Document:

EXHIBIT 4.25

 

January 15, 2004

 

 

Kentucky Utilities Company

(as
Borrower)

 

 

Fidelia Corporation

(as
Lender)

 

 

 

LOAN
AGREEMENT

 

 

 

 

Contents

 

Clause

 

	
  1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  TERM LOAN

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  AVAILABILITY OF REQUESTS

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  INTEREST

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  REPAYMENT AND
  PREPAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  PAYMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  TERMINATION EVENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  OPERATIONAL BREAKDOWN

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  ASSIGNMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  SEVERABILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  COUNTERPARTS

  	
   

  
	
   

  	
   

  	
   

  
	
  13.

  	
  LAW

  	
   

  

 

 

THIS AGREEMENT made on January 15, 2004

 

Between

 

KENTUCKY UTILITIES COMPANY, a Kentucky
corporation, as borrower (the Borrower); and

 

FIDELIA CORPORATION, a Delaware
corporation, as lender (the Lender).

 

Whereas

 

(A)          The Lender and the
Borrower hereby enter into an agreement for the provision by the Lender to the
Borrower of a loan in the amount of $50,000,000 (the Loan Amount).

 

Now it is hereby agreed as follows:

 

1.             Definitions

 

1.1           In this Agreement

 

Business Day means a day on which
banks in New York are generally open

 

Default Interest Rate means: the rate,
as determined by the Lender, applying to the principal element of an overdue
amount under Clause 6.3, calculated as the sum of the interest rate in effect
immediately before the due date of such amount, plus 1%;

 

Effective Date shall have the meaning
given to it in Clause 2.1;

 

Final Repayment Date means January 16,
2012;

 

Interest Payment Date means January
15th and July 15th of each year during the term of this agreement, provided,
that:

 

any Interest Payment Date
which is not a Business Day shall be extended to the next succeeding Business
Day;

 

Loan Amount means $50,000,000;

 

Maturity Date means the Final
Repayment Date;

 

1

 

Request means a request for the Loan
Amount from the Borrower to the Lender under the terms of clause 3.1;

 

Termination Event means an event
specified as such in Clause 7;

 

Value Date means the date upon which
cleared funds are made available to the Borrower by the Lender pursuant to a
Request made in accordance with Clause 3.1. Such date shall be a Business
Day as defined herein.

 

2.             Term Loan

 

2.1           This Agreement shall come into effect on January 15, 2004
(the “Effective Date”).

 

2.2           The Lender grants to the Borrower upon the terms and
conditions of this Agreement a term loan in an amount of $50,000,000.

 

2.3           The new indebtedness shall be evidenced by a note in
substantially the form of Exhibit “A” attached hereto.

 

3.             Availability of Requests

 

3.1           On the Effective Date, the Borrower will submit a request
(the “Request”) to the Lender for the Loan Amount, such Request specifying the
Value Date, the Maturity Date and the bank account to which payment is to be
made. The Request shall be submitted to the Lender by the Borrower and
delivered in accordance with Clause 9.3.

 

4.             Interest

 

4.1           The rate of interest on the Loan Amount is 4.39%.

 

4.2           Interest shall accrue on the basis of a 360-day year
consisting of twelve 30 day months upon the Loan Amount.

 

4.3           Interest shall be payable in arrears on each Interest
Payment Date.

 

2

 

5.             Repayment and Prepayment

 

5.1           The Borrower shall repay the Loan Amount together with all
interest accrued thereon and all other amounts due from the Borrower hereunder
on the Final Repayment Date, whereupon this Agreement shall be terminated.

 

5.2           On any Interest Payment Date, and with at least three
business day’s prior written notice, the Borrower shall be entitled to prepay
any amount of the loan outstanding, provided such payment is not less than
$1,000,000 and, provided further, the Borrower shall pay a prepayment charge
equal to the present value of the difference between (i) the interest payable
provided in this loan agreement and (ii) the interest payable at the prevailing
interest rate at the time of prepayment, for the period from the date of
prepayment through the Maturity Date, 
which difference, if negative, shall be deemed to be zero. The present
value will be determined using the prevailing interest rate at the time of the
prepayment as the discount rate.

 

5.3           A certificate from the Lender as to the amount due at any
time from the Borrower to the Lender under this Agreement shall, in the absence
of manifest error, be conclusive.

 

6.             Payments

 

6.1           All payments of principal to be made to the Lender by the
Borrower shall be made on the Final Repayment Date, or on an Interest Payment
Date under Clause (5.2) to such account as the Lender shall have specified.

 

6.2           Interest shall be payable in arrears on each Interest
Payment Date.

 

6.3           If and to the extent that full payment of any amount due
hereunder is not made by the Borrower on the due date then, interest shall be
charged at the Default Interest Rate on such overdue amount from the date of
such default to the date payment is received by the Lender.

 

3

 

7.             Termination Events

 

7.1           The Borrower shall notify the Lender of any Event of Default
(and the steps, if any, being taken to remedy it) promptly upon becoming aware
of it.

 

7.2           The following shall constitute an Event of Default
hereunder:

 

7.2.1        Default is made by the Borrower in the payment of any sum
due under this Agreement and such default continues for a period of 10 Business
Days;

 

7.2.2        Bankruptcy proceedings are initiated against the Borrower;

 

7.2.3        The Borrower leaves the E.ON Group (i.e. the companies
consolidated in EON AG’s balance sheet);

 

7.2.4        Securities and Exchange Commission or Public Utility Holding
Company Act (PUHCA) requirements prohibit the transactions hereunder.

 

If
a Termination Event occurs under Clause (7.2.2) of this section, the Loan
Amount outstanding together with interest will become due and payable
immediately.

 

If
a Termination Event occurs according to Clauses (7.2.1) or (7.2.3) or (7.2.4)
of this Section, Lender shall at its discretion grant Borrower a reasonable
grace period unless such grace period shall be detrimental to the Lender. If
the Termination Event is uncured at the expiration of such period, the Loan
Amount outstanding together with interest will become due and payable
immediately.

 

8.             Operational Breakdown

 

8.1           The
Borrower is not liable for any damages incurred by the Lender and the Lender is
not liable for any damages incurred by the Borrower caused by Acts of God or
other circumstances incurred by one party for which the other party cannot be
held responsible (i.e. power outages, strikes, lock-outs, domestic and foreign
acts of government and the like).

 

4

 

9.             Notices

 

9.1           Each communication to be made in respect of this Agreement
shall be made in writing but, unless otherwise stated, may be made by facsimile
transmission or letter.

 

9.2           Communications to the Borrower shall be addressed to:
Kentucky Utilities Company, 220 W. Main St., Louisville, KY 40202, Attn:
Treasurer fax# (502) 627-4742 except for confirmations which should be sent to
the attention of Mimi Kelly.

 

9.3           Communications to the Lender shall be addressed to: Fidelia
Corporation, 919 N. Market Street, Suite 504, Wilmington, Delaware 19801, fax#
(302) 778-5014, Attn: President.

 

10.          Assignment

 

10.1         The Lender may at any time assign, novate or otherwise
transfer all or any part of its rights and obligations under this Agreement to
any affiliate of the Lender.

 

11.          Severability

 

11.1         If any of the provisions
of this Agreement becomes invalid, illegal or unenforceable in any respect
under any law, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired.

 

12.          Counterparts

 

12.1         This Agreement may be
executed in any number of counterparts that shall together constitute one
Agreement. Any party may enter into an Agreement by signing any such
counterpart.

 

5

 

13.          Law

 

13.1         This Agreement shall be governed by and
construed for all purposes in accordance with the laws of Delaware.

 

In
witness whereof the parties have executed this Agreement the
day and year first above written.

 

	
  SIGNED by 

  	
   

  	
   

  	
  )

  
	
  for and on behalf of

  	
  )

  
	
  Kentucky Utilities

  	
  )

  
	
   

  	
   

  
	
   

  	
   

  
	
  SIGNED by 

  	
   

  	
   

  	
  )

  
	
  Udo Koch, President

  	
  )

  
	
  Fidelia Corporation

  	
  )

  

 

6EXHIBIT
4.26

 

LOAN AND SECURITY
AGREEMENT

 

Dated as of August
15, 2003

 

between

 

KENTUCKY UTILITIES
COMPANY

 

and

 

FIDELIA
CORPORATION

 

 

TABLE OF
CONTENTS

 

	
  1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
  1.1

  	
  General
  Terms

  	
   

  
	
   

  	
  1.2

  	
  Accounting
  Terms

  	
   

  
	
   

  	
  1.3

  	
  Others Terms Defined in the Code

  	
   

  
	
   

  	
  1.4

  	
  Computation of Time Periods

  	
   

  
	
   

  	
  1.5

  	
  Headings and References

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  TERM
  LOANS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Loans

  	
   

  
	
   

  	
  2.2

  	
  Request for Purchase

  	
   

  
	
   

  	
  2.3

  	
  Interest

  	
   

  
	
   

  	
  2.4

  	
  Notes

  	
   

  
	
   

  	
  2.5

  	
  Closings

  	
   

  
	
   

  	
  2.6

  	
  Payments

  	
   

  
	
   

  	
  2.7

  	
  Term of This Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS OF ADVANCES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Documents

  	
   

  
	
   

  	
  3.2

  	
  No
  Default

  	
   

  
	
   

  	
  3.3

  	
  Reaffirmation of Representations and
  Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  COLLATERAL

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Security
  Interest

  	
   

  
	
   

  	
  4.2

  	
  Appointment of the Lender as the Borrower’s
  Attorney-in-Fact

  	
   

  
	
   

  	
  4.3

  	
  Preservation of Collateral and Perfection
  of Security Interests

  	
   

  
	
   

  	
  4.4

  	
  Reasonable
  Care

  	
   

  
	
   

  	
  4.5

  	
  Termination of Security Interest and Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Existence

  	
   

  
	
   

  	
  5.2

  	
  Authority

  	
   

  
	
   

  	
  5.3

  	
  Binding
  Effect

  	
   

  
	
   

  	
  5.4

  	
  Financial Statements

  	
   

  
	
   

  	
  5.5

  	
  Collateral

  	
   

  
	
   

  	
  5.6

  	
  Chief Executive Office Jurisdiction of
  Incorporation

  	
   

  
	
   

  	
  5.7

  	
  Other Corporate Names

  	
   

  
	
   

  	
  5.8

  	
  Margin
  Security

  	
   

  
	
   

  	
  5.9

  	
  Survival of Warranties

  	
   

  
	
   

  	
  5.10

  	
  Compliance with Laws and Regulations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Financial Statements; Notices; Reports

  	
   

  
	
   

  	
  6.2

  	
  Books, Records and Inspections

  	
   

  
	
   

  	
  6.3

  	
  Conduct of Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  EVENTS
  OF DEFAULT, RIGHTS AND REMEDIES OF LENDER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Events
  of Default

  	
   

  

 

i

 

	
   

  	
  7.2

  	
  Rights and Remedies Generally

  	
   

  
	
   

  	
  7.3

  	
  Waiver
  of Demand

  	
   

  
	
   

  	
  7.4

  	
  Marshalling; Payments Set Aside

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  SUBORDINATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Agreement to Subordinate

  	
   

  
	
   

  	
  8.2

  	
  Administration of Collateral

  	
   

  
	
   

  	
  8.3

  	
  Delivery of Proceeds of Collateral

  	
   

  
	
   

  	
  8.4

  	
  Agreement Not to Contest

  	
   

  
	
   

  	
  8.5

  	
  Release of Collateral

  	
   

  
	
   

  	
  8.6

  	
  Release of Security Interest

  	
   

  
	
   

  	
  8.7

  	
  Obligations under this Agreement Not
  Affected

  	
   

  
	
   

  	
  8.8

  	
  Bankruptcy

  	
   

  
	
   

  	
  8.9

  	
  Third Party Beneficiary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Amendments and Waivers

  	
   

  
	
   

  	
  9.2

  	
  Severability

  	
   

  
	
   

  	
  9.3

  	
  Notices

  	
   

  
	
   

  	
  9.4

  	
  Counterparts

  	
   

  
	
   

  	
  9.5

  	
  Prior
  Agreements

  	
   

  
	
   

  	
  9.6

  	
  Successors and Assigns

  	
   

  
	
   

  	
  9.7

  	
  CHOICE
  OF LAW

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXHIBITS

  	
   

  
	
  EXHIBIT A

  	
  —

  	
  Form of Note

  	
   

  
						

 

ii

 

LOAN
AND SECURITY AGREEMENT

 

This LOAN AND SECURITY AGREEMENT, dated as of August 15, 2003 (this “Agreement”),
is made between KENTUCKY UTILITIES COMPANY, a Kentucky and Virginia
corporation, as borrower (the “Borrower”), and FIDELIA CORPORATION, a
Delaware corporation, as lender (the “Lender”).

 

W I T N E S S E T H:

 

WHEREAS, the Borrower has requested that the Lender
provide the Borrower with term loans;

 

WHEREAS, to induce the Lender to make such term loans
available to the Borrower, the Borrower has agreed to secure its obligations to
the Lender by granting the Lender a security interest in, and lien upon, the
Collateral (as defined herein); and

 

WHEREAS, the Lender is willing to make such term loans
available to the Borrower  upon the
terms and conditions set forth in this Agreement;

 

NOW, THEREFORE, in consideration of the foregoing and
the mutual agreements contained in this Agreement, the Borrower and the Lender
agree as follows:

 

1.                                      DEFINITIONS.

 

1.1          General Terms. 
When used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):

 

“Affiliate”, with respect to any Person, means
another Person (i) that directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
such Person, (ii) that directly or beneficially owns or holds 5% or more
of any class of the voting stock of such Person or (iii) 5% or more of the
voting stock (or in the case of a Person that is not a corporation, 5% or more
of the equity interest) of which is owned directly or beneficially or held by
such Person.

 

“Agreement” has the meaning set forth in the preamble.

 

“Authorized Officer” means at any time an
individual whose signature has been certified to the Lender on behalf
of the Borrower by a certificate now or hereafter executed on behalf of
the Borrower and delivered to the Lender and whose authority has not been
revoked prior to such time.

 

“Bond Trustee” means U.S. Bank National
Association, as successor trustee under the First Mortgage Bond Indenture, or
any successor trustee thereunder.

 

“Borrower” has the meaning set forth in the preamble.

 

1

 

“Business Day” means a day (other than a Saturday
or Sunday) on which banks are open for business in Louisville, Kentucky and
Wilmington, Delaware.

 

“Code” means the Uniform Commercial Code of the
Commonwealth of Kentucky as in effect on the Closing Date.

 

“Collateral” has the meaning set forth in Section
4.1.

 

“Default” means any event that, with lapse of
time or notice or lapse of time and notice, will constitute an Event of Default
if it continues uncured.

 

“Dollars” and the “$” each means lawful
money of the United States of America.

 

“Equipment” has the meaning set forth in the
Code and includes, without limitation, any and all of the Borrower’s now owned
or hereafter acquired machinery, equipment, furniture, furnishings and all
tangible personal property similar to any of the foregoing (other than
Inventory), together with all improvements, accessions and appurtenances
thereto and any proceeds of any of the foregoing, including insurance proceeds
and condemnation awards, excluding, however, any Equipment which is not subject
to a Lien now or at any time hereafter pursuant to the First Mortgage Bond
Indenture.

 

“Event of Default” means the occurrence or
existence of any one of more of the events described in Section 7.1.

 

“First Mortgage Bond Indenture” means the
Indenture of Trust dated as of May 1, 1947 from the Borrower to the Bond
Trustee, and any and all supplemental indentures thereof, as further amended
and supplemented from time to time.

 

“GAAP” means generally accepted accounting
principles, as in effect in the United States from time to time.

 

“Governmental Authority” means any nation or
government, any federal, state, local or other political subdivision thereof
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

 

“Lender” has the meaning set forth in the preamble.

 

“Liabilities” means all of the Borrower’s
liabilities, obligations, and indebtedness to the Lender for monetary amounts,
whether now or hereafter owing, arising, due or payable under this Agreement
and the Notes howsoever evidenced, created, incurred, acquired, or owing.

 

“Lien” means any mortgage, deed of trust,
pledge, hypothecation, assignment, collateral deposit arrangement, security
interest, encumbrance for the payment of money, lien (statutory or other),
preference, right of setoff, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, or the
interest of a lessor under a capital lease.

 

“Loan” has the meaning set forth in Section
2.1.

 

2

 

 “Material
Adverse Effect” means a material adverse effect upon (i) the business,
assets,  properties or condition
(financial or otherwise), or results of operations of the Borrower, or
(ii) upon the ability of the Borrower to perform or cause to be performed
any of its obligations under this Agreement or the rights or remedies of the
Lender under this Agreement.

 

“Note” has the meaning set forth in Section
2.4.

 

“Permitted Lien” means Liens created under or
in connection with the First Mortgage Bond Indenture and Liens permitted by the
First Mortgage Bond Indenture.

 

“Person” means any natural person, firm,
enterprise, institution, corporation, association, partnership, trust,
unincorporated organization, sole proprietorship, joint venture, limited
liability company or Governmental Authority.

 

1.2          Accounting
Terms.  Any accounting terms used in this Agreement
which are not specifically defined in this Agreement have the meanings
customarily given them in accordance with GAAP.

 

1.3          Others
Terms Defined in the Code.  All other terms contained in this Agreement (and which are not
otherwise specifically defined in the Agreement) have the meanings provided by
the Code to the extent the same are used or defined in the Code.

 

1.4          Computation
of Time Periods.  In this Agreement in the computation of
periods of time from a specified date to a later specified date, the words
“from” or “commencing on” means “from and including” and the words “to,”
“through,” “ending on” and “until” each mean “to but excluding.”

 

1.5          Headings
and References.  Section and other headings are for reference
only, and shall not affect the interpretation or meaning of any provision of
this Agreement.  Any Section or clause
references are to this Agreement, unless otherwise specified.  References in this Agreement or any other
agreement include this Agreement and other agreements as the same may be
amended, restated, supplemented or otherwise modified from time to time
pursuant to the provisions hereof or thereof. 
A reference to any law, statute or regulation shall mean that law,
statute or regulation as it may be amended, supplemented or otherwise modified
from time to time, and any successor law, statute or regulation.

 

2.                                      TERM LOANS.

 

2.1          Loans. 
The Lender, at its discretion, may make available to the Borrower term
loans (the “Loans”) from time to time pursuant to this Agreement, upon
telephonic or written communication of a borrowing request from the Borrower as
provided in Section 2.2.

 

2.2          Request for
Loans.  The Borrower may from time to time make
requests for Loans (each such request being a “Borrowing Notice”)
hereunder.  Each Borrowing Notice shall
(i) specify the principal amount of the Loan requested, (ii) specify the final
maturity not to be less than one year from the Borrowing Date, (iii) specify
the proposed date for the borrowing of the Loan (the “Borrowing Date”),
(iv) specify whether the Loan shall bear interest at a fixed rate or a floating
rate, (v) specify the dates on which interest is to be paid, and (vi) specify
the

 

3

 

number of the
account and the name and address of the depository institution to which the
proceeds of the Loan are to be transferred on the Borrowing Date.  Each Borrowing Notice may be given
telephonically or in writing.  Each such
request for a Loan is subject to acceptance by the Lender, in its sole
discretion.

 

2.3          Interest.

 

(A)          Interest Rate. 
The interest rate payable by the Borrower on any Loan shall be set at
such interest rate as the Borrower and the Lender shall agree, but in no event
greater than the lowest of (i) the effective cost of capital of E.ON AG, (ii)
the effective cost of capital of the Lender and (iii) the Borrower’s effective
cost of capital determined by reference to the effective cost of a direct
borrowing by the Borrower from a nonassociate for a comparable term loan that
could be entered into at such time. 
Such interest rate may be determined as a fixed interest rate or a
floating rate, as specified by the Borrower in the Borrowing Notice.

 

(B)          Interest Payments.  Accrued but unpaid interest on each Loan is
payable in arrears on dates agreed to by the Borrower and the Lender as
specified in the Borrowing Notice and upon payment in full of such Loan.  Interest on the Loans is computed on the
basis of a 360-day year consisting of twelve 30-day months.

 

(C)          Highest Lawful Rate.  In no contingency or event whatsoever will interest
charged on the Loans, however, such interest may be characterized or computed,
exceed the highest rate permissible under any law which a court of competent
jurisdiction, in a final determination, deems applicable to the Loans. In the
event that such a court determines that the Lender has received interest under
the Loans in excess of the highest rate applicable to the Loans, any such
excess interest collected by the Lender is deemed to have been a repayment of
principal and will be so applied.

 

2.4          Notes.  On
each Borrowing Date, the Borrower shall issue to the Lender a promissory note
(the “Notes”) in a principal amount equal to the principal amount of the
Loan to be made on such Borrowing Date; to bear interest on the unpaid balance
thereof from the date thereof at the rate per annum as determined in accordance
with Section 2.3(A); and to be substantially in the form of Exhibit A
attached hereto.  The term “Notes” as
used herein shall include each Note delivered pursuant to this Agreement and
each Note delivered in substitution or exchange for any such Note.

 

2.5          Closings.  Not later than 11:30 A.M. (New York City local time) on the
Borrowing Date for any Loan, the Borrower will deliver to the Lender at the
offices of the Lender, a Note dated the Borrowing Date, evidencing the Loan to
be made on such Borrowing Date, against payment of the Loan proceeds by
transfer of immediately available funds for credit to the Borrower’s account
specified in the Borrowing Notice.

 

2.6          Payments.

 

(A)          Place of Payments.  The Borrower will make each payment under
this Agreement and under the Notes not later than 2:00 p.m. (New York
time) on the day when due to the Lender at its address set forth in Section 9.3
in immediately available funds.  The
Borrower’s

 

4

 

obligations to the
Lender with respect to such payments will be discharged by making such payments
to the Lender under this Section 2.6.

 

(B)          Timing of Payments.  If any payment of any interest or fees owing
under this Agreement falls due on a day that is not a Business Day, then such
due date is extended to the next following Business Day.

 

(C)          Optional Prepayments.  On any interest payment date, and with at
least three business day’s prior written notice, the Borrower shall be entitled
to prepay any amount of the loan outstanding, provided such payment is not less
than $1,000,000 and, provided further, the Borrower shall pay a prepayment
charge equal to the present value of the difference between (i) the interest payable
provided in this loan agreement and (ii) the interest payable at the prevailing
interest rate at the time of prepayment, for the period from the date of
prepayment through the final maturity date, 
which difference, if negative, shall be deemed to be zero. The present
value will be determined using the prevailing interest rate at the time of the
prepayment as the discount rate.

 

2.7          Term of
This Agreement.  This Agreement shall remain in full force
and effect until the second Business Day after the Borrower or the Lender gives
notice to the other party hereto stating that it elects to terminate this
Agreement.  Notwithstanding the
termination of this Agreement, until all of the Loans under this Agreement have
been paid in full and all financing arrangements between the Borrower and the
Lender under this Agreement have been terminated, all of the Lender’s rights
and remedies under this Agreement survive and the Lender is entitled to retain
its security interest in and to all existing and future Collateral.

 

3.                                      CONDITIONS OF ADVANCES.

 

Notwithstanding
any other provisions contained in this Agreement to the contrary, the making of
each Loan provided for in this Agreement is conditioned upon the following:

 

3.1          Documents.  The Lender has received all of the following (or the delivery of
such has been waived), each duly executed, in form and substance satisfactory
to the Lender, and delivered on or prior to the applicable Borrowing Date:

 

(i)                                     This
Agreement, duly executed by the Borrower.

 

(ii)                                  The
Note, evidencing such Loan, duly executed by the Borrower.

 

(iii)                               UCC-1 financing
statements listing the Borrower as debtor, and the Lender, as secured party,
covering the Collateral.

 

(iv)                              Certified
copies of all documents evidencing any necessary corporate action, consents and
governmental approvals, if any, with respect to this Agreement and the Notes.

 

(v)                                 A
signature authorization certificate for the Borrower.

 

(vi)                              Such
other documents as the Lender may reasonably request.

 

5

 

3.2          No Default. 
No Default or Event of Default has occurred and is continuing.

 

3.3          Reaffirmation of Representations and
Warranties
..  The representations and warranties
contained in Section 5 are true and correct in all material aspects on
and as of the Borrowing Date.

 

4.                                      COLLATERAL.

 

4.1          Security
Interest.  To
secure payment of the Liabilities and performance of its obligations under this
Agreement and the Notes, the Borrower grants, mortgages, hypothecates and
pledges to the Lender a continuing lien upon and security interest in all of
the Borrower’s right, title and interest in the Collateral, wherever located,
whether now or hereafter existing, owned, licensed, leased (to the extent of
the Borrower’s leasehold interest in such property), consigned (to the extent
of the Borrower’s ownership interest in such property), arising or acquired,
subject, however, in all respects to the provisions of Section 8.  The “Collateral” shall consist of:  (i) the
Equipment;  (ii) all insurance proceeds of or
relating thereto, (iii) all of the Borrower’s books and records relating
to any of the foregoing; and (iv) all accessions and additions to,
substitutions for, and replacements, products and proceeds of any of the
foregoing.

 

4.2          Appointment of the Lender as the
Borrower’s Attorney-in-Fact. 
The Borrower irrevocably designates, makes, constitutes and appoints the
Lender (and all persons designated by the Lender) as the Borrower’s true and
lawful attorney-in-fact, and authorizes the Lender, in the Borrower’s or the
Lender’s name, upon the occurrence and during the continuation of an Event of
Default, with respect to any item of Collateral or the proceeds of such
Collateral, to do all acts and things which are necessary, in the Lender’s sole
discretion, to fulfill the Borrower’s obligations under this Agreement.

 

4.3          Preservation of Collateral and
Perfection of Security Interests. 
The Borrower will execute and deliver, or cause to be executed and
delivered, to the Lender at any time or times after the date of this Agreement
at the request of the Lender, all (i) financing
statements or (ii) other documents (and, in
each case, pay the cost of filing or recording the same in all public offices
deemed necessary by the Lender), as the Lender may request, in a form
satisfactory to the Lender, to perfect and keep perfected the security
interest, and preserve the priority of such security interest, in the
Collateral granted by the Borrower to the Lender or to otherwise protect and
preserve the Collateral and the Lender’s security interest in the
Collateral.  Should the Borrower fail to
do so, the Lender is authorized to sign any such financing statements as the
Borrower’s agent.  The Borrower further
agrees that a carbon, photographic or other reproduction of this Agreement or
of a financing statement is sufficient as a financing statement.

 

4.4          Reasonable Care.  The Lender is deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as the Borrower requests in
writing, but the Lender’s failure to comply with any such request will not of
itself be deemed a failure to exercise reasonable care.

 

4.5          Termination of Security Interest and
Liens. The Lender’s security interest and
other liens in, on and to the Collateral terminates when all the Liabilities
have been paid in full and this Agreement has been terminated, at which time
the Lender will reassign and redeliver (or

 

6

 

cause to be
reassigned and redelivered) to the Borrower, or to such Person as the Borrower
designates, against receipt, such of the Collateral (if any) assigned by the
Borrower to the Lender (or otherwise held by the Lender) as has not been sold
or otherwise applied by the Lender under the terms of this Agreement and is
still held by it under this Agreement, together with appropriate instruments of
reassignment and release.  Any such
reassignment is without recourse upon or representation or warranty by the Lender
and will be at the Borrower’s cost and expense.

 

5.                                      REPRESENTATIONS AND WARRANTIES.

 

The
Borrower represents and warrants that as of the date of this Agreement and as
of each Borrowing Date.

 

5.1          Existence.  The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Kentucky and the
Commonwealth of Virginia and is duly qualified as a foreign entity and is in
good standing in all jurisdictions where the nature and extent of the business
transacted by it or the ownership of its assets makes such qualification
necessary, except for those jurisdictions in which the failure so to qualify or
to be in good standing would not have a Material Adverse Effect.

 

5.2          Authority. 
The execution and delivery by the Borrower of this Agreement and the
Notes and the performance of the Borrower’s obligations under this Agreement
and the Notes:  (i) are within the
Borrower’s corporate powers; (ii) are duly authorized by the Borrower’s
board of directors or other governing body; (iii) are not in contravention
of the terms of the Borrower’s certificate of incorporation or bylaws or of any
material indenture, agreement or undertaking to which the Borrower is a party
or by which the Borrower or any of its property is bound; (iv) does not
require any consent, registration or approval of any Governmental Authority,
which has not been obtained; (v) does not contravene any material
contractual or governmental restriction binding upon the Borrower; and (vi) will
not, except as contemplated in this Agreement, result in the imposition of any
Lien, claim or encumbrance upon any property of the Borrower under any existing
material indenture, mortgage, deed of trust, loan or credit agreement or other
material agreement or instrument to which the Borrower is a party or by which
it or its property may be bound or affected.

 

5.3          Binding
Effect.  This Agreement and the Notes are the
legal, valid and binding obligations of the Borrower and are enforceable
against the Borrower in accordance with their respective terms.

 

5.4          Financial
Statements.  The financial statements of the Borrower
filed with the Securities and Exchange Commission since December 31, 2001 are
in accordance with the books and records of the Borrower and fairly present the
financial condition of the Borrower at the dates of such financial statements
and the results of operations for the periods indicated (subject, in the case
of unaudited financial statements, to normal year-end adjustments), and such
financial statements were prepared in conformity with GAAP (other than the
absence of notes to such financial statements).

 

7

 

5.5          Collateral.  Except for Permitted Liens and as otherwise
provided in Section 8.5, all of the Collateral is and will continue to
be owned by the Borrower free and clear of all Liens, claims and encumbrances.

 

5.6          Chief Executive Office Jurisdiction of
Incorporation.  As of the date hereof, the principal place
of business and chief executive office of the Borrower is located at 1 Quality
Street, Lexington, Kentucky 40507 and the Borrower has been duly incorporated
in the Commonwealth of Kentucky and the Commonwealth of Virginia.

 

5.7          Other
Corporate Names. The Borrower has not used any
other corporate or fictitious names in the past five years.

 

5.8          Margin
Security.  The Borrower owns no margin security and none
of the proceeds of the Loans advanced under this Agreement will be used for the
purpose of purchasing or carrying any margin securities or for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
any margin securities or for any other purpose not permitted by Regulations T,
U or X of the Board of Governors of the Federal Reserve System.

 

5.9          Survival
of Warranties.  All representations contained in this
Agreement survive the execution and delivery of this Agreement.

 

5.10        Compliance with Laws and Regulations.  The execution and delivery by the Borrower
of this Agreement and the performance of the Borrower’s obligations under this
Agreement and the Notes are not in contravention of any laws.  The Borrower is in compliance with all laws,
orders, regulations and ordinances of all federal, foreign, state and local governmental
authorities relating to the business, operations and the assets of the
Borrower, including, without limitation, Regulations T, U and X of the
Board of Governors of the Federal Reserve System, except for laws, orders,
regulations and ordinances the violation of which are not likely to have a
Material Adverse Effect.

 

6.                                      COVENANTS.

 

The
Borrower covenants and agrees that, so long as any of the Liabilities remain
outstanding:

 

6.1          Financial Statements; Notices;
Reports.  The Borrower will keep, in all material
respects, proper books of record and account in which entries will be made of
all dealings or transactions of or in relation to the business and affairs of
the Borrower, in accordance with GAAP consistently applied.  The Borrower will furnish to the Lender:

 

(A)          SEC Reports.  Copies of annual reports and quarterly
reports filed by the Borrower with the Securities and Exchange Commission on
Forms 10-K and 10-Q, within 20 Business Days of the date of filing of such
report;

 

(B)          Default Notices.  As soon as practicable (but in any event not
more than two Business Days after any Authorized Officer of the Borrower
obtains knowledge of the occurrence of an event or the existence of a
circumstance giving rise to a Default or an Event of Default), notice of any
and all Defaults or Events of Default;

 

8

 

(C)          Notice of Change of Name.  Notice in writing to the Lender, as soon as
practicable and in any event within five days after the occurrence of any
change in the name, address or jurisdiction of incorporation of the Borrower or
the location of the books and records of the Borrower; and

 

(D)          Other Information.  With reasonable promptness, such other
business or financial data as the Lender may reasonably request.

 

The Lender will take reasonable efforts to keep such
information, and all information acquired as a result of any inspection
conducted in accordance with Section 6.2 (and any other information
provided to the Lender under this Agreement), confidential, provided that the
Lender may communicate such information (i) in
accordance with the Borrower’s written authorization, (ii) to
any regulatory authority having jurisdiction over the Lender, (iii) to any other Person in connection with the
exercise of the Lender’s rights under this Agreement, (iv) to
any Person in any litigation in which the Lender is a party or (v) to any other Person if the Lender believes in
its sole discretion that disclosure is necessary in connection with any legal
process or informal investigative demand, whether issued by a court, judicial
or administrative or legislative body or committee or other governmental
authority.  Notwithstanding the
foregoing, information will not be deemed to be confidential to the extent such
information (a) is available in the public
domain, (b) becomes available in the public
domain other than as a result of unauthorized disclosure by the Lender or (c) is acquired from a Person not known by the
Lender to be in breach of an obligation of secrecy to the Borrower.

 

6.2          Books, Records and
Inspections.  The
Lender, or any agent or employee designated by the Lender in writing, has the
right, from time to time after the date of this Agreement, to call at the
Borrower’s place or places of business (or any other place where the Collateral
or any information relating to the Collateral is kept or located) during
reasonable business hours and, without unreasonable hindrance or delay,
(i) to inspect, audit, check and make copies of and extracts from the
Borrower’s books, records, journals, orders, receipts and any correspondence
and other data relating to the Borrower’s business or to any transactions
between the parties thereto, (ii) to make such verification concerning the
Collateral as the Lender may consider reasonable under the circumstances and (iii) to
discuss the affairs, finances and business of the Borrower with any officers,
employees or directors of the Borrower.

 

6.3          Conduct of
Business.  Except
as contemplated in this Agreement, the Borrower will (i) maintain its
existence, (ii) continue in, and limit its operations to, the same general
lines of business as that presently conducted by it or other businesses
reasonably related thereto and (iii) comply with all laws, orders,
regulations and ordinances of any federal, foreign, state or local governmental
authority, except for such laws, orders, regulations and ordinances the
violation of which has no reasonable likelihood of having a Material Adverse
Effect.

 

7.                                      EVENTS OF DEFAULT, RIGHTS AND REMEDIES OF LENDER.

 

7.1          Events of Default.  If any one or more of the following events
(“Events of Default”) occurs:

 

9

 

(A)          the Borrower fails
to pay any of the principal of or interest on the Loans, or any Commitment Fees
or other amounts due hereunder, within 10 Business Days after such amounts are
due (whether by scheduled maturity, acceleration or otherwise);

 

(B)          the Borrower fails
or neglects to perform, keep or observe any of its covenants, conditions or
agreements contained in this Agreement;

 

(C)          any warranty or
representation now or hereafter made by the Borrower under this Agreement is
untrue or incorrect in any material respect when made;

 

(D)          a proceeding under
any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment
of debt or receivership law or statute is filed by or against the Borrower, the
Borrower makes an assignment for the benefit of creditors or the Borrower takes
any requisite action to authorize any of the foregoing and, in the case of an
involuntary proceeding filed against the Borrower, such proceeding is not
discharged or dismissed within 30 days;

 

(E)           the Borrower
voluntarily or involuntarily dissolves or is dissolved;

 

(F)           the Borrower
becomes insolvent or fails generally to pay its debts as they become due;

 

(G)          the Lender shall
cease to have a valid, perfected security interest in all or any material
portion of the Collateral; or

 

(H)          E.ON AG shall cease
to own, directly or indirectly, at least 80% of the voting capital stock of the
Borrower;

 

then the Lender, upon notice to the Borrower, may
declare the Loans to be immediately due and payable, whereupon the Loans will
become immediately due and payable; provided, that if an Event of Default
described in Section 7.1(D) exists or occurs, the Loans shall
automatically, without notice of any kind, become immediately due and payable.

 

7.2          Rights
and Remedies Generally. 
Subject to the subordination provisions of Section 8, upon the
occurrence and continuance of an Event of Default, the Lender has, in addition
to any other rights and remedies contained in this Agreement, all of the rights
and remedies of a secured party under the Code or other applicable laws, all of
which rights and remedies are cumulative, and none exclusive, to the extent
permitted by law.  Any single or partial
exercise by the Lender of any right or remedy for a default or breach of any
term, covenant, condition or agreement in this Agreement does not affect its
rights and does not waive, alter, affect, or prejudice any other right or
remedy to which the Lender may be lawfully entitled for the same default or
breach.

 

7.3          Waiver of
Demand.  Demand, presentment, protest and notice of
nonpayment are waived by the Borrower. 
The Borrower also waives the benefit of all valuation, appraisal
and exemption laws.

 

10

 

7.4          Marshalling;
Payments Set Aside.  The Lender is under no obligation to
marshall any assets in favor of the Borrower or any other party or against or
in payment of any or all of the Liabilities. 
To the extent that the Borrower makes a payment or payments to the
Lender or the Lender enforces its security interests or exercises its rights of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied will be revived
and continue in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.

 

8.                                      SUBORDINATION.

 

8.1          Agreement
to Subordinate.

 

(A)          Terms of Subordination.  The Lender and the Borrower agree that the
lien granted by the Borrower hereunder to secure the Liabilities is
subordinate, to the extent and in the manner set forth in this Agreement, to
the lien of the First Mortgage Bond Indenture and any and all of the bonds
outstanding from time to time thereunder (the “Senior Obligations”).  Notwithstanding the order or time of
creation, acquisition, attachment, or the order, time, or manner of perfection,
or the order or time of filing or recordation of any document or instrument, or
other method of perfecting a security interest or Lien on and against any of
the Collateral or other assets of the Borrower, the Lender agrees that any Lien
or security interest now or hereafter existing in and to the Collateral in
favor of the Lender shall be and at all times remain subject and subordinate in
all respects to any Lien or security interest which may now or hereafter at any
time or from time to time be granted pursuant to the First Mortgage Bond
Indenture on or in any or all of the Collateral as security for the Senior
Obligations.

 

(B)          Further Assurances.  The Lender and the Borrower will, at the
Borrower’s expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action,
that may be necessary, or that the Bond Trustee may reasonably request, in
order to protect any right or interest granted or purported to be granted by
this Agreement or to enable the Bond Trustee to exercise and enforce its rights
and remedies under this Agreement.

 

8.2          Administration
of Collateral.  The
Bond Trustee shall have complete and sole discretion in, and shall not be
liable to the Lender for, determining how, when and in what manner the Bond
Trustee administers the Senior Obligations or forecloses or otherwise realizes
upon the Collateral or exercises any rights or remedies of a secured party or
lien creditor or any other rights with respect to the Collateral or otherwise
takes any action with respect thereto. 
Without in any way limiting the foregoing, the Lender specifically
acknowledges and agrees that the Bond Trustee may take such action as it deems
appropriate to enforce the Senior Obligations and its Lien on and security
interest in the Collateral, whether or not such action is beneficial or
detrimental to the Lender’s interest. 
The Lender agrees that it shall not take any action to foreclose or
otherwise realize upon the Collateral or exercise any rights or remedies of a
secured party with respect to the Collateral, unless and until the Senior
Obligations have been paid in full. 
Also without in any way limiting the foregoing, the Lender hereby
expressly waives and

 

11

 

releases any and
all rights to have the Collateral or any part thereof marshaled upon any
foreclosure, sale or other realization thereon.  There shall be no obligation on the part of the Bond Trustee, at
any time, to resort for payment of the Senior Obligations to any obligor
thereon or any guarantor thereof, or to any other person or corporation, their
properties or estates, or to resort to any other collateral or any other rights
or remedies whatsoever, and the Bond Trustee shall have the right to foreclose
or otherwise realize upon the Collateral upon which it has a security interest
irrespective of whether or not other proceedings or steps are pending seeking
resort to or realization upon or from any of the foregoing.

 

8.3          Delivery of Proceeds of Collateral.  So long as the Senior
Obligations are outstanding, the Lender will without demand or request being
made upon it deliver any parts or proceeds of the Collateral which shall come
into its possession, control or custody to the Bond Trustee for application as
set forth in the First Mortgage Bond Indenture.

 

8.4          Agreement
Not to Contest.  The
Lender hereby agrees that it shall not contest the validity, perfection,
priority or enforceability of any security interest or Lien granted to the Bond
Trustee pursuant to the First Mortgage Bond Indenture.

 

8.5          Release of
Collateral.  The
Lender agrees that in the event the Bond Trustee shall come into the
possession, custody and control of any property or assets of the Borrower as
the result of any security interest granted to secure the Senior Obligations,
the Bond Trustee may, to the extent the Bond Trustee does not apply the same to
the payment or partial payment of the Senior Obligations, release the same to
or upon the order of the Borrower, without notice, or accounting for the same,
to the Lender or any other person, firm or corporation whomsoever, it being
specifically understood and agreed that any property so released shall remain
subject to all claims of the Lender and the Bond Trustee thereto in accordance
herewith.  Without limiting the
foregoing, the Lender acknowledges and agrees that the Bond Trustee may from
time to time in its discretion release proceeds of the Collateral in which the
Bond Trustee has a security interest to the Borrower or otherwise deal with the
Collateral in which the Bond Trustee has a security interest, without any
notice or accounting to the Lender whatsoever.

 

8.6          Release
of Security Interest.  The
Lender agrees that, whether or not a default has occurred in payment of the
Loans, its Lien on the Collateral or any portion thereof shall automatically be
released ipso facto as to all indebtedness secured thereby owing to the Lender
if, when and to the same extent that the Bond Trustee releases its Lien on such
Collateral or portion thereof.  The Lender
further hereby agrees to execute and deliver such further instruments and do
such further acts as the Borrower or the Bond Trustee may deem necessary or
proper to carry out more effectively the foregoing.

 

8.7          Obligations under this Agreement Not
Affected.  Except
as specifically described in this Agreement, nothing contained in this
Agreement or in any Note is intended to or impairs, as between the Borrower,
its creditors other than the Bond Trustee and the Lender, the obligations of
the Borrower, which are absolute and unconditional, to pay to the Lender the
Liabilities as and when they become due and payable in accordance with the
terms of this Agreement, subject, however, to the terms of this Section 8.  Except as specifically described in this
Agreement, nothing contained in this Agreement or in any Note is intended to or
affects the relative rights of the Lender and creditors of the Borrower other
than the Bond Trustee.

 

12

 

8.8          Bankruptcy.  The Lender agrees that in
the event bankruptcy proceedings are instituted by or against the Borrower, the
Bond Trustee may consent to the use of cash collateral or provide postpetition
financing under section 364 of the United States Bankruptcy Code, 11 U.S.C. § 364,
to the Borrower on such terms and conditions and in such amounts as the Bond
Trustee, in its sole discretion, may decide. 
The Lender waives any rights it may have under applicable law to object
to such use of such cash collateral or postpetition financing.

 

8.9          Third
Party Beneficiary.  The Bond Trustee shall be a third party
beneficiary of this Section 8.

 

9.                                      MISCELLANEOUS.

 

9.1          Amendments
and Waivers.  No
modification or waiver of, nor any consent to the departure by the Borrower
from, any provision of this Agreement will be effective unless it is in writing
from the Lender and then such modification, waiver or consent will be effective
only on the specific instance and for the purpose for which it is given.

 

9.2          Severability. 
Wherever possible, each provision of this Agreement must be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is prohibited by or invalid under applicable law,
such provision is ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provisions or the
remaining provisions of this Agreement.

 

9.3          Notices. 
Except as otherwise expressly provided in this Agreement, any notice
required or desired to be served, given or delivered under this Agreement must
be in writing and is deemed to have been validly served, given or delivered
(i) three days after deposit in the United States mails, with proper
postage prepaid, (ii) when sent after receipt of confirmation if sent by
telecopy or other similar facsimile transmission, (iii) one Business
Day after deposit with a reputable overnight courier with all charges prepaid
or (iv) when delivered, if hand delivered by messenger, all of which must
be properly addressed to the party to be notified and sent to the address or
number indicated on the signature page hereof or to such other address or
number as each party designates to the other in the manner prescribed in this Section
9.3.

 

9.4          Counterparts.  This Agreement and any amendment or
supplement to this Agreement or any waiver granted in connection with this
Agreement may be executed in any number of counterparts and by the different
parties on separate counterparts and each such counterpart is deemed to be an
original, but all such counterparts together constitute but one and the same
Agreement.

 

9.5          Prior
Agreements.  The terms and conditions set forth in this
Agreement supersede all prior agreements, discussions, correspondence,
memoranda and understandings (whether written or oral) of the Borrower and the
Lender concerning or relating to the subject matter of this Agreement.

 

9.6          Successors
and Assigns.  This
Agreement is binding upon the Borrower and the Lender and their respective
successors and assigns and inures to the benefit of the Borrower and the
Lender and their respective successors and permitted assigns.  The Borrower has no right to assign its
rights or delegate its duties under this Agreement, without the prior written
consent

 

13

 

of the
Lender.  The Lender has the right to
assign to any Affiliate of the Lender all or a portion of its rights and
obligations under this Agreement.  Upon
any such assignment by the Lender, (i) the assignee becomes a party to
this Agreement and, to the extent of such assignment, has all rights and
obligations of the Lender under this Agreement and (ii) the Lender will,
to the extent of such assignment, relinquish its rights and be released from
its obligations under this Agreement. 
The Borrower and the Lender agree to execute and deliver such documents,
and to take such other actions, as the other party may reasonably request to
accomplish the foregoing.

 

9.7          CHOICE OF LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
DELAWARE.

 

*  * 
*  *  *

 

14

 

IN WITNESS
WHEREOF, the parties have executed this Agreement as of the day and year first
above written.

 

 

	
   

  	
  KENTUCKY UTILITIES COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  1 Quality Street

  	
   

  
	
   

  	
   

  	
  Lexington,
  Kentucky 40507

  	
   

  
	
   

  	
   

  	
  Attn:   Treasurer

  	
   

  
	
   

  	
  Facsimile:

  	
  502-627-4742

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  FIDELIA CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  300 Delaware
  Avenue

  	
   

  
	
   

  	
   

  	
  Wilmington,
  Delaware 19801

  	
   

  
	
   

  	
   

  	
  Attn:   Executive
  Vice President

  	
   

  
	
   

  	
  Facsimile:

  	
  302-417-5913

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

 

EXHIBIT A

 

FORM OF NOTE

 

	
  $

  	
  Date:                    

  

 

FOR VALUE RECEIVED, on _______________ “Maturity
Date”) the undersigned, KENTUCKY UTILITIES COMPANY, a Kentucky and Virginia
corporation (the “Borrower”), unconditionally promises to pay to FIDELIA
CORPORATION (the “Lender”), at the Lender’s office at 300 Delaware
Avenue, Wilmington, Delaware  19801, or
at such other place as the holder of this Note may from time to time designate
in writing, in lawful money of the United States of America and immediately
available funds, the principal sum of $___________.  This Note is referred to in and was executed and delivered under
the Loan and Security Agreement dated as of August 15, 2003 (the “Loan
Agreement”) between the Borrower and the Lender, to which reference is made
for a more complete statement of the terms and conditions under which the loan
evidenced by this Note was made and is to be repaid.  Capitalized terms used in this Note and not otherwise defined
have the meanings assigned to such terms in the Loan Agreement.

 

Unless otherwise paid sooner under the provisions of Section
2.6(c) or 7.1 of the Loan Agreement, the principal indebtedness
represented by this Note is payable on the Maturity Date.  The Borrower further promises to pay
interest on the outstanding principal amount of the indebtedness represented by
this Note from the date of this Note until payment in full at the applicable rates
determined in accordance with Section 2.3(A) of the Loan Agreement.  Except as otherwise provided in the Loan
Agreement, interest is payable quarterly in arrears not later than the last
Business Day of each calendar quarter and is computed on the basis of a 360-day
year consisting of twelve 30-day months.

 

If payment under this Note becomes due and payable on
a Business Day, the due date of such payment is extended to the next succeeding
Business Day.  In no contingency or
event whatsoever will interest charged under this Note, however such interest
may be characterized or computed, exceed the highest rate permissible under any
law which a court of competent jurisdiction, in a final determination, deems
applicable to this Note.  In the event
that such a court determines that the Lender has received interest under this
Note in excess of the highest rate applicable to this Note, any such excess
interest collected by the Lender is deemed to have been a repayment of
principal and be so applied.

 

The obligations of the Borrower under this Note is
secured by certain collateral as and to the extent set forth in the Loan
Agreement.  This Note is subject to
prepayment at the option of the Borrower as provided in the Loan Agreement.

 

16

 

DEMAND, PRESENTMENT, PROTEST AND NOTICE OF NONPAYMENT AND
PROTEST ARE WAIVED BY THE BORROWER.

 

This Note has been delivered and is deemed to have
been made, at Wilmington, Delaware and will be interpreted in accordance with
the internal law as (as opposed to conflicts of law provisions) and decisions
of the State of Delaware.  Whenever
possible each provision of this Note will be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
is prohibited by or invalid under applicable law, such provision will be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note.  Whenever in this Note
reference is made to the Lender or the Borrower, such reference is deemed to
include, as applicable, a reference to their respective successors and
assigns.  The provisions of this Note
are binding upon and inure to the benefit of said successors and assigns.  The Borrower’s successors and assigns
include, without limitation, a receiver, 
trustee or debtor-in-possession of or for the Borrower.

 

	
   

  	
  KENTUCKY UTILITIES COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  
					

 

17

 

NOTE

 

	
  $75,000,000.00

  	
   

  	
  Date:  August 15, 2003

  

 

FOR VALUE RECEIVED, on August 15, 2013 “Maturity
Date”) the undersigned, KENTUCKY UTILITIES COMPANY, a Kentucky and Virginia
corporation (the “Borrower”), unconditionally promises to pay to FIDELIA
CORPORATION (the “Lender”), at the Lender’s office at 300 Delaware
Avenue, Wilmington, Delaware  19801, or
at such other place as the holder of this Note may from time to time designate
in writing, in lawful money of the United States of America and immediately available
funds, the principal sum of $75,000,000. 
This Note is referred to in and was executed and delivered under the
Loan and Security Agreement dated as of August 15, 2003 (the “Loan Agreement”)
between the Borrower and the Lender, to which reference is made for a more
complete statement of the terms and conditions under which the loan evidenced
by this Note was made and is to be repaid. 
Capitalized terms used in this Note and not otherwise defined have the
meanings assigned to such terms in the Loan Agreement.

 

Unless otherwise paid sooner under the provisions of Section
2.6(c) or 7.1 of the Loan Agreement, the principal indebtedness
represented by this Note is payable on the Maturity Date.  The Borrower further promises to pay
interest on the outstanding principal amount of the indebtedness represented by
this Note from the date of this Note until payment in full at the applicable
rates determined in accordance with Section 2.3(A) of the Loan
Agreement.  Except as otherwise provided
in the Loan Agreement, interest is payable quarterly in arrears not later than
the last Business Day of each calendar quarter and is computed on the basis of
a 360-day year consisting of twelve 30-day months.

 

If payment under this Note becomes due and payable on
a Business Day, the due date of such payment is extended to the next succeeding
Business Day.  In no contingency or
event whatsoever will interest charged under this Note, however such interest
may be characterized or computed, exceed the highest rate permissible under any
law which a court of competent jurisdiction, in a final determination, deems
applicable to this Note.  In the event
that such a court determines that the Lender has received interest under this
Note in excess of the highest rate applicable to this Note, any such excess
interest collected by the Lender is deemed to have been a repayment of
principal and be so applied.

 

The obligations of the Borrower under this Note is
secured by certain collateral as and to the extent set forth in the Loan
Agreement.  This Note is subject to
prepayment at the option of the Borrower as provided in the Loan Agreement.

 

1

 

DEMAND, PRESENTMENT, PROTEST AND NOTICE OF NONPAYMENT AND
PROTEST ARE WAIVED BY THE BORROWER.

 

This Note has been delivered and is deemed to have
been made, at Wilmington, Delaware and will be interpreted in accordance with
the internal law as (as opposed to conflicts of law provisions) and decisions
of the State of Delaware.  Whenever
possible each provision of this Note will be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
is prohibited by or invalid under applicable law, such provision will be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note.  Whenever in this Note
reference is made to the Lender or the Borrower, such reference is deemed to
include, as applicable, a reference to their respective successors and
assigns.  The provisions of this Note
are binding upon and inure to the benefit of said successors and assigns.  The Borrower’s successors and assigns
include, without limitation, a receiver, 
trustee or debtor-in-possession of or for the Borrower.

 

	
   

  	
  KENTUCKY UTILITIES COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  

 

2

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