LG&E CAPITAL CORP.
MEDIUM-TERM NOTES, SERIES A
U.S. $150,000,000 OF 5 3/4% RESET PUT SECURITIES
TERMS AGREEMENT
October 29, 1998
Morgan Stanley & Co. Incorporated ("Morgan Stanley")
1585 Broadway, 2nd Floor
New York, New York 10036
Chase Securities Inc. ("CSI")
270 Park Avenue
New York, New York 10017
Merrill Lynch & Co. ("Merrill")
Merrill Lynch, Pierce, Fenner & Smith Incorporated
World Financial Center - North Tower
250 Vesey Street
New York, New York 10281
J.P. Morgan Securities Inc. ("JPMSI")
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
LG&E Capital Corp., a Kentucky corporation (the "Company"), proposes to
issue and sell to Morgan Stanley, CSI, Merrill and JPMSI (the "Agents"), subject
in all respects to the terms and conditions of the Private Placement Agency
Agreement dated February 3, 1998 (the "Agreement"), U.S. $150,000,000 aggregate
principal amount of its Medium-Term Notes, Series A, described in the Pricing
Supplement (as defined below). This agreement (this "Terms Agreement") is
supplemental to the Agreement. The notes to be issued pursuant to this Terms
Agreement are referred to herein as the "Notes". All terms used herein have the
meanings given to them in the Agreement except as otherwise indicated.
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The following terms and conditions of the Notes are more extensively
described in the Company's Pricing Supplement, dated October 29, 1998, relating
to the Notes (the "Pricing Supplement"):
Title: 5 3/4% REset Put Securities ("REPS(SM)")*
Trade Date: October 29, 1998
Original Issue Date: November 3, 1998
Principal Amount: $150,000,000
Price to Public: 100% of Principal Amount, plus accrued
interest, if any, from and including
November 3, 1998
Purchase Price: 100% of Principal Amount, plus accrued
interest, if any, from and including
November 3, 1998
Commission: $525,000
Interest Rate: To but excluding November 1, 2001, 5 3/4%.
From and including November 1, 2001, as
described in the Pricing Supplement under
"Additional Terms--Interest Rate and
Interest Payment Dates"
Form: Book-Entry Only
Interest Payment Dates: November 1 and May 1 of each year,
commencing May 1, 1999
Maturity Date: November 1, 2011, subject to the purchase
and repurchase rights referred to below
Remarketing: The Notes may be purchased by the
Remarketing Dealer prior to the Maturity
Date, as described in the Pricing Supplement
under "Description of the REPS--Purchase by
the Remarketing Dealer; Remarketing"
Remarketing Dealer: Morgan Stanley & Co. Incorporated
Repurchase by the Company: The Notes are subject to repurchase by the
Company prior to the Maturity Date if the
Notes are not purchased by the Remarketing
Dealer, as described in the Pricing
Supplement under " Description of the REPS
--Mandatory Repurchase by the
- --------
* REPS is a service mark of Morgan Stanley Dean Witter & Co.
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Company" and "--Optional Repurchase by the
Company"
Purchase Date and Time: 10:00 a.m., New York time, on November 3,
1998
Place for Delivery of Notes and
Payment Therefor: New York, New York
Method of Payment: Wire transfer of immediately available funds
Address for notices: As set forth in Section 6 hereof
Period during which additional debt securities may not be sold pursuant to
Section 4(m) of the Agreement (until the Purchase Date, unless otherwise
specified herein): From the date hereof through and including November 3, 1998.
1. On the terms and subject to the conditions of the Agreement and this
Terms Agreement, the Company hereby agrees to issue the Notes and to pay to the
Agents the aggregate Commission set forth above, and the Agents agree to
purchase from the Company, at a purchase price of 100% of the principal amount
of the Notes, plus accrued interest, if any, from and including November 3, 1998
(the "Purchase Price"), the entire principal amount of Notes; provided, however,
that the Company's obligations hereunder are subject to the receipt by the
Company on or prior to the Purchase Date of documentation evidencing the
termination (without payment by either party) of the transactions described and
confirmed in the Confirmation dated September 28, 1998 between Morgan Stanley
Capital Services Inc. and the Company.
2. As a condition precedent to the Agents' obligations to consummate the
transaction referred to above, the Agents shall have received the following: (1)
a letter from each of John R. McCall, Esq., the General Counsel of the Company,
and Gardner, Carton & Douglas, counsel for the Company, to the effect set forth
in Section 6(c) of the Agreement and such other legal matters as the Agents
shall reasonably request; (2) a letter from counsel for the Agents, to the
effect set forth in Section 6(c) of the Agreement, and such other legal matters
as the Agents shall reasonably request; (3) a letter from Arthur Anderson LLP,
to the effect set forth in Section 6(d) of the Agreement; and (4) a certificate
of the Company and LG&E Energy Corp. dated as of November 3, 1998 to the effect
set forth in Section 6(b) of the Agreement.
3. This Terms Agreement is subject to termination by any Agent, as to
itself, as set forth in Section 7 of the Agreement. In the event of such
termination, no party shall have any liability to any other party hereto, except
as provided in Section 7 of the Agreement and except for any direct liability
arising before or in relation to such termination.
4. If at any time when an Offering Memorandum is to be delivered in
connection with sales of the Notes (including any sale of the Notes by the
Remarketing Dealer or any Agent or any of their affiliates in connection with
any remarketing referenced above), any event shall occur or condition shall
exist as a result of which it is necessary, in the reasonable opinion of counsel
for such Agent or for the Company, to amend or supplement any Offering
Memorandum or Pricing Supplement in order that such Offering Memorandum or
Pricing Supplement will not
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include any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a purchaser,
the Company shall prepare such amendment or supplement as may be necessary to
correct such statement or omission, or prepare any such new offering memorandum,
offering memorandum supplement and pricing supplement as may be necessary for
such purpose, and furnish to such Agent such number of copies of such amendment,
supplement or other document as they may reasonably request. In addition, the
Company shall, in connection with any such sale of the applicable principal
amount of Notes by any Agent or any of its affiliates in connection with such
remarketing, (i) execute and deliver or cause to be executed and delivered legal
documentation (including, but not limited to, a purchase agreement with
customary indemnities, covenants, representations and warranties, comfort
letters and legal opinions) reasonably requested to facilitate a successful
Coupon Reset Process in accordance with the terms of the Remarketing Agreement,
in form and substance reasonably satisfactory to such Agent, (ii) provide
promptly upon request updated consolidated financial statements as provided for
in the Agreement, and (iii) to the extent the Company and such Agent deem
reasonably necessary for successful completion of the Coupon Reset Process, make
available senior management of the Company for road show and one-on-one
presentations. The Remarketing Dealer and or such Agent will conduct the
remarketing in a manner (i) substantially consistent with the original offering
and sale of the Notes, to the extent required by law, and (ii) which complies
with any applicable transfer restrictions set forth in the Indenture; provided,
however, that each of the Remarketing Dealer and the Agents acknowledges and
agrees that the Notes have not been registered or qualified, and the Company has
no obligations to register or qualify, the Notes under the Securities Act of
1933, as amended, or, subject to Section 4(i) of the Agreement, any other
applicable securities laws.
5. On July 31, 1998, Standard & Poor's downgraded its ratings of the
Company's senior unsecured debt to "A" from "A+" and LG&E Energy Corp.'s senior
unsecured debt and preferred stock to "A" from "A+". Solely with respect to the
Notes, the Agents hereby waive the condition to their obligations set forth in
Section 5(m) (the No Downgrade condition) of the Agreement with respect to the
July 31, 1998 downgrade. Such waiver shall not apply to (i) any downgrading,
surveillance or review of the Company's or LG&E Energy Corp.'s debt securities
or preferred stock as set forth in Section 5(m) of the Agreement occurring from
and after the date hereof and prior to the Purchase Date, (ii) any other
condition to the Agents' obligations set forth in the Agreement or (iii) any
other notes issued or to be issued by the Company.
6. All notices to the Agents pursuant to Section 15 of the Agreement shall
be sent (i) with respect to Morgan Stanley, to Morgan Stanley & Co.
Incorporated, 1585 Broadway, 3rd Floor, New York, New York 10036, Attention:
DPG, Telephone: 212-761-2566, Telecopy: 212-761-0580 and (ii) with respect to
any other Agent, at the address for such Agent set forth in Section 15 of the
Agreement.
7. This agreement is a Terms Agreement referred to in the Agreement and
shall be governed by and construed in accordance with the laws of the State of
New York and shall be binding upon the parties hereto and their respective
successors.
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement between the
Company and you.
Very truly yours,
LG&E CAPITAL CORP.
By: /s/ C. A. Markel
--------------------------------------------
Name: Charles A. Markel III
Title: Chief Financial Officer and Treasurer
LG&E ENERGY CORP.
By: /s/ C. A. Markel
--------------------------------------------
Name: Charles A. Markel III
Title: Vice President - Finance and Treasurer
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Accepted as of the date hereof:
MORGAN STANLEY & CO.
INCORPORATED
By: /s/ signed
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Name:
Title:
CHASE SECURITIES INC.
By: /s/ William Dexter Rogers
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Name: William D. Rogers
Title: Managing Director
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Richard N. Doyle
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Name:
Title:
J.P. MORGAN SECURITIES INC.
By: /s/ Kevin O'Brien
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Name:
Title: