend Period) is hereinafter referred to as the "Applicable Rate." (k) The dividend per share to accrue and be payable on each share of Series A Stock for the Initial Dividend Period shall be computed by multiplying the product of 3.30% (the dividend rate for the Initial Dividend Period) and $100 by a fraction, the numerator of which shall be the number of days in the Initial Dividend Period, including the first and last days of such Initial Dividend Period, and the denominator of which shall be 360. The dividend per share to accrue and be payable on each share of Series A Stock for each Quarterly Period shall be computed by dividing by four the product of the Applicable Rate for such Dividend Period and $100. The dividend per share to accrue and be payable on each share of Series A Stock for any Short-Term Period shall be computed by multiplying the Applicable Rate for such Short-Term Period by a fraction, the numerator of which 5 shall be the number of days in such Short-Term Period, including the first and last days of such Dividend Period, and the denominator of which shall be 360, and multiplying by $100 the rate so obtained. (l) Notwithstanding anything to the contrary contained in subarticle A of this Article Thirteenth, the dividend rate for any Dividend Period on the Series A Stock shall not exceed 25% per annum; provided, however, that if paragraph (7)(B)(b) of Article Fourth hereof is amended to provide a method for computing the dividend rate on preferred stock having dividends determined pursuant to an adjustable, floating or variable rate, then from and after the date such amendment becomes effective, this subsection (l), including the 25% restriction contained in this subsection (l), shall cease to be operative, and shall be of no force and effect and all references to this subsection (l) in subarticle A of this Article Thirteenth shall be of no force and effect. (3) Definitions. As used with respect to the shares of Series A Stock, the following terms shall have the following meanings, unless the context otherwise requires: "Affiliate" shall mean any Person known to the Trust Company to be controlled by, in control of or under common control with the Company. "Agent Member" shall mean a member of the Securities Depository that will act on behalf of a Bidder and is identified as such in such Bidder's Master Purchaser's Letter. "Applicable AA Composite Commercial Paper Rate," on any date, shall mean (i) with respect to a 49-day Short-Term Period, (A) the Interest Equivalent of the 60-day rate on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by Standard & Poor's Corporation or its successor ("S&P"), or the equivalent of such rating by S&P or another rating agency, as such 60-day rate is made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day immediately preceding such date, or (B) in the event that the Federal Reserve Bank of New York does not make available such a rate, then the arithmetic average of the Interest Equivalent of the 60-day rate on commercial paper placed on behalf of such issuers, and as quoted, on a discount basis or otherwise, to the Trust Company for the close of business on the Business Day immediately preceding such date by the Commercial Paper Dealers or (ii) with respect to a Quarterly Period or a 13-week Short-Term 6 Period, the Interest Equivalent of the 90-day rate on such commercial paper as so determined. In the event that either of the Commercial Paper Dealers does not quote a rate required to determine the Applicable AA Composite Commercial Paper Rate, the Applicable AA Composite Commercial Paper Rate shall be determined on the basis of the quotations furnished by the remaining Commercial Paper Dealer and the Substitute Commercial Paper Dealer selected by the Company to provide such rate or, if the Company does not select any such Substitute Commercial Paper Dealer, the remaining Commercial Paper Dealer. If an adjustment is made to the length of a Short-Term Period to comply with the Minimum Holding Period pursuant to subsection (c) of Section (2), then if the resulting number of days in each subsequent Short-Term Period, before any adjustment shall be (i) 70 or more days but fewer than 85 days, such rate shall be the arithmetic average of the Interest Equivalent of the 60-day and 90-day rates on such commercial paper, or (ii) 85 or more days but 98 or fewer days, such rate shall be the Interest Equivalent of the 90-day rate on such commercial paper. "Applicable Rate" shall have the meaning specified in Section (2), subsection (j). "Auction" shall mean periodic implementation of the Auction Procedures set forth herein. "Auction Date" shall mean the Business Day immediately preceding a Dividend Payment Date. "Auction Procedures" shall mean the procedures for conducting Auctions set forth in Section (4). "Available Units" shall have the meaning specified in Section (4), subsection (c), paragraph 1, subparagraph a. "Bid" and "Bids" shall have the respective meanings specified in Section (4), subsection (a), paragraph 1, subparagraph c. "Bidder" and "Bidders" shall have the respective meanings specified in Section (4), subsection (a), paragraph 1, subparagraph c. "Board of Directors" shall mean the Board of Directors of the Company or any committee authorized by the Board of Directors to perform any or all of the duties of the Board with respect to the Series A Stock. "Broker-Dealer" shall mean any broker-dealer or other entity permitted by law to perform the functions required of a Broker-Dealer in Sections (4) and (5), that is a member of, or a participant in, the Securities Depository and that has been 7 selected by the Company and has entered into a Broker-Dealer Agreement with the Trust Company that remains effective. "Broker-Dealer Agreement" shall mean an agreement between the Trust Company and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in Sections (4) and (5). "Business Day" shall mean a day on which the New York Stock Exchange, Inc. is open for trading and which is not a day on which banks in New York City are authorized by law to close. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commercial Paper Dealers" shall mean Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated or, in lieu thereof, their respective affiliates or successors that are engaged in the business of buying and selling commercial paper. "Date of Original Issue" shall have the meaning specified in Section (2), subsection (b). "Dividend Payment Date" shall have the meaning specified in Section (2), subsection (f). "Dividend Period" shall have the meaning specified in Section (2), subsection (c). "Dividends-Received Deduction" shall mean the dividends- received deduction on preferred stock held by nonaffiliate corporations (currently found in Section 243(a) of the Code). "Existing Holder" shall mean a Person who has executed a Master Purchaser's Letter and who is listed as the beneficial owner of shares of Series A Stock in the records of the Trust Company. "Hold Order" and "Hold Orders" shall have the respective meanings specified in Section (4), subsection (a), paragraph 1, subparagraph c. "Holders" shall mean the holders of shares of the Series A Stock as the same appear on the stock books of the Company or the registrar of the Series A Stock. "Initial Dividend Payment Date" shall have the meaning specified in Section (2), subsection (b). "Initial Dividend Period" shall have the meaning specified in Section (2), subsection (b). 8 "Interest Equivalent" shall mean the equivalent yield on a 360-day basis of a discount basis security to an interest- bearing security. "Master Purchaser's Letter" shall mean a letter addressed to the Company, the Trust Company, the re-marketing agent, a Broker-Dealer and an Agent Member in which the executing Person agrees, among other things, to offer to purchase, to purchase, to offer to sell and to sell shares of Series A Stock as set forth in Section (4). "Maximum Rate" for any Auction shall mean, subject to subsection (1) of Section (2), the product of the Applicable AA Composite Commercial Paper Rate on the Auction Date for such Auction and the Rate Multiple. "Minimum Holding Period" shall have the meaning specified in Section (2), subsection (c). "Minimum Rate" for any Auction shall mean, subject to subsection (1) of Section (2), 58% of the Applicable AA Composite Commercial Paper Rate on the Auction Date for such Auction. "Order" and "Orders" shall have the respective meanings specified in Section (4), subsection (a), paragraph 1, subparagraph c. "Outstanding Shares" shall mean, as of any date, shares of Series A Stock theretofore issued by the Company except, without duplication, (i) any shares theretofore cancelled or delivered to the Trust Company for cancellation or redeemed or deemed to have been redeemed by the Company, (ii) any shares as to which the Company or any Affiliate thereof shall be an Existing Holder, and (iii) any shares represented by any certificate in lieu of which a new certificate has been executed and delivered by the Company. "Outstanding Units" shall mean Units comprised of Outstanding Shares. "Payment Failure" shall mean a failure by the Company to pay to the Holders on or within three Business Days (i) after any Dividend Payment Date, the full amount of any dividends to be paid on such Dividend Payment Date on any share of the Series A Stock or (ii) after any redemption date, the redemption price to be paid on that redemption date on any share of the Series A Stock with respect to which a notice of redemption has been given. "Person" shall mean an individual, a partnership, a corporation, a trust, an unincorporated association, a joint 9 venture or other entity or a government or any agency or political subdivision thereof. "Potential Holder" shall mean any Person, including any Existing Holder, (i) who shall have executed a Master Purchaser's Letter and (ii) who may be a prospective purchaser of Units (or, in the case of an Existing Holder, additional Units). "Quarterly Dividend Payment Date" shall have the meaning specified in Section (2), subsection (f). "Quarterly Period" shall have the meaning specified in Section (2), subsection (c). "Rate Multiple," on any Auction Date, shall mean the percentage determined as set forth below based on the Prevailing Rating (as defined below) of the Series A Stock in effect at the close of business on the Business Day immediately preceding such Auction Date: Prevailing Rating Percentage AA/aa or above........................110% A/a...................................150% BBB/baa...............................200% Below BBB/baa.........................250% For purposes of this definition, the "Prevailing Rating" of the Series A Stock shall be (i) AA/aa or above, if the Series A Stock has a rating of AA- or better by S&P and a rating of aa3 or better by Moody's Investors Service, Inc. or its successor ("Moody's"), or the equivalent of both of such ratings by a substitute rating agency or substitute rating agencies selected as provided below, (ii) if not AA/aa or above, then A/a, if the Series A Stock has a rating of A- or better by S&P and a rating of a3 or better by Moody's, or the equivalent of both of such ratings by a substitute rating agency or substitute rating agencies selected as provided below, (iii) if not AA/aa or above or A/a, then BBB/baa, if the Series A Stock has a rating of BBB- or better by S&P and a rating of baa3 or better by Moody's, or the equivalent of both of such ratings by a substitute rating agency or substi- tute rating agencies selected as provided below, and (iv) if not AA/aa or above, A/a or BBB/baa, then Below BBB/baa. If both S&P and Moody's fail to make such a rating available, Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, or their successors and assigns, will select one or two nationally recognized securities rating agencies to act as a 10 substitute rating agency or agencies. The Company will take all reasonable action necessary to enable S&P and Moody's, or such substitute rating agency or agencies, to provide a rating for the Series A Stock. "Remaining Units" shall have the meaning specified in Section (4), subsection (d), paragraph 1, subparagraph d. "Securities Depository" shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Company which agrees to follow the procedures required to be followed by such securities depository in connection with shares of the Series A Stock. "Sell Order" and "Sell Orders" shall have the respective meanings specified in Section (4), subsection (a), paragraph 1, subparagraph c. "Short-Term Dividend Payment Date" shall have the meaning specified in Section (2), subsection (f). "Short-Term Period" shall have the meaning specified in Section (2), subsection (c). "Submission Deadline" shall mean 1:00 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Trust Company as specified by the Trust Company from time to time. "Submitted Bid" and "Submitted Bids" shall have the respective meanings specified in Section (4), subsection (c), paragraph 1. "Submitted Hold Order" and "Submitted Hold Orders" shall have the respective meanings specified in Section (4), subsection (c), paragraph 1. "Submitted Order" shall have the meaning specified in Section (4), subsection (c), paragraph 1. "Submitted Sell Order" and "Submitted Sell Orders" shall have the respective meanings specified in Section (4), subsection (c), paragraph 1. "Substitute Commercial Paper Dealer" shall mean any commercial paper dealer that is a leading dealer in the commercial paper market. "Sufficient Clearing Bids" shall have the meaning specified in Section (4), subsection (c), paragraph 1, subparagraph b. 11 "Trust Company" shall mean a bank or trust company duly appointed as such with respect to the shares of the Series A Stock. "Unit" shall have the meaning specified in Section (1). "Winning Bid Rate" shall have the meaning specified in Section (4), subsection (c), paragraph 1, subparagraph c. (4) Auction Procedures. (a) Orders by Existing Holders and Potential Holders. 1. Prior to the Submission Deadline on each Auction Date: a. Each Existing Holder may submit to a Broker-Dealer by telephone information as to: (i) the number of Outstanding Units, if any, held by such Existing Holder that such Existing Holder desires to continue to hold for the next succeeding Dividend Period without regard to the rate determined by the Auction Procedures; (ii) the number of Outstanding Units, if any, that such Existing Holder desires to continue to hold for the next succeeding Dividend Period, if the rate determined by the Auction Procedures shall not be less than the rate per annum specified by such Existing Holder; and/or (iii) the number of Outstanding Units, if any, held by such Existing Holder that such Existing Holder offers to sell without regard to the rate determined by the Auction Procedures for the next succeeding Dividend Period; and b. Each Broker-Dealer, using a list of Potential Holders, in good faith for the purpose of conducting a competitive Auction in a commercially reasonable manner, shall contact Potential Holders, including Persons that are not Existing Holders, on such list to determine the number of Outstanding Units, if any, that each such Potential Holder offers to purchase, if the rate determined by the Auction Procedures for the next succeeding Dividend Period shall not be less than the rate per annum specified by such Potential Holder. 12 c. For the purposes hereof, the communication to a Broker-Dealer of information referred to in subparagraph a or subparagraph b of this paragraph 1 is referred to hereinafter as an "Order" and collectively as "Orders," and each Existing Holder and each Potential Holder placing an Order is referred to hereinafter as a "Bidder" and collectively as "Bidders;" an Order containing the information referred to in clause (i) of subparagraph a of this paragraph 1 is referred to hereinafter as a "Hold Order" and collectively as "Hold Orders;" an Order containing the information referred to in clause (ii) of subparagraph a or subparagraph b of this paragraph 1 is referred to hereinafter as a "Bid" and collectively as "Bids;" and an Order containing the information referred to in clause (iii) of subparagraph a of this paragraph 1 is referred to hereinafter as a "Sell Order" and collectively as "Sell Orders." d. On any Auction Date, a Bid submitted by an Existing Holder shall constitute an irrevocable offer to sell: (i) the number of Outstanding Units specified in such Bid if the rate determined by the Auction Procedures on such Auction Date shall be less than the rate specified in such Bid; or (ii) such number or a lesser number of Outstanding Units to be determined as set forth in subsection (d), paragraph 1, subparagraph d, of this Section (4), if the rate determined by the Auction Procedures on such Auction Date shall be equal to the rate specified in such Bid; or (iii) a lesser number of Outstanding Units than was specified in such Bid, to be determined as set forth in subsection (d), paragraph 2, subparagraph c, of this Section (4), if the rate specified therein shall be higher than the Maximum Rate and Sufficient Clearing Bids do not exist. e. On any Auction Date, a Sell Order by an Existing Holder shall constitute an irrevocable offer to sell: (i) the number of Outstanding Units specified in such Sell Order; or 13 (ii) such number or a lesser number of Outstanding Units as set forth in subsection (d), paragraph 2, subparagraph c, of this Section (4) if Sufficient Clearing Bids do not exist. f. On any Auction Date, a Bid by a Potential Holder shall constitute an irrevocable offer to purchase: (i) the number of Outstanding Units specified in such Bid if the rate determined by the Auction Procedures on such Auction Date shall be higher than the rate specified in such Bid; or (ii) such number or a lesser number of Outstanding Units as set forth in subsection (d), paragraph 1, subparagraph e, of this Section (4) if the rate determined by the Auction Procedures on such Auction Date shall be equal to the rate specified in such Bid. g. On each Auction Date, the Trust Company shall determine the Applicable AA Composite Commercial Paper Rate and the Maximum Rate and shall notify the Company and each Broker-Dealer of each such rate not later than 9:30 A.M. on such Auction Date or such other time on such Auction Date as specified by the Trust Company with the consent of the Company (which consent shall not be unreasonably withheld). (b) Submission of Orders by Broker-Dealers to Trust Company. 1. Each Broker-Dealer shall submit in writing to the Trust Company prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker-Dealer and specifying with respect to each Order: a. The name of the Bidder placing such Order; b. The aggregate number of Units that are the subject of such Order; c. To the extent that such Bidder is an Existing Holder: (i) the number of Units, if any, subject to any Hold Order placed by such Existing Holder; (ii) the number of Units, if any, subject to any Bid placed by such Existing Holder and the rate specified in such Bid; and 14 (iii) the number of Units, if any, subject to any Sell Order placed by such Existing Holder; and d. To the extent such Bidder is a Potential Holder, the number of Units and the rate specified in such Potential Holder's Bid. 2. If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Trust Company shall round such rate up to the next highest one thousandth (.001) of 1%. 3. If, for any reason, an Order or Orders covering all of the Outstanding Units held by any Existing Holder is not submitted to the Trust Company prior to the Submission Deadline, the Trust Company shall deem a Hold Order to have been submitted on behalf of such Existing Holder covering the number of Outstanding Units held by such Existing Holder and not subject to Orders submitted to the Trust Company. 4. If one or more Orders by an Existing Holder covering in the aggregate more than the number of Outstanding Units held by such Existing Holder are submitted to the Trust Company by one or more Broker-Dealers on behalf of such Existing Holder, such Orders shall be considered valid as follows and in the following order of priority: a. Any Hold Orders submitted on behalf of such Existing Holder shall be considered valid up to and including, in the aggregate, the number of Outstanding Units held by such Existing Holder; provided that, if more than one Hold Order is submitted on behalf of such Existing Holder and the number of Units subject to such Hold Orders exceeds the number of Outstanding Units held by such Existing Holder, the number of Units subject to such Hold Orders shall be reduced pro rata so that such Hold Orders shall cover only the number of Outstanding Units held by such Existing Holder; b. (i) Any Bid submitted on behalf of an Existing Holder shall be considered valid up to and including the excess of the number of Outstanding Units held by such Existing Holder over the number of Units subject to valid Hold Orders of such Existing Holder referred to in subparagraph a of this paragraph 4, 15 (ii) subject to clause (i) of this subparagraph b, if more than one Bid with the same rate is submitted on behalf of such Existing Holder and the aggregate number of Outstanding Units subject to such Bids is greater than the excess referred to in clause (i) of this subparagraph b, such Bids shall be considered valid up to the amount of such excess and the number of Units subject to such Bids shall be reduced pro rata so that such Bids shall cover only the number of Units equal to such excess, (iii) subject to clause (i) of this subparagraph b, if more than one Bid with different rates is submitted on behalf of such Existing Holder, such Bids shall be considered valid in their entirety up to the excess referred to in clause (i) of this subparagraph b in the ascending order of their respective rates, and (iv) in any such event specified in this subparagraph b, the number, if any, of such Units subject to Bids not valid under this subparagraph b shall be treated as the subject of a Bid by a Potential Holder; and c. Any Sell Order shall be considered valid up to and including, in the aggregate, the excess of the number of Outstanding Units held by such Existing Holder over the sum of the Units subject to valid Hold Orders of such Existing Holder referred to in subparagraph a of this paragraph 4 and valid Bids by such Existing Holder referred to in subparagraph b of this paragraph 4. 5. In any Auction, if more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate and number of Units therein specified. 6. Orders by Existing Holders and Potential Holders must specify a whole number of Units. An Order that does not specify a whole number of Units will not be considered a Submitted Order for purposes of the Auction. (c) Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate. 1. Not earlier than the Submission Deadline on each Auction Date, the Trust Company shall assemble all Orders 16 submitted or deemed submitted to it by Broker-Dealers (each such Order as submitted or deemed submitted by a Broker-Dealer being referred to hereinafter individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a "Submitted Order") and shall determine: a. The excess of the total number of Outstanding Units over the number of Outstanding Units that are the subject of Submitted Hold Orders (such excess being hereinafter referred to as the "Available Units"); b. From the Submitted Orders, whether the number of Outstanding Units that are the subject of Submitted Bids by Existing Holders and Potential Holders specifying one or more rates equal to or lower than the Maximum Rate exceeds or is equal to the sum of: (i) the number of Outstanding Units that are the subject of Submitted Bids by Existing Holders specifying one or more rates higher than the Maximum Rate, and (ii) the number of Outstanding Units that are subject to Submitted Sell Orders (in the event of such excess or of such equality (other than because the number of Units specified in each of clauses (i) and (ii) of this subparagraph b is zero because all of the Outstanding Units are the subject of Submitted Hold Orders) such Submitted Bids in this subparagraph b are hereinafter referred to collectively as "Sufficient Clearing Bids"); and c. If Sufficient Clearing Bids exist, the lowest rate specified in the Submitted Bids (the "Winning Bid Rate") which if: (i) (A) Each Submitted Bid from Existing Holders specifying such Winning Bid Rate and (B) all other Submitted Bids from Existing Holders specifying lower rates were accepted, thus entitling such Existing Holders to continue to hold the Outstanding Units that are the subject of such Submitted Bids, and (ii) (A) Each Submitted Bid from Potential Holders specifying such Winning Bid Rate and (B) all other Submitted Bids from Potential Holders specifying lower rates were accepted, thus requiring the Potential 17 Holders to purchase the Outstanding Units that are subject to such Submitted Bids, would result in such Existing Holders described in clause (i) of this subparagraph c continuing to hold an aggregate number of Outstanding Units that, when added to the number of Outstanding Units to be purchased by such Potential Holders described in clause (ii) of this subparagraph c, would at least equal the Available Units. 2. In connection with any Auction and promptly after the Trust Company has made the determinations pursuant to paragraph 1 of this subsection (c), the Trust Company shall advise the Company of the Applicable AA Composite Commercial Paper Rate and the Maximum Rate and, based on such determinations, of the Applicable Rate for the next succeeding Dividend Period and such other information as follows: a. If Sufficient Clearing Bids exist, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Winning Bid Rate so determined; b. If Sufficient Clearing Bids do not exist (other than because all of the Outstanding Units are the subject of Submitted Hold Orders), that the Applicable Rate for the next succeeding Dividend Period shall be the Maximum Rate; or c. If all of the Outstanding Units are the subject of Submitted Hold Orders, that the Applicable Rate for the next succeeding Dividend Period shall be equal to the Minimum Rate. (d) Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Units. Based on the determinations made pursuant to subsection (c), paragraph 1, of this Section (4), the Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Trust Company shall take such other action as set forth below: 1. If Sufficient Clearing Bids have been made, subject to the provisions of paragraphs 4 and 5 of this subsection (d), Submitted Bids and Submitted Sell Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected: a. The Submitted Sell Orders of each Existing Holder shall be accepted and the Submitted Bids of each 18 Existing Holder specifying any rate that is higher than the Winning Bid Rate shall be rejected, thus requiring each such Existing Holder to sell the Outstanding Units that are the subject of such Submitted Sell Orders or Submitted Bids; b. The Submitted Bids of each Existing Holder specifying any rate that is lower than the Winning Bid Rate shall be accepted, thus entitling each such Existing Holder to continue to hold the Outstanding Units that are the subject of such Submitted Bids; c. The Submitted Bids of each Potential Holder specifying any rate that is lower than the Winning Bid Rate shall be accepted, thus requiring such Potential Holder to purchase the number of Outstanding Units that are the subject of such Submitted Bids; d. The Submitted Bids of each Existing Holder specifying a rate that is equal to the Winning Bid Rate shall be accepted, thus entitling such Existing Holder to continue to hold the Outstanding Units that are the subject of each such Submitted Bid, unless the number of Outstanding Units subject to all such Submitted Bids of Existing Holders shall be greater than the number of Outstanding Units ("Remaining Units") equal to the excess of the Available Units over the number of Outstanding Units subject to Submitted Bids described in subparagraphs b and c of this paragraph 1, in which event the Submitted Bids of each such Existing Holder shall be rejected, and each such Existing Holder shall be required to sell Units, but only in an amount equal to the difference between (i) the number of Outstanding Units then held by such Existing Holder subject to such Submitted Bid and (ii) the number of Outstanding Units obtained by multiplying (x) the number of Remaining Units by (y) a fraction (the numerator of which shall be the number of Outstanding Units held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the sum of the number of Outstanding Units subject to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate); and e. The Submitted Bid of each Potential Holder specifying a rate that is equal to the Winning Bid Rate shall be accepted, but only in an amount equal to the number of Outstanding Units obtained by 19 multiplying (x) the difference between the Available Units and the number of Outstanding Units subject to Submitted Bids described in subparagraphs b, c, and d of this paragraph 1 by (y) a fraction (the numerator of which shall be the number of Outstanding Units subject to such Submitted Bid of such Potential Holder and the denominator of which shall be the sum of the number of Outstanding Units subject to Submitted Bids that specified rates equal to the Winning Bid Rate submitted by all such Potential Holders). 2. If Sufficient Clearing Bids have not been made (other than because all of the Outstanding Units are subject to Submitted Hold Orders), subject to the provisions of paragraph 4 of this subsection (d), Submitted Orders shall be accepted or rejected in the following order of priority and all other Submitted Bids shall be rejected: a. The Submitted Bids of each Existing Holder specifying any rate that is equal to or lower than the Maximum Rate shall be accepted, thus entitling such Existing Holder to continue to hold the Outstanding Units that are the subject of such Submitted Bids; b. The Submitted Bids of each Potential Holder specifying any rate that is equal to or lower than the Maximum Rate shall be accepted, thus requiring such Potential Holder to purchase the Outstanding Units that are the subject of such Submitted Bids; and c. The Submitted Bids of each Existing Holder specifying any rate that is higher than the Maximum Rate shall be rejected, and each Submitted Sell Order of each Existing Holder shall be accepted, thus requiring such Existing Holder to sell the Outstanding Units that are the subject of each such Submitted Bid or Submitted Sell Order, in both cases only in an amount equal to the difference between (i) the number of Outstanding Units then held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and (ii) the number of Outstanding Units obtained by multiplying (x) the difference between the Available Units and the aggregate number of Outstanding Units subject to Submitted Bids described in subparagraphs a and b of this paragraph 2 by (y) a fraction (the numerator of which shall be the number of Outstanding Units held by such Existing Holder subject to such Submitted Bid or Submitted Sell 20 Order and the denominator of which shall be the number of Outstanding Units subject to all such Submitted Bids and Submitted Sell Orders of Existing Holders). 3. If all of the Outstanding Units are the subject of Submitted Hold Orders, all Submitted Bids shall be rejected. 4. If, as a result of the procedures described in paragraph 1 or 2 of this subsection (d), any Existing Holder would be entitled to hold or required to sell, or any Potential Holder would be required to purchase, a fraction of a Unit on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, round up or down the number of Units to be held or sold by any Existing Holder or purchased by any Potential Holder on such Auction Date so that the number of Units held or sold by each Existing Holder or purchased by any Potential Holder on such Auction Date shall be a whole number of Units. 5. If, as a result of the procedures described in paragraph 1 of this subsection (d), any Potential Holder would be entitled or required to purchase less than a whole Unit on any Auction Date, the Trust Company shall, in such manner as, in its sole discretion, it shall determine, allocate Units for purchase among Potential Holders so that only whole Units are purchased on such Auction Date by any Potential Holder, even if such allocation results in one or more of such Potential Holders not purchasing Units on such Auction Date. 6. Based on the results of each Auction, the Trust Company shall determine the aggregate number of Outstanding Units to be purchased and the aggregate number of Outstanding Units to be sold by Potential Holders and Existing Holders on whose behalf each Broker-Dealer submitted Bids or Sell Orders and, with respect to each Broker-Dealer, to the extent that such aggregate number of Units to be sold differ, determine to which other Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-Dealer shall deliver, or from which other Broker- Dealer or Broker-Dealers acting for one or more sellers such Broker-Dealer shall receive, as the case may be, Units. (5) Miscellaneous. (a) So long as the Applicable Rate is based on the results of an Auction, an Existing Holder (i) may sell, transfer or otherwise dispose of shares of Series A Stock only in 21 Units and only pursuant to a Bid or Sell Order in accordance with the Auction Procedures, or to or through a Broker-Dealer or to a Person that has delivered a signed copy of a Master Purchaser's Letter to the Trust Company; provided that, in the case of all transfers other than pursuant to Auctions, Such Existing Holder or its Broker-Dealer or its Agent Member advises the Trust Company of Such transfer, and (ii) shall have the ownership of the shares of Series A Stock held by it maintained in book entry form by the Securities Depository in the account of its Agent Member, which in turn will maintain account records of Such Existing Holder's beneficial ownership. (b) Neither the Company nor any Affiliate thereof may submit an Order in any Auction. (c) All references to time of day refer to New York City time. (d) From and during the continuance of a Payment Failure and during any period in which there shall not be a Securities Depository, shares of Series A Stock may be registered for transfer or exchange and new certificates issued upon surrender of the old certificates properly endorsed for transfer, with (i) all necessary endorsers' signatures guaranteed in such manner and form as the Trust Company (or such other transfer agent or registrar) may require by a guarantor reasonably believed by the Trust Company (or such other transfer agent or registrar) to be responsible, (ii) accompanied by such assurances as the Trust Company (or such other transfer agent or registrar) shall deem necessary or appropriate to evidence the genuineness and effectiveness of each necessary endorsement and (iii) satisfactory evidence of compliance with all applicable laws relating to the collection of taxes or funds necessary for the payment of such taxes. (e) Commencing with the Dividend Payment Date for which a Payment Failure occurs, the Company or an Affiliate thereof, at the option of the Company, may perform any of the functions to be performed by the Trust Company or the Securities Depository set forth herein. (f) The Board of Directors of the Company may interpret the provisions of the Auction Procedures as set forth herein to resolve any inconsistency or ambiguity which may arise or be revealed in connection therewith, and, if such inconsistency or ambiguity reflects an inaccurate 22 provision hereof, the Board of Directors of the Company may, in appropriate circumstances, authorize the filing of a corrected Articles of Amendment. (g) Shares of Series A Stock which have been redeemed or otherwise acquired by the Company or any Affiliate are not subject to reissuance as Series A Stock. (6) Redemption. The shares of Series A Stock shall be subject to redemption, in whole or in part on any Dividend Payment Date, upon the notice and in the manner and with the effect provided in Article Fourth of these Articles; provided that if such Article Fourth is amended to grant the Company's Board of Directors in certain instances the authority to determine the time, form and manner of a notice of redemption, from and after the date such amendment becomes effective, publication of notice of the redemption of the Series A Stock shall not be required and notice of such redemption shall be sufficient if mailed at least thirty (30) days prior to redemption to the holders of record of the Series A Stock so to be redeemed, at their respective addresses as the same shall appear on the books of the Company, but no failure to mail a particular notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of those shares of Series A Stock for which proper notice has been given; provided further that all other terms of Article Fourth, as amended, relating to the redemption of shares of Preferred Stock and Preferred Stock (without par value) shall continue to apply to the redemption of the Series A Stock. The notice of redemption shall include a statement setting forth (i) the number of shares of the Series A Stock to be redeemed (if applicable to be denominated in Units), (ii) the date fixed for redemption and (iii) the redemption price. So long as shares of Series A Stock are held of record by the nominee of the Securities Depository, the Company need only give notice to the Securities Depository of any such redemption. The redemption price or prices applicable to shares of said series shall be $100.00 per share plus accrued and unpaid dividends to the date of redemption. Unless the shares of Series A Stock shall have been registered for transfer and exchange as provided in subsection (d) of Section (5), redemptions shall be made only in whole Units. (7) Voluntary or Involuntary Liquidation. The preferential amounts to which the holders of Series A Stock shall be entitled upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, in addition to dividends accumulated but unpaid thereon, shall be $100 per share. 23 (8) Stated Value. The stated value of the Series A Stock shall be $100 per share. * * * 24 ARTICLE OF AMENDMENT TO ARTICLES OF INCORPORATION OF LOUISVILLE GAS AND ELECTRIC COMPANY To the Secretary of State of Kentucky: Pursuant to the provisions of Chapter 271B of the Kentucky Revised Statutes, the undersigned corporation hereby amends its Articles of Incorporation, and for that purpose, submits the following statement: 1. The name of the corporation is Louisville Gas and Electric Company. 2. On April 21, 1992, the stockholders of the corporation duly adopted the Amendment to the Company's Articles of Incorporation attached hereto as Exhibit A. 3. If not contained in the Amendment itself, the manner in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be implemented as follows: Not Applicable 4. The Amendment was duly adopted on April 21, 1992, to be effective from the date of filing with the Secretary of State. 5. The Amendment was duly adopted by the shareholders of the corporation and: (i) the designation, number of outstanding shares and number of votes entitled to be cast by each voting group entitled to vote separately on the Amendment were: Number of Number of Votes Designation Outstanding Shares Entitled to be Cast Common Stock 21,294,223 21,294,223 Preferred Stock 750,000 750,000 (without par value) Preferred Stock 1,718,415 1,718,415 (par value $25 per share) Preferred Stock 2,468,415 2,468,415 (without par value and par value $25 per share) 25 (ii) the total number of undisputed votes cast for the plan by each voting group entitled to vote separately on the Amendment was: Total Number of Undisputed Voting Group Votes Case for the Amendment Common Stock 21,294,223 Preferred Stock 488,246 (without par value) Preferred Stock 1,231,844 (par value $25 per share) Preferred Stock 1,720,090 (without par value and par value $25 per share) and the number of votes cast for the Amendment by each voting group was sufficient for approval by that group. Dated: March 24, 1993 LOUISVILLE GAS AND ELECTRIC COMPANY Charles A. Markel, III Treasurer 26 EXHIBIT A AMENDMENTS TO ARTICLE FOURTH OF RESTATED ARTICLES OF INCORPORATION OF LOUISVILLE GAS AND ELECTRIC COMPANY 1. Paragraph (1) of Article Fourth shall be amended to read as follows: PREFERRED STOCK AND PREFERRED STOCK (WITHOUT PAR VALUE) (1) In addition to the series of Cumulative Preferred Stock, described in paragraphs (10) through (13) hereof, the Board of Directors is hereby authorized, subject to and in accordance with the provisions of paragraphs (1) through (9), inclusive, to cause Preferred Stock (without par value) to be issued in series, each such series to have such variations in respect thereof as may be determined by the Board of Directors prior to the issuance thereof. The shares of the Preferred Stock of different series may vary as to: (a) The distinctive serial designations and number of shares of such series; (b) The rate of dividends (within such limits as shall be permitted by law not exceeding 8% per annum) payable on the shares of the particular series; (c) The prices (not less than the amount limited by law) and terms upon which the shares of the particular series may be redeemed; and (d) The amount or amounts which shall be paid to the holders of the shares of particular series in case of voluntary or involuntary dissolution or any distribution of assets. The shares of the Preferred Stock (without par value) of different series may vary as to: (a) The distinctive serial designations and number of shares of such series; (b) The stated value thereof; (c) The rate or rates of dividends (within such limits as shall be permitted by law) payable on the shares of the particular series, which may be expressed in terms of a formula or other method by which such rate or rates shall be calculated from time to time, and the dividend periods, 1 including the date or dates on which dividends are payable; (d) The prices (not less than the amount limited by law) and terms (including sinking fund provisions) upon which the shares of the particular series may be redeemed; and (e) The amount or amounts which shall be paid to the holders of the shares of the particular series in case of voluntary or involuntary dissolution or any distribution of assets. The shares of all series of Preferred Stock and Preferred Stock (without par value) shall in all other respects be identical, except that the Preferred Stock (without par value) shall not have the voting rights of the Preferred Stock provided by paragraph 9(A) hereof. 2. Paragraph (2) of Article Fourth shall be amended to read as follows: (2) The holders of each series of the Preferred Stock and the Preferred Stock (without par value) at the time outstanding shall be entitled, pari passu with the holders of every other series of the Preferred Stock and the Preferred Stock (without par value), to receive, but only when and as declared by the Board of Directors, out of funds legally available for the payment of dividends, cumulative preferential dividends, at the dividend rate or rates for the particular series fixed therefor as herein provided, payable on such dates or for such period or periods as may be specified by the Board of Directors at the time of establishment of such series, to stockholders of record on the respective dates, not exceeding thirty (30) days preceding such dividend payment dates, fixed for the purpose by the Board of Directors. No dividends shall be declared on any series of the Preferred Stock or the Preferred Stock (without par value) in respect of any dividend period unless there shall likewise be declared on all shares of all other series of the Preferred Stock and the Preferred Stock (without par value) at the time outstanding, like proportionate dividends, ratably, in proportion to the respective dividend rates fixed therefor, in respect of the same dividend period, to the extent that such shares are entitled to receive dividends for such dividend period. The dividends on shares of all series of the Preferred Stock and the Preferred Stock (without par value) shall be cumulative. In the case of all shares of each particular series, the dividends on shares of such series shall be cumulative from 2 the date of issue thereof unless the Board of Directors at the time of establishing such series specifies that such dividends shall be cumulative from the first day of the current dividend period in which shares of such series shall have been issued, so that unless dividends on all outstanding shares of each series of the Preferred Stock and the Preferred Stock (without par value), at the dividend rate or rates and from the dates for accumulation thereof fixed as herein provided shall have been paid for all past dividend periods, but without interest on cumulative dividends, no dividends shall be paid or declared and no other distribution shall be made on the Common Stock and no Common Stock shall be purchased or otherwise acquired for value. The holders of the Preferred Stock and the Preferred Stock (without par value) of any series shall not be entitled to receive any dividends thereon other than the dividends referred to in this paragraph (2). 3. The first sentence of paragraph (3) of Article Fourth shall be amended by deleting the phrase "annual dividend rate" and inserting in lieu thereof the phrase "dividend rate or rates." 4. The second and third sentences of paragraph (3) of Article Fourth shall be amended to read as follows: Notice of every such redemption shall be given (i) at such time, in such form and in such manner as may have been determined and fixed for each series of Preferred Stock and Preferred Stock (without par value) at the time of establishment of such series or (ii) if such matters shall not have been so fixed by the Board of Directors, by publication at least once in one daily newspaper printed in the English language and of general circulation in Louisville, Kentucky, the first publication in such newspaper to be at least thirty (30) days prior to the date fixed for such redemption, and at least thirty (30) days' previous notice of every such redemption shall also be mailed to the holders of record of the shares of the Preferred Stock or the Preferred Stock (without par value) so to be redeemed, at their respective addresses as the same shall appear on the books of the Company; but no failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any shares of the Preferred Stock or the Preferred Stock (without par value) so to be redeemed. 5. The last sentence of paragraph (3) of Article Fourth shall be amended by deleting the phrase "by publication" wherever it appears. 3 6. The first sentence of paragraph (4) of Article Fourth shall be amended by deleting the phrase "annual dividend rate" and inserting in lieu thereof the phrase "dividend rate or rates." 7. Paragraph 5 of Article Fourth shall be amended by deleting the phrase "quarterly-yearly." 8. Subdivision 7(B)(b) of Article Fourth shall be amended to read as follows: (b) Issue, sell or otherwise dispose of any shares of the Preferred Stock or the Preferred Stock (without par value), or of any class of stock ranking prior to or on a parity with the Preferred Stock and the Preferred Stock (without par value) of each series as to dividends or distributions, unless the net income of the Company, determined in accordance with generally accepted accounting practices, to be available for the payment of dividends on the Preferred Stock, the Preferred Stock (without par value) and any class of stock ranking prior thereto or on a parity therewith as aforesaid, for a period of twelve (12) consecutive calendar months within the fifteen (15) calendar months immediately preceding the issuance, sale or disposition of such stock, is at least equal to twice the annual dividend requirements on the entire amount of all Preferred Stock, all Preferred Stock (without par value), and of all such other classes of stock ranking prior thereto or on a parity therewith, as to dividends or distributions to be outstanding immediately after the issuance, sale or disposition of such additional shares; provided that for purposes of calculating the annual dividend requirements applicable to any series of Preferred Stock (without par value) proposed to be issued which will have dividends determined according to an adjustable, floating or variable rate, the dividend rate used shall be the higher of (1) the dividend rate applicable to such series of Preferred Stock (without par value) on the date of such calculation or (2) the average dividend rate payable on all series of Preferred Stock and Preferred Stock (without par value) during the twelve month period immediately preceding the date of such calculation; provided further that for purposes of calculating the annual dividend requirements applicable to any series of Preferred Stock (without par value) outstanding at the date of such proposed issue and having dividends determined according to an adjustable, floating or variable rate, the dividend rate used shall be: (1) if such series of Preferred Stock (without par value) has been outstanding for at least twelve months, the actual amount of dividends paid on account of such series of Preferred Stock (without par value) for the twelve-month period immediately preceding the date of such calculation, or (2) if such 4 series of Preferred Stock (without par value) has been outstanding for less than twelve months, the average dividend rate payable on such series of Preferred Stock (without par value) during the period immediately preceding the date of such calculation; or 9. The first sentence of Subdivision 9(B) of Article Fourth shall be amended to read as follows: (B) If and when dividends shall be in default in an amount equivalent to dividends for the immediately preceding eighteen months on all shares of all series of the Preferred Stock and the Preferred Stock (without par value) at the time outstanding, and until all dividends in default on such Preferred Stock and such Preferred Stock (without par value) shall have been paid, the holders of all shares of the Preferred Stock and all shares of the Preferred Stock (without par value), voting separately as one class, shall be entitled to elect the smallest number of Directors necessary to constitute a majority of the full Board of Directors, and the holders of the Common Stock, voting separately as a class, shall be entitled to elect the remaining Directors of the Company. 5 ARTICLE OF AMENDMENT TO ARTICLES OF INCORPORATION OF LOUISVILLE GAS AND ELECTRIC COMPANY To the Secretary of State of Kentucky: Pursuant to the provisions of Chapter 271B of the Kentucky Revised Statutes, the undersigned corporation hereby amends its Articles of Incorporation, and for that purpose, submits the following statement: 1. The name of the corporation is Louisville Gas and Electric Company. 2. On May 13, 1993, the Executive Committee of the Board of Directors, acting on behalf of the corporation, duly adopted the following Amendments to its Articles of Incorporation. A copy of the text is attached hereto as Exhibit A and incorporated by reference herein as the text of a new subarticle B of Article Thirteenth. 3. If not contained in the Amendment itself, the manner in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be implemented as follows: Not Applicable 4. The Amendment is to be effective upon the filing of these articles by the Secretary of State. 5. The amendment was duly adopted by the Executive Committee of the Board of Directors without shareholder approval pursuant to 271B.10-020 and 271B.6-020 of the Kentucky Revised Statutes, and shareholder action was not required. Dated: May 19, 1993 LOUISVILLE GAS AND ELECTRIC COMPANY Charles A. Markel, III Treasurer 6 AMENDMENT The Restated Articles of Incorporation are hereby amended by adding thereto a new subarticle B to Article Thirteenth which subarticle B shall read in its entirety as follows: B. Terms of $5.875 Cumulative Preferred Stock (without par value). The Company has classified 250,000 shares of the Preferred Stock (without par value) as a series of such Preferred Stock designated as "$5.875 Cumulative Preferred Stock (without par value)." The preferences, rights, qualifications and restrictions of the shares of the "$5.875 Cumulative Preferred Stock (without par value)," shall be as follows: (1) The annual dividend payable in respect of each share of said series shall be $5.875; and the initial dividend in respect of each share of said series shall be payable on July 15, 1993, when and as declared by the Board of Directors of this Company, to holders of record on June 30, 1993, and will accrue from the date of original issuance of said series; thereafter, such dividends shall be payable on January 15, April 15, July 15 and October 15 in each year (or the next business date thereafter in each case), when and as declared by the Board of Directors of this Company, for the quarter-yearly period ending on the last business day of the preceding month. (2) The shares of said series are not subject to redemption prior to July 1, 1998. On and after July 1, 1998, the shares of said series shall be subject to redemption, in whole or in part, in the manner and with the effect provided in these Articles; and the redemption price or prices applicable to shares of said series shall be $105.875 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 1998, and prior to July 1, 1999; $104.700 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1,1999, and prior to July 1, 2000; $103.525 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 2000, and prior to July 1, 2001; $102.350 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 2001, and prior to July 1, 2002; $101.175 per share plus accrued and unpaid dividends to the date of redemption if such date of redemption is on or subsequent to July 1, 2002, and prior to July 1, 2003; and $100.000 per share plus accrued and unpaid dividends thereafter. 1 Notice of every such redemption shall be mailed at least thirty (30) days prior to redemption to the holders of record of the $5.875 Cumulative Preferred Stock (without par value) so to be redeemed, at their respective addresses as the same shall appear on the books of the Company, but no failure to mail a particular notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of those shares of $5.875 Cumulative Preferred Stock (without par value) for which proper notice has been given. (3) So long as any shares of said series shall remain outstanding, the Company shall on or before July 15, 2003, and on or before July 15 of each year thereafter to and including July 15, 2007, set aside, separate and apart from its other funds, an amount equal to $1,250,000 (or such lesser amount as may be sufficient to redeem all of the shares of said series then outstanding) and shall on or before July 15, 2008 (each such July 15 being hereinafter in this Section 3 called a "Sinking Fund Redemption Date"), set aside, separate and apart from its other funds, an amount equal to $18,750,000 (or such lesser amount as may be sufficient to redeem all the shares of said series then outstanding) as a mandatory sinking fund payment for the exclusive benefit of shares of said series, plus such further amount as shall equal the accrued and unpaid dividends on the shares of said series to be redeemed out of such payment (as hereinafter in this Section 3 provided) through the day preceding the applicable Sinking Fund Redemption Date. The obligation of the Company to make such payment shall be cumulative, so that if for any reason the full amount thereof shall not be set aside for any year, the amount of the deficiency from time to time shall be added to the amount due from the Company on subsequent Sinking Fund Redemption Dates (or, if such deficiency exists on July 15, 2008, on subsequent quarterly dividend payment dates thereafter for such series) until the deficiency shall have been fully satisfied. The Company shall be entitled to credit against any such mandatory sinking fund payment shares of said series redeemed by the Company at the Company's option, purchased by the Company in the open market or otherwise acquired by the Company, except through application of any sinking fund payment, and not theretofore so credited, at the sinking fund redemption price hereinafter specified in this Section 3. Any amounts set aside by the Company pursuant to this Section 3 shall be applied on the date of such setting aside if a Sinking Fund Redemption Date or otherwise on the first Sinking Fund Redemption Date occurring thereafter to the redemption of shares of said series at $100.000 per share, plus accrued and unpaid dividends through the day preceding 2 the applicable Sinking Fund Redemption Date, in the manner and upon the notice provided in Section 2 of this sub article B. If any Sinking Fund Redemption Date shall be a Saturday, Sunday or other day on which banking institutions in Louisville, Kentucky are authorized or obligated to remain closed, such term shall be construed to refer to the next preceding business day. Notwithstanding anything to the contrary set forth above, no sinking fund payments on the shares of said series of $5.875 Cumulative Preferred Stock shall be made: (i) unless the full dividends on all shares of Preferred Stock and Preferred Stock (without par value) at the time outstanding for all past dividend periods shall have been paid or declared and set apart for payment or (ii) if such sinking fund payment would be contrary to applicable law. (4) The preferential amounts to which the holders of shares of such series shall be entitled upon any liquidation, dissolution or winding up of the Company, in addition to dividends accumulated but unpaid thereon, shall be $100.000 per share, in the event of any voluntary liquidation, dissolution or winding up of the Company, except that if such voluntary liquidation, dissolution or winding up of the Company shall have been approved by the vote in favor thereof given at a meeting called for that purpose or by the written consent of the holders of a majority of the total shares of the $5.875 Cumulative Preferred Stock (without par value) then outstanding, the amount so payable on such voluntary liquidation, dissolution or winding up shall be $100.000 per share; or $100.000 per share, in the event of any involuntary liquidation, dissolution or winding up of the Company. (5) The shares of said series of $5.875 Cumulative Preferred Stock (without par value) shall be subject to all other terms, provisions and restrictions set forth in these Articles with respect to the shares of the Preferred Stock (without par value) and, excepting only as to the rates of dividend payable in respect of the shares of said series, the dividend periods and dividend payment dates, the redemption price or prices applicable to the shares of said series, the sinking fund provisions applicable to the shares of said series, and the liquidation price applicable to shares of said series, shall have the same relative rights and preferences as, shall be of equal rank with, and shall confer rights equal to those conferred by, all other shares of the Preferred Stock (without par value) of the Company. (6) The stated value of the shares of said series shall be $100.000 per share. 3 EX-4.34 3 SUPPLEMENTAL INDENTURE FROM LG&E TO HARRIS TRUST SUPPLEMENTAL INDENTURE FROM LOUISVILLE GAS AND ELECTRIC COMPANY TO HARRIS TRUST AND SAVINGS BANK Trustee ________________________ DATED AUGUST 15, 1993 ________________________ SUPPLEMENTAL TO TRUST INDENTURE DATED NOVEMBER 1, 1949 Table of Contents Page Parties 1 Recitals 1 Form of Bonds 5 Further Recitals 8 ARTICLE I. SPECIFIC SUBJECTION OF PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE. Section 1.01 Grant of certain property, including all personal property to comply with Uniform commercial Code of the State of Kentucky, subject to permissible encumbrances and other exceptions contained in Original Indenture 8 ARTICLE II. PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES DUE AUGUST 15, 2003. Section 2.01 Terms of Bonds 10 Section 2.02 Redemption Provisions 12 Section 2.03 Interchangeability of Bonds 12 Section 2.04 Charges upon exchange or transfer of bonds 12 ARTICLE III. APPOINTMENT OF AUTHENTICATING AGENT. Section 3.01 Appointment of Agent or Agents for Bonds of this Series 12 Section 3.02 (a) Qualifications of Agents 12 (b) Continuation of Agent upon merger or consolidation 13 (c) Successor Agent 13 (d) Compensation of Agent 13 Section 3.03 Form of Alternate Certificate of Authentication 13 Section 3.04 Limit on location and number of Agents 14 i. ARTICLE IV. MISCELLANEOUS Section 4.01 Recitals of fact, except as stated, are statements of the Company 14 Section 4.02 Supplemental Indenture to be 14 construed as a part of the Original Indenture Section 4.03 (a) Trust Indenture Act to control 14 (b) Severability of provisions contained 14 in Supplemental Indenture and bonds Section 4.04 Word "Indenture" as used herein includes in its meaning the Original Indenture and all indentures supplemental thereto 14 Section 4.05 References to either party in Supplemental Indenture include successors or assigns 14 Section 4.06 (a) Provision for execution in counterparts 15 (b) Table of contents and descriptive headings of Articles not to affect meaning 15 Schedule A A-1 ii Supplemental Indenture made as of the sixteenth day of August, 1993, by and between LOUISVILLE GAS AND ELECTRIC COMPANY, a corporation duly organized and existing under and by virtue of the laws of the State of Kentucky, having its principal office in the City of Louisville, County of Jefferson, in said State of Kentucky (the "Company"), the party of the first part, and HARRIS TRUST AND SAVINGS BANK, a corporation duly organized and existing under and by virtue of the laws of the State of Illinois, having its principal office at 111 West Monroe Street, City of Chicago, County of Cook, State of Illinois 60690, as Trustee (the "Trustee"), party of the second part; WITNESSETH: WHEREAS, the Company has heretofore executed and delivered to the Trustee its Trust Indenture (the "Original Indenture"), made as of November 1, 1949, whereby the Company granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed unto the Trustee and to its respective successors in trust, all property, real, personal and mixed then owned or thereafter acquired or to be acquired by the Company (except as therein excepted from the lien thereof) and subject to the rights reserved by the Company in and by the provisions of the Original Indenture, to be held by said Trustee in trust in accordance with the provisions of the Original Indenture for the equal pro rata benefit and security of all and each of the bonds issued and to be issued thereunder in accordance with the provisions thereof; and WHEREAS, Section 2.01 of the Original Indenture provides that bonds may be issued thereunder in one or more series, each series to have such distinctive designation as the Board of Directors of the Company may select for such series; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture, bonds of a series designated "First Mortgage Bonds, Series due November 1, 1979," bearing interest at the rate of 2% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1952, bonds of a series designated "First Mortgage Bonds, Series due February 1, 1982," bearing interest at the rate of 3 1/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1954, bonds of a series designated "First Mortgage Bonds, Series due February 1, 1984," bearing interest at the rate of 3 1/8% per annum; and 1 WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1957, bonds of a series designated "First Mortgage Bonds, Series due September 1, 1987," bearing interest at the rate of 4 7/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated October 1, 1960, bonds of a series designated "First Mortgage Bonds, Series due October 1, 1990," bearing interest at the rate of 4 7/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1966, bonds of a series designated "First Mortgage Bonds, Series due June 1, 1996," bearing interest at the rate of 5 5/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1968, bonds of a series designated "First Mortgage Bonds, Series due June 1, 1998," bearing interest at the rate of 6% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1970, bonds of a series designated "First Mortgage Bonds, Series due July 1, 2000," bearing interest at the rate of 9 1/4% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated August 1, 1971, bonds of a series designated "First Mortgage Bonds, Series due August 1, 2001," bearing interest at the rate of 8 1/4% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1972, bonds of a series designated "First Mortgage Bonds, Series due July 1, 2002," bearing interest at the rate of 7 1/2% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1975, bonds of a series designated "First Mortgage Bonds, Series due March 1, 2005," bearing interest at the rate of 8 7/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1975, bonds of a series designated "First Mortgage Bonds, Pollution Control Series A," 2 bearing interest as provided therein and maturing September 1, 2000; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1976, bonds of a series designated "First Mortgage Bonds, Pollution Control Series B," bearing interest as provided therein and maturing September 1, 2006; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated October 1, 1976, bonds of a series designated "First Mortgage Bonds, Series due November 1, 2006," bearing interest at the rate of 8 1/2% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1978, bonds of a series designated "First Mortgage Bonds, Pollution Control Series C," bearing interest as provided therein and maturing June 1, 1998/2008; and WHEREAS, the Company has heretofore executed and delivered to the Trustee a Supplemental Indenture dated February 15, 1979, setting forth duly adopted modifications and alterations to the Original Indenture and all Supplemental Indentures thereto; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1979, bonds of a series designated "First Mortgage Bonds, Series due October 1, 2009," bearing interest at the rate of 10 1/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 15, 1979, bonds of a series designated "First Mortgage Bonds, Pollution Control Series D," bearing interest as provided therein and maturing October 1, 2004/2009; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 15, 1981, bonds of a series designated "First Mortgage Bonds, Pollution Control Series E," bearing interest as provided therein and maturing September 15, 1984; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated March 1, 1982, bonds of a series designated "First Mortgage Bonds, Pollution Control Series F," 3 bearing interest as provided therein and maturing March 1, 2012; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated March 15, 1982, bonds of a series designated "First Mortgage Bonds, Pollution Control Series G," bearing interest as provided therein and maturing March 1, 2012; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 15, 1982, bonds of a series designated "First Mortgage Bonds, Pollution Control Series H," bearing interest as provided therein and maturing September 15, 1992; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 15, 1984, bonds of a series designated "First Mortgage Bonds, Pollution Control Series I," bearing interest as provided therein and maturing February 15, 2011; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated July 1, 1985, bonds of a series designated "First Mortgage Bonds, Pollution Control Series J," bearing interest as provided therein and maturing July 1, 1995/2015; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated November 15, 1986, bonds of a series designated "First Mortgage Bonds, Pollution Control Series K," bearing interest as provided therein and maturing December 1, 2016; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated November 16, 1986, bonds of a series designated "First Mortgage Bonds, Pollution Control Series L," bearing interest as provided therein and maturing December 1, 2016; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated August 1, 1987, bonds of a series designated "First Mortgage Bonds, Pollution Control Series M," bearing interest as provided therein and maturing August 1, 1997; and 4 WHEREAS, the Company has heretofore issued in accordance with the provisions of the Or,Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1989, bonds of a series designated "First Mortgage Bonds, Pollution Control Series N," bearing interest as provided therein and maturing February 1, 2019; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 2, 1989, bonds of a series designated "First Mortgage Bonds, Pollution Control Series O," bearing interest as provided therein and maturing February 1, 2019; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 15, 1990, bonds of a series designated "First Mortgage Bonds, Pollution Control Series P," bearing interest as provided therein and maturing June 15, 2015; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated November 1, 1990, bonds of a series designated "First Mortgage Bonds, Pollution Control Series Q," and bonds of a series designated "First Mortgage Bonds, Pollution Control Series R," each series bearing interest as provided therein and maturing November 1, 2020; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1992, bonds of a series designated "First Mortgage Bonds, Pollution Control Series S," bearing interest as provided therein and maturing September 1, 2017; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 2, 1992, bonds of a series designated "First Mortgage Bonds, Pollution Control Series T," bearing interest as provided therein and maturing September 1, 2017; and WHEREAS, the Company is desirous of providing for the issuance under the Original Indenture of a new series of bonds designated "First Mortgage Bonds, Series due August 15, 2003" (sometimes called Bonds of this Series), the bonds of said series to be issued as registered bonds without coupons in denominations of a multiple of $1,000, and the bonds of said series are to be substantially in the form and of the tenor following (with the redemption prices, if any, inserted therein in conformity with the provisions of Section 2.02 hereof) to wit: 5 LOUISVILLE GAS AND ELECTRIC COMPANY (Incorporated under the laws of the State of Kentucky) First Mortgage Bond Series Due August 15, 2003 No.___________ $___________ Louisville Gas and Electric Company, a corporation organized and existing under and by virtue of the laws of the State of Kentucky (herein called the "Company"), for value received, hereby promises to pay or registered assigns, at the office of the Trustee, in Chicago, Illinois, or, at the option of the registered holder, at the agency of the Company in the Borough of Manhattan, City and State of New York, the sum of Dollars in lawful money of the United States of America, on the fifteenth day of August, 2003, and to pay interest hereon from the date hereof, at the rate of six percent per annum, in like money, until the principal hereof becomes due and payable and thereafter, if the Company should default in the payment of the principal hereof, at the interest rate of this bond until the Company's obligation with respect to the payment of such principal shall be discharged as provided in the Indenture hereinafter mentioned; said interest being payable at the option of the person entitled to such interest either at the office of the Trustee, in Chicago, Illinois, or at the agency of the Company in the Borough of Manhattan, City and State of New York, on the fifteenth day of February and on the fifteenth day of August in each year; provided that, as long as there is no existing default in the payment of interest and except for the payment of defaulted interest, the interest payable on any February 15 or August 15 will be paid to the person in whose name this bond was registered at the close of business on the record ate (the February 1 prior to such February 15 or the August 1 prior to such August 15 unless any such date is not a business day, in which event it will be the next preceding business day). This bond is one of a duly authorized issue of bonds of the Company, known as its First Mortgage Bonds, unlimited in aggregate principal amount, which issue of bonds consists, or may consist of several series of varying denominations, dates and tenors, all issued and to be issued under and equally secured (except in so far as a sinking fund, or similar fund, established in accordance with the provisions of the Indenture may afford additional security for the bonds of any specific series) by a Trust Indenture dated November 1, 1949, and Supplemental Indentures thereto dated February 1, 1952, February 1, 1954, September 1, 1957, October 1, 1960, June 1, 1966, June 1, 1968, June 1, 1970, August 1, 1971, June 1, 1972, February 1, 1975, September 1, 1975, September 1,1976, October 1, 1976, June 1, 1978, February 15, 1979, September 1, 1979, September 15,1979, September 15,1981, March 1, 1982, March 15, 1982, September 15, 1982, February 15, 1984, July 1, 1985, November 15, 1986, November 16,1986, August 1, 1987, February 1,1989, February 2, 1989, June 15, 1990, November 1, 1990, 6 September 1, 1992, September 2, 1992 and August 15, 1993 (all of which instruments are herein collectively called the "Indenture"), executed by the Company to the Trustee, to which Indenture reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds as to such security, and the terms and conditions upon which the bonds may be issued under the Indenture and are secured. The principal hereof may be declared or may become due on the conditions, in the manner and at the time set forth in the Indenture, upon the happening of a completed default as in the Indenture provided. The Indenture provides that such declaration may in certain events be waived by the holders of a majority in principal amount of the bonds outstanding. With the consent of the Company and to the extent permitted by and as provided in the Indenture, the rights and obligations of the Company and/or of the holders of the bonds, and/or the terms and provisions of the Indenture and/or of any instruments supplemental thereto may be modified or altered by affirmative vote of the holders of at least seventy percent in principal amount of the bonds then outstanding under the Indenture and any instruments supplemental thereto (excluding bonds disqualified from voting by reason of the interest of the Company or of certain related persons therein as provided in the Indenture), and by the affirmative vote of at least seventy percent in principal amount of the bonds of any series entitled to vote then outstanding under the Indenture and any instruments supplemental thereto (excluding bonds disqualified from voting as aforesaid) and affected by such modification or alteration, in case one or more but less than all of the series of bonds then outstanding are so affected; provided that no such modification or alteration shall permit the extension of the maturity of the principal of this bond or the reduction in the rate of interest, if any, hereon or any other modification in the terms of payment of such principal or interest, if any, or the taking of certain other action as more fully set forth in the Indenture, without the consent of the holder hereof. The Company, the Trustee and any paying agent may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment of or on account of the principal hereof and interest hereon and for all other purposes and shall not be affected by any notice to the contrary. This bond is not redeemable prior to maturity for any reason and is not subject to any sinking fund. This bond is transferable as prescribed in the Indenture by the registered holder hereof in person, or by his duly authorized attorney, at the office of the Trustee in Chicago, Illinois, or at the option of the owner at the agency of the Company in the Borough of Manhattan, City and State of New York, or elsewhere if 7 authorized by the Company, upon surrender and cancellation of this bond, and thereupon a new bond or bonds of the same series and of a like aggregate principal amount will be issued to the transferee in exchange therefor as provided in the Indenture. Bonds of this Series are interchangeable as to denominations in the manner and upon the conditions prescribed in the Indenture. No charge shall be made by the Company for any exchange or transfer of bonds of the Series due August 15, 2003, other than for taxes or other governmental charges, if any, that may be imposed in relation thereto. No recourse shall be had for the payment of principal of or interest on this bond, or any part thereof, or of any claim based hereon or in respect hereof or of the indenture, against any incorporator, or any past, present or future stockholder, officer or director of the Company or of any predecessor or successor corporation, either directly or through the Company, or through any such predecessor or successor corporation, or through any receiver or trustee in bankruptcy, whether by virtue of any constitution, statute of rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue thereof, expressly waived and released, as more fully provided in the Indenture. This bond shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereof shall have been signed by or on behalf of Harris Trust and Savings Bank, as Trustee under the Indenture, or its successor thereunder. IN WITNESS WHEREOF, LOUISVILLE GAS AND ELECTRIC COMPANY has caused this instrument to be signed in its name by its President or a Vice President or with the facsimile signature of its President, and its corporate seal, or a facsimile thereof, to be hereto affixed and attested by its Secretary or with the facsimile signature of its Secretary. Dated LOUISVILLE GAS AND ELECTRIC COMPANY Attest: By:_____________________________________________ (Vice) President ___________________________________ Secretary and 8 WHEREAS, the Company is desirous of specifically assigning, conveying, mortgaging, pledging, transferring and setting over additional property unto the Trustee and to its respective successors in trust; and WHEREAS, Sections 4.01 and 21.03 of the Original Indenture provide in substance that the Company and the Trustee may enter into indentures supplemental thereto for the purposes, among others, of creating and setting forth the particulars of any new series of bonds and of providing the terms and conditions of the issue of the bonds of any series not expressly provided for in the Original Indenture and of assigning, conveying, mortgaging, pledging and transferring unto the Trustee additional property of the Company, and for any other purpose not inconsistent with the terms of the Original Indenture; and WHEREAS, the execution and delivery of this Supplemental Indenture have been duly authorized by a resolution adopted by the Board of Directors of the Company; NOW, THEREFORE, THIS INDENTURE WITNESSETH: Louisville Gas and Electric Company, in consideration of the premises and of one dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and other good and valuable considerations, does hereby covenant and agree to and with Harris Trust and Savings Bank, as Trustee, and its successors in the trust under the Indenture for the benefit of those who hold or shall hold the bonds issued or to be issued thereunder, as follows: ARTICLE I. SPECIFIC SUBJECTION OF PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE SECTION 1.01. The Company in order better to secure the payment, both of principal and interest, of all bonds of the Company at any time outstanding under the Indenture, according to their tenor and effect, and the performance of and compliance with the covenants and conditions in the Indenture contained, has granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed and by these presents does grant, bargain, sell, warrant, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto Harris Trust and Savings Bank as Trustee and to its respective successors in said trust forever, subject to the rights reserved by the Company in and by the provisions of the Indenture, all the property described and mentioned or enumerated in a schedule hereto annexed and marked Schedule A, reference to said schedule being hereby made with the same force and effect as if the same were incorporated herein at length; together with all and singular the 9 tenements, hereditaments and appurtenances belonging or in any wise appertaining to the aforesaid property or any part thereof with the reversion and reversions, remainder and remainders, tolls, rents and revenues, issues, income, product and profits thereof; Also, in order to subject all of the personal property and chattels of the Company to the lien of the Indenture in conformity with the provisions of the Uniform Commercial Code of the State of Kentucky, all steam, hydro and other electric generating plants, including buildings and other structures, turbines, generators, boilers, condensing equipment, and all other equipment; substations; electric transmission and distribution systems, including structures, poles, towers, fixtures, conduits, insulators, wires, cables, transformers, services and meters; steam and heating mains and equipment; gas generating and coke plants, including buildings, holders and other structures, boilers and other boiler plant equipment, benches, retorts, coke ovens, water gas sets, condensing and purification equipment, piping and other accessory works equipment; facilities for gas storage whether above or below surface; gas transmission and distribution systems, including structures, mains, compressor stations, purifier stations, pressure holders, governors, services and meters; office, shop, garage and other general buildings and structures, furniture and fixtures; and all municipal and other franchises and all leaseholds, licenses, permits, easements, and privileges; all as now owned or hereafter acquired by the Company pursuant to the provisions of the Original Indenture; and All the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof; Excluding, however, (1) all shares of stock, bonds, notes, evidences of indebtedness and other securities other than such as may be or are required to be deposited from time to time with the Trustee in accordance with the provisions of the Indenture; (2) cash on hand and in banks other than such as may be or is required to be deposited from time to time with the Trustee in accordance with the provisions of the Indenture; (3) contracts, claims, bills and accounts receivable and chooses in action other than such as may be or are required to be from time to time assigned to the Trustee in accordance with the provisions of the Indenture; (4) motor vehicles; (5) any stock of goods, wares and merchandise, equipment, materials and supplies acquired for the purpose of sale or lease in the usual course of business or for the purpose of consumption in the operation, construction or repair of any of the properties of the Company; and (6) the properties described in Schedule B annexed to the Original Indenture. To have and to hold all said property, real, personal and mixed, mortgaged, pledged or conveyed by the Company as aforesaid, 10 or intended so to be, unto the Trustee and its successors and assigns forever, subject, however, to permissible encumbrances as defined in Section 1.09 of the Original Indenture and to the further reservations, covenants, conditions, uses and trusts set forth in the Indenture, in trust nevertheless for the same purposes and upon the same conditions as are set forth in the Indenture. ARTICLE II. PROVISIONS OF BONDS OF SERIES DUE AUGUST 15, 2003 SECTION 2.01. There is hereby created, for issuance under the Original Indenture, a series of bonds designated Series due August 15, 2003, each of which shall bear the descriptive title "First Mortgage Bonds, Series due August 15, 2003" and the form thereof shall contain suitable provisions with respect to the matters specified in this Section. The bonds of said series shall be substantially of the tenor and purport previously recited. The bonds of said series shall mature August 15, 2003, and shall be issued as registered bonds without coupons in denominations of a multiple of $1,000. The bonds of said series shall bear interest at the rate of 6% per annum payable semiannually on February 15 and August 15 of each year, and the principal shall be payable at the office of the Trustee in Chicago, Illinois, or, at the option of the registered holder, at the agency of the Company in the Borough of Manhattan, City and State of New York, in lawful money of the United States of America, and the interest shall be payable in like money at the option of the person entitled to such interest either at said office of the Trustee in Chicago, Illinois, or at the agency of the Company in the Borough of Manhattan, City and State of New York. Bonds of the Series due August 15, 2003, shall be dated as of the interest payment date next preceding the authentication thereof by the Trustee except that (i) if any bond shall be authenticated before February 15, 1994, it shall be dated as of August 15, 1993 unless (iii) below is applicable, (ii) if the Company shall at the time of the authentication of a bond of the Series due August 15, 2003, be in default in the payment of interest upon bonds of the Series due August 15, 20031 such bond shall be dated as of the date of the beginning of the period for which such interest is so in default, and (iii) as long as there is no existing default in the payment of interest on the bonds of the Series due August 15, 2003, if any bond of the Series due August 15, 2003, shall be authenticated after the close of business on any Record Date but on or prior to the interest payment date relating to such Record Date, it shall be dated as of such interest payment date. As long as there is no existing default in the payment of interest on the bonds of the Series due August 15, 2003, the person in whose name any bond of the Series due August IS, 2003, is registered at the close of business on any Record Date with respect to any interest payment date shall be entitled to receive the 11 interest payable on such interest payment date notwithstanding any transfer or exchange of such bond of the Series due August 15, 2003, subsequent to the Record Date and on or prior to such interest payment date, except as and to the extent the Company shall default in the payment of the interest due on such interest payment date, in which case such defaulted interest shall be paid to the person in whose name such bond of the Series due August 15, 2003, is registered at the close of business on a Special Record Date for the payment of such defaulted interest to be fixed by the Trustee, notice whereof shall be given to the registered holder of any bond of the Series due August 15, 2003, not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the bonds of the Series due August 15, 2003, may be listed, and upon such notice as may be required by such exchange. The term "Record Date" as used herein with respect to any interest payment date (February 15 or August 15) shall mean the February 1 prior to such February 15 or the August 1 prior to such August 15 unless such February 1 or August 1 shall not be a business day, in which event "Record Date" shall mean the next preceding business day. The term "business day" as used herein shall mean any day other than a Saturday or a Sunday or a day on which the offices of the Trustee in the City of Chicago, Illinois are closed pursuant to authorization of law. As used in this Section 2.01, the term "default in the payment of interest" means failure to pay interest on the applicable interest payment date disregarding any period of grace permitted by the Indenture. The "Special Record Date'" as used herein shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each bond of the Series due August 15, 2003, and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such defaulted interest as provided in this Section 2.01. Thereupon the Trustee shall fix a Special Record Date for the payment of such defaulted interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment 12 of such defaulted interest and the Special Record Date therefor to be mailed, first class postage prepaid, to each holder of the bonds of the Series due August 15, 2003, at his address as it appears in the bond register, not less than 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Company, cause a similar notice to be published at least once in an English language newspaper of general circulation in Chicago, Illinois or New York, New York, but such publication shall not be a condition precedent to the establishment of the Special Record Date. Notice of the proposed payment of such defaulted interest and the Special Record Date therefor having been mailed as aforesaid, such defaulted interest shall be paid to the persons in whose names the bonds of the Series due August 15, 2003, are registered on such Special Record Date and shall not be payable pursuant to the paragraph immediately following in this Section 2.01. The Company may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the bonds of the Series due August 15, 2003, may be listed, and upon such notice as may be required by such exchange, if, after notice is given by the Company to the Trustee of the proposed payment pursuant to this Section 2.01, such payment shall be deemed practicable by the Trustee. SECTION 2.02. The Bonds of this Series are not redeemable prior to maturity for any reason and are not subject to any sinking fund. SECTION 2.03. The registered holder of any of the Bonds of this Series at his option may surrender the same at the office of the Trustee, in Chicago, Illinois, or at the agency of the Company in the Borough of Manhattan, City and State of New York, or elsewhere, if authorized by the Company, for cancellation, in exchange for other Bonds of this Series of the same aggregate principal amount bearing interest as provided in Section 2.09 of the Original Indenture. Thereupon, and upon receipt of any payment required under the provisions of Section 2.04 hereof, the Company shall execute and deliver to the Trustee and the Trustee shall authenticate and deliver such other registered bonds to such registered holder at its office or at any other place specified as aforesaid. SECTION 2.04. NO charge shall be made by the Company for any exchange or transfer of bonds of the Series due August 15, 2003 other than for taxes or other governmental charges, if any, that may be imposed in relation thereto. 13 ARTICLE III. APPOINTMENT OF AUTHENTICATING AGENT SECTION 3.01. The Trustee shall, if requested in writing so to do by the Company, promptly appoint an agent or agents of the Trustee who shall have authority to authenticate registered Bonds of this Series in the name and on behalf of the Trustee. Such appointment by the Trustee shall be evidenced by a certificate of vice-president of the Trustee delivered to the Company prior to the effectiveness of such appointment. SECTION 3.02. (a) Any such authenticating agent shall be acceptable to the Company and shall at all times be a corporation which is organized and doing business under the laws of the United States or of any State, is authorized under such laws to act as authenticating agent, has a combined capital and surplus of at least $10,000,000, and is subject to supervision or examination by Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 3.02 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) Any corporation into which any authenticating agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which any authenticating agent shall be a party, or any corporation succeeding to the corporate agency business of any authenticating agent, shall continue to be the authenticating agent without the execution or filing of any paper or any further act on the part of the Trustee or the authenticating agent. (c) Any authenticating agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time, and upon written request of the Company to the Trustee shall, terminate the agency of any authenticating agent by giving written notice of termination to such authenticating agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any authenticating agent shall cease to be eligible in accordance with the provisions of this Section 3.02, the Trustee, unless otherwise requested in writing by the Company, promptly shall appoint a successor authenticating agent, which shall be acceptable to the Company. Any successor authenticating agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers, duties, and responsibilities of its predecessor hereunder, with like effect as if originally named. No successor authenticating agent shall be appointed unless eligible under the provisions of this Section 3.02. 14 (d) The Trustee agrees to pay any authenticating agent, appointed in accordance with the provisions of this Section 3.02, reasonable compensation for its services, and the Trustee shall be entitled to be reimbursed for such payments. SECTION 3.03. If an appointment is made pursuant to this Article III, the Bonds of this Series shall have endorsed thereon, in addition to the Trustee's Certificate, an alternate Trustee's Certificate in the following form: This bond is one of the bonds of the Series designated therein, described in the within mentioned Indenture. HARRIS TRUST AND SAVINGS BANK, as Trustee By:____________________________________ Authenticating Agent, By:____________________________________ Authorized Officer. SECTION 3.04. No provision of this Article III shall require the Trustee to have at any time more than one such authenticating agent for any one State or to appoint any such authenticating agent in the State in which the Trustee has its principal place of business. ARTICLE IV. MISCELLANEOUS SECTION 4.01. The recitals of fact herein and in the bonds (except the Trustee's Certificate) shall be taken as statements of the Company and shall not be construed as made or warranted by the Trustee. The Trustee makes no representations as to the value of any of the property subject to the lien of the Indenture, or any part thereof, or as to the title of the Company thereto, or as to the security afforded thereby and hereby, or as to the validity of this Supplemental Indenture and the Trustee shall incur no responsibility in respect of such matters. SECTION 4.02. This Supplemental Indenture shall be construed in connection with and as a part of the Original Indenture. SECTION 4.03.(a) If any provision of this Supplemental Indenture limits, qualifies or conflicts with another provision of the Original Indenture or this Supplemental Indenture required to be included in indentures qualified under the Trust Indenture act of 1939, as amended (as enacted prior to the date of this Supplemental Indenture) by any of the provisions of Sections 310 to 317, inclusive, of the said Act, such required provision shall control. 15 (b) In case any one or more of the provisions contained in this Supplemental Indenture or in the bonds issued hereunder shall be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected, impaired, prejudiced or disturbed thereby. SECTION 4.04. Wherever in this Supplemental Indenture the word "Indenture" is used without either prefix, "Original" or "Supplemental," such word was used intentionally to include in its meaning both the Original Indenture and all indentures supplemental thereto. SECTION 4.05. Wherever in this Supplemental Indenture either of the parties hereto is named or referred to, this shall be deemed to include the successors or assigns of such party, and all the covenants and agreements in this Supplemental Indenture contained by or on behalf of the Company or by or on behalf of the Trustee shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not. SECTION 4.06.(a) This Supplemental Indenture may be simultaneously executed in several counterparts, and all said counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. (b) The Table of Contents and the descriptive headings of the several Articles of this Supplemental Indenture were formulated, used and inserted in this Supplemental Indenture for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the party of the first part has caused its corporate name and seal to be hereunto affixed and this Supplemental Indenture to be signed by its President or a Vice President, and attested by its Secretary for and in its behalf, and the party of the second part to evidence its acceptance of the trust hereby created, has caused its corporate name and seal to be hereunto affixed, and this Supplemental Indenture to be signed by its President, a Vice President or an Assistant Vice President, and attested by its Secretary or an Assistant Secretary, for and in its behalf, all done as of the sixteenth day of August, 1993. LOUISVILLE GAS AND ELECTRIC COMPANY By:_____________________________________ M. LEE FOWLER Vice President (Corporate Seal) 16 ATTEST: ______________________________________ VICTOR A. STAFFIERI Senior Vice President, General Counsel and Secretary HARRIS TRUST AND SAVINGS BANK, TRUSTEE By:_____________________________________ C. POTTER Assistant Vice President (Corporate Seal) ATTEST: ______________________________________ J. BARTOLINI Assistant Secretary STATE OF KENTUCKY ) ) SS: COUNTY OF JEFFERSON ) BE IT REMEMBERED that on this 25th day of August, 1993, before me, a Notary Public duly commissioned in and for the County and State aforesaid, personally appeared M. LEE FOWLER and VICTOR A. STAFFIERI, respectively, Vice President and Senior Vice President, General Counsel and Secretary of Louisville Gas and Electric Company, a corporation organized and existing under and by virtue of the laws of the State of Kentucky, who are personally known to me to be such officers, respectively, and who are personally known to me to be the same persons who executed as officers the foregoing instrument of writing, and such persons duly acknowledged before me the execution of the foregoing instrument of writing to be their act and deed and the act and deed of said corporation. WITNESS my hand and notarial seal this 25th day of August, 1993. PATRICIA A. ROSE _______________________________ NOTARY PUBLIC My commission expires: 1-23-96 17 STATE OF ILLINOIS ) ) SS: COUNTY OF COOK ) BE IT REMEMBERED that on this 24th day of August, 1993, before me, a Notary Public duly commissioned in and for the County and State aforesaid, personally appeared C. POTTER and J. BARTOLINI, respectively, Assistant Vice President and Assistant Secretary of Harris Trust and Savings Bank, a corporation organized and existing under and by virtue of the laws of the State of Illinois, who are personally known to me to be such officers, respectively, and who are personally known to me to be the same persons who executed as officers the foregoing instrument of writing, and such persons duly acknowledged before me the execution of the foregoing instrument of writing to be their act and deed and the act and deed of said corporation. WITNESS my hand and notarial seal this 24th day of August, 1993. T. MUZQUIZ ___________________________________ NOTARY PUBLIC My commission expires: 7-12-97 This Instrument Prepared by: Susan M. Jenkins LG&E Energy Corp. 220 West Main Street Louisville, Kentucky 40202 By:_______________________________ Susan M. Jenkins, Esq. 18 SCHEDULE A The following property situated, lying and being in the County of Jefferson, State of Kentucky, to-wit: Transmission Lines A 138KV wood and steel transmission line circuit #3859 in Louisville, Jefferson County, Kentucky. This line is built between Magazine Substation to Hancock Substation at a distance of approximately 2.44 miles. This distance reflects 2.36 miles of overhead lines and .08 miles of underground lines. A-1 EX-4.35 4 SUPPLEMENTAL INDENTURE FROM LG&E TO HARRIS TRUST SUPPLEMENTAL INDENTURE FROM LOUISVILLE GAS AND ELECTRIC COMPANY TO HARRIS TRUST AND SAVINGS BANK Trustee ___________________ DATED AUGUST 16, 1993 ___________________ SUPPLEMENTAL TO TRUST INDENTURE DATED NOVEMBER 1, 1949 Table of Contents Page Parties 1 Recitals 1 Form of Bonds of Pollution Control Series U and V 5 Further Recitals 8 ARTICLE I. SPECIFIC SUBJECTION OF PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE. Section 1.01 Grant of certain property, including all personal property to comply with Uniform Commercial Code of the State of Kentucky, subject to permissible encumbrances and other exceptions contained in Original Indenture 8 ARTICLE II. PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES U AND V. Section 2.01 Terms of Bonds of Pollution Control Series U 9 Section 2.02 Terms of Bonds of Pollution Control Series V 10 Section 2.03 Payment of principal and interest - Bonds of Pollution Control Series U 10 Section 2.04 Payment of principal and interest - Bonds of Pollution Control Series V 11 Section 2.05 Bonds of Pollution Control Series U deemed fully paid upon payment of corresponding Pollution Control Revenue Bonds 12 Section 2.06 Bonds of Pollution Control Series V deemed fully paid upon payment of corresponding Pollution Control Revenue Bonds 12 Section 2.07 Interchangeability of bonds 13 Section 2.08 Charges upon exchange or transfer of bonds 13 i ARTICLE III. MISCELLANEOUS. Section 3.01 Recitals of fact, except as stated, are statements of the Company 13 Section 3.02 Supplemental Indenture to be construed as a part of the Original Indenture 13 Section 3.03(a) Trust Indenture Act to control 13 (b) Severability of provisions contained in Supplemental Indenture and bonds 13 Section 3.04 Word "Indenture" as used herein includes in its meaning the Original Indenture and all indentures supplemental thereto 13 Section 3.05 References to either party in Supplemental Indenture include successors or assigns 13 Section 3.06(a) Provision for execution in counterparts 14 (b) Table of contents and descriptive headings of Articles not to affect meaning 14 Schedule A A-1 ii Supplemental Indenture made as of the sixteenth day of August, 1993, by and between LOUISVILLE GAS AND ELECTRIC COMPANY, a corporation duly organized and existing under and by virtue of the laws of the State of Kentucky, having its principal office in the City of Louisville, County of Jefferson, in said State of Kentucky (the "Company"), the party of the first part, and HARRIS TRUST AND SAVINGS BANK, a corporation duly organized and existing under and by virtue of the laws of the State of Illinois, having its principal office at 111 West Monroe Street, City of Chicago, County of Cook, State of Illinois 60690, as Trustee (the "Trustee"), party of the second part; WITNESSETH: WHEREAS, the Company has heretofore executed and delivered to the Trustee its Trust Indenture (the "Original Indenture"), made as of November 1, 1949, whereby the Company granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed unto the Trustee and to its respective successors in trust, all property, real, personal and mixed then owned or thereafter acquired or to be acquired by the Company (except as therein excepted from the lien thereof) and subject to the rights reserved by the Company in and by the provisions of the Original Indenture, to be held by said Trustee in trust in accordance with the provisions of the Original Indenture for the equal pro rata benefit and security of all and each of the bonds issued and to be issued thereunder in accordance with the provisions thereof; and WHEREAS, Section 2.01 of the Original Indenture provides that bonds may be issued thereunder in one or more series, each series to have such distinctive designation as the Board of Directors of the Company may select for such series; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture, bonds of a series designated "First Mortgage Bonds, Series due November 1, 1979," bearing interest at the rate of 2% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1952, bonds of a series designated "First Mortgage Bonds, Series due February 1, 1982," bearing interest at the rate of 3 1/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1954, bonds of a series designated "First Mortgage Bonds, Series due February 1, 1984," bearing interest at the rate of 3 1/8% per annum; and 1 WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1957, bonds of a series designated "First Mortgage Bonds, Series due September 1, 1987," bearing interest at the rate of 4 7/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated October 1, 1960, bonds of a series designated "First Mortgage Bonds, Series due October 1, 1990," bearing interest at the rate of 4 7/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1966, bonds of a series designated "First Mortgage Bonds, Series due June 1, 1996," bearing interest at the rate of 5 5/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1968, bonds of a series designated "First Mortgage Bonds, Series due June 1, 1998," bearing interest at the rate of 6% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1970, bonds of a series designated "First Mortgage Bonds, Series due July 1, 2000," bearing interest at the rate of 9 1/4% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated August 1, 1971, bonds of a series designated "First Mortgage Bonds, Series due August 1, 2001," bearing interest at the rate of 8 1/4% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1972, bonds of a series designated "First Mortgage Bonds, Series due July 1, 2002," bearing interest at the rate of 7 1/2% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1975, bonds of a series designated "First Mortgage Bonds, Series due March 1, 2005," bearing interest at the rate of 8 7/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1975, bonds of a series designated "First Mortgage Bonds, Pollution Control Series A," 2 bearing interest as provided therein and maturing September 1, 2000; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1976, bonds of a series designated "First Mortgage Bonds, Pollution Control Series B," bearing interest as provided therein and maturing September 1, 2006; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated October 1, 1976, bonds of a series designated "First Mortgage Bonds, Series due November 1, 2006," bearing interest at the rate of 8 1/2% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1978, bonds of a series designated "First Mortgage Bonds, Pollution Control Series C," bearing interest as provided therein and maturing June 1, 1998/2008; and WHEREAS, the Company has heretofore executed and delivered to the Trustee a Supplemental Indenture dated February 15, 1979, setting forth duly adopted modifications and alterations to the Original Indenture and all Supplemental Indentures thereto; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1979, bonds of a series designated "First Mortgage Bonds, Series due October 1, 2009," bearing interest at the rate of 10 1/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 15, 1979, bonds of a series designated "First Mortgage Bonds, Pollution Control Series D," bearing interest as provided therein and maturing October 1, 2004/2009; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 15, 1981, bonds of a series designated "First Mortgage Bonds, Pollution Control Series E," bearing interest as provided therein and maturing September 15, 1984; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated March 1, 1982, bonds of a series designated "First Mortgage Bonds, Pollution Control Series F," 3 bearing interest as provided therein and maturing March 1, 2012; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated March 15, 1982, bonds of a series designated "First Mortgage Bonds, Pollution Control Series G," bearing interest as provided therein and maturing March 1, 2012; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 15, 1982, bonds of a series designated "First Mortgage Bonds, Pollution Control Series H," bearing interest as provided therein and maturing September 15, 1992; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 15, 1984, bonds of a series designated "First Mortgage Bonds, Pollution Control Series I," bearing interest as provided therein and maturing February 15, 2011; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated July 1, 1985, bonds of a series designated "First Mortgage Bonds, Pollution Control Series J," bearing interest as provided therein and maturing July 1, 1995/2015; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated November 15, 1986, bonds of a series designated "First Mortgage Bonds, Pollution Control Series K," bearing interest as provided therein and maturing December 1, 2016; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated November 16, 1986, bonds of a series designated "First Mortgage Bonds, Pollution Control Series L," bearing interest as provided therein and maturing December 1, 2016; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated August 1, 1987, bonds of a series designated "First Mortgage Bonds, Pollution Control Series M," bearing interest as provided therein and maturing August 1, 1997; and 4 WHEREAS, the Company has heretofore issued in accordance with the provisions of the Or,Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1989, bonds of a series designated "First Mortgage Bonds, Pollution Control Series N," bearing interest as provided therein and maturing February 1, 2019; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 2, 1989, bonds of a series designated "First Mortgage Bonds, Pollution Control Series O," bearing interest as provided therein and maturing February 1, 2019; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 15, 1990, bonds of a series designated "First Mortgage Bonds, Pollution Control Series P," bearing interest as provided therein and maturing June 15, 2015; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated November 1, 1990, bonds of a series designated "First Mortgage Bonds, Pollution Control Series Q," and bonds of a series designated "First Mortgage Bonds, Pollution Control Series R," each series bearing interest as provided therein and maturing November 1, 2020; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1992, bonds of a series designated "First Mortgage Bonds, Pollution Control Series S," bearing interest as provided therein and maturing September 1, 2017; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 2, 1992, bonds of a series designated "First Mortgage Bonds, Pollution Control Series T," bearing interest as provided therein and maturing September 1, 2017; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated August 15, 1993, bonds of a series designated "First Mortgage Bonds, Series due August 15, 2003," bearing interest at the rate of 6% per annum; and 5 WHEREAS, the County of Jefferson in the Commonwealth of Kentucky (the "County") has agreed to issue $35,200,000 principal amount of its Pollution Control Revenue Bonds, 1993 Series A (Louisville Gas and Electric Company Project) (the "1993 Series A Pollution Control Revenue Bonds") pursuant to the provisions of the Indenture of Trust, dated as of August 15, 1993 (the "Series A Pollution Control Indenture"), between and among the County and BankAmerica National Trust Company, New York, New York, as Trustee, Paying Agent and Bond Registrar (said Trustee or any successor trustee under the Series A Pollution Control Indenure being hereinafter referred to as the "Series A Pollution Control Trustee"); and WHEREAS, the County also has agreed to issue $102,000,000 principal amount of its Pollution Control Revenue Bonds, 1993 Series B, (Louisville Gas and Electric Company Project) (the "1993 Series B Pollution Control Revenue Bonds, and, together with the 1993 Series A Pollution Control Revenue Bonds, the "Pollution Control Revenue Bonds") pursuant to the provisions of the Indenture of Trust, dated as of August 15, 1993 (the "Series B Pollution Control Indenture"), between and among the County and PNC Bank, Kentucky, Inc., Louisville, Kentucky, as Trustee, Paying Agent and Bond Registrar (said Trustee or any successor trustee under the Series B Pollution Control Indenture being hereinafter referred to as the Series B Pollution Control Trustee); and WHEREAS, the proceeds of the 1993 Series A Pollution Control Revenue Bonds and 1993 Series B Pollution Control Revenue Bonds (other than any accrued interest, if any, thereon) will be loaned by the County to the Company pursuant to the provisions of separate Loan Agreements, each dated as of August 15, 1993, between the County and the Company (the "Series A Agreement" and the "Series B Agreement," respectively, and, collectively, the "Agreements"), to provide a portion of the funds required to pay and discharge $35,200,000 in outstanding principal amount of "County of Jefferson, Kentucky, Pollution Control Revenue Bonds, 1976 Series A (Louisville Gas and Electric Company Project)," dated September 1, 1976, $42,000,000 in outstanding principal amount of "County of Jefferson, Kentucky, Pollution Control Revenue Bonds, 1978 Series A (Louisville Gas and Electric Company Project)," dated June 1, 1978 and $60,000,000 in outstanding principal amount of "County of Jefferson, Kentucky, Pollution Control Revenue Bonds, 1979 Series A (Louisville Gas and Electric Company Project)," dated October 1, 1979 (collectively, the "Refunded Bonds"), which refunded Bonds were used to finance the acquisition, construction and installation of certain facilities for the control, containment, reduction and abatement of air and water pollution and for the disposal of solid waste at the Mill Creek and Cane Run Generating Stations of the Company, which facilities are sometimes referred to as the "Project" which Project is located in the County and is more fully described in Exhibit A to the Agreements; and 6 WHEREAS, payments by the Company under and pursuant to the Agreements have been assigned by the County to the applicable Pollution Control Trustee in order to secure the payment of the applicable Pollution Control Revenue Bonds; and WHEREAS, in order to further secure the payment of the 1993 Series A Pollution Control Revenue Bonds, the Company desires to provide for the issuance under the Original Indenture to the Series A Pollution Control Trustee of a new series of bonds designated "First Mortgage Bonds, Pollution Control Series U" (sometimes called "Bonds of Pollution Control Series U"), in a principal amount equal to the principal amount of the 1993 Series A Pollution Control Revenue Bonds, and with corresponding terms and maturity, the Bonds of Pollution Control Series U to be issued as registered bonds without coupons in denominations of a multiple of $1,000, and in order to further secure the payment of the 1993 Series B Pollution Control Revenue Bonds, the Company desires to provide for the issuance under the Original Indenture to the Series B Pollution Control Trustee of a new series of bonds designated "First Mortgage Bonds, Pollution Control Series V" (sometimes called "Bonds of Pollution Control Series V"), in a principal amount equal to the principal amount of the 1993 Series B Pollution Control Revenue Bonds, and with corresponding terms and maturity, the bonds of Pollution Control Series V to be issued as registered bonds without coupons in denominations of a multiple of $1,000; and the Bonds of Pollution Control Series U and the Bonds of Pollution Control Series V are to be substantially in the form and tenor following, to-wit: (Form of Bonds of Pollution Control Series U and V) This Bond has not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in contravention of said Act and is not transferable except to a successor Trustee under the Indenture of Trust dated as of August 15, 1993, from the County of Jefferson, Kentucky, to [BankAmerica National Trust Company, New York, New York] [PNC Bank, Kentucky, Inc., Louisville, Kentucky], as Trustee, Paying Agent and Bond Registrar. LOUISVILLE GAS AND ELECTRIC COMPANY (Incorporated under the laws of the State of Kentucky) First Mortgage Bond Pollution Control Series No.___________ $___________ Louisville Gas and Electric Company, a corporation organized and existing under and by virtue of the laws of the State of Kentucky (herein called the "Company"), for value received, hereby promises to pay to [BankAmerica National Trust Company, New York, New York][PNC Bank, Kentucky, Inc., Louisville, Kentucky], as Trustee under the Indenture of Trust (the "Pollution Control 7 Indenture") dated as of August 15, 1993, from the County of Jefferson, Kentucky, to [BankAmerica National Trust Company, New York, New York][PNC Bank, Kentucky, Inc., Louisville, Kentucky], or any successor trustee under the Pollution Control Indenture (the "Pollution Control Trustee") and at the office of Harris Trust and Savings Bank, Chicago, Illinois (the "Trustee") the sum of _______________________ Dollars in lawful money of the United States of America on the Demand Redemption Date, as hereinafter defined, and to pay on the Demand Redemption Date to the Pollution Control Trustee, interest hereon from the Initial Interest Accrual Date, as hereinafter defined, to the Demand Redemption Date at the same rate or rates per annum then and thereafter from time to time borne by the [1993 Series A Pollution Control Revenue Bonds (for the Bonds of Pollution Control Series U)] [1993 Series B Pollution Control Revenue Bonds (for the Bonds of Pollution Control Series V)], in like money, said interest being payable at the office of the Trustee in Chicago, Illinois, subject to the provisions hereinafter set forth in the event of a rescission of a Redemption Demand, as hereinafter defined. This bond is one of a duly authorized issue of bonds of the Company, known as its First Mortgage Bonds, unlimited in aggregate principal amount, which issue of bonds consists, or may consist of several series of varying denominations, dates and tenors, all issued and to be issued under and equally secured (except in so far as a sinking fund, or similar fund, established in accordance with the provisions of the Indenture may afford additional security for the bonds of any specific series) by a Trust Indenture dated November 1, 1949, and Supplemental Indentures thereto dated February 1, 1952, February 1, 1954, September 1, 1957, October 1, 1960, June 1, 1966, June 1, 1968, June 1, 1970, August 1, 1971, June 1, 1972, February 1, 1975, September 1, 1975, September 1,1976, October 1, 1976, June 1, 1978, February 15, 1979, September 1, 1979, September 15,1979, September 15,1981, March 1, 1982, March 15, 1982, September 15, 1982, February 15, 1984, July 1, 1985, November 15, 1986, November 16,1986, August 1, 1987, February 1,1989, February 2, 1989, June 15, 1990, November 1, 1990, September 1, 1992, September 2, 1992, August 15, 1993 and August 16, 1993 (all of which instruments are herein collectively called the "Indenture"), executed by the Company to the Trustee, to which Indenture reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds as to such security, and the terms and conditions upon which the bonds may be issued under the Indenture and are secured. The principal hereof may be declared or may become due on the conditions, in the manner and at the time set forth in the Indenture, upon the happening of a completed default as in the Indenture provided. The Indenture provides that such declaration may in certain events be waived by the holders of a majority in principal amount of the bonds outstanding. 8 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 . The bonds of this Series have been issued to the Pollution Control Trustee under the Pollution Control Indenture to secure payment of the Pollution Control Revenue Bonds, Series (Louisville Gas and Electric Company Project) (the "Pollution Control Revenue Bonds") issued by the County of Jefferson, Kentucky (the "County") under the Pollution Control Indenture, the proceeds of which have been or are to be loaned to the Company pursuant to the provisions of the Loan Agreement dated as of October 15, 1993 (the "Agreement") between the Company and the County. The maturity of the obligation represented by the bonds of this Series is [October 15, 2020] [April 15, 2023]. The date of maturity of the obligation represented by the bonds of this Series is hereinafter referred to as the Final Maturity Date. The bonds of this Series shall bear interest from the Initial Interest Accrual Date, as hereinafter defined, at the same rate or rates per annum then and thereafter from time to time borne by the Pollution Control Revenue Bonds. With the consent of the Company and to the extent permitted by and as provided in the Indenture, the rights and obligations of the Company and/or of the holders of the bonds, and/or the terms and provisions of the Indenture and/or of any instruments supplemental thereto may be modified or altered by affirmative vote of the holders of at least seventy percent in principal amount of the bonds then outstanding under the Indenture and any instruments supplemental thereto (excluding bonds disqualified from voting by reason of the interest of the Company or of certain related persons therein as provided in the Indenture), and by the affirmative vote of at least seventy percent in principal amount of the bonds of any series entitled to vote then outstanding under the Indenture and any instruments supplemental thereto (excluding bonds disqualified from voting as aforesaid) and affected by such modification or alteration, in case one or more but less than all of the series of bonds then outstanding are so affected; provided that no such modification or alteration shall permit the extension of the maturity of the principal of this bond or the reduction in the rate of interest, if any, hereon or any other modification in the terms of payment of such principal or interest, if any, or the taking of certain other action as more fully set forth in the Indenture, without the consent of the holder hereof. Except as provided in the next succeeding paragraph, in the event of a default under Section 9.1 of the Agreement or in the event of a default in the payment of the principal of, premium, if any, or interest (and such default in the payment of interest continues for the full grace period, if any, permitted by the Pollution Control Indenture and the Pollution Control Revenue Bonds) on the Pollution Control Revenue Bonds, whether at maturity, by tender for purchase, by acceleration, by sinking fund, redemption or otherwise, as and when the same becomes due, the 9 bonds of this Series shall be redeemable in whole upon receipt by the Trustee of a written demand (hereinafter called a "Redemption Demand") from the Pollution Control Trustee stating that there has been such a default, stating that it is acting pursuant to the authorization granted by Section 9.02(c) of the Pollution Control Indenture, specifying the last date to which interest on the Pollution Control Revenue Bonds has been paid (such date being hereinafter referred to as the "Initial Interest Accrual Date") and demanding redemption of the bonds of this Series. The Trustee shall, within 10 days after receiving such Redemption Demand, mail a copy thereof to the Company marked to indicate the date of its receipt by the Trustee. Promptly upon receipt by the Company of such copy of a Redemption Demand, the Company shall fix a date on which it will redeem the bonds of this Series so demanded to be redeemed (hereinafter called the "Demand Redemption Date"). Notice of the date fixed as and for the Demand Redemption Date shall be mailed by the Company to the Trustee at least 30 days prior to such Demand Redemption Date. The date to be fixed by the Company as and for the Demand Redemption Date may be any date up to and including the earlier of (i) the 120th day after receipt by the Trustee of the Redemption Demand or (ii) the Final Maturity Date, provided that if the Trustee shall not have received such notice fixing the Demand Redemption Date within 90 days after receipt by it of the Redemption Demand, the Demand Redemption Date shall be deemed to be the earlier of (i) the 120th day after receipt by the Trustee of the Redemption Demand or (ii) the Final Maturity Date. The Trustee shall mail notice of the Demand Redemption Date (such notice being hereinafter called the "Demand Redemption Notice") to the Pollution Control Trustee not more than 10 nor less than five days prior to the Demand Redemption Date. Notwithstanding the foregoing, if a default to which this paragraph is applicable is existing on the Final Maturity Date, such date shall be deemed to be the Demand Redemption Date without further action (including actions specified in this paragraph) by the Pollution Control Trustee, the Trustee or the Company. The bonds of this Series shall be redeemed by the Company on the Demand Redemption Date, upon surrender thereof by the Pollution Control Trustee to the Trustee, at a redemption price equal to the principal amount thereof, plus accrued interest thereon at the rate per annum set forth in the third paragraph of this Bond, from the Initial Interest Accrual Date to the Demand Redemption Date. If a Redemption Demand is rescinded by the Pollution Control Trustee by written notice to the Trustee prior to the Demand Redemption Date, no Demand Redemption Notice shall be given, or, if already given, shall be automatically annulled, and interest on the bonds of this Series shall cease to accrue, all interest accrued thereon shall be automatically rescinded and cancelled and the Company shall not be obligated to make any payments of principal of or interest on the bonds of this Series; but no such rescission shall extend to or affect any subsequent default or impair any right consequent thereon. 10 In the event that all of the bonds outstanding under the Indenture shall have become immediately due and payable, whether by declaration or otherwise, and such acceleration shall not have been annulled, the bonds of this Series shall bear interest at the rate per annum set forth in the third paragraph of this Bond, from the Initial Interest Accrual Date, as specified in a written notice to the Trustee from the Pollution Control Trustee, and the principal of and interest on the bonds of this Series from the Initial Interest Accrual Date shall be payable in accordance with the provisions of the Indenture. Upon payment of the principal of and premium, if any, and interest on the Pollution Control Revenue Bonds, whether at maturity or prior to maturity by redemption or otherwise, and the surrender thereof to and cancellation thereof by the Pollution Control Trustee (other than any Pollution Control Revenue Bond that was cancelled by the Pollution Control Trustee and for which one or more other Pollution Control Revenue Bonds were delivered and authenticated pursuant to the Pollution Control Indenture in lieu of or in exchange or substitution for such cancelled Pollution Control Revenue Bond), or upon provision for the payment thereof having been made in accordance with the Pollution Control Indenture, bonds of this Series in a principal amount equal to the principal amount of the Pollution Control Revenue Bonds so surrendered and cancelled or for the provision for which payment has been made shall be deemed fully paid and the obligations of the Company thereunder shall be terminated, and such bonds of this Series shall be surrendered by the Pollution Control Trustee to the Trustee and shall be cancelled by the Trustee. No recourse shall be had for the payment of principal of, or interest, if any, on this bond, or any part thereof, or of any claim based hereon or in respect hereof or of the Indenture, against any incorporator, or any past, present or future stockholder, officer or director of the Company or of any predecessor or successor corporation, either directly or through the Company, or through any such predecessor or successor corporation, or through any receiver or trustee in bankruptcy, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released, as more fully provided in the Indenture. This bond shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have been signed by or on behalf of Harris Trust and Savings Bank, as Trustee under the Indenture, or its successor thereunder. 11 IN WITNESS WHEREOF, LOUISVILLE GAS AND ELECTRIC COMPANY has caused this instrument to be signed in its name by its President or a Vice President or with the facsimile signature of its President, and its corporate seal, or a facsimile thereof, to be hereto affixed and attested by its Secretary or with the facsimile signature of its Secretary. Dated LOUISVILLE GAS AND ELECTRIC COMPANY Attest: By:_____________________________________________ (Vice) President ___________________________________ Secretary and WHEREAS, the Company is desirous of specifically assigning, conveying, mortgaging, pledging, transferring and setting over additional property unto the Trustee and to its respective successors in trust; and WHEREAS, Sections 4.01 and 21.03 of the Original Indenture provide in substance that the Company and the Trustee may enter into indentures supplemental thereto for the purposes, among others, of creating and setting forth the particulars of any new series of bonds and of providing the terms and conditions of the issue of the bonds of any series not expressly provided for in the Original Indenture and of assigning, conveying, mortgaging, pledging and transferring unto the Trustee additional property of the Company, and for any other purpose not inconsistent with the terms of the Original Indenture; and WHEREAS, the execution and delivery of this Supplemental Indenture have been duly authorized by a resolution adopted by the Board of Directors of the Company; NOW, THEREFORE, THIS INDENTURE WITNESSETH: Louisville Gas and Electric Company, in consideration of the premises and of one dollar to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and other good and valuable considerations, does hereby covenant and agree to and with Harris Trust and Savings Bank, as Trustee, and its successors in the trust under the Indenture for the benefit of those who hold or shall hold the bonds issued or to be issued thereunder, as follows: 12 ARTICLE I. SPECIFIC SUBJECTION OF PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE SECTION 1.01. The Company in order better to secure the payment, both of principal and interest, of all bonds of the Company at any time outstanding under the Indenture, according to their tenor and effect, and the performance of and compliance with the covenants and conditions in the Indenture contained, has granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed and by these presents does grant, bargain, sell, warrant, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto Harris Trust and Savings Bank as Trustee and to its respective successors in said trust forever, subject to the rights reserved by the Company in and by the provisions of the Indenture, all the property described and mentioned or enumerated in a schedule hereto annexed and marked Schedule A, reference to said schedule being hereby made with the same force and effect as if the same were incorporated herein at length; together with all and singular the tenements, hereditaments and appurtenances belonging or in any wise appertaining to the aforesaid property or any part thereof with the reversion and reversions, remainder and remainders, tolls, rents and revenues, issues, income, product and profits thereof; Also, in order to subject all of the personal property and chattels of the Company to the lien of the Indenture in conformity with the provisions of the Uniform Commercial Code of the State of Kentucky, all steam, hydro and other electric generating plants, including buildings and other structures, turbines, generators, boilers, condensing equipment, and all other equipment; substations; electric transmission and distribution systems, including structures, poles, towers, fixtures, conduits, insulators, wires, cables, transformers, services and meters; steam and heating mains and equipment; gas generating and coke plants, including buildings, holders and other structures, boilers and other boiler plant equipment, benches, retorts, coke ovens, water gas sets, condensing and purification equipment, piping and other accessory works equipment; facilities for gas storage whether above or below surface; gas transmission and distribution systems, including structures, mains, compressor stations, purifier stations, pressure holders, governors, services and meters; office, shop, garage and other general buildings and structures, furniture and fixtures; and all municipal and other franchises and all leaseholds, licenses, permits, easements, and privileges; all as now owned or hereafter acquired by the Company pursuant to the provisions of the Original Indenture; and 13 All the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof; Excluding, however, (1) all shares of stock, bonds, notes, evidences of indebtedness and other securities other than such as may be or are required to be deposited from time to time with the Trustee in accordance with the provisions of the Indenture; (2) cash on hand and in banks other than such as may be or is required to be deposited from time to time with the Trustee in accordance with the provisions of the Indenture; (3) contracts, claims, bills and accounts receivable and chooses in action other than such as may be or are required to be from time to time assigned to the Trustee in accordance with the provisions of the Indenture; (4) motor vehicles; (5) any stock of goods, wares and merchandise, equipment, materials and supplies acquired for the purpose of sale or lease in the usual course of business or for the purpose of consumption in the operation, construction or repair of any of the properties of the Company; and (6) the properties described in Schedule B annexed to the Original Indenture. To have and to hold all said property, real, personal and mixed, mortgaged, pledged or conveyed by the Company as aforesaid, or intended so to be, unto the Trustee and its successors and assigns forever, subject, however, to permissible encumbrances as defined in Section 1.09 of the Original Indenture and to the further reservations, covenants, conditions, uses and trusts set forth in the Indenture, in trust nevertheless for the same purposes and upon the same conditions as are set forth in the Indenture. ARTICLE II. PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES U AND V SECTION 2.01. There is hereby created, for issuance under the Original Indenture, a series of bonds designated Pollution Control Series U, each of which shall bear the descriptive title "First Mortgage Bonds, Pollution Control Series U" and the form thereof shall contain suitable provisions with respect to the matters specified in this section. The Bonds of Pollution Control Series U shall be printed, lithographed or typewritten and shall be substantially of the tenor and purport previously recited. The Bonds of Pollution Control Series U shall be issued as registered bonds without coupons in denominations of a multiple of $1,000 and shall be registered in the name of the Series A Pollution Control Trustee. The Bonds of Pollution Control Series U shall be dated as of the date of their authentication. The Bonds of Pollution Control Series U shall be payable, both as to principal and interest, at the office of the Trustee in Chicago, Illinois, in lawful money of the United States of America. 14 The maturity of the obligation represented by the Bonds of Pollution Control Series U is August 15, 2013. The date of maturity of the obligation represented by the Bonds of Pollution Control Series U is hereinafter referred to as the Series U Final Maturity Date. The Bonds of Pollution Control Series U shall bear interest from the Series U Initial Interest Accrual Date, as hereinafter defined, at the same rate or rates then and thereafter from time to time borne by the 1993 Series A Pollution Control Revenue Bonds. SECTION 2.02. There is hereby created, for issuance under the Original Indenture, a series of bonds designated Pollution Control Series V, each of which shall bear the descriptive title "First Mortgage Bonds, Pollution Control Series V" and the form thereof shall contain suitable provisions with respect to the matters specified in this section. The Bonds of Pollution Control Series V shall be printed, lithographed or typewritten and shall be substantially of the tenor and purport previously recited. The Bonds of Pollution Control Series V shall be issued as registered bonds without coupons in denominations of a multiple of $1,000 and shall be registered in the name of the Pollution Control Trustee. The Bonds of Pollution Control Series V shall be dated as of the date of their authentication. The Bonds of Pollution Control Series V shall be payable, both as to principal and interest, at the office of the Trustee in Chicago, Illinois, in lawful money of the United States of America. The maturity of the obligation represented by the bonds of Pollution Control Series V is August 15, 2019. The date of maturity of the obligation represented by the Bonds of Pollution Control Series V is hereinafter referred to as the Series V Final Maturity Date. The Bonds of Pollution Control Series V shall bear interest from the Series V Initial Interest Accrual Date, as hereinafter defined, at the same rate or rates then and thereafter from time to time borne by the 1993 Series B Pollution Control Revenue Bonds. SECTION 2.03. Except as provided in the next succeeding paragraph of this Section 2.03, in the event of a default under Section 9.1 of the Series A 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 1993 Series A Pollution Control Indenture and the 1993 Pollution Control Revenue Bonds) on the Series A Pollution Control Revenue Bonds, whether at maturity, by tender for purchase, by acceleration, by sinking fund, redemption or otherwise, as and when the same becomes due, the Bonds of Pollution Control Series U shall be redeemable in whole upon receipt by the Trustee of a written demand (hereinafter called a "Series U Redemption Demand") from the 1993 Pollution Control Trustee stating that there has been such a default, stating that it is acting pursuant to the authorization granted by Section 9.02(c) of the Series A Pollution Control Indenture, specifying the last date to which interest on the 1993 Series A Pollution Control 15 Revenue Bonds has been paid (such date being hereinafter referred to as the "Series U Initial Interest Accrual Date") and demanding redemption of the Bonds of Pollution Control Series U. The Trustee shall, within 10 days after receiving such Series U 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 Series U Redemption Demand, the Company shall fix a date on which it will redeem the Bonds of Pollution Control Series U so demanded to be redeemed hereinafter called the "Series U Demand Redemption Date"). Notice of the date fixed as the Series U Demand Redemption Date shall be mailed by the Company to the Trustee at least 30 days prior to such Series U Demand Redemption Date. The date to be fixed by the Company as and for the Series U 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 Series U Redemption Demand or (ii) the Series U Final Maturity Date; provided that if the Trustee shall not have received such notice fixing the Series U Demand Redemption Date within 90 days after receipt by it of the Series U Redemption Demand, the Series U Demand Redemption Date shall be deemed to be the earlier of (i) the 120th day after receipt by the Trustee of the Series U Redemption Demand or (ii) the Series U Final Maturity Date. The Trustee shall mail notice of the Series U Demand Redemption Date (such notice being hereinafter called the "Series U Demand Redemption Notice") to the Series A Pollution Control Trustee not more than 10 nor less than five days prior to the Series U Demand Redemption Date. Notwithstanding the foregoing, if a default to which this paragraph is applicable is existing on the Series U Final Maturity Date, such date shall be deemed to be the Series U Demand Redemption Date without further action (including actions specified in this paragraph) by the 1993 Series A Pollution Control Trustee, the Trustee or the Company. The Bonds of Pollution Control Series U shall be redeemed by the Company on the Series U Demand Redemption Date, upon surrender thereof by the Series A Pollution Control Trustee to the Trustee, at a redemption price equal to the principal amount thereof, plus accrued interest thereon at the rate per annum set forth in Section 2.01 hereof, from the Series U Initial Interest Accrual Date to the Series U Demand Redemption Date. If a Series U Redemption Demand is rescinded by the Series A Pollution Control Trustee by written notice to the Trustee prior to the Series U Demand Redemption Date, no Series U Demand Redemption Notice shall be given, or, if already given, shall be automatically annulled, and interest on the Bonds of Pollution Control Series U shall cease to accrue, all interest accrued thereon shall be automatically rescinded and cancelled and the Company shall not be obligated to make any payments of principal of or interest on the Bonds of Pollution Control Series U; but no such rescission shall extend to or affect any subsequent default or impair any right consequent thereon. 16 In the event that all of the bonds outstanding under the Indenture shall have become immediately due and payable, whether by declaration or otherwise, and such acceleration shall not have been annulled, the Bonds of Pollution Control Series U shall bear interest at the rate per annum set forth in Section 2.01 hereof, from the Series U Initial Interest Accrual Date, as specified in a written notice to the Trustee from the 1993 Pollution Control Trustee, and the principal of and interest on the Bonds of Pollution Control Series U from the Series U Initial Interest Accrual Date shall be payable in accordance with the provisions of the Indenture. Anything herein contained to the contrary notwithstanding, the Trustee is not authorized to take any action pursuant to a Series U Redemption Demand or a rescission thereof or a written notice required by this Section 2.03, and such Series U Redemption Demand, rescission or notice shall be of no force or effect, unless it is executed in the name of the Series A Pollution Control Trustee by one of its Vice Presidents. SECTION 2.04. Except as provided in the next succeeding paragraph of this Section 2.04, in the event of a default under Section 9.1 of the 1995 Agreement or in the event of a default in the payment of the principal of, premium of, if any, or interest (and such default in the payment of interest continues for the full grace period, if any, permitted by the Series B Pollution Control Indenture and the 1993 Series B Pollution Control Revenue Bonds) on the 1993 Series B Pollution Control Revenue Bonds, whether at maturity, by tender for purchase, by acceleration, by sinking fund, redemption or otherwise, as and when the same becomes due, the Bonds of Pollution Control Series V shall be redeemable in whole upon receipt by the Trustee of a written demand (hereinafter called a "Series V Redemption Demand") from the Series B Pollution Control Trustee stating that there has been such a default, stating that it is acting pursuant to the authorization granted by Section 9.02(c) of the Series B Pollution Control Indenture, specifying the last date to which interest on the 1993 Series B Pollution Control Revenue Bonds has been paid (such date being hereinafter referred to as the "Series V Initial Interest Accrual Date") and demanding redemption of the Bonds of Pollution Control Series V. The Trustee shall, within 10 days after receiving such Series V 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 Series V Redemption Demand, the Company shall fix a date on which it will redeem the Bonds of Pollution Control Series V so demanded to be redeemed (hereinafter called the "Series V Demand Redemption Date"). Notice of the date fixed as the Series V Demand Redemption Date shall be mailed by the Company to the Trustee at least 30 days prior to such Series V Demand Redemption Date. The date to be fixed by the Company as and for the Series V Demand Redemption Date may be any date up to and including the earlier of (i) the 120th day after receipt by the Trustee of 17 the Series V Redemption Demand or (ii) the Series V Final Maturity Date; provided that if the Trustee shall not have received such notice fixing the Series V Demand Redemption Date within 90 days after receipt by it of the Series V Redemption Demand, the Series V Demand Redemption Date shall be deemed to be the earlier of (i) the 120th day after receipt by the Trustee of the Series V Redemption Demand or (ii) the Series V Final Maturity Date. The Trustee shall mail notice of the Series V Demand Redemption Date (such notice being hereinafter called the "Series V Demand Redemption Notice") to the Series B Pollution Control Trustee not more than 10 nor less than five days prior to the Series V Demand Redemption Date. Notwithstanding the foregoing, if a default to which this paragraph is applicable is existing on the Series V Final Maturity Date, such date shall be deemed to be the Series V Demand Redemption Date without further action (including actions specified in this paragraph) by the Series B Pollution Control Trustee, the Trustee or the Company. The Bonds of Pollution Control Series V shall be redeemed by the Company on the Series V Demand Redemption Date, upon surrender thereof by the Series Pollution Control Trustee to the Trustee, at a redemption price equal to the principal amount thereof, plus accrued interest thereon at the rate per annum set forth in Section 2.02 hereof, from the Series V Initial Interest Accrual Date to the Series V Demand Redemption Date. If a Series V Redemption Demand is rescinded by the Series B Pollution Control Trustee by written notice to the Trustee prior to the Series V Demand Redemption Date, no Series V Demand Redemption Notice shall be given, or, if already given, shall be automatically annulled, and interest on the Bonds of Pollution Control Series V shall cease to accrue, all interest accrued thereon shall be automatically rescinded and cancelled and the Company shall not be obligated to make any payments of principal of or interest on the Bonds of Pollution Control Series V; 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 Pollution Control Series V shall bear interest at the rate per annum set forth in Section 2.02 hereof, from the Series V Initial Interest Accrual Date, as specified in a written notice to the Trustee from the Series B Pollution Control Trustee, and the principal of and interest on the Bonds of Pollution Control Series V from the Series V Initial Interest Accrual Date shall be payable in accordance with the provisions of the Indenture. Anything herein contained to the contrary notwithstanding, the Trustee is not authorized to take any action pursuant to a Series V Redemption Demand or a rescission thereof or a written notice required by this Section 2.04, and such Series V Redemption Demand, rescission or notice shall be of no force or effect, unless it is 18 executed in the name of the Series B Pollution Control Trustee by one of its Vice Presidents. SECTION 2.05. Upon payment of the principal of and premium, if any, and interest on the 1993 Series A Pollution Control Revenue Bonds, whether at maturity or prior to maturity by redemption or otherwise, and the surrender thereof to and cancellation thereof by the Series A Pollution Control Trustee (other than any 1993 Series A Pollution Control Revenue Bond that was cancelled by the Series A Pollution Control Trustee and for which one or more other 1993 Series A Pollution Control Revenue Bonds were delivered and authenticated pursuant to the Series A Pollution Control Indenture in lieu of or in exchange or substitution for such cancelled 1993 Series A Pollution Control Revenue Bond), or upon provision for the payment thereof having been made in accordance with the Series A Pollution Control Indenture, Bonds of Pollution Control Series U in a principal amount equal to the principal amount of the 1993 Series A Pollution Control Revenue Bonds so surrendered and cancelled or for the provision for which payment has been made shall be deemed fully paid and the obligations of the Company thereunder shall be terminated, and such Bonds of Pollution Control Series U shall be surrendered by the Series A Pollution Control Trustee to the Trustee and shall be cancelled and destroyed by the Trustee, and a certificate of such cancellation and destruction shall be delivered to the Company. SECTION 2.06. Upon payment of the principal of and premium, if any, and interest on the 1993 Series B Pollution Control Revenue Bonds, whether at maturity or prior to maturity by redemption or otherwise, and the surrender thereof to and cancellation thereof by the Series B Pollution Control Trustee (other than any 1993 Series B Pollution Control Revenue Bond that was cancelled by the Series B Pollution Control Trustee and for which one or more other 1993 Series B Pollution Control Revenue Bonds were delivered and authenticated pursuant to the Series B Pollution Control Indenture in lieu of or in exchange or substitution for such cancelled 1993 Series B Pollution Control Revenue Bond), or upon provision for the payment thereof having been made in accordance with the Series B Pollution Control Indenture, Bonds of Pollution Control Series V in a principal amount equal to the principal amount of the 1993 Series B Pollution Control Revenue Bonds so surrendered and cancelled or for the provision for which payment has been made shall be deemed fully paid and the obligations of the Company thereunder shall be terminated, and such Bonds of Pollution Control Series V shall be surrendered by the Series B Pollution Control Trustee to the Trustee and shall be cancelled and destroyed by the Trustee, and a certificate of such cancellation and destruction shall be delivered to the Company. SECTION 2.07. The Series A Pollution Control Trustee as the registered holder of the Bonds of Pollution Control Series U and the Series B Pollution Control Trustee as the registered holder of 19 the Bonds of Pollution Control Series V at its option may surrender the same at the office of the Trustee, in Chicago, Illinois, or elsewhere, if authorized by the Company, for cancellation, in exchange for other bonds of the same series of the same aggregate principal amount. Thereupon, and upon receipt of any payment required under the provisions of Section 2.08 hereof, the Company shall execute and deliver to the Trustee and the Trustee shall authenticate and deliver such other registered bonds to such registered holder at its office or at any other place specified as aforesaid. SECTION 2.08. No charge shall be made by the Company for any exchange or transfer of Bonds of Pollution Control Series U or Pollution Control Series V other than for taxes or other governmental charges, if any, that may be imposed in relation thereto. ARTICLE III. MISCELLANEOUS SECTION 3.01. The recitals of fact herein and in the bonds (except the Trustee's Certificate) shall be taken as statements of the Company and shall not be construed as made or warranted by the Trustee. The Trustee makes no representations as to the value of any of the property subject to the lien of the Indenture, or any part thereof, or as to the title of the Company thereto, or as to the security afforded thereby and hereby, or as to the validity of this Supplemental Indenture and the Trustee shall incur no responsibility in respect of such matters. SECTION 3.02. This Supplemental Indenture shall be construed in connection with and as a part of the Original Indenture. SECTION 3.03.(a) If any provision of this Supplemental Indenture limits, qualifies or conflicts with another provision of the Original Indenture or this Supplemental Indenture required to be included in indentures qualified under the Trust Indenture act of 1939, as amended (as enacted prior to the date of this Supplemental Indenture) by any of the provisions of Sections 310 to 317, inclusive, of the said Act, such required provision shall control. (b) In case any one or more of the provisions contained in this Supplemental Indenture or in the bonds issued hereunder shall be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected, impaired, prejudiced or disturbed thereby. SECTION 3.04. Wherever in this Supplemental Indenture the word "Indenture" is used without either prefix, "Original" or "Supplemental," such word was used intentionally to include in its meaning both the Original Indenture and all indentures supplemental thereto. 20 SECTION 3.05. Wherever in this Supplemental Indenture either of the parties hereto is named or referred to, this shall be deemed to include the successors or assigns of such party, and all the covenants and agreements in this Supplemental Indenture contained by or on behalf of the Company or by or on behalf of the Trustee shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not. SECTION 3.06.(a) This Supplemental Indenture may be simultaneously executed in several counterparts, and all said counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. (b) The Table of Contents and the descriptive headings of the several Articles of this Supplemental Indenture were formulated, used and inserted in this Supplemental Indenture for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the party of the first part has caused its corporate name and seal to be hereunto affixed and this Supplemental Indenture to be signed by its President or a Vice President, and attested by its Secretary for and in its behalf, and the party of the second part to evidence its acceptance of the trust hereby created, has caused its corporate name and seal to be hereunto affixed, and this Supplemental Indenture to be signed by its President, a Vice President or an Assistant Vice President, and attested by its Secretary or an Assistant Secretary, for and in its behalf, all done as of the sixteenth day of August, 1993. LOUISVILLE GAS AND ELECTRIC COMPANY By:_____________________________________________ M. LEE FOWLER Vice President (Corporate Seal) ATTEST: ______________________________________ VICTOR A. STAFFIERI Senior Vice President, General Counsel and Secretary HARRIS TRUST AND SAVINGS BANK, TRUSTEE By:_____________________________________________ C. POTTER Assistant Vice President 21 (Corporate Seal) ATTEST: ______________________________________ J. BARTOLINI Assistant Secretary STATE OF KENTUCKY ) ) SS: COUNTY OF JEFFERSON ) BE IT REMEMBERED that on this 25th day of August, 1993, before me, a Notary Public duly commissioned in and for the County and State aforesaid, personally appeared M. LEE FOWLER and VICTOR A. STAFFIERI, respectively, Vice President and Senior Vice President, General Counsel and Secretary of Louisville Gas and Electric Company, a corporation organized and existing under and by virtue of the laws of the State of Kentucky, who are personally known to me to be such officers, respectively, and who are personally known to me to be the same persons who executed as officers the foregoing instrument of writing, and such persons duly acknowledged before me the execution of the foregoing instrument of writing to be their act and deed and the act and deed of said corporation. WITNESS my hand and notarial seal this 25th day of August, 1993. PATRICIA A. ROSE NOTARY PUBLIC My commission expires: 1-23-96 STATE OF ILLINOIS ) ) SS: COUNTY OF COOK ) BE IT REMEMBERED that on this 24th day of August, 1993, before me, a Notary Public duly commissioned in and for the County and State aforesaid, personally appeared C. POTTER and J. BARTOLINI, respectively, Assistant Vice President and Assistant Secretary of Harris Trust and Savings Bank, a corporation organized and existing under and by virtue of the laws of the State of Illinois, who are personally known to me to be such officers, respectively, and who are personally known to me to be the same persons who executed as officers the foregoing instrument of writing, and such persons duly 22 acknowledged before me the execution of the foregoing instrument of writing to be their act and deed and the act and deed of said corporation. WITNESS my hand and notarial seal this 24th day of August, 1993. T. MUZQUIZ NOTARY PUBLIC My commission expires: 7-12-97 This Instrument Prepared by: Susan M. Jenkins LG&E Energy Corp. 220 West Main Street Louisville, Kentucky 40202 By:_______________________________ Susan M. Jenkins, Esq. 23 SCHEDULE A The following property situated, lying and being in the County of Jefferson, State of Kentucky, to-wit: Electric Transmission Lines A 138KV wood, concrete and steel transmission line circuit #3888 in Louisville, Jefferson County, Kentucky. This line is built between Breckenridge Substation and Hurstbourne Substation at a distance of approximately 4.04 miles. A-1 EX-4.36 5 SUPPLEMENTAL INDENTURE FROM LG&E TO HARRIS TRUST SUPPLEMENTAL INDENTURE FROM LOUISVILLE GAS AND ELECTRIC COMPANY TO HARRIS TRUST AND SAVINGS BANK Trustee __________________________ DATED OCTOBER 15, 1993 __________________________ SUPPLEMENTAL TO TRUST INDENTURE DATED NOVEMBER 1, 1949 Table of Contents Page Parties 1 Recitals 1 Form of Bonds of Pollution Control Series W and X 5 Further Recitals 8 ARTICLE I. SPECIFIC SUBJECTION OF PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE. Section 1.01 Grant of certain property, including all personal property to comply with Uniform commercial Code of the State of Kentucky, subject to permissible encumbrances and other exceptions contained in Original Indenture 8 ARTICLE II. PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES W AND X. Section 2.01 Terms of Bonds of Pollution Control Series W 9 Section 2.02 Terms of Bonds of Pollution Control Series X 10 Section 2.03 Payment of principle and interest - Bonds of Pollution Control Series W 10 Section 2.04 Payment of principle and interest - Bonds of Pollution Control Series X 11 Section 2.05 Bonds of Pollution Control Series W deemed fully paid upon payment of corresponding Pollution Control Revenue Bonds 12 Section 2.06 Bonds of Pollution Control Series X deemed fully paid upon payment of corresponding Pollution Control Revenue Bonds 12 Section 2.07 Interchangeability of Bonds 13 Section 2.08 Charges upon exchange or transfer of bonds 13 i. ARTICLE III. MISCELLANEOUS. Section 3.01 Recitals of fact, except as stated, are statements of the Company 13 Section 3.02 Supplemental Indenture to be construed as a part of the Original Indenture 13 Section 3.03 (a) Trust Indenture Act to control 13 (b) Severability of provisions contained in Supplemental Indenture and bonds 13 Section 3.04 Word "Indenture" as used herein includes in its meaning the Original Indenture and all indentures supplemental thereto 13 Section 3.05 References to either party in Supplemental Indenture include successors or assigs 13 Section 3.06 (a) Provision for execution in counterparts 14 (b) Table of contents and descriptive headings of Articles not to affect meaning 14 Schedule A A-1 ii. Supplemental Indenture made as of the fifteenth day of October, 1993, by and between LOUISVILLE GAS AND ELECTRIC COMPANY, a corporation duly organized and existing under and by virtue of the laws of the State of Kentucky, having its principal office in the City of Louisville, County of Jefferson, in said State of Kentucky (the "Company"), the party of the first part, and HARRIS TRUST AND SAVINGS BANK, a corporation duly organized and existing under and by virtue of the laws of the State of Illinois, having its principal office at 111 West Monroe Street, City of Chicago, County of Cook, State of Illinois 60690, as Trustee (the "Trustee"), party of the second part; WITNESSETH: WHEREAS, the Company has heretofore executed and delivered to the Trustee its Trust Indenture (the "Original Indenture"), made as of November 1, 1949, whereby the Company granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed unto the Trustee and to its respective successors in trust, all property, real, personal and mixed then owned or thereafter acquired or to be acquired by the Company (except as therein excepted from the lien thereof) and subject to the rights reserved by the Company in and by the provisions of the Original Indenture, to be held by said Trustee in trust in accordance with the provisions of the Original Indenture for the equal pro rata benefit and security of all and each of the bonds issued and to be issued thereunder in accordance with the provisions thereof; and WHEREAS, Section 2.01 of the Original Indenture provides that bonds may be issued thereunder in one or more series, each series to have such distinctive designation as the Board of Directors of the Company may select for such series; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture, bonds of a series designated "First Mortgage Bonds, Series due November 1, 1979," bearing interest at the rate of 2% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1952, bonds of a series designated "First Mortgage Bonds, Series due February 1, 1982," bearing interest at the rate of 3 1/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1954, bonds of a series designated "First Mortgage Bonds, Series due February 1, 1984," bearing interest at the rate of 3 1/8% per annum; and 1 WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1957, bonds of a series designated "First Mortgage Bonds, Series due September 1, 1987," bearing interest at the rate of 4 7/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated October 1, 1960, bonds of a series designated "First Mortgage Bonds, Series due October 1, 1990," bearing interest at the rate of 4 7/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1966, bonds of a series designated "First Mortgage Bonds, Series due June 1, 1996," bearing interest at the rate of 5 5/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1968, bonds of a series designated "First Mortgage Bonds, Series due June 1, 1998," bearing interest at the rate of 6% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1970, bonds of a series designated "First Mortgage Bonds, Series due July 1, 2000," bearing interest at the rate of 9 1/4% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated August 1, 1971, bonds of a series designated "First Mortgage Bonds, Series due August 1, 2001," bearing interest at the rate of 8 1/4% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1972, bonds of a series designated "First Mortgage Bonds, Series due July 1, 2002," bearing interest at the rate of 7 1/2% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1975, bonds of a series designated "First Mortgage Bonds, Series due March 1, 2005," bearing interest at the rate of 8 7/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1975, bonds of a series designated "First Mortgage Bonds, Pollution Control Series A," 2 bearing interest as provided therein and maturing September 1, 2000; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1976, bonds of a series designated "First Mortgage Bonds, Pollution Control Series B," bearing interest as provided therein and maturing September 1, 2006; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated October 1, 1976, bonds of a series designated "First Mortgage Bonds, Series due November 1, 2006," bearing interest at the rate of 8 1/2% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 1, 1978, bonds of a series designated "First Mortgage Bonds, Pollution Control Series C," bearing interest as provided therein and maturing June 1, 1998/2008; and WHEREAS, the Company has heretofore executed and delivered to the Trustee a Supplemental Indenture dated February 15, 1979, setting forth duly adopted modifications and alterations to the Original Indenture and all Supplemental Indentures thereto; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1979, bonds of a series designated "First Mortgage Bonds, Series due October 1, 2009," bearing interest at the rate of 10 1/8% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 15, 1979, bonds of a series designated "First Mortgage Bonds, Pollution Control Series D," bearing interest as provided therein and maturing October 1, 2004/2009; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 15, 1981, bonds of a series designated "First Mortgage Bonds, Pollution Control Series E," bearing interest as provided therein and maturing September 15, 1984; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated March 1, 1982, bonds of a series designated "First Mortgage Bonds, Pollution Control Series F," 3 bearing interest as provided therein and maturing March 1, 2012; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated March 15, 1982, bonds of a series designated "First Mortgage Bonds, Pollution Control Series G," bearing interest as provided therein and maturing March 1, 2012; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 15, 1982, bonds of a series designated "First Mortgage Bonds, Pollution Control Series H," bearing interest as provided therein and maturing September 15, 1992; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 15, 1984, bonds of a series designated "First Mortgage Bonds, Pollution Control Series I," bearing interest as provided therein and maturing February 15, 2011; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated July 1, 1985, bonds of a series designated "First Mortgage Bonds, Pollution Control Series J," bearing interest as provided therein and maturing July 1, 1995/2015; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated November 15, 1986, bonds of a series designated "First Mortgage Bonds, Pollution Control Series K," bearing interest as provided therein and maturing December 1, 2016; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated November 16, 1986, bonds of a series designated "First Mortgage Bonds, Pollution Control Series L," bearing interest as provided therein and maturing December 1, 2016; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated August 1, 1987, bonds of a series designated "First Mortgage Bonds, Pollution Control Series M," bearing interest as provided therein and maturing August 1, 1997; and 4 WHEREAS, the Company has heretofore issued in accordance with the provisions of the Or,Original Indenture as supplemented by the Supplemental Indenture dated February 1, 1989, bonds of a series designated "First Mortgage Bonds, Pollution Control Series N," bearing interest as provided therein and maturing February 1, 2019; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated February 2, 1989, bonds of a series designated "First Mortgage Bonds, Pollution Control Series O," bearing interest as provided therein and maturing February 1, 2019; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated June 15, 1990, bonds of a series designated "First Mortgage Bonds, Pollution Control Series P," bearing interest as provided therein and maturing June 15, 2015; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated November 1, 1990, bonds of a series designated "First Mortgage Bonds, Pollution Control Series Q," and bonds of a series designated "First Mortgage Bonds, Pollution Control Series R," each series bearing interest as provided therein and maturing November 1, 2020; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 1, 1992, bonds of a series designated "First Mortgage Bonds, Pollution Control Series S," bearing interest as provided therein and maturing September 1, 2017; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated September 2, 1992, bonds of a series designated "First Mortgage Bonds, Pollution Control Series T," bearing interest as provided therein and maturing September 1, 2017; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated August 15, 1993, bonds of a series designated "First Mortgage Bonds, Series due August 15, 2003," bearing interest at the rate of 6% per annum; and WHEREAS, the Company has heretofore issued in accordance with the provisions of the Original Indenture as supplemented by the Supplemental Indenture dated August 16, 1993, bonds of a series 5 designated "First Mortgage Bonds, Pollution Control Series U," bearing interest as provided therein and maturing August 15, 2013, and bonds designated "First Mortgage Bonds, Pollution Control Series V," bearing interest as provided therein and maturing August 15, 2019; and WHEREAS, the County of Jefferson in the Commonwealth of Kentucky (the "County") has agreed to issue $26,000,000 principal amount of its Pollution Control Revenue Bonds, 1993 Series C (Louisville Gas and Electric Company Project) (the "1993 Pollution Control Revenue Bonds") pursuant to the provisions of the Indenture of Trust, dated as of October 15, 1993 (the "1993 Pollution Control Indenture"), between and among the County and Liberty National Bank and Trust Company of Louisville, Louisville, Kentucky, as Trustee, Paying Agent and Bond Registrar (said Trustee or any successor trustee under the 1993 Pollution Control Indenture being hereinafter referred to as the "1993 Pollution Control Trustee"); and WHEREAS, the County also has agreed to issue $40,000,000 principal amount of its Pollution Control Revenue Bonds, 1995 Series A, (Louisville Gas and Electric Company Project) (the "1995 Pollution Control Revenue Bonds, and, together with the 1993 Pollution Control Revenue Bonds, the "Pollution Control Revenue Bonds") pursuant to the provisions of the Indenture of Trust, dated as of October 15, 1993 (the "1995 Pollution Control Indenture"), between and among the County and Liberty National Bank and Trust Company of Louisville, Louisville, Kentucky, as Trustee, Paying Agent and Bond Registrar (said Trustee or any successor trustee under the 1995 Pollution Control Indenture being hereinafter referred to as the 1995 Pollution Control Trustee); and WHEREAS, the proceeds of the 1993 Pollution Control Revenue Bonds and 1995 Pollution Control Revenue Bonds (other than any accrued interest, if any, thereon) will be loaned by the County to the Company pursuant to the provisions of separate Loan Agreements, each dated as of October 15, 1993, between the County and the Company (the "1993 Agreement" and the "1995 Agreement," respectively, and, collectively, the "Agreements"), to provide a portion of the funds required to pay and discharge $26,000,000 in outstanding principal amount of "County of Jefferson, Kentucky, Pollution Control Revenue Bonds, 1984 Series A (Louisville Gas and Electric Company Project)," dated February 15, 1984 (the "Refunded 1984 Series A Bonds) and $40,000,000 in outstanding principal amount of "County of Jefferson, Kentucky, Pollution Control Revenue Bonds, 1985 Series A (Louisville Gas and Electric Company Project)," dated July 1, 1985 (the "Refunded 1985 Series A Bonds"). The Refunded 1984 Series A Bonds were used to finance the acquisition, construction and installation of certain facilities for the control, containment, reduction and abatement of air and water pollution and for the disposal of solid waste at the Mill Creek Generating Station of the Company, which facilities are 6 located in the County and are more fully described in Exhibit A to the 1993 Agreement. The Refunded 1985 Series A Bonds were used to finance the acquisition, construction and installation of certain facilities for the control, containment, reduction and abatement of air pollution at the Mill Creek and Cane Run Generating Stations of the Company, which facilities are located in the County and are more fully described in Exhibit A to the 1995 Agreement; and WHEREAS, payments by the Company under and pursuant to the Agreements have been assigned by the County to the applicable Pollution Control Trustee in order to secure the payment of the applicable Pollution Control Revenue Bonds; and WHEREAS, in order to further secure the payment of the 1993 Pollution Control Revenue Bonds, the Company desires to provide for the issuance under the Original Indenture to the 1993 Pollution Control Trustee of a new series of bonds designated "First Mortgage Bonds, Pollution Control Series W" (sometimes called "Bonds of Pollution Control Series W"), in a principal amount equal to the principal amount of the 1993 Pollution Control Revenue Bonds, and with corresponding terms and maturity, the Bonds of Pollution Control Series W to be issued as registered bonds without coupons in denominations of a multiple of $1,000, and in order to further secure the payment of the 1995 Pollution Control Revenue Bonds, the Company desires to provide for the issuance under the Original Indenture to the 1995 Pollution Control Trustee of a new series of bonds designated "First Mortgage Bonds, Pollution Control Series X" (sometimes called "Bonds of Pollution Control Series X"), in a principal amount equal to the principal amount of the 1995 Pollution Control Revenue Bonds, and with corresponding terms and maturity, the bonds of Pollution Control Series X to be issued as registered bonds without coupons in demoninations of a multiple of $1,000; and the Bonds of Pollution Control Series W and the Bonds of Pollution Control Series X are to be substantially in the form and tenor following, to-wit: (Form of Bonds of Pollution Control Series W and X) This Bond has not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in contravention of said Act and is not transferable except to a successor Trustee under the Indenture of Trust dated as of October 15, 1993, from the County of Jefferson, Kentucky, to Liberty National Bank and Trust Company of Louisville, Louisville, Kentucky, as Trustee, Paying Agent and Bond Registrar. 7 LOUISVILLE GAS AND ELECTRIC COMPANY (Incorporated under the laws of the State of Kentucky) First Mortgage Bond Pollution Control Series No.___________ $___________ Louisville Gas and Electric Company, a corporation organized and existing under and by virtue of the laws of the State of Kentucky (herein called the "Company"), for value received, hereby promises to pay to Liberty National Bank and Trust Company of Louisville, Louisville, Kentucky, as Trustee under the Indenture of Trust (the "Pollution Control Indenture") dated as of October 15, 1993, from the County of Jefferson, Kentucky, to Liberty National Bank and Trust Company of Louisville, Louisville, Kentucky, or any successor trustee under the Pollution Control Indenture (the "Pollution Control Trustee") and at the office of Harris Trust and Savings Bank, Chicago, Illinois (the "Trustee") the sum of _______________________ Dollars in lawful money of the United States of America on the Demand Redemption Date, as hereinafter defined, and to pay on the Demand Redemption Date to the Pollution Control Trustee, interest hereon from the Initial Interest Accrual Date, as hereinafter defined, to the Demand Redemption Date at the same rate or rates per annum then and thereafter from time to time borne by the Pollution Control Revenue Bonds (as hereinafter defined), in like money, said interest being payable at the office of the Trustee in Chicago, Illinois, subject to the provisions hereinafter set forth in the event of a rescission of a Redemption Demand, as hereinafter defined. This bond is one of a duly authorized issue of bonds of the Company, known as its First Mortgage Bonds, unlimited in aggregate principal amount, which issue of bonds consists, or may consist of several series of varying denominations, dates and tenors, all issued and to be issued under and equally secured (except in so far as a sinking fund, or similar fund, established in accordance with the provisions of the Indenture may afford additional security for the bonds of any specific series) by a Trust Indenture dated November 1, 1949, and Supplemental Indentures thereto dated February 1, 1952, February 1, 1954, September 1, 1957, October 1, 1960, June 1, 1966, June 1, 1968, June 1, 1970, August 1, 1971, June 1, 1972, February 1, 1975, September 1, 1975, September 1,1976, October 1, 1976, June 1, 1978, February 15, 1979, September 1, 1979, September 15,1979, September 15,1981, March 1, 1982, March 15, 1982, September 15, 1982, February 15, 1984, July 1, 1985, November 15, 1986, November 16,1986, August 1, 1987, February 1,1989, February 2, 1989, June 15, 1990, November 1, 1990, September 1, 1992, September 2, 1992, August 15, 1993, August 16, 1993 and October 15, 1993 (all of which instruments are herein collectively called the "Indenture"), executed by the Company to the Trustee, to which Indenture reference is hereby made for a 8 description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds as to such security, and the terms and conditions upon which the bonds may be issued under the Indenture and are secured. The principal hereof may be declared or may become due on the conditions, in the manner and at the time set forth in the Indenture, upon the happening of a completed default as in the Indenture provided. The Indenture provides that such declaration may in certain events be waived by the holders of a majority in principal amount of the bonds outstanding. This bond is one of a series of bonds of the Company issued under the Indenture and designated as First Mortgage Bonds, Pollution Control Series . The bonds of this Series have been issued to the Pollution Control Trustee under the Pollution Control Indenture to secure payment of the Pollution Control Revenue Bonds, Series (Louisville Gas and Electric Company Project) (the "Pollution Control Revenue Bonds") issued by the County of Jefferson, Kentucky (the "County") under the Pollution Control Indenture, the proceeds of which have been or are to be loaned to the Company pursuant to the provisions of the Loan Agreement dated as of October 15, 1993 (the "Agreement") between the Company and the County. The maturity of the obligation represented by the bonds of this Series is [October 15, 2020] [April 15, 2023]. The date of maturity of the obligation represented by the bonds of this Series is hereinafter referred to as the Final Maturity Date. The bonds of this Series shall bear interest from the Initial Interest Accrual Date, as hereinafter defined, at the same rate or rates per annum then and thereafter from time to time borne by the Pollution Control Revenue Bonds. With the consent of the Company and to the extent permitted by and as provided in the Indenture, the rights and obligations of the Company and/or of the holders of the bonds, and/or the terms and provisions of the Indenture and/or of any instruments supplemental thereto may be modified or altered by affirmative vote of the holders of at least seventy percent in principal amount of the bonds then outstanding under the Indenture and any instruments supplemental thereto (excluding bonds disqualified from voting by reason of the interest of the Company or of certain related persons therein as provided in the Indenture), and by the affirmative vote of at least seventy percent in principal amount of the bonds of any series entitled to vote then outstanding under the Indenture and any instruments supplemental thereto (excluding bonds disqualified from voting as aforesaid) and affected by such modification or alteration, in case one or more but less than all of the series of bonds then outstanding are so affected; provided that no such modification or alteration shall permit the extension of the maturity of the principal of this bond or the reduction in the rate of interest, if any, hereon or any other modification in the terms 9 of payment of such principal or interest, if any, or the taking of certain other action as more fully set forth in the Indenture, without the consent of the holder hereof. Except as provided in the next succeeding paragraph, in the event of a default under Section 9.1 of the Agreement or in the event of a default in the payment of the principal of, premium, if any, or interest (and such default in the payment of interest continues for the full grace period, if any, permitted by the Pollution Control Indenture and the Pollution Control Revenue Bonds) on the Pollution Control Revenue Bonds, whether at maturity, by tender for purchase, by acceleration, by sinking fund, redemption or otherwise, as and when the same becomes due, the bonds of this Series shall be redeemable in whole upon receipt by the Trustee of a written demand (hereinafter called a "Redemption Demand") from the Pollution Control Trustee stating that there has been such a default, stating that it is acting pursuant to the authorization granted by Section 9.02(c) of the Pollution Control Indenture, specifying the last date to which interest on the Pollution Control Revenue Bonds has been paid (such date being hereinafter referred to as the "Initial Interest Accrual Date") and demanding redemption of the bonds of this Series. The Trustee shall, within 10 days after receiving such Redemption Demand, mail a copy thereof to the Company marked to indicate the date of its receipt by the Trustee. Promptly upon receipt by the Company of such copy of a Redemption Demand, the Company shall fix a date on which it will redeem the bonds of this Series so demanded to be redeemed (hereinafter called the "Demand Redemption Date"). Notice of the date fixed as and for the Demand Redemption Date shall be mailed by the Company to the Trustee at least 30 days prior to such Demand Redemption Date. The date to be fixed by the Company as and for the Demand Redemption Date may be any date up to and including the earlier of (i) the 120th day after receipt by the Trustee of the Redemption Demand or (ii) the Final Maturity Date, provided that if the Trustee shall not have received such notice fixing the Demand Redemption Date within 90 days after receipt by it of the Redemption Demand, the Demand Redemption Date shall be deemed to be the earlier of (i) the 120th day after receipt by the Trustee of the Redemption Demand or (ii) the Final Maturity Date. The Trustee shall mail notice of the Demand Redemption Date (such notice being hereinafter called the "Demand Redemption Notice") to the Pollution Control Trustee not more than 10 nor less than five days prior to the Demand Redemption Date. Notwithstanding the foregoing, if a default to which this paragraph is applicable is existing on the Final Maturity Date, such date shall be deemed to be the Demand Redemption Date without further action (including actions specified in this paragraph) by the Pollution Control Trustee, the Trustee or the Company. The bonds of this Series shall be redeemed by the Company on the Demand Redemption Date, upon surrender thereof by the Pollution Control Trustee to the Trustee, at a redemption price equal to the principal amount thereof, plus accrued interest thereon at the rate per annum set forth in the third paragraph of 10 this Bond, from the Initial Interest Accrual Date to the Demand Redemption Date. If a Redemption Demand is rescinded by the Pollution Control Trustee by written notice to the Trustee prior to the Demand Redemption Date, no Demand Redemption Notice shall be given, or, if already given, shall be automatically annulled, and interest on the bonds of this Series shall cease to accrue, all interest accrued thereon shall be automatically rescinded and cancelled and the Company shall not be obligated to make any payments of principal of or interest on the bonds of this Series; but no such rescission shall extend to or affect any subsequent default or impair any right consequent thereon. In the event that all of the bonds outstanding under the Indenture shall have become immediately due and payable, whether by declaration or otherwise, and such acceleration shall not have been annulled, the bonds of this Series shall bear interest at the rate per annum set forth in the third paragraph of this Bond, from the Initial Interest Accrual Date, as specified in a written notice to the Trustee from the Pollution Control Trustee, and the principal of and interest on the bonds of this Series from the Initial Interest Accrual Date shall be payable in accordance with the provisions of the Indenture. Upon payment of the principal of and premium, if any, and interest on the Pollution Control Revenue Bonds, whether at maturity or prior to maturity by redemption or otherwise, and the surrender thereof to and cancellation thereof by the Pollution Control Trustee (other than any Pollution Control Revenue Bond that was cancelled by the Pollution Control Trustee and for which one or more other Pollution Control Revenue Bonds were delivered and authenticated pursuant to the Pollution Control Indenture in lieu of or in exchange or substitution for such cancelled Pollution Control Revenue Bond), or upon provision for the payment thereof having been made in accordance with the Pollution Control Indenture, bonds of this Series in a principal amount equal to the principal amount of the Pollution Control Revenue Bonds so surrendered and cancelled or for the provision for which payment has been made shall be deemed fully paid and the obligations of the Company thereunder shall be terminated, and such bonds of this Series shall be surrendered by the Pollution Control Trustee to the Trustee and shall be cancelled by the Trustee. No recourse shall be had for the payment of principal of, or interest, if any, on this bond, or any part thereof, or of any claim based hereon or in respect hereof or of the Indenture, against any incorporator, or any past, present or future stockholder, officer or director of the Company or of any predecessor or successor corporation, either directly or through the Company, or through any such predecessor or successor corporation, or through any receiver or trustee in bankruptcy, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such 11 liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released, as more fully provided in the Indenture. This bond shall not be valid or become obligatory for any purpose unless and until the certificate of authentication hereon shall have been signed by or on behalf of Harris Trust and Savings Bank, as Trustee under the Indenture, or its successor thereunder. IN WITNESS WHEREOF, LOUISVILLE GAS AND ELECTRIC COMPANY has caused this instrument to be signed in its name by its President or a Vice President or with the facsimile signature of its President, and its corporate seal, or a facsimile thereof, to be hereto affixed and attested by its Secretary or with the facsimile signature of its Secretary. Dated LOUISVILLE GAS AND ELECTRIC COMPANY Attest: By:____________________________________ (Vice) President ___________________________________ Secretary and WHEREAS, the Company is desirous of specifically assigning, conveying, mortgaging, pledging, transferring and setting over additional property unto the Trustee and to its respective successors in trust; and WHEREAS, Sections 4.01 and 21.03 of the Original Indenture provide in substance that the Company and the Trustee may enter into indentures supplemental thereto for the purposes, among others, of creating and setting forth the particulars of any new series of bonds and of providing the terms and conditions of the issue of the bonds of any series not expressly provided for in the Original Indenture and of assigning, conveying, mortgaging, pledging and transferring unto the Trustee additional property of the Company, and for any other purpose not inconsistent with the terms of the Original Indenture; and WHEREAS, the execution and delivery of this Supplemental Indenture have been duly authorized by a resolution adopted by the Board of Directors of the Company; NOW, THEREFORE, THIS INDENTURE WITNESSETH: Louisville Gas and Electric Company, in consideration of the premises and of one dollar to it duly paid by the Trustee at or 12 before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and other good and valuable considerations, does hereby covenant and agree to and with Harris Trust and Savings Bank, as Trustee, and its successors in the trust under the Indenture for the benefit of those who hold or shall hold the bonds issued or to be issued thereunder, as follows: ARTICLE I. SPECIFIC SUBJECTION OF PROPERTY TO THE LIEN OF THE ORIGINAL INDENTURE SECTION 1.01. The Company in order better to secure the payment, both of principal and interest, of all bonds of the Company at any time outstanding under the Indenture, according to their tenor and effect, and the performance of and compliance with the covenants and conditions in the Indenture contained, has granted, bargained, sold, warranted, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed and by these presents does grant, bargain, sell, warrant, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto Harris Trust and Savings Bank as Trustee and to its respective successors in said trust forever, subject to the rights reserved by the Company in and by the provisions of the Indenture, all the property described and mentioned or enumerated in a schedule hereto annexed and marked Schedule A, reference to said schedule being hereby made with the same force and effect as if the same were incorporated herein at length; together with all and singular the tenements, hereditaments and appurtenances belonging or in any wise appertaining to the aforesaid property or any part thereof with the reversion and reversions, remainder and remainders, tolls, rents and revenues, issues, income, product and profits thereof; Also, in order to subject all of the personal property and chattels of the Company to the lien of the Indenture in conformity with the provisions of the Uniform Commercial Code of the State of Kentucky, all steam, hydro and other electric generating plants, including buildings and other structures, turbines, generators, boilers, condensing equipment, and all other equipment; substations; electric transmission and distribution systems, including structures, poles, towers, fixtures, conduits, insulators, wires, cables, transformers, services and meters; steam and heating mains and equipment; gas generating and coke plants, including buildings, holders and other structures, boilers and other boiler plant equipment, benches, retorts, coke ovens, water gas sets, condensing and purification equipment, piping and other accessory works equipment; facilities for gas storage whether above or below surface; gas transmission and distribution systems, including structures, mains, compressor stations, purifier stations, pressure holders, governors, services and meters; office, shop, garage and other general buildings and structures, furniture and fixtures; and all municipal and other franchises and all 13 leaseholds, licenses, permits, easements, and privileges; all as now owned or hereafter acquired by the Company pursuant to the provisions of the Original Indenture; and All the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof; Excluding, however, (1) all shares of stock, bonds, notes, evidences of indebtedness and other securities other than such as may be or are required to be deposited from time to time with the Trustee in accordance with the provisions of the Indenture; (2) cash on hand and in banks other than such as may be or is required to be deposited from time to time with the Trustee in accordance with the provisions of the Indenture; (3) contracts, claims, bills and accounts receivable and chooses in action other than such as may be or are required to be from time to time assigned to the Trustee in accordance with the provisions of the Indenture; (4) motor vehicles; (5) any stock of goods, wares and merchandise, equipment, materials and supplies acquired for the purpose of sale or lease in the usual course of business or for the purpose of consumption in the operation, construction or repair of any of the properties of the Company; and (6) the properties described in Schedule B annexed to the Original Indenture. To have and to hold all said property, real, personal and mixed, mortgaged, pledged or conveyed by the Company as aforesaid, or intended so to be, unto the Trustee and its successors and assigns forever, subject, however, to permissible encumbrances as defined in Section 1.09 of the Original Indenture and to the further reservations, covenants, conditions, uses and trusts set forth in the Indenture, in trust nevertheless for the same purposes and upon the same conditions as are set forth in the Indenture. ARTICLE II. PROVISIONS OF BONDS OF POLLUTION CONTROL SERIES W AND X SECTION 2.01. There is hereby created, for issuance under the Original Indenture, a series of bonds designated Pollution Control Series W, each of which shall bear the descriptive title "First Mortgage Bonds, Pollution Control Series W" and the form thereof shall contain suitable provisions with respect to the matters specified in this section. The Bonds of Pollution Control Series W shall be printed, lithographed or typewritten and shall be substantially of the tenor and purport previously recited. The Bonds of Pollution Control Series W shall be issued as registered bonds without coupons in denominations of a multiple of $1,000 and shall be registered in the name of the 1993 Pollution Control 14 Trustee. The Bonds of Pollution Control Series W shall be dated as of the date of their authentication. The Bonds of Pollution Control Series W shall be payable, both as to principal and interest, at the office of the Trustee in Chicago, Illinois, in lawful money of the United States of America. The maturity of the obligation represented by the Bonds of Pollution Control Series W is October 15, 2020. The date of maturity of the obligation represented by the Bonds of Pollution Control Series W is hereinafter referred to as the Series W Final Maturity Date. The Bonds of Pollution Control Series W shall bear interest from the Series W Initial Interest Accrual Date, as hereinafter defined, at the same rate or rates then and thereafter from time to time borne by the 1993 Pollution Control Revenue Bonds. SECTION 2.02. There is hereby created, for issuance under the Original Indenture, a series of bonds designated Pollution Control Series X, each of which shall bear the descriptive title "First Mortgage Bonds, Pollution Control Series X" and the form thereof shall contain suitable provisions with respect to the matters specified in this section. The Bonds of Pollution Control Series X shall be printed, lithographed or typewritten and shall be substantially of the tenor and purport previously recited. The Bonds of Pollution Control Series X shall be issued as registered bonds without coupons in denominations of a multiple of $1,000 and shall be registered in the name of the Pollution Control Trustee. The Bonds of Pollution Control Series X shall be dated as of the date of their authentication. The Bonds of Pollution Control Series X shall be payable, both as to principal and interest, at the office of the Trustee in Chicago, Illinois, in lawful money of the United States of America. The maturity of the obligation represented by the bonds of Pollution Control Series X is April 15, 2023. The date of maturity of the obligation represented by the Bonds of Pollution Control Series X is hereinafter referred to as the Series X Final Maturity Date. The Bonds of Pollution Control Series X shall bear interest from the Series X Initial Interest Accrual Date, as hereinafter defined, at the same rate or rates then and thereafter from time to time borne by the 1995 Pollution Control Revenue Bonds. SECTION 2.03. Except as provided in the next succeeding paragraph of this Section 2.03, in the event of a default under Section 9.1 of the 1993 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 1993 Pollution Control Indenture and the 1993 Pollution Control Revenue Bonds) on the 1993 Pollution Control Revenue Bonds, whether at maturity, by tender for purchase, by acceleration, by sinking fund, redemption or otherwise, as and when the same becomes due, the Bonds of Pollution 15 Control Series W shall be redeemable in whole upon receipt by the Trustee of a written demand (hereinafter called a "Series W Redemption Demand") from the 1993 Pollution Control Trustee stating that there has been such a default, stating that it is acting pursuant to the authorization granted by Section 9.02(c) of the 1993 Pollution Control Indenture, specifying the last date to which interest on the 1993 Pollution Control Revenue Bonds has been paid (such date being hereinafter referred to as the "Series W Initial Interest Accrual Date") and demanding redemption of the Bonds of Pollution Control Series W. The Trustee shall, within 10 days after receiving such Series W 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 Series W Redemption Demand, the Company shall fix a date on which it will redeem the Bonds of Pollution Control Series W so demanded to be redeemed hereinafter called the "Series W Demand Redemption Date"). Notice of the date fixed as the Series W Demand Redemption Date shall be mailed by the Company to the Trustee at least 30 days prior to such Series W Demand Redemption Date. The date to be fixed by the Company as and for the Series W 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 Series W Redemption Demand or (ii) the Series W Final Maturity Date; provided that if the Trustee shall not have received such notice fixing the Series W Demand Redemption Date within 90 days after receipt by it of the Series W Redemption Demand, the Series W Demand Redemption Date shall be deemed to be the earlier of (i) the 120th day after receipt by the Trustee of the Series W Redemption Demand or (ii) the Series W Final Maturity Date. The Trustee shall mail notice of the Series W Demand Redemption Date (such notice being hereinafter called the "Series W Demand Redemption Notice") to the 1993 Pollution Control Trustee not more than 10 nor less than five days prior to the Series W Demand Redemption Date. Notwithstanding the foregoing, if a default to which this paragraph is applicable is existing on the Series W Final Maturity Date, such date shall be deemed to be the Series W Demand Redemption Date without further action (including actions specified in this paragraph) by the 1993 Pollution Control Trustee, the Trustee or the Company. The Bonds of Pollution Control Series W shall be redeemed by the Company on the Series W Demand Redemption Date, upon surrender thereof by the 1993 Pollution Control Trustee to the Trustee, at a redemption price equal to the principal amount thereof, plus accrued interest thereon at the rate per annum set forth in Section 2.01 hereof, from the Series W Initial Interest Accrual Date to the Series W Demand Redemption Date. If a Series W Redemption Demand is rescinded by the 1993 Pollution Control Trustee by written notice to the Trustee prior to the Series W Demand Redemption Date, no Series W Demand Redemption Notice shall be given, or, if already given, shall be automatically annulled, and interest on the Bonds of Pollution Control Series W 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 16 principal of or interest on the Bonds of Pollution Control Series W; 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 Pollution Control Series W shall bear interest at the rate per annum set forth in Section 2.01 hereof, from the Series W Initial Interest Accrual Date, as specified in a written notice to the Trustee from the 1993 Pollution Control Trustee, and the principal of and interest on the Bonds of Pollution Control Series W from the Series W Initial Interest Accrual Date shall be payable in accordance with the provisions of the Indenture. Anything herein contained to the contrary notwithstanding, the Trustee is not authorized to take any action pursuant to a Series W Redemption Demand or a rescission thereof or a written notice required by this Section 2.03, and such Series W Redemption Demand, rescission or notice shall be of no force or effect, unless it is executed in the name of the 1993 Pollution Control Trustee by one of its Vice Presidents. SECTION 2.04. Except as provided in the next succeeding paragraph of this Section 2.04, in the event of a default under Section 9.1 of the 1995 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 1995 Pollution Control Indenture and the 1995 Pollution Control Revenue Bonds) on the 1995 Pollution Control Revenue Bonds, whether at maturity, by tender for purchase, by acceleration, by sinking fund, redemption or otherwise, as and when the same becomes due, the Bonds of Pollution Control Series X shall be redeemable in whole upon receipt by the Trustee of a written demand (hereinafter called a "Series X Redemption Demand") from the 1995 Pollution Control Trustee stating that there has been such a default, stating that it is acting pursuant to the authorization granted by Section 9.02(c) of the 1995 Pollution Control Indenture, specifying the last date to which interest on the 1995 Pollution Control Revenue Bonds has been paid (such date being hereinafter referred to as the "Series X Initial Interest Accrual Date") and demanding redemption of the Bonds of Pollution Control Series X. The Trustee shall, within 10 days after receiving such Series X 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 Series X Redemption Demand, the Company shall fix a date on which it will redeem the Bonds of Pollution Control Series X so demanded to be redeemed (hereinafter called the "Series X Demand Redemption Date"). Notice of the date fixed as the Series X Demand Redemption Date shall be mailed by the Company to the Trustee at least 30 days 17 prior to such Series X Demand Redemption Date. The date to be fixed by the Company as and for the Series X 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 Series X Redemption Demand or (ii) the Series X Final Maturity Date; provided that if the Trustee shall not have received such notice fixing the Series X Demand Redemption Date within 90 days after receipt by it of the Series X Redemption Demand, the Series X Demand Redemption Date shall be deemed to be the earlier of (i) the 120th day after receipt by the Trustee of the Series X Redemption Demand or (ii) the Series X Final Maturity Date. The Trustee shall mail notice of the Series X Demand Redemption Date (such notice being hereinafter called the "Series X Demand Redemption Notice") to the 1995 Pollution Control Trustee not more than 10 nor less than five days prior to the Series X Demand Redemption Date. Notwithstanding the foregoing, if a default to which this paragraph is applicable is existing on the Series X Final Maturity Date, such date shall be deemed to be the Series X Demand Redemption Date without further action (including actions specified in this paragraph) by the 1995 Pollution Control Trustee, the Trustee or the Company. The Bonds of Pollution Control Series X shall be redeemed by the Company on the Series X Demand Redemption Date, upon surrender thereof by the 1995 Pollution Control Trustee to the Trustee, at a redemption price equal to the principal amount thereof, plus accrued interest thereon at the rate per annum set forth in Section 2.02 hereof, from the Series X Initial Interest Accrual Date to the Series X Demand Redemption Date. If a Series X Redemption Demand is rescinded by the 1995 Pollution Control Trustee by written notice to the Trustee prior to the Series X Demand Redemption Date, no Series X Demand Redemption Notice shall be given, or, if already given, shall be automatically annulled, and interest on the Bonds of Pollution Control Series X shall cease to accrue, all interest accrued thereon shall be automatically rescinded and cancelled and the Company shall not be obligated to make any payments of principal of or interest on the Bonds of Pollution Control Series X; 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 Pollution Control Series X shall bear interest at the rate per annum set forth in Section 2.02 hereof, from the Series X Initial Interest Accrual Date, as specified in a written notice to the Trustee from the 1995 Pollution Control Trustee, and the principal of and interest on the Bonds of Pollution Control Series X from the Series X Initial Interest Accrual Date shall be payable in accordance with the provisions of the Indenture. Anything herein contained to the contrary notwithstanding, the Trustee is not authorized to take any action pursuant to a Series 18 X Redemption Demand or a rescission thereof or a written notice required by this Section 2.04, and such Series X Redemption Demand, rescission or notice shall be of no force or effect, unless it is executed in the name of the 1995 Pollution Control Trustee by one of its Vice Presidents. SECTION 2.05. Upon payment of the principal of and premium, if any, and interest on the 1993 Pollution Control Revenue Bonds, whether at maturity or prior to maturity by redemption or otherwise, and the surrender thereof to and cancellation thereof by the 1993 Pollution Control Trustee (other than any 1993 Pollution Control Revenue Bond that was cancelled by the 1993 Pollution Control Trustee and for which one or more other 1993 Pollution Control Revenue Bonds were delivered and authenticated pursuant to the 1993 Pollution Control Indenture in lieu of or in exchange or substitution for such cancelled 1993 Pollution Control Revenue Bond), or upon provision for the payment thereof having been made in accordance with the 1993 Pollution Control Indenture, Bonds of Pollution Control Series W in a principal amount equal to the principal amount of the 1993 Pollution Control Revenue Bonds so surrendered and cancelled or for the provision for which payment has been made shall be deemed fully paid and the obligations of the Company thereunder shall be terminated, and such Bonds of Pollution Control Series W shall be surrendered by the 1993 Pollution Control Trustee to the Trustee and shall be cancelled and destroyed by the Trustee, and a certificate of such cancellation and destruction shall be delivered to the Company. SECTION 2.06. Upon payment of the principal of and premium, if any, and interest on the 1995 Pollution Control Revenue Bonds, whether at maturity or prior to maturity by redemption or otherwise, and the surrender thereof to and cancellation thereof by the 1995 Pollution Control Trustee (other than any 1995 Pollution Control Revenue Bond that was cancelled by the 1995 Pollution Control Trustee and for which one or more other 1995 Pollution Control Revenue Bonds were delivered and authenticated pursuant to the 1995 Pollution Control Indenture in lieu of or in exchange or substitution for such cancelled 1995 Pollution Control Revenue Bond), or upon provision for the payment thereof having been made in accordance with the 1995 Pollution Control Indenture, Bonds of Pollution Control Series X in a principal amount equal to the principal amount of the 1995 Pollution Control Revenue Bonds so surrendered and cancelled or for the provision for which payment has been made shall be deemed fully paid and the obligations of the Company thereunder shall be terminated, and such Bonds of Pollution Control Series X shall be surrendered by the 1995 Pollution Control Trustee to the Trustee and shall be cancelled and destroyed by the Trustee, and a certificate of such cancellation and destruction shall be delivered to the Company. SECTION 2.07. The 1993 Pollution Control Trustee as the registered holder of the Bonds of Pollution Control Series W and 19 the 1995 Pollution Control Trustee as the registered holder of the Bonds of Pollution Control Series X at its option may surrender the same at the office of the Trustee, in Chicago, Illinois, or elsewhere, if authorized by the Company, for cancellation, in exchange for other bonds of the same series of the same aggregate principal amount. Thereupon, and upon receipt of any payment required under the provisions of Section 2.08 hereof, the Company shall execute and deliver to the Trustee and the Trustee shall authenticate and deliver such other registered bonds to such registered holder at its office or at any other place specified as aforesaid. SECTION 2.08. No charge shall be made by the Company for any exchange or transfer of Bonds of Pollution Control Series W or Pollution Control Series X other than for taxes or other governmental charges, if any, that may be imposed in relation thereto. ARTICLE III. MISCELLANEOUS SECTION 3.01. The recitals of fact herein and in the bonds (except the Trustee's Certificate) shall be taken as statements of the Company and shall not be construed as made or warranted by the Trustee. The Trustee makes no representations as to the value of any of the property subject to the lien of the Indenture, or any part thereof, or as to the title of the Company thereto, or as to the security afforded thereby and hereby, or as to the validity of this Supplemental Indenture and the Trustee shall incur no responsibility in respect of such matters. SECTION 3.02. This Supplemental Indenture shall be construed in connection with and as a part of the Original Indenture. SECTION 3.03.(a) If any provision of this Supplemental Indenture limits, qualifies or conflicts with another provision of the Original Indenture or this Supplemental Indenture required to be included in indentures qualified under the Trust Indenture act of 1939, as amended (as enacted prior to the date of this Supplemental Indenture) by any of the provisions of Sections 310 to 317, inclusive, of the said Act, such required provision shall control. (b) In case any one or more of the provisions contained in this Supplemental Indenture or in the bonds issued hereunder shall be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected, impaired, prejudiced or disturbed thereby. 20 SECTION 3.04. Wherever in this Supplemental Indenture the word "Indenture" is used without either prefix, "Original" or "Supplemental," such word was used intentionally to include in its meaning both the Original Indenture and all indentures supplemental thereto. SECTION 3.05. Wherever in this Supplemental Indenture either of the parties hereto is named or referred to, this shall be deemed to include the successors or assigns of such party, and all the covenants and agreements in this Supplemental Indenture contained by or on behalf of the Company or by or on behalf of the Trustee shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not. SECTION 3.06.(a) This Supplemental Indenture may be simultaneously executed in several counterparts, and all said counterparts executed and delivered, each as an original, shall constitute but one and the same instrument. (b) The Table of Contents and the descriptive headings of the several Articles of this Supplemental Indenture were formulated, used and inserted in this Supplemental Indenture for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the party of the first part has caused its corporate name and seal to be hereunto affixed and this Supplemental Indenture to be signed by its President or a Vice President, and attested by its Secretary for and in its behalf, and the party of the second part to evidence its acceptance of the trust hereby created, has caused its corporate name and seal to be hereunto affixed, and this Supplemental Indenture to be signed by its President, a Vice President or an Assistant Vice President, and attested by its Secretary or an Assistant Secretary, for and in its behalf, all done as of the fifteenth day of October, 1993. LOUISVILLE GAS AND ELECTRIC COMPANY By:____________________________________ M. LEE FOWLER Vice President and Controller (Corporate Seal) ATTEST: ______________________________________ VICTOR A. STAFFIERI Senior Vice President, General Counsel and Secretary 21 HARRIS TRUST AND SAVINGS BANK, TRUSTEE By:_________________________________ C. POTTER Assistant Vice President (Corporate Seal) ATTEST: ______________________________________ F.A. PIERSON Assistant Secretary STATE OF KENTUCKY ) ) SS: COUNTY OF JEFFERSON ) BE IT REMEMBERED that on this 10th day of November, 1993, before me, a Notary Public duly commissioned in and for the County and State aforesaid, personally appeared M. LEE FOWLER and VICTOR A. STAFFIERI, respectively, Vice President and Controller and Senior Vice President, General Counsel and Secretary of Louisville Gas and Electric Company, a corporation organized and existing under and by virtue of the laws of the State of Kentucky, who are personally known to me to be such officers, respectively, and who are personally known to me to be the same persons who executed as officers the foregoing instrument of writing, and such persons duly acknowledged before me the execution of the foregoing instrument of writing to be their act and deed and the act and deed of said corporation. WITNESS my hand and notarial seal this 10th day of November, 1993. PATRICIA A. ROSE NOTARY PUBLIC My commission expires: 1-23-96 STATE OF ILLINOIS ) ) SS: COUNTY OF COOK ) BE IT REMEMBERED that on this 9th day of November, 1993, before me, a Notary Public duly commissioned in and for the County and State aforesaid, personally appeared C. POTTER and F.A. 22 PIERSON, respectively, Assistant Vice President and Assistant Secretary of Harris Trust and Savings Bank, a corporation organized and existing under and by virtue of the laws of the State of Illinois, who are personally known to me to be such officers, respectively, and who are personally known to me to be the same persons who executed as officers the foregoing instrument of writing, and such persons duly acknowledged before me the execution of the foregoing instrument of writing to be their act and deed and the act and deed of said corporation. WITNESS my hand and notarial seal this 9th day of November, 1993. T. MUZQUIC NOTARY PUBLIC My commission expires: 7-12-97 This Instrument Prepared by: Victor A. Staffieri LG&E Energy Corp. 220 West Main Street Louisville, Kentucky 40202 By:_______________________________ Victor A. Staffieri, Esq. 23 SCHEDULE A The following property situated, lying and being in the County of Jefferson, State of Kentucky, to-wit: Electric Substation Hancock Substation was constructed during 1992 on property owned by the Company at Clay and Caldwell Streets located in Louisville, Jefferson County, Kentucky. This includes a 138kV transmission line which serves the 138/12kV power transformer rated at 44.8MVA, and five feeder 12kV switchgear which serves electrical distribution circuits for the surrounding neighborhood. A-1 EX-10.42 6 MODIFICATION #13 TO POWER AGREEMENT DTD 10-15-52 1 ________________________________________________________________ Modification No. 13 to POWER AGREEMENT Dated October 15, 1952 between OHIO VALLEY ELECTRIC CORPORATION AND UNITED STATES OF AMERICA Acting By and Through the SECRETARY OF ENERGY, the statutory head of the DEPARTMENT OF ENERGY Dated as of September 1, 1989 ________________________________________________________________ 2 Contract No. DE-AC05-76OR01530 (Modification No. 13) THIS MODIFICATION NO. 13, dated as of the 1st day of September , 1989, by and between OHIO VALLEY ELECTRIC CORPORATION, a corporation organized under the laws of the State of Ohio (hereinafter called the "Corporation") and the UNITED STATES OF AMERICA (hereinafter sometimes called the "Government"), acting by and through the SECRETARY OF ENERGY, the statutory head of the DEPARTMENT OF ENERGY (hereinafter called "DOE"); W I T N E S S E T H T H A T ----------------------------- WHEREAS, Corporation and the Government have heretofore entered into a contract dated October 15, 1952, providing for the supply by Corporation of electric utility services to the United States Atomic Energy Commission (hereinafter called "AEC") at AEC's project near Portsmouth, Ohio (hereinafter called the "Project"), which contract has heretofore been modified by Modification No. 1, dated July 23, 1953, Modification No. 2, dated as of March 15, 1964, Modification No. 3, dated as of May 12, 1966, Modification No. 4, dated as of January 7, 1967, Modification No. 5, dated as of August 15, 1967, Modification No. 6, dated as of November 15, 1967, Modification No. 7, dated as of November 5, 1975, Modification No. 8, dated as of June 23, 1977, Modification No. 9, dated as of July 1, 1978, Modification No. 10, dated as of August 1, 1979, Modification No. 11, dated as of September 1, 1979, 2nd 3 Modification No. 12, dated as of August 1, 1981 (said contract, as so modified, is hereinafter called the "DOE Power Agreement"); and WHEREAS, pursuant to the Energy Reorganization Act of 1974, the AEC was abolished on January 19, 1975 and certain of its functions, including the procurement of electric utility services for the Project, were transferred to and vested in the Administrator of Energy Research and Development; and WHEREAS, pursuant to the Department of Energy Organization Act, all of the functions vested by law in the Administrator of Energy Research and Development or the Energy Research and Development Administration were transferred to, and vested in, the Secretary of Energy on October 1, 1977; and WHEREAS, Corporation and DOE desire to amend the DOE Power Agreement further for the purposes hereinafter provided; NOW, THEREFORE, the parties hereto do hereby agree as follows: 1. Paragraph 1 of Section 2.08 is amended in its entirety to read as follows: "1. In the event that permanent power (together with any occasional energy) and supplemental power, and the energy associated therewith, to be supplied by Corporation to DOE will not be sufficient to supply the DOE requirements for electric power at the Project, at the request of DOE and upon reasonable notice, and provided that arrangements for the supply to Corporation of other power and energy from sources other than the project generating stations have been effected, Corporation will schedule the delivery of such other power and associated energy to DOE, such other power being herein called 'arranged power' and the energy associated therewith scheduled to be delivered to the point of delivery being herein called 'scheduled kwh of arranged energy'." 4 2. Paragraph 3 of Section 2.08 is amended in its entirety to read as follows: "2. DOE shall pay to Corporation for arranged power and/or for billing kwh of arranged energy during any month an amount equal to the 'out-of- pocket costs of arranged power,' determined as provided in paragraph 5 of this Section 2.08, plus a charge for difficult to quantify costs of 1 mill per scheduled kwh of arranged energy. No portion of such 1 mill charge for difficult to quantify costs shall be included in the computations under Sections 3.03 and 3.04." 3. Clause (c) of Paragraph 3 of Section 3.04 is amended in its entirety to read as follows: "(c) Component (C) shall consist of the total expenses for taxes, including all taxes on income (other than (i) Federal income taxes, (ii) any taxes that are now or may hereafter be levied based on revenue, energy generated or sold or on any other basis capable of direct distribution, the cost of which taxes shall be allocated directly to DOE and Corporation in amounts reflecting the proper share of each, and DOE shall pay to Corporation its share thereof, (iii) taxes arising from payments received by Corporation for difficult to quantify costs under Section 2.08) properly chargeable to Account 507 of the Uniform System of Accounts; provided, however, that any taxes for which DOE reimburses Corporation under Sections 1.05, 4.02 and 4.08 shall not be included in Component (C)." 4. Section 4.08 is amended in its entirety to read as follows: "SECTION 4.08 Arranged Power and Occasional Energy. Corporation shall submit to DOE as early as practicable in each month a bill for the costs incurred during the immediately preceding month pursuant to Sections 2.08 and 2.09, respectively." 5. This Modification No. 13 to the DOE Power Agreement shall become effective at 12:00 Midnight on the date on which Corporation shall deliver to DOE a written notice to the effect that: 5 All applicable requirements as to approval by or filings with regulatory agencies having jurisdiction in respect of the transactions constituting the subject matter of this Modification No. 13 (including expiration of any specified period after the date of any filing) have been complied with and all requisite approvals of such regulatory agencies are in full force and effect and none is the subject of attack on appeal by direct proceeding or otherwise, and (except to the extent that Corporation shall waive such condition) any requisite approvals of regulatory agencies having such jurisdiction have become final and not subject to judicial review in any court. 6. The DOE Power Agreement, as modified by Modifications No. 1 through No. 12, both inclusive, and by this Modification No. 13, is hereby in all respects confirmed. IN WITNESS WHEREOF, the parties hereto have executed this Modification No. 13 as of the date and year first above written. OHIO VALLEY ELECTRIC CORPORATION By_________________________________ UNITED STATES OF AMERICA By ROBERT E. LYNCH Authorized Contracting Officer EX-10.43 7 MODIFICATION #14 TO POWER AGREEMENT DTD 10-15-52 Modification No. 14 to POWER AGREEMENT Dated October 15, 1952 between OHIO VALLEY ELECTRIC CORPORATION AND UNITED STATES OF AMERICA Acting By and Through the SECRETARY OF ENERGY, the statutory head of the DEPARTMENT OF ENERGY Dated as of January 15, 1992 Contract No. DE-AC05-760R01520 (Modification No. 14) THIS MODIFICATION NO. 14, dated as of the 15th day of January, 1992, by and between OHIO VALLEY ELECTRIC CORPORATION, a corporation organized under the laws of the State of Ohio (hereinafter called the "Corporation") and the UNITED STATES OF AMERICA (hereinafter sometimes called the "Government"), acting by and through the SECRETARY OF ENERGY, the statutory head of the DEPARTMENT OF ENERGY (hereinafter called "DOE"); W I T N E S S E T H T H A T WHEREAS, Corporation and the Government have heretofore entered into a contract dated October 15, 1952, providing for the supply by Corporation of electric utility services to the United States Atomic Energy Commission (hereinafter called "AEC") at AEC's project near Portsmouth, Ohio (hereinafter called the "Project"), which contract has heretofore been modified by Modification No. 1, dated July 23, 1953, Modification No. 2, dated as of March 15, 1964, Modification No. 3, dated as of May 12, 1966, Modification No. 4, dated as of January 7, 1967, Modification No. 5, dated as of August 15, 1967, Modification No. 6, dated as of November 15, 1967, Modification No. 7, dated as of November 5, 1975, Modification No. 8, dated as of June 23, 1977, Modification No. 9, dated as of July 1, 1979, Modification No. 10, dated as of August 1, 1979, Modification No. 11, dated as of September 1, 1979, Modification 1 No. 12, dated as of August 1, 1981, and Modification No. 13, dated as of September 1, 1989 (said contract, as so modified, is hereinafter called the "DOE Power Agreement"); and WHEREAS, pursuant to the Energy Reorganization Act of 1974, the AEC was abolished on January 19, 1975 and certain of its functions, including the procurement of electric utility services for the Project, were transferred to and vested in the Administrator of Energy Research and Development; and WHEREAS, pursuant to the Department of Energy Organization Act, all of the functions vested by law in the Administrator of Energy Research and Development or the Energy Research and Development Administration were transferred to, and vested in, the Secretary of Energy on October 1, 1977; and WHEREAS, Corporation and DOE desire to amend the DOE Power Agreement further for the purpose of extending its term and for certain other purposes as more particularly hereinafter provided; NOW, THEREFORE, the parties hereto do hereby agree as follows: 1. The Equity Participation Ratios of American Gas and Electric Company (now American Electric Power Company, Inc.) and Louisville Gas and Electric Company shall be 39.9 Percent and 4.9 Percent, respectively, in lieu of the percentages listed in the table in the second clause of the preamble to the DOE Power Agreement. In connection therewith, the third clause of the preamble to the DOE Power Agreement is hereby modified to read as follows: "WHEREAS, Corporation proposes to issue from time to time to the Participating Companies, as required, shares 2 of the capital stock of Corporation for cash at the par value thereof of $100 per share in amounts presently estimated not to exceed the aggregate number of shares of such capital stock indicated in the tabulation below: Aggregate Number Name of of Shares of Participating Company Corporation American Gas and Electric Company 79,800 The Cincinnati Gas & Electric Company 18,000 Columbus and Southern Ohio Electric Company 8,600 The Dayton Power and Light Company 9,800 Kentucky Utilities Company 5,000 Louisville Gas and Electric Company 9,800 Ohio Edison Company 33,000 Southern Indiana Gas and Electric Company 3,000 The Toledo Edison Company 8,000 The West Penn Electric Company 25,000" 2. Paragraph 1 of Section 2.04 is amended in its entirety to read as follows: "1. Whenever, for any clock hour, the aggregate amount of permanent power and the energy associated therewith furnished by Corporation to DOE pursuant to Section 2.03 and the scheduled kwh of occasional energy for which provision has been made by Corporation pursuant to Section 2.09 is insufficient to supply the part of the DOE contract demand which is then being demanded by DOE, Corporation shall, unless Corporation shall be excused as a result of conditions contemplated by Section 7.05 of this Agreement or DOE shall have otherwise excused Corporation from meeting such demand, furnish additional generating capacity and the energy associated therewith to DOE at the point of delivery to make up for such insufficiency in any amount necessary up to a number of kilowatts which will equal the Applicable Percentage (which percentage, for purposes of this Section 2.04, shall not exceed thirty percent) of the sum of (i) the DOE contract demand and (ii) the transmission losses thereon from the 345 kv busses of the project generating stations. At the request of DOE, during any clock hour Corporation may, at its option, furnish to DOE supplemental power which, when added to the permanent power and occasional energy then being furnished, shall exceed the DOE contract demand; provided that, in such event, DOE shall, if requested to do so by Corporation, forthwith take action to reduce its power and energy 3 requirements to an amount not exceeding the aggregate amount which Corporation would otherwise be obligated to supply. Notwithstanding the foregoing, the aggregate amount of supplemental power and energy which Corporation shall be obligated to furnish to D0E pursuant to this paragraph l during any calendar year shall not exceed the product of 900,000,000 kwh multiplied by the average DOE capacity ratio of such calendar year, weighted with respect to the periods of time during which DOE capacity ratios were in effect." 3. Paragraph 1 of Section 2.05 is amended by deleting subsection (b) of clause (B) of said paragraph 1 and substituting therefor the following: "(b) in the event that any of the events specified in clause (i), clause (ii), clause (iii) or clause (iv) of Section 6.05 of this Agreement shall occur on the effective date of Modification No. 14 to this Agreement or thereafter during the term of this Agreement, then, and in such event, if Corporation so elects pursuant to Section 6.05, for the purpose of computing the demand charges or modified demand charges payable by DOE as cancellation costs pursuant to Section 6.02 of this Agreement, and for all other purposes of this Agreement, the DOE contract demand in effect on the date of the occurrence of such event and thereafter shall be, and be deemed to be, the Full Contract Quantity; and provided further" 4. Section 2.05 is further amended by deleting paragraphs 2, 3 and 4 in their entirety and substituting therefor the following: "2. DOE shall have the right at any time to sell or provide permanent or supplemental power and energy to which it is entitled hereunder to its vendors, contractors and concessionaires for their consumption at or in the vicinity of the Project. In addition, DOE shall have the right at any time to sell or provide permanent or supplemental power and energy in an amount up to 2,500 kw to its tenants for their consumption at or in the vicinity of the Project. "3. Except as hereinafter provided, DOE shall have the right, at any time during the term of this Agreement, to the extent that power and energy shall no longer be required at the Project, to transfer all or part of the power and energy to which DOE is entitled hereunder in a block or blocks not less than 20,000 kw in any one case 4 to supply a Governmental requirement at DOE's uranium enrichment facility near Paducah, Kentucky for consumption in operations at such installation. In the event that DOE desires to exercise such right, it shall give notice of its intention to Corporation. If arrangements are mutually agreed upon for such transfer over transmission facilities provided by Corporation, such power and energy shall be delivered by Corporation to the point agreed upon at the rates provided in this Agreement, adjusted to reflect any increase in cost to Corporation as well as applicable transmission charges. If, however, within 60 days after receipt of the notice provided for in this paragraph, Corporation undertakes to release DOE from liability with respect to charges payable by DOE with respect to such power and energy as of (a) one year after such notice, or (b) the day on which such power and energy could have been used at the Paducah facility, whichever is later, or (c) as of such earlier date, if any, when Corporation can absorb such power and energy in its system or in the systems of Sponsoring Companies, then Corporation shall, as of the date when DOE is released from such liability, have the right to dispose of such power and energy in any manner it may determine." 5. A new Section 2.10 is to be inserted after Section 2.09 as follows: "SECTION 2.10 Transmission Revenues. From time to time Corporation may receive payments from other utilities or entities for the transmission over transmission facilities of Corporation of electric power and energy not associated with the Project. In such event, no portion of the payments received by Corporation for the use of Corporation's transmission facilities shall be included in the computations under Sections 3.03 and 3.04." 6. A new Section 2.11 is to be inserted after Section 2.10 as follows: "SECTION 2.11 Transmission Payments. In the event that Corporation is required to make payments to other utilities and/or entities of transmission or transmission-related charges for or in connection with the delivery of electric power and energy to DOE under this Agreement, which charges would not, pursuant to any other provision of this Agreement, be billed by Corporation to, and paid by, DOE, DOE shall pay to Corporation the full amount paid by Corporation for such 5 charges; provided, however, that such amount shall be reduced, to not less than zero, by any amount which Corporation receives from other utilities and/or entities under Section 2.10 during the calendar year when the obligation to make payments to other utilities and/or entities arises." 7. Clauses (c) and (d) of paragraph 3 of Section 3.04 are amended in their entirety to read as follows: "(c) Component (C) shall consist of the total expenses for taxes, including all taxes on income (other than (i) Federal income taxes, (ii) any taxes that are now or may hereafter be levied based on revenue, energy generated or sold or on any other basis capable of direct distribution, the cost of which taxes shall be allocated directly to DOE and Corporation in amounts reflecting the proper share of each, and DOE shall pay to Corporation its share thereof, (iii) taxes arising from payments received by Corporation for difficult to quantify costs under Section 2.08 and (iv) taxes arising from payments received by Corporation for use of Corporation's transmission facilities under Section 2.10), properly chargeable to Account 507 of the Uniform System of Accounts; provided, however, that any taxes for which DOE reimburses Corporation under Sections 1.05, 3.06, 3.07, 4.02, and 4.08 shall not be included in Component (C)." "(d) Component (D) shall consist of an amount equal to the product of $2.089 multiplied by the total number of shares of capital stock of the par value of $100 per share of Ohio Valley Electric Corporation which shall have been issued and which are outstanding on the last day of such month." 8. The second paragraph of paragraph 8 of Section 3.04 is amended by deleting the first sentence thereof and substituting therefor the following: "Prior to the effectiveness of any assignment of this Agreement by DOE, the 'Review Board,' for the purposes of this paragraph 8, shall be the DOE Board of Contract Appeals." 9. Section 3.06 is amended in its entirety to read as follows: 6 "SECTION 3.06 Additional Facilities. In connection with the operation of the Paducah or Portsmouth installations of DOE, as a part of the cost structure of this Agreement and for the purpose of providing funds in the amount necessary to cover the entire cost to Corporation of additional facilities and/or spare parts associated with the provision of electric utility services to DOE, including, without limitation, such facilities as fuel processing plants, flue gas or waste product processing facilities and additional generating units or stations at the location of the existing facilities or elsewhere, as shall be purchased and/or installed or being installed by Corporation pursuant to the provisions of this Section 3.06, DOE shall pay to Corporation amounts sufficient, after provision for any estimated income taxes that may be applicable thereto, to enable Corporation to cover the entire cost of such additional facilities and/or spare parts; provided, however, that neither any single additional facility and/or spare part costing more than $100,000 nor any single additional facility or spare part costing less than $100,000 ('small additional facility or spare part') after the total cost of all small additional facilities or spare parts in one calendar year has reached $5 million shall be purchased or installed by Corporation pursuant to this Section 3.06 without the prior written approval of DOE unless the purchase or installation of such additional facilities and/or spare parts is ordered or required by any regulatory body having jurisdiction over the emission of pollutants or the discharge of wastes by Corporation or is reasonably required to enable Corporation to limit the emission of pollutants or the discharge of wastes or is otherwise reasonably necessary in order to comply with any governmental requirement as to health, safety or the protection of the environment. "Corporation agrees, upon the request of DOE, to use its best efforts to arrange, to the extent that, in Corporation's judgment, such financing is feasible, financing for a period not to extend beyond December 31, 2005, from sources of capital funds other than DOE of the cost of each additional facility and/or spare part which has a cost in excess of $5,000,000, or such lesser amount as may be specified by Corporation, and also agrees where the cost is so financed in whole or in part (1) to reimburse or credit DOE from any proceeds of such financing to the extent such proceeds are, under the financing arrangements, available for such purpose, for any amount which DOE may have previously paid to Corporation under this Section 3.06 for the cost of such additional facility and/or spare part and (2) to apply the balance of any such proceeds in payment of the 7 remaining cost, if any, of such additional facility and/or spare part; DOE shall be relieved of its obligation under this Section 3.06 to pay Corporation for the cost of any additional facility and/or spare part to the extent that Corporation pays such cost from the balance of any proceeds as contemplated under clause (2) of this sentence. "DOE agrees that, if DOE requests that Corporation arrange for financing from sources of capital funds other than DOE the cost of any additional facility and/or spare part, DOE will provide to Corporation assurance in a form satisfactory to Corporation that DOE will pay to Corporation (or, if the right to receive principal payments, interest payments, and any other financing expenses under an installment sale, loan, lease or similar agreement shall have been assigned by the seller, lender, lessor or other party to any such similar agreement with the written consent of Corporation and DOE to a trustee under an indenture pursuant to which bonds or other debt securities have been issued and sold, will pay directly to such assignee rather than to Corporation) the full amount of principal payments, interest payments and any other expenses of financing the cost of the additional facility and/or spare part. "If Corporation requests a ruling to the effect that amounts paid by DOE under this Section 3.06 do not constitute taxable income to Corporation, but is unable to obtain a ruling satisfactory to Corporation, or in case such ruling once obtained shall be reversed or rescinded, then DOE shall pay to Corporation such amounts, in lieu of the amounts to be paid as above provided, which, after provision for all estimated income taxes that may be applicable thereto, shall equal the entire costs of the additional facilities and/or spare parts payable by DOE to Corporation as above provided. "If Corporation charges to expense any item of additional facilities and/or spare parts which is later determined to be an item which should have been capitalized for tax purposes, then DOE shall, as part of the cost structure of this Agreement, pay to Corporation such amount which, after provision for all estimated income taxes that may be applicable thereto, when added to any amount previously paid for the item by DOE, shall equal the entire cost of the additional facilities and/or spare parts payable by DOE to Corporation as above provided. 8 "DOE shall not pay to Corporation any amount pursuant to paragraph 3(a) and paragraph 3(d) of Section 3.04 with respect to all or such portion of the cost of such additional facilities and/or spare parts as has been paid by DOE and has not thereafter been financed from sources other than DOE. If the purchase, acquisition or installation of any additional facility and/or spare part is ordered or required by any regulatory agency having jurisdiction over the emission of pollutants or the discharge of wastes by Corporation or by a court in any proceeding relating to the control of pollutants or the discharge of wastes by Corporation, or if in the judgment of Corporation any additional facility and/or spare part is reasonably required to enable Corporation to limit the emission of pollutants or the discharge of wastes of is otherwise reasonably necessary in order to comply with any governmental requirement as to health, safety or the protection of the environment, then until such additional facility and/or spare part shall be purchased, acquired or installed and operating effectively (A) Corporation shall be entitled so to operate the project generating stations as, in the judgment of Corporation, will (i) limit emissions of pollutants and the discharge of wastes to permissible amounts, and (ii) otherwise comply with all governmental requirements as to health, safety and the protection of the environment, and (B) Corporation shall not be held responsible or liable for any loss or damage to DOE on account of non-delivery of energy, and DOE shall not be relieved from its obligation to pay any charges payable under this Agreement." 10. Section 3.07 is amended in its entirety to read as follows: "SECTION 3.07 Replacements. In connection with the operation of the Paducah or Portsmouth installations of DOE, as a part of the cost structure of this Agreement and for the purpose of providing funds in the amount necessary to cover the entire cost to Corporation of replacements chargeable to property and plant pursuant to the provisions of this Section 3.07 necessary or desirable to keep the project generating stations and project transmission facilities in a dependable and efficient operating condition in order to facilitate the provision of electric utility services to DOE, DOE shall pay to Corporation amounts sufficient, after provision for any estimated income taxes that may be applicable thereto, to enable Corporation to cover the entire cost of such replacements made or being made by Corporation 9 during any month or prior thereto (and not previously reimbursed), which costs are incurred after October 14, 1977, whether or not the purchase and installation of such replacements occurred in whole or in part prior to such date; provided, however, that neither any single replacement costing more than $500,000 nor any single replacement costing less than $500,000 ('small replacement') after the total cost of all small replacements in one calendar year has reached $1,000,000 shall be effected by Corporation pursuant to this Section 3.07 without the written approval of DOE unless such replacements are ordered or required by any regulatory body having jurisdiction over the emission of pollutants or the discharge of wastes by Corporation or are reasonably required to enable Corporation to limit the emission of pollutants or the discharge of wastes or are otherwise reasonably necessary in order to comply with any governmental requirement as to health, safety or the protection of the environment. "Corporation agrees, upon the request of DOE, to use its best efforts to arrange, to the extent that, in Corporation's judgment, such financing is feasible, financing for a period not to extend beyond December 31, 2005, from sources of capital funds other than DOE of the cost of each replacement which has a cost in excess of $5,000,000, or such lesser amount as may be specified by Corporation, and also agrees where the cost of a replacement is so financed in whole or in part (1) to reimburse or credit DOE from any proceeds of such financing to the extent such proceeds are, under the financing arrangements, available for such purpose, for any amount which DOE may have previously paid to Corporation under this Section 3.07 for the cost of such replacement and (2) to apply the balance of any such proceeds in payment of the remaining cost, if any, of such replacement; DOE shall be relieved of its obligation under this Section 3.07 to pay Corporation for the cost of any replacement to the extent that Corporation pays such cost from the balance of any proceeds as contemplated under clause (2) of this sentence. "DOE agrees that, if DOE requests that Corporation arrange financing from source of capital funds other than DOE or the cost of any replacement, DOE will provide to Corporation assurance in a form satisfactory to Corporation that DOE will pay to Corporation (or, if the right to receive principal payments, interest payments, and any other financing expenses under an installment sale, loan, lease or similar agreement shall have been assigned by the seller, lender, lessor or other party to any such similar agreement with the written consent of 10 Corporation and DOE to a trustee under an indenture pursuant to which bonds or other debt securities have been issued and sold, will pay directly to such assignee rather than to Corporation) the full amount of principal payments, interest payments and any other expenses of financing the cost of the replacement. "If Corporation requests a ruling to the effect that amounts paid by DOE under this Section 3.07 do not constitute taxable income to Corporation, but is unable to obtain a ruling satisfactory to Corporation, or in case such ruling once obtained shall be reversed or rescinded, then DOE shall pay to Corporation such amounts, in lieu of any amounts paid as above provided, which, after provision for all estimated income taxes that may be applicable thereto, shall equal the entire cost of the replacements payable to DOE as above provided. "If Corporation charges to expense any replacement item which is later determined to be an item which should have been capitalized for tax purposes, then DOE shall, as part of the cost structure of this Agreement, pay to Corporation such amount which, after provision for all estimated income taxes that may be applicable thereto, when added to any amount previously paid for the item by DOE, shall equal the entire cost of the replacements payable by DOE to Corporation as above provided. "For the purposes of this Section 3.07 the term 'replacement' shall include, in addition to electric plant constructed or installed in place of property retired, any facilities or equipment (i) the installation of which shall require some physical alteration of the project generating facilities and/or the project transmission facilities and (ii) which are designed to limit the emission of pollutants or the discharge of wastes or are otherwise reasonably necessary to comply with any governmental requirement as to health, safety or the protection of the environment, whether or not the project generating facilities or the project transmission facilities previously included facilities or equipment serving the same purpose or function as the replacement. "No replacement costs paid for out of the proceeds of insurance, or out of amounts recovered from third parties, shall be included in the cost of replacements. The term 'costs of replacements' shall include all components of cost plus removal expenses, less salvage. DOE shall not pay to Corporation any amounts pursuant to paragraph 3 (a) and paragraph 3 (d) of Section 3.04 with respect to all or such portion of the cost of such 11 replacements as has been paid by DOE and not thereafter been financed from sources other than DOE. "If the purchase, acquisition or installation of any replacement is ordered or required by any regulatory agency having jurisdiction over the emission of pollutants or the discharge of wastes by Corporation or by a court in any proceeding relating to the control of pollutants or the discharge of wastes by Corporation, or if in the judgment of Corporation any replacement is reasonably required to enable Corporation to limit the emission of pollutants or the discharge of wastes or is otherwise reasonably necessary in order to comply with any governmental requirement as to health, safety or the protection of the environment, then until such replacement shall be installed and operating effectively (A) Corporation shall be entitled so to operate the project generating stations as, in the judgment of Corporation, will (i) limit emissions of pollutants and the discharge of wastes to permissible amounts, and (ii) otherwise comply with all governmental requirements as to health, safety and the protection of the environment, and (B) Corporation shall not be held responsible or liable for any loss or damage to DOE on account of non-delivery of energy, and DOE shall not be relieved from its obligation to pay any charges payable under this Agreement." 11. Section 4.05 is amended in its entirety to read as follows: "SECTION 4.05 Taxes and Insurance Allocated Directly to DOE. Corporation shall bill DOE for (i) its share of the cost of any estimated taxes allocated directly to DOE pursuant to clause (c) of paragraph 3 of Section 3.04, (ii) the cost of any estimated taxes or other charges to be paid by DOE pursuant to Sections 3.06 and 3.07, and (iii) the cost of any Insurance to be paid by DOE pursuant to clause (b) of paragraph 3 of Section 3.04." 12. A new Section 4.09 is to be inserted after Section 4.08 as follows: "SECTION 4.09 Transmission Payments. Corporation shall submit to DOE as early as practicable in each month a bill or the amount by which costs incurred during the current calendar year pursuant to Section 2.11 exceed the total of (i) the amounts paid by DOE during the current calendar year under this Section 4.09, and (ii) the 12 amount of any transmission revenues received by the Corporation during the current calendar year pursuant to Section 2.10." 13. Section 6.01 is amended in its entirety to read as follows: "SECTION 6.01 Duration. The term of this Agreement, unless otherwise terminated in accordance with the provisions hereof, shall terminate at 12:00 Midnight, Central Standard Time, on December 31, 2005. The parties recognize that the project generating stations were constructed to service the United States of America's load requirements at the Project, and therefore recognize the principle that power and associated energy produced by the project generating stations beyond the term of this Agreement are to be made available, at least to the extent of DOE's contract demand as in effect on December 31, 2005, to serve such load, provided Corporation's equipment is then serviceable and mutually agreeable arrangements can be evolved by the parties hereto. Accordingly, Corporation and DOE agree to review the possibility of negotiating power supply arrangements for the delivery of power and associated energy produced by the project generating stations to DOE subsequent to December 31, 2005, at least two years in advance of such date." 14. The first sentence of Section 6.02 is amended by deleting the words "not less than five years" and substituting therefor the words "not less than three years." 15. Section 6.04 is amended in its entirety to read as follows: "SECTION 6.04 Payments for Employee Benefits. "1. As part of the cost structure of this Agreement, beginning in 1993, and in any event not later than the effective date of termination of this Agreement, DOE shall pay to Corporation amounts, after provision for any estimated taxes that may be applicable thereto, determined by an actuary or actuaries selected in accordance with the provisions of paragraph 2 of this Section 6.04 to be sufficient to pay the premiums due or expected to become due, as well as administrative fees and costs, on life insurance medical insurance or other post-retirement benefits other than pensions attributable 13 to the employment and employee service of active employees, retirees, or other employees prior to such effective date, such amounts being sufficient to provide payment with respect to all periods for which Corporation has committed or is otherwise obligated to make such payments, including amounts attributable to current employee service and any unamortized transition obligation attributable to prior service years ("Post-- Retirement Benefit Obligation"); further provided, that, not later than the effective dates of termination, DOE will pay to Corporation additional amounts, after provision for any estimated taxes that may be applicable thereto, sufficient to purchase insurance policies, or DOE will provide other forms of assurance, together with provisions for estimated taxes, if any, that may be applicable thereto, satisfactory to DOE and to Corporation, such insurance policies or other forms of assurance being adequate to cover any shortfall if the amount of the Post-Retirement benefit Obligation is insufficient to permit Corporation to fulfill its commitments or obligations with respect to post- retirement benefits other than pensions; further provided that if, after the decease of the last person entitled to life and/or medical insurance coverage or other post- retirement benefits other than pensions, the amounts paid by DOE to Corporation plus earnings thereon are found to have exceeded Corporation's commitments or obligations, such excess shall be refunded to DOE; and further provided, that should Corporation be required by law or by regulation of governmental agencies to provide funds in connection with life and/or medical insurance premiums for employees whose employment with Corporation terminates or has terminated before retirement, DOE shall pay Corporation amounts, after provision for any estimated taxes that may be applicable thereto, required to provide funds sufficient to pay life and/or medical insurance benefits for such employees, such payments to be made on or before the dates when any accruals in connection therewith are required by Generally Accepted Accounting Principles to be recorded or in any event by the effective date of termination of this Agreement. 2. The actuary selected by Corporation to determine the amounts sufficient to make payments referenced in paragraph 1 of this Section 6.04 shall be a person classified under the Employee Retirement income Security Act as an 'Enrolled Actuary' unless such actuary is selected by Corporation with the approval of DOE. An actuary retained by DOE shall have the right to review and approve any actuarial or other assumption or calculation performed with respect to Section 6.04 by or on behalf of the actuary retained by Corporation and the 14 actuary retained by Corporation shall have the right to review any actuarial or other assumption or calculation performed with respect to Section 6.04 by or on behalf of an actuary retained by DOE. If there is a dispute between Corporation's actuary and DOE's actuary concerning any actuarial or other assumption or calculation pursuant to this Section 6.04 and the respective actuaries are not able to resolve such dispute within 30 days, they shall within 30 days thereafter select and appoint a third actuary to resolve the dispute. If the actuaries retained by Corporation and DOE are unable to agree within 30 days upon the selection of a third actuary to resolve the dispute, an Enrolled Actuary who has no professional relationship with either party or to the actuaries retained by either party shall be chosen by the Executive Director of the Society of Actuaries or its successor. The fees and expenses of the third actuary shall be divided equally between Corporation and DOE." 16. Section 6.05 is amended in its entirety to read as follows: "SECTION 6.05 Termination as Result of Certain Conditions. In the event of the occurrence of any of the events specified in clause (i), clause (ii), clause (iii) or clause (iv) of this Section 6.05, Corporation may in its sole discretion elect, by notice in writing delivered to DOE within 270 days following such occurrence, to treat such occurrence as the delivery by DOE to Corporation on the data of such occurrence of a notice of termination pursuant to Section 6.02 hereof designating an effective date of termination as the earlier of (a) the date when this Agreement would otherwise terminate in accordance with Section 6.01 hereof, or (b) a date three years subsequent to the date of such occurrence and, in the event of such election by Corporation, this Agreement shall terminate upon the earlier of (a) the date when this Agreement would otherwise terminate in accordance with Section 6.01 hereof, or (b) a date three years subsequent to the date of such occurrence and, in the event of such election by Corporation, this Agreement shall terminate upon the earlier of (a) the date when this Agreement would otherwise terminate in accordance with Section 6.01 hereof, or (b) a date three years subsequent to the date of such occurrence: (i) DOE shall have failed to pay any amount required to be paid by DOE pursuant to the provisions of this Agreement within a period of 30 days after the 15 receipt of a written notice from Corporation to DOE of DOE's failure to pay any such amount; or (ii) DOE shall have made any payment required to be made by DOE pursuant to the provisions of this Agreement without having full authority to make such payment; or (iii) DOE shall have claimed as a reason for failing to pay any amount billed to DOE by Corporation that DOE was prevented from doing so by Section 165(b) of the Atomic Energy Act, unless Corporation specifically identifies all or a portion of such billing as requiring a direct payment or direct reimbursement of Federal income taxes; or (iv) DOE shall have assigned this Agreement or rights under this Agreement and the assignee shall not have been at the time of the assignment, or shall have ceased to be at any time after the assignment, wholly owned by the United States of America." 17. A new Section 6.09 is to be inserted after Section 6.08 as follows: "SECTION 6.09 Decommissioning, Shutdown, Demolition and Closing. DOE recognizes that a part of the cost of supplying power to it under this Agreement is the amount that may be incurred in connection with the decommissioning, shutdown, demolition and closing of Corporation's Ohio Station and its Indiana Station when production of electric power and energy is discontinued at each of these facilities. Such cost (net of salvage credits) shall include, but is not limited to, the costs of demolishing the plant's building structures, disposal of non-salvageable materials, removal and disposal of insulating materials, removal and disposal of storage tanks and associated piping, disposal or removal of materials and supplies (including fuel oil and coal), grading, covering and reclaiming storage and disposal areas, disposing of ash in ash ponds to the extent required by regulatory authorities, undertaking corrective or remedial action required bv regulatory authorities, and any other costs incurred in putting the facilities in a condition necessary to protect health or the environment or which are required by regulatory authorities, or which are incurred to fund continuing obligations to monitor or to correct environmental problems which result, or are later discovered to result, from the facilities' operation, closure or post-closure activities. 16 "DOE agrees to pay as incurred or, if not incurred, not later than the effective date of the termination of the Agreement its pro rata share of any of the above-- referenced costs incurred or, if not incurred, as estimated by the Independent Engineer in accordance with the methodology described below. The pro rata share to be paid by DOE and the estimated total amount of the above-referenced costs are to be determined by a recognized firm of Independent Engineers to be selected by Corporation with the approval of DOE (hereinafter called "Independent Engineer"). The Independent Engineer shall determine DOE's pro rata share on the basis of the following ratio: (i) The total number of megawatt-hours produced and estimated to be produced at the generating station incurring such costs for sale to DOE subsequent to the effective date of this Modification No. 14 to this Agreement, as compared to (ii) The total number of megawatt-hours produced and estimated to be produced at the generating station incurring such costs subsequent to the effective date of this Modification No. 14 to this Agreement." 18. Section 7.04 is amended by deleting paragraph 1 in its entirety and substituting therefor the following: "1. Corporation shall keep books of account in accordance with the Federal Power Commission (FPC) Uniform System of Accounts of 1937 (Uniform System of Accounts) and, with the consent of DOE, such other systems of accounts prescribed by other governmental regulatory authorities having jurisdiction as may be applicable. In addition, Corporation shall keep such records and memorandum accounts as may be required for the computation of amounts payable by DOE hereunder. The Uniform System of Accounts shall be used for the determination of any question relative to costs and expenses arising under this Agreement except that where specific methods of computations of amounts are set forth in this Agreement such methods shall be employed in lieu of any other method which might be required by the Uniform System of Accounts." 19. Section 7.07 is amended in its entirety to read as follows: 17 "SECTION 7.07 - FAR 52.222-3 Convict Labor (APR 1984). "Corporation agrees not to employ any person undergoing sentence of imprisonment in performing this contract except as provided by 18 U.S.C. 4082(c)(2) and Executive Order 11755, December 29, 1973." 20. Section 7.08 is amended in its entirety to read as follows: "SECTION 7.08 - FAR 52.203-1 Officials Not to Benefit (APR 1984). "No member of or delegate to Congress, or resident commissioner, shall be admitted to any share or part of this contract, or to any benefit arising from it. However, this clause does not apply to this contract to the extent that this contract is made with a corporation for the corporation's general benefit." 21. Section 7.12 is amended in its entirety to read as follows: "SECTION 7.12 Successors and Assigns. "1. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. Neither this Agreement nor any rights under this Agreement may be assigned by either party without the written consent of the other, provided, however, that consent shall not be unreasonably withheld and provided further that, in the case of an assignment by DOE, reasonable grounds for refusal of consent shall include, without limitation, that such assignment may be prejudicial to Corporation or the holders of any indebtedness of Corporation, except that (A) DOE may without Corporation's consent assign this Agreement or any of its rights under this Agreement, provided that (i) the assignee is a successor to DOE for purposes of operating the Project, (ii) the assignee is wholly owned by the United States of America, (iii) the assignee is authorized by law to assume, and does assume (by written instrument that is in form satisfactory to Corporation), all of the obligations and responsibilities of DOE and the United States of America under this Agreement, and (iv) the assignment does not have the effect of relieving the United States of America of any of its obligations or responsibilities under this Agreement, and (B) Corporation may without the consent of DOE assign this Agreement or any of its rights under this Agreement to a successor to all or substantially all of its property and assets and may pledge 18 this Agreement to secure its indebtedness incurred or to be incurred for the purpose of constructing facilities, and this Agreement or rights under this Agreement may be assigned or transferred without the consent of DOE to one or more persons who shall assume the obligations of Corporation hereunder in connection with the enforcement of any such pledge. Corporation may without the consent of DOE assign pursuant to the provisions of the Assignment of Claims Act of 1940, as amended, to any bank, trust company, or other financing institution, including any Federal lending agency, any moneys due or to become due under this Agreement, and any such assignment may cover all or any part of the amounts payable by DOE to Corporation under this Agreement and may be made to more than one such bank, trust company or financing institution either for the account of such bank, trust company or financing institution or as agent or trustee for two or more parties who are holders of indebtedness of Corporation. Payments to be made to the assignee of any moneys due or to become due under this Agreement shall not be subject to reduction or set off. "2. Notwithstanding any other provision of this Agreement, any assignment by DOE shall not become effective if the same would require any shareholder of the Corporation to dispose of its shares or until the date upon which all authorizations, consents, approvals, exemptions, franchises, permissions, permits and licenses of Federal, State or other governmental authorities, free of conditions deemed burdensome by the Corporation or any of its shareholders, shall have been issued and there have been made all recordings and filings with such authorities which are necessary to enable Corporation legally to furnish to such successor operator of the Project the electric service required to be furnished to DOE under this Agreement and to enable Corporation legally to carry out is obligations under this Agreement, and all such authorizations, consents, approvals, exemptions, franchises, permissions, permits, licenses, recordings and filings are valid and in full force and effect, are not the subject of attack on the appeal, by direct proceedings or otherwise, and (except to the extent that Corporation shall waive such condition) that either the time within which any appeal therefrom may be taken or any review thereof may be had has expired or that no review thereof may be had nor appeal therefrom taken. "3. In the event that any assignment of this Agreement or rights under this Agreement shall become effective as herein provided, Corporation shall thereafter be entitled to take such action before, or make such filings with, any regulatory authority having jurisdiction with respect to any term or condition of this Agreement as Corporation shall deem appropriate and in the event of such action by Corporation, 19 the terms and conditions under which service shall be rendered shall be the terms and conditions as so changed or as shall result from such action by or before any such regulatory authority. "4. Notwithstanding nay other provision of this Agreement, no assignment contemplated by this Section 7.12 or transfer, by operation of law or otherwise, of any of the rights, obligations or responsibilities of DOE and the United States of America under this Agreement shall relieve the United States of America of its obligations or responsibilities to pay interest and principal or amortization components of purchase price, amortization, rental or other payments under installment sale, loan, lease or similar agreements directly to a trustee as provided in subclauses(i) and (iii) of clause (a) of paragraph 3 of Section 3.04 or as provided in Sections 3.06 and 3.07 of this Agreement." 22. Section 7.13 is amended in its entirety to read as follows: "SECTION 7.13 FAR 52.2222-6 Equal Opportunity (APR 1984). "(a) If, during any 12-month period (including the 12 months preceding the award of this contract), Corporation has been or is awarded non-exempt Federal contracts and/or subcontracts that have an aggregate value in excess of $10,000, Corporation shall comply with the subparagraph (b)(1) through (11) below. Upon request, Corporation shall provide information necessary to determine the applicability of this clause. "(b) During performing this contract, Corporation agrees as follows: (1) Corporation shall not discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin. (2) Corporation shall take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex or national origin. This shall include, but not be limited to, (i) employment, (ii) upgrading, (iii) demotion, (iv) transfer, (v) recruitment or recruitment advertising, (vi) layoff or termination, (vii) rates of pay or other forms of compensation, and (viii) selection for training, including apprenticeship. 20 (3) Corporation shall post in conspicuous places available to employees and applicants for employment the notices to be provided by the Contracting Officer that explain this clause. (4) Corporation shall, in all solicitations or advertisement for employees placed by or on behalf of the Corporation, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex or national origin. (5) Corporation shall send to each labor union or representative of workers with which it has a collective bargaining agreement or other contract or understanding, the notice to be provided by the Contracting Officer advising the labor union or workers' representative of Corporation's commitments under this clause, and post copies of the notice in conspicuous places available to employees and applicants for employment. (6) Corporation shall comply with Executive Order 11246, as amended, and the rules, regulations and orders of the Secretary of Labor. (7) Corporation shall furnish to the contracting agency all information required by Executive Order 11246, as amended, and by the rules, regulations and orders of the Secretary of Labor. Standard Form 100 (EEO-1), or any successor form, is the prescribed form to be filed within 30 days following the award, unless filed within 12 months preceding the date of award. (8) Corporation shall permit access to its books, records and accounts by the contracting agency or the Office of Federal Contract Compliance Programs (OFCCP) for the purposes of investigation to ascertain Corporation's compliance with the applicable rules, regulations and orders. (9) In the event of Corporation's non-compliance with this clause or any rule, regulation or order of the Secretary of Labor, this contract may be canceled, terminated or suspended in whole or in part and Corporation may be declared ineligible for further Government contracts under the procedures authorized in Executive Order 11246, as amended. In addition, sanctions may be imposed and remedies invoked against Corporation as provided in Executive Order 11246, as amended, the rules, regulations and orders of the Secretary of Labor, or as otherwise provided by law. 21 (10) Corporation shall include the terms and conditions of subparagraph (b)(1) through (11) of this clause in every subcontract or purchase order that is not exempted by the rules, regulations or orders of the Secretary of Labor issued under Executive Order 11246, as amended, so that these terms and conditions will be binding upon each subcontractor or vendor. (11) Corporation shall take such action with respect to any subcontract or purchase order as the contracting agency may direct as a means of enforcing these terms and conditions, including sanctions for non- compliance; provided, that if Corporation becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of any direction, Corporation may request the United States to enter into the litigation to protect the interests of the United States. "(c) If, pursuant to this section, DOE elects, in whole or in part, to cancel, terminate, annul or suspend this Agreement, to terminate the right of Corporation to proceed or to suspend contract payments, such action by DOE may only be taken by delivering to Corporation a notice in writing of DOE's election to terminate not less than three years prior to the effective date of termination pursuant to Section 6.02 of this Agreement." 23. Section 7.14 is amended in its entirety to read as follows: "SECTION 7.14. Security. "1. Corporation's Duty to Safeguard Restricted Data, Formerly Restricted Data, and Other Classified Information. Corporation shall, in accordance with DOE's security regulations and requirements, be responsible for safeguarding all classified information and protecting against sabotage, espionage, loss and theft the classified documents and material in the Corporation's possession in connection with work under this Agreement. Except as otherwise expressly provided in this Agreement, Corporation shall, upon completion or termination of this Agreement, transmit to DOE any classified matter in the possession of Corporation or any person under Corporation's control in connection with the performance of the Agreement. If retention by Corporation of any classified matter is required after the completion or termination of the Agreement and such retention is approved by the Contracting Officer, Corporation will complete a certificate of possession to be furnished to 22 DOE specifying the classified matter to be retained. The certification shall identify the items and types of categories of matter retained, the conditions governing the retention of the matter and the period of retention, if known. If the retention is approved by the Contracting Officer, the security provisions of the Agreement will continue to be applicable to the matter retained. "2. Regulations. Corporation agrees to conform to all security regulations and requirements of DOE. "3. Definition of Classified Information. The term 'Classified Information' means Restricted Data, Formerly Restricted Data, or National Security Information. "4. Definition of Restricted Data. The term 'Restricted Data,' as used in this paragraph, means all data concerning (a) design, manufacture, or utilization of atomic weapons; (b) the production of special nuclear material; or (c) the use of special nuclear material in the production of energy, but shall not include data declassified or removed from the Restricted Data category pursuant to Section 142 of the Atomic Energy Act of 1954, as amended. "5. Definition of Formerly Restricted Data. The term 'Formerly Restricted Data,' as used in this paragraph, means all data removed from the Restricted Data category under Section 142(d) of the Atomic Energy Act of 1954, as amended. "6. Definition of National Security Information. The term 'National Security Information' means any information or material, regardless of its physical form or characteristics, that is owned by, produced for or by, or is under the control of the United States Government, that has been determined pursuant to Executive Order 12356 or prior Orders to require protection against unauthorized disclosure, and which is so designated. "7. Security Clearance of Personnel. Corporation shall not permit any individual to have access to any classified information, except in accordance with the Atomic Energy Act of 1954, "8. Criminal Liability. It is understood that disclosure of any classified information relating to the work or services ordered hereunder to any person not entitled to receive it, or failure to safeguard any classified matter that may come to Corporation or any 23 person under Corporation's control in connection with work under this Agreement, may subject Corporation, its agents, employees, or subcontractors to criminal liability under the laws of the United States. (See the Atomic Energy Act of 1954, as amended, 42 U.S.C. 2011 et seq.; 18 U.S.C. 793 and 794; and Executive Order 12356.) "9. Subcontracts and Purchase Orders. Except as otherwise authorized in writing by the Contracting Officer, Corporation shall insert provisions similar to the foregoing provisions of this Section 7.14 in all subcontracts and purchase orders under this Agreement." 24. Section 7.15 is amended in its entirety to read as follows: "SECTION 7.15 Contract Work Hours and Safety Standards Act -- Overtime Compensation. "Prior to any assignment or transfer by DOE under Section 7.12, this Agreement, to the extent that it is of a character specified in the Contract Work Hours and Safety Standards Act (40 U.S.C. 327-333), is subject to the following provisions and to all other applicable provisions and exceptions of such Act and the regulations of the Secretary of Labor thereunder. "1. Overtime Requirements. No contractor or subcontractor contracting for any part of the contract work which may require or involve the employment of laborers or mechanics shall require or permit any laborer or mechanic, in any workweek in which he is employed on such work, to work in excess of 40 hours in such workweek on work unless such laborer or mechanic receives compensation at a rate not less than one and one-half times the basic rate of pay for all such hours worked in excess of 40 hours in such workweek. "2. Violation; liability for unpaid wages; liquidated damages. In the event of any violation of the provisions of paragraph 1 of this Section 7.15, Corporation and any subcontractor responsible therefor shall be liable to any affected employee for the unpaid wages. In addition, such Corporation and subcontractor shall be liable to the United States for liquidated damages. Such liquidated damages shall be computed with respect to each individual laborer or mechanic employed in violation of the provisions of paragraph 1 of this Section 7.15 in the sum of $10 for each calendar day bon which such employee was required or permitted to be 24 employee on such work in excess of his standard workweek of 40 hours without payment of the overtime wages required by paragraph 1 of this Section 7.15. "3. Withholding of unpaid wages and liquidated damages. Except as otherwise provided in Section 7.12 of this Agreement, the Contracting Officer may withhold from Corporation, from any moneys payable on account of work performed by Corporation or subcontractor under any such contract or other Federal contract with Corporation, or any other Federally Assisted contract subject to the Contract Work Hours and Safety Standards Act which is held by Corporation, such sums as may administratively be determined to be necessary to satisfy any liabilities of Corporation or subcontractor for unpaid wages and liquidated damages as provided in the provisions of paragraph 2 of this Section 7.15. "4. Payrolls and basic records. Corporation or subcontractor shall maintain payrolls and basic payroll records during the course of contract work and shall preserve them for a period of 3 years from the completion of this Agreement for all laborers and mechanics working on this Agreement. Such records shall contain the name and address of each such employee, social security number, correct classifications, hourly rates of wages paid, daily and weekly number of hours worked, deductions made, and actual wages paid. Nothing in this paragraph shall require the duplication of records required to be maintained for construction work by Department of labor regulations at 29 CFR 5.5(a)(3) implementing the Davis- Bacon Act. "5. Subcontracts. Corporation shall insert paragraphs 1 through 4 of this Section 7.15 in all subcontracts, and shall require their inclusion in all subcontracts of any tier." 25. Paragraph (a) of Section 7.18 is amended by adding a second sentence to read as follows: "It is further the policy of the United States that its prime contractors establish procedures to ensure the timely payment of amounts due pursuant to the terms of their subcontracts with small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals." 26. Paragraph (c) of Section 7.18 is amended in its entirety to read as follows: 25 "(c) As used in this Agreement, the term 'small business concern' shall mean a small business as defined pursuant to section 3 of the Small Business Act (15 U.S.C. 632) and relevant regulations promulgated pursuant thereto. The term 'small business concern owned and controlled by socially and economically disadvantaged individuals' shall mean a small business concern: (1) which is at least 51 percent owned by one or more socially and economically disadvantaged individuals; or, in the case of any publicly-owned business, at least 51 percent of the stock of which is owned by one or more socially and economically disadvantaged individuals; and (2) whose management and daily business operations are controlled by one or more of such individuals. This term also means a small business concern that is at least 51 percent unconditionally owned by an economically disadvantaged Indian tribe or Native Hawaiian organization, or a publicly-owned business having at least 51 percent of its stock unconditionally owned by one of these entities which has its management economically disadvantaged Indian tribe or Native Hawaiian organization which meet the requirements of 13 CFR 124. Corporation shall presume that socially and economically disadvantaged individuals include Black Americans, Hispanic Americans, Native Americans, Asian- Pacific Americans, Asian-Indian Americans, and other specified minorities, or any other individual found to be disadvantaged by the Small Business Administration pursuant to section 8(a) of the Small Business Act. Corporation shall presume that socially and economically disadvantaged entities also include Indian Tribes and Native Hawaiian Organizations." 27. Section 7.19 is amended by deleting subparagraph (1) of paragraph (c) thereof in its entirety and substituting therefor the following: "(1) The term 'labor surplus area' means a geographical area identified by the Department of Labor, in accordance with 20 CFR 654, Subpart A, as an area of concentrated unemployment and under-employed or an area of labor surplus." 26 28. Paragraph (g) of Section 7.22 is amended in its entirety to read as follows: "(g) If, pursuant to this section, DOE elects, in whole or in part, to cancel, terminate, annul or suspend this Agreement, to terminate the right of Corporation to proceed or to suspend contract payments, such action by DOE may only be taken by delivering to Corporation a notice in writing of DOE's election to terminate not less than three years prior to the effective date of termination pursuant to Section 6.02 of this Agreement." 29. Section 7.23 is amended in its entirety to read as follows: "Section 7.23 Clean Air and Water. "(a) Corporation agrees as follows: (i) to comply with all applicable requirements of Section 114 of the Clean Air Act (42 U.S.C. 7414) and Section 308 of the Clean Water Act (33 U.S.C. 1518), respectively, relating to inspection, monitoring, entry, reports and information, as well as other applicable requirements specified in Section 114 and Section 308 of the Air Act and the Water Act, respectively, and all applicable regulations and guidelines issued thereunder before the execution of Modification No. 14 to this Agreement; (ii) that no portion of the work required by this Agreement will be performed in a facility listed on the Environmental Protection Agency list of violating facilities on the date when Modification No. 14 to this Agreement was executed unless and until the Environmental Protection Agency eliminates the name of such facility or facilities from such listing; (iii) to use its best efforts to comply with clean air standards and clean water standards at the facilities in which the Agreement is being performed; (iv) to insert the substance of the provisions of this Section 7.23 in any non-exempt subcontract, including this paragraph (iv). "(b) The terms used in this Section 7.23 have the following meanings: 27 (i) the term 'Air Act' means the Clean Air Act, as amended (42 U.S.C. 7401 et seq.); (ii) the term 'Water Act' means Clean Water Act, as amended (33 U.S.C. 1251 et seq.); (iii) the term 'Clean Air Standards' means any applicable and enforceable rules, regulations, guidelines, standards, limitations, orders, controls, prohibitions, or other requirements which are contained in, issued under, or otherwise adopted pursuant to the Air Act or Executive Order 11,738, an applicable implementation plan as described in Section 110(d) of the Air Act (42 U.S.C. 7410(d)), an approved implementation procedure or plan under Section 111(c) or Section 111(d), respectively, of the Air Act (42 U.S.C 7411(c) or (d), or an approved implementation procedure under Section 112 (d) of the Air Act (42 U.S.C. 7412 (d)); (iv) the term 'Clean Water Standards' means any applicable and enforceable limitation, control, condition, prohibition, standard, or other requirement which is promulgated pursuant to the Water Act or contained in a permit issued to a discharger by the Environmental Protection Agency or by a state under an approved program, as authorized by Section 402 of the Water Act (33 U.S.C. 1342), or by a local government to ensure compliance with pretreatment regulations as required by Section 307 of the Water Act (33 U.S.C. 1317); (v) the term 'compliance' means compliance with applicable clean air or water standards. Compliance shall also mean compliance with a schedule or plan ordered or approved by a court of competent jurisdiction, the Environmental Protection Agency or an air or water pollution control agency in accordance with the requirements of the Air Act or Water Act and regulations issue pursuant thereto; (vi) the term 'facility' means any building, plant, installation, structure, mine, vessel, or other loading craft, location, or site of operations, owned, leased or supervised by a contractor or subcontractor, to be utilized in the performance of a contract or subcontract. Where a location or site of operations contains or includes more than one building, plant, installation, or structure, the entire location shall be deemed to be a facility except where the Director, Office of Federal Activities, Environmental Protection Agency, determines that independent facilities are located in one geographical area." 28 30. Paragraph (b) of Section 7.24 is amended by deleting the words "Modification No. 11" and substituting therefor the words "Modification No. 14." 31. Paragraph (d) of Section 7.24 is amended in its entirety to read as follows: "(d)(l) Corporation shall report at least annually, as required by the Secretary of Labor, on: (i) The number of special disabled veterans and the number of veterans of the Vietnam era in the work force of Corporation by job category and hiring location; and (ii) The total number of new employees hired during the period covered by the report, and of that total, the number of special disabled veterans,and the number of veterans of the Vietnam era. (2) The above items shall be reported by completing the form entitled Federal Contractor Veterans' Employment Report VETS-100.' (3) Reports shall be submitted no later than March 31 of each year. (4) The employment activity report required by paragraph (d) (1) (ii) of this clause shall reflect total hires during the most recent 12-month period as of the ending date selected for the employment profile report required by paragraph (d) (1) (i) of this clause. Contractors may select an ending date: (i) As of the end of any pay period during the period January through March 1st of the year the report is due, or (ii) as of December 31, if the contractor has previous written approval from the Equal Opportunity Commission to do so for purposes of submitting the Employer Information Report EEQ-l (Standard Form 100). (5) The count of veterans reported according to paragraph (d) (1) of this clause shall be based on voluntary disclosure. Each contractor subject to the reporting requirements at 38 U.S.C. 2012(d) shall invite all special disabled veterans and veterans of the Vietnam era who wish to benefit under the affirmative action program at 38 U.S.C. 2012 to identify themselves to the contractor. The invitation shall state that the information is voluntarily provided. that the information will be kept confidential, that disclosure or refusal to provide the information will not subject the applicant or employee to any adverse treatment and that the 29 information will be used only in accordance with the regulations promulgated under 38 U.S.C. 2012." 32. Paragraph (f) of Section 7.24 is amended to read as follows: "(f) This clause does not apply to the listing of employment openings which occur and are filled outside of the 50 states, the District of Columbia, Puerto Rico, Guam, Virgin Islands, American Samoa, and the Trust Territory of the Pacific Islands." 33. Subparagraph (2) of paragraph (h) of Section 7.24 is amended in its entirety to read as follows: "(2) Appropriate office of the State employment service system means the local office of the Federal-State national system of public employment offices with assigned responsibility for serving the areas where the employment opening is to be filled, including the District of Columbia, Guam, Puerto Rico, the Virgin Islands, American Samoa, and the Trust Territory of the Pacific Islands." 34. Paragraph (i) of Section 7.24 is amended in its entirety to read as follows: "(i) Corporation agrees to comply with the rules, regulations, and relevant orders of the Secretary of Labor issued pursuant to the Vietnam Era Veterans Readjustment Assistance Act of 1972 (the 'Act'), as amended." 35. Paragraph (n) of Section 7.24 is amended in its entirety to read as follows: "(n) If, pursuant to this section, DOE elects, in whole or in part, to cancel, terminate, annul or suspend this Agreement, to terminate the right of Corporation to proceed or to suspend contract payments, such action by DOE may only be taken by delivering to Corporation a notice in writing of DOE's election to terminate not less than three years prior to the effective date of termination pursuant to Section 6.02 of this Agreement." 36. Section 7.25 is amended in its entirety to read as follows: "SECTION 7.25 Covenant Against Contingent Fees. "(a) The Corporation warrants that no person or selling agency has been employed or retained to solicit or secure this contract upon an agreement or understanding for a commission, 30 percentage, brokerage, or contingent fee, excepting bona fide employees or bona fide established commercial or selling agencies maintained by the Corporation for the purpose of securing business. For breach or violation of this warranty the Government shall have the right to annul this contract without liability or in its discretion to deduct from the contract price or consideration, or otherwise recover, the full amount of such commission, percentage, brokerage, or contingent fee; provided, however, that if, pursuant to this section, DOE elects, in whole or in part, to cancel, terminate, annul or suspend this Agreement, to terminate the right of Corporation to proceed or to suspend contract payments, such action by DOE may only be taken by delivering to Corporation a notice in writing of DOE's election to terminate not less than three years prior to the effective date of termination pursuant to Section 6.02 of this Agreement. "(b) 'Bona fide agency,' as used in this clause, means an established commercial or selling agency, maintained by a contractor for the purpose of securing business, that neither exerts nor proposes to exert improper influence to solicit or obtain Government contracts nor holds itself out as being able to obtain any Government contract or contracts through improper influence. 'Bona fide employee,' as used in this clause, means a person, employed by a contractor and subject to the contractor's supervision and control as to time, place, and manner of performance, who neither exerts nor proposes to exert improper influence to solicit or obtain Government contracts nor holds out as being able to obtain any Government contract or contracts through improper influence. 'Contingent fee,' as used in this clause, means any commission, percentage, brokerage, or other fee that is contingent upon the success that a person or concern has in securing a Government contract. 'Improper influence,' as used in this clause, means any influence that induces or tends to induce a Government employee or officer to give consideration or to act regarding a Government contract on any basis other than the merits of the matter." 37. Section 7.26 is amended by deleting its third and fourth sentences. 38. A new Section 7.30 is to be inserted after Section 7.29 as follows: "SECTION 7.30 - DEAR 952.202-l Definitions (APR 1984). 31 "(a) 'Contracting Officer' means a person with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings. The term includes certain authorized representatives of the Contracting Officer acting within the limits of their authority as delegated by the Contracting Officer. "(b) Except as otherwise provided in this Agreement, the term 'subcontracts' includes, but is not limited to, purchase orders and changes and modifications to purchase orders under this Agreement." 39. A new Section 7.31 is to be inserted after 7.30 as follows: "SECTION 7.31 - FAR 52.203-3 Gratuities (APR 1984). "(a) The right of Corporation to proceed may be terminated by written notice if, after notice and hearing, the agency head or a designee determines that Corporation, its agent, or another representative -- (1) Offered or gave a gratuity (e.g., an entertainment or gift) to an officer, official, or employee of the Government; and (2) Intended, by the gratuity, to obtain a contract or favorable treatment under a contract. "(b) The facts supporting this determination may be reviewed by any court having lawful jurisdiction. "(c) If this Agreement is terminated under paragraph (a) above, the Government is entitled -- (1) To pursue the same remedies as in a breach of this Agreement; and (2) In addition to any other damages provided by law, to exemplary damages of not less than 3 nor more than 10 times the cost incurred by Corporation in giving gratuities to the person concerned, as determined by the agency head or a designee. (This subparagraph (c) (2) is applicable only if this contract uses money appropriated to the Department of Defense.) "(d) If, pursuant to this section, DOE elects, in whole or in part, to cancel, terminate, annul or suspend this Agreement, to terminate the right of Corporation to proceed or to suspend contract payments, such action by DOE may only be taken by delivering to Corporation a notice in writing of DOE's election to terminate not less than three years prior to the effective date of termination pursuant to Section 6.02 of this Agreement." 32 40. A new Section 7.32 is to be inserted after Section 7.31 as follows: "SECTION 7.32 - FAR 52.203-6 Restrictions on Subcontractor Sales to the Government (JUL 1985) "(a) Except as provided in (b) below, Corporation shall not enter into any agreement with an actual or prospective subcontractor, nor otherwise act in any manner, which has or may have the effect of unreasonably restricting sales by such subcontractors directly to the Government of any item or process (including computer software) made or furnished by the subcontractor under this Agreement or under any follow-on production contract. "(b) The prohibition in (a) above does not preclude Corporation from asserting rights that are otherwise authorized by law or regulation. 41. A new Section 7.33 is to be inserted after Section 7.32 as follows: "SECTION 7.33 - FAR 52.203-7 Anti-Kickback Procedures (OCT 1988). "(a) Definitions. 'Kickback,' as used in this clause, means any money, fee, commission, credit, gift, gratuity, thing of value, or compensation of any kind which is provided, directly or indirectly, to any prime Contractor, prime Contractor employee, sub-contractor, or subcontractor employee for the purpose of improperly obtaining or rewarding favorable treatment in connection with a prime contract or in connection with a subcontractor relating to a prime contract. 'Person,' as used in this clause, means a corporation, partnership, business association of any kind, trust, joint-stock company, or individual. 'Prime contract,' as used in this clause, means a contract or contractual action entered into by the United States for the purpose of obtaining supplies, materials, equipment, or services of any kind. 'Prime Contractor,' as used in this clause, means a person who has entered into a prime contract with the United States. 33 'Prime Contractor employee,' as used in this clause, means any officer, partner, employee, or agent of a prime Contractor. 'Subcontract,' as used in this clause, means a contract or contractual action entered into by a prime Contractor or subcontractor for the purpose of obtaining supplies, materials, equipment or services of any kind under a prime contract. 'Subcontractor,' as used in this clause, (1) means any person, other than the prime Contractor, who offers to furnish or furnishes any supplies, materials, equipment, or services of any kind under a prime contractor or subcontract entered into in connection with such prime contract, and (2) includes any person who offers to furnish or furnishes general supplies to the prime Contractor or a higher tier subcontractor. 'Subcontractor employee,' as used in this clause, means any officer, partner, employee, or agent of a subcontractor. "(b) The Anti-Kickback Act of 1986 (41 U.S.C. 51- 58) (the Act), prohibits any person from -- (1) Providing or attempting to provide or offering to provide any kickback; (2) Soliciting, accepting, or attempting to accept any kickback; or (3) Including, directly or indirectly, the amount of any kickback in the contract price charged by a prime Contractor to the United States or in the contract price charged by a subcontractor to a prime contractor or higher tier subcontractor. "(c)(1) Corporation shall have in place and follow reasonable procedures designed to prevent and detect possible violations described in paragraph (b) of this clause in its own operations and direct business relationships. (2) When Corporation has reasonable grounds to believe that a violation described in paragraph (b) of this clause may have occurred, Corporation shall promptly report in writing the possible violation. Such reports shall be made to the inspector general of the contracting agency, the head of the contracting agency if the agency does not have an inspector general, or the Department of Justice. 34 (3) Corporation shall cooperate fully with any Federal Agency investigating a possible violation described in paragraph (b) of this clause. (4) The Contracting Officer may (i) offset the amount of the kickback against any monies owed by the United States under the prime contract and/or (ii) direct that the Prime Contractor withhold, from sums owed a subcontractor under the prime contract, the amount of any kickback. The Contracting Officer may order that monies withheld under subdivision (c)(4)(ii) of this clause be paid over to the Government unless the Government has already offset those monies under subdivision (c)(4)(i) of this clause. In either case, the Prime Contractor shall notify the Contracting Officer when the monies are withheld. (5) Corporation agrees to incorporate the substance of this clause, including this subparagraph (c) (5) but excepting subparagraph (c) (1), in all subcontracts under this Agreement." 42. A new Section 7.34 is to be inserted after Section 7.33 as follows: "SECTION 7.34 - FAR 52.219-9 Small Business And Small Disadvantaged Business Subcontracting Plan (FEB 1990). "(a) This clause does not apply to small business concerns. "(b) 'Commercial product,' as used in this clause, means a product in regular production that is sold in substantial quantities to the general public and/or industry at established catalog or market prices. It also means a product which, in the opinion of the Contracting Officer, differs only insignificantly from Corporation's commercial product. 'Subcontract,' as used in this clause, means any agreement (other than one involving an employer-employee relationship) entered into by a Federal Government prime Contractor or subcontractor calling for supplies or services rendered for performance of the contract or subcontract. "(c) The offeror, upon request by the Contracting Officer, shall submit and negotiate a subcontracting plan, where applicable, which separately addresses subcontracting with small business concerns and small disadvantaged business concerns. If the offeror is submitting an individual contract plan, the plan must separately address subcontracting with small business concerns and with small disadvantaged business concerns 35 with a separate part for each option (if any). The plan shall be included in and made a part of the resultant contract. The subcontracting plan shall be negotiated within the time specified by the Contracting Officer. Failure to submit and negotiate the subcontracting plan shall make the offeror ineligible for award of a contract. "(d) The offeror's subcontracting plan shall include the following: (1) Goals, expressed in terms of percentages of total planned subcontracting dollars, for use of small business concerns and small disadvantaged business concerns as subcontractors. The offeror shall include all subcontracts that contribute to contract performance, and may include a proportionate share of products and services that are normally allocated as indirect costs. (2) A statement of -- (i) Total dollars planned to be subcontracted; (ii) Total dollars planned to be subcontracted to small business concerns; and (iii) Total dollars planned to be subcontracted to small disadvantaged business concerns. (3) A description of the principal types of supplies and services to be subcontracted, and an identification of the types planned for subcontracting to (i) small business concerns and (ii) small disadvantaged business concerns. (4) A description of the method used to develop the subcontracting goals in (1) above. (5) A description of the method used to identify potential sources for solicitation purposes (e.g., existing company source lists, the Procurement Automated Source System (PASS) of the Small Business Administration, the National Minority Purchasing Council Vendor Information Service, the Research and Information Division of the Minority Business Development Agency in the Department of Commerce, or small and small disadvantaged concerns trade associations). 36 (6) A statement as to whether or not the offeror included indirect costs in establishing subcontracting goals, and a description of the method used to determine the proportionate share of indirect costs to be incurred with (in small business concerns and (ii) small disadvantaged business concerns. (7) The name of the individual employed by the offeror who will administer the offeror's subcontracting program, and a description of the duties of the individual. (8) A description of the efforts the offeror will make to assure that small business concerns and small disadvantaged business concerns have an equitable opportunity to compete for subcontracts. (9) Assurances that the offeror will include the clause in this Agreement entitLed 'Utilization of Small Business Concerns and Small Disadvantaged Business Concerns in all subcontracts that offer further subcontracting opportunities, and that the offeror will require all subcontractors (except small business concerns) who receive subcontracts in excess of $500,000 ($1,000,000 for construction of any public facility) to adopt a plan similar to the plan agreed to by the offeror. (10) Assurances that the offeror will (i) cooperate in any studies or surveys as may be required, (ii) submit periodic reports in order to allow the Government to determine the extent of compliance by the offeror with the subcontracting plan, (iii) submit, not later than the 25th day of the succeeding month, Standard Form (SF) 294 only, (DOE contractors need not submit SF 295) on a quarterly basis current as the last day of March, June, September, and December, and upon contract completion, in accordance with the instructions on the form except the report shall be submitted quarterly rather than semiannually and additionally shall indicate at the remarks block the number and dollar amount of award made to labor surplus area concerns to the extent such reporting is required by the terms of their contract, and (iv) ensure that its subcontractors agree to submit Standard Form 294 in accordance with the instructions of (iii) above. 37 (11) A recitation of the types of records the offeror will maintain to demonstrate procedures that have been adopted to comply with the requirements and goals in the plan, including establishing source lists; and a description of its efforts to locate small and small disadvantaged business concerns and award subcontracts to them. The records shall include at least the following (on a plant-- wide or company-wide basis, unless otherwise indicated): (i) Source lists, guides, and other data that identify small and small disadvantaged business concerns. (ii) Organizations contacted in an attempt to locate sources that are small or small disadvantaged business concerns. (iii) Records on each subcontract solicitation resulting in an award of more than $100,000, indicating (A) whether small business concerns were solicited and if not, why not, (B) whether small disadvantaged business concerns were solicited and if not, why not, and (C) if applicable, the reason award was not made to a small business concern. (iv) Records of any outreach efforts to contact (A) trade Associations, (B) business development organizations, and (C) conferences and trade fairs to locate small and small disadvantaged business sources. (v) Records of internal guidance and encouragement provided to buyers through (A) workshops, seminars, training etc., and (B) monitoring performance to evaluate compliance with the program's requirements. (vi) On a contract-by-contract basis, records to support award data submitted by the offeror to the Government, including the name, address, and business size of each 38 subcontractor. Contractors having company or division-wide annual plans need not comply with this requirements. "(e) In order to effectively implement this plan to the extent consistent with efficient contract performance, Corporation shall perform the following functions: (1) Assist small business and small disadvantaged business concerns by arranging solicitations, time for the preparation of bids, quantities, specifications, and delivery schedules so as to facilitate the participation by such concerns. Where Corporation's lists of potential small business and small disadvantaged subcontractors are excessively long, reasonable effort shall be made to give all small business concerns an opportunity to compete over a period of time. (2) Provide adequate and timely consideration of the potentialities of small business and small disadvantaged business concerns in all 'make-or-buy' decisions. (3) Counsel and discuss subcontracting opportunities with representatives of small and small disadvantaged business firms. (4) Provide notice to subcontractors, similar to that in the solicitation provision at 52.219-l, concerning penalties from its representations of business status as small business or small disadvantaged business for the purpose of obtaining a subcontract that is to be included as part or all of a goal contained in Corporation's subcontracting plan. "(f) A master subcontracting plan on a plant or division-wide basis which contains all the elements required by (d) above, except goals, may be incorporated by reference as a part of the subcontracting plan required of the offeror by this clause; provided, (1) the master plan has been approved, (2) the offeror provides copies of the approved master plan and evidence of its approval to the Contracting Officer, and (3) goals and any deviations from the master plan deemed necessary by the Contracting Officer to satisfy the requirements of this contract are set forth in the individual subcontracting plan. 39 "(g)(1) If a commercial product is offered, the subcontracting plan required by this clause may relate to the offeror's production generally, for both commercial and non-commercial products, rather than solely to the Government contract. In these cases, the offeror shall, with the concurrence of the Contracting Officer, submit one company-wide or division-wide annual plan. (2) The annual plan shall be reviewed for approval by the agency awarding the offeror its first prime contract requiring a subcontracting plan during the fiscal year, or by an agency satisfactory to the Contracting Officer. (3) The approved plan shall remain in effect during the offeror's fiscal year for all of the offeror's commercial products. "(h) Prior compliance of the offeror with other such subcontracting plans under previous contracts will be considered by the Contracting Officer in determining the responsibility of the Offeror for award of the contract. "(i) The failure of the Corporation to comply in good faith with (1) the clause of this Agreement entitled Utilization of Small Business Concerns and Small Disadvantaged Business Concerns,' or (2) an approved plan required by this clause, shall be a material breach of this Agreement. "(j) If, pursuant to this section, DOE elects, in whole or in part, to cancel, terminate, annul or suspend this Agreement, to terminate the right of Corporation to proceed or to suspend contract payments, such action by DOE may only be taken by delivering to Corporation a notice in writing of DOE's election to terminate not less than three years prior to the effective date of termination pursuant to Section 6.02 of this Agreement. " 43. A new Section 7.35 is to be inserted after Section 7.34 as follows: "SECTION 7.35 - FAR 52.291-13 Utilization of Women-Owned Small Businesses (AUG 1986). "(a) 'Women-owned small businesses,' as used in this clause, means small business concerns that are at least 51 percent owned by women who are United States citizens and who also control and operate the business. 'Control,' as used in this clause, means exercising the power to make policy decisions. 40 'Operate,' as used in this clause, means being actively involved in the day-to-day management of the business. 'Small business concern,' as used in this clause, means a concern including its affiliates, that is independently owned and operated, not dominant in the field of operation in which it is bidding on government contracts, and qualified as a small business under the criteria and size standards in 13 CFR 121. "(b) It is the policy of the United States that women- owned small businesses shall have the maximum practicable opportunity to participate in performing contracts awarded by any Federal agency. "(c) Corporation agrees to use its best efforts to give women-owned small businesses the maximum practicable opportunity to participate in the subcontracts it awards to the fullest extent consistent with the efficient performance of this Agreement. "(d) Corporation may rely on written representations by its subcontractors regarding their status as women-owned small businesses." 44. A new Section 7.36 is to be inserted after Section 7.35 as follows: "SECTION 7.36 - FAR 52.223-6 Drug-Free Work place (JUL 1990). "(a) Definitions. As used in this clause, 'Controlled substance' means a controlled substance in schedules I through V of section 202 of the Controlled Substances Act (21 U.S.C. 812) and as further defined in regulation at 21 CFR 1308.11 - 1308.15. 'Conviction' means a finding of guilt (including a plea of nolo contendere) or imposition of sentence, or both, by any judicial body charged with the responsibility to determine violations of the Federal or State criminal drug statutes. 'Criminal drug statute' means a Federal or non-Federal criminal statute involving the manufacture, distribution, dispensing, possession or use of any controlled substance. 'Drug-free work place' means the site(s) for the performance of work done by the Contractor in connection with a specific contract at which employees of the Contractor are prohibited from engaging in the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance. 41 'Employee' means an employee of a Contractor directly engaged in the performance of work under a Government contract. 'Directly engaged' is defined to include all direct cost employees and any other Contractor employee who has other than a minimal impact or involvement in contract performance. "(b) Corporation, if other than an individual, shall -- within 30 calendar days after award (unless a longer period is agreed to in writing for contracts of 30 calendar days or more performance duration); or as soon as possible for contracts of less than 30 days performance duration - (1) Publish a statement notifying its employees that the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance is prohibited in Corporation's work place and specifying the actions that will be taken against employees for violations of such prohibition; (2) Establish an ongoing drug-free awareness program to inform such employees about -- (i) The dangers o f drug abuse in the work place; (ii) Corporation's policy of maintaining a drug-free work place; (iii) Any available drug counseling, rehabilitation, and employee assistance program; and (iv) The penalties that may be imposed upon employees for drug abuse violations occurring in the work place. (3) Provide all employees engaged in performance of the Agreement with a copy of the statement required by subparagraph (b)(1) of this clause; (4) Notify such employees in writing in the statement required by subparagraph (b)(1) of this clause that, as a condition of continued employment of this Agreement, the employee will -- (i) Abide by the terms of the statement; 42 (ii) Notify the employer in writing of the employee's conviction under a criminal drug statute for a violation occurring in the work place no later than five (5) calendar days after such conviction. (5) Notify the Contracting Officer within 10 calendar days after receiving notice under subdivision (b)(4)(ii) of this clause, from an employee or otherwise receiving actual notice of such conviction. The notice shall include the position title of the employee; (6) Within 30 calendar days after receiving notice under subdivision (b)(4)(ii) of this clause of a conviction, take one of the following actions with respect to any employee who is convicted of a drug abuse violation occurring in the work place: (i) Taking appropriate personnel action against such employee up to and including termination; or (ii) Require such employee to satisfactorily participate in a drug abuse assistance or rehabilitation program approved for such purposes by a Federal, State, or local health, law enforcement, or other appropriate agency. (7) Make a good faith effort to maintain a drug-free work place through implementation of subparagraphs (b)(l) through (b)(6) of this clause. "(c) Corporation, if an individual, agrees by award of this Agreement or acceptance of a purchase order, not to engage in the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance in the performance of this Agreement. "(d) In addition to other remedies available to the Government, Corporation's failure to comply with the requirements of paragraphs (b) and (c) of this clause may, pursuant to FAR 23.506, render Corporation subject to suspension of contract payments, termination of the Agreement for default, and suspension or debarment. "(e) If, pursuant to this section, DOE elects, in whole or in part, to cancel, terminate, annul or suspend this Agreement, to terminate the right of Corporation to proceed 43 or to suspend contract payments, such action by DOE may only be taken by delivering to Corporation a notice in writing of DOE's election to terminate not less than three years prior to the effective date of termination pursuant to Section 6.02 of this Agreement." 45. A new Section 7.37 is to be inserted after Section 7.36 follows: "SECTION 7.37 - FAR 52.232-28 Electronic Funds Transfer Payment Methods (APR 1989). "Payments under this Agreement will be made by the Government either by check or electronic funds transfer (through the Treasury Fedline Payment System (FEDLINE) or the Automated Clearing House (ACH)), at the option of the Government. After award, but no later than 14 days before an invoice or contract financing request is submitted, Corporation shall designate a financial institution for receipt of electronic funds transfer payments, and shall submit this designation to the Contracting Officer or other Government official, as directed. "(a) For payments through FEDLINE, Corporation shall provide the following information: (1) Name, address, and telegraphic abbreviation of the financial institution receiving payment. (2) The American Bankers Association 9- digit identifying number for wire transfers of the financing institution receiving payment if the institution has access to the Federal Reserve Communications System. (3) Payee's account number at the financial institution where funds are to be transferred. (4) If the financial institution does not have access to the Federal Reserve Communications System, name, address, and telegraphic abbreviation of the correspondent financial institution through which the financial institution receiving payment obtains wire transfer activity. Provide the telegraphic abbreviation and American Bankers Association identifying number for the correspondent institution. "(b) For payment through ACH, Corporation shall provide the following information: 44 (1) Routing transit number of the financial institution receiving payment (same as American Bankers Association identifying number used for FEDLINE). (2) Number of account to which funds are to be deposited. (3) Type of depositor account ('C' for checking, 'S' for savings). (4) If Corporation is a new enrollee to the ACH system, a 'Payment Information Form,' SF 3881, must be completed before payment can be processed. "(c) In the event Corporation, during the performance of this Agreement, elects to designate a different financial institution for the receipt of any payment made using electronic funds transfer procedures, notification of such change and the required information specified above must be received by the appropriate Government official 30 days prior to the date of such change is to become effective. "(d) The documents furnishing the information required in this clause must be dated and contain the signature, title, and telephone number of the Corporation official authorized to provide it, as well as Corporation's name and contract number. "(e) Corporation's failure to properly designate a financial institution or to provide appropriate payee bank account information may delay payments of amounts otherwise properly due." 46. A new Section 7.38 is to be inserted after Section 7.37 as follows: "SECTION 7.38 - Payment of Interest. "(a) Notwithstanding any other clause of this Agreement, all amounts that become payable by Corporation to the Government under this Agreement (net of any applicable tax credit under the Internal Revenue Code (26 U.S.C. 1481)) shall bear simple interest from the date due until paid unless paid within 30 days of becoming due. The interest rate shall be the interest rate established by the Secretary of the Treasury as provided in Section 12 of the Contract Disputes Act of 1978 (Public Law 95-563), which is applicable to the period in which the amount becomes due, as provided in paragraph (b) of this clause, and then at the rate applicable for each six- month period as fixed by the Secretary until the amount is paid. 45 "(b) Amounts shall be due at the earliest of the following dates: (1) The date fixed under this Agreement. (2) The date of the first written demand for payment consistent with this Agreement. "(c) The interest charge made under this clause may be reduced under the procedures prescribed in 32.614-2 of the Federal Acquisition Regulation in effect on the date of this Agreement." 47. A new Section 7.39 is to be inserted after Section 7.38 as follows: "SECTION 7.39 - FAR 52.203-10 Price or Fee Adjustment for Illegal or Improper Activity (SEP 1990). "(a) The Government, at its election, may reduce the price of a fixed-price type contract or contract modification and the total cost and fee under a cost-type contract or contract modification by the amount of profit or fee determined as set forth in paragraph (b) of this clause if the head of the contracting activity or his or her designee determines that there was a violation of subsection 27(a) of the Office of Federal Procurement Policy Act, as amended (41 U.S.C. 423), as implemented in the FAR. In the case of a contract modification, the fee subject to reduction is the fee specified in the particular contract modification at the time of execution, except as provided in subparagraph (b)(5) of this clause. "(b) The price or fee reduction referred to in paragraph (a) of this clause shall be -- (1) For cost-plus-fixed-fee contracts, the amount of the fee specified in the contract at the time of award; (2) For cost-plus-incentive-fee contracts, the target fee specified in the contract at the time of award, notwithstanding any minimum fee or 'fee floor' specified in the contract; (3) For cost-plus-award-fee contracts -- (i) The base fee established in the contract at the time of contract award; 46 (ii) If no base fee is specified in the contract, 30 percent of the amount of each award fee otherwise payable to the Contractor for each award fee evaluation period or at each award fee determination point. (4) For fixed price incentive contracts, the Government may -- (i) Reduce the contract target price and contract target profit both by an amount equal to the initial target profit specified in the contract at the time of contract award; or (ii) If an immediate adjustment to the contract target price and contract target profit would have a significant adverse impact on the incentive price revision relationship under the contract, or adversely affect the contract financing provisions, the Contracting Officer may defer such adjustment until establishment of the total final price of the contract. The total final price established in accordance with the incentive price revision provisions of the contract shall be reduced by an amount equal to the initial target profit specified in the contract at the time of contract award and such reduced price shall be the total final contract price. (5) For firm-fixed-price contracts or contract modifications, by 10 percent of the initial contract price; 10 percent of the contract modification price; or a profit amount determined by the Contracting Officer from records or documents in existence prior to the date of the contract award or modification. "(c) The Government may, at its election, reduce a prime contractor's price or fee in accordance with the procedures of paragraph (b) of this clause for violations of the Act by its subcontractors by an amount not to exceed the amount of profit or fee reflected 47 in the subcontract at the time the subcontract was first definitively priced. "(d) In addition to the remedies in paragraphs (a) and (c) of this clause, the Government may terminate this contract for default. The rights and remedies of the Government specified herein are not exclusive and are in addition to any other rights and remedies provided by law or under this contract. "(e) Notwithstanding the provisions of paragraphs (a),(b),(c) and (d) of this Section 7.39 : (1) The cumulative total of all reductions, made pursuant to this Section 7.39, in price, profit, fee or other compensation shall not exceed $140,000; and (2) If, pursuant to this section, DOE elects, in whole or in part, to cancel, terminate, annul or suspend this Agreement, to terminate the right of Corporation to proceed or to suspend contract payments, such action by DOE may only be taken by delivering to Corporation a notice in writing of DOE's election to terminate not less than three years prior to the effective date of termination pursuant to Section 6.02 of this Agreement." 48. The term "indebtedness" referred to in the DOE Power Agreement shall include any indebtedness of Corporation for borrowed money incurred in connection with the acquisition, financing, construction and completion of the project generating stations, or the project transmission facilities, and shall include any indebtedness (including, without limitation any indebtedness relating to the interest component, the principal or amortization component and any other component of any purchase price, amortization, rental or other payment under an installment sale, loan, lease or similar agreement) relating to the purchase, lease or acquisition by Corporation of additional facilities under Section 3.06 and replacements under Section 3.07. 49. Appendix II is amended in its entirety to read as follows: 48 APPENDIX II "DEFINITION OF OUT-OF-POCKET COSTS OF SUPPLEMENTAL ENERGY "Out-of-pocket costs associated with the furnishing of supplemental energy mean such operating and tax expenses incurred that would not have been otherwise incurred if such supplemental energy had not been furnished. "Such operating expenses, under usual circumstances, include the incremental production expenses incurred in the production of the energy so furnished. Incremental production expenses associated with the production of such energy will be influenced by the type or class of generating station used for such purpose. If the station used is normally operating and carrying load, the incremental production expenses will include, without limitation, the fuel expense normally charged at the time in question by the producer of the power plus an appropriate allowance for maintenance, plus, in the case of supplemental energy scheduled to be delivered to Corporation from the Sponsoring Companies for redelivery to DOE, 0.5 mills per kwh for incremental operating labor. The appropriate unit allowance for maintenance shall be one-half of the weighted average unit cost (expressed in mills per kwh of net generation) normally charged at the time in question by the producer of the power. If the station or part thereof used is normally held in reserve as standby, all expenses incurred that are in excess of the expenses that would have been incurred for standby operation of such station or part thereof will be considered incremental production expenses. Incremental production expenses associated with fuel for each kwh of supplemental energy not scheduled for redelivery to DOE from the Sponsoring Companies shall be an amount determined by dividing (i) the total amount determined under Section 3.03 of this Agreement, by (ii) the billing kwh of permanent power for such month, plus the transmission losses thereon from the 345 kv busses of the project generating stations to the point of delivery. "To the operating expenses as hereinabove determined, there will be added a charge of 0.7 mills per kwh to cover accounting, administration and billing expenses. Tax expenses will be the expenses that are payable as taxes either in connection with the sale or production of such energy. "The above-described charges for operating labor and for accounting, administration and billing shall be adjusted in the following manner: 49 (i) Operating Labor. Effective January 1 of each year, commencing January 1, 1989, the value for average hourly earnings of production or non-supervisory workers in electric services (1972 SIC Code 491) published by the U.S. Department of Labor, Bureau of Labor Statistics for the month of August in the preceding calendar year shall be compared to the March 1988 base value of such average hourly earnings of $14.28 per hour. The percentage change thereof (carried out four decimal places, e.g., 6.124% shall be .0612) in such average hourly earnings shall be multiplied by the initial charge for operating labor of 0.5 mills per kwh. The amount of increase or decrease shall be added to or subtracted from, as the case may be, the initial charge for operating labor; and the amount obtained in this manner (carried out four decimal places) shall become the then effective charge for operating labor. (ii) Accounting, Administration and Billing. Effective January 1 of each year, commencing January 1, 1989, the value for average hourly earnings of production or non-supervisory workers in accounting, auditing and bookkeeping services (1972 SIC Code 893) published by the U.S. Department of Labor, Bureau of Labor Statistics for the month of August in the preceding calendar year shall be compared to the March 1988 base value of such average hourly earnings of $10.26 per hour. The percentage change thereof (carried out four decimal places, e.g., 6.124% shall be .0612) in such average hourly earnings shall be multiplied by the initial charge for accounting, administration and billing of 0.7 mills per kwh. The amount of increase or decrease shall be added to or subtracted from, as the case may be, the initial charge for accounting, administration and billing; and the amount obtained in this manner (carried out four decimal places) shall become the then effective charge for accounting, administration and billing. "Should publication of average hourly earnings be discontinued for either or both of the above-referenced statistical codes, a statistical code or codes which is or are, as nearly as practicable, equivalent shall be substituted by mutual agreement of the parties hereto.: 50. This Modification No. 14 to the DOE Power Agreement shall become effective at 12:00 Midnight on the date on which Corporation shall deliver to DOE a written notice to the effect that: (a) All applicable requirements as to approval by or filings with regulatory agencies having jurisdiction in respect of the transactions constituting the subject matter of this Modification No. 14 (including expiration of any specified period after the date of any filing) 50 have been complied with and all requisite approvals of such regulatory agencies are in full force and effect and none is the subject of attack on appeal by direct proceeding or otherwise, and (except to the extent that Corporation shall waive such condition) any requisite approvals of regulatory agencies having such jurisdiction have become final and not subject to judicial review in any court; and (b) All applicable requirements as to approval by or filings with regulatory agencies having jurisdiction in respect of a modification, if any of the Inter-Company Power Agreement dated July 10, 1953, as amended (including expiration of any specified period after the date of any filing) have been complied with and all requisite approvals of such regulatory agencies are in full force and effect and none is the subject of attack on appeal by direct proceeding or otherwise, and (except to the extent that Corporation shall waive such condition) any requisite approvals of regulatory agencies having such jurisdiction have become final and not subject to judicial review in any court; and (c) The General Counsel of DOE shall have delivered to Corporation an opinion satisfactory to Corporation that the Agreement as modified herein constitutes a valid and legally binding obligation of the United States of America enforceable in accordance with its terms. 51. The DOE Power Agreement, as modified by Modifications No. 1 through No. 13, both inclusive, and by this Modification No. 14, is hereby in all respects confirmed. IN WITNESS WHEREOF, the parties hereto have executed this Modification No. 14 as of the date and year first above written. OHIO VALLEY ELECTRIC CORPORATION By 51 UNITED STATES OF AMERICA By: SECRETARY OF ENERGY By WILLIS DAVIS Authorized Contracting Officer 52 EX-10.44 8 MODIFICATION #7 TO INTER-COMPANY POWER AGREEMENT 1 MODIFICATION NO. 7 TO INTER-COMPANY POWER AGREEMENT DATED JULY 10, 1953 AMONG OHIO VALLEY ELECTRIC CORPORATION, APPALACHIAN POWER COMPANY, THE CINCINNATI GAS & ELECTRIC COMPANY, COLUMBUS SOUTHERN POWER COMPANY (formerly COLUMBUS AND SOUTHERN OHIO ELECTRIC COMPANY), THE DAYTON POWER AND LIGHT COMPANY, INDIANA MICHIGAN POWER COMPANY (formerly INDIANA & MICHIGAN ELECTRIC COMPANY), KENTUCKY UTILITIES COMPANY, LOUISVILLE GAS AND ELECTRIC COMPANY, MONONGAHELA POWER COMPANY, OHIO EDISON COMPANY, OHIO POWER COMPANY, PENNSYLVANIA POWER COMPANY, THE POTOMAC EDISON COMPANY, SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, THE TOLEDO EDISON COMPANY, and WEST PENN POWER COMPANY. Dated as of January 15, 1992 2 MODIFICATION NO. 7 TO INTER-COMPANY POWER AGREEMENT THIS AGREEMENT dated as of the 15th day of January, 1992, by and among OHIO VALLEY ELECTRIC CORPORATION (herein called "OVEC" or "Corporation"), APPALACHIAN POWER COMPANY (herein called "Appalachian"), THE CINCINNATI GAS & ELECTRIC COMPANY (herein called "Cincinnati"), COLUMBUS SOUTHERN POWER COMPANY (formerly COLUMBUS AND SOUTHERN OHIO ELECTRIC COMPANY) (herein called "Columbus"), THE DAYTON POWER AND LIGHT COMPANY (herein called "Dayton"), INDIANA MICHIGAN POWER COMPANY (formerly INDIANA & MICHIGAN ELECTRIC COMPANY) (herein called "Indiana"), KENTUCKY UTILITIES COMPANY (herein called "Kentucky"), LOUISVILLE GAS AND ELECTRIC COMPANY (herein called "Louisville"), MONONGAHELA POWER COMPANY (herein called "Monongahela"), OHIO EDISON COMPANY (herein called "Ohio Edison"), OHIO POWER COMPANY (herein called "Ohio Power"), PENNSYLVANIA POWER COMPANY (herein called "Pennsylvania"), THE POTOMAC EDISON COMPANY (herein called "Potomac"), SOUTHERN INDIANA GAS AND ELECTRIC COMPANY (herein called "Southern Indiana"), THE TOLEDO EDISON COMPANY (herein called "Toledo"), and WEST PENN POWER COMPANY (herein called "West Penn"), all of the foregoing, other than OVEC, being herein sometimes collectively referred to as the Sponsoring Companies and individually as a Sponsoring Company. W I T N E S S E T H T H A T 3 WHEREAS, Corporation and the United States of America have heretofore entered into a Contract No. AT-(40-1)-1530, (redesignated Contract No. E-(40-1)1530, later redesignated Contract No. EY-76-C-05-1530 and later redesignated Contract No. DE-AC05-76OR01530), dated October 15, 1952, providing for the supply by Corporation of electric utility services to the United States Atomic Energy Commission (hereinafter called "AEC") at AEC's project near Portsmouth, Ohio (hereinafter called the "Project"), which contract has heretofore been modified by Modification No. 1, dated July 23, 1953, Modification No. 2, dated as of March 15, 1964, Modification No. 3, dated as of May 12, 1966, Modification No. 4, dated as of January 7, 1967, Modification No. 5, dated as of August 15, 1967, Modification No. 6, dated as of November 15, 1967, Modification No. 7, dated as of November 5, 1975, Modification No. 8, dated as of June 23, 1977, Modification No. 9, dated as of July 1, 1978, Modification No. 10, dated as of August 1, 1979, Modification No. 11, dated as of September 1, 1979, Modification No. 12, dated as of August 1, 1981, and Modification No. 13, dated as of September 1, 1989 (said contract, as so modified, is hereinafter called the "DOE Power Agreement"); and WHEREAS, pursuant to the Energy Reorganization Act of 1974, the AEC was abolished on January 19, 1975 and certain of its functions, including the procurement of electric utility services for the Project, were transferred to and vested in the Administrator of Energy Research and Development; and WHEREAS, pursuant to the Department of Energy Organization Act, on October 1, 1977, all of the functions vested by law in the 4 Administrator of Energy Research and Development or the Energy Research and Development Administration were transferred to, and vested in, the Secretary of Energy, the statutory head of the Department of Energy (hereinafter called "DOE"); and WHEREAS, OVEC and DOE propose to execute and deliver Modification No. 14, dated as of January 15, 1992, to the DOE Power Agreement, and the parties hereto hereby consent to the execution and delivery thereof by OVEC; and WHEREAS, the parties hereto have entered into a contract, herein called the "Inter-Company Power Agreement," dated July 10, 1953, governing, among other things, (a) the supply by the Sponsoring Companies of Supplemental Power in order to enable Corporation to fulfill its obligations under the DOE Power Agreement, and (b) the rights of the Sponsoring Companies to receive Surplus Power (as defined in the Agreement identified in the next clause in this preamble) as may be available at the Project Generating Stations and the obligations of the Sponsoring Companies to pay therefor; and WHEREAS, the Inter-Company Power Agreement has heretofore been amended by Modification No. 1, dated as of June 3, 1966, Modification No. 2, dated as of January 7, 1967, Modification No. 3, dated as of November 15, 1967, Modification No. 4, dated as of November 5, 1975, Modification No. 5, dated as of September 1, 1979, and Modification No. 6, dated as of August 1, 1981 (said contract so amended and as modified and amended by this Modification No. 7 being herein and therein sometimes called the "Agreement"); and 5 WHEREAS, OVEC and the Sponsoring Companies desire to enter into this Modification No. 7 to reflect in the Agreement the provisions of the DOE Power Agreement in effect after modification by Modification No. 14 thereto and certain other purposes as more particularly hereinafter provided; NOW, THEREFORE, the parties hereto agree with each other as follows: 1. In the first sentence of Section 2.03 of Article 2, delete the words "Section 2.02 and 12.13" and substitute therefor the words "Section 2.02." 2. In Article 4, delete Section 4.01, and substitute therefor the following: "4.01 Supply of Supplemental Power. Paragraph 1 and the first sentence of Paragraph 2 of Section 2.04 of the DOE Power Agreement read as follows: '1. Whenever, for any clock hour, the aggregate amount of permanent power and the energy associated therewith furnished by Corporation to DOE pursuant to Section 2.03 and the scheduled kwh of occasional energy for which provision has been made by Corporation pursuant to Section 2.09 is insufficient to supply the part of the DOE contract demand which is then being demanded by DOE, Corporation shall, unless Corporation shall be excused as a result of conditions contemplated by Section 7.05 of this Agreement or DOE shall have otherwise excused Corporation from meeting such demand, furnish additional generating capacity and the energy associated therewith to DOE at the point of delivery to make up for such insufficiency in any amount necessary up to a number of kilowatts which will equal the Applicable Percentage (which percentage, for purposes of this Section 2.04, shall not exceed thirty percent) of the sum of (i) the DOE contract demand and (ii) the transmission losses thereon from the 345 kv busses of the project generating stations. At the request of DOE, during any clock hour Corporation may, at its option, furnish to DOE 6 supplemental power which, when added to the permanent power and occasional energy then being furnished, shall exceed the DOE contract demand; provided that, in such event, DOE shall, if requested to do so by Corporation, forthwith take action to reduce its power and energy requirements to an amount not exceeding the aggregate amount which Corporation would otherwise be obligated to supply. Notwithstanding the foregoing, the aggregate amount of supplemental power and energy which Corporation shall be obligated to furnish to DOE pursuant to this paragraph 1 during any calendar year shall not exceed the product of 900,000,000 kwh multiplied by the average DOE capacity ratio of such calendar year, weighted with respect to the periods of time during which DOE capacity ratios were in effect. '2. The additional generating capacity and the energy associated therewith furnished to DOE pursuant to paragraph 1. above is called "supplemental power."'... "In order to enable Corporation to fulfill its obligation under the DOE Power Agreement to supply Supplemental Power to DOE, each Sponsoring Company shall stand ready to supply, either from its own capacity, capacity to which it is entitled at the Project Generating Stations or through arrangements with other companies, its Power Participation Ratio of the amounts of power and energy required for such supply of Supplemental Power plus its Power Participation Ratio of the aggregate of all electrical losses incurred by all Sponsoring Companies in so supplying required amounts of power and energy. It is understood, however, that Corporation shall endeavor to obtain such power from the most economical source without respect to Power Participation Ratios, including power classified as Surplus Power to which the Sponsoring Companies are entitled but which they are not utilizing." 3. In Article 6, delete the portion of the first paragraph of subsection 6.031 which quotes clauses (c) and (d) of paragraph 3 of Section 3.04 of the DOE Power Agreement, and substitute therefor the following: "(c) Component (C) shall consist of the total expenses for taxes, including all taxes on income (other than (i) Federal income taxes, (ii) any taxes that are now or may hereafter be levied based on revenue, energy 7 generated or sold or on any other basis capable of direct distribution, the cost of which taxes shall be allocated directly to DOE and Corporation in amounts reflecting the proper share of each, and DOE shall pay to Corporation its share thereof, (iii) taxes arising from payments received by Corporation for difficult to quantify costs under Section 2.08 and (iv) taxes arising from payments received by Corporation for use of Corporation's transmission facilities under Section 2.10), properly chargeable to Account 507 of the Uniform System of Accounts; provided, however, that any taxes for which DOE reimburses Corporation under Sections 1.05, 3.06, 3.07, 4.02, and 4.08 shall not be included in Component (C). "(d) Component (D) shall consist of an amount equal to the product of $2.089 multiplied by the total number of shares of capital stock of the par value of $100 per share of Ohio Valley Electric Corporation which shall have been issued and which are outstanding on the last day of such month." 4. In Article 6, delete the first sentence of the second paragraph of subsection 6.031, and substitute therefor the following: "The amount specified in the computation of Component (D) in subparagraph (d) of paragraph 3 of Section 3.04 of the DOE Power Agreement is subject to modification or adjustment as provided in the DOE Power Agreement." 5. Change the title of Article 9 so that it reads "COSTS OF REPLACEMENTS AND ADDITIONAL FACILITIES; ADVANCE PAYMENTS FOR ENERGY CHARGES." 6. In Article 9, delete the first sentence of Section 9.01, and substitute therefor the following: "The Sponsoring Companies shall reimburse Corporation for the difference between (a) the total cost of replacements chargeable to property and plant (other than facilities described in Section 2.02) made by Corporation during any month prior thereto (and not previously reimbursed) and (b) the amounts received by Corporation from DOE as reimbursement for the cost of replacements under the provisions of the DOE Power 8 Agreement, or paid for out of proceeds of fire or other applicable insurance protection, or out of amounts recovered from third parties responsible for damages requiring replacement." 7. In Article 9, delete in its entirety the last sentence of Section 9.01. 8. In Article 9, renumber Section 9.02 as Section 9.03, and then insert a new Section 9.02 after Section 9.01 as follows: "9.02 Additional Facility Costs. The Sponsoring Companies shall reimburse Corporation for the difference between (a) the total cost of additional facilities and/or spare parts (other than facilities described in Section 2.02) purchased and/or installed by Corporation during any month prior thereto (and not previously reimbursed) and (b) the amounts received by Corporation from DOE as reimbursement for the cost of additional facilities and/or spare parts under the provisions of the DOE Power Agreement. If Corporation is unable to secure a satisfactory ruling to the effect that amounts paid by the Sponsoring Companies in reimbursement of additional facility and/or spare part costs do not constitute taxable income to Corporation, or in case such ruling once obtained shall be reversed or rescinded, then the Sponsoring Companies shall pay to Corporation such amount, in lieu of the amounts to be paid as above provided, which, after provision for all taxes on income, shall equal the costs of the additional facilities and/or spare parts reimbursable by the Sponsoring Companies to Corporation as above provided. Each Sponsoring Company's share of such payment shall be the percentage of such difference represented by its Power Participation Ratio." 9. In Article 10, delete Section 10.04 in its entirety, and substitute therefor the following: "10.04 Replacement and Additional Facility Costs. As soon as practicable after the end of each month Corporation shall render to each Sponsoring Company a separate statement indicating the appropriate charge against such Sponsoring Company for reimbursement of the cost of replacements and additional facilities and/or spare parts incurred during such month as provided in Article 9 above. Such Sponsoring Company shall make payment therefor promptly upon receipt of such statement." 10. Delete Article 11, and substitute therefor the 9 following: "11.01 DOE Requirements for Service Following Termination of the DOE Power Agreement. The last two sentences of Section 6.01 of the DOE Power Agreement read as follows: 'The parties recognize that the project generating stations were constructed to service the United States of America's load requirements at the Project, and therefore recognize the principle that power and associated energy produced by the project generating stations beyond the term of this Agreement are to be made available, at least to the extent of DOE's contract demand as in effect on December 31, 2005, to serve such load, provided Corporation's equipment is then serviceable and mutually agreeable arrangements can be evolved by the parties hereto. Accordingly, Corporation and DOE agree to review the possibility of negotiating power supply arrangements for the delivery of power and associated energy produced by the project generating stations to DOE subsequent to December 31, 2005, at least two years in advance of such date.' "In the event the said last two sentences of Section 6.01 result in Corporation's and DOE's reaching agreement for the supply of service to DOE following termination of the DOE Power Agreement, the provisions of this Agreement shall be appropriately amended and modified, consistently with the principles herein, to conform with any agreement so reached." 11. In Article 12, delete Section 12.13 in its entirety. 12. In Article 12, delete Section 12.15, and substitute therefor the following: "12.15 Certain Provisions of the DOE Power Agreement. The parties hereto each agree that the clauses specified (a) in paragraph 4 of Section 7.04, (b) in paragraph (b) (10) of Section 7.13, (c) in paragraph 9 of Section 7.14, (d) in paragraph 5 of Section 7.15, (e) in clause (f) of Section 7.22, (f) in paragraph (a)(iv) of Section 7.23, (g) in paragraph (m) of Section 7.24, (h) in paragraph (c) (5) of Section 7.33, and/or (i) in paragraph (d) (9) of Section 7.34, of the DOE Power Agreement, shall (i) to the extent required to be included in a subcontract or a purchase order, and (ii) to the extent that this Agreement constitutes a subcontract or a purchase order, as the case may be, be deemed, unless exempted by applicable rules, regulations or orders, to be included herein as if set forth in full herein; provided, however, that the parties hereto do not 10 concede by the inclusion of this Section 12.15 in this Agreement that either the United States of America or OVEC intended by their execution and delivery of the DOE Power Agreement, or any modification thereof, to include contractual arrangements such as this Agreement within the concept of a subcontract or purchase order as such terms are used in the DOE Power Agreement." 13. Delete APPENDIX I, and substitute therefor the following: "APPENDIX I "DEFINITION OF OUT-OF-POCKET COSTS OF SUPPLEMENTAL ENERGY "Out-of-pocket costs associated with the furnishing of supplemental energy mean such operating and tax expenses incurred that would not have been otherwise incurred if such supplemental energy had not been furnished. "Such operating expenses, under usual circumstances, include the incremental production expenses incurred in the production of the energy so furnished. Incremental production expenses associated with the production of such energy will be influenced by the type or class of generating station used for such purpose. If the station used is normally operating and carrying load, the incremental production expenses will include, without limitation, the fuel expense normally charged at the time in question by the producer of the power plus an appropriate allowance for maintenance, plus, in the case of supplemental energy scheduled to be delivered to Corporation from the Sponsoring Companies for redelivery to DOE, 0.5 mills per kwh for incremental operating labor. The appropriate unit allowance for maintenance shall be one-half of the weighted average unit cost (expressed in mills per kwh of net generation) normally charged at the time in question by the producer of the power. If the station or part thereof used is normally held in reserve as standby, all expenses incurred that are in excess of the expenses that would have been incurred for standby operation of such station or part thereof will be considered incremental production expenses. Incremental production expenses associated with fuel for each kwh of supplemental energy not scheduled for redelivery to DOE from the Sponsoring Companies shall be an amount determined by dividing (i) the total amount determined under Section 3.03 of the DOE Power Agreement, by (ii) the billing kwh of permanent power for such month, plus the transmission losses thereon from the 345 kv busses of the project generating 11 stations to the point of delivery. "To the operating expenses as hereinabove determined, there will be added a charge of 0.7 mills per kwh to cover accounting, administration and billing expenses. Tax expenses will be the expenses that are payable as taxes either in connection with the sale or production of such energy. "The above-described charges for operating labor and for accounting, administration and billing shall be adjusted in the following manner: (i) Operating Labor. Effective January 1 of each year, commencing January 1, 1989, the value for average hourly earnings of production or non-supervisory workers in electric services (1972 SIC Code 491) published by the U.S. Department of Labor, Bureau of Labor Statistics for the month of August in the preceding calendar year shall be compared to the march 1988 base value of such average hourly earnings of $14.28 per hour. The percentage change thereof (carried out four decimal places, e.g., 6.124% shall be .0612) in such average hourly earnings shall be multiplied by the initial charge for operating labor of 0.5 mills per kwh. The amount of increase or 12 decrease shall be added to or subtracted from, as the case may be, the initial charge for operating labor; and the amount obtained in this manner (carried out four decimal places) shall become the then effective charge for operating labor. (ii) Accounting, Administration and Billing. Effective January 1 of each year, commencing January 1, 1989, the value for average hourly earnings of production or non-supervisory workers in accounting, auditing and bookkeeping services (1972 SIC Code 893) published by the U.S. Department of Labor, Bureau of Labor Statistics for the month of August in the preceding calendar year shall be compared to the March 1988 base value of such average hourly earnings of $10.26 per hour. The percentage change thereof (carried out four decimal places, e.g., 6.124% shall be .0612) in such average hourly earnings shall be multiplied by the initial charge for accounting, administration and billing of 0.7 mills per kwh. The amount of increase or decrease shall be added to or subtracted from, as the case may be, the initial charge for accounting, administration and billing; and the amount obtained in this manner (carried out four decimal places) shall become the then effective charge for accounting, administration and billing. "Should publication of average hourly earnings be discontinued for either or both of the above-referenced statistical codes, a statistical code or codes which is or are, as nearly as practicable, equivalent shall be substituted by mutual agreement of the parties hereto." 14. This Modification No. 7 shall become effective at 12:00 o' clock Midnight on the day on which Corporation shall advise the other parties to this Modification No. 7 (to be later confirmed in writing) that all conditions precedent to the effectiveness of this Modification No. 7 shall have been satisfied including the conditions precedent set forth below: (a) Modification No. 14 to the DOE Power Agreement shall have been executed and delivered; and (b) Corporation shall be in a position to deliver to DOE the notice described in Paragraph 49 of Modification No. 14 to the DOE Power Agreement. 13 15. The Inter-Company Power Agreement, as modified by Modifications Nos. 1, 2, 3, 4, 5, and 6 and as hereinbefore provided, is hereby in all respects confirmed. 16. This Modification No. 7 may be executed in any number of copies and by the different parties hereto on separate counterparts, each of which shall be deemed an original but all of which together shall constitute a single agreement. IN WITNESS WHEREOF, the parties hereto have executed this Modification No. 7 as of the day and year first written above. OHIO VALLEY ELECTRIC CORPORATION By: APPALACHIAN POWER COMPANY By: THE CINCINNATI GAS & ELECTRIC COMPANY By: COLUMBUS SOUTHERN POWER COMPANY By: THE DAYTON POWER AND LIGHT COMPANY By: INDIANA MICHIGAN POWER COMPANY By: 14 KENTUCKY UTILITIES COMPANY By: LOUISVILLE GAS AND ELECTRIC COMPANY By: FRED WRIGHT MONONGAHELA POWER COMPANY By: OHIO EDISON COMPANY By: OHIO POWER COMPANY By: PENNSYLVANIA POWER COMPANY By: THE POTOMAC EDISON COMPANY By: SOUTHERN INDIANA GAS AND ELECTRIC COMPANY By: THE TOLEDO EDISON COMPANY By: 15 WEST PENN POWER COMPANY By: EX-10.45 9 MODIFICATION #15 TO POWER AGREEMENT DTD 10-15-52 1 Modification No. 15 to POWER AGREEMENT Dated October 15, 1952 between OHIO VALLEY ELECTRIC CORPORATION AND UNITED STATES OF AMERICA Acting By and Through the SECRETARY OF ENERGY, the statutory head of the DEPARTMENT OF ENERGY Dated as of February 1, 1993 2 Contract No. DE-AC05-76OR01530 (Modification No. 15) THIS MODIFICATION NO. 15, dated as of the 1st day of February, 1993, by and between OHIO VALLEY ELECTRIC CORPORATION, a corporation organized under the laws of the State of Ohio (hereinafter called the "Corporation"), and the UNITED STATES OF AMERICA (hereinafter sometimes called the "Government"), acting by and through the SECRETARY OF ENERGY, the statutory head of the DEPARTMENT OF ENERGY (hereinafter called "DOE"); W I T N E S S E T H T H A T ----------------------------- WHEREAS, Corporation and the Government have heretofore entered into a contract dated October 15, 1952, providing for the supply by Corporation of electric utility services to the United States Atomic Energy Commission (hereinafter called "AEC") at AEC's project near Portsmouth, Ohio (hereinafter called the "Project"), which contract has heretofore been modified by Modification No. 1, dated July 23, 1953, Modification No. 2, dated as of March 15, 1964, Modification No. 3, dated as of May 12, 1966, Modification No. 4, dated as of January 7, 1967, Modification No. 5, dated as of August 15, 1967, Modification No. 6, dated as of November 15, 1967, Modification No. 7, dated as of November 5, 1975, Modification No. 8, dated as of June 23, 1977, Modification No. 9, dated as of July 1, 1978, Modification No. 10, dated as of August 1, 1979, Modification No. 11, dated as of September 1, 1979, Modification No. 12, dated as of August 1, 1981, Modification No. 13, dated as 3 of September 1, 1989, and Modification No. 14, dated as of January 15, 1992 (said contract, as so modified, is hereinafter called the "DOE Power Agreement"); and WHEREAS, pursuant to the Energy Reorganization Act of 1974, the AEC was abolished on January 19, 1975, and certain of its functions, including the procurement of electric utility services for the Project, were transferred to and vested in the Administrator of Energy Research and Development; and WHEREAS, pursuant to the Department of Energy Organization Act, all of the functions vested by law in the Administrator of Energy Research and Development or the Energy Research and Development Administration were transferred to, and vested in, the Secretary of Energy on October 1, 1977; and WHEREAS, pursuant to the Energy Policy Act of 1992, the United States Enrichment Corporation (hereinafter called "USEC") was established to lease from DOE its uranium enrichment facilities beginning July 1, 1993; and the DOE was authorized by such Act to continue to receive electricity under the DOE Power Agreement and to resell it to USEC; and WHEREAS, Corporation and DOE desire to amend the DOE Power Agreement further as hereinafter provided; NOW, THEREFORE, the parties hereto do hereby agree as follows: 1. Paragraph 2 of Section 2.05 is amended by deleting the second sentence thereof in its entirety and substituting therefor 4 the following: In addition, DOE shall have the right at any time to sell or provide permanent or supplemental power and energy in an amount up to 2,500 kw to its tenants for their consumption at or in the vicinity of the Project; provided, however, that DOE's right to sell to its tenant, the United States Enrichment Corporation ("USEC"), a corporation established by the Energy Policy Act of 1992, for consumption at the Project, power and energy purchased from Corporation shall not be limited in amount and provided further that DOE's right to sell to its tenant USEC for consumption at DOE's uranium enrichment facility near Paducah, Kentucky, power and energy purchased from Corporation shall not be limited in amount except as provided in paragraph 3 of this Section 2.05. 2. Paragraph 3 of Section 2.05 is amended by deleting from its first sentence the word "Governmental." 3. This Modification No. 15 to the DOE Power Agreement shall become effective at 12:01 A.M. on July 1, 1993, if Corporation has delivered to DOE a written notice to the effect that: All applicable requirements as to approval by or filings with regulatory agencies or other governmental bodies having jurisdiction in respect of the transactions constituting the subject matter of this Modification No. 15 (including expiration of any specified period after the date of any filing) have been complied with and all requisite approvals are in full force and effect and none is the subject of attack on appeal by direct proceeding or otherwise, and (except to the extent that Corporation shall waive such condition) any requisite approvals have become final and not subject to judicial review in any court. 4. The DOE Power Agreement, as modified by Modifications No. 1 through No. 14, both inclusive, and by this Modification No. 15, is hereby in all respects confirmed. 5 IN WITNESS WHEREOF, the parties hereto have executed this Modification No. 15 as of the date and year first above written. OHIO VALLEY ELECTRIC CORPORATION By________________________________ President UNITED STATES OF AMERICA By________________________________ Authorized Contracting Officer EX-10.46 10 GAS TRANSPORTATION AGRMT BETWEEN TEXAS GAS & LG&E GAS TRANSPORTATION AGREEMENT BETWEEN TEXAS GAS TRANSMISSION CORPORATION AND LOUISVILLE GAS AND ELECTRIC COMPANY DATED NOVEMBER 1, 1993 INDEX Page No. ARTICLE I Definitions 1 ARTICLE II Transportation Service 1 ARTICLE III Scheduling and Transportation 2 Limitations ARTICLE IV Points of Receipt, Delivery, and Supply Lateral Allocation 3 ARTICLE V Term of Agreement 3 ARTICLE VI Point(s) of Measurement 3 ARTICLE VII Facilities 4 ARTICLE VIII Rates and Charges 4 ARTICLE IX Miscellaneous 5 EXHIBIT "A" FIRM POINT(S) OF RECEIPT EXHIBIT "A-I" SECONDARY POINT(S) OF RECEIPT EXHIBIT "B" FIRM POINT(S) OF DELIVERY EXHIBIT "C" SUPPLY LATERAL CAPACITY STANDARD FACILITIES KEY FIRM TRANSPORTATION AGREEMENT THIS AGREEMENT, made and entered into this 1st day of November, 1993, by and between Texas Gas Transmission Corporation, a Delaware corporation, hereinafter referred to as "Texas Gas," and Louisville Gas and Electric Company, a Kentucky corporation, hereinafter referred to as "Customer," WITNESSETH: WHEREAS, Customer has natural gas which cannot be moved into its system through its existing facilities; and WHEREAS, Texas Gas has the ability in its pipeline system to move natural gas for the account of Customer; and WHEREAS, Customer desires that Texas Gas transport such natural gas for the account of Customer; and WHEREAS, Customer and Texas Gas are of the opinion that the transaction referred to above falls within the provisions of Section 284.223 of Subpart G of Part 284 of the Federal Energy Regulatory Commission's (Commission) regulations and the blanket certificate issued to Texas Gas in Docket No. CP88-686-000, and can be accomplished without the prior approval of the Commission; NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto covenant and agree as follows: ARTICLE I Definitions 1.1 Definition of Terms of the General Terms and Conditions of Texas Gas's FERC Gas Tariff on file with the Commission is hereby incorporated by reference and made a part of this Agreement. ARTICLE II Transportation Service 2.1 Subject to the terms and provisions of this Agreement, Customer agrees to deliver or cause to be delivered to Texas Gas, at the Point(s) of Receipt in Exhibit "A" hereunder, Gas for Transportation, and Texas Gas agrees to receive, transport, and re- deliver, at the Point(s) of Delivery in Exhibit "B" hereunder, Equivalent Quantities of Gas to Customer or for the account of Customer, in accordance with Section 3 of Texas Gas's effective FT Rate Schedule and the terms and conditions contained herein, up to 30,000 MMBtu per day during the winter season, and up to 30,000 MMBtu per day during the summer season which shall be Customer's 1 Firm Transportation Contract Demand, and up to 4,530,000 MMBtu during the winter season, and up to 6,420,000 MMBtu during the summer season, which shall be Customer's Seasonal Quantity Levels. 2.2 Customer shall reimburse Texas Gas for the Quantity of Gas required for fuel, company use, and unaccounted for associated with the transportation service hereunder in accordance with Section 16 of the General Terms and Conditions of Texas Gas's FERC Gas Tariff. The applicable fuel retention percentage(s) is shown on Exhibit "A". Texas Gas may adjust the fuel retention percentage as operating circumstances warrant; however, such change shall not be retroactive. Texas Gas agrees to give Customer thirty (30) days written notice before changing such percentage. 2.3 Texas Gas, at its sole option, may, if tendered by Customer, transport daily quantities in excess of the Transportation Contract Demand. 2.4 In order to protect its system, the delivery of gas to its customers and/or the safety of its operations, Texas Gas shall have the right to vent excess natural gas delivered to Texas Gas by Customer or Customer's supplier(s) in that part of its system utilized to transport gas received hereunder. Prior to venting excess gas, Texas Gas will use its best efforts to contact Customer or Customer's supplier in an attempt to correct such excess deliveries to Texas Gas. Texas Gas may vent such excess gas solely within its reasonable judgment and discretion without liability to Customer, and a pro rata share of any gas so vented shall be allocated to Customer. Customer's pro rata share shall be determined by a fraction, the numerator of which shall be the quantity of gas delivered to Texas Gas at the Point of Receipt by Customer or Customer's suppliers in excess of Customer's confirmed nomination and the denominator of which shall be the total quantity of gas in excess of total confirmed nominations flowing in that part of the Texas Gas's system utilized to transport gas, multiplied by the total quantity of gas vented or lost hereunder. 2.5 Any gas imbalance between receipts and deliveries of gas, less fuel and PVR adjustments, if applicable, shall be cleared each month in accordance with Section 17 of the General Terms and Conditions in Texas Gas's FERC Gas Tariff. Any imbalance remaining at the termination of this Agreement shall also be cashed-out as provided herein. ARTICLE III Scheduling 3.1 Customer shall be obligated five (5) working days prior to the end of each month to furnish Texas Gas with a schedule of the estimated daily quantity(ies) of gas it desires to be received, transported, and re-delivered for the following month. Such 2 schedules will show the quantity(ies) of gas Texas Gas will receive from Customer at the Point(s) of Receipt, along with the identity of the supplier(s) that is delivering or causing to be delivered to Texas Gas quantities for Customer's account at each Point of Receipt for which a nomination has been made. 3.2 Customer shall give Texas Gas, after the first of the month, at least twenty-four (24) hours notice prior to the commencement of any day in which Customer desires to change the quantity(ies) of gas it has scheduled to be delivered to Texas Gas at the Point(s) of Receipt. If Customer's nomination change does not require Texas Gas to interrupt service to another Customer, Texas Gas will agree to waive this 24-hour prior notice and implement nomination changes requested by Customer to commence in such lesser time frame subject to Texas Gas's being able to confirm and verify such nomination change at both Receipt and Delivery Points, and receive PDAs reflecting this nomination change at both Receipt and Delivery Points. Texas Gas will use its best efforts to make the nomination change effective at the time requested by Customer; however, if Texas Gas is unable to do so, the nomination change will be implemented as soon as confirmation is received. ARTICLE IV Points of Receipt, Delivery, and Supply Lateral Allocation 4.1 Customer shall deliver or cause to be delivered natural gas to Texas Gas at the Point(s) of Receipt specified in Exhibit "A" attached hereto and Texas Gas shall redeliver gas to Customer or for the account of Customer at the Point(s) of Delivery specified in Exhibit "B" attached hereto in accordance with Sections 7 and 15 of the General Terms and Conditions of Texas Gas's FERC Gas Tariff. 4.2 Customer's preferential capacity rights on each of Texas Gas's supply laterals shall be as set forth in Exhibit "C" attached hereto, in accordance with Section 34 of the General Terms and Conditions of Texas Gas's FERC Gas Tariff. ARTICLE V Term of Agreement 5.1 This Agreement shall become effective November 1, 1993, and shall remain in full force and effect for a primary term of two (2) years ending October 31, 1995, and year-to-year thereafter, unless cancelled by either party by giving the other party at least 365 days advance written notice prior to the expiration of the primary term or any subsequent roll-over term. Provided however, Texas Gas and Customer agree that, as provided in Section 32.3 of the General Terms and Conditions of Texas Gas's FERC Gas Tariff, Texas Gas will 3 not terminate service to Customer under this Agreement without receiving specific abandonment approval under Section 7 of the Natural Gas Act. ARTICLE VI Point(s) of Measurement 6.1 The gas shall be delivered by Customer to Texas Gas and re- delivered by Texas Gas to Customer at the Point(s) of Receipt and Delivery hereunder. 6.2 The gas shall be measured or caused to be measured by Customer and/or Texas Gas at the Point(s) of Measurement which shall be as specified in Exhibits A, A-I, and B herein. In the event of a line loss or leak between the Point of Measurement and the Point of Receipt, the loss shall be determined in accordance with the methods described contained in Section 3, "Measuring and Measuring Equipment," contained in the General Terms and Conditions of First Revised Volume No. 1 of Texas Gas's FERC Gas Tariff. ARTICLE VII Facilities 7.1 Texas Gas and Customer agree that any facilities required at the Point(s) of Receipt, Point(s) of Delivery, and Point(s) of Measurement, shall be installed, owned, and operated as specified in Exhibits A, A-I, and B herein. Customer may be required to pay or cause Texas Gas to be paid for the installed cost of any new facilities required as contained in Sections 1.3, 1.4, and 1.5 of Texas Gas's FT Rate Schedule. Customer shall only be responsible for the installed cost of any new facilities described in this Section if agreed to in writing between Texas Gas and Customer. ARTICLE VIII Rates and Charges 8.1 Each month, Customer shall pay Texas Gas for the service hereunder, an amount determined in accordance with Section 5 of Texas Gas's FT Rate Schedule contained in Texas Gas's FERC Gas Tariff and as indicated on Exhibit "A" herein, which Rate Schedule is by reference made a part of this Agreement. The maximum rates for such service consist of a monthly reservation charge multiplied by Customer's firm transportation demand as specified in Section 2.1 herein. The reservation charge shall be billed as of the effective date of this Agreement. In addition to the monthly reservation charge, Customer agrees to pay Texas Gas each month the maximum commodity charge up to Customer's Transportation Contract Demand. For any quantities delivered by Texas Gas in excess of 4 Customer's Transportation Contract Demand, Customer agrees to pay the maximum FT overrun commodity charge. In addition, Customer agrees to pay: (a) Texas Gas's Fuel Retention percentage(s). (b) The currently effective GRI funding unit, if applicable, the currently effective FERC Annual Charge Adjustment unit charge (ACA), the currently effective Take-or-Pay surcharge, or any other then currently effective surcharges, including but not limited to Order 636 Transition Costs. If Texas Gas declares force majeure which renders it unable to perform service herein, then Customer shall be relieved of its obligation to pay demand charges for that part of its FT Contract Demand affected by such force majeure event until the force majeure event is remedied. Unless otherwise agreed to in writing by Texas Gas and Customer, Texas Gas may, from time to time, and at any time selectively after negotiation, adjust the rate(s) applicable to any individual Customer; provided, however, that such adjusted rate(s) shall not exceed the applicable Maximum Rate(s) nor shall they be less than the Minimum Rate(s) set forth in the currently effective Sheet No. 10 of this Tariff. If Texas Gas so adjusts any rates to any Customer, Texas Gas shall file with the Commission any and all required reports respecting such adjusted rate. 8.2 In the event Customer utilizes a Secondary Point(s) of Receipt or Delivery for transportation service herein, Customer will continue to pay the monthly reservation charges as described in Section 8.1 above. In addition, Customer will pay the maximum commodity charge applicable to the zone in which gas is received and re-delivered up to Customer's Transportation Contract Demand and the maximum overrun commodity charge for any quantities delivered by Texas Gas in excess of Customer's winter season or summer season Transportation Contract Demand. Customer also agrees to pay the ACA, Take-or-Pay Surcharge, GRI charges, fuel retention charge, and any other effective surcharges, if applicable, as described in Section 8.1 above. 8.3 It is further agreed that Texas Gas may seek authorization from the Commission and/or other appropriate body for such changes to any rate(s) and terms set forth herein or in Rate Schedule FT, as may be found necessary to assure Texas Gas just and reasonable rates. Nothing herein contained shall be construed to deny Customer any rights it may have under the Natural Gas Act, as amended, including the right to participate fully in rate proceedings by intervention or otherwise to contest increased rates in whole or in part. 5 8.4 Customer agrees to fully reimburse Texas Gas for all filing fees, if any, associated with the service contemplated herein which Texas Gas is required to pay to the Commission or any agency having or assuming jurisdiction of the transactions contemplated herein. 8.5 Customer agrees to execute or cause its supplier or processor to execute a separate agreement with Texas Gas providing for the transportation of any liquids and/or liquefiables, and agrees to pay or reimburse Texas Gas, or cause Texas Gas to be paid or reimbursed, for any applicable rates or charges associated with the transportation of such liquids and/or liquefiables, as specified in Section 24 of the General Terms and Conditions of Texas Gas' FERC Gas Tariff. ARTICLE IX Miscellaneous 9.1 Texas Gas's Transportation Service hereunder shall be subject to receipt of all requisite regulatory authorizations from the Commission, or any successor regulatory authority, and any other necessary governmental authorizations, in a manner and form acceptable to Texas Gas. The parties agree to furnish each other with any and all information necessary to comply with any laws, orders, rules, or regulations. 9.2 Except as may be otherwise provided, any notice, request, demand, statement, or bill provided for in this Agreement or any notice which a party may desire to give the other shall be in writing and mailed by regular mail, or by postpaid registered mail, effective as of the postmark date, to the post office address of the party intended to receive the same, as the case may be, or by facsimile transmission, as follows: Texas Gas Texas Gas Transmission Corporation 3800 Frederica Street Post Office Box 1160 Owensboro, Kentucky 42302 Attention: Gas Revenue Accounting (Billings and Statements) Transportation & Exchange (Other Matters) Nomination & Allocation (Nominations) Fax (502) 926-8686 6 Customer Louisville Gas and Electric Company 220 West Main Street Louisville, Kentucky 40202 Attention: Mr. Clay Murphy The address of either party may, from time to time, be changed by a party mailing, by certified or registered mail, appropriate notice thereof to the other party. Furthermore, if applicable, certain notices shall be considered duly delivered when posted to Texas Gas's Electronic Bulletin Board, as specified in Texas Gas's tariff. 9.3 This Agreement shall be governed by the laws of the State of Kentucky. 9.4 Each party agrees to file timely all statements, notices, and petitions required under the Commission's Regulations or any other applicable rules or regulations of any governmental authority having jurisdiction hereunder and to exercise due diligence to obtain all necessary governmental approvals required for the implementation of this Transportation Agreement. 9.5 All terms and conditions of Rate Schedule FT and the attached Exhibits A, A-I, B, and C are hereby incorporated to and made a part of this Agreement. 9.6 This contract shall be binding upon and inure to the benefit of the successors, assigns, and legal representatives of the parties hereto. 9.7 Neither party hereto shall assign this Agreement or any of its rights or obligations hereunder without the consent in writing of the other party. Notwithstanding the foregoing, either party may assign its right, title and interest in, to and by virtue of this Agreement including any and all extensions, renewals, amendments, and supplements thereto, to a trustee or trustees, individual or corporate, as security for bonds or other obligations or securities, without such trustee or trustees assuming or becoming in any respect obligated to perform any of the obligations of the assignor and, if any such trustee be a corporation, without its being required by the parties hereto to qualify to do business in the state in which the performance of this Agreement may occur, nothing contained herein shall require consent to transfer this Agreement by virtue of merger or consolidation of a party hereto or a sale of all or substantially all of the assets of a party hereto, or any other corporate reorganization of a party hereto. 7 9.8 This Agreement insofar as it is affected thereby, is subject to all valid rules, regulations, and orders of all governmental authorities having jurisdiction. 9.9 No waiver by either party of any one or more defaults by the other in the performance of any provisions hereunder shall operate or be construed as a waiver of any future default or defaults whether of a like or a different character. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective representatives thereunto duly authorized, on the day and year first above written. ATTEST: TEXAS GAS TRANSMISSION CORPORATION ______________________ By Kathy Kirk Secretary Vice President WITNESSES: LOUISVILLE GAS AND ELECTRIC COMPANY ______________________ By Wendy C. Heck Vice President ______________________ Attest: Beverly J. Bradford Secretary Date of Execution by Customer: 10-22-93 ___________________________ 8 Firm Transportation Agreement Contract No. T4041 Exhibit "A" Firm Point(s) of Receipt LOUISVILLE GAS AND ELECTRIC COMPANY
Meter Daily Firm Fuel Use/ Loss(%) Zone Number Name Capacity (MMBtu) Winter Summer SL 2740 Superior-Pure 4,047 2.68 2.02 SL 2790 Henry Hub 10,275 2.68 2.02 SL 9836 Texaco-Dog Lake 5,138 2.68 2.02 SL 2845 Lake Pagie 5,911 2.68 2.02 SL 9471 Sohio 10,276 2.68 2.02 SL 9383 WC 293/HI 167/ 3,402 2.68 2.02 HI 167-166 SL 8170 Iowa 659 2.68 2.02
Notes:1) Further information on Receipt Point Description, Facilities, and MAOP can be found under the Receipt Point tab in Texas Gas's Gas Quest Manual. Demand Commodity FT Charges: 1 Exhibit "A - I" Secondary Points of Receipt SUPPLY Lateral Segment Meter No. Supply Point North Louisiana Carthage - Haughton 2102 Champlin 9805 Delhi 9051 Grigsby 9860 Nelson- Greenwood/ Waskom 8116 Texas Eastern -Sligo 9884 Valero -Carthage Haughton - Sharon 8003 Barksdale 2455 Beacon 9866 Cornerstone -Ada 2173 Crystal Oil -West Arcadia 2340 F.E. Hargraves- Minden 2186 LGI #1 2456 McCormick 2459 Minden Pan- Am #1 2457 Minden-Hunt 9819 Nelson-Sibley 9461 Olin-McGoldrick 2760 Sligo Plant 9834 Texaco-Athens Sharon - East 2631 Calhoun Plant 2202 Ergon-Monroe 8760 Lonewa 8020 MRT-Bastrop 9302 Munce 9812 Par Minerals/Downsville 9823 Reliance -Bernice 2612 Reliance- West Monroe 2 Exhibit "A - I" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Sharon (Cont.) 2634 Southwest -Guthrie Sharon 2145 Claiborne 2010 Fina Oil-HICO 9818 PGC-Bodcaw 2757 Texas Eastern- Sharon 2756 Texas Eastern- Sharon (Master List) West Iowa-Eunice 2091 Caribbean-China #1 2092 Caribbean-China #2 2093 Caribbean-China #3 9038 Coastal/ANR-Iowa 9839 Great Southern - Woodlawn 8170 Iowa 9445 Kilroy Riseden - Woodlawn 9890 Source Petroleum - S. Elton #1 9896 Source Petroleum - S. Elton #2 2883 Tee Oil-Woodlawn 9802 Trimble No. 1 Mallard Bay-Woodlawn 2140 California Co.- South Thornwell 2615 Caroline Hunt Sands - S. Thornwell 2170 Cockrell-North Chalkley 9828 Denovo-Lake Arthur 2207 Franks Petroleum - Chalkley 9028 Gas Energy Development-Hayes 2355 Humble-Chalkley 2383 IMC Wintershall - Chalkley 3 Exhibit "A - I" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Mallard Bay-Woodlawn 9848 Lamson Onshore -Mallard Bay 8071 LRC-Mallard Bay 9813 Rio Bravo 2701 Samedan-N Chalkley 2635 Shell-Chalkley (Cont.) 2266 South Mallard -BayAmerical 2822 Superior-S. Thornwell 9879 Total Minatone-Bell City 2885 Union Texas-Welsh 2853 Welsh Field Southwest East Cameron-Lowry 2581 E.C. 14 9872 E.C. 9A 2033 Little Cheniere-Arco 2034 Little Cheniere -Linder 2392 LRC-Grand Cheniere Lowry-Eunice 2860 Lake Arthur 9843 Mobile-Lowry 9446 NGPL - Lowry 2438 Willis Meter Station 2431 Fletcher-Schmeburger 2432 Fletcher-Patterson 2433 Fletcher-IAMS 2434 Fletcher-Young/Bert 2436 Caddo County, OK 2437 Washita County, OK South Egan-Eunice 9851 Booher-Iota 9003 Egan Offshore points entering at Egan. 9130 E.I. 278/S.S. 247F 9131 E.I. 278/S.S. 248D 9128 E.I. 299/S.S. 271A 9129 E.I. 299/S.S. 271A/S.S. 271B 4 Exhibit "A - I" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT South (Cont.) 9122 E.I. 320/325A 9123 E.I. 342/366A 2793 E.I. 342/372A 9399 E.I. 342/384A 2787 E.I. 342A 2767 E.I. 342C 2786 E.I. 343B Offshore points 9363 E.I. 349/349A entering at 9364 E.I. 349/349A/349B Egan (Cont.) 9369 E.I. 365A/365A/348 2781 S.S. 247F 2776 S.S. 248D 2778 S.S. 271A 2785 S.S. 271B/271A/271B 2788 E.I. 365 9342 Vermillion 255/256E 2774 Vermillion 256D 9105 Vermillion 267/275A 9340 Vermillion 267/287A 9341 Vermillion 267/287A/276 9374 Vermillion 267/289A 2782 Vermillion 267C 2770 Vermillion 267F 9159 Vermillion 267/287A/277 Southeast Lafayette - Eunice 2153 Branch-Cox 2125 Calif. Co.-North Duson 2137 California Co.-South Bosco #1 2138 California Co.-South Bosco #2 2600 Cayman-anslem Coulee 9852 CNG-South Rayne 2389 Duson 9837 Excel-Judice 8068 Exch. O&G-No. Maurice 2601 Fina Oil-anslem Coulee 8041 Florida 2290 Gulf Transport-Church Pt 5 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Southeast (Cont.) 2148 Maurice Cox 9906 Quintana-South Bosco 9005 Rayne-Columbia Gulf 2045 Riceland-North Tepetate 8067 South Scott 2810 Tidewater-North Duson 8053 Youngsville Henry-Lafayette 8190 Faustina-Henry 2790 Henry Hub 9822 Cities Service-Nunez Maurice - Freshwater 2147 CNG-Hell Hole Bayou 2203 Deck Oil-Perry/Hope 9808 Duhon/Parcperdue 9044 EDC-N. Parcperdue 9160 LLOG-Abbeville 2394 LRC-Theall 9800 May Petroleum 2424 Mccain-Maurice 2748 Parc Perdue 2749 Parc Perdue 2 9830 R&R Res-Abbeville 2706 Sun Ray 2840 Unical-N Fresh Bayou Morgan City - Lafayette 2064 Amoco-Charenton 9803 Atlantic 9809 BH Petroleum-SE Avery 2080 Bayou Sale-British Am 2085 British American- Ramos 9425 Charenton 9047 Florida Gas-E.B. Pigeon 2454 FMP/Bayou Postillion 2750 FMP/S Bayou Pigeon 8059 Franklin 2208 Frantzen 9898 Hadson-East Bayou Pigeon 2188 Lamson 9811 Lanaux-Jeff Island 6 Exhibit "A - I" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Southeast (Cont.) 9854 Linder Oil-Bayou Penchant 9853 Linder Oil- Garden City 2189 Rutledge Deas 2636 Shell-Bayou Pigeon 9902 Smith Production -Charenton 2035 Southwest-Jeanerette 9895 Texaco-Bayou Sale 8205 Transco-Myette Point 9829 Trunkline-Centerville Morgan City - Lafayette 2832 Union Oil-Bayou Pigeon 9350 Vulcan 9835 W.T. Burton-Lake Palourde 9040 ANR-Calumet (Rec.) Offshore points entering at Calumet 2583 EI 273A 2158 EI 273A/273A/284B 2584 EI 273B 2834 EI 276C 2771 EI 287D 2151 EI 292B 9339 EI 292B/286I 2550 EI 293/308/315 2773 EI 307E 2154 EI 309C 2155 EI 309G 2157 EI 309H 9886 EI 309H/309H/309J 2156 EI 314F/309C/314F 2780 SMI 11C 2425 SMI 161 2783 SS 204/219 Blk. 8-Morgan City 2198 Bois D'Arc 9142 Bois D'Arc-Pelican Lake 2109 Chevron-Block 8 2638 Coon Point 2845 Lake Pagie 9817 Linder Oil-Bayou Piquant 2460 Peltex Deep Saline #1 2480 SS 41 7 Exhibit "A - I" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Southeast (Cont.) 9471 Sohio 9888 Star Oil & Gas- Bay Junop 2755 Texaco-Bay Junop 9836 Texaco-Dog Lake 2463 Toce Oil 2850 Union Oil-N. Lake Pagie 9883 Zeit-Lake Pagie Thibodaux- Morgan City 2250 A. Glassell -Chacahoula 2047 Alliance Exploration 9029 Coastal-Chacahoula 2835 Lake Palourde 9873 Linder Oil-Chacahoula 2440 Magna-Chacahoula #1 2445 Magna-St. John #2 2470 Patterson-Chacahoula 2135 Simon Pass East Bosco-Eunice 2015 Amerada Hess 2016 Amerada Hess- South Lewisburg 2385 D.B. Mcclinton #1 2240 Faul Energy 9844 Germany Oil- Church Point 2288 Great Southern-Mowata #2 9804 Great Southern-Mowata #3 2289 Great Southern-South Lewisburg 8145 Ritchie 9119 Sevarg 2740 Superior-Pure HIOS Offshore points entering at 9035 ANR-Eunice ANR-Eunice 9135 WC 167/HIOS Main Line HI 247 2868 HIA-244A/A-231 8 Exhibit "A - I" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT HIOS Offshore points HI 283 9894 HIA-283/A-231A 2855 HIA-285/A-282 HI 303 2858 HIA-302A/A-303 entering at ANR 2863 HIA-334A/A-335 Eunice (Cont.) 9327 HIA-345/A-325A HIA-498 2536 HIA-498/462/VARIOUS 2867 HIA-462 9375 HIA-477/A-462/A-486 2534 HIA-498/A-489 2533 HIA-498/A-489/A-474 2535 HIA-498/A-489/A-499 9371 HIA-498/A-490 2856 HIA-498/A-517 HIA-539 2537 HIA-539/A-480 9365 HIA-539/A-511 9376 HIA-539/A-532 9328 HIA-539/A-550 9901 HIA-539/A-552/A-551 9889 HIA-539/A-552/A-553 2539 HIA-539/A-567 9380 HIA-539/A-568 HIA-555 2857 HIA-531A 2861 HIA-536C 2862 HIA-537B 9127 HIA-537B/A-537D/A-556 9308 HIA-555 9125 HIA-555/A-537D/A-556 9887 HIA-555/A-557A/A-556 HIA-573 2859 HIA-573B COMPLEX 9909 HIA-573/A-384/GB 224 2542 HIA-595CF COMPLEX 9 Exhibit "A - I" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT HIOS (Cont.) HIA-582 Offshore points 9165 HIA-582/A-561A entering at ANR- 9133 HIA-582/EB 110 Eunice (Cont.) 9134 HIA-582/EB 165 9377 HIA-582/EB -160/VARIOUS W.C. 294 entering at ANR 9026 WC 167/132 Eunice (Cont.) 9396 WC 293/HI 120/HI 120-128 9383 WC 293/HI 167/HI 167 -166 2838 WC 294 9136 WC 167/Near Shore Mainline Bastrop-Eunice 2020 Arkla-Perryville 9870 Channel Explo. -Chicksaw Creek 9826 Delhi-Ewing 8112 Evangeline 2361 Guffrey-Millhaven 9877 Hadson -Olla/Summerville 9814 Hogan-Davis Lake 8147 Mamou 8063 Pineville (LIG) 3800 Pooling Receipt- Zone O 9832 Wintershall-Clarks Bastrop-North 2399 ANR-Slaughters 2061 BeeHunter 2072 Blair 8125 Dyersburg 2373 HarKen/Addison-G #1 2352 HarKen/Cox 2376 HarKen/I.C.C. #12 2379 HarKen/I.C.C. #15 2022 HarKen/I.C.C. #16 2381 HarKen/I.C.C. #17 2367 HarKen/I.C.C. #9 9530 HarKen/Murray 10 Exhibit "A - I" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Mainline (Cont.) 2362 HarKen/P. Gannon Est. #1 Bastrop-North (Cont.) 2351 HarKen/Qualls 2966 HarKen/Stearman #1 2960 HarKen/W. Ky. #1 2962 HarKen/W. Ky. #2 2375 HarKen/W. Ky. #6 2087 Heathville-Trenton 9303 Helena #2 9876 Hux Oil-Russellville 1715 Lebanon-Columbia 1247 Lebanon-Congas 1859 Lebanon-Texas Eastern 9527 Liberty-South Hill 3801 Pooling Receipt- Zone 1 9525 Pride Energy No. 1 9931 Reynolds-Narge Creek 2648 Spears 5700 Storage Receipt 9868 United Cities -Barnsley 11 EXHIBIT "B" FIRM POINT(S) OF DELIVERY LOUISVILLE GAS AND ELECTRIC COMPANY
Firm Capacity Point Meter (MMBtu/D) MAOP MDP* No. No. Name/Description Facilities Winter Summer (psig) (psig) 1. 1529 Louisville Gas and Electric Company 30,000 30,000 BARDSTOWN ROAD - LON 85-36-0, LAT 38-12-0, Jefferson County, KY (1) 674 400 BEDFORD-LG&E - LON 85-18-15, LAT 38-34-30, Trimble County, KY (1) 810 400 CRESTWOOD - LON 85-25-15, LAT 38-20-0, Oldham County, KY (1) 810 400 DOE RUN - LON 86-2-30, LAT 37-55-30, Meade County, KY (1) 810 400 ELDER PARK - LON 85-25-0, LAT 38-22-0, Oldham County, KY (1) 810 400 ELLINGSWORTH LANE - LON 85-33-0, LAT 38-13-15, Jefferson County, KY (1) 810 350 LAGRANGE - LON 85-24-15, LAT 38-24-0, Oldham County, KY (1) 810 400 PENILE ROAD - LON 85-47-0, LAT 38-6-0, Jefferson County, KY (1) 674 400 PRESTON STREET ROAD - LON 85-41-30, LAT 38-9-45, Jefferson County, KY (1) 674 400
Firm Transportation Agreement Exhibit "C" Supply Lateral Capacity Louisville Gas and Electric Company Preferential Rights Supply Lateral MMBtu/d Zone 1 Supply Lateral(s) - ------------------------ North Louisiana Leg: 0 ------ Total Zone 1: 0 Zone SL Supply Lateral(s) - ------------------------- East Leg: 4,047 Southeast Leg: 31,600 South Leg: 0 Southwest Leg: 0 West Leg: 1,637 WC-294: 3,402 HIOS: 0 ----- Total Zone SL: 40,686 ------ Grand Total: 40,686 ------ ------ C-1 STANDARD FACILITIES KEY FOR EXHIBIT "B", POINT(S) OF RECEIPT EXHIBIT "C", POINT(S) OF DELIVERY (1) Measurement facilities are owned, operated, and maintained by Texas Gas Transmission Corporation. (2) Measurement facilities are owned, operated, and maintained by ANR Pipeline Company. (3) Measurement facilities are owned, operated, and maintained by Arkansas Louisiana Gas Company. (4) Measurement facilities are owned by Texas Gas Transmission Corporation and operated and maintained by Kerr-McGee Corporation. (5) Measurement facilities are owned, operated, and maintained by United Gas Pipe Line Company. (6) Measurement facilities are owned by Texas Gas Transmission Corporation and operated and maintained by Delhi Gas Pipeline Corporation. (7) Measurement facilities are owned, operated, and maintained by Kerr-McGee Corporation. (8) Measurement facilities are owned, operated, and maintained by Louisiana Intrastate Gas Corporation. (9) Measurement facilities are owned, operated, and maintained by Trunkline Gas Company. (10) Measurement facilities are owned, operated, and maintained by Columbia Gulf Transmission Company. (11) Measurement facilities are owned by Texas Gas Transmission Corporation and operated and maintained by Columbia Gulf Transmission Company. (12) Measurement facilities are owned, operated, and maintained by Florida Gas Transmission Company. (13) Measurement facilities are owned by Texas Gas Transmission Corporation and operated and maintained by ANR Pipeline Company. (14) Measurement facilities are owned by Champlin Petroleum Company and operated and maintained by ANR Pipeline Company. 1 (15) Measurement facilities are owned by Transcontinental Gas Pipe Line Corporation and operated and maintained by ANR Pipeline Company. (16) Measurement facilities are jointly owned by others and operated and maintained by ANR Pipeline Company. (17) Measurement facilities are owned by United Gas Pipe Line Company and operated and maintained by ANR Pipeline Company. (18) Measurement facilities are owned by Texas Gas Transmission Corporation and operated and maintained by Texas Eastern Transmission Corporation. (19) Measurement facilities are owned by Texas Gas Transmission Corporation and operated and maintained by Natural Gas Pipeline Company of America. (20) Measurement facilities are owned by Louisiana Intrastate Gas Corporation and operated and maintained by Texas Gas Transmission Corporation. (21) Measurement facilities are owned, operated, and maintained by Texas Eastern Transmission Corporation. (22) Measurement facilities are owned by Kerr-McGee Corporation and operated and maintained by ANR Pipeline Company. (23) Measurement facilities are operated and maintained by ANR Pipeline Company. (24) Measurement facilities are owned, operated, and maintained by Transcontinental Gas Pipe Line Corporation. (25) Measurement facilities are owned by Texas Gas Transmission Corporation and operated and maintained by Tennessee Gas Pipeline Company. (26) Measurement facilities are owned, operated, and maintained by Northern Natural Gas Company. (27) Measurement facilities are owned and maintained by Faustina Pipeline Company and operated by Texas Gas Transmission Corporation. (28) Measurement facilities are owned by Samedan and operated and maintained by ANR Pipeline Company. (29) Measurement facilities are owned by Texas Gas Transmission Corporation and operated and maintained by CNG Producing. 2 (30) Measurement facilities are owned, operated, and maintained by Devon Energy Corporation. (31) Measurement facilities are owned by Total Minatome Corporation and operated and maintained by Texas Gas Transmission Corporation. (32) Measurement and interconnecting pipeline facilities are owned by Transco-Louisiana Intrastate Pipeline Company. The measurement facilities are operated and maintained by Trunkline Gas Company. (33) Measurement and interconnecting pipeline facilities are owned and maintained by Transco-Louisiana Intrastate Pipeline Company. The measurement facilities are operated and flow controlled by Texas Gas Transmission Corporation. (34) Measurement facilities are owned, operated, and maintained by Mississippi River Transmission Corporation. (35) Measurement facilities are owned, operated, and maintained by Texaco Inc. (36) Measurement facilities are owned by Texas Gas Transmission Corporation and operated and maintained by Louisiana Resources Company. (37) Measurement facilities are owned, operated, and maintained by Louisiana Resources Company. (38) Measurement facilities are owned by Oklahoma Gas Pipeline Company and operated and maintained by ANR Pipeline Company. (39) Measurement and interconnecting pipeline facilities are owned and maintained by Louisiana Resources Company. The measurement facilities are operated and flow controlled by Texas Gas Transmission Corporation. (40) Measurement facilities are owned by Hall-Houston and operated and maintained by ANR Pipeline Company. (41) Measurement facilities are owned, operated, and maintained as specified in Exhibit "B". (42) Measurement facilities are owned by Enron Corporation and operated and maintained by Texas Gas Transmission Corporation. (43) Measurement facilities are owned by United Cities Gas Company and operated and maintained by TXG Engineering, Inc. 3 (44) Measurement facilities are owned, operated, and maintained by Arkla Energy Resources. (45) Measurement facilities are owned by Falcon Seaboard Gas Company and operated and maintained by Texas Gas Transmission Corporation. (46) Measurement facilities are owned by ANR Pipeline Company and operated and maintained by High Island Offshore System. (47) Measurement facilities are owned by Forest Oil Corporation, et al., and operated and maintained by Tenneco Gas Transportation Company. (48) Measurement facilities are owned by PSI, Inc., and operated and maintained by ANR Pipeline Company. (49) Measurement facilities are owned, operated, and maintained by Tennessee Gas Pipeline Company. (50) Measurement facilities are owned, operated, and maintained by Colorado lnterstate Gas Company. (51) Measurement facilities are owned by Producer's Gas Company and operated and maintained by Natural Gas Pipeline Company of America. (52) Measurement facilities are owned by Zapata Exploration and operated and maintained by ANR Pipeline Company. (53) Measurement facilities are jointly owned by Amoco, Mobil, and Union; operated and maintained by ANR Pipeline Company. (54) Measurement facilities are owned, operated, and maintained by VHC Gas Systems, L.P. (55) Measurement facilities are owned by Walter Oil and Gas and operated and maintained by Columbia Gulf Transmission Company. 4 EX-10.47 11 SCHEDULE TO EXHIBIT 10.47 Schedule to Exhibit 10.47 Exhibit 10.47 references three material contracts: Firm No Notice Transportation Agreement between Texas Gas Transmission Corporation and LG&E (8-Year Term), effective November 1, 1993, for the transmission of natural gas (the "8- Year Agreement"). Firm No Notice Transportation Agreement between Texas Gas Transmission Corporation and LG&E (2-Year Term), effective November 1, 1993, for the transmission of natural gas (the "2- Year Agreement"). Firm No Notice Transportation Agreement between Texas Gas Transmission Corporation and LG&E (5-Year Term), effective November 1, 1993, for the transmission of natural gas (the "5- Year Agreement"). Pursuant to Item 601(a) and the instructions thereto, as all of the listed contracts are substantially similar in all material respects, except as to the initial term (length in years) of the contracts, only the 8-Year Agreement has been filed with this Annual report on Form 10-K for the year ended December 31, 1993. The 2-Year Agreement and the 5-Year Agreement, while listed in the Exhibit Index, have not been filed as Exhibits hereto. As stated above, each contract is identical in all material respects, save for the initial term (length in years) as specified in "Article V. Term of Agreement." Under Article V, each contract became effective November 1, 1993, and each shall be automatically extended for an additional term of five years upon expiration of the initial term. The initial term of the 8-Year Agreement is eight years, expiring on October 31, 2001, while the initial term of the 5-Year Agreement is five years, expiring on October 31, 1998, and the initial term of the 2-Year Agreement is two years, expiring on October 31, 1995. Contract No. NO415 FIRM NO NOTICE TRANSPORTATION AGREEMENT between TEXAS GAS TRANSMISSION CORPORATION and LOUISVILLE GAS AND ELECTRIC COMPANY (8-YEAR TERM) Effective November 1, 1993 FIRM NO NOTICE TRANSPORTATION AGREEMENT Rate Schedule NNS THIS AGREEMENT, made and entered into this 1st day of November, 1993, by and between Texas Gas Transmission Corporation, a Delaware corporation, hereinafter referred to as "Texas Gas," and Louisville Gas and Electric Company, a Kentucky corporation, hereinafter referred to as "Customer," WITNESSETH: WHEREAS, Customer was receiving a firm, bundled city-gate sales service from Texas Gas on May 18, 1992, under provisions of a sales service agreement effective November 1, 1992; and WHEREAS, Customer desires to continue receiving the equivalent transportation service formerly embedded in its bundled sales service, or portion thereof, as no-notice service; and WHEREAS, Texas Gas desires to provide and Customer desires to receive such no-notice service under its NNS Rate Schedule on the terms and conditions set forth herein; NOW THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto covenant and agree as follows: ARTICLE I. DEFINITIONS 1.1 The definitions in Section 3 of Rate Schedule NNS, as well as Section 1 of the General Terms and Conditions of Texas Gas's FERC Gas Tariff, are hereby incorporated by reference and made a part of this Agreement. ARTICLE II. QUANTITY 2.1 Pursuant to Texas Gas's Rate Schedule NNS and subject to the terms and provisions of this Agreement, Customer agrees to deliver or cause to be delivered to Texas Gas at the Point(s) of Receipt in Exhibit "A" hereunder, gas for transportation and Texas Gas agrees to receive, transport, and re-deliver to Customer at the Point(s) of Delivery in Exhibit "B" hereunder, the daily and seasonal quantities of gas set forth herein. The parties agree that the transportation service provided hereunder shall be a firm service provided by combining pipeline capacity (the "Nominated" portion of the service) and storage capacity (the "Unnominated" portion of the service) into a single transportation service. 2.2 The maximum daily quantity of gas which Texas Gas shall be obligated to transport and re-deliver to Customer, and which Customer shall be obligated to receive, is Customer's applicable Contract Demand expressed on a seasonal basis as set forth below: 1 Daily Contract Demand MMBtu/d Winter 61,634 Summer 45,000 Shoulder Month (April) 57,480 Shoulder Month (October) 61,634 2.3 The above Contract Demands consist of a Nominated Daily Quantity, for which Customer is responsible for scheduling the delivery of gas supplies into Texas Gas's system, and an Unnominated Daily Quantity, which is automatically delivered from storage by Texas Gas to meet Customer's requirements. Those quantities, expressed on a seasonal basis, are set forth below: Nominated Daily Quantity MMBtu/d Winter 49,000 Summer (except October) 45,000 October 49,000 Unnominated Daily Quantity MMBtu/d Winter 12,634 Shoulder Month (April) 6,317 Shoulder Month (October) 8,844 2.4 Customer's Excess Unnominated Daily Quantity shall be 6,163 MMBtu per day, which is ten percent (10%) of its Winter Contract Demand. 2.5 The maximum seasonal quantities of gas which Texas Gas shall be obligated to transport and deliver to Customer, and which Customer shall be obligated to receive, are Customer's Seasonal Quantity Entitlements as set forth below: Seasonal Quantity Entitlement MMBtu Winter 8,740,000 Summer 7,026,667 2.6 A portion of Customer's Winter Quantity Entitlement consists of unnominated quantities of gas delivered by Texas Gas from storage. The maximum net quantity of gas Texas Gas is obligated to deliver to Customer from storage during any Winter Season is Customer's Unnominated Seasonal Quantity, which is 1,516,000 MMBtu. In addition to scheduling the receipt of Customer's Summer Quantity Entitlement, Customer is also responsible for the re-delivery each summer of that portion of Customer's Unnominated Seasonal Quantity actually used the prior winter, as more fully set forth herein. 2 2.7 Customer shall reimburse Texas Gas for the Quantity of Gas required for fuel, company use, and unaccounted for associated with the transportation service hereunder in accordance with Section 16 of the General Terms and Conditions of Texas Gas's FERC Gas Tariff. Texas Gas may adjust the fuel retention percentage as operating circumstances warrant pursuant to Section 16 of the General Terms and Conditions; however, such change shall not be retroactive. Texas Gas agrees to give Customer thirty (30) days written notice before changing such percentage. 2.8 Texas Gas, at its sole option, may, if tendered by Customer, transport daily quantities in excess of Customer's Contract Demand. 2.9 In order to protect its system, the delivery of gas to its customers and/or the safety of its operations, Texas Gas shall have the right to vent excess natural gas delivered to Texas Gas by Customer or Customer's supplier(s) in that part of its system utilized to transport gas received hereunder. Prior to venting excess gas, Texas Gas will use its best efforts to contact Customer or Customer's supplier in an attempt to correct such excess deliveries to Texas Gas. Texas Gas may vent such excess gas solely within its reasonable judgment and discretion without liability to Customer, and a pro rata share of any gas so vented shall be allocated to Customer. Customer's pro rata share shall be determined by a fraction, the numerator of which shall be the quantity of gas delivered to Texas Gas at the Point of Receipt by Customer or Customer's suppliers in excess of Customer's confirmed nomination and the denominator of which shall be the total quantity of gas in excess of total confirmed nominations flowing in that part of the Texas Gas's system utilized to transport gas, multiplied by the total quantity of gas vented or lost hereunder. 2.10 Customer shall have the right to elect to reduce its Daily Contract Demand by an amount up to the Daily Contract Demand which was contracted for by Customer to serve any end use customer of Customer which is bypassed to Texas Gas. Any such reduction right, if exercised by customer providing thirty (30) days prior written notice, shall be effective on the day which such end use Customer commences receipt of direct or indirect deliveries of natural gas from Texas Gas. To the extent that Texas Gas bypasses an end-use customer of Customer and Texas Gas enters into a firm contract with the end-use customer pursuant to which the end-use customer shall be responsible for the transition costs associated with such Contract Demand, Texas Gas shall adjust any Order 636 transition costs billed to Customer to reflect Customer's loss of such end-use customer load. If Customer recommences service to any such end-use customer, in whole or in part, Customer's Daily Contract Demand may be increased, at Customer's request, by an amount up to the prior such reduction made for that particular end-use customer, subject to the availability of capacity and FERC authorization, if applicable. 3 ARTICLE III. SCHEDULING OF CUSTOMER'S NOMINATED DAILY QUANTITY 3.1 This Article III only applies to the scheduling of the Nominated Daily Quantity portion of Customer's Contract Demand and not to the Unnominated Daily Quantity of Unnominated Seasonal Quantity delivered from storage. 3.2 Customer shall be obligated five (5) working days prior to the end of each month to furnish Texas Gas with a schedule of the estimated daily quantity(ies) of gas it desires to be received, transported, and redelivered for the following month. Such schedules will show the quantity(ies) of gas Texas Gas will receive from Customer at the Point(s) of Receipt, along with the identity of the supplier(s) that is delivering or causing to be delivered to Texas Gas quantities for Customer's account at each Point of Receipt for which a nomination has been made. 3.3 Customer shall give Texas Gas, after the first of the month, twenty-four (24) hours notice prior to the commencement of any day in which Customer desires to change the quantity(ies) of gas it has scheduled to be delivered to Texas Gas at the Point(s) of Receipt. If Customer's nomination change does not require Texas Gas to interrupt service to another customer, Texas Gas will agree to waive this 24-hour prior notice and implement nomination changes requested by customer to commence in such lesser time frame subject to Texas Gas's being able to confirm and verify such nomination change at both receipt and delivery points, and receive PDA's reflecting this nomination change at both receipt and delivery points. Texas Gas will use its best efforts to make the nomination change effective at the time requested by customer; however, if Texas Gas is unable to do so, the nomination change will be implemented as soon as confirmation is received. ARTICLE IV. POINTS OF RECEIPT AND DELIVERY AND SUPPLY LATERAL ALLOCATION 4.1 Customer shall deliver or cause to be delivered natural gas to Texas Gas at the Point(s) of Receipt specified in Exhibit "A" attached hereto and Texas Gas shall redeliver gas to Customer or for the account of Customer at the Point(s) of Delivery specified in Exhibit "B" attached hereto, in accordance with Sections 7 and 15 of the General Terms and Conditions of Texas Gas's FERC Gas Tariff. 4.2 Customer's preferential capacity rights on each of Texas Gas's supply laterals shall be as set forth in Exhibit "C" attached hereto, in accordance with Section 34 of the General Terms and Conditions of Texas Gas's FERC Gas Tariff. 4 ARTICLE V. TERM OF AGREEMENT 5.1 This Agreement shall become effective November 1, 1993, and shall remain in full force and effect for a primary term of eight (8) years ending October 31, 2001. At the end of such primary term, or any subsequent rollover term, this Agreement shall automatically be extended for an additional rollover term of five (5) years, unless Customer terminates this Agreement at the end of such primary or rollover term by giving Texas Gas at least 365 days advance written notice prior to the expiration of the primary term or any subsequent rollover term. ARTICLE VI. POINT OF MEASUREMENT 6.1 The gas shall be measured or caused to be measured by Customer and/or Texas Gas at the Point(s) of Measurement which shall be as specified in Exhibits A, A-I, and B herein. In the event of a line loss or leak between the Point of Measurement and the Point of receipt, the loss shall be determined in accordance with the methods described in Section 3, "Measuring and Measuring Equipment," contained in the General Terms and Conditions of First Revised Volume No. 1 of Texas Gas's FERC Gas Tariff. ARTICLE VII. FACILITIES 7.1 Texas Gas and Customer agree that any facilities required at the Point(s) of receipt, Point(s) of Delivery, and Point(s) of Measurement, shall be installed, owned, and operated as specified in Exhibits A, A-I, and B herein. Customer may be required to pay or cause Texas Gas to be paid for the installed cost of any new facilities required as contained in Sections 1.3, 1.4 and 1.5 of Texas Gas's FT Rate Schedule. Customer shall only be responsible for the installed cost of any new facilities described in this Section if agreed to in writing between Texas Gas and Customer. ARTICLE VIII. RATES AND CHARGES 8.1 Unless otherwise agreed to in writing by Texas Gas and Customer, Customer shall pay to Texas Gas each month a Reservation Charge which shall consist of the applicable Contract Demand as specified in this Agreement multiplied by the applicable demand rate per MMBtu. The Reservation Charge shall be billed as of the effective date of this Agreement. Unless otherwise agreed to in writing by Texas Gas and Customer, Customer shall also pay Texas Gas the Maximum Commodity Rate per MMBtu of gas delivered by Texas Gas for no-notice transportation services rendered to Customer up to Customer's applicable Contract Demand. For all gas quantities delivered in excess of Customer's applicable Contract Demand on any day, Customer shall pay the NNS Overrun Rate per MMBtu, as described in the NNS Rate Schedule. In addition, Customer shall pay any and all currently effective demand or commodity surcharges, including but not limited to, the GRI Funding Unit, the FERC ACA 5 Unit Charge, Texas Gas's Take-or-Pay surcharge, and Order 636 Transition Costs surcharge. If Texas Gas declares force majeure which renders it unable to perform service for Customer under this Agreement either in whole or part, then Customer shall be relieved of its obligation to pay NNS demand charges for that part of its NNS contract demand affected by such force majeure event until the force majeure event is remedied. Unless otherwise agreed to in writing by Texas Gas and Customer, Texas Gas may, from time to time, and at any time selectively after negotiation, adjust the rate(s) applicable to any individual Customer; provided, however, that such adjusted rate(s) shall not exceed the applicable Maximum Rate(s) nor shall they be less than the Minimum Rate(s) set forth in the currently effective Sheet No. 10 of Texas Gas's FERC Gas Tariff. If Texas Gas so adjusts any rates to any Customer, Texas Gas shall file with the Commission any and all required reports respecting such adjusted rate. 8.2 In the event Customer utilizes a Secondary Point(s) of Delivery for transportation service herein, Customer will continue to pay the monthly reservation charges as described in Section 8.1 above. In addition, Customer will pay the maximum commodity charge applicable to the zone in which gas is delivered up to Customer's applicable Contract Demand and the maximum overrun commodity charge for any quantities delivered by Texas Gas in excess of Customer's Seasonal Quantity Entitlement. Customer also agrees to pay the ACA, Take-or-Pay Surcharge, GRI charges, fuel retention charge, and any other effective surcharges, if applicable, as described in Section 8.1 above. 8.3 It is further agreed that Texas Gas may seek authorization from the Commission and/or other appropriate body for such changes to any rate(s) and terms set forth herein or in Texas Gas's tariff, as may be found necessary to assure Texas Gas just and reasonable rates. Nothing herein contained shall be construed to deny Customer any rights it may have under the Natural Gas Act, as amended, including the right to participate fully in rate proceedings by intervention or otherwise to contest increased rates in whole or in part. 8.4 Customer agrees to fully reimburse Texas Gas for all filing fees, if any, associated with the service contemplated herein which Texas Gas is required to pay to the Commission or any agency having or assuming jurisdiction of the transactions contemplated herein. 8.5 Customer agrees to execute or cause its supplier or processor to execute a separate agreement with Texas Gas providing for the transportation of any liquids and/or liquefiables, and agrees to 6 pay or reimburse Texas Gas, or cause Texas Gas to be paid or reimbursed, for any applicable rates or charges associated with the transportation of such liquids and/or liquefiables, as specified in Section 24 of the General Terms and Conditions of Texas Gas' FERC Gas Tariff. ARTICLE IX. WINTER SERVICE 9.1 Customer will only be required to nominate into Texas Gas's system a quantity of gas up to the Nominated Daily Quantity. 9.2 In addition to the Nominated Daily Quantity actually scheduled by Customer, Texas Gas will adjust deliveries from storage up to Customer's Unnominated Daily Quantity to meet Customer's city-gate requirements up to Customer's Winter Contract Demand. 9.3 In addition, Customer may exceed its Unnominated Daily Quantity by a quantity equal to its Excess Unnominated Daily Quantity (i.e. 10% of its Winter Contract Demand) for up to two consecutive gas days without a penalty; however, total deliveries to the Customer may not exceed the Customer's Winter Contract Demand. Texas Gas will notify the Customer within four (4) hours of the end of the gas day in which Customer has exceeded its Unnominated Daily Quantity. If the Customer does not cease taking such Excess Unnominated Daily Quantity from Texas Gas's storage after two consecutive gas days, then pipeline may assess a penalty of $15 per MMBtu of such excess gas taken and may issue an operational flow order requiring Customer to immediately inject additional gas supply and/or reduce city-gate deliveries so that the customer is no longer exceeding his Unnominated Daily Quantity. 9.4 Monthly Maximum Withdrawal: No more than 50% of Customer's Unnominated Seasonal Quantity shall be withdrawn in any consecutive thirty (30) day period. 9.5 Seasonal Minimum and Maximum Withdrawal: No more than 105% of Customer's Unnominated Seasonal Quantity shall be withdrawn by March 1; provided further, that no less than 68% and no more than 100% of Customer's Unnominated Seasonal Quantity shall be withdrawn by April 1 (the end of the Winter Season). 9.6 Adjusted Unnominated Daily Quantity: As Customer's Unnominated Seasonal Quantity (USQ) is withdrawn, that portion of Customer's Unnominated Daily Quantity (UDQ) available to Customer shall be adjusted. Customer's Adjusted Unnominated Daily Quantity (UDQ) shall be equal to the greater of its average winter daily unnominated quantity (i.e., Customer's USQ divided by the total number of Winter days the UDQ is available) or the applicable percentage of its Unnominated Daily Quantity (UDQ) as set forth in the following table: 7 % USQ Withdrawn % UDQ Available 75% 90% 80% 85% 85% 80% 90% 75% Notwithstanding the adjustments described above, Customer's UDQ shall be available for a total of 120 days each Winter Season. 9.7 During the Winter Season, Texas Gas will also inject gas into storage on a best efforts basis as part of NNS service. Although such injections will be done on a best efforts basis, Texas Gas will be presumed, unless it gives notice to the contrary, to be able to inject into storage such quantities of gas as to take into account routine variations in no-notice deliveries. If Texas Gas is unable to make such best efforts injections, it will advise Customer by posting on its electronic bulletin board. However, no presumption will exist for non-routine situations (e.g. injections in excess of 15% of Customer's Winter Contract Demand or sustained injections of more than five days) and Customer must give 24 hours advance written notice to Texas Gas of quantities it desires to inject into storage, so that Texas Gas can determine the extent to which it can make such injections and adjust its operations accordingly. ARTICLE X. SUMMER SERVICE 10.1 Texas Gas shall deliver to Customer at the city-gate during each Summer Season up to the Customer's Summer Contract Demand and Summer Quantity Entitlement as nominated by Customer. 10.2 Pursuant to the provisions set forth below, Customer shall deliver in kind to Texas Gas during each Summer Season a quantity of gas equal to that portion of Customer's Unnominated Seasonal Quantity actually utilized by Customer (including any in-field transfers pursuant to Section 25.8(c) of the General Terms and Conditions of this tariff) during the prior Winter Season (as well as any Shoulder Month quantities delivered to customer during the Summer Season). Customer shall reserve and utilize such portion of its Summer Contract Demand as necessary to redeliver such volumes into storage. 10.3 Maximum Daily Injection Quantity: To protect the storage formations and allow uniform filling of the storage reservoirs, Customer will be required to adhere to certain injection limits (calculated as a percentage of the Unnominated Seasonal Quantity), throughout the summer injection period. During the Summer Season Customer may, on a daily basis, inject according to the following table: 8 % of Unnominated Maximum Available Seasonal Quantity Injection Rate Injected % of USQ 0% - 65% 1.3% 65% - 90% 1.1% > 90% 0.6% 10.4 Inventory verification tests will be conducted on a semiannual basis. These tests require the temporary suspension of individual storage field activities (injections and withdrawals) for a period of approximately two weeks. If conditions will not permit the full maximum daily injection or withdrawal quantity, Texas Gas may temporarily adjust the limit and allow make-up quantities on succeeding days. Texas Gas will provide at least 45 days prior notice in regard to the scheduling of these shut-in periods. 10.5 During the Summer Season (except as provided in Section 11 below), Texas Gas will also withdraw gas from storage on a best efforts basis as part of the NNS service. Although such withdrawals will be done on a best efforts basis, Texas Gas will be presumed, unless it gives notice to the contrary, to be able to withdraw from storage such quantities of gas as to take into account routine variations in no-notice services. If Texas Gas is unable to make such best efforts withdrawals, it will advise Customer by posting on its electronic bulletin board. However, no presumption will exist for non-routine situations (e.g. withdrawals in excess of 10% of Customer's Winter Contract Demand or sustained withdrawals of more than five days) and Customer must give 24 hours advance written notice to Texas Gas of quantities it desires to withdraw from storage, so that Texas Gas can determine the extent to which it can make such withdrawals and adjust its operations accordingly. 10.6 To assist Texas Gas's operational and maintenance scheduling through the Summer Season, Customer will notify Texas Gas by April 1 of each year, with updates monthly, of the quantities it intends to inject monthly during the immediately upcoming Summer Season; such injection schedule provided by Customer is a best efforts estimate and may be revised as necessary. Texas Gas will use its reasonable efforts to coordinate its test, maintenance, alteration and repair activities during such Summer Season to accommodate Customer's request. ARTICLE XI. SHOULDER MONTH FLEXIBILITY 11.1 During the Shoulder Months of April and October, Texas Gas will deliver to Customer at the city-gate the Customer's Shoulder Month Contract Demand, which shall, unless otherwise agreed, be the sum of Customer's Summer Contract Demand, Customer's Excess 9 Unnominated Quantity and the applicable percentage as set forth below of Customer's Unnominated Daily Quantity for the Winter Season: Shoulder Month Percent of Unnominated Daily Quantity April 50% October 70% In the event that Customer's Unnominated Seasonal Quantity is available in quantities sufficient to support additional access to Customer's Unnominated Daily Quantity the applicable percentage available to Customer during such Shoulder Month will be as follows: % of Unnominated % of Unnominated Shoulder Month Seasonal Quantity Withdrawn Daily Quantity Available April/October 75% 90% 80% 85% 85% 80% 90% 75% 95% 70% Although such Shoulder Month Contract Demand shall be available during any day of the Shoulder Month, it shall only be available for a maximum of fifteen (15) gas days during such month. However, Customer shall neither exceed nor be billed in excess of the applicable Winter Daily Contract Demand set forth in Article 2.2. 11.2 In the event that Customer's Unnominated Seasonal Quantity has been exhausted prior to the April Shoulder Month period, Customer shall retain access to fifty (50) percent of its Unnominated Daily Quantity up to an aggregate monthly total equivalent to ten (10) percent of Customer's Unnominated Seasonal Quantity, as set forth above from that date until April 30. ARTICLE XII. MISCELLANEOUS 12.1 Texas Gas's Transportation Service hereunder shall be subject to receipt of all requisite regulatory authorizations from the Commission, or any successor regulatory authority, and any other necessary governmental authorizations, in a manner and form acceptable to Texas Gas. The parties agree to furnish each other with any and all information necessary to comply with any laws, orders, rules, or regulations. 12.2 Except as may be otherwise provided, any notice, request, demand, statement, or bill provided for in this Agreement or any notice which a party may desire to give the other shall be in writing and mailed by regular mail, or by postpaid registered mail, 10 effective as of the postmark date, to the post office address of the party intended to receive the same, as the case may be, or by facsimile transmission, as follows: Texas Gas Texas Gas Transmission Corporation 3800 Frederica Street Post Office Box 1160 Owensboro, Kentucky 42302 Attention: Gas Revenue Accounting (Billings and Statements) Nomination & Allocation (Nominations) Transportation & Exchange (Contractual Matters) Marketing Services (Other Matters) Fax #: 502/926-8686 Customer Louisville Gas and Electric Company 220 West Main Street Post Office Box 32010 Louisville, Kentucky 40232 Attention: Gas Supply Department The address of either party may, from time to time, be changed by a party mailing, by certified or registered mail, appropriate notice thereof to the other party. Furthermore, if applicable, certain notices shall be considered duly delivered when posted to Texas Gas's Electronic Bulletin Board, as specified in Texas Gas's Tariff. 12.3 This Agreement shall be governed by the laws of the State of Kentucky. 12.4 Each party agrees to file timely all statements, notices, and petitions required under the Commission's Regulations or any other applicable rules or regulations of any governmental authority having jurisdiction hereunder and to exercise due diligence to obtain all necessary governmental approvals required for the implementation of this Transportation Agreement. 12.5 All terms and conditions of Rate Schedule NNS and the attached Exhibits A, A-I, B, and C are hereby incorporated to and made a part of this Agreement. 12.6 This contract shall be binding upon and inure to the benefit of the successors, assigns, and legal representatives of the parties hereto. 12.7 Neither party hereto shall assign this Agreement or any of its rights or obligations hereunder without the consent in writing of the other party. Notwithstanding the foregoing, either party may assign its right, title and interest in, to and by virtue of this Agreement including any and all extensions, renewals, amendments, and supplements thereto, to a trustee or trustees, 11 individual or corporate, as security for bonds or other obligations or securities, without such trustee or trustees assuming or becoming in any respect obligated to perform any of the obligations of the assignor and, if any such trustee be a corporation, without its being required by the parties hereto to qualify to do business in the state in which the performance of this Agreement may occur, nothing contained herein shall require consent to transfer this Agreement by virtue of merger or consolidation of a party hereto or a sale of all or substantially all of the assets of a party hereto, or any other corporate reorganization of a party hereto. 12.8 This Agreement insofar as it is affected thereby, is subject to all valid rules, regulations, and orders of all governmental authorities having jurisdiction. 12.9 No waiver by either party of any one or more defaults by the other in the performance of any provisions hereunder shall operate or be construed as a waiver of any future default or defaults whether of a like or a different character. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective representatives thereunto duly authorized, as indicated below. ATTEST: TEXAS GAS TRANSMISSION CORPORATION ___________________________ By_________________________________ Secretary Vice President Date of Execution by Texas Gas: ___________________________ WITNESSES: LOUISVILLE GAS AND ELECTRIC COMPANY ___________________________ By WENDY C. HECK Vice President ___________________________ Attest: BEVERLY J. BRADFORD Date of Execution by Customer: 10-22-93 12 Firm No-Notice Transportation Agreement Exhibit "A" Firm Point(s) of Receipt LOUISVILLE GAS AND ELECTRIC COMPANY
Meter Daily Firm Zone Number Name Capacity (MMBtu) 1 2145 Claiborne 13,455 1 9303 Helena #2 10,000 1 8063 Pineville (LIG) 20,000 1 2631 Calhoun Plant 5,000 1 2020 Arkla-Perryville 10,000 1 8760 Lonewa 15,000 1 2102 Champlin 16,715 3 9868 U.Cities-Barnsley (ref. #9404) 12,000 3 2399 ANR-Slaughters (ref. #8082) 20,000 SL 2774 Vermillon 256D 951 SL 9342 Vermillon 255/256E 225 SL 2776 S.S. 248D 4,811 SL 2781 S.S. 247F 3,592 SL 2782 Vermillon 267C 1,254 SL 9446 NGPL - Lowry 6,161 SL 9003 Egan 19,379 SL 9044 EDC-N. Parcperdue 3,040 SL 9135 WC167/HIOS Mainline 3,800 SL 2770 Vermillon 267F 2,116 SL 2840 Unical - N Fresh Bayou 15,789 SL 2550 EI 293/308/315 11,592 SL 2845 Lake Pagie 3,007 SL 9471 Sohio 5,743 SL 9887 HIA-555/A-557A/A-556 2,000 SL 2859 HIA-573B COMPLEX 17,743 SL 9383 WC 293/HI 167/HI 167-166 4,819 SL 8147 Mamou (ref. #8046) 2,092 SL 2790 Henry Hub 26,682 Notes: 1) Please refer to Sheet No. 14 in Texas Gas's FERC Gas Tariff, First Revised Volume No. 1 for Fuel Retention Percentages. 2) Further information on Receipt Point Description, Facilities, and MAOP can be found under the Receipt Point tab in Texas Gas's Gas Quest Manual.
13 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT North Louisiana Carthage - Haughton 2102 Champlin 9805 Delhi 9051 Grigsby 9860 Nelson- Greenwood/Waskom 8116 Texas Eastern -Sligo 9884 Valero-Carthage Haughton - Sharon 8003 Barksdale 2455 Beacon 9866 Cornerstone-Ada 2173 Crystal Oil-West Arcadia 2340 F.E. Hargraves -Minden 2186 LGI #1 2456 McCormick 2459 Minden Pan -Am #1 2457 Minden-Hunt 9819 Nelson-Sibley 9461 Olin-McGoldrick 2760 Sligo Plant 9834 Texaco-Athens Sharon - East 2631 Calhoun Plant 2202 Ergon-Monroe 8760 Lonewa 8020 MRT-Bastrop 9302 Munce 9812 Par Minerals/ Downsville 9823 Reliance-Bernice 2612 Reliance-West Monroe 2634 Southwest-Guthrie Sharon 2145 Claiborne 2010 Fina Oil-HICO 9818 PGC-Bodcaw 1 Exhibit "A-1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Sharon (Cont.) 2757 Texas Eastern - Sharon 2756 Texas Eastern - Sharon (Master List) West Iowa-Eunice 2091 Caribbean- China #1 2092 Caribbean- China #2 2093 Caribbean- China #3 9038 Coastal/ANR-Iowa 9839 Great Southern - Woodlawn 8170 Iowa 9445 Kilroy Riseden- Woodlawn 9890 Source Petroleum -S. Elton #1 9896 Source Petroleum -S. Elton #2 2883 Tee Oil-Woodlawn 9802 Trimble No. 1 Mallard Bay-Woodlawn 2140 California Co. -South Thornwell 2615 Caroline Hunt Sands-S. Thornwell 2170 Cockrell-North Chalkley 9828 Denovo-Lake Arthur 2207 Franks Petroleum- Chalkley 9028 Gas Energy Development -Hayes 2355 Humble-Chalkley 2383 IMC Wintershall- Chalkley 9848 Lamson Onshore- Mallard Bay 2 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT West (Cont.) 8071 LRC-Mallard Bay 9813 Rio Bravo 2701 Samedan-N Chalkley 2635 Shell-Chalkley 2266 South Mallard- BayAmerical 2822 Superior-S. Thornwell 9879 Total Minatone -Bell City 2885 Union Texas -Welsh 2853 Welsh Field Southwest East Cameron-Lowry 2581 E.C. 14 9872 E.C. 9A 2033 Little Chenlere -Arco 2034 Little Chenlere -Linder 2392 LRC-Grand Chenlere Lowry-Eunice 2860 Lake Arthur 9843 Mobile-Lowry 9446 NGPL - Lowry 2438 Willis Meter Station 2431 Fletcher -Schmeburger 2432 Fletcher -Patterson 2433 Fletcher-IAMS 2434 Fletcher- Young/Bert 2436 Caddo County, OK 2437 Washita County, OK South Egan-Eunice 9851 Booher-Iota 9003 Egan Offshore points entering at Egan 9130 E.I. 278/S.S. 247F 3 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT South Offshore points 9131 E.I. 278/S.S. entering at Egan 248D 9128 E.I. 299/S.S. 271A 9129 E.I. 299/S.S. 271A/S.S. 271B 9122 E.I. 320/325A 9123 E.I. 342/366A 2793 E.I. 342/372A 9399 E.I. 342/384A 2787 E.I. 342A 2767 E.I. 342C 2786 E.I. 343B 9363 E.I. 349/349A 9364 E.I. 349/349A/349B 9369 E.I. 365A/365A/ 348 2781 S.S. 247F 2776 S.S. 248D 2778 S.S. 271A 2785 S.S. 271B/271A/271B 2788 E.I. 365 9342 Vermillion 255/256E 2774 Vermillion 256D 9105 Vermillion 267/275A 9340 Vermillion 267/287A 9341 Vermillion 267/287A/276 9374 Vermillion 267/289A 2782 Vermillion 267C 2770 Vermillion 267F 9159 Vermillion 267/287A/277 Southeast Lafayette - Eunice 2153 Branch-Cox 2125 Calif. Co.-North Duson 2137 California Co. -South Bosco #1 4 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Southeast (Cont.) 2138 California Co. -South Bosco #2 2600 Cayman-anslem Coulee 9852 CNG-South Rayne 2389 Duson 9837 Excel-Judice 8068 Exch. O&G-No. Maurice 2601 Fina Oil-anslem Coulee 8041 Florida 2290 Gulf Transport -Church Pt 2148 Maurice Cox 9906 Quintana-South Bosco 9005 Rayne-Columbia Gulf 2045 Riceland-North Tepetate 8067 South Scott 2810 Tidewater-North Duson 8053 Youngsville Henry-Lafayette 8190 Faustina-Henry 2790 Henry Hub 9822 Cities Service -Nunez Maurice - Freshwater 2147 CNG-Hell Hole Bayou 2203 Deck Oil -Perry/Hope 9808 Duhon/Parcperdue 9044 EDC-N. Parcperdue 9160 LLOG-Abbeville 2394 LRC-Theall 9800 May Petroleum 2424 Mccain-Maurice 2748 Parc Perdue 2749 Parc Perdue 2 9830 R&R Res-Abbeville 2706 Sun Ray 2840 Unical-N Fresh Bayou 5 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Southeast (Cont.) Morgan City - Lafayette 2064 Amoco-Charenton 9803 Atlantic 9809 BH Petroleum-SE Avery 2080 Bayou Sale -British Am 2085 British American-Ramos 9425 Charenton 9047 Florida Gas-E.B. Pigeon 2454 FMP/Bayou Postillion 2750 FMP/S Bayou Pigeon 8059 Franklin 2208 Frantzen 9898 Hadson-East Bayou Pigeon 2188 Lamson 9811 Lanaux-Jeff Island 9854 Linder Oil-Bayou Penchant 9853 Linder Oil- Garden City 2189 Rutledge Deas 2636 Shell-Bayou Pigeon 9902 Smith Production- Charenton 2035 Southwest -Jeanerette 9895 Texaco-Bayou Sale 8205 Transco-Myette Point 9829 Trunkline -Centerville Morgan City - Lafayette 2832 Union Oil-Bayout Pigeon 9350 Vulcan 9835 W.T. Burton-Lake Palourde 9040 ANR-Calumet (Rec.) 6 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Southeast (Cont.) Offshore points entering at Calumet 2583 EI 273A 2158 EI 273A/273A/284B 2584 EI 273B 2834 EI 276C 2771 EI 287D 2151 EI 292B 9339 EI 292B/286I 2550 EI 293/308/315 2773 EI 307E 2154 EI 309C 2155 EI 309G 2157 EI 309H 9886 EI 309H/309H/309J 2156 EI 314F/309C/314F 2780 SMI 11C 2425 SMI 161 2783 SS 204/219 Blk. 8-Morgan City 2198 Bois D'Arc 9142 Bois D'Arc -Pelican Lake 2109 Chevron-Block 8 2638 Coon Point 2845 Lake Pagle 9817 Linder Oil-Bayou Piquant 2460 Peltex Deep Saline #1 2480 SS 41 9471 Sohio 9888 Star Oil & Gas -Bay Junop 2755 Texaco-Bay Junop 9836 Texaco-Dog Lake 2463 Toce Oil 2850 Union Oil-N. Lake Pagle 9883 Zelt-Lake Pagle Thibodaux-Morgan City 2250 A. Glassell Chacahoula 2047 Alliance Exploration 9029 Coastal -Chacahoula 7 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Southeast (Cont.) Thibodaux-Morgan City (Cont.) 2835 Lake Palourde 9873 Linder Oil -Chacahoula 2440 Magna- Chacahoula #1 2445 Magna-St. John #2 2470 Patterson -Chacahoula 2135 Simon Pass East Bosco-Eunice 2015 Amerada Hess 2016 Amerada Hess -South Lewisburg 2385 D.B. Mcclinton #1 2240 Faul Energy 9844 Germany Oil -Church Point 2288 Great Southern- Mowata #2 9804 Great Southern- Mowata #3 2289 Great Southern -South Lewisburg 8145 Ritchie 9119 Sevarg 2740 Superior-Pure HIOS Offshore points entering at ANR-Eunice 9035 ANR-Eunice 9135 WC 167/HIOS Main Line HI 247 2868 HIA-244A/ A-231 8 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT HIOS Offshore points entering at ANR-Eunice (Cont.) HI 283 9894 HIA-283/ A-231A 2855 HIA-285/A-282 HI 303 2858 HIA A-302/ A-303 HIA-345 2863 HIA-334A/ A-335 9327 HIA-345/ A-325A HIA-498 2536 HIA-498/462/ VARIOUS 2867 HIA-462 9375 HIA-477/ A-462/ A-486 2534 HIA-498/A-489 2533 HIA-498/ A-489/ A-474 2535 HIA-498/ A-489/ A-499 9371 HIA-498/A-490 2856 HIA-498/A-517 HIA-539 2537 HIA-539/A-480 9365 HIA-539/A-511 9376 HIA-539/A-532 9328 HIA-539/A-550 9901 HIA-539/ A-552/A-551 9889 HIA-539/ A-552/A-553 2539 HIA-539/A-567 9380 HIA-539/A-568 9 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT HIOS Offshore points entering at ANR- Eunice (Cont.) HIA-555 2857 HIA-531A 2861 HIA-536C 2862 HIA-537B 9127 HIA-537B/ A-537D/A-556 9308 HIA-555 9125 HIA-555/ A-537D/A-556 9887 HIA-555/ A-557A/A-556 HIA-573 2859 HIA-573B COMPLEX 9909 HIA-573/ A-384/GB 224 2542 HIA-595CF COMPLEX HIA-582 9165 HIA-582/ A-561A 9133 HIA-582/ EB 110 9134 HIA-582/ EB 165 9377 HIA-582/EB- 160/VARIOUS W.C. 294 9026 WC 167/132 9396 WC 293/ HI 120/ HI 120-128 9383 WC 293/ HI 167/ HI 167-166 2838 WC 294 9136 WC 167/ Near Shore 10 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Mainline Bastrop-Eunice 2020 Arkla- Perryville 9870 Channel Explo.- Chicksaw Creek 9826 Delhi-Ewing 8112 Evangeline 2361 Guffrey -Millhaven 9877 Hadson-Olla/ Summerville 9814 Hogan-Davis Lake 8147 Mamou 8063 Pineville (LIG) 3800 Pooling Receipt- Zone O Bastrop-Eunice 9832 Wintershall -Clarks Bastrop-North 2399 ANR- Slaughters 2061 BeeHunter 2072 Blair 8125 Dyersburg 2373 HarKen/ Addison- G #1 2352 HarKen/Cox 2376 HarKen/I.C.C. #12 2379 HarKen/I.C.C. #15 2022 HarKen/I.C.C. #16 2381 HarKen/I.C.C. #17 2367 HarKen/I.C.C. #9 9530 HarKen/Murray 2362 HarKen/P. Gannon Est. #1 2351 HarKen/Qualls 2966 HarKen/ Stearman #1 2960 HarKen/W. Ky. #1 11 Exhibit "A - 1" Secondary Points of Receipt SUPPLY LATERAL SEGMENT METER NO. SUPPLY POINT Mainline (Cont.) Bastrop-North (Cont.) 2962 HarKen/W. Ky. #2 2375 HarKen/W. Ky. #6 2087 Heathville -Trenton 9303 Helena #2 9876 Hux Oil -Russellville 1715 Lebanon- Columbia 1247 Lebanon- Congas 1859 Lebanon-Texas Eastern 9527 Liberty-South Hill 3801 Pooling Receipt- Zone 1 9525 Pride Energy No. 1 9931 Reynolds- Narge Creek 2648 Spears 5700 Storage Receipt 9868 United Cities -Barnsley 12 EXHIBIT "B" FIRM POINT(S) OF DELIVERY LOUISVILLE GAS AND ELECTRIC COMPANY
Nomination Point Meter MAOP MDP* No. No. Name/Description Facilities (psig) (psig) - ---------------------------------------------------------------------------------------------- 1. 1529 Louisville Gas and Electric Company Z-4 BARDSTOWN ROAD - LON 85-36-0, LAT 38-12-0, Jefferson County, KY (#1524) (1) 675 400 BEDFORD-LG&E - LON 85-18-15, LAT 38-34-30, Trimble Countym, KY (#1523) (1) 810 400 CRESTWOOD - LON 85-25-15, LAT 38-20-0, Oldham County, KY (#1525) (1) 810 400 DOE RUN - LON 86-2-30, LAT 37-55-30, Meade County, KY (#1526) (1) 810 400 ELDER PARK - LON 85-25-0, LAT 38-22-0, Oldham County, KY (#1527) (1) 810 400 ELLINGSWORTH LANE - LON 85-33-0, LAT 38-13-15, Jefferson County, KY (#1528) (1) 810 350 LAGRANGE - LON 85-24-15, LAT 38-24-0, Oldham County, KY (#1531) (1) 810 400 PENILE ROAD - LON 85-47-0, LAT 38-6-0, Jefferson County, KY (#1535) (1) 674 400 PRESTON STREET ROAD - LON 85-41-30, LAT 38-9-45, Jefferson County, KY (#1536) (1) 674 400 * Minimum Delivery Pressure (1) Measurement facilities are owned, operated, and maintained by Texas Gas Transmission Corporation.
B-1 Firm No.-Notice Transportation Agreement Exhibit "C" Supply Lateral Capacity LOUISVILLE GAS AND ELECTRIC COMPANY Preferential Rights Supply Lateral MMBtu/d Zone 1 Supply Lateral(s) - ------------------------ North Louisiana Leg: 50,170 ------- Total Zone 1: 50,170 Zone SL Supply Lateral(s) - ------------------------- East Leg: 0 Southeast Leg: 65,853 South Leg: 32,328 Southwest Leg: 22,648 West Leg: 0 WC-294: 4,819 HIOS: 23,543 ------- Total Zone SL: 149,191 ------- Grand Total: 199,361 ------- EX-12 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 LOUISVILLE GAS AND ELECTRIC COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Thousands of $)
1993 1992 1991 1990 1989 ---- ---- ---- ---- ---- Earnings: Net Income per statements of income................. $ 90,535 $ 73,793 $ 94,643 $ 83,450 $ 76,091 Add: Federal income taxes - current...................... 42,091 13,785 35,490 24,966 27,938 State income taxes - current........................ 12,954 3,140 8,425 8,232 8,800 Deferred Federal income taxes - net................. 4,712 20,441 17,207 13,142 1,730 Deferred State income taxes - net................... 226 8,470 6,085 4,475 1,193 Investment tax credit - net......................... (7,821) (5,033) (11,472) (1,964) 5,788 Fixed charges....................................... 49,640 52,196 55,171 56,061 52,578 ------- ------- ------- ------- ------- Earnings.......................................... 192,337 166,792 205,549 188,362 174,118 ------- ------- ------- ------- ------- Fixed Charges: Interest Charges per statements of income........... 47,496 49,833 52,680 53,663 51,141 Add: Interest income .............................. - 4 98 251 7 One-third of rentals charged to operating expense .................................... 2,144 2,359 2,393 2,147 1,430 ------- ------- ------- ------- ------- Fixed charges................................. $ 49,640 $ 52,196 $ 55,171 $ 56,061 $ 52,578 ------- ------- ------- ------- ------- Ratio of Earnings to Fixed Charges.................... 3.87 3.20 3.73 3.36 3.31 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- NOTES: Interest income earned on pollution control revenue bond proceeds held and invested by trustees--netted against interest charges above. In the Company's opinion, one-third of rentals represents a reasonable approximation of the interest factor.
EX-23 13 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report dated January 28, 1994, included in this Form 10-K, into the Company's previously filed Registration Statement No. 33-13427, relating to the issuance of $5.875 Series Cumulative Preferred Stock. Louisville, Kentucky March 28, 1994 Arthur Andersen & Co. EX-24 14 POWER OF ATTORNEY POWER OF ATTORNEY WHEREAS, LOUISVILLE GAS AND ELECTRIC COMPANY, a Kentucky corporation, is to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934, as amended, its Annual Report on Form 10-K for the year ended December 31, 1993 (the 1993 Form 10-K); and WHEREAS, each of the undersigned holds the office or offices in LOUISVILLE GAS AND ELECTRIC COMPANY set opposite his name; NOW, THEREFORE, each of the undersigned hereby constitutes and appoints ROGER W. HALE and M. L. FOWLER, and each of them, individually, his attorney, with full power to act for him and in his name, place, and stead, to sign his name in the capacity or capacities set forth below to the 1993 Form 10-K and to any and all amendments to such 1993 Form 10-K and hereby ratifies and confirms all that said attorney may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals this 2nd day of March 1994. Roger W. Hale, Principal Executive Officer and Director J. David Grissom, Director - --------------------------------- --------------------------------- William C. Ballard, Jr., Director David B. Lewis, Director - --------------------------------- --------------------------------- Charles A. Markel III, Principal Owsley Brown II, Director Financial Officer - --------------------------------- --------------------------------- S. Gordon Dabney, Director Anne H. McNamara, Director - --------------------------------- --------------------------------- M. L. Fowler, Principal Accounting Officer T. Ballard Morton, Jr., Director - --------------------------------- --------------------------------- Gene P. Gardner, Director Dr. Donald C. Swain, Director - --------------------------------- --------------------------------- STATE OF KENTUCKY ) ) ss. COUNTY OF JEFFERSON ) On this 2nd day of March 1994, before me, Kathryn M. Carpenter, a Notary Public, State of Kentucky at Large, personally appeared the above named directors and officers of LOUISVILLE GAS AND ELECTRIC COMPANY, a Kentucky corporation, and known to me to be the persons whose names are subscribed to the foregoing instrument, and they severally acknowledged to me that they executed the same as their own free act and deed. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal on the date above set forth. My Commission expires: Kathryn M. Carpenter November 2, 1996 ------------------------------ Notary Public State of Kentucky at Large -----END PRIVACY-ENHANCED MESSAGE-----