Document:

WP Exhibit 10.3  (W0180153.DOC;1)

Exhibit 10.3

WAUSAU PAPER CORP.

2000 STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

FOR DIRECTORS

(ANNUAL DIRECTOR GRANT)

Agreement made as of _______________ (the “Date of Grant”) between Wausau Paper Corp., a Wisconsin corporation with its principal place of business at Mosinee, Wisconsin (the “Corporation”), and ________________ (the “Optionee”) for the purpose of granting the Option described below under the terms of the Wausau Paper Corp. 2000 Stock Incentive Plan (the “Plan”).

1.

Grant of Option.  The Corporation hereby grants the Optionee as of the Date of Grant the Option to purchase ____________ shares of the common stock of the Corporation (the “Shares”) upon the terms and conditions of the Plan, including those hereinafter stated. 

2.

Purchase Price.  The Option Price shall be $______ for each Share.

3.

Time of Exercise.

(a)

Exercise During Optionee’s Lifetime.  This Option has been granted by reason of the Optionee’s status as a Director and is exercisable during the Optionee’s lifetime only by him and only if this Option is exercised on or before the Expiration Date of this Option.  For purposes of this Agreement, the term “Expiration Date” of this Option means the first to occur of:

(i)

the tenth anniversary of the Date of Grant; 

(ii)

if the Optionee’s Termination of Service occurs because of the death of the Optionee, the first anniversary of the Optionee’s death;

(iii)

if the Optionee’s Termination of Service occurs because of the Disability of the Optionee, the first anniversary of the Optionee’s Termination of Service; 

(iv)

if the Optionee’s Termination of Service occurs because of the Retirement of the Optionee, the second anniversary of the Optionee’s termination of Service;

(v)

if the Optionee’s Termination of Service occurs because of a reason other than Disability, Retirement, or death, 90 days after the date of such Termination of Service; or

(vi)

if the Optionee’s Termination of Service occurs because of Cause, the date of such Termination of Service;

-1-

provided, however, that notwithstanding the foregoing, in the event the Optionee incurs a Termination of Service for a reason other than for Cause during the 12-month period following a Change in Control of the Corporation, this Option shall be exercisable in accordance with the terms of Section 6.3(e)(vi) of the Plan. 

(c)

Exercise After Optionee’s Death.  In the event of Termination of Service by reason of the Optionee’s death, this Option may be exercised in whole or in part prior to the Expiration Date specified in subparagraph 3(a)(ii) by his estate or his designee by will to the extent this Option was exercisable by the Optionee immediately prior to his death, but only on or before the first anniversary of the Optionee’s death.  In the event of the Optionee’s death after he had incurred a Termination of Service by reason of Disability or Retirement, this Option may be exercised in whole or in part by the Optionee’s estate or his designee by will on or before the first to occur of (i) the Expiration Date specified in subparagraph 3(a)(iii) or (iv), as the case may be, and (ii) the first anniversary of the Optionee’s death, but only to the extent this Option was exercisable by the Optionee immediately prior to his death.

4.

Method of Exercise. 

(a)

Notice of Exercise.  This Option shall be exercisable by written notice to the Secretary of the Corporation at its principal place of business at Mosinee, Wisconsin.  Such notice shall be in substantially the form set forth as Form 1 attached to this Agreement and shall state the exact number of Shares as to which this Option is being exercised and shall be signed by the person or persons exercising this Option.  The date of exercise shall be the date such written notice and payment in a manner provided in subparagraph 4(c) have been delivered to the Secretary of the Corporation either in person or by depositing said notice and payment of the purchase price in the United States mail, postage prepaid and addressed to the Secretary of the Corporation at the Corporation’s home business office.

(b)

Minimum Number of Shares.  This Option may be exercised in whole or in part, but cannot be exercised with respect to any fractional Shares.

(c)

Payment for Shares.  A notice of exercise shall be accompanied by payment of the full purchase price of such Shares (plus minimum required tax withholding, if any) by:

(i)

tendering cash (in the form of a check or otherwise) in such amount;

(ii)

except as otherwise provided by the Committee prior to exercise of this Option, tendering Shares, by delivery of certificates or by attestation, with a Fair Market Value on the date of exercise equal to such amount; or

(iii)

delivering irrevocable instructions to a broker to promptly deliver to the Corporation the sale or loan proceeds equal to such amount, along with documentation from such broker guaranteeing such payment;

-2-

provided, however, that the payment option otherwise provided in subparagraph 4(c)(ii) shall be void during any period in which the Corporation is, in the opinion of its executive officers or legal counsel, prohibited from purchasing or acquiring its common stock.

(d)

Delivery of Shares.  The Corporation shall deliver a certificate or certificates representing Shares attributable to an exercise of this Option as soon as practicable after the notice of exercise and payment shall have been received.  The certificate or certificates for the Shares as to which this Option shall have been exercised shall be registered in the name of the person or persons exercising this Option and shall be delivered as provided above to the person or persons exercising this Option.  The Corporation shall not be obligated to deliver any certificates prior to the fulfillment by it of any listing obligations with respect to the Shares on any exchange or over-the-counter market or the registration or qualification of the Shares under any federal or state securities laws which the Corporation deems advisable.

5.

Adjustment Upon Changes in Capitalization.  If the Common Stock is changed into a greater or lesser number of shares as a result of a stock dividend, stock split-up, or combination of Shares, then the number of Shares subject to this Option and the Option Price shall be proportionately increased or decreased to give effect to the change as provided for in Section 3.4 of the Plan.  In the event of any other change in the Common Stock or change in the capitalization of the Corporation, the Committee may make such changes in the terms of this Option as provided for in Section 3.5 of the Plan.

6.

Non-Transferability of Option.  This Option may be exercised only by the Optionee or, if the Optionee dies, by the personal representative or designee under the Optionee’s will or by the Optionee’s estate, as the case may be.  Except as otherwise provided in the preceding sentence, this Option may not be assigned, transferred, pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment or similar process.  Any attempted assignment, transfer, pledge, hypothecation or other disposition of this Option contrary to the provisions hereof, and the levy of any execution, attachment or similar process upon this Option, shall be null and void and without effect.

7.

Shares as Investment.  If not registered by the Corporation under the Securities Act of 1933 (the “Act”), the Shares acquired pursuant to the exercise of this Option, will be “restricted” stock which will not be freely transferable by the holder after exercise of this Option.  The Optionee and any successor in interest of the Optionee accordingly represents and acknowledges, as a condition of the granting of this Option, that (a) Shares which are unregistered under the Act will be acquired for the Optionee’s (or his successor’s) own account for investment only and not with a view to offer for sale or for sale in connection with the distribution or transfer thereof and (b) that the certificates representing Shares purchased pursuant to this Option which have not been registered pursuant to the Act will bear a legend as to such restrictions on transfer.

8.

Employment.  This Agreement does not constitute a contract of employment between the Corporation or any subsidiary of the Corporation and the Optionee nor does it create any right of the Optionee to continue in the service of the Corporation in any capacity.

-3-

9.

Construction and Definitions.  This Agreement is subject to and shall be construed in accordance with the terms of the Plan which are explicitly made applicable to this Agreement and incorporated by this reference.  Unless otherwise defined, all terms used in this Agreement, when capitalized, have the same meaning as such terms are defined in the Plan and each such definition is hereby incorporated by this reference.  In the event of any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern.  

10.

Governing Law.  This Agreement shall be governed by the internal laws of the State of Wisconsin without reference to the principles of conflicts of law.

11.

Binding Effect.  This Option incorporates by reference all the terms, conditions and limitations set forth in the Plan, and this Agreement shall be binding upon and inure to the benefit of the Corporation and the Optionee and their successors. 

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be signed by its officer, thereunto duly authorized, and the Optionee has acknowledged his acceptance of this Option in accordance with the terms of this Agreement and the Plan, all as of the Date of Grant.

OPTIONEE:

WAUSAU PAPER CORP.

______________________________

By:  ________________________________

______________________________

______________________________

As its _________________________

-4-

WAUSAU PAPER CORP.

2000 STOCK INCENTIVE PLAN

NOTICE OF INTENT TO EXERCISE STOCK OPTION

The undersigned Optionee hereby exercises the Option to purchase shares of common stock of Wausau Paper Corp. under the Corporation’s 2000 Stock Incentive Plan as follows:

Date of Grant:

__________________, _____

Type of Option:

Non-qualified Stock Option

Number of Shares:

____________ (whole shares only)

Option Price:

$___________ per Share

Income Tax Due:

$___________

(Optionee is required to make a cash payment or to direct the Corporation to withhold shares having a fair market value equal to the amount of withholding required.)

Total Amount Due:

$___________

Method of Payment:

Indicate the method or methods by which payment will be made:

c

Check

c

Surrender of Common Stock

No. of Shares surrendered:_____________    £ by delivery    £ by attestation

(Shares must have been purchased on the open market and held for at least 6 months.  If surrendering shares by attestation, attach statement specifying the stock certificates representing shares which are to be treated as exchanged.  Statement should be signed by Optionee or, if held in street name, by broker.)

c

Cashless exercise and sale or loan by broker (attach copy of broker sale or loan agreement)  By checking this box, the Optionee certifies that no shares to be sold will violate any Corporation policies on insider trading.

Date:

_______________, 20__.

Optionee Name:   _______________________

Signature:__________________________

Social Security No.   ____________________

Address: Street: _______________________________________________________________

   City:   _____________________________    State: ____     Zip: _________________

-5-exhibit10a.htm

    Exhibit
10(a)

     

     

     

     

    CREDIT
AND SECURITY AGREEMENT

     

    DATED AS
OF AUGUST 5, 2008

     

    AMONG

     

    PPL
RECEIVABLES CORPORATION, AS BORROWER,

     

    PPL
ELECTRIC UTILITIES CORPORATION, AS SERVICER,

     

    VICTORY
RECEIVABLES CORPORATION,

     

    THE
LIQUIDITY BANKS FROM TIME TO TIME PARTY HERETO

     

    AND

     

    THE BANK
OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH, AS AGENT

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE OF CONTENTS

     

    
      
        	
                ARTICLE
      I

              	
                THE
      ADVANCES

              	
                2

              
	 
      	
                Section
      1.1

              	
                Credit Facility

              	
                2

              
	 
      	
                Section
      1.2

              	
                Increases

              	
                2

              
	 
      	
                Section
      1.3

              	
                Decreases

              	
                3

              
	 
      	
                Section
      1.4

              	
                Deemed Collections; Borrowing
      Limit

              	
                3

              
	 
      	
                Section
      1.5

              	
                Payment
      Requirements

              	
                4

              
	 
      	
                Section
      1.6

              	
                Ratable Loans; Funding
      Mechanics; Liquidity Fundings

              	
                4

              
	
                ARTICLE
      II

              	
                PAYMENTS
      AND COLLECTIONS

              	
                5

              
	 
      	
                Section
      2.1

              	
                Payments

              	
                5

              
	 
      	
                Section
      2.2

              	
                Collections Prior to
      Amortization

              	
                5

              
	 
      	
                Section
      2.3

              	
                Collections Following
      Amortization

              	
                6

              
	 
      	
                Section
      2.4

              	
                Payment
    Rescission

              	
                7

              
	 
      	
                Section
      2.5

              	
                Maximum Lawful
    Rate

              	
                7

              
	
                ARTICLE
      III

              	
                VICTORY
      FUNDING

              	
                8

              
	 
      	
                Section
      3.1

              	
                CP Costs

              	
                8

              
	 
      	
                Section
      3.2

              	
                Calculation of CP
      Costs

              	
                8

              
	 
      	
                Section
      3.3

              	
                CP Costs
    Payments

              	
                8

              
	 
      	
                Section
      3.4

              	
                Default Rate

              	
                8

              
	
                ARTICLE
      IV

              	
                LIQUIDITY
      BANK FUNDING

              	
                8

              
	 
      	
                Section
      4.1

              	
                Liquidity Bank
      Funding

              	
                8

              
	 
      	
                Section
      4.2

              	
                Interest
    Payments

              	
                9

              
	 
      	
                Section
      4.3

              	
                Selection and Continuation of
      Interest Periods

              	
                9

              
	 
      	
                Section
      4.4

              	
                Liquidity Bank Interest
      Rates

              	
                9

              
	 
      	
                Section
      4.5

              	
                Suspension of the LIBO
      Rate

              	
                10

              
	 
      	
                Section
      4.6

              	
                Default Rate

              	
                10

              
	
                ARTICLE
      V

              	
                REPRESENTATIONS
      AND WARRANTIES

              	
                10

              
	 
      	
                Section
      5.1

              	
                Representations and Warranties
      of the PPL Electric Parties

              	
                10

              
	
                ARTICLE
      VI

              	
                CONDITIONS
      OF ADVANCES

              	
                15

              
	 
      	
                Section
      6.1

              	
                Conditions Precedent to
      Effectiveness

              	
                15

              
	 
      	
                Section
      6.2

              	
                Conditions Precedent to Initial
      Advance

              	
                15

              
	 
      	
                Section
      6.3

              	
                Conditions Precedent to All
      Advances

              	
                16

              
	
                ARTICLE
      VII

              	
                COVENANTS

              	
                16

              
	 
      	
                Section
      7.1

              	
                Affirmative Covenants of the
      PPL Electric Parties

              	
                16

              
	 
      	
                Section
      7.2

              	
                Negative Covenants of the PPL
      Electric Parties

              	
                24

              
	
                ARTICLE
      VIII

              	
                SERVICING

              	
                26

              
	 
      	
                Section
      8.1

              	
                Designation of
      Servicer

              	
                26

              
	 
      	
                Section
      8.2

              	
                Duties of
    Servicer

              	
                26

              
	 
      	
                Section
      8.3

              	
                Collections

              	
                28

              
	 
      	
                Section
      8.4

              	
                Responsibilities of PPL
      Electric Parties

              	
                28

              
	 
      	
                Section
      8.5

              	
                Monthly Reports

              	
                28

              
	 
      	
                Section
      8.6

              	
                Servicing Fee

              	
                28

              
	
                ARTICLE
      IX

              	
                AMORTIZATION
      EVENTS

              	
                28

              
	 
      	
                Section
      9.1

              	
                Amortization
    Events

              	
                28

              
	 
      	
                Section
      9.2

              	
                Remedies

              	
                31

              
	
                ARTICLE
      X

              	
                INDEMNIFICATION

              	
                31

              
	 
      	
                Section
      10.1

              	
                Indemnities by the PPL Electric
      Parties

              	
                31

              
	 
      	
                Section
      10.2

              	
                Increased Cost and Reduced
      Return

              	
                34

              
	 
      	
                Section
      10.3

              	
                Other Costs and
      Expenses

              	
                34

              
	 
      	
                Section
      10.4

              	
                Allocations

              	
                35

              
	
                ARTICLE
      XI

              	
                THE
      AGENT

              	
                35

              
	 
      	
                Section
      11.1

              	
                Authorization and
      Action

              	
                35

              
	 
      	
                Section
      11.2

              	
                Delegation of
      Duties

              	
                35

              
	 
      	
                Section
      11.3

              	
                Exculpatory
      Provisions

              	
                36

              
	 
      	
                Section
      11.4

              	
                Reliance by
    Agent

              	
                36

              
	 
      	
                Section
      11.5

              	
                Non-Reliance on Agent and Other
      Lenders

              	
                36

              
	 
      	
                Section
      11.6

              	
                Reimbursement and
      Indemnification

              	
                37

              
	 
      	
                Section
      11.7

              	
                Agent in its Individual
      Capacity

              	
                37

              
	 
      	
                Section
      11.8

              	
                Successor Agent

              	
                37

              
	
                ARTICLE
      XII

              	
                ASSIGNMENTS;
      PARTICIPATIONS

              	
                38

              
	 
      	
                Section
      12.1

              	
                Assignments

              	
                38

              
	 
      	
                Section
      12.2

              	
                Participations

              	
                39

              
	
                ARTICLE
      XIII

              	
                SECURITY
      INTEREST

              	
                39

              
	 
      	
                Section
      13.1

              	
                Grant of Security
      Interest

              	
                39

              
	 
      	
                Section
      13.2

              	
                Termination after Final Payout
      Date

              	
                39

              
	
                ARTICLE
      XIV

              	
                MISCELLANEOUS

              	
                39

              
	 
      	
                Section
      14.1

              	
                Waivers and
      Amendments

              	
                39

              
	 
      	
                Section
      14.2

              	
                Notices

              	
                40

              
	 
      	
                Section
      14.3

              	
                Ratable
Payments

              	
                41

              
	 
      	
                Section
      14.4

              	
                Protection of Agent’s Security
      Interest

              	
                41

              
	 
      	
                Section
      14.5

              	
                Confidentiality

              	
                42

              
	 
      	
                Section
      14.6

              	
                Bankruptcy
    Petition

              	
                42

              
	 
      	
                Section
      14.7

              	
                Limitation of
      Liability

              	
                43

              
	 
      	
                Section
      14.8

              	
                CHOICE OF LAW

              	
                43

              
	 
      	
                Section
      14.9

              	
                CONSENT TO
      JURISDICTION

              	
                43

              
	 
      	
                Section
      14.10

              	
                WAIVER OF JURY
      TRIAL

              	
                43

              
	 
      	
                Section
      14.11

              	
                Integration; Binding Effect;
      Survival of Terms

              	
                44

              
	 
      	
                Section
      14.12

              	
                Counterparts; Severability;
      Section References

              	
                44

              
	 
      	
                Section
      14.13

              	
                BTMU Roles

              	
                44

              

      

    

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
    

    
      
        	
                Exhibits

              	 
      
	
                Exhibit
      I

              	
                Definitions

              
	
                Exhibit
      II

              	
                Form
      of Borrowing Notice

              
	
                Exhibit
      III

              	
                Places
      of Business of the PPL Electric Parties; Locations of Records; Federal
      Employer Identification Number(s); Organizational Identification
      Number(s)

              
	
                Exhibit
      IV

              	
                Names
      of Collection Banks & Collection Accounts

              
	
                Exhibit
      V

              	
                Form
      of Compliance Certificate

              
	
                Exhibit
      VI

              	
                Nuclear
      Decommissioning Receivables Amortization Schedule

              
	
                Exhibit
      VII

              	
                Form
      of Assignment Agreement

              
	
                Exhibit
      VIII

              	
                Summary
      of Credit and Collection Practices

              
	
                Exhibit
      IX

              	
                Form
      of Monthly Report

              
	 
      	 
      
	
                Schedules

              	 
      
	
                Schedule
      A

              	
                Commitments
      of Liquidity Banks

              
	
                Schedule
      B

              	
                Documents
      to be Delivered to the Agent on or prior to the Initial
      Advance

              
	
                Schedule
      C

              	
                Addresses
      for Notices

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    CREDIT
AND SECURITY AGREEMENT

     

    THIS
CREDIT AND SECURITY AGREEMENT, dated as of August 5, 2008 is entered into by and
among:

     

    (a)           PPL
RECEIVABLES CORPORATION, a Delaware corporation (“Borrower”),

     

    (b)           PPL
Electric Utilities Corporation, a Pennsylvania corporation, in its individual
capacity and as initial Servicer (“PPL
Electric”, and together with the Borrower, the “PPL
Electric Parties” and each, a “PPL
Electric Party”)

     

    (c)           The
entities listed on Schedule A to this
Agreement (together with any of their respective successors and assigns
hereunder, the “Liquidity
Banks”),

     

    (d)           Victory
Receivables Corporation, a Delaware corporation (“Victory”),
and

     

    (e)           The
Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch (“BTMU”),
as agent for the Lenders hereunder or any successor agent hereunder (together
with its successors and assigns hereunder, the “Agent”).

     

    Unless
defined elsewhere herein, capitalized terms used in this Agreement shall have
the meanings assigned to such terms in Exhibit I and if not
defined in Exhibit
I, shall have the meanings assigned to such terms in the Receivables Sale
Agreement.

     

    PRELIMINARY
STATEMENTS

     

    Borrower
desires to borrow from the Lenders from time to time.

     

    Victory
may, in its absolute and sole discretion, make Advances to Borrower from time to
time.

     

    Upon the
terms and subject to the conditions set forth herein, in the event that Victory
declines to make any Advance, the Liquidity Banks shall, at the request of
Borrower, make Advances from time to time.

     

    The Bank
of Tokyo-Mitsubishi UFJ, Ltd., New York Branch has been requested and is willing
to act as Agent on behalf of Victory and the Liquidity Banks in accordance with
the terms hereof.

     

    In
consideration of the mutual agreements, provisions and covenants contained
herein, the parties hereto agree as follows:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Article
I 

    The
Advances

     

    Section
1.1 Credit
Facility.

     

    (a) Upon the
terms and subject to the conditions hereof, from time to time prior to the
Facility Termination Date:

     

    (i) Borrower
may, at its option, request Advances from the Lenders in an aggregate principal
amount at any one time outstanding not to exceed the lesser of the Aggregate
Commitment and the Borrowing Base (such lesser amount, the “Borrowing
Limit”); and

     

    (ii) Victory
may, at its option, make the requested Advance, or if Victory shall decline to
make any Advance, except as otherwise provided in Section 1.2, the
Liquidity Banks severally agree to make Loans in an aggregate principal amount
equal to the requested Advance.

     

    Each of
the Advances, and all other Obligations, shall be secured by the Collateral as
provided in Article
XIII.  It is the intent of Victory to fund all Advances by the
issuance of Commercial Paper.

     

    (b) Borrower
may, upon at least thirty (30) days’ notice to the Agent, terminate in whole or
reduce in part, ratably among the Liquidity Banks, the unused portion of the
Aggregate Commitment; provided that each
partial reduction of the Aggregate Commitment shall be in an amount equal to
$10,000,000 (or a larger integral multiple of $1,000,000 if in excess thereof)
and shall reduce the Commitments of the Liquidity Banks ratably in accordance
with their respective Pro Rata Shares, and no such partial reduction shall
reduce the Aggregate Commitment to an amount less than $25,000,000.

     

    Section
1.2 Increases.

     

    Borrower
shall provide the Agent with at least two (2) Business Days’ prior notice in a
form set forth as Exhibit II hereto of
each Advance (each, a “Borrowing
Notice”).  Each Borrowing Notice, except as set forth below,
shall be irrevocable and shall specify the requested increase in Aggregate
Principal (which shall not be less than $1,000,000 or a larger integral multiple
of $100,000) and the Borrowing Date and, in the case of an Advance to be funded
by the Liquidity Banks, the requested Interest Rate and Interest
Period.  Following receipt of a Borrowing Notice, the Agent will
determine whether Victory agrees to make the requested Advance.  If
Victory declines to make a proposed Advance, Borrower may cancel the Borrowing
Notice or, in the absence of such a cancellation, the Advance will be made by
the Liquidity Banks; provided, however, that in no
event will more than four (4) Advances be made during any calendar
month.  On the date of each Advance, upon satisfaction of the
applicable conditions precedent set forth in Article VI, Victory
or the Liquidity Banks, as applicable, shall deposit into the Facility Account,
in immediately available funds, no later than 2:00 p.m. (New York time), an
amount equal to (a) in the case of Victory, the principal amount of the
requested Advance or (b) in the case of a Liquidity Bank, such Liquidity Bank’s
Pro Rata Share of the principal amount of the requested Advance.

     

    Section
1.3 Decreases.

     

    Except as
provided in Section
1.4, Borrower shall provide the Agent with prior written notice in
conformity with the Required Notice Period (a “Reduction
Notice”) of any proposed reduction of Aggregate
Principal.  Such Reduction Notice shall designate (a) the date (the
“Proposed
Reduction Date”) upon which any such reduction of Aggregate Principal
shall occur (which date shall give effect to the applicable Required Notice
Period and shall be a Settlement Date), and (b) the amount of Aggregate
Principal to be reduced which shall be applied ratably to the Loans of Victory
and the Liquidity Banks in accordance with the amount of principal (if any)
owing to Victory, on the one hand, and the amount of principal (if any) owing to
the Liquidity Banks (ratably, based on their respective Pro Rata Shares), on the
other hand (the “Aggregate
Reduction”).  Only one (1) Reduction Notice shall be
outstanding at any time.  In connection with each Aggregate Reduction
and on the related Proposed Reduction Date, the Borrower shall pay to the
applicable Lenders all accrued and unpaid CP Costs, Interest, Broken Funding
Costs and fees under the Fee Letter, in each case, attributable to the Loans (or
portion thereof) subject of such reduction.

     

    Section
1.4 Deemed Collections;
Borrowing Limit.

     

    (a) If on any
day:

     

    (i) the
Outstanding Balance of any Receivable is reduced as a result of any cash
discount or any other adjustment by any Originator or any Affiliate thereof, or
as a result of any tariff or other governmental or regulatory action,
or

     

    (ii) the
Outstanding Balance of any Receivable is reduced or canceled as a result of a
setoff in respect of any claim by the Obligor thereof (whether such claim arises
out of the same or a related or an unrelated transaction), or

     

    (iii) the
Outstanding Balance of any Receivable is reduced on account of the obligation of
any Originator or any Affiliate thereof to pay to the related Obligor any rebate
or refund, or

     

    (iv) the
Outstanding Balance of any Receivable is less than the amount included in
calculating the Net Pool Balance for purposes of any Monthly Report (for any
reason other than (x) such Receivable becoming a Defaulted Receivable or (y) due
to the application of Collections received with respect to such Receivable),
or

     

    (v) any
Receivable is extended, amended or otherwise modified, or any term of the
related Contract is amended, modified or waived, in either case, except to the
extent expressly permitted pursuant to Section 8.2(d),
or

     

    (vi) any of
the representations or warranties of Borrower set forth in Section 5.1(b), Section 5.1(e), Section 5.1(f), Section 5.1(h), Section 5.1(i), Section 5.1(q), Section 5.1(r), Section 5.1(s) or
Section 5.1(t)
were not true when made with respect to any Receivable,

     

    then, on
such day, Borrower shall be deemed to have received a Collection of such
Receivable (A) in the case of clauses (i) - (iv)
above, in the amount of such reduction or cancellation or the difference between
the actual Outstanding Balance and the amount included in calculating such Net
Pool Balance, as applicable; and (B) in the case of clauses (v) or (vi) above, in the
amount of the Outstanding Balance of such Receivable and, effective as of the
date on which the next succeeding Monthly Report is required to be delivered,
the Borrowing Base shall be reduced by the amount of such Deemed
Collection.

     

    (b) Borrower
shall ensure that the Aggregate Principal at no time exceeds the Borrowing
Limit.  If at any time the Aggregate Principal exceeds the Borrowing
Limit, Borrower shall pay to the Agent not later than the next succeeding
Business Day an amount to be applied to reduce the Aggregate Principal (as
allocated by the Agent), such that after giving effect to such payment the
Aggregate Principal is less than or equal to the Borrowing Limit.

     

    Section
1.5 Payment
Requirements.

     

    (a) All
amounts to be paid or deposited by any PPL Electric Party pursuant to any
provision of this Agreement shall be paid or deposited in accordance with the
terms hereof no later than 12:00 noon (New York time) on the day when due in
immediately available funds, and if not received before 12:00 noon (New York
time) shall be deemed to be received on the next succeeding Business
Day.  If such amounts are payable to a Lender they shall be paid to
the Agent’s Account, for the account of such Lender, until otherwise notified by
the Agent.

     

    (b) All
computations of CP Costs, Interest, per annum fees calculated as part of any CP
Costs, per annum fees hereunder and per annum fees under the Fee Letter shall be
made on the basis of a year of 360 days for the actual number of days
elapsed.  If any amount hereunder shall be payable on a day which is
not a Business Day, such amount shall be payable on the next succeeding Business
Day.

     

    Section
1.6 Ratable Loans; Funding
Mechanics; Liquidity Fundings.

     

    (a) Each
Advance hereunder shall consist of one or more Loans made by Victory and/or the
Liquidity Banks.

     

    (b) Each
Lender funding any Loan shall wire transfer the principal amount of its Loan to
the Agent in immediately available funds not later than 12:00 noon (New York
City time) on the applicable Borrowing Date and, subject to its receipt of such
Loan proceeds, the Agent shall wire transfer such funds received by it to the
account specified by Borrower in its Borrowing Request not later than 2:00 p.m.
(New York City time) on such Borrowing Date.

     

    (c) While it
is the intent of Victory to fund each requested Advance through the issuance of
its Commercial Paper, the parties acknowledge that if Victory is unable, or
determines that it is undesirable, to issue Commercial Paper to fund all or any
portion of its Loans, or is unable to repay such Commercial Paper upon the
maturity thereof, Victory may (without the consent of any PPL Electric Party)
sell, assign, participate or otherwise transfer all or any portion of its Loans
to the Liquidity Banks at any time pursuant to the Liquidity Agreement to
finance or refinance the necessary portion of its Loans through a Liquidity
Funding to the extent available.  Victory agrees to notify (or to
cause the Agent to notify) the PPL Electric Parties of any such sale,
assignment, participation or other transfer promptly thereafter; provided, however, that no
failure by Victory to deliver any such notice shall invalidate or otherwise
affect the enforceability of any such sale, assignment, participation or other
transfer.  The Liquidity Fundings may be Alternate Base Rate Loans or
LIBO Rate Loans, or a combination thereof, selected by Borrower in accordance
with Article
IV.  Regardless of whether a Liquidity Funding constitutes the
direct funding of a Loan, an assignment of a Loan made by Victory or the sale of
one or more participations in a Loan made by Victory, each Liquidity Bank
participating in a Liquidity Funding shall have the rights of a “Lender”
hereunder with the same force and effect as if it had directly made a Loan to
Borrower in the amount of its Liquidity Funding.

     

    (d) Nothing
herein shall be deemed to commit Victory to make Loans or to fund or maintain
any Loan through the issuance of Commercial Paper.

    

      
        

      

    

     

    Article
II    

    Payments
and Collections

     

    Section
2.1 Payments.

     

    Borrower
hereby promises to pay the following (collectively, the “Obligations”):

     

    (a) the
Aggregate Principal on and after the Facility Termination Date as and when
Collections are received;

     

    (b) the fees
set forth in the Fee Letter on the dates specified therein;

     

    (c) all
accrued and unpaid Interest on the Alternate Base Rate Loans on each Settlement
Date applicable thereto;

     

    (d) all
accrued and unpaid Interest on the LIBO Rate Loans on the last day of each
Interest Period applicable thereto;

     

    (e) all
accrued and unpaid CP Costs on the CP Rate Loans on each Settlement
Date;

     

    (f) all
Broken Funding Costs and Indemnified Amounts upon demand; and

     

    (g) any other
amounts payable by the Borrower to the Secured Parties or any Indemnified Party
hereunder or under any other Transaction Document.

     

    Section
2.2 Collections Prior to
Amortization.

     

    (a) On each
Settlement Date prior to the Amortization Date, the Servicer shall distribute
Collections equal to the sum of the following amounts for application to the
Obligations in the order specified:

     

    first, to the
Lenders, ratably to the payment of all accrued and unpaid CP Costs, Interest and
Broken Funding Costs (if any) then due and owing,

     

    second, to the
Lenders and the Agent, ratably to the payment of all accrued and unpaid fees
under the Fee Letter (if any) then due and owing,

     

    third, to the
Servicer, the amount of any accrued and unpaid Servicing Fees (so long as the
Servicer is not PPL Electric or an Affiliate of PPL Electric),

     

    fourth, to the
Lenders, if required under Section 1.3 or Section 1.4, to the
ratable reduction of Aggregate Principal,

     

    fifth, to the Secured
Parties and the other Indemnified Parties (as applicable), for the ratable
payment of all other unpaid Obligations, if any, then due and owing,
and

     

    sixth, to the
Servicer, the amount of any accrued and unpaid Servicing Fees (so long as the
Servicer is PPL Electric or an Affiliate of PPL Electric).

     

    (b) Provided
that (i) each of the conditions precedent set forth in Sections 6.3 are
satisfied and (ii) the Amortization Date has not occurred, any Collections
received in excess of the amount necessary to make the payments required under
Section 2.2(a)
shall, after application in payment for new Receivables or otherwise in payment
for obligations of the Borrower under this Agreement and the Receivables Sale
Agreement, be distributed to Borrower or otherwise in accordance with Borrower’s
instructions.

     

    Collections
applied to the payment of Obligations shall be distributed in accordance with
the aforementioned provisions, and, giving effect to each of the priorities set
forth above in Section
2.2(a), shall be shared ratably (within each priority) among the Agent
and the Lenders in accordance with the amount of such Obligations owing to each
of them in respect of each such priority.

     

    Section
2.3 Collections Following
Amortization.

     

    On (a)
each day on which any of the conditions precedent set forth in Section 6.3 are not
satisfied, (b) the Amortization Date and (c) each day thereafter, the Servicer
shall set aside and hold in trust, for the Secured Parties, all Collections
received on such day.  On and after the Amortization Date, the
Servicer shall, on each Settlement Date and on each other Business Day (which
may be each Business Day) specified by the Agent (after deduction of any accrued
and unpaid Servicing Fee as of such date):  (i) remit to the Agent’s
Account the amounts set aside pursuant to the preceding sentence, and (ii) apply
such amounts to reduce the Obligations as follows:

     

    first, to the Agent,
to the reimbursement of the Agent’s costs of collection and enforcement of this
Agreement,

     

    second, to the
Lenders, ratably to the payment of all accrued and unpaid CP Costs, Interest and
Broken Funding Costs,

     

    third, to the Lenders
and the Agent, ratably to the payment of all accrued and unpaid fees under the
Fee Letter,

     

    fourth, to the
Lenders, to the ratable reduction of Aggregate Principal,

     

    fifth, to the Secured
Parties and the other Indemnified Parties (as applicable), for the ratable
payment of all other unpaid Obligations, and

     

    sixth, after the
Obligations have been indefeasibly reduced to zero, to Borrower.

     

    Collections
applied to the payment of Obligations shall be distributed in accordance with
the aforementioned provisions, and, giving effect to each of the priorities set
forth above in this Section 2.3, shall be
shared ratably (within each priority) among the Agent and the Lenders in
accordance with the amount of such Obligations owing to each of them in respect
of each such priority.

     

    Section
2.4 Payment
Rescission.

     

    No
payment of any of the Obligations shall be considered paid or applied hereunder
to the extent that, at any time, all or any portion of such payment or
application is rescinded by application of law or judicial authority, or must
otherwise be returned or refunded for any reason.  The Borrower shall
remain obligated for the amount of any payment or application so rescinded,
returned or refunded, and shall promptly pay to the Agent (for application to
the Person or Persons who suffered such rescission, return or refund) the full
amount thereof, plus interest on such amount at the Default Rate from the date
of any such rescission, return or refunding.

     

    Section
2.5 Maximum Lawful
Rate.

     

    Notwithstanding
anything in this Agreement to the contrary, if at any time the rate of interest
payable by the Borrower under this Agreement exceeds the highest rate of
interest permissible under any applicable law (the “Maximum Lawful
Rate”), then, so long as the Maximum Lawful Rate would be exceeded, the
rate of interest under this Agreement shall be equal to the Maximum Lawful
Rate.  If at any time thereafter the rate of interest payable under
this Agreement is less than the Maximum Lawful Rate, the Borrower shall continue
to pay interest under this Agreement at the Maximum Lawful Rate until such time
as the total interest received from the Borrower is equal to the total interest
that would have been received had any applicable law not limited the interest
rate payable under this Agreement.  In no event shall the total amount
of interest received by a Lender under this Agreement exceed the amount that
such Lender could lawfully have received had the interest due under this
Agreement been calculated since the Closing Date at the Maximum Lawful
Rate.

     

    Article
III 

    Victory
Funding

     

    Section
3.1 CP
Costs.

     

    Borrower
shall pay CP Costs with respect to the principal balance of Victory’s Loans from
time to time outstanding.  Each Loan of Victory that is funded with
Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis, based
upon the percentage share that the principal in respect of such Loan represents
in relation to all assets held by Victory and funded substantially with related
Pooled Commercial Paper.

     

    Section
3.2 Calculation of CP
Costs.

     

    Not later
than the 3rd
Business Day immediately preceding each Monthly Reporting Date, Victory (or the
Agent on its behalf) shall calculate the aggregate amount of CP Costs applicable
to its CP Rate Loans for the Calculation Period then most recently ended and
shall notify Borrower of such aggregate amount.

     

    Section
3.3 CP Costs
Payments.

     

    On each
Settlement Date, Borrower shall pay to the Agent (for the benefit of Victory) an
aggregate amount equal to all accrued and unpaid CP Costs in respect of the
principal associated with all CP Rate Loans for the Calculation Period then most
recently ended in accordance with Article
II.

     

    Section
3.4 Default
Rate.

     

    From and
after the occurrence of (i) a Servicer Replacement Event, (ii) a Servicer
Default or (iii) a Downgrading Event with respect to the Servicer, and during
the continuance of (iv) an Amortization Event (other than as a result of a
voluntary termination of either (x) the facility evidenced by this Agreement or
(y) the facility evidenced by the Receivables Sale Agreement, except if in
either case another Amortization Event has occurred or thereafter occurs), all
Loans of Victory shall accrue Interest at the Default Rate and shall cease to be
CP Rate Loans.  With respect to clause (iv) above,
the Agent will promptly notify Borrower of any Amortization Event with respect
to which it intends to assess additional interest at the Default Rate; provided, however, that any
failure to provide any such notice shall not prevent any such Loan from accruing
interest at the Default Rate for the period during which such Amortization Event
has occurred and is continuing.

     

    Article
IV 

    Liquidity
Bank Funding

     

    Section
4.1 Liquidity Bank
Funding.

     

    Prior to
the occurrence of an Amortization Event (other than as a result of a voluntary
termination of either (x) the facility evidenced by this Agreement or (y) the
facility evidenced by the Receivables Sale Agreement, except if in either case
another Amortization Event has occurred or thereafter occurs), the outstanding
principal balance of each Liquidity Funding shall accrue interest for each day
during its Interest Period at either the LIBO Rate or the Alternate Base Rate in
accordance with the terms and conditions hereof.  Until Borrower gives
notice to the Agent of another Interest Rate in accordance with Section 4.4, the
initial Interest Rate for any Loan transferred to the Liquidity Banks by Victory
pursuant to the Liquidity Agreement shall be the Alternate Base Rate (unless the
Default Rate is then applicable).  If the Liquidity Banks acquire by
assignment from Victory any Loan pursuant to the Liquidity Agreement, each Loan
so assigned shall be deemed to have an Interest Period commencing on the date of
any such assignment and ending on a date determined pursuant to the definition
of Interest Period.

     

    Section
4.2 Interest
Payments.

     

    On the
Settlement Date for each Liquidity Funding, Borrower shall pay to the Agent (for
the benefit of the Liquidity Banks) an aggregate amount equal to the accrued and
unpaid Interest for the entire Interest Period of each such Liquidity Funding in
accordance with Article
II.

     

    Section
4.3 Selection and Continuation
of Interest Periods.

     

    (a) With
consultation from (and approval by) the Agent, Borrower shall from time to time
request Interest Periods for the Liquidity Fundings; provided that if at
any time any Liquidity Funding is outstanding, Borrower shall always request
Interest Periods such that at least one Interest Period shall end on the date
specified in clause
(i) of the definition of Settlement Date.

     

    (b) Borrower
or the Agent, upon notice to and consent by the other (provided that if an
Amortization Event or an Unmatured Amortization Event shall have occurred and is
continuing, such consent of the Borrower shall not be required) received at
least three (3) Business Days prior to the end of an Interest Period (the “Terminating
Tranche”) for any Liquidity Funding, may, effective on the last day of
the Terminating Tranche:  (i) divide any such Liquidity Funding into
multiple Liquidity Fundings, (ii) combine any such Liquidity Funding with one or
more other Liquidity Fundings that have a Terminating Tranche ending on the same
day as such Terminating Tranche or (iii) combine any such Liquidity Funding with
a new Liquidity Funding to be made by the Liquidity Banks on the day such
Terminating Tranche ends.

     

    Section
4.4 Liquidity Bank Interest
Rates.

     

    So long
as no Amortization Event or an Unmatured Amortization Event shall have occurred
and is continuing and subject to Sections 4.5 and
4.6, Borrower
may (with the consent of the Agent, which consent shall not be unreasonably
withheld) select the LIBO Rate or the Alternate Base Rate for each Liquidity
Funding.  Borrower shall by 12:00 noon (New York time):  (a)
at least three (3) Business Days prior to the expiration of any Terminating
Tranche with respect to which the LIBO Rate is being requested as a new Interest
Rate and (b) at least one (1) Business Day prior to the expiration of any
Terminating Tranche with respect to which the Alternate Base Rate is being
requested as a new Interest Rate, give the Agent irrevocable notice of the new
Interest Rate for the Liquidity Funding associated with such Terminating
Tranche.  Until Borrower gives notice to the Agent of another Interest
Rate, the initial Interest Rate for any Loan transferred to the Liquidity Banks
pursuant to the Liquidity Agreement shall be the Alternate Base Rate (unless the
Default Rate is then applicable).

     

    Section
4.5 Suspension of the LIBO
Rate.

     

    (a) If any
Liquidity Bank notifies the Agent that it has determined that funding its Pro
Rata Share of the Liquidity Fundings at a LIBO Rate would violate any applicable
law, rule, regulation, or directive of any governmental or regulatory authority,
whether or not having the force of law, or that such LIBO Rate will not
adequately and fairly reflect the cost of acquiring or maintaining a Liquidity
Funding at such LIBO Rate, then the Agent shall suspend the availability of such
LIBO Rate and require Borrower to select the Alternate Base Rate for any
Liquidity Funding accruing Interest at such LIBO Rate.

     

    (b) If less
than all of the Liquidity Banks give a notice to the Agent pursuant to Section 4.5(a), each
Liquidity Bank which gave such a notice shall be obliged, at the request of
Borrower, Victory or the Agent, to assign all of its rights and obligations
hereunder to (i) another Liquidity Bank or (ii) another funding entity nominated
by Borrower or the Agent that is an Eligible Assignee willing to participate in
this Agreement through the Liquidity Termination Date in the place of such
notifying Liquidity Bank; provided that the
notifying Liquidity Bank receives payment in full, pursuant to an Assignment
Agreement, of all Obligations owing to it (whether due or accrued), and the
replacement Liquidity Bank otherwise satisfies the requirements of Section
12.1(b).

     

    Section
4.6 Default
Rate.

     

    From and
after the occurrence of (i) a Servicer Replacement Event, (ii) a Servicer
Default or (iii) a Downgrading Event with respect to the Servicer, and during
the continuance of (iv) an Amortization Event (other than as a result of a
voluntary termination of either (x) the facility evidenced by this Agreement or
(y) the facility evidenced by the Receivables Sale Agreement, except if in
either case another Amortization Event has occurred or thereafter occurs), all
Liquidity Fundings shall accrue Interest at the Default Rate.  With
respect to clause (iv) above, the Agent will promptly notify Borrower of any
Amortization Event with respect to which it intends to assess additional
interest at the Default Rate; provided, however, that any
failure to provide any such notice shall not prevent any such Liquidity Funding
from accruing interest at the Default Rate for the period during which such
Amortization Event has occurred and is continuing.

     

    Article
V 

    Representations
and Warranties

     

    Section
5.1 Representations and
Warranties of the PPL Electric Parties.

     

    Each PPL
Electric Party hereby represents and warrants to the Agent and the Lenders, as
to itself, as of the date hereof, as of the date of each Advance and as of each
Settlement Date that:

     

    (a) Status.  Borrower
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has taken no action in connection with, or in
contemplation of, changing its jurisdiction of formation to any other
jurisdiction.  The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania.  Each such PPL Electric Party has the corporate
authority to make and perform this Agreement and each other Transaction Document
to which it is a party.  This Agreement and each Transaction Document
to which such PPL Electric Party is a party has been duly executed and delivered
by such PPL Electric Party.

     

    (b) Legality;
Etc.  This Agreement and each other Transaction Document to
which it is a party constitute the legal, valid and binding obligations of such
PPL Electric Party, in each case enforceable against such PPL Electric Party in
accordance with their terms except to the extent limited by (i) bankruptcy,
insolvency, fraudulent conveyance or reorganization laws, or by other laws
relating to or affecting the enforceability of creditors’ rights generally and
by general equitable principles which may limit the right to obtain equitable
remedies regardless of whether enforcement is considered in a proceeding of law
or equity or (ii) any applicable public policy on enforceability of provisions
relating to contribution and indemnification.

     

    (c) Authority; No
Conflict.  The execution, delivery and performance by such PPL
Electric Party of this Agreement and each other Transaction Document to which it
is a party have been duly authorized by all necessary corporate or other action
and (i) do not violate any provision of law or regulation, or any decree, order,
writ or judgment, (ii) do not violate any provision of its articles of
incorporation or by-laws, or (iii) result in the breach of or constitute a
default under any indenture or other agreement or instrument to which it is a
party and do not result in the creation of or imposition of any Adverse Claim
(other than as created by the Transaction Documents) on any of the assets of
such PPL Electric Party or its Subsidiaries, except, in any such case, where
such contravention could not reasonably be expected to have a Material Adverse
Effect.  No transaction contemplated hereby requires compliance with
any bulk sales act or similar law.

     

    (d) Governmental
Approvals.  No authorization, consent or approval from any
Governmental Authority is required for the execution, delivery and performance
by such PPL Electric Party of this Agreement and the other Transaction Documents
to which it is a party, except such authorizations, consents and approvals,
including, without limitation, the PUC Order, as have been obtained prior to the
date hereof and are in full force and effect.

     

    (e) Litigation.  No
litigation, arbitration or administrative proceeding against Borrower is
pending, or to Borrower’s knowledge, threatened, which, if adversely determined,
could reasonably be expected to have a Material Adverse
Effect.  Except as disclosed in or contemplated by PPL Electric’s Form
10-K report to the Securities and Exchange Commission for the year ended
December 31, 2007, or in any subsequent Form 10-K, 10-Q or 8-K report or
otherwise furnished in writing to the Agent, no litigation, arbitration or
administrative proceeding against PPL Electric is pending, or to PPL Electric’s
knowledge, threatened, which would materially and adversely affect the ability
of the Borrower to perform any of its obligations under this Agreement or the
other Transaction Documents.  There is no litigation, arbitration or
administrative proceeding pending, or to the knowledge of such PPL Electric
Party, threatened, which could have a material adverse effect on the legality,
validity or enforceability of the Agreement or the other Transaction Documents
to which it is a party, on the Agent’s security interest, for the benefit of the
Secured Parties, in the Receivables generally or in any significant portion of
the Receivables, the Related Security or the Collections with respect thereto,
or the collectability of the Receivables generally or of any material portion of
the Receivables.

     

    (f) Accuracy of
Information.  All information, certificates and statements
heretofore furnished by, or on behalf of, such PPL Electric Party to the Agent
or the Lenders for purposes of or in connection with this Agreement, any of the
other Transaction Documents or any transaction contemplated hereby or thereby,
taken as a whole, and all such information, certificates and statements
hereafter so furnished and taken as a whole, will be true, complete and accurate
in all material respects on the date such information is stated or certified,
except to the extent such information is stated to be as of an earlier date, and
does not and will not contain any material misstatement of fact or omit to state
a material fact or any fact necessary to make the statements contained therein
not misleading in light of the circumstances under which such information was
furnished; provided, however, that to the
extent any such information was based upon or constitutes a forecast or
projection, such PPL Electric Party represents only that it acted in good faith
and utilized reasonable assumptions and due care in the preparation of such
information.

     

    (g) No
Violation.  No part of the proceeds of any Advance hereunder
will be used directly or indirectly for the purpose of purchasing or carrying
any “margin stock” within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System, or for any other purpose which violates, or which
conflicts with, the provisions of Regulation U or X of said Board of
Governors.  Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
extending credit for the purpose of purchasing or carrying any such “margin
stock”.

     

    (h) Good
Title.  Borrower is the legal and beneficial owner of the
Receivables and Related Security with respect thereto, free and clear of any
Adverse Claim, except as created by the Transaction Documents.  There
have been duly filed all financing statements or other similar instruments or
documents necessary under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect Borrower’s ownership interest in each Receivable, its
Collections and the Related Security.

     

    (i) Perfection.  This
Agreement is effective to create a valid security interest in favor of the Agent
for the benefit of the Secured Parties in the Collateral to secure payment of
the Obligations, free and clear of any Adverse Claim except as created by the
Transactions Documents.  All actions necessary under the UCC (or any
comparable law) of all appropriate jurisdictions have been taken, including,
without limitation, the filing of all financing statements or other similar
instruments or documents necessary under the UCC (or any comparable law) of all
appropriate jurisdictions to perfect the Agent’s (on behalf of the Secured
Parties) security interest in the Collateral.  Borrower is a
“registered organization” as defined in Article 9 of the UCC as in effect in the
State of New York (the “NY
UCC”) and, for purposes of Article 9 of the NY UCC, is “located” in the
State of Delaware.

     

    (j) Places of Business and
Locations of Records.  The principal places of business and
chief executive office of such PPL Electric Party and the offices where it keeps
all of its Records are located at the address(es) listed on Exhibit III or such
other locations (of which the Agent has been notified in accordance with Section 7.2(a)) in
jurisdictions where all action required by Section 14.4(a) has
been taken and completed.  Borrower’s Federal Employer Identification
Number is correctly set forth on Exhibit
III.

     

    (k) Collections.  The
conditions and requirements set forth in Section 8.2 have at
all times been satisfied and duly performed.  The names, addresses and
jurisdictions of organization of all Collection Banks, together with the account
numbers of the accounts into which Collections are at any time deposited or
held, are listed on Exhibit
IV.  Except pursuant to PPL Electric’s Mortgage and Deed of
Trust, dated as of October 1, 1945, and PPL Electric’s Indenture, dated as of
August 1, 2001, in each case as amended and supplemented from time to time
(respectively, the “1945 Mortgage” and
the “2001
Mortgage”, and collectively, the “PPL Electric
Mortgages”), the Servicer has not granted a security interest in any
Collection Account to any Person.  Except as contemplated by Section 7.2(k) of
this Agreement, the Servicer has not granted dominion and control of any
Collection Account, or, except for the grants under the PPL Electric Mortgages,
the right to take dominion and control of any Collection Account at a future
time or upon the occurrence of a future event.

     

    (l) Material Adverse
Effect.  (i) The initial Servicer represents and warrants that
since December 31, 2007, there has been no change in the business, assets,
financial condition or operations of the initial Servicer and its Subsidiaries
which materially adversely affects the ability of the initial Servicer to
perform its obligations under this Agreement or any other Transaction Document,
and (ii) Borrower represents and warrants that since the date of this Agreement,
there has been no change in the business, assets, financial condition or
operations of Borrower which materially adversely affects the ability of
Borrower to perform its obligations under this Agreement or any other
Transaction Document or the collectability of the Receivables generally or any
material portion of the Receivables.

     

    (m) Names.  The
name in which Borrower has executed this Agreement is identical to the name of
Borrower as indicated on the public record of its state of organization which
shows Borrower to have been organized.  In the past five (5) years,
Borrower has not used any corporate names, trade names or assumed names other
than the name in which it has executed this Agreement.

     

    (n) Ownership of
Borrower.  PPL Electric owns, directly or indirectly, 100% of
the issued and outstanding capital stock of Borrower, free and clear of any
Adverse Claim.  Such capital stock is validly issued, fully paid and
nonassessable, and there are no options, warrants or other rights to acquire
securities of Borrower.

     

    (o) Not an Investment
Company.  Such PPL Electric Party is not (i) required to
register as an Investment Company or (ii) controlled by an Investment Company,
under (and to such terms, as defined in) the Investment Company Act of
1940.

     

    (p) Compliance with
Laws.  Borrower is in compliance with all applicable laws,
regulations and orders of any Governmental Authority, domestic or foreign, in
respect of the conduct of its business and ownership of its property (including,
without limitation, compliance with all applicable ERISA and Environmental Laws
and the requirements of any permits issued under such Environmental Laws) except
to the extent (i) such compliance is being contested in good faith by
appropriate proceedings or (ii) non-compliance could not reasonably be expected
to have a Material Adverse Effect.  To the knowledge of the Servicer,
it is in compliance with all applicable laws, regulations and order of any
Governmental Authority, domestic or foreign, in respect of the conduct of its
business and ownership of its property (including, without limitation,
compliance with all applicable ERISA and Environmental Laws and the requirements
of any permits issued under such Environmental Laws) except to the extent (i)
such compliance is being contested in good faith by appropriate proceedings or
(ii) non-compliance could not reasonably be expected to have a Material Adverse
Effect (except with respect to clause (i) of the definition
thereof).  No Receivable (including any related Contract) contravenes
any applicable law, regulation or order of any Governmental Authority, domestic
or foreign (including, without limitation, laws, rules and regulations relating
to truth in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy), and no part of such
Contract is in violation of any such law, rule or regulation, except where such
contravention or violation could not reasonably be expected to have a Material
Adverse Effect.

     

    (q) Compliance with Credit and
Collection Practices.  Such PPL Electric Party has complied in
all material respects with the Credit and Collection Practices with regard to
each Receivable and the related Contract, and has not made any change to such
Credit and Collection Practices, except in accordance with Section
7.1(a)(vii).

     

    (r) Payments to
Originator.  With respect to each Receivable transferred to
Borrower under the Receivables Sale Agreement, Borrower has given reasonably
equivalent value to Originator in consideration therefor and such transfer was
not made for or on account of an antecedent debt.  No transfer by
Originator of any Receivable under the Receivables Sale Agreement is or may be
voidable under any section of the Federal Bankruptcy Code.

     

    (s) Enforceability of
Contracts.  Each Contract with respect to each Receivable is
effective to create, and has created, a legal, valid and binding obligation of
the related Obligor to pay the Outstanding Balance of the Receivable created
thereunder and any accrued interest thereon, enforceable against the Obligor in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or limiting creditors’ rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).

     

    (t) Eligible
Receivables.  Each Receivable included in the Net Pool Balance
as an Eligible Receivable on the date of any Monthly Report was an Eligible
Receivable on such date.

     

    (u) Borrowing
Limit.  Immediately after giving effect to each Advance and
each settlement on any Settlement Date hereunder, the Aggregate Principal is
less than or equal to the Borrowing Limit.

     

    (v) Accounting.  The
manner in which such PPL Electric Party accounts for the transactions
contemplated by this Agreement and the Receivables Sale Agreement does not
adversely affect the conclusions set forth in the bankruptcy opinions delivered
to Agent by counsel to the Originator on the Closing Date (or if updated, any
such updated opinion).

     

    (w) Sequestration
Powers.  The PUC has not taken any action in connection with
its sequestration powers under the Competition Act, and the taking of any such
action is not reasonably foreseeable, in respect of Borrower, any Affiliate of
Borrower or the Collections.

     

    (x) Ordinary Course of
Business.  Each remittance of Collections by the Borrower under
this Agreement in respect of principal and interest on the Loans and fees under
the Fee Letter to the Lenders or the Agent will have been (i) in payment of a
debt incurred by the Borrower in the ordinary course of business or financial
affairs of the Borrower and (ii) made in the ordinary course of business or
financial affairs of the Borrower.

     

    Article
VI 

    Conditions
of Advances

     

    Section
6.1 Conditions
Precedent to Effectiveness.

     

    This
Agreement shall be effective as of the Closing Date upon satisfaction of the
conditions precedent that:

     

    (a)           the
Agent shall have received on or before the Closing Date those documents listed
on Schedule A
to the Receivables Sale Agreement and those documents listed on Schedule B to this
Agreement; and

     

    (b)           the
Agent shall have received all fees and expenses required to be paid on or prior
to the Closing Date pursuant to the terms of this Agreement and the Fee
Letter.

     

    Section
6.2 Conditions Precedent to
Initial Advance.

     

    The
initial Advance under this Agreement is subject to the conditions precedent
that:

     

    (a)           the
liens of the 1945 Mortgage shall have been discharged, and all liens, security
interests, mortgages and charges granted thereunder by PPL Electric shall have
been forever terminated and released;

     

    (b)           all
effective UCC financing statements filed to perfect the liens, security
interests, mortgages and charges granted by PPL Electric under the 1945 Mortgage
and naming PPL Electric as debtor (including, without limitation, that certain
UCC financing statement number 30680649 filed with the Pennsylvania Department
of State) shall have been terminated; and

     

    (c)           the
Borrower (or the Servicer on its behalf) shall have delivered to the Agent
evidence (reasonably satisfactory to the Agent) of the satisfaction of the
conditions precedent set forth in clauses (a) and (b)
above.

     

    Acceptance
of the proceeds of the initial Advance hereunder shall be deemed a
representation and warranty by Borrower that the conditions precedent set forth
in clauses (a)
and (b) above
have been satisfied.

     

    Section
6.3 Conditions Precedent to All
Advances.

     

    Each
Advance and each rollover or continuation of any Advance shall be subject to the
further conditions precedent that (a) the Servicer shall have delivered to the
Agent on or prior to the date thereof, in form and substance satisfactory to the
Agent, all Monthly Reports as and when due under Section 8.5; (b) the
Facility Termination Date shall not have occurred; (c) the Agent shall have
received such other approvals, opinions or documents as it may reasonably
request; and (d) on the date thereof, the following statements shall be true
(and acceptance of the proceeds of such Advance shall be deemed a representation
and warranty by Borrower that such statements are then true):

     

    (i) the
representations and warranties set forth in Section 5.1 are true
and correct on and as of the date of such Advance (or such Settlement Date, as
the case may be), rollover or continuation of any Advance and as of the date of
any Purchase by Borrower under the Receivables Sale Agreement as though made on
and as of such date;

     

    (ii) no event
has occurred and is continuing, or would result from such Advance (or the
continuation thereof), that will constitute an Amortization Event, and no event
has occurred and is continuing, or would result from such Advance (or the
continuation thereof), rollover or continuation of any Advance or any Purchase
by Borrower under the Receivables Sale Agreement, that would constitute an
Unmatured Amortization Event; and

     

    (iii) after
giving effect to such Advance, rollover or continuation of any Advance and any
Purchase by Borrower under the Receivables Sale Agreement, the Aggregate
Principal will not exceed the Borrowing Limit.

     

    Article
VII 

    Covenants

     

    Section
7.1 Affirmative Covenants of the
PPL Electric Parties.

     

    Until the
Final Payout Date, each PPL Electric Party hereby covenants, as to itself, as
set forth below:

     

    (a) Financial
Reporting.  Such PPL Electric Party will maintain, for itself
and each of its Subsidiaries, a system of accounting established and
administered in accordance with GAAP, and furnish or cause to be furnished to
the Agent (it being understood that the posting of the information required in
sub-clauses
(i), (ii), (iv) and (v) of this clause (a) on PPL
Electric’s website (http://www.pplweb.com)
shall be deemed to be effective delivery thereof to the Agent):

     

    (i) Annual
Reporting.  Promptly when available and in any event within ten
(10) days after the date such information is required to be delivered to the
Securities and Exchange Commission (or if not required to be so filed, within
ninety (90) days after the close of each of its respective fiscal years), a
consolidated balance sheet of each PPL Electric Party as of the end of such
fiscal year and the related statements of income and cash flows for such fiscal
year (which in the case of any such statements of income and cash flows relating
to PPL Electric may be on a consolidated basis) and (i) in the case of PPL
Electric, shall be accompanied by an opinion thereon by independent public
accountants of recognized national standing, which opinion shall state that such
financial statements present fairly the financial position of PPL Electric as of
the date of such financial statements and the results of its operations for the
period covered by such financial statements in conformity with GAAP applied on a
consistent basis and (ii) in the case of the Borrower, shall be accompanied by a
certification by its principal financial or accounting officer that such
financial statements present fairly the financial position of the Borrower as of
the date of such financial statements and the results of its operations for the
period covered by such financial statements in conformity with GAAP applied on a
consistent basis.

     

    (ii) Quarterly
Reporting.  Promptly when available and in any event within ten
(10) days after the date required to be delivered to the Securities and Exchange
Commission (or if not required to be so filed, within forty-five (45) days after
the close of the first three (3) quarterly periods of each of its respective
fiscal years), consolidated balance sheets of each of the PPL Electric Parties
as at the close of each of the first three (3) quarterly periods of each fiscal
year of each of the PPL Electric Parties and the related statements of income
and cash flows for each such Person (which in the case of any such statements of
income and cash flows relating to PPL Electric may be on a consolidated basis)
for the period from the beginning of such fiscal year to the end of such
quarter, all certified (subject to normal year-end audit adjustments) as to
fairness of presentation, GAAP and consistency by its respective principal
financial or accounting officer.

     

    (iii) Compliance
Certificate.  Together with the financial statements required
hereunder, a compliance certificate in substantially the form of Exhibit V signed by
such PPL Electric Party’s Authorized Officer and dated the date of such annual
financial statement or such quarterly financial statement, as the case may
be.

     

    (iv) Shareholders Statements and
Reports.  Promptly upon the furnishing thereof to the
shareholders of such PPL Electric Party, copies of all financial statements,
reports and proxy statements so furnished.

     

    (v) S.E.C. Filings.  Promptly
upon the filing thereof, copies of all registration statements and annual,
quarterly, monthly or other regular reports which any PPL Electric Party files
with the Securities and Exchange Commission.

     

    (vi) Copies of
Notices.  Promptly upon its receipt of any notice, request for
consent, financial statements, certification, report or other communication
under or in connection with any Transaction Document from any Person other than
the Agent or any Lender, copies of the same.

     

    (vii) Change in Credit and
Collection Practices.  At least thirty (30) days prior to the
effectiveness of any change in or amendment to the Credit and Collection
Practices which in any such case would be reasonably likely to adversely affect
the collectability of the Receivables or decrease the credit quality of any
newly created Receivables, a notice (A) indicating such proposed change or
amendment and (B) requesting the Agent’s consent thereto.

     

    (viii) PUC
Filings.  Promptly, upon the filing thereof, copies of all
notices, requests, reports, statements, financial information, annual
reconciliation filings, filings with respect to the ITC Bonds, the Receivables
or the CTC Receivables which it files with, or receives from the
PUC.

     

    (ix) Other
Information.  Promptly, from time to time, such other
information, documents, Records or reports relating to the Receivables or the
condition or operations, financial or otherwise, of such PPL Electric Party as
the Agent may from time to time reasonably request in order to protect the
interests of the Agent and the Lenders under or as contemplated by this
Agreement.

     

    (b) Notices.  Such
PPL Electric Party will notify the Agent in writing of any of the following
promptly upon learning of the occurrence thereof, describing the same and, if
applicable, the steps being taken with respect thereto:

     

    (i) Amortization Events or
Unmatured Amortization Events.  The occurrence of each
Amortization Event and each Unmatured Amortization Event, by a statement of an
Authorized Officer of such PPL Electric Party.

     

    (ii) Material Adverse
Effect.  The occurrence of any event or condition that has had,
or could reasonably be expected to have, a Material Adverse Effect (other than
as defined in clause (i) of
the definition thereof).

     

    (iii) Termination
Date.  The occurrence of the “Termination Date” under and as
defined in the Receivables Sale Agreement.

     

    (iv) Notices under Receivables
Sale Agreement.  Copies of all notices delivered or received by
it under the Receivables Sale Agreement.

     

    (v) Downgrade of
Servicer.  The occurrence of any Downgrading Event with respect
to the Servicer setting forth the nature of such change.

     

    (vi) Amendment to Final
Order.  The occurrence of any amendment or supplement to the
Final Order of the PUC dated August 27, 1998, relating to PPL
Electric.

     

    (vii) Amendment of PPL Electric
Agreements.  The occurrence of any amendment or supplement to
or modification of the Five-Year Credit Agreement or the ITC Bond
Documents.

     

    (viii) Satisfaction of Certain
Conditions Precedent.  Satisfaction of the conditions precedent
to the initial Advance set forth in Section 6.2(a) and
(b).

     

    (ix) Exercise of Sequestration
Powers.  The taking of any action by the PUC in connection with
its sequestration powers under the Competition Act in respect of Borrower or any
Affiliate thereof or the Collections.

     

    (x) Purpose for Entering the
Transactions.  Any change or modification in Borrower’s purpose
in entering into the transactions contemplated by the Transaction Documents and
simultaneously provide a full and complete description of such change or
modification, which description shall be true and accurate in all material
respects.

     

    (xi) Accounting
Treatment.  Any change in either or both the proposed or actual
accounting treatment of the transactions contemplated by the Transaction
Documents and/or the effects that the transactions contemplated by the
Transaction Documents will have on the financial statements of Borrower or any
Affiliate thereof.

     

    (xii) Correspondence Regarding
Collection Curves.  Copies of all correspondence between third
parties (other than accountants, legal advisors and consultants) and any PPL
Electric Party relating to the Collection Curves including, without limitation,
the finalized Collection Curves for each year this Agreement is in
effect.

     

    (c) Compliance with Laws and
Preservation of Corporate Existence.  Such PPL Electric Party
will comply with all applicable laws, regulations and orders of any Governmental
Authority, domestic or foreign, in respect of the conduct of its business and
the ownership of its property (including, without limitation, compliance with
all applicable ERISA and Environmental Laws and the requirements of any permits
issued under such Environmental Laws), except to the extent (i) such compliance
is being contested in good faith by appropriate proceedings or (ii)
non-compliance could not reasonably be expected to have a Material Adverse
Effect.  Such PPL Electric Party will preserve, renew and keep in full
force and effect their respective corporate (or other entity) existence and
their respective rights, franchises and privileges necessary or material to the
normal conduct of business, except, in each case, where the failure to do so
could not reasonably be expected to have a Material Adverse Effect.

     

    (d) Audits.  Such
PPL Electric Party will furnish within a reasonable time to the Agent from time
to time such information with respect to it and the Receivables as the Agent may
reasonably request; provided, however, it is
understood that certain consumer information related to the Receivables and the
servicing thereof shall not be available for review by the Agent in accordance
with Section 54.8 of the Pennsylvania Public Utility Commission
Regulations.  Such PPL Electric Party will, from time to time during
regular business hours as requested by the Agent upon reasonable notice and at
the sole cost of such PPL Electric Party, permit the Agent, or its agents or
representatives (and shall cause each Originator to permit the Agent or its
agents or representatives):  (i) to examine and make copies of, and
abstracts from, all Records in the possession or under the control of such
Person relating to the Collateral, including, without limitation, the related
Contracts (it is understood that certain consumer information related to the
Receivables and the servicing thereof shall not be available for review by the
Agent in accordance with Section 54.8 of the Pennsylvania Public Utility
Commission Regulations), and (ii) to visit the offices and properties of such
Person for the purpose of examining such materials described in clause (i) above, and
to discuss matters relating to such Person’s financial condition or the
Collateral or any Person’s performance under any of the Transaction Documents or
any Person’s performance under the Contracts and, in each case, with any of the
officers or employees of Borrower or the Servicer having knowledge of such
matters (each of the foregoing examinations and visits, a “Review”);
provided, however, that, so
long as no Amortization Event or Downgrading Event with respect any PPL Electric
Party has occurred and is continuing, (A) the PPL Electric Parties shall only be
responsible for the costs and expenses of one (1) Review in any one calendar
year, and (B) the Agent will not request more than four (4) Reviews in any one
calendar year.

     

    (e) Keeping and Marking of
Records and Books.

     

    (i) The
Servicer will (and will cause the Originator to) maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Receivables in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the immediate identification of each new Receivable and all
Collections of and adjustments to each existing Receivable).  The
Servicer will (and will cause each Originator to) give the Agent notice of any
material change in the administrative and operating procedures referred to in
the previous sentence.

     

    (ii) Such PPL
Electric Party will (and will cause the Originator to):  (A) on or
prior to the date hereof, mark its master data processing records and other
books and records relating to the Loans with a legend, acceptable to the Agent,
describing the Agent’s security interest in the Collateral and (B) upon the
request of the Agent within a reasonable time following the occurrence of an
Amortization Event:  (1) mark each Contract with a legend describing
the Agent’s security interest and (2) deliver to the Agent all Contracts
(including, without limitation, all multiple originals of any such Contract
constituting an instrument) relating to the Receivables.

     

    (f) Compliance with Contracts
and Credit and Collection Practices.  Such PPL Electric Party
will (and will cause Originator to) timely and fully (i) perform and comply with
all provisions, covenants and other promises required to be observed by it under
the Contracts related to the Receivables, and (ii) comply in all material
respects with the Credit and Collection Practices in regard to each Receivable
and the related Contract.

     

    (g) Performance and Enforcement
of Receivables Sale Agreement.  Borrower will, and will require
Originator to, perform each of their respective obligations and undertakings
under and pursuant to the Receivables Sale Agreement, will purchase Receivables
thereunder in strict compliance with the terms thereof and will vigorously
enforce the rights and remedies accorded to Borrower under the Receivables Sale
Agreement.  Borrower will take all actions to perfect and enforce its
rights and interests (and the rights and interests of the Agent and the Lenders
as assignees of Borrower) under the Receivables Sale Agreement as the Agent may
from time to time reasonably request, including, without limitation, making
claims to which it may be entitled under any indemnity, reimbursement or similar
provision contained in the Receivables Sale Agreement.

     

    (h) Ownership.  Borrower
will (or will cause Originator to) take all necessary action to (i) vest legal
and equitable title to the Collateral purchased under the Receivables Sale
Agreement irrevocably in Borrower, free and clear of any Adverse Claims (other
than Adverse Claims in favor of the Agent, for the benefit of the Secured
Parties) including, without limitation, the filing of all financing statements
or other similar instruments or documents necessary under the UCC (or any
comparable law) of all appropriate jurisdictions to perfect Borrower’s interest
in such Collateral and such other action to perfect, protect or more fully
evidence the interest of Borrower therein as the Agent may reasonably request),
and (ii) establish and maintain, in favor of the Agent, for the benefit of the
Secured Parties, a valid and perfected first priority security interest in all
Collateral, free and clear of any Adverse Claims, including, without limitation,
the filing of all financing statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all appropriate jurisdictions
to perfect the Agent’s (for the benefit of the Secured Parties) security
interest in the Collateral and such other action to perfect, protect or more
fully evidence the interest of the Agent for the benefit of the Secured Parties
as the Agent may reasonably request.

     

    (i) Lenders’
Reliance.  Borrower acknowledges that the Lenders are entering
into the transactions contemplated by this Agreement in reliance upon Borrower’s
identity as a legal entity that is separate from
Originator.  Therefore, from and after the date of execution and
delivery of this Agreement, Borrower shall take all reasonable steps, including,
without limitation, all steps that the Agent or any Lender may from time to time
reasonably request, to maintain Borrower’s identity as a separate legal entity
and to make it manifest to third parties that Borrower is an entity with assets
and liabilities distinct from those of Originator and any Affiliates thereof
(other than Borrower) and not just a division of Originator or any such
Affiliate.  Without limiting the generality of the foregoing and in
addition to the other covenants set forth herein, Borrower will:

     

    (i) hold
itself out as a separate entity, conduct its own business in its own name and
require that all full-time employees of Borrower, if any, identify themselves as
such and not as employees of Originator (including, without limitation, by means
of providing appropriate employees with business or identification cards
identifying such employees as Borrower’s employees) and correct any known
misunderstanding regarding its status as a separate entity;

     

    (ii) maintain
a sufficient number of employees in light of its contemplated business
operations and compensate all employees, consultants and agents directly, from
Borrower’s own funds, for services provided to Borrower by such employees,
consultants and agents and, to the extent any employee, consultant or agent of
Borrower is also an employee, consultant or agent of Originator or any Affiliate
thereof, allocate the compensation of such employee, consultant or agent between
Borrower and Originator or such Affiliate, as applicable, on a basis that
reflects the services rendered to Borrower and Originator or such Affiliate, as
applicable;

     

    (iii) clearly
identify its offices (by signage or otherwise) as its offices and, if such
office is located in the offices of Originator, Borrower shall lease such office
at a fair market rent;

     

    (iv) have
separate stationery, invoices and checks in its own name;

     

    (v) conduct
all transactions with Originator and the Servicer (including, without
limitation, any delegation of its obligations hereunder as Servicer) strictly on
an arm’s-length basis, allocate all overhead expenses (including, without
limitation, telephone and other utility charges) for items shared between
Borrower and Originator on the basis of actual use to the extent practicable
and, to the extent such allocation is not practicable, on a basis reasonably
related to actual use;

     

    (vi) at all
times have a Board of Directors consisting of at least three (3) members, at
least one (1) member of which is an Independent Director;

     

    (vii) observe
all corporate formalities as a distinct entity, and ensure that all corporate
actions relating to (A) the dissolution or liquidation of Borrower or (B) the
initiation of, participation in, acquiescence in or consent to any bankruptcy,
insolvency, reorganization or similar proceeding involving Borrower, are duly
authorized by unanimous vote of its Board of Directors (including the
Independent Director);

     

    (viii) maintain
Borrower’s books and records separate from those of any other Person or entity
and otherwise readily identifiable as its own assets rather than assets of any
other Person or entity;

     

    (ix) prepare
its financial statements separately from those of Originator and insure that any
consolidated financial statements of Originator or any Affiliate thereof that
include Borrower and that are filed with the Securities and Exchange Commission
or any other governmental agency have notes clearly stating that Borrower is a
separate corporate entity and that its assets will be available first and
foremost to satisfy the claims of the creditors of Borrower;

     

    (x) except as
herein specifically otherwise provided, maintain the funds or other assets of
Borrower separate from, and not commingled with, those of Originator or any
Affiliate thereof and only maintain bank accounts or other depository accounts
to which Borrower alone is the account party, into which Borrower alone makes
deposits and from which Borrower alone (or the Agent hereunder) has the power to
make withdrawals;

     

    (xi) pay all
of Borrower’s operating expenses and other liabilities from Borrower’s own
assets (except for certain payments by Originator or other Persons pursuant to
allocation arrangements that comply with the requirements of this Section
7.1(i));

     

    (xii) operate
its business and activities such that:  it does not engage in any
business or activity of any kind, or enter into any transaction or indenture,
mortgage, instrument, agreement, contract, lease or other undertaking, other
than the transactions contemplated and authorized by this Agreement and the
Receivables Sale Agreement; and does not hold out its credit as being available
to satisfy the obligations of others, pledge its assets for the benefit of any
other entity, make loans or advances to any other entity, acquire obligations or
securities of any of its shareholders or otherwise create, incur, guarantee,
assume or suffer to exist any indebtedness or other liabilities, whether direct
or contingent, other than (A) as a result of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (B) the incurrence of obligations under this Agreement, (C)
the incurrence of obligations, as expressly contemplated in the Receivables Sale
Agreement, to make payment to the Originator thereunder for the purchase of
Receivables from Originator under the Receivables Sale Agreement, and (D) the
incurrence of operating expenses in the ordinary course of business of the type
otherwise contemplated by this Agreement;

     

    (xiii) maintain
its corporate charter in conformity with this Agreement, such that it does not
amend, restate, supplement or otherwise modify its Organizational Documents in
any respect that would impair its ability to comply with the terms or provisions
of any of the Transaction Documents, including, without limitation, Section 7.1(i) of
this Agreement;

     

    (xiv) maintain
the effectiveness of, and continue to perform under the Receivables Sale
Agreement, such that it does not amend, restate, supplement, cancel, terminate
or otherwise modify the Receivables Sale Agreement, or give any consent, waiver,
directive or approval thereunder or waive any default, action, omission or
breach under the Receivables Sale Agreement or otherwise grant any indulgence
thereunder, without (in each case) the prior written consent of the
Agent;

     

    (xv) maintain
its corporate separateness such that it does not merge or consolidate with or
into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions, and except as otherwise contemplated
herein) all or substantially all of its assets (whether now owned or hereafter
acquired) to, or acquire all or substantially all of the assets of, any Person,
nor at any time create, have, acquire, maintain or hold any interest in any
Subsidiary;

     

    (xvi) maintain
at all times the Required Capital Amount and refrain from making any dividend,
distribution, redemption of capital stock or payment of any subordinated
indebtedness which would cause the Required Capital Amount to cease to be so
maintained; and

     

    (xvii) take such
other actions as are necessary on its part to ensure that the facts and
assumptions set forth in the opinion issued by Dewey & LeBoeuf LLP, as
counsel for Borrower, in connection with the closing or initial Advance under
this Agreement and relating to substantive consolidation issues, and in the
certificates accompanying such opinion, remain true and correct in all material
respects at all times.

     

    (j) Taxes.  Such
PPL Electric Party will file all Federal, state, local and foreign tax returns
required to be filed by it and will promptly pay or cause to be paid all taxes
shown to be due on such returns and all governmental charges at any time due and
owing, except any such taxes or charges that are being contested in good faith
by appropriate proceedings and for which such PPL Electric Party shall have set
aside on its books appropriate reserves with respect thereto in accordance with
GAAP or that would not reasonably be expected to have a Material Adverse
Effect.  Borrower will pay when due any taxes payable in connection
with the Receivables, exclusive of taxes on or measured by income or gross
receipts of the Agent or any Lender.

     

    (k) Payment to
Originator.  With respect to any Receivable purchased by
Borrower from Originator, such sale shall be effected under, and in strict
compliance with the terms of, the Receivables Sale Agreement, including, without
limitation, the terms relating to the amount and timing of payments to be made
to Originator in respect of the purchase price for such Receivable.

     

    Section
7.2 Negative Covenants of the
PPL Electric Parties.

     

    Until the
Final Payout Date, each PPL Electric Party hereby covenants, as to itself,
that:

     

    (a) Change in Name, Jurisdiction
of Organization, Offices and Records.  Borrower will not change
(i) its name as it appears in official filings in the jurisdiction of its
organization, (ii) its status as a “registered organization” (within the meaning
of Article 9 of any applicable enactment of the UCC) in such jurisdiction, (iii)
its organizational identification number, if any, issued by its jurisdiction of
organization, or (iv) its jurisdiction of organization unless it shall
have:  (A) given the Agent at least forty-five (45) days’ prior
written notice thereof; (B) at least ten (10) days prior to such change,
delivered to the Agent all financing statements, instruments and other documents
necessary to continue the perfection and priority of the Agent’s interest in the
Collateral and/or requested by the Agent in connection with such change or
relocation and (C) caused an opinion of counsel acceptable to Agent to be
delivered to Agent not later than the effective date of such change, to the
effect that Agent’s security interest (for the benefit of the Secured Parties)
is perfected and of first priority, such opinion to be in form and substance
acceptable to Agent in its sole discretion.

     

    (b) Change of Collection Banks
and Collection Accounts.  No PPL Electric Party will, or permit
Originator to, close any Collection Account or open a new bank account and
designate the same as a Collection Account, unless the Agent shall have
received, at least ten (10) days before the proposed effective date therefor,
written notice of such addition, termination or change.

     

    (c) Modifications to Contracts
and Credit and Collection Practices.  Except in accordance with
Section
7.1(a)(vii), such PPL Electric Party will not, and will not permit
Originator to, make any change to the Credit and Collection Practices that could
adversely affect the collectability of the Receivables or decrease the credit
quality of any newly created Receivables.  Except as provided in Section 8.2(d), the
Servicer will not, and will not permit Originator to, extend, amend or otherwise
modify the terms of any Receivable or any Contract related thereto other than in
accordance with the Credit and Collection Practices.

     

    (d) Sales,
Liens.  Borrower will not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with respect to, or
create or suffer to exist any Adverse Claim upon (including, without limitation,
the filing of any UCC financing statement) or with respect to, any of the
Collateral, or assign any right to receive income with respect thereto (other
than, in each case, the creation of a security interest therein in favor of the
Agent as provided for herein), and Borrower will defend the right, title and
interest of the Secured Parties in, to and under any of the foregoing property,
against all claims of third parties claiming through or under Borrower or
Originator.  Except for the grants of the security interests in favor
of the trustees pursuant to the PPL Electric Mortgages, the Borrower will not
grant or suffer to exist a security interest in any Collection Account to any
Person.

     

    (e) Use of
Proceeds.  Borrower will not use the proceeds of the Advances
for any purpose other than (i) paying for Receivables and Related Security under
and in accordance with the Receivables Sale Agreement, including without
limitation, making payments on the Subordinated Notes to the extent permitted
thereunder and under the Receivables Sale Agreement, (ii) paying its ordinary
and necessary operating expenses when and as due, and (iii) making Restricted
Junior Payments to the extent permitted under this Agreement.

     

    (f) Termination Date
Determination.  Borrower will not designate the Termination
Date, or send any written notice to Originator in respect thereof, without the
prior written consent of the Agent, except with respect to the occurrence of
such Termination Date arising pursuant to Section 5.1(d) of the Receivables Sale
Agreement.

     

    (g) Restricted Junior
Payments.  Borrower will not make any Restricted Junior Payment
if after giving effect thereto, Borrower’s Net Worth would be less than the
Required Capital Amount.

     

    (h) Borrower
Indebtedness.  Borrower will not incur or permit to exist any
Indebtedness or liability on account of deposits except:  (i) the
Obligations, (ii) the Subordinated Loans, and (iii) other current accounts
payable arising in the ordinary course of business and not overdue.

     

    (i) Prohibition on Additional
Negative Pledges.  No PPL Electric Party will enter into or
assume any agreement (other than this Agreement and the other Transaction
Documents) prohibiting the creation or assumption of any Adverse Claim upon the
Collateral except as contemplated by the Transaction Documents, or otherwise
prohibiting or restricting any transaction contemplated hereby or by the other
Transaction Documents.

     

    (j) Prohibition on Adverse
Claims on Subordinated Note.  No PPL Electric Party will enter
into or assume any agreement creating any Adverse Claim upon the Subordinated
Note.

     

    (k) Prohibition on Control
Agreements.  No PPL Electric Party will enter into any
agreement giving any Person dominion and control of any Collection Account
without the prior written consent of the Agent; provided that such
agreement recognizes (to the Agent’s reasonable satisfaction) the rights of the
Agent in all Receivables and Related Security and provisions are contained
therein that require the timely payment of all proceeds of the Receivables and
Related Security to the Agent.

     

    Article
VIII 

    Servicing

     

    Section
8.1 Designation of
Servicer.

     

    (a) The
servicing, administration and collection of the Receivables shall be conducted
by such Person (the “Servicer”)
so designated from time to time in accordance with this Section
8.1.  PPL Electric is hereby designated as, and hereby agrees
to perform the duties and obligations of, the Servicer pursuant to the terms of
this Agreement until replaced in accordance with the provisions of this
Agreement.

     

    (b) So long
as a Person is acting as the Servicer hereunder, (i) such Person shall be and
remain primarily liable to the Agent and the Lenders for the full and prompt
performance of all duties and responsibilities of the Servicer hereunder and
(ii) the Agent and the Lenders shall be entitled to deal exclusively with such
Person in matters relating to the discharge by the Servicer of its duties and
responsibilities hereunder.  The Agent and the Lenders shall not be
required to give notice, demand or other communication to any Person other than
PPL Electric in order for communication to the Servicer and its sub-servicer or
other delegate with respect thereto to be accomplished.  The Servicer
may not employ agents or delegate to any other Person any of its obligations
hereunder except with the prior written consent of the Agent and, in any such
case, the Servicer shall be responsible for all actions taken by any
sub-servicer or other delegate of the Servicer.

     

    (c) If (i)
any Person is designated to replace PPL Electric as ITC Bonds Servicer under the
ITC Bonds Servicing Agreement or (ii) any Governmental Authority shall act to
replace PPL Electric as ITC Bonds Servicer or otherwise causes any transfer of
all or any portion of the servicing duties or obligations under the ITC Bonds
Servicing Agreement of PPL Electric to another Person in such a way as to
materially reduce the scope of PPL Electric’s duties as ITC Bonds Servicer under
the ITC Bond Documents with respect to any of the ITC Receivables, then, such
Person shall, provided such Person executes an amendment to this Agreement
agreeing to undertake all duties of the Servicer hereunder on substantially the
same terms and conditions (subject to such limitations on liability and to such
indemnifications as are reasonably acceptable to the Agent and such successor
Servicer) as PPL Electric has agreed to act as Servicer hereunder (including,
without limitation, with respect to cost and scope of service provided), become
the successor Servicer hereunder; provided, however, that if such
Person does not so agree, then PPL Electric shall be deemed (effective as of the
date such Person is designated as described in clause (i) or (ii) above, as
applicable) to have resigned as Servicer hereunder and the Agent shall appoint a
successor Servicer acceptable to the Agent.  In addition, if the ITC
Bond Documents are terminated for any reason (including upon repayment of the
ITC Bonds), then, upon the occurrence of a Servicer Default, the Agent may
designate as Servicer any Person acceptable to the Agent to succeed PPL Electric
as Servicer.

     

    Section
8.2 Duties of
Servicer.

     

    (a) The
Servicer shall take or cause to be taken all such actions as may be necessary or
advisable to collect each Receivable from time to time, all in accordance with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Practices.

     

    (b) The
Servicer, on a daily basis, shall set aside the Fixed Daily Amount by the close
of each Business Day.  Prior to each Settlement Date, the Servicer
shall identify the Collections received for the applicable Calculation Period
and, upon request of any Lender pursuant to Section 8.2(e), the
Servicer shall promptly identify the Collections received by it for any given
day.

     

    (c) The
Servicer shall administer the Collections in accordance with the procedures
described herein and in Article
II.  The Servicer shall hold in trust for the account of
Borrower and the Lenders their respective shares of the Collections in
accordance with Article
II.  The Servicer shall not deposit any Collections into an
account other than a Collection Account at any time without the prior written
consent of the Agent which consent shall be in the sole discretion of the
Agent.  Except for the grants of the security interests in favor of
the trustees pursuant to the PPL Electric Mortgages, the Servicer will not grant
a security interest in any Collection Account to any Person.

     

    (d) The
Servicer may, in accordance with the Credit and Collection Practices, extend the
maturity of any Receivable or adjust the Outstanding Balance of any Receivable
as the Servicer determines to be appropriate to maximize Collections thereof;
provided, however, that such
extension or adjustment shall not alter the status of such Receivable as a
Delinquent Receivable or Defaulted Receivable or limit the rights of the Agent
or the Lenders under this Agreement.

     

    (e) The
Servicer shall hold in trust for Borrower and the Lenders all Records that (i)
evidence or relate to the Receivables, the related Contracts and Related
Security or (ii) are otherwise necessary or desirable to collect the Receivables
and shall, as soon as practicable upon demand of the Agent, make available to
the Agent all such Records.  The Servicer shall, subject to the first
sentence of Section
8.2(b) hereof, apply any cash collections or other cash proceeds in
respect of the Collateral in accordance with Article
II.  The Servicer shall, from time to time at the request of
any Lender, furnish to the Lenders (promptly after any such request) a
calculation of the amounts identified as Collections pursuant to Article II and Section
8.2(b).

     

    (f) Any
payment by an Obligor in respect of any indebtedness owed by it to Originator,
other than indebtedness allocable to the ITC Receivables or the Nuclear
Decommissioning Receivables, shall, except as otherwise specified by such
Obligor or otherwise required by contract or law and unless otherwise instructed
by the Agent, be applied as a Collection of any Receivable of such Obligor
(starting with the oldest such Receivable) to the extent of any amounts then due
and payable thereunder before being applied to any other receivable or other
obligation of such Obligor.

     

    (g) In the
event any payments relating to the Collateral are remitted directly to Borrower
or any Affiliate of Borrower, Borrower will remit (or will cause all such
payments to be remitted) directly to a Collection Account within two (2)
Business Days following receipt thereof, and, at all times prior to such
remittance, Borrower will itself hold or, if applicable, will cause such
payments to be held in trust for the exclusive benefit of the Agent and the
Lenders.

     

    (h) The
Servicer hereby represents and warrants that it is maintaining all Collections
solely in its capacity as Servicer, subject at all times to the ownership of the
Borrower therein and the security interest therein of the Agent, for the benefit
of the Secured Parties, that it retains bare legal title for the convenience of
the parties hereto, and that such Collections are not intended to be or
constitute property of the estate of the Servicer in any proceeding referenced
in the definition of Event of Bankruptcy and are intended to constitute property
of the type described in Section 541(d) of the Federal Bankruptcy
Code.

     

    Section
8.3 Collections.

     

    From and
after the earliest to occur of an Amortization Event, a Downgrading Event with
respect to the Servicer, a Servicer Default or a Servicer Replacement Event, the
Servicer shall remit or cause to be remitted to the Agent, on each day, all
Collections received on such day.

     

    Section
8.4 Responsibilities of PPL
Electric Parties.

     

    Anything
herein to the contrary notwithstanding, the exercise by the Agent and the
Lenders of their rights hereunder shall not release the Servicer, Originator or
Borrower from any of their respective duties or obligations with respect to any
Receivables or under the related Contracts.  The Lenders shall have no
obligation or liability with respect to any Receivables or related Contracts,
nor shall any of them be obligated to perform the obligations of
Borrower.

     

    Section
8.5 Monthly
Reports.

     

    The
Servicer shall prepare and forward to the Agent (a) on each Monthly Reporting
Date (and following the occurrence of any Amortization Event, Servicer
Replacement Event, Downgrading Event with respect to the Servicer or a Servicer
Default, at any time upon the request of the Agent) a Monthly Report and an
electronic file of the data contained therein and (b) at such times as the Agent
shall request, a listing by Obligor of all Receivables together with an aging of
such Receivables.

     

    Section
8.6 Servicing
Fee.

     

    As
compensation for the Servicer’s servicing activities on their behalf, the
Lenders hereby agree to pay the Servicer the Servicing Fee, which fee shall be
paid in arrears on each Settlement Date out of Collections in accordance with
the priorities for payment set forth in Section 2.2 and 2.3.

     

    Article
IX

    Amortization
Events

     

    Section
9.1 Amortization
Events.

     

    The
occurrence of any one or more of the following events shall constitute an
amortization event (each, an “Amortization
Event”):

     

    (a) Any PPL
Electric Party shall fail to make any payment or deposit required to be made by
it under the Transaction Documents when due and, for any such payment or deposit
which is not in respect of principal, such failure continues for three (3)
consecutive Business Days.

     

    (b) Any
representation or warranty made by any PPL Electric Party in any Transaction
Document to which it is a party or in any other document delivered pursuant
thereto shall prove to have been incorrect (or, with respect to the
representations and warranties contained in Sections 5.1(a),
(c), (d), (g), (j), (k) or (s) hereof, or in
Sections
2.1(a), (c), (d), (g), (j), (k) or (s) of the
Receivables Sale Agreement, incorrect in any material manner) when made or
deemed made.

     

    (c) Any PPL
Electric Party shall fail to perform or observe any covenant contained in Section 7.2 or Section 8.5 when
due.

     

    (d) Any PPL
Electric Party shall fail to perform or observe any covenant contained in Section 7.1(a)(vii),
Section 7.1(b)
or Section 8.3
and such failure shall continue for ten (10) consecutive Business Days following
Borrower’s receipt of notice of such failure from the Agent or Borrower’s actual
knowledge of such failure.

     

    (e) Any PPL
Electric Party shall fail to perform or observe any other covenant or agreement
under any Transaction Document (other than those referenced in Sections 9.1(a),
(c) or (d)) and such failure
shall continue for ten (10) consecutive Business Days following Borrower’s
receipt of notice of such failure from the Agent or for thirty (30) consecutive
days following Borrower’s actual knowledge of such failure.

     

    (f) Failure
of Borrower to pay any Indebtedness (other than the Obligations) when due or the
default by Borrower in the performance of any term, provision or condition
contained in any agreement under which any such Indebtedness was created or is
governed, the effect of which is to cause, or to permit the holder or holders of
such Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity; or any such Indebtedness of Borrower shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled payment)
prior to the date of maturity thereof.

     

    (g) Failure
by the Servicer or PPL Transition Bond Company LLC (i) to pay any principal or
interest, regardless of amount, due in respect of any Material Indebtedness
beyond any period of grace provided with respect thereto, or (ii) to observe or
perform any other term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing any such Material Indebtedness
beyond any period of grace provided with respect thereto if the effect of any
failure referred to in this clause (ii) is to cause, or to permit the holder or
holders of such Indebtedness or a trustee on its or their behalf to cause, such
Indebtedness to become due prior to its stated maturity.

     

    (h) An Event
of Bankruptcy shall occur with respect to any PPL Electric Party or PPL
Transition Bond Company LLC.

     

    (i) As at the
end of any Calculation Period:

     

    (i) the
three-month rolling average Delinquency Ratio shall exceed 6.00%,

     

    (ii) the
three-month rolling average Default Ratio shall exceed 2.50%, or

     

    (iii) the
three-month rolling average Dilution Ratio shall exceed 2.25%

     

    (j) A Change
of Control shall occur.

     

    (k) (i) One
or more final judgments for the payment of money in an aggregate amount of
$11,625 or more shall be entered against Borrower or (ii) one or more final
judgments for the payment of money in an amount in excess of $20,000,000,
individually or in the aggregate, shall be entered against the Servicer or PPL
Transition Bond Company LLC and such judgment shall not be paid, bonded or
otherwise discharged for sixty (60) consecutive days unless such judgment is
stayed on appeal or otherwise being appropriately contested in good
faith.

     

    (l) The
“Termination Date” under and as defined in the Receivables Sale Agreement shall
occur under the Receivables Sale Agreement or Originator shall for any reason
cease to transfer, or cease to have the legal capacity to transfer, or otherwise
be incapable of transferring Receivables to Borrower under the Receivables Sale
Agreement.

     

    (m) This
Agreement shall terminate in whole or in part (except in accordance with its
terms), or shall cease to be effective or to be the legally valid, binding and
enforceable obligation of Borrower, or any Obligor shall directly or indirectly
contest in any manner such effectiveness, validity, binding nature or
enforceability, or the Agent for the benefit of the Lenders shall cease to have
a valid and perfected first priority security interest in the
Collateral.

     

    (n) On any
day, after giving effect to the turnover of Collections by the Servicer on such
date and the application thereof to the Obligations in accordance with this
Agreement, the Aggregate Principal shall exceed the Borrowing Limit and if such
day is not a Settlement Date, such condition shall have been continuing for five
(5) consecutive Business Days.

     

    (o) [reserved].

     

    (p) The
Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of
the Tax Code with regard to any of the Collateral and such lien shall not have
been released within seven (7) days, or the PBGC shall, or shall indicate its
intention to, file notice of a lien pursuant to Section 4068 of ERISA with
regard to any of the Collateral.

     

    (q) Any
member of the ERISA Group shall fail to pay when due an amount or amounts
aggregating in excess of $25,000,000 which it shall have become liable to pay
under Title IV of ERISA; or notice of intent to terminate a Material Plan shall
be filed under Title IV of ERISA by any member of the ERISA Group, any plan
administrator or any combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could reasonably be expected to cause one or more members of the ERISA Group to
incur a current payment obligation in excess of $25,000,000.

     

    (r) Any event
shall occur which (i) materially and adversely impairs the ability of Originator
to originate Receivables of a credit quality that is at least equal to the
credit quality of the Receivables sold or contributed to Borrower on the date of
this Agreement or (ii) has, or could be reasonably expected to have a Material
Adverse Effect (other than as defined in clause (i) of
the definition thereof).

     

    (s) The PUC
shall exercise its sequestration powers under the Competition Act with respect
to Originator or the Collections.

     

    Section
9.2 Remedies.

     

    Upon the
occurrence and during the continuation of an Amortization Event, the Agent may,
or upon the direction of the Required Liquidity Banks shall, take any of the
following actions:  (a) declare the Amortization Date to have
occurred, whereupon the Aggregate Commitment shall immediately terminate and the
Amortization Date shall forthwith occur, all without demand, protest or further
notice of any kind, all of which are hereby expressly waived by each PPL
Electric Party; provided, however, that upon
the occurrence of an Event of Bankruptcy with respect to any PPL Electric Party,
the Amortization Date shall automatically occur, without demand, protest or any
notice of any kind, all of which are hereby expressly waived by each PPL
Electric Party, (b) exercise all rights and remedies of a secured party upon
default under the UCC and other applicable laws, and (c) notify Obligors of the
Agent’s security interest in the Receivables and other
Collateral.  The aforementioned rights and remedies shall be without
limitation, and shall be in addition to all other rights and remedies of the
Agent and the Lenders otherwise available under any other provision of this
Agreement, by operation of law, at equity or otherwise, all of which are hereby
expressly preserved, including, without limitation, all rights and remedies
provided under the UCC, all of which rights shall be cumulative.

     

    Article
X 

    Indemnification

     

    Section
10.1 Indemnities by the PPL
Electric Parties.

     

    Without
limiting any other rights that the Agent or any Lender may have hereunder or
under applicable law, (a) Borrower hereby agrees to indemnify (and pay upon
demand to) the Agent, Victory, each of the Liquidity Banks and each of the
respective assigns, officers, directors, agents and employees of the foregoing
(each, an “Indemnified
Party”) from and against any and all damages, losses, claims, taxes,
liabilities, costs, expenses and for all other amounts payable, including
attorneys’ fees (which attorneys may be employees of the Agent or such Lender)
and disbursements (all of the foregoing being collectively referred to as “Indemnified
Amounts”) awarded against or incurred by any of them arising out of or as
a result of this Agreement or the acquisition, either directly or indirectly, by
a Lender of an interest in the Receivables, and (b) the Servicer hereby agrees
to indemnify (and pay upon demand to) each Indemnified Party for Indemnified
Amounts awarded against or incurred by any of them arising out of the Servicer’s
activities as Servicer hereunder excluding, however, in all of the foregoing
instances under the preceding clauses (a) and (b):

     

    (i) Indemnified
Amounts to the extent a final judgment of a court of competent jurisdiction
holds that such Indemnified Amounts resulted from gross negligence or willful
misconduct on the part of the Indemnified Party seeking indemnification;
or

     

    (ii) Indemnified
Amounts to the extent the same includes losses in respect of Receivables that
are uncollectible on account of the insolvency, bankruptcy or lack of
creditworthiness of the related Obligor; or

     

    (iii) taxes
imposed by the jurisdiction in which such Indemnified Party’s principal
executive office is located, on or measured by the overall net income of such
Indemnified Party to the extent that the computation of such taxes is consistent
with the characterization for income tax purposes of the acquisition by the
Lenders of Loans as a loan or loans by the Lenders to Borrower secured by the
Receivables, the Related Security, the Collection Accounts and the
Collections;

     

    provided, however, that nothing
contained in this sentence shall limit the liability of any PPL Electric Party
or limit the recourse of the Lenders to any PPL Electric Party for amounts
otherwise specifically provided to be paid by such PPL Electric Party under the
terms of this Agreement.  Without limiting the generality of the
foregoing indemnification, Borrower shall indemnify the Agent and the Lenders
for Indemnified Amounts (including, without limitation, losses in respect of
uncollectible receivables) relating to or resulting from:

     

    (A) any
representation or warranty made by any PPL Electric Party or Originator (or any
officers of any such Person) under or in connection with this Agreement, any
other Transaction Document or any other information or report delivered by any
such Person pursuant hereto or thereto, which shall have been false or incorrect
when made or deemed made;

     

    (B) the
failure by Borrower, the Servicer or Originator to comply with any applicable
law, rule or regulation with respect to any Receivable or Contract related
thereto, or the nonconformity of any Receivable or Contract included therein
with any such applicable law, rule or regulation or any failure of Originator to
keep or perform any of its obligations, express or implied, with respect to any
Contract;

     

    (C) any
failure of Borrower, the Servicer or Originator to perform its duties, covenants
or other obligations in accordance with the provisions of this Agreement or any
other Transaction Document;

     

    (D) any
products liability, personal injury or damage suit, or other similar claim
arising out of or in connection with merchandise, insurance or services that are
the subject of any Contract or any Receivable;

     

    (E) any
dispute, claim, offset or defense (other than discharge in bankruptcy of the
Obligor) of the Obligor to the payment of any Receivable (including, without
limitation, a defense based on such Receivable or the related Contract not being
a legal, valid and binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the delivery of
electricity related to such Receivable or the furnishing or failure to furnish
such electricity;

     

    (F) the
commingling of Collections of Receivables with, or deposit in a Collection
Account at any time of, other funds;

     

    (G) any
investigation, litigation or proceeding related to or arising from this
Agreement or any other Transaction Document, the transactions contemplated
hereby, the use of the proceeds of any Advance, the Collateral or any other
investigation, litigation or proceeding relating to Borrower, the Servicer or
Originator in which any Indemnified Party becomes involved as a result of any of
the transactions contemplated hereby;

     

    (H) any
inability to litigate any claim against any Obligor in respect of any Receivable
as a result of such Obligor being immune from civil and commercial law and suit
on the grounds of sovereignty or otherwise from any legal action, suit or
proceeding;

     

    (I) any
failure of Borrower to acquire and maintain legal and equitable title to, and
ownership of any of the Collateral from Originator, free and clear of any
Adverse Claim (other than as created hereunder); or any failure of Borrower to
give reasonably equivalent value to Originator under the Receivables Sale
Agreement in consideration of the transfer by Originator of any Receivable, or
any attempt by any Person to void such transfer under statutory provisions or
common law or equitable action;

     

    (J) any
failure to vest and maintain vested in the Agent for the benefit of the Lenders,
or to transfer to the Agent for the benefit of the Secured Parties, a valid
first priority perfected security interests in the Collateral, free and clear of
any Adverse Claim (except as created by the Transaction Documents);

     

    (K) the
failure to have filed, or any delay in filing, financing statements or other
similar instruments or documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Collateral, and the proceeds thereof,
whether at the time of any Advance or at any subsequent time;

     

    (L) any
action or omission by any PPL Electric Party which reduces or impairs the rights
of the Agent or the Lenders with respect to any Collateral or the value of any
Collateral;

     

    (M) any
attempt by any Person to void any Advance or the Agent’s security interest in
the Collateral under statutory provisions or common law or equitable action;
and

     

    (N) the
failure of any Receivable included in the calculation of the Net Pool Balance as
an Eligible Receivable to be an Eligible Receivable at the time so
included.

     

    Section
10.2 Increased Cost and Reduced
Return.

     

    If after
the date hereof, any Funding Source shall be charged any fee, expense or
increased cost on account of the adoption of any applicable law, rule or
regulation (including any applicable law, rule or regulation regarding capital
adequacy) or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, or compliance with any
request or directive (whether or not having the force of law) of any such
Governmental Authority (a “Regulatory
Change”):  (a) that subjects any Funding Source to any charge
or withholding on or with respect to any Funding Agreement or a Funding Source’s
obligations under a Funding Agreement, or on or with respect to the Receivables,
or changes the basis of taxation of payments to any Funding Source of any
amounts payable under any Funding Agreement (except for changes in the rate of
tax on the overall net income of a Funding Source or taxes excluded by Section 10.1) or (b)
that imposes, modifies or deems applicable any reserve, assessment, insurance
charge, special deposit or similar requirement against assets of, deposits with
or for the account of a Funding Source, or credit extended by a Funding Source
pursuant to a Funding Agreement or (c) that imposes any other condition the
result of which is to increase the cost to a Funding Source of performing its
obligations under a Funding Agreement, or to reduce the rate of return on a
Funding Source’s capital as a consequence of its obligations under a Funding
Agreement, or to reduce the amount of any sum received or receivable by a
Funding Source under a Funding Agreement or to require any payment calculated by
reference to the amount of interests or loans held or interest received by it,
then, upon demand by the Agent, Borrower shall pay to the Agent, for the benefit
of the relevant Funding Source, such amounts charged to such Funding Source or
such amounts to otherwise compensate such Funding Source for such increased cost
or such reduction.

     

    Section
10.3 Other Costs and
Expenses.

     

    Borrower
shall pay to the Secured Parties on demand by the Agent (on their behalf) all
costs and out-of-pocket expenses in connection with the preparation, execution,
delivery and administration of this Agreement, the other Transaction Documents,
the transactions contemplated hereby and thereby and the other documents to be
delivered hereunder and thereunder, including without limitation, the cost of
the Secured Parties’ auditors auditing the books, records and procedures of
Borrower, fees and out-of-pocket expenses of legal counsel for the Secured
Parties (which such counsel may be employees of the Secured Parties) with
respect thereto and with respect to advising the Secured Parties as to their
respective rights and remedies under this Agreement and the other Transaction
Documents.  Borrower shall pay to the Secured Parties on demand by the
Agent (on their behalf) any and all costs and expenses of the Secured Parties,
if any, including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of this Agreement, the other Transaction
Documents and the other documents delivered hereunder and thereunder and in
connection with any restructuring or workout of this Agreement, the other
Transaction Documents or such other documents, or the administration of this
Agreement and the other Transaction Documents following an Amortization
Event.  Subject to the provisions of Section 10.4,
Borrower shall reimburse Victory on demand for all other costs and expenses
incurred by Victory (“Other
Costs”), including, without limitation, the cost of auditing Victory’s
books by certified public accountants, the cost of rating the Commercial Paper
by independent financial rating agencies, and the reasonable fees and
out-of-pocket expenses of counsel for Victory or any counsel for any shareholder
of Victory with respect to advising Victory or such shareholder as to matters
relating to Victory’s operations.

     

    Section
10.4 Allocations.

     

    Victory
shall allocate the liability for Other Costs among Borrower and other Persons
with whom Victory has entered into agreements to purchase interests in or
finance receivables and other financial assets (“Other
Customers”).  If any Other Costs are attributable to Borrower
and not attributable to any Other Customer, Borrower shall be solely liable for
such Other Costs.  However, if Other Costs are attributable to Other
Customers and not attributable to Borrower, such Other Customer shall be solely
liable for such Other Costs.  All allocations to be made pursuant to
the foregoing provisions of this Article X shall be
made by Victory in its sole discretion and shall be binding on Borrower and the
Servicer.

     

    Article
XI 

    The
Agent

     

    Section
11.1 Authorization and
Action.

     

    Each
Lender hereby designates and appoints BTMU to act as its agent under the
Transaction Documents and under the Liquidity Agreement, and authorizes the
Agent to take such actions as agent on its behalf and to exercise such powers as
are delegated to the Agent by the terms of the Liquidity Agreement or the
Transaction Documents, together with such powers as are reasonably incidental
thereto.  The Agent shall not have any duties or responsibilities,
except those expressly set forth in the Liquidity Agreement or in any
Transaction Document, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Agent shall be read into the Liquidity Agreement
or any Transaction Document or otherwise exist for the Agent.  In
performing its functions and duties under the Liquidity Agreement and the
Transaction Documents, the Agent shall act solely as agent for the Lenders and
does not assume nor shall be deemed to have assumed any obligation or
relationship of trust or agency with or for any PPL Electric Party or any of
such PPL Electric Party’s successors or assigns.  The Agent shall not
be required to take any action that exposes the Agent to personal liability or
that is contrary to the Liquidity Agreement or any Transaction Document or
applicable law.  The appointment and authority of the Agent hereunder
shall terminate upon the indefeasible payment in full of all
Obligations.  Each Lender hereby authorizes the Agent to file each of
the UCC financing statements on behalf of such Lender.

     

    Section
11.2 Delegation of
Duties.

     

    The Agent
may execute any of its duties under the Liquidity Agreement and each Transaction
Document by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such
duties.  The Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.

     

    Section
11.3 Exculpatory
Provisions.

     

    Neither
the Agent nor any of its directors, officers, agents or employees shall be (a)
liable for any action lawfully taken or omitted to be taken by it or them under
or in connection with the Liquidity Agreement or any Transaction Document
(except for its, their or such Person’s own gross negligence or willful
misconduct), or (b) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any PPL Electric
Party contained in the Liquidity Agreement, any Transaction Document or any
certificate, report, statement or other document referred to or provided for in,
or received under or in connection with, any Transaction Document or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
the Liquidity Agreement or any Transaction Document or any other document
furnished in connection therewith, or for any failure of any PPL Electric Party
to perform its obligations under any Transaction Document, or for the
satisfaction of any condition specified in Article VI, or for
the perfection, priority, condition, value or sufficiency of any collateral
pledged in connection herewith.  The Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements or covenants contained in, or conditions
of, any Transaction Document, or to inspect the properties, books or records of
the PPL Electric Parties.  The Agent shall not be deemed to have
knowledge of any Amortization Event or Unmatured Amortization Event unless the
Agent has received notice from a PPL Electric Party or a Lender.

     

    Section
11.4 Reliance by
Agent.

     

    The Agent
shall in all cases be entitled to rely, and shall be fully protected in relying,
upon any document or conversation believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to Borrower), independent accountants and other experts selected by the
Agent.  The Agent shall in all cases be fully justified in failing or
refusing to take any action under the Liquidity Agreement or any Transaction
Document unless it shall first receive such advice or concurrence of Victory or
the Required Liquidity Banks or all of the Lenders, as applicable, as it deems
appropriate and it shall first be indemnified to its satisfaction by the
Lenders, provided, that unless and until the Agent shall have received such
advice, the Agent may take or refrain from taking any action, as the Agent shall
deem advisable and in the best interests of the Lenders.  The Agent
shall in all cases be fully protected in acting, or in refraining from acting,
in accordance with a request of Victory or the Required Liquidity Banks or all
of the Lenders, as applicable, and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Lenders.

     

    Section
11.5 Non-Reliance on Agent and
Other Lenders.

     

    Each
Lender expressly acknowledges that neither the Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any PPL
Electric Party, shall be deemed to constitute any representation or warranty by
the Agent.  Each Lender represents and warrants to the Agent that it
has and will, independently and without reliance upon the Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, operations,
property, prospects, financial and other conditions and creditworthiness of
Borrower and made its own decision to enter into the Liquidity Agreement, the
Transaction Documents and all other documents related thereto.

     

    Section
11.6 Reimbursement and
Indemnification.

     

    The
Liquidity Banks agree to reimburse and indemnify the Agent and its officers,
directors, employees, representatives and agents ratably according to their Pro
Rata Shares, to the extent not paid or reimbursed by the PPL Electric Parties
(a) for any amounts for which the Agent, acting in its capacity as Agent, is
entitled to reimbursement by the PPL Electric Parties hereunder and (b) for any
other expenses incurred by the Agent, in its capacity as Agent and acting on
behalf of the Lenders, in connection with the administration and enforcement of
the Liquidity Agreement and the Transaction Documents.

     

    Section
11.7 Agent in its Individual
Capacity.

     

    The Agent
and its Affiliates may make loans to, accept deposits from and generally engage
in any kind of business with Borrower or any Affiliate of Borrower as though the
Agent were not the Agent hereunder.  With respect to the making of
Loans pursuant to this Agreement, the Agent shall have the same rights and
powers under the Liquidity Agreement and this Agreement in its individual
capacity as any Lender and may exercise the same as though it were not the
Agent, and the terms “Liquidity Bank,” “Lender,” “Liquidity Banks” and “Lenders”
shall include the Agent in its individual capacity.

     

    Section
11.8 Successor
Agent.

     

    The
Agent, upon five (5) days’ notice to the PPL Electric Parties and the Lenders,
may voluntarily resign and may be removed at any time, with or without cause, by
the Required Liquidity Lenders; provided, however, that BTMU
shall not voluntarily resign as the Agent so long as any of the Liquidity
Commitments remain in effect or Victory has any outstanding Loans.  If
the Agent (other than BTMU) shall voluntarily resign or be removed as Agent
under this Agreement, then the Required Liquidity Lenders during such five-day
period shall appoint, from among the remaining Liquidity Banks, a successor
Agent, whereupon such successor Agent shall succeed to the rights, powers and
duties of the Agent and the term “Agent” shall mean such successor agent,
effective upon its appointment, and the former Agent’s rights, powers and duties
as Agent shall be terminated, without any other or further act or deed on the
part of such former Agent or any of the parties to this
Agreement.  Upon resignation or replacement of any Agent in accordance
with this Section
11.8, the retiring Agent shall execute such UCC-3 assignments and
amendments, and assignments and amendments of the Liquidity Agreement and the
Transaction Documents, as may be necessary to give effect to its replacement by
a successor Agent.  After any retiring Agent’s resignation hereunder
as Agent, the provisions of this Article XI and Article X shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.

     

    Article
XII

    Assignments;
Participations

     

    Section
12.1 Assignments.

     

    (a) Each of
the Agent, the PPL Electric Parties and the Liquidity Banks hereby agrees and
consents to the complete or partial assignment by Victory of all or any portion
of its rights under, interest in, title to and obligations under this Agreement
to the Liquidity Banks pursuant to the Liquidity Agreement.

     

    (b) Any
Liquidity Bank may at any time and from time to time assign to one or more
Eligible Assignees (each, a “Purchasing
Liquidity Bank”) all or any part of its rights and obligations under this
Agreement pursuant to an assignment agreement substantially in the form set
forth in Exhibit
VII hereto (an “Assignment
Agreement”) executed by such Purchasing Liquidity Bank and such selling
Liquidity Bank; provided, however, that any
assignment of a Liquidity Bank’s rights and obligations hereunder shall include
a pro rata assignment of its rights and obligations under the Liquidity
Agreement.  The consent of Victory shall be required prior to the
effectiveness of any such assignment.  Each assignee of a Liquidity
Bank must (i) be an Eligible Assignee and (ii) agree to deliver to the Agent,
promptly following any request therefor by the Agent or Victory, an
enforceability opinion in form and substance satisfactory to the Agent and
Victory.  Upon delivery of an executed Assignment Agreement to the
Agent, such selling Liquidity Bank shall be released from its obligations
hereunder and under the Liquidity Agreement to the extent of such
assignment.  Thereafter the Purchasing Liquidity Bank shall for all
purposes be a Liquidity Bank party to this Agreement and the Liquidity Agreement
and shall have all the rights and obligations of a Liquidity Bank hereunder and
thereunder to the same extent as if it were an original party hereto and thereto
and no further consent or action by Borrower, the Lenders or the Agent shall be
required.

     

    (c) Each of
the Liquidity Banks agrees that in the event that it shall become a Downgraded
Liquidity Bank, such Downgraded Liquidity Bank shall be obliged, at the request
of Victory or the Agent, to (i) collateralize its Commitment and its Liquidity
Commitment in a manner acceptable to the Agent, or (ii) assign all of its rights
and obligations hereunder and under the Liquidity Agreement to an Eligible
Assignee nominated by the Agent or a PPL Electric Party and acceptable to
Victory and willing to participate in this Agreement and the Liquidity Agreement
through the Liquidity Termination Date in the place of such Downgraded Liquidity
Bank; provided
that the Downgraded Liquidity Bank receives payment in full, pursuant to an
Assignment Agreement, of an amount equal to such Liquidity Bank’s Pro Rata Share
of the Obligations owing to the Liquidity Banks.

     

    (d) No PPL
Electric Party may assign any of its rights or obligations under this Agreement
without the prior written consent of the Agent and each of the Lenders and
without satisfying the Rating Agency Condition.

     

    Section
12.2 Participations.

     

    Any
Liquidity Bank may, in the ordinary course of its business at any time sell to
one or more Persons (each, a “Participant”)
participating interests in its Pro Rata Share of the Aggregate Commitment, its
Loans, its Liquidity Commitment or any other interest of such Liquidity Bank
hereunder or under the Liquidity Agreement.  Notwithstanding any such
sale by a Liquidity Bank of a participating interest to a Participant, such
Liquidity Bank’s rights and obligations under this Agreement and the Liquidity
Agreement shall remain unchanged, such Liquidity Bank shall remain solely
responsible for the performance of its obligations hereunder and under the
Liquidity Agreement, and the PPL Electric Parties, Victory and the Agent shall
continue to deal solely and directly with such Liquidity Bank in connection with
such Liquidity Bank’s rights and obligations under this Agreement and the
Liquidity Agreement.  Each Liquidity Bank agrees that any agreement
between such Liquidity Bank and any such Participant in respect of such
participating interest shall not restrict such Liquidity Bank’s right to agree
to any amendment, supplement, waiver or modification to this Agreement, except
for any amendment, supplement, waiver or modification described in Section
14.1(b)(i).

     

    Article
XIII 

    Security
Interest

     

    Section
13.1 Grant of Security
Interest.

     

    To secure
the due and punctual payment of the Obligations, whether now or hereafter
existing, due or to become due, direct or indirect, or absolute or contingent,
including, without limitation, all Indemnified Amounts, in each case pro rata
according to the respective amounts thereof, Borrower hereby grants to the
Agent, for the benefit of the Secured Parties, a security interest in all assets
of Borrower, including, without limitation, all of Borrower’s right, title and
interest, whether now owned and existing or hereafter arising in and to all of
the Receivables, the Related Security, the Collections and all proceeds of the
foregoing, subject to Permitted Claims (collectively, the “Collateral”).

     

    Section
13.2 Termination after Final
Payout Date.

     

    Each of
the Secured Parties hereby authorizes the Agent, and the Agent hereby agrees,
promptly after the Final Payout Date to execute and deliver to Borrower such UCC
termination statements as may be necessary to reflect the termination of the
Agent’s security interest in and lien upon the Collateral, all at Borrower’s
expense.  Upon the Final Payout Date, all right, title and interest of
the Agent and the other Secured Parties in and to the Collateral shall
terminate.

     

    Article
XIV 

    Miscellaneous

     

    Section
14.1 Waivers and
Amendments.

     

    (a) No
failure or delay on the part of the Agent or any Lender in exercising any power,
right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or remedy preclude
any other further exercise thereof or the exercise of any other power, right or
remedy.  The rights and remedies herein provided shall be cumulative
and nonexclusive of any rights or remedies provided by law.  Any
waiver of this Agreement shall be effective only in the specific instance and
for the specific purpose for which given.

     

    (b) No
provision of this Agreement may be amended, supplemented, modified or waived
except in writing in accordance with the provisions of this Section
14.1(b).  Victory, Borrower and the Agent, at the direction of
the Required Liquidity Banks, may enter into written modifications or waivers of
any provisions of this Agreement, provided, however, that no such
modification or waiver shall:

     

    (i) without
the consent of each affected Lender, (A) extend the Liquidity Termination Date
or the date of any payment or deposit of Collections by Borrower or the
Servicer, reduce the rate or extend the time of payment of Interest or any CP
Costs (or any component of Interest or CP Costs), (B) reduce any fee payable to
the Agent for the benefit of the Lenders, (C) except pursuant to Article XIII hereof,
change the amount of the principal of any Lender, any Liquidity Bank’s Pro Rata
Share or any Liquidity Bank’s Commitment, (D) amend, modify or waive any
provision of the definition of Required Liquidity Banks or this Section 14.1(b), (E)
consent to or permit the assignment or transfer by Borrower of any of its rights
and obligations under this Agreement, (F) change the definition of “Eligible
Receivable,” “Loss Reserve,” “Dilution Reserve,” “Yield Reserve,” “Servicing
Reserve,” “Servicing Fee Rate,” or “Required Reserve” or (G) amend or modify any
defined term (or any defined term used directly or indirectly in such defined
term) used in clauses
(A) through (G) above in a manner
that would circumvent the intention of the restrictions set forth in such
clauses; or

     

    (ii) without
the written consent of the then Agent, amend, modify or waive any provision of
this Agreement if the effect thereof is to affect the rights or duties of such
Agent,

     

    and any
material amendment, waiver or other modification of this Agreement shall require
satisfaction of the Rating Agency Condition.  Notwithstanding the
foregoing,  without the consent of the Liquidity Banks, but with the
consent of Borrower, the Agent may amend this Agreement solely to add additional
Persons as Liquidity Banks hereunder and  the Agent, the Required
Liquidity Banks and Victory may enter into amendments to modify any of the terms
or provisions of Article XI, Article XII, Section 14.13 or any
other provision of this Agreement without the consent of
Borrower.  Any modification or waiver made in accordance with this
Section 14.1
shall apply to each of the Lenders equally and shall be binding upon the PPL
Electric Parties, the Lenders and the Agent.

     

    Section
14.2 Notices.

     

    Except as
provided in this Section 14.2, all
communications and notices provided for hereunder shall be in writing (including
bank wire, telecopy or electronic facsimile transmission or similar writing) and
shall be given to the other parties hereto at their respective addresses or
facsimile numbers set forth on Schedule C hereto or
at such other address or facsimile number as such Person may hereafter specify
for the purpose of notice to each of the other parties hereto.  Each
such notice or other communication shall be effective (a) if given by facsimile,
upon the receipt thereof, (b) if given by mail, three (3) Business Days after
the time such communication is deposited in the mail with first class postage
prepaid or (c) if given by any other means, when received at the address
specified in this Section
14.2.  Borrower hereby authorizes the Agent to effect Advances
and Interest Period and Interest Rate selections based on telephonic notices
made by any Person whom the Agent in good faith believes to be acting on behalf
of Borrower.  Borrower agrees to deliver promptly to the Agent a
written confirmation of each telephonic notice signed by an authorized officer
of Borrower; provided, however, the absence
of such confirmation shall not affect the validity of such notice.  If
the written confirmation differs from the action taken by the Agent, the records
of the Agent shall govern absent manifest error.

     

    Section
14.3 Ratable
Payments.

     

    If any
Lender, whether by setoff or otherwise, has payment made to it with respect to
any portion of the Obligations owing to such Lender (other than payments
received pursuant to Section 10.2 or Section 10.3 ) in a
greater proportion than that received by any other Lender entitled to receive a
ratable share of such Obligations, such Lender agrees, promptly upon demand, to
purchase for cash without recourse or warranty a portion of such Obligations
held by the other Lenders so that after such purchase each Lender will hold its
ratable proportion of such Obligations; provided that if all
or any portion of such excess amount is thereafter recovered from such Lender,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.

     

    Section
14.4 Protection of Agent’s
Security Interest.

     

    (a) Borrower
hereby authorizes the filing of each of the financing statements provided for in
Schedule B
hereto.  Borrower agrees that from time to time, at its expense, it
will promptly authorize and deliver all instruments and documents, and take all
actions, that may be necessary or desirable, or that the Agent may request, to
perfect, protect or more fully evidence the Agent’s security interest in the
Collateral, or to enable the Agent or Victory to exercise and enforce their
rights and remedies hereunder.  At any time, the Agent may, or the
Agent may direct Borrower or the Servicer to, notify the Obligors of
Receivables, at Borrower’s expense, of the security interests of the Agent under
this Agreement and may also direct that payments of all amounts due or that
become due under any or all Receivables be made directly to the Agent or its
designee.  Borrower or the Servicer (as applicable) shall, at the
Agent’s request, withhold the identities of the Agent and the Lenders in any
such notification.  The Borrower hereby authorizes the Agent to file
financing statements describing as the collateral covered thereby as “all of the
debtor's personal property and assets” or words to that effect, notwithstanding
that such wording may be broader in scope than the collateral described in this
Agreement.

     

    (b) If any
PPL Electric Party fails to perform any of its obligations hereunder, the Agent
or any Lender may (but shall not be required to) perform, or cause performance
of, such obligations, and the Agent’s or such Lender’s costs and expenses
incurred in connection therewith shall be payable by Borrower as provided in
Section
10.3.  Each of the PPL Electric Parties (i) hereby authorizes
the Agent to file UCC financing statements and other filing or recording
documents with respect to the Receivables and Related Security (including any
amendments thereto, or continuation or termination statements thereof), without
the signature or other authorization of such PPL Electric Party, in such form
and in such offices as the Agent reasonably determines appropriate to perfect or
maintain the perfection of the security interest of the Agent hereunder, (ii)
acknowledges and agrees that it is not authorized to, and will not, file UCC
financing statements or other filing or recording documents with respect to the
Receivables or Related Security (including any amendments thereto, or
continuation or termination statements thereof), without the express prior
written approval by the Agent, consenting to the form and substance of such
filing or recording document, and (iii) approves, authorizes and ratifies any
filings or recordings made by or on behalf of the Agent in connection with the
perfection of the security interests in favor of Borrower or the
Agent.

     

    Section
14.5 Confidentiality.

     

    (a) Each PPL
Electric Party and each Lender shall maintain and shall cause each of its
employees and officers to maintain the confidentiality of this Agreement and the
other confidential or proprietary information with respect to the PPL Electric
Parties, the Agent and the Lenders and their respective businesses obtained by
it or them in connection with the structuring, negotiating and execution of the
transactions contemplated herein, except that such PPL Electric Party and such
Lender and its officers and employees may disclose such information to such PPL
Electric Party’s and such Lender’s respective external accountants and attorneys
and as required by any applicable law or order of any judicial or administrative
proceeding.

     

    (b) Anything
herein to the contrary notwithstanding, each PPL Electric Party hereby consents
to the disclosure of any nonpublic information with respect to it (i) to the
Agent, the Liquidity Banks or Victory by each other, (ii) by the Agent or the
Lenders to any prospective or actual assignee or participant of any of them and
(iii) by the Agent to any rating agency, Commercial Paper dealer or provider of
a surety, guaranty or credit or liquidity enhancement to Victory and to any
officers, directors, employees, advisors, outside accountants and attorneys of
any of the foregoing, provided that each such Person is informed of the
confidential nature of such information.  In addition, the Lenders and
the Agent may disclose any such nonpublic information pursuant to any law, rule,
regulation, direction, request or order of any judicial, administrative or
regulatory authority or proceedings (whether or not having the force or effect
of law).

     

    Section
14.6 Bankruptcy
Petition.

     

    Borrower,
the Servicer, the Agent and each Liquidity Bank hereby covenants and agrees
that, prior to the date that is one year and one day after the payment in full
of all outstanding senior indebtedness of Victory (including, without
limitation, all Victory’s Commercial Paper), it will not institute against, or
join any other Person in instituting against, Victory any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States.

     

    Section
14.7 Limitation of
Liability.

     

    Except
with respect to any claim arising out of the willful misconduct or gross
negligence of Victory, the Agent or any Liquidity Bank, no claim may be made by
any PPL Electric Party or any other Person against Victory, the Agent or any
Liquidity Bank or their respective Affiliates, directors, officers, employees,
attorneys or agents for any special, indirect, consequential or punitive damages
in respect of any claim for breach of contract or any other theory of liability
arising out of or related to the transactions contemplated by this Agreement, or
any act, omission or event occurring in connection therewith; and each PPL
Electric Party hereby waives, releases, and agrees not to sue upon any claim for
any such damages, whether or not accrued and whether or not known or suspected
to exist in its favor.

     

    Section
14.8 CHOICE OF
LAW.

     

    THIS
AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF
OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW.

     

    Section
14.9 CONSENT TO
JURISDICTION.

     

    EACH
PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW
YORK, NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT,
AND EACH SUCH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY PPL ELECTRIC PARTY IN THE
COURTS OF ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY ANY PPL
ELECTRIC PARTY AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR
ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY
SUCH PPL ELECTRIC PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A
COURT IN NEW YORK, NEW YORK.

     

    Section
14.10 WAIVER OF JURY
TRIAL.

     

    EACH
PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT, ANY DOCUMENT EXECUTED BY ANY PPL ELECTRIC PARTY PURSUANT TO THIS
AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

     

    Section
14.11 Integration; Binding Effect;
Survival of Terms.

     

    (a) This
Agreement and each other Transaction Document contain the final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.

     

    (b) This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns (including any trustee in
bankruptcy).  This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms and
shall remain in full force and effect until terminated in accordance with its
terms; provided, however, that the
rights and remedies with respect to (i) any breach of any representation and
warranty made by any PPL Electric Party pursuant to Article V and (ii)
the indemnification and payment provisions of Article X, and Sections 2.4, 14.5, 14.6 and 14.7 shall be
continuing and shall survive any termination of this Agreement.

     

    Section
14.12 Counterparts; Severability;
Section References.

     

    This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement.  Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.  Unless
otherwise expressly indicated, all references herein to “Article,” “Section,”
“Schedule” or “Exhibit” shall mean articles and sections of, and schedules and
exhibits to, this Agreement.

     

    Section
14.13 BTMU
Roles.

     

    Each of
the Liquidity Banks acknowledges that BTMU acts, or may in the future
act:  (a) as administrative agent for Victory or any Liquidity Bank,
(b) as an issuing and paying agent for the Commercial Paper, (c) to provide
credit or liquidity enhancement for the timely payment for the Commercial Paper,
and/or (d) to provide other services from time to time for Victory or any
Liquidity Bank (collectively, the “BTMU
Roles”).  Without limiting the generality of this Section 14.13, each
Liquidity Bank hereby acknowledges and consents to any and all BTMU Roles and
agrees that in connection with any BTMU Role, BTMU may take, or refrain from
taking, any action that it, in its discretion, deems appropriate, including,
without limitation, in its role as administrative agent for Victory, and the
giving of notice of a mandatory purchase pursuant to the Liquidity
Agreement.

     

    [Signature
pages follow.]

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date
hereof.

     

    PPL
RECEIVABLES CORPORATION, as Borrower

     

    By:                                                                                     

    Name:

    Title:

    

    PPL
ELECTRIC UTILITIES CORPORATION, in its individual capacity and as
Servicer

     

    By:                                                                                     

    Name:

    Title:

    
      
        

      

    

                              VICTORY RECEIVABLES CORPORATION,
as a Lender

    

    

    By:                                                                                     

    Name:

    Title:

    

    

    THE BANK
OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,

    as a
Liquidity Bank

    

    

    

    By:                                                                                     

    Name:

    Title:

    

    

    THE BANK
OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,

    as
Agent

    

    

    

    By:                                                                                     

    Name:

    Title:

    

     

    Exhibit
I

     

    

     

    Definitions

     

    As used
in this Agreement, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):

     

    1945
Mortgage:  As defined in Section
5.1(k).

     

    2001
Mortgage:  As defined in Section
5.1(k).

     

    Adjusted Dilution
Ratio:  At any time, the rolling average of the Dilution Ratio
for the 12 Calculation Periods then most recently ended.

     

    Advance:  A
borrowing hereunder consisting of the aggregate amount of the several Loans made
on the same Borrowing Date.

     

    Adverse
Claim:  A lien, security interest, charge or encumbrance, or
other right or claim in, of or on any Person’s assets or properties in favor of
any other Person, other than any Permitted Claim.

     

    Affiliate:  With
respect to any Person, any other Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, such Person or
any Subsidiary of such Person.  A Person shall be deemed to control
another Person if the controlling Person owns 10% or more of any class of voting
securities of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or
otherwise.

     

    Agent:  As
defined in the Preamble to this
Agreement.

     

    Agent’s
Account:  Account # 01419647 at Deutsche Bank Trust Company
Americas, ABA #021-001-033, Re: Victory Receivables / PPL.

     

    Aggregate
Commitment:  On any date of determination, the aggregate amount
of the Liquidity Banks’ Commitments to make Loans hereunder.  As of
the Closing Date the Aggregate Commitment is $150,000,000.

     

    Aggregate
Principal:  On any date of determination, the aggregate
outstanding principal amount of all Advances outstanding on such
date.

     

    Aggregate
Reduction:  As defined in Section
1.3(b).

     

    Agreement:  This
Credit and Security Agreement, dated as of the Closing Date, as it may be
amended, restated or otherwise modified and in effect from time to time in
accordance with the terms hereof.

     

    Alternate Base
Rate:  For any day, the rate per annum equal to the
higher, as of such day, of (i) the Prime Rate, or (ii) one-half of one percent
(0.50%) above the Federal Funds Effective Rate.  For purposes of
determining the Alternate Base Rate for any day, changes in the Prime Rate or
the Federal Funds Effective Rate shall be effective on the date of each such
change.

     

    Alternate Base Rate
Loan:  A Loan which bears interest at the Alternate Base Rate
or the Default Rate.

     

    Alternate Supplier
Charge:  Any indebtedness arising out of the sale of
electricity to an Obligor by, and owing to, an Energy Supplier other than
Originator or any Affiliate of Originator that is invoiced by the Servicer
together with the Receivables, and payments in respect of which are remitted by
the Servicer to such Energy Supplier.

     

    Amortization
Date:  The earliest to occur of (i) the day on which any of the
conditions precedent set forth in Section 6.3 are not
satisfied, (ii) the Business Day immediately prior to the occurrence of an Event
of Bankruptcy with respect to any PPL Electric Party, (iii) the Business Day
specified in a written notice from the Agent following the occurrence of any
other Amortization Event, and (iv) the date which is thirty (30) days after the
Agent’s receipt of written notice from Borrower that it wishes to terminate the
facility evidenced by this Agreement.

     

    Amortization
Event:  As defined in Article
IX.

     

    Applicable
Margin:  As defined in the Fee Letter.

     

    Assignment
Agreement:  As defined in Section
12.1(b).

     

    Authorized
Officer:  With respect to any Person, its president, corporate
controller, treasurer, assistant treasurer or chief financial
officer.

     

    Borrower:  As
defined in the Preamble to this
Agreement.

     

    Borrowing
Base:  On any date of determination, the Net Pool Balance as of
the last day of the period covered by the most recent Monthly Report, minus the
Required Reserve as of the last day of the period covered by the most recent
Monthly Report, and minus Deemed Collections that have occurred since the most
recent Cut-Off Date to the extent that such Deemed Collections exceed the
Dilution Reserve.

     

    Borrowing
Date:  A Business Day on which an Advance is made
hereunder.

     

    Borrowing
Limit:  As defined in Section
1.1(a)(i).

     

    Borrowing
Notice:  As defined in Section
1.2.

     

    Broken Funding
Costs:  For any CP Rate Loan or LIBO Rate Loan
which:  (i) in the case of a CP Rate Loan, has its principal reduced
without compliance by Borrower with the notice requirements hereunder, (ii) in
the case of a CP Rate Loan or a LIBO Rate Loan, does not become subject to an
Aggregate Reduction following the delivery of any Reduction Notice, (iii) in the
case of a CP Rate Loan, is assigned under the Liquidity Agreement, or (iv) in
the case of a LIBO Rate Loan, is terminated or reduced prior to the last day of
its Interest Period, an amount equal to the excess, if any, of (A) the CP Costs
or Interest (as applicable) that would have accrued during the remainder of the
Interest Periods or the tranche periods for Commercial Paper determined by the
Agent to relate to such Loan (as applicable) subsequent to the date of such
reduction, assignment or termination (or in respect of clause (ii) above,
the date such Aggregate Reduction was designated to occur pursuant to the
Reduction Notice) of the principal of such Loan if such reduction, assignment or
termination had not occurred or such Reduction Notice had not been delivered,
over (B) the sum of (1) to the extent all or a portion of such principal is
allocated to another Loan, the amount of CP Costs or Interest actually accrued
during the remainder of such period on such principal for the new Loan, and (2)
to the extent such principal is not allocated to another Loan, the income, if
any, actually received during the remainder of such period by the holder of such
Loan from investing the portion of such principal not so
allocated.  In the event that the amount referred to in clause (B) exceeds
the amount referred to in clause (A), the
relevant Lender or Lenders agree to pay to Borrower the amount of such
excess.  All Broken Funding Costs shall be due and payable hereunder
upon demand.

     

    BTMU:  As
defined in the Preamble to this
Agreement.

     

    Business
Day:  Any day on which banks are not authorized or required to
close in New York, New York or Allentown, Pennsylvania and, if the applicable
Business Day relates to any computation or payment to be made with respect to
the LIBO Rate, any day on which dealings in dollar deposits are carried on in
the London interbank market.

     

    Budget Plan
Receivable:  Any indebtedness arising under any budget billing
program whereby the Obligor pays a flat monthly payment for a 12-month
period.

     

    Budget Plan Receivable
Liability Amount:  On any day, the liability maintained, or
that should be maintained in accordance with GAAP, by the Originator in respect
of Obligors of Budget Plan Receivables in respect of cumulative overpayments by
such Obligors.

     

    Calculation
Period:  A calendar month.

     

    Capital
Lease:  Any lease of property which, in accordance with GAAP,
should be capitalized on the lessee’s balance sheet.

     

    Capital Lease
Obligations:  With respect to any Person, all obligations of
such Person as lessee under Capital Leases, in each case taken at the amount
thereof accounted for as liabilities in accordance with GAAP.

     

    Change of
Control:  The acquisition by any Person, or two or more Persons
acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended) of 25% or more of the outstanding shares of voting stock of
any PPL Electric Party or the failure at any time of PPL Corporation or its
successors to own 80% or more of the outstanding shares of the voting stock in
the Servicer.

     

    Closing
Date:  August 5, 2008.

     

    Collateral:  As
defined in Section
13.1.

     

    Collection
Account:  The Facility Account and any account of PPL Electric
into which any Collections are at any time deposited.

     

    Collection
Bank:  At any time, the bank maintaining a Collection
Account.

     

    Collection
Curve:  At any time, the then applicable “collection curve” as
defined in the ITC Bond Servicing Agreement.

     

    Collections:  With
respect to any Receivable, all cash collections and other cash proceeds in
respect of such Receivable, including, without limitation, all Finance Charges
or other related amounts accruing in respect thereof and all cash proceeds of
Related Security with respect to such Receivable.

     

    Commercial
Paper:  Promissory notes of Victory issued by Victory in the
commercial paper market.

     

    Commitment:  For
each Liquidity Bank, the commitment of such Liquidity Bank to make Loans to
Borrower hereunder in the event that Victory elects not to fund any Advance in
an aggregate principal amount at any one time outstanding not to exceed the
amount set forth opposite such Liquidity Bank’s name on Schedule A to this
Agreement.

     

    Competition Act: The
Electricity Generation Customer Choice and Competition Act (66 P.A. C.S. § 2801
et seq.), as amended,
and any successor statute thereto.

     

    Contingent
Obligation:  Of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of
credit.

     

    Contract:  With
respect to any Receivable, any and all instruments, agreements, invoices or
other writings pursuant to which such Receivable arises or which evidences such
Receivable.

     

    CP
Costs:  For any period and with respect to any Loan funded by
Victory through the issuance of Commercial Paper, the weighted average cost (as
determined by Victory (or by the Agent on its behalf) which shall include
commissions and fees of placement agents and dealers, incremental carrying costs
incurred with respect to Commercial Paper maturing on dates other than those on
which corresponding funds are received by Victory, other borrowings by Victory
(other than under any Liquidity Agreement) and any other costs and expenses
associated with the issuance of Commercial Paper) of or related to the issuance
of Commercial Paper that is allocated, in whole or in part, by Victory (or by
the Agent on its behalf) to fund or maintain such Loan (and which may be also
allocated in part to the funding of other assets of Victory (including, in the
case of Commercial Paper issued on a discount, such discount)); provided that
notwithstanding anything in the Agreement or the other Transaction Documents to
the contrary, Borrower agrees that any amounts payable to Victory in respect of
interest for any period with respect to any Loan funded by Victory through the
issuance of Commercial Paper shall include an amount equal to the portion of the
face amount of the outstanding Commercial Paper issued to fund or maintain such
Loan that corresponds to the portion of the proceeds of such Commercial Paper
that was used to pay the interest component of maturing Commercial Paper issued
to fund or maintain such Loan, to the extent that Victory had not received
payments of interest in respect of such interest component prior to the maturity
date of such maturing Commercial Paper (for purposes of the foregoing, the
“interest component” of Commercial Paper equals the excess of the face amount
thereof over the net proceeds received by Victory from the issuance of
Commercial Paper, except that if such Commercial Paper is issued on an
interest-bearing basis its “interest component” will equal the amount of
interest accruing on such Commercial Paper through maturity
thereof).

     

    CP Rate
Loan:  For each Loan of Victory made to Borrower under the
Agreement prior to the time, if any, when (i) it is refinanced with a Liquidity
Funding pursuant to the Liquidity Agreement, (ii) Victory is no longer funding
or maintaining such Loan through the issuance of Commercial Paper, or (iii) the
occurrence of an Amortization Event and the commencement of the accrual of
interest thereon at the Default Rate.

     

    Credit and Collection
Practices:  Borrower’s credit and collection policies and
practices relating to Contracts and Receivables existing on the date hereof and
summarized in Exhibit
VIII hereto, as modified from time to time in accordance with this
Agreement.

     

    CTC
Receivables:  All indebtedness and other obligations owed to
Originator related to or arising out of Originator’s recovery of Competitive
Transition Charges (as defined in Section 2803 of the Competition
Act).

     

    Cut-Off
Date:  The last day of a Calculation Period.

     

    Days Sales
Outstanding:  As of any day, an amount equal to the product of
(i) 91, multiplied by (ii) the amount obtained by dividing (A) the aggregate
outstanding balance of Receivables as of the most recent Cut-Off Date, by (B)
the aggregate amount of Receivables created during the three (3) Calculation
Periods including and immediately preceding such Cut-Off Date.

     

    Deemed
Collections:  Collections deemed received by Borrower under
Section
1.4(a).

     

    Default Horizon
Ratio:  As of any Cut-Off Date, the ratio (expressed as a
decimal) computed by dividing (i) the aggregate sales generated by Originator
during the four Calculation Periods ending on such Cut-Off Date, by (ii) the Net
Pool Balance as of such Cut-off Date.

     

    Default
Rate:  A rate per annum equal to the sum of (i) the Alternate
Base Rate plus (ii) 2.00%, changing when and as the Alternate Base Rate
changes.

     

    Default
Ratio:  As of any Cut-Off Date, the ratio (expressed as a
percentage) computed by dividing (i) the total amount of Receivables which
became Default Ratio Receivables during the Calculation Period that includes
such Cut-Off Date, by (ii) the aggregate sales generated by Originator during
the Calculation Period occurring four months prior to the Calculation Period
ending on such Cut-Off Date.

     

    Default Ratio
Receivable:  A Receivable (i) that is a Defaulted Receivable
described in clause
(i) or (ii) of the
definition of “Defaulted Receivable” or (ii) as to which any payment, or part
thereof, (x) remains unpaid for 121 days or more, but not longer than 150 days,
from the original invoice date for such payment and (y) is not a Payment
Agreement Receivable, On-Track Receivable or Late Payment
Receivable.

     

    Defaulted
Receivable:  A Receivable:  (i) as to which the
Obligor thereof has suffered an Event of Bankruptcy; (ii) which, consistent with
the Credit and Collection Practices, would be written off Borrower’s books as
uncollectible; or (iii) as to which any payment, or part thereof, remains unpaid
for 121 days or more from the original invoice date for such
payment.

     

    Delinquency
Ratio:  At any time, a percentage equal to (i) the aggregate
Outstanding Balance of all Receivables that were Delinquent Receivables at such
time divided by (ii) the aggregate Outstanding Balance of all Receivables at
such time.

     

    Delinquent
Receivable:  A Receivable as to which any payment, or part
thereof, remains unpaid for 91-120 days from the original invoice date for such
payment.

     

    Deposit
Receivable:  Any indebtedness arising in respect of any
obligation of an Obligor to pay a security or other deposit to Originator in
respect of the delivery to such Obligor by Originator of any
services.

     

    Designated
Obligor:  An Obligor indicated by the Agent to Borrower in
writing.

     

    Dilution:  The
amount of any reduction or cancellation of the Outstanding Balance of a
Receivable as described in Section
1.4(a).

     

    Dilution Horizon
Ratio:  As of any Cut-off Date, a ratio (expressed as a
decimal), computed by dividing (1) the sum of (i) the aggregate sales generated
by the Originators during the Calculation Period ending on such Cut-Off Date and
(ii) the aggregate sales generated by the Originators during the Calculation
Period immediately preceding the Calculation Period ending on such Cut-Off Date,
by (2) the Net Pool Balance as of such Cut-Off Date.

     

    Dilution
Ratio:  As of any Cut-Off Date, a ratio (expressed as a
percentage), computed by dividing (1) the total amount of decreases in
Outstanding Balances due to Dilutions during the Calculation Period ending on
such Cut-Off Date, by (2) the aggregate sales generated by the Originators
during the Calculation Period that ended two months prior to the commencement of
the Calculation Period ending on such Cut-Off Date (for example with respect to
the August 31, 2008 Cut-Off Date the ratio would be calculated using aggregate
sales generated during the May 2008 Calculation Period).

     

    Dilution
Reserve:  For any Calculation Period, the product (expressed as
a percentage) of:

     

    (i)           the
sum of (A) two (2) times the Adjusted Dilution Ratio as of the immediately
preceding Cut-Off Date, plus (B) the Dilution Volatility Component as of the
immediately preceding Cut-Off Date, times

     

    (ii)           the
Dilution Horizon Ratio as of the immediately preceding Cut-Off
Date.

     

    Dilution Volatility
Component:  The product (expressed as a percentage) of (i) the
difference between (A) the highest three (3)-month rolling average Dilution
Ratio over the past 12 Calculation Periods and (B) the Adjusted Dilution Ratio,
and (ii) a fraction, the numerator of which is equal to the amount calculated in
(i)(A) of this
definition and the denominator of which is equal to the amount calculated in
(i)(B) of this
definition.

     

    Downgraded Liquidity
Bank:  A Liquidity Bank with a rating of its short-term
securities lower than (1) A-1 by S&P and (ii) P-1 by Moody’s.

     

    Downgrading
Event:  With respect to any Person means the lowering of the
long-term issuer rating or senior unsecured long-term debt rating of such Person
to below (i) BBB- by S&P, or (ii) Baa3 by Moody’s or the withdrawal by
either S&P or Moody’s of such rating of such Person.

     

    Dual Month Revenue
Adjustment:  For each Calculation Period, the aggregate
Outstanding Balance of all Receivables, Nuclear Decommissioning Receivables and
ITC Receivables generated between the first Business Day of such Calculation
Period and the third Business Day of such Calculation Period (both
inclusive).

     

    ECP Contract
Payments:  All fixed monthly payments and any other monies
payable to PPL Electric, as seller, for an energy conservation project pursuant
to that certain Master Purchase Agreement, dated as of July 1, 1999, between PPL
Electric (f/k/a PP&L, Inc.), as seller, and BLC Corporation, as
purchaser.

     

    Eligible
Assignee:  A commercial bank having a combined capital and
surplus of at least $250,000,000 with a rating of its (or its holding company’s)
short-term securities equal to or higher than (i) A-1 by S&P and (ii) P-1 by
Moody’s.

     

    Eligible
Receivable:  At any time, a Receivable, including, prior to the
occurrence of a Downgrading Event with respect to the Servicer, Unbilled
Receivables:

     

    (i)           the
Obligor of which (A) if a natural person, is a resident of the United States or,
if a corporation or other business organization, is organized under the laws of
the United States or any political subdivision thereof and has its chief
executive office in the United States; (B) is not an Affiliate of any of the
parties hereto; (C) may be a government or a governmental subdivision or agency;
provided, however, that
Receivables as to which the Obligor is a government or a governmental
subdivision or agency may account for no more than 8.00% of the aggregate
Outstanding Balance of all Eligible Receivables as of any date of determination;
and (D) is not a Designated Obligor,

     

    (ii)           [reserved],

     

    (iii)           which
is not owing from an Obligor as to which more than 25% of the aggregate
Outstanding Balance of all Receivables owing from such Obligor are Defaulted
Receivables,

     

    (iv)           which
is not a Defaulted Receivable,

     

    (v)           except
for Unbilled Receivables prior to the occurrence of a Downgrading Event with
respect to the Servicer, which by its terms is due and payable within thirty
(30) days of the original billing date therefor and has not had its payment
terms extended more than once,

     

    (vi)           which
is an “account” or “payment intangible” within the meaning of Section
9-102(a)(2), Section 9-102(61) and Section 9-102(a)(11), respectively, of
the UCC of all applicable jurisdictions,

     

    (vii)           which
is denominated and payable only in U.S. Dollars in the United
States,

     

    (viii)                      which
arises under a Contract in substantially the form of one of the form contracts
or otherwise approved by the Agent in writing, which, together with such
Receivable, is in full force and effect and constitutes the legal, valid and
binding obligation of the related Obligor enforceable against such Obligor in
accordance with its terms subject to no offset, counterclaim or other
defense,

     

    (ix)           which
arises under a Contract which (A) does not require the Obligor under such
Contract to consent to the transfer, sale, pledge or assignment of the rights
and duties of Originator or any of its assignees under such Contract and (B)
does not contain a confidentiality provision that purports to restrict the
ability of any Lender to exercise its rights under this Agreement, including,
without limitation, its right to review the Contract,

     

    (x)           which
arises under a Contract that contains an obligation to pay a specified sum of
money, contingent only upon the provision of services by
Originator,

     

    (xi)           which,
together with the Contract related thereto, does not contravene in any material
way any law, rule or regulation applicable thereto (including, without
limitation, any law, rule and regulation relating to truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and with respect to which no part of the
Contract related thereto is in violation of any such law, rule or
regulation,

     

    (xii)           which
satisfies all applicable requirements of the Credit and Collection Practices in
all material respects,

     

    (xiii)                      which
was generated in the ordinary course of Originator’s business,

     

    (xiv)                      which
arises solely from the delivery of electricity to the related Obligor by
Originator, and not by any other Person (in whole or in part),

     

    (xv)           as
to which the Agent has not notified Borrower that the Agent has determined that
such Receivable or class of Receivables is not acceptable as an Eligible
Receivable, including, without limitation, because such Receivable arises under
a Contract that is not acceptable to the Agent,

     

    (xvi)                      which
is not subject to any dispute, counterclaim, right of rescission, set-off,
counterclaim or any other defense (including defenses arising out of violations
of usury laws) of the applicable Obligor against Originator or any other Adverse
Claim; provided, however, that if such
dispute, offset, counterclaim or defense affects only a portion of the
Outstanding Balance of such Receivable, then such Receivable may be deemed an
Eligible Receivable to the extent of the portion of such Outstanding Balance
which is not so affected, and provided, further, that Receivables of any Obligor
which has any accounts payable by Originator or by a wholly-owned Subsidiary of
Originator (thus giving rise to a potential offset against such Receivables) may
be treated as Eligible Receivables to the extent that the Obligor of such
Receivables has agreed pursuant to a written agreement in form and substance
satisfactory to the Agent, that such Receivables shall not be subject to such
offset,

     

    (xvii)                      as
to which Originator has satisfied and fully performed all obligations on its
part with respect to such Receivable required to be fulfilled by it, and no
further action is required to be performed by any Person with respect thereto
other than payment thereon by the applicable Obligor,

     

    (xviii)                      as
to which each of the representations and warranties contained in Section 5.1(f), Section 5.1(h), Section 5.1(i), Section 5.1(q), Section 5.1(r), Section 5.1(s) and
Section 5.1(t)
is true and correct,

     

    (xix)                      all
right, title and interest to and in which has been validly transferred by
Originator directly to Borrower under and in accordance with the Receivables
Sale Agreement, and Borrower has good and marketable title thereto free and
clear of any Adverse Claim, and

     

    (xx)           which
is not an Ineligible Receivable.

     

    Energy
Supplier:  Any Person who is not the Originator.

     

    Environmental
Laws:  Any and all federal, state and local statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses or other written governmental
restrictions relating to the environment or to emissions, discharges or releases
of pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or Hazardous Substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
petroleum or petroleum products, chemicals or industrial, toxic or Hazardous
Substances or wastes.

     

    ERISA:  The
Employee Retirement Income Security Act of 1974, as amended from time to time,
and any rule or regulation issued thereunder.

     

    ERISA
Group:  The Originator and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Originator, are treated as a single
employer under Section 414(b) or (c) of the Internal Revenue Code.

     

    Event of
Bankruptcy:  Shall be deemed to have occurred with respect to a
Person if either:

     

    (i)           a
case or other proceeding shall be commenced, without the application or consent
of such Person, in any court, seeking the liquidation, reorganization, debt
arrangement, dissolution, winding up, or composition or readjustment of debts of
such Person, the appointment of a trustee, receiver, custodian, liquidator,
assignee, sequestrator or the like for such Person or all or substantially all
of its assets, or any similar action with respect to such Person under any law
relating to bankruptcy, insolvency, reorganization, winding up or composition or
adjustment of debts, and such case or proceeding shall continue undismissed, or
unstayed and in effect, for a period of sixty (60) consecutive days; or an order
for relief in respect of such Person shall be entered in an involuntary case
under the federal bankruptcy laws or other similar laws now or hereafter in
effect; or

     

    (ii)           such
Person shall commence a voluntary case or other proceeding under any applicable
bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other
similar law now or hereafter in effect, or shall consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee (other than a
trustee under a deed of trust, indenture or similar instrument), custodian,
sequestrator (or other similar official) for, such Person or for any substantial
part of its property, or shall make any general assignment for the benefit of
creditors, or shall be adjudicated insolvent, or admit in writing its inability
to pay its debts generally as they become due, or, if a corporation or similar
entity, its board of directors shall vote to implement any of the
foregoing.

     

    Facility
Account:  The following account:

     

    Bank:                                           Mellon
Bank, N.A.

    ABA:                                           031-000-037

    Credit
DDA:                                           9-990-011

    Account
Name                                Mellon
Trust of Delaware Association

    Further
Credit:                                           PPL
Receivables/DELF67L-A002

    

    Facility Termination
Date:  The earliest of (i) the Liquidity Termination Date, (ii)
the Amortization Date, (iii) July 29, 2009 and (iv) December 31, 2008 if any of
the conditions precedent to the initial Advance hereunder set forth in Section 6.2(a) and
(b) have not
been satisfied on or prior to such date.

     

    Federal Bankruptcy
Code:  Title 11 of the United States Code entitled
“Bankruptcy,” as amended and any successor statute thereto.

     

    Federal Funds Effective
Rate:  For any period, a fluctuating interest rate per annum
for each day during such period equal to (i) the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the preceding Business Day) by the Federal
Reserve Bank of New York in the Composite Closing Quotations for U.S. Government
Securities; or (ii) if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 11:30 a.m. (New
York time) for such day on such transactions received by the Agent from three
federal funds brokers of recognized standing selected by it.

     

    Fee
Letter:  That certain fee letter agreement dated as of the date
hereof among Borrower, Victory and the Agent, as it may be amended or modified
and in effect from time to time.

     

    Final Payout
Date:  The date on which all Obligations have been paid in full
and the Aggregate Commitment has been terminated.

     

    Finance
Charges:  With respect to a Contract, any finance, interest,
late payment charges or similar charges owing by an Obligor pursuant to such
Contract.

     

    Five-Year Credit
Agreement:  That certain Third Amended and Restated Five-Year
Credit Agreement, dated as of May 4, 2007, by and among Originator, the Lenders
from time to time party thereto, Wachovia Bank, National Association, Barclays
Bank PLC, Citibank, N.A., Wachovia Capital Markets, LLC, Barclays Capital,
JPMorgan Chase Bank and Morgan Stanley Bank, as the same may be modified,
amended or restated from time to time.

     

    Fixed Daily
Amount:  An amount equal to the estimated daily collections
allocable to the ITC Receivables (which amount shall be determined by the
Servicer based upon the Collection Curve and adjusted annually) and the Nuclear
Decommissioning Receivables (which amount shall be, with respect to any month,
the dollar amount for such month set forth in the amortization schedule attached
as Exhibit VI
hereto).

     

    Funding
Agreement:  (i) this Agreement, (ii) the Liquidity Agreement
and (iii) any other agreement or instrument executed by any Funding Source with
or for the benefit of Victory.

     

    Funding
Source:  (i) any Liquidity Bank or (ii) any insurance company,
bank or other funding entity providing liquidity, credit enhancement or back-up
purchase support or facilities to Victory.

     

    GAAP:  At
any time, generally accepted accounting principles in effect in the United
States of America at such time.

     

    GENCO
Receivable:  Any Receivable arising out of the supply of
electricity to an Obligor on a wholesale basis by Originator.

     

    Governmental
Authority:  Any federal, state or local government, authority,
agency, central bank, quasi-governmental authority, court or other body or
entity, and any arbitrator with authority to bind a party at law.

     

    Guarantee:  Of
or by any Person means any obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing any Indebtedness of
any other Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation of such Person, direct or indirect, (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or to purchase (or to advance or supply funds for the purchase
of) any security for payment of such Indebtedness, (ii) to purchase or lease
property, securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness or (iii) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness; provided, however, that the
term Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.

     

    Hazardous
Substances:  Any toxic, caustic or otherwise hazardous
substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics.

     

    Indebtedness:  Of
any Person means, without duplication, (i) all obligations of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all Guarantees by such Person of
Indebtedness of others, (iv) all Capital Lease Obligations and Synthetic Leases
of such Person, (v) all obligations of such Person in respect of Interest Rate
Protection Agreements, foreign currency exchange agreements or other interest or
exchange rate hedging arrangements (the amount of any such obligation to be the
net amount that would be payable upon the acceleration, termination or
liquidation thereof) and (vi) all obligations of such Person as an account party
in respect of letters of credit and bankers’ acceptances; provided, however, that
“Indebtedness” of such Person does not include (A) obligations of such Person
under any installment sale, conditional sale or title retention agreement or any
other agreement relating to obligations for the deferred purchase price of
property or services (B) obligations under agreements relating to the purchase
and sale of any commodity, including any power sale or purchase agreements, any
commodity hedge or derivative (regardless of whether any such transaction is a
“financial” or physical transaction), (C) any trade obligations or other
obligations of such Person incurred in the ordinary course of business or (D)
obligations of such Person under any lease agreement (including any lease
intended as security) that is not a Capital Lease or a Synthetic
Lease.

     

    Indemnified
Amounts:  As defined in Section
10.1.

     

    Indemnified
Party:  As defined in Section
10.1.

     

    Independent
Director:  A member of the Board of Directors of Borrower who
is not at such time, and has not been at any time during the preceding five (5)
years:  (i) a creditor, supplier, director, officer, employee, family
member, manager or contractor of PPL Electric, Originator or any of their
respective Subsidiaries or Affiliates (other than Borrower), (ii) a direct or
indirect or beneficial owner, excluding de minimus ownership
interests, (at the time of such individual’s appointment as an Independent
Director or at any time thereafter while serving as an Independent Director) of
any of the outstanding common shares of Borrower, PPL Electric, Originator, or
any of their respective Subsidiaries or Affiliates, having general voting
rights, or (iii) a person who controls (whether directly, indirectly or
otherwise), PPL Electric, Originator or any of their respective Subsidiaries or
Affiliates (other than Borrower) or any creditor, supplier, employee, officer,
director, manager or contractor of PPL Electric, Originator or any of their
respective Subsidiaries or Affiliates (other than Borrower).

     

    Ineligible
Receivables:  All Alternate Supplier Charges, Deposit
Receivables, GENCO Receivables, Ineligible Unbilled Receivables, Late Payment
Receivables, On-Track Receivables, Operation Help Receivables, Payment Agreement
Receivables, Transferred Receivables and following the occurrence of a
Downgrading Event with respect to the Servicer, all Unbilled
Receivables.

     

    Ineligible Unbilled
Receivable:  Any Unbilled Receivable, which Unbilled Receivable
if billed would constitute a Payment Agreement Receivable, an On-Track
Receivable or an Alternate Supplier Charge.

     

    Intercreditor
Agreement:  That certain Intercreditor Agreement, dated as of
the Closing Date, among PPL Electric, the Borrower and the Agent, as the same
may be amended, supplemented or otherwise modified from time to
time.

     

    Interest:  For
each respective Interest Period relating to Loans of the Liquidity Banks, an
amount equal to the product of the applicable Interest Rate for each Loan
multiplied by the principal of such Loan for each day elapsed during such
Interest Period, annualized on a 360 day basis.

     

    Interest
Period:  With respect to any Loan held by a Liquidity
Bank:

     

    (i)           if
Interest for such Loan is calculated on the basis of the LIBO Rate, a period of
one (1), two (2), three (3) or six (6) months, or such other period as may be
mutually agreeable to the Agent and Borrower, commencing on a Business Day
selected by Borrower or the Agent pursuant to this Agreement.  Such
Interest Period shall end on the day in the applicable succeeding calendar month
which corresponds numerically to the beginning day of such Interest Period;
provided, however, that if
there is no such numerically corresponding day in such succeeding month, such
Interest Period shall end on the last Business Day of such succeeding month;
or

     

    (ii)           if
Interest for such Loan is calculated on the basis of the Alternate Base Rate, a
period commencing on a Business Day selected by Borrower and agreed to by the
Agent, provided that no such period shall exceed one month.

     

    If any
Interest Period would end on a day which is not a Business Day, such Interest
Period shall end on the next succeeding Business Day; provided, however, that in the
case of Interest Periods corresponding to the LIBO Rate, if such next succeeding
Business Day falls in a new month, such Interest Period shall end on the
immediately preceding Business Day.  In the case of any Interest
Period for any Loan which commences before the Amortization Date and would
otherwise end on a date occurring after the Amortization Date, such Interest
Period shall end on the Amortization Date.  The duration of each
Interest Period which commences after the Amortization Date shall be of such
duration as selected by the Agent.

     

    Interest
Rate:  With respect to each Loan of the Liquidity Banks, the
LIBO Rate, the Alternate Base Rate or the Default Rate, as
applicable.

     

    Interest Rate Protection
Agreements:  Any agreement providing for an interest rate swap,
cap or collar, or any other financial agreement designed to protect against
fluctuations in interest rates.

     

    Interest
Reserve:  For any Calculation Period, the product (expressed as
a percentage) of (i) 1.5 times (ii) the
Alternate Base Rate as of the immediately preceding Cut-Off Date times (iii) a
fraction the numerator of which is the highest Days Sales Outstanding for the
most recent 12 Calculation Periods and the denominator of which is
360.

     

    ITC
Bonds:  Each series of Transition Bonds issued pursuant to the
ITC Indenture and any related series supplements, as authorized by the PUC under
Section 2812 of the Competition Act.

     

    ITC Bond
Documents:  That certain Indenture, dated as of August 10, 1999
(the “ITC Indenture”),
by and between PPL Transition Bond Company LLC and The Bank of New York, the ITC
Bonds Servicing Agreement and each other Basic Document (as defined in the ITC
Indenture), as each may be amended, supplemented, modified or amended and
restated, and all other documents related thereto.

     

    ITC Bonds
Servicer:  At any time the Person designated as “Servicer” (as
defined in the ITC Bonds Servicing Agreement) pursuant to the ITC Bonds
Servicing Agreement.

     

    ITC Bonds Servicing
Agreement:  That certain Intangible Transition Property
Servicing Agreement, dated as of August 10, 1999, by and between PPL Transition
Bond Company LLC and PPL Electric, as such may be amended, supplemented,
modified or amended and restated.

     

    ITC
Receivables:  All “Intangible Transition Property”, “Intangible
Transition Charges” and “ITC Collections” (each as defined in the ITC Bonds
Servicing Agreement) and all accounts receivable, payment intangibles and
general intangibles arising in connection with the “Collateral” (as defined in
the ITC Indenture).

     

    Late Payment
Receivables:  Any indebtedness of Obligors pertaining to
Receivables constituting late payment fees and/or service charges.

     

    Lender:  Victory
and each Liquidity Bank.

     

    LIBO
Rate:  For any Interest Period, a rate per annum equal to (i)
(A) the rate per annum determined on the basis of the offered rate for deposits
in U.S. dollars of amounts equal or comparable to the principal amount of the
related Loan offered for a term comparable to such Interest Period, which rate
is designated as The Bank of Tokyo-Mitsubishi UFJ, Ltd. LIBO Rate for a period
of time comparable to such Interest Period that appears on the Reuters Screen
LIBO Page as of 11:00 a.m. (London, England time) on the second Business Day
preceding the first day of such Interest Period, or (B) if such rate cannot be
determined pursuant to clause (A) above, the
rate per annum equal to the average (rounded upwards if necessary to the
nearest 1/100th of 1%) of the rates per annum at which deposits in U.S.
Dollars with a duration equal to such Interest Period in a principal amount
substantially equal to the applicable Loan or Loans are offered to the principal
London office of The Bank of Tokyo-Mitsubishi UFJ, Ltd. by three
London banks, selected by Agent in good faith, at about 11:00 a.m. London time
on the second Business Day preceding the first day of such Interest Period,
divided by (ii) one minus the maximum
aggregate reserve requirement (including all basic, supplemental, marginal or
other reserves) which is imposed against the Agent in respect of Eurocurrency
liabilities, as defined in Regulation D of the Board of Governors of the Federal
Reserve System as in effect from time to time (expressed as a decimal),
applicable to such Interest Period, plus (iii) the
Applicable Margin.  The LIBO Rate shall be rounded, if necessary, to
the next higher 1/16 of 1%.

     

    LIBO Rate
Loan:  A Loan which bears interest at the LIBO
Rate.

     

    Liquidity
Agreement:  Collectively, (i) that certain Liquidity Agreement,
dated as of the Closing Date, by and among Victory, as issuer, Duetsche Bank
Trust Company Americas, as administrator and as collateral agent, and the
Liquidity Banks from time to time party thereto, as banks, and (ii) that certain
Asset Purchase Agreement, dated as of the Closing Date, by and among Duetsche
Bank Trust Company Americas, as program administrator, Victory, as issuer, and
the Liquidity Banks from time to time party thereto, as purchasers, as such
agreements may be amended, restated and/or otherwise modified from time to time
in accordance with the terms thereof.

     

    Liquidity
Banks:  As defined in the Preamble in this
Agreement.

     

    Liquidity
Commitment:  As to each Liquidity Bank, its commitment under
the Liquidity Agreement.

     

    Liquidity
Funding:  (i) a purchase made by any Liquidity Bank pursuant to
its Liquidity Commitment of all or any portion of, or any undivided interest in,
a Victory Loan, or (ii) any Loan made by a Liquidity Bank in lieu of Victory
pursuant to Section
1.1.

     

    Liquidity Termination
Date:  The earlier to occur of the following:

     

    (i)           the
date on which the Liquidity Banks’ Liquidity Commitments expire, cease to be
available to Victory or otherwise cease to be in full force and effect;
or

     

    (ii)           the
date on which a Liquidity Bank shall have become a Downgraded Liquidity Bank and
shall have continued as a Downgraded Liquidity Bank for not less than thirty
(30) days, and either (A) the Downgraded Liquidity Bank shall not have been
replaced by an Eligible Assignee pursuant to the Liquidity Agreement, or (B) the
Liquidity Commitment of such Downgraded Liquidity Bank shall not have been
funded or collateralized in such a manner that will avoid a reduction in or
withdrawal of the credit rating applied to the Commercial Paper to which such
Liquidity Agreement applies by any of the rating agencies then rating such
Commercial Paper.

     

    Loan:  Any
loan made by a Lender to Borrower pursuant to this Agreement (including, without
limitation, any Liquidity Funding).  Each Loan shall either be a CP
Rate Loan, an Alternate Base Rate Loan or a LIBO Rate Loan, selected in
accordance with the terms of this Agreement.

     

    Loss
Reserve:  For any Calculation Period, the greater of (a) 8.00%
and (b) the product (expressed as a percentage) of (i) 2.0, times (ii) the
highest three-month rolling average Default Ratio during the twelve (12)
Calculation Periods ending on the immediately preceding Cut-Off Date, times
(iii) the Default Horizon Ratio as of the immediately preceding Cut-Off
Date.

     

    Material Adverse
Effect:  A material adverse effect on (i) the financial
condition or operations of any PPL Electric Party, (ii) the ability of any PPL
Electric Party to perform its obligations under this Agreement, (iii) the
legality, validity or enforceability of this Agreement or any other Transaction
Document, (iv) the Agent’s security interest, for the benefit of the Secured
Parties, in the Receivables generally or in any significant portion of the
Receivables, the Related Security or the Collections with respect thereto, or
(v) the collectability of the Receivables generally or of any material portion
of the Receivables.

     

    Material
Indebtedness:  Indebtedness of any Person in a principal or
face amount exceeding $50,000,000.

     

    Material
Plan:  At any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $25,000,000.

     

    Maximum Lawful
Rate:  As defined in Section
2.5.

     

    Monthly
Report:  A report, in substantially the form of Exhibit IX hereto
(appropriately completed), furnished by the Servicer to the Agent pursuant to
Section
8.5.

     

    Monthly Reporting
Date:  The 15th day of
each month after the date of this Agreement (or if any such day is not a
Business Day, the next succeeding Business Day thereafter).

     

    Moody’s:  Moody’s
Investors Service, Inc.

     

    Multiemployer
Plan:  At any time an employee pension benefit plan within the
meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is
then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.

     

    Net Pool
Balance:  At any time, the aggregate Outstanding Balance of all
Eligible Receivables at such time reduced by (i) the aggregate amount by which
the Outstanding Balance of all Eligible Receivables of each Obligor and its
Affiliates exceeds the Obligor Concentration Limit for such Obligor and its
Affiliates (ii) the aggregate Budget Plan Receivable Liability Amount and (iii)
the Dual Month Revenue Adjustment.

     

    Net
Worth:  As defined in the Receivables Sale
Agreement.

     

    Nuclear Decommissioning
Receivables:  The CTC Receivables arising out of the
Originator’s recovery of the portion of the Competitive Transition Charges (as
defined in Section 2803 of the Competition Act) that has been designated for the
funding of the decommissioning of the Susquehanna Nuclear Power
Plant.

     

    Obligations:  As
defined in Section
2.1.

     

    Obligor:  A
Person obligated to make payments pursuant to a Contract.

     

    Obligor Concentration
Limit:  At any time, with respect to any single Obligor and its
Affiliates (if any), an amount equal to the product of (x) the aggregate
Outstanding Balance of all Eligible Receivables and (y) the applicable
percentage for such Obligor set forth on the following table determined (1) if
such Obligor has short term unsecured debt ratings currently assigned to it by
S&P and Moody’s, by such short term unsecured debt ratings or (2) in the
absence thereof, by the equivalent long term unsecured senior debt
ratings:

     

    
      	
              Obligor
      Rating

            	
              %
      of Eligible Rec.

            
	
              A-1
      and P-1 or better

            	
              8%

            
	
              Lower
      than A-1 or P-1, and not lower than A-2 and P-2

            	
              6%

            
	
              Lower
      than A-2 or P-2, and not lower than A-3 and P-3

            	
              3%

            
	
              Lower
      than A-3 or P-3 or unrated

            	
              2%

            
	 
      	 
      

    

    ; provided, however, that (i) if
any Obligor has a split rating, the applicable rating will be the lower of the
two, (ii) if any Obligor is not rated by either S&P or Moody’s, the
applicable Obligor Concentration Limit shall be the one set forth in the last
line of the table above, and (iii) subject to satisfaction of the Rating Agency
Condition and/or an increase in the percentage set forth in clause (i)(A) of the
definition of “Required Reserve,” upon Borrower’s request from time to time, the
Agent may agree to a higher percentage of Eligible Receivables for a particular
Obligor and its Affiliates (each such higher percentage, a “Special
Concentration Limit”), it being understood that any Special Concentration
Limit may be cancelled by the Agent upon not less than five (5) Business Days’
written notice to the PPL Electric Parties.

     

    On-Track
Receivable:  Any Receivable arising out of the sale of
electricity to an Obligor by Originator which Obligor pays a flat monthly fee
for such electricity, which monthly fee is less than the full amount invoiced
therefor, with the difference between the amount invoiced to the Obligor and the
amount paid by the Obligor written off by Originator.

     

    Operation Help
Receivable:  Any amounts accrued as a result of voluntary
payments to Originator by Obligors to offset Originator’s cost of providing
electricity to underprivileged families.

     

    Organizational
Documents:  For any Person, the documents for its formation and
organization, which, for example, (i) for a corporation are its corporate
charter and bylaws, (ii) for a partnership are its certificate of partnership
(if applicable) and partnership agreement, (iii) for a limited liability company
are its certificate of formation or organization and its operating agreement,
regulations or the like and (iv) for a trust is the trust agreement, declaration
of trust, indenture or bylaws under which it is created.

     

    Originator:  PPL
Electric Utilities Corporation (f/k/a PP&L, Inc.), in its capacity as the
seller under the Receivables Sale Agreement.

     

    Outstanding
Balance:  Of any Receivable at any time means the then
outstanding principal balance thereof.

     

    Participant:  As
defined in Section
12.2.

     

    Payment Agreement
Receivable:  Any Receivable arising out of the sale of
electricity to an Obligor by Originator for which individualized payment
arrangements have been agreed to by such Obligor and Originator because of such
Obligor’s negative payment history.

     

    PBGC:  The
Pension Benefit Guaranty Corporation, or any successor thereto.

     

    Permitted
Claims:  Solely with respect to the Records, any rights,
claims, liens, security interests or encumbrances of the trustees which may
arise pursuant to the PPL Electric Mortgages.

     

    Person:  An
individual, partnership, corporation (including a business trust), limited
liability company, joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.

     

    Plan:  At
any time an employee pension benefit plan (including a Multiemployer Plan) which
is covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained, or
contributed to, by any member of the ERISA Group for employees of any member of
the ERISA Group or (ii) has at any time within the preceding five years been
maintained, or contributed to, by any Person which was at such time a member of
the ERISA Group for employees of any Person which was at such time a member of
the ERISA Group.

     

    Pooled Commercial
Paper:  Commercial Paper of Victory subject to any particular
pooling arrangement by Victory, but excluding Commercial Paper issued by Victory
for a tenor and in an amount specifically requested by any Person in connection
with any agreement effected by Victory.

     

    PPL
Electric:  PPL Electric Utilities Corporation and its
successors.

     

    PPL Electric
Mortgages:  As defined in Section
5.1(k).

     

    PPL Electric
Parties:  As defined in the Preamble to this
Agreement.

     

    Prime
Rate:  A rate per annum equal to the prime rate of interest
announced from time to time by BTMU (which is not necessarily the lowest rate
charged to any customer), changing when and as said prime rate
changes.

     

    Pro Rata
Share:  For each Liquidity Bank, a percentage equal to the
Commitment of such Liquidity Bank, divided by the Aggregate
Commitment.

     

    Proposed Reduction
Date:  As defined in Section
1.3(a).

     

    PUC:  The
Commonwealth of Pennsylvania Public Utility Commission.

     

    PUC
Order:  The order of the PUC, dated March 18, 2004, authorizing
each PPL Electric Party to enter this Agreement and each other Transaction
Document.

     

    Purchasing Liquidity
Bank:  As defined in Section
12.1(b).

     

    Rating Agency
Condition:  That Victory has received written notice from
S&P and Moody’s that an amendment, a change or a waiver will not result in a
withdrawal or downgrade of the then current ratings on Victory’s Commercial
Paper.

     

    Receivable:  All
indebtedness and other obligations owed to Borrower or Originator, excluding the
ITC Receivables, the Nuclear Decommissioning Receivables and the ECP Contract
Payments (at the time such indebtedness or other obligation arises, and before
giving effect to any transfer or conveyance under the Receivables Sale
Agreement) or in which Borrower or an Originator has a security interest or
other interest, including, without limitation, any indebtedness, obligation or
interest constituting an account, payment intangible, instrument or general
intangible, arising in connection with the sale of electricity to an Obligor by
the Originator, and further includes, without limitation, the obligation to pay
any Finance Charges with respect thereto.  Indebtedness and other
rights and obligations arising from any one transaction, including, without
limitation, indebtedness and other rights and obligations represented by an
individual invoice, shall constitute a Receivable separate from a Receivable
consisting of the indebtedness and other rights and obligations arising from any
other transaction; provided further, that any
indebtedness, rights or obligations referred to in the immediately preceding
sentence shall be a Receivable regardless of whether the account debtor or
Borrower treats such indebtedness, rights or obligations as a separate payment
obligation.

     

    Receivables Sale
Agreement:  That certain Receivables Sale Agreement, dated as
of August 1, 2004, by and between Originator and Borrower, as the same may be
amended, restated or otherwise modified from time to time.

     

    Records:  With
respect to any Receivable, all documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch cards,
data processing software and related property and rights but excluding
Contracts) relating to such Receivable, any Related Security therefor and the
related Obligor.

     

    Reduction
Notice:  As defined in Section
1.3.

     

    Regulatory
Change:  As defined in Section
10.2.

     

    Related
Security:  All of Borrower’s right, title and interest in, to
and under the Receivables Sale Agreement and with respect to any
Receivable:

     

    (i)           all
security interests or liens and property subject thereto from time to time, if
any, purporting to secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise, together with all financing
statements and security agreements describing any collateral securing such
Receivable,

     

    (ii)           all
guaranties, letters of credit, insurance and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Receivable whether pursuant to the Contract related to such Receivable or
otherwise,

     

    (iii)           all
Contracts associated with such Receivable,

     

    (iv)           all
Records related to such Receivable,

     

    (v)           all
of Borrower’s right, title and interest in, to and under the Receivables Sale
Agreement in respect of such Receivable, and

     

    (vi)           all
proceeds of any of the foregoing.

     

    Required Capital
Amount:  As defined in the Receivables Sale
Agreement.

     

    Required Liquidity
Banks:  At any time, Liquidity Banks with Commitments in excess
of 66-2/3% of the Aggregate Commitment.

     

    Required Notice
Period:  The number of days required notice set forth below
applicable to the Aggregate Reduction indicated below:

     

    
      	
              Aggregate
      Reduction

               

            	
              Required Notice
      Period

            
	
              ≤
      25% of the Aggregate Commitment

            	
              2
      Business Days

            
	
              >
      25% but ≤ 50% of the Aggregate Commitment

            	
              5
      Business Days

            
	
              >
      50% of Aggregate Commitment

            	
              10
      Business Days

            
	 
      	 
      

    

    Required
Reserve:  On any day during a Calculation Period, the product
of (i) the sum of the Loss Reserve, the Interest Reserve, the Dilution Reserve
and the Servicing Reserve, times (ii) the Net Pool Balance as of the Cut-Off
Date immediately preceding such Calculation Period.

     

    Restricted Junior
Payment:  (i) any dividend or other distribution, direct or
indirect, on account of any shares of any class of capital stock of Borrower now
or hereafter outstanding, except a dividend payable solely in shares of that
class of stock or in any junior class of stock of Borrower, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of capital stock of
Borrower now or hereafter outstanding, (iii) any payment or prepayment of
principal of, premium, if any, or interest, fees or other charges on or with
respect to, and any redemption, purchase, retirement, defeasance, sinking fund
or similar payment and any claim for rescission with respect to the Subordinated
Loans, (iv) any payment made to redeem, purchase, repurchase or retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of capital stock of Borrower now or hereafter
outstanding, and (v) any payment of management fees by Borrower (except for
reasonable management fees to any Originator or its Affiliates in reimbursement
of actual management services performed).

     

    Review:  As
defined in Section
7.1(d)(ii).

     

    S&P:  Standard
and Poor’s Ratings Services, a division of The McGraw Hill Companies,
Inc.

     

    Secured
Parties:  All of the Lenders, the Agent and their respective
successors and assigns.

     

    Servicer:  At
any time the Person (which may be the Agent) then authorized pursuant to Section 8.1 to
service, administer and collect Receivables.

     

    Servicer
Default:  The occurrence of any Amortization Event with respect
to the Servicer or the Originator described in Sections 9.1(a),
(b), (d), (e), (h), (j), (k) or (m); and/or any
Amortization Event described in Sections 9.1(c),
(g), (i), (p), (q), (r) or (s).

     

    Servicer Replacement
Event:  The occurrence of any of the events described in Section
8.1(c).

     

    Servicing
Fee:  For each day in a Calculation Period:

     

    (i)           an
amount equal to (A) the Servicing Fee Rate (or, at any time while PPL Electric
or one of its Affiliates is the Servicer, such lesser percentage as may be
agreed between Borrower and the Servicer on an arms’ length basis based on then
prevailing market terms for similar services), times (B) the aggregate
Outstanding Balance of all Receivables at the close of business on the Cut-Off
Date immediately preceding such Calculation Period, times (C) 1/360;
or

     

    (ii)           on
and after the Servicer’s reasonable request made at any time when PPL Electric
or one of its Affiliates is no longer acting as Servicer hereunder, an
alternative amount specified by the successor Servicer not exceeding (A) 110% of
such Servicer’s reasonable costs and expenses of performing its obligations
under this Agreement during the preceding Calculation Period, divided by (B) the
number of days in the current Calculation Period.

     

    Servicing Fee
Rate:  1.0% per annum.

     

    Servicing
Reserve:  For any Calculation Period, the product (expressed as
a percentage) of (i) the Servicing Fee Rate, times (ii) a fraction, the
numerator of which is the highest Days Sales Outstanding for the most recent
twelve (12) Calculation Periods and the denominator of which is
360.

     

    Settlement
Date:  (i) the 2nd
Business Day after each Monthly Reporting Date, and (ii) the last day of the
relevant Interest Period in respect of each Loan of the Liquidity
Banks.

     

    Settlement
Period:  (i) in respect of each Loan of Victory, the
immediately preceding Calculation Period, and (ii) in respect of each Loan of
the Liquidity Banks, the entire Interest Period of such Loan.

     

    Subordinated
Loan:  As defined in the Receivables Sale
Agreement.

     

    Subordinated Note: As
defined in the Receivables Sale Agreement.

     

    Subsidiary:  Of
a Person means (i) any corporation more than 50% of the outstanding securities
having ordinary voting power of which shall at the time be owned or controlled,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, or (ii) any partnership,
association, limited liability company, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.

     

    Synthetic
Lease:  Any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product where such
transaction is considered borrowed money indebtedness for tax purposes but is
classified as an operating lease in accordance with GAAP.

     

    Tax
Code:  The Internal Revenue Code of 1986, as the same may be
amended from time to time.

     

    Termination
Date:  As defined in the Receivables Sale
Agreement.

     

    Terminating
Tranche:  As defined in Section
4.3(b).

     

    Transaction
Documents:  Collectively, this Agreement, each Borrowing
Notice, the Receivables Sale Agreement, the Fee Letter, the Subordinated Note,
the Intercreditor Agreement and all other instruments, documents and agreements
executed and delivered in connection herewith.

     

    Transferred
Receivable:  Any Receivable arising out of the sale of
electricity to an Obligor by Originator, which Receivable is transferred from
such Obligor’s account to a new account established by such Obligor because the
related Obligor changed its place of residence, disconnected electric service or
otherwise closed such prior account.

     

    UCC:  The
Uniform Commercial Code as from time to time in effect in the specified
jurisdiction.

     

    Unbilled
Receivable:  Any Receivable arising out of the sale of
electricity to an Obligor by Originator, but for which an invoice has not yet
been sent to the applicable Obligor; provided, that if an
invoice for such amount is not mailed to such Obligor with in thirty (30) days
after the rendering of such services, such Receivables shall not be an “Unbilled
Receivable” and shall not be an Eligible Receivable.

     

    Unfunded
Liabilities:  With respect to any Plan at any time, the amount
(if any) by which (i) the value of all benefit liabilities under such Plan,
determined on a plan termination basis using the assumptions prescribed by the
PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value
of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.

     

    Unmatured Amortization
Event:  An event which, with the passage of time or the giving
of notice, or both, would constitute an Amortization Event.

     

    U.S. Dollars and $:  Dollars
in lawful money of the United States of America.

     

    Victory:  As
defined in the Preamble to this
Agreement.

     

    All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.  All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.

     

    Exhibit
II

     

    Form of
Borrowing Notice

     

    ---

     

    PPL
Receivables Corporation

     

    BORROWING
NOTICE

     

    dated
______________, 20__

     

    for
Borrowing on ________________, 20__

     

    The Bank
of Tokyo Mitsubishi UFJ, Ltd., New York Branch, as Agent

     

    1251
Avenue of the Americas

     

    New York,
NY 10020

     

    Attention:  Van
W.L. Dusenbury

     

    

     

    Ladies
and Gentlemen:

     

    Reference
is made to the Credit and Security Agreement dated as of August 5, 2008 (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”) among PPL Receivables Corporation (the “Borrower”),
PPL Electric Utilities Corporation, as initial Servicer, Victory Asset Funding
Corporation, and The Bank of Tokyo Mitsubishi UFJ, Ltd., New York Branch,
individually and as Agent.  Capitalized terms defined in the Credit
Agreement are used herein with the same meanings.

     

    1.           The
[Servicer, on behalf of the] Borrower hereby certifies, represents and warrants
to the Agent and the Lenders that on and as of the Borrowing Date (as
hereinafter defined):

     

    (a)           all
applicable conditions precedent set forth in Article VI of the
Credit Agreement have been satisfied;

     

    (b)           each
of its representations and warranties contained in Section 5.1 of the
Credit Agreement will be true and correct, in all material respects, as if made
on and as of the Borrowing Date;

     

    (c)           no
event will have occurred and is continuing, or would result from the requested
Purchase, that constitutes an Amortization Event or Unmatured Amortization
Event;

     

    (d)           the
Facility Termination Date has not occurred; and

     

    (e)           after
giving effect to the Loans comprising the Advance requested below, the Aggregate
Principal will not exceed the Borrowing Limit.

     

    2.           The
[Servicer, on behalf of the] Borrower hereby requests that Victory (or their
respective Liquidity Banks) make an Advance on ___________, 20__ (the “Borrowing
Date”) as follows:

     

    (a)           Aggregate
Amount of Advance:  $_____________.

     

    (b)           If
the Advance is not funded by Victory, [Servicer on behalf of the] Borrower
requests that the Liquidity Banks make an Alternate Base Rate Loan that converts
into LIBO Rate Loan with an Interest Period of _____ months on the third
Business Day after the Borrowing Date).

     

    3.           Please
disburse the proceeds of the Loans as follows:

     

    [Apply
$________ to payment of principal and interest of existing Loans due on the
Borrowing Date].  [Apply $______ to payment of fees due on the
Borrowing Date]. [Wire transfer $________ to account no. ________ at ___________
Bank, in [city, state], ABA No. __________,
Reference:  ________].

     

    IN
WITNESS WHEREOF, the [Servicer, on behalf of the] Borrower has caused this
Borrowing Request to be executed and delivered as of this ____ day of
___________, _____.

     

    [PPL
Electric Utilities Corporation, as Servicer,

    on behalf
of:] PPL Receivables Corporation, as Borrower

    

    By: __________________________

    Name: ________________________

    Title:  
________________________                                                                     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
III

     

    Places of
Business of the PPL Electric Parties; Locations of Records;

    Federal
Employer Identification Number(s); Organizational Identification
Number(s)

     

    PPL Receivables
Corporation:

    Principal
Office:                    3993
Howard Hughes Parkway

                    Suite
250

                    Las Vegas, Nevada
89169

     

    

     

    Registered
Office

    in
Delaware:                         Delaware
Corporate Management Inc.

                   1105 North Market
Street

                   Suite 1300

                   Wilmington, Delaware
19801

     

    

     

    FEIN:                                    20-0897190

     

    

     

    Organizational
ID
No.:                            3780307

     

    

     

    PPL
Electric:

     

    

     

    Principal
Office:               2
North 9th
Street

                  Allentown, Pennsylvania
18101

     

    

     

    FEIN:                                 23-0959590

     

    

     

    Organizational
ID
No.:                               273941

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
IV

    

    Names of
Collection Banks & Collection Accounts

    

    

    Collection
Accounts

    

    Name of
Current Account Holder:  PPL Electric Utilities

    Account
Number:  2334233

    Mellon
Bank

    ABA
Number:  031000037

    Contact
Person:  ACH Operations

    Contact’s
Tel:  (412)234-2694

    

    Name of
Current Account Holder:  PPL Electric Utilities

    Account
Number:  2000303379562

    Wachovia
Bank, National Association

    ABA
Number:  031000503 (ACH)

    ABA
Number:  053000219 (Wire Transfer)

    Contact
Person:  Customer Service

    Contact’s
Tel:  (800)590-7868 ext.663

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
V

     

    Form of
Compliance Certificate

     

    To:  The
Bank of Tokyo Mitsubishi UFJ, Ltd., New York Branch, as Agent

     

    This
Compliance Certificate is furnished pursuant to that certain Credit and Security
Agreement, dated as of August 5, 2008 (as amended, supplemented or otherwise
modified from time to time, the “Agreement”),
among PPL Receivables Corporation (the “Borrower”),
PPL Electric Utilities Corporation (the “Servicer”),
the Lenders party thereto and The Bank of Tokyo Mitsubishi UFJ, Ltd., New York
Branch, as agent for such Lenders (the “Agreement”).

     

    THE
UNDERSIGNED HEREBY CERTIFIES THAT:

     

    1.           I
am the duly elected [financial/accounting officer] of [Borrower] [Servicer] (the
“Company”).

     

    2.           I
have reviewed the terms of the Agreement and I have made, or have caused to be
made under my supervision, a detailed review of the transactions and conditions
of the Company [and its Subsidiaries] during the accounting period covered by
the attached financial statements.

     

    3.           The
examinations described in paragraph 2 did not
disclose, and I have no knowledge of, the existence of any condition or event
which constitutes an Amortization Event or Unmatured Amortization Event, as each
such term is defined under the Agreement, during or at the end of the accounting
period covered by the attached financial statements or as of the date of this
Certificate[, except as set forth in paragraph 5
below].

     

    4.           Such
financial statements present fairly the financial position of the [Borrower]
[Servicer] as of the date of such financial statements and the results of its
operations for the period covered by such financial statements in conformity
with GAAP applied on a consistent basis.

     

    5.           [Described
on Schedule I attached hereto are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Company has taken, is taking, or
proposes to take with respect to each such condition or
event:  ____________________]

     

    The
foregoing certifications, together with the computations set forth in Schedule I hereto and
the financial statements delivered with this Certificate in support hereof, are
made and delivered as of ______________, 20__.

     

    By:                                                                      

    Name:                                                                      

    Title:                                            

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
I to Compliance Certificate

     

    A.           Schedule
of Compliance as of __________, 200__.  Unless otherwise defined
herein, the terms used in this Compliance Certificate have the meanings ascribed
thereto in the Agreement.

     

    This
schedule relates to the month ended: _______________.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
VI

     

    

     

    Nuclear
Decommissioning Receivables

     

    Amortization
Schedule

     

    

     

    
      	
              Month
      and Year

            	
              Amount

            
	
              6/30/2004

            	
              1,560,865

            
	
              7/31/2004

            	
              1,552,021

            
	
              8/31/2004

            	
              1,543,177

            
	
              9/30/2004

            	
              1,534,334

            
	
              10/31/2004

            	
              1,525,490

            
	
              11/30/2004

            	
              1,516,647

            
	
              1/1/2005

            	
              1,507,804

            
	
              1/31/2005

            	
              1,498,960

            
	
              2/28/2005

            	
              1,490,116

            
	
              3/31/2005

            	
              1,481,273

            
	
              4/30/2005

            	
              1,472,429

            
	
              5/31/2005

            	
              1,463,585

            
	
              6/30/2005

            	
              1,454,742

            
	
              7/31/2005

            	
              1,445,898

            
	
              8/31/2005

            	
              1,437,054

            
	
              9/30/2005

            	
              1,428,212

            
	
              10/31/2005

            	
              1,419,368

            
	
              11/30/2005

            	
              1,410,524

            
	
              1/1/2006

            	
              1,401,681

            
	
              1/31/2006

            	
              1,392,837

            
	
              2/28/2006

            	
              1,383,993

            
	
              3/31/2006

            	
              1,375,150

            
	
              4/30/2006

            	
              1,366,306

            
	
              5/31/2006

            	
              1,357,462

            
	
              6/30/2006

            	
              1,348,619

            
	
              7/31/2006

            	
              1,339,775

            
	
              8/31/2006

            	
              1,330,932

            
	
              9/30/2006

            	
              1,322,089

            
	
              10/31/2006

            	
              1,313,245

            
	
              11/30/2006

            	
              1,304,401

            
	
              1/1/2007

            	
              1,295,558

            
	
              1/31/2007

            	
              1,286,714

            
	
              2/28/2007

            	
              1,277,870

            
	
              3/31/2007

            	
              1,269,027

            
	
              4/30/2007

            	
              1,260,183

            
	
              5/31/2007

            	
              1,251,339

            
	
              6/30/2007

            	
              1,242,497

            
	
              7/31/2007

            	
              1,233,653

            
	
              8/31/2007

            	
              1,224,809

            
	
              9/30/2007

            	
              1,215,966

            
	
              10/31/2007

            	
              1,207,122

            
	
              11/30/2007

            	
              1,198,278

            
	
              1/1/2008

            	
              1,189,435

            
	
              1/31/2008

            	
              1,180,591

            
	
              2/28/2008

            	
              1,171,747

            
	
              3/31/2008

            	
              1,162,904

            
	
              4/30/2008

            	
              1,154,061

            
	
              5/31/2008

            	
              1,145,217

            
	
              6/30/2008

            	
              1,136,374

            
	
              7/31/2008

            	
              1,127,530

            
	
              8/31/2008

            	
              1,118,686

            
	
              9/30/2008

            	
              1,109,843

            
	
              10/31/2008

            	
              1,100,999

            
	
              11/30/2008

            	
              1,092,155

            
	
              1/1/2009

            	
              1,083,312

            
	
              1/31/2009

            	
              1,074,468

            
	
              2/28/2009

            	
              1,065,625

            
	
              3/31/2009

            	
              1,056,782

            
	
              4/30/2009

            	
              1,047,938

            
	
              5/31/2009

            	
              1,039,094

            
	
              6/30/2009

            	
              1,030,251

            
	
              7/31/2009

            	
              1,021,407

            
	
              8/31/2009

            	
              1,012,563

            
	
              9/30/2009

            	
              1,003,720

            
	
              10/31/2009

            	
              994,876

            
	
              11/30/2009

            	
              985,952

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
VII

     

    Form of
Assignment Agreement

     

    THIS
ASSIGNMENT AGREEMENT (this “Assignment
Agreement”) is entered into as of the ___ day of ____________, ____, by
and between _____________________ (“Assignor”)
and __________________ (“Assignee”).

     

    PRELIMINARY
STATEMENTS

     

    A.           This
Assignment Agreement is being executed and delivered in accordance with Section
12.1(b) of that certain Credit and Security Agreement dated as of August 5, 2008
by and among PPL Receivables Corporation, as Borrower, PPL Electric Utilities
Corporation, as Servicer, Victory Asset Funding Corporation, The Bank of Tokyo
Mitsubishi UFJ, Ltd., New York Branch, as Agent, and the Liquidity Banks party
thereto (as amended, modified or restated from time to time, the “Credit
and Security Agreement”) and that certain Liquidity Agreement (as defined
in the Credit and Security Agreement).  Capitalized terms used and not
otherwise defined herein are used with the meanings set forth or incorporated by
reference in the Credit and Security Agreement.

     

    B.           Assignor
is a Liquidity Bank party to the Credit and Security Agreement and the Liquidity
Agreement, and Assignee wishes to become a Liquidity Bank thereunder;
and

     

    C.           Assignor
is selling and assigning to Assignee an undivided ____________% (the “Transferred
Percentage”) interest in all of Assignor’s rights and obligations under
the Transaction Documents and the Liquidity Agreement, including, without
limitation, Assignor’s Commitment, Assignor’s Liquidity Commitment and (if
applicable) Assignor’s Loans as set forth herein.

     

    AGREEMENT

     

    The
parties hereto hereby agree as follows:

     

    (1)           The
sale, transfer and assignment effected by this Assignment Agreement shall become
effective (the “Effective
Date”) two (2) Business Days (or such other date selected by the Agent in
its sole discretion) following the date on which a notice substantially in the
form of Schedule
II to this Assignment Agreement (“Effective
Notice”) is delivered by the Agent to Victory, Assignor and
Assignee.  From and after the Effective Date, Assignee shall be a
Liquidity Bank party to the Credit and Security Agreement for all purposes
thereof as if Assignee were an original party thereto and Assignee agrees to be
bound by all of the terms and provisions contained therein.

     

    (2)           If
Assignor has no outstanding principal under the Credit and Security Agreement or
the Liquidity Agreement, on the Effective Date, Assignor shall be deemed to have
hereby transferred and assigned to Assignee, without recourse, representation or
warranty (except as provided in paragraph 6 below),
and the Assignee shall be deemed to have hereby irrevocably taken, received and
assumed from Assignor, the Transferred Percentage of Assignor’s Commitment and
Liquidity Commitment and all rights and obligations associated therewith under
the terms of the Credit and Security Agreement and the Liquidity Agreement,
including, without limitation, the Transferred Percentage of Assignor’s future
funding obligations under the Credit and Security Agreement and the Liquidity
Agreement.

     

    (3)           If
Assignor has any outstanding principal under the Credit and Security Agreement
and Liquidity Agreement, at or before 12:00 noon, local time of Assignor, on the
Effective Date Assignee shall pay to Assignor, in immediately available funds,
an amount equal to the sum of (i) the Transferred Percentage of the outstanding
principal of Assignor’s Loans and, without duplication, Assignor’s Percentage
Interests (as defined in the Liquidity Agreement) (such amount, being
hereinafter referred to as the “Assignee’s
Principal”); (ii) all accrued but unpaid (whether or not then due)
Interest attributable to Assignee’s Principal; and (iii) accruing but unpaid
fees and other costs and expenses payable in respect of Assignee’s Principal for
the period commencing upon each date such unpaid amounts commence accruing, to
and including the Effective Date (the “Assignee’s
Acquisition Cost”); whereupon, Assignor shall be deemed to have sold,
transferred and assigned to Assignee, without recourse, representation or
warranty (except as provided in paragraph 6 below),
and Assignee shall be deemed to have hereby irrevocably taken, received and
assumed from Assignor, the Transferred Percentage of Assignor’s Commitment,
Liquidity Commitment, Loans (if applicable) and Percentage Interests (if
applicable) and all related rights and obligations under the Transaction
Documents and the Liquidity Agreement, including, without limitation, the
Transferred Percentage of Assignor’s future funding obligations under the Credit
and Security Agreement and the Liquidity Agreement.

     

    (4)           Concurrently
with the execution and delivery hereof, Assignor will provide to Assignee copies
of all documents requested by Assignee which were delivered to Assignor pursuant
to the Credit and Security Agreement or the Liquidity Agreement.

     

    (5)           Each
of the parties to this Assignment Agreement agrees that at any time and from
time to time upon the written request of any other party, it will execute and
deliver such further documents and do such further acts and things as such other
party may reasonably request in order to effect the purposes of this Assignment
Agreement.

     

    (6)           By
executing and delivering this Assignment Agreement, Assignor and Assignee
confirm to and agree with each other, the Agent and the Liquidity Banks as
follows:  (a) other than the representation and warranty that it has
not created any Adverse Claim upon any interest being transferred hereunder,
Assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made by any other
Person in or in connection with any of the Transaction Documents or the
Liquidity Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of Assignee, the Credit and Security
Agreement, the Liquidity Agreement or any other instrument or document furnished
pursuant thereto or the perfection, priority, condition, value or sufficiency of
any Collateral; (b) Assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower, any Obligor,
any Affiliate of Borrower or the performance or observance by Borrower, any
Obligor, any Affiliate of Borrower of any of their respective obligations under
the Transaction Documents or any other instrument or document furnished pursuant
thereto or in connection therewith; (c) Assignee confirms that it has received a
copy of each of the Transaction Documents and the Liquidity Agreement, and other
documents and information as it has requested and deemed appropriate to make its
own credit analysis and decision to enter into this Assignment Agreement; (d)
Assignee will, independently and without reliance upon the Agent, Victory,
Borrower or any other Liquidity Bank or Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Transaction Documents
and the Liquidity Agreement; (e) Assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under the
Transaction Documents and the Liquidity Agreement as are delegated to the Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto; and (f) Assignee agrees that it will perform in accordance with their
terms all of the obligations which, by the terms of the Liquidity Agreement, the
Credit and Security Agreement and the other Transaction Documents, are required
to be performed by it as a Liquidity Bank or, when applicable, as a
Lender.

     

    (7)           Each
party hereto represents and warrants to and agrees with the Agent that it is
aware of and will comply with the provisions of the Credit and Security
Agreement, including, without limitation, Section 14.5 and Section 14.6
thereof.

     

    (8)           Schedule I hereto
sets forth the revised Commitment and Liquidity Commitment of Assignor and the
Commitment and Liquidity Commitment of Assignee, as well as administrative
information with respect to Assignee.

     

    (9)           THIS
ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.

     

    (10)           Assignee
hereby covenants and agrees that, prior to the date which is one year and one
day after the payment in full of all senior indebtedness for borrowed money of
Victory, it will not institute against, or join any other Person in instituting
against, Victory any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the United
States or any state of the United States.

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be
executed by their respective duly authorized officers of the date
hereof.

     

    [ASSIGNOR]

    

    By:     
_____________________                                                              

    Name 
_____________________                                                               

    Title:   _____________________                                                              

    

    [ASSIGNEE]

    

    By:     
_____________________                                                            

    Name: _____________________                                                                

    Title:   _____________________                                                              

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
I

     

    to
Assignment Agreement

     

    

     

    List of
Lending Offices, Addresses

     

    for
Notices and Commitment Amounts

     

    Date:  _____________,
______

     

    

     

    Transferred
Percentage:                  ____________%

     

    
      	 
      	
              A-1

            	
              A-2

            	
              B-1

            	
              B-2

            	
              C-1

            	
              C-2

            
	
              Assignor

            	
              Commitment
      (prior to giving effect to the Assignment Agreement)

            	
              Commitment
      (after giving effect to the Assignment Agreement)

            	
              Outstanding
      principal (if any)

            	
              Ratable
      Share of Outstanding principal

            	
              Liquidity
      Commitment (prior to giving effect to the Assignment
      Agreement)

            	
              Liquidity
      Commitment (after giving effect to the Assignment
    Agreement)

            
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	
              A-1

            	
              A-2

            	
              B-1

            	
              B-2

            	
              C-1

            	
              C-2

            
	
              Assignee

            	
              Commitment
      (prior to giving effect to the Assignment Agreement)

            	
              Commitment
      (after giving effect to the Assignment Agreement)

            	
              Outstanding
      principal (if any)

            	
              Ratable
      Share of Outstanding principal

            	
              Liquidity
      Commitment (prior to giving effect to the Assignment
      Agreement)

            	
              Liquidity
      Commitment (after giving effect to the Assignment
    Agreement)

            
	 
      	 
      	 
      	 
      	 
      	 
      	 
      

    

    Address for
Notices

     

    

     

    Attention:

     

    Phone:

     

    Fax:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
II

    

     

    to
Assignment Agreement

     

    

     

    Effective
Notice

     

    

     

    TO:           ________________________,
Assignor

     

    ________________________

     

    ________________________

     

    ________________________

     

    

     

    TO:           ________________________,
Assignee

     

    ________________________

     

    ________________________

     

    ________________________

     

    The
undersigned, as Agent under the Credit and Security Agreement dated as of August
5, 2008, by and among PPL Receivables Corporation, a Delaware corporation, as
Borrower, PPL Electric Utilities Corporation, as Servicer, Victory Funding
Corporation, The Bank of Tokyo Mitsubishi UFJ, Ltd., New York Branch, as Agent,
and the Liquidity Banks party thereto, hereby acknowledges receipt of executed
counterparts of a completed Assignment Agreement dated as of ____________, 200__
between __________________, as Assignor, and __________________, as
Assignee.  Terms defined in such Assignment Agreement are used herein
as therein defined.

     

    1.           Pursuant
to such Assignment Agreement, you are advised that the Effective Date will be
______________, ____.

     

    2.           Each
of the undersigned hereby consents to the Assignment Agreement as required by
Section 12.1(b) of the Credit and Security Agreement.

     

    [3.  Pursuant
to such Assignment Agreement, the Assignee is required to pay $____________ to
Assignor at or before 12:00 noon (local time of Assignor) on the Effective Date
in immediately available funds.]

     

    Very
truly yours,

    

    THE BANK
OF TOKYO MITSUBISHI UFJ, LTD., NEW YORK BRANCH,

    as
Agent

    

    By ____________________________________

    Name:__________________________________

    Title:___________________________________

     

    VICTORY
FUNDING CORPORATION

    By:             [_______________],

    as attorney-in-fact

    

    By: _________________________________

    Name:_______________________________

    Title:________________________________

    

    

    ****[Borrower
hereby consents to the foregoing assignment:

    

    [BORROWER]

    

    By:__________________________

    Name:________________________

    Title:_________________________]****

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
VIII

     

     

    SUMMARY
OF CREDIT AND COLLECTION PRACTICES

     

    

     

    PPL
Electric Utilities Corporation’s credit and collection practices are, for the
most part, prescribed by applicable regulations and regulatory
guidelines.  Specifically, PPL Electric is subject to the
following:

     

    
      	
               
      

            	
              (i)

            	
              Chapters
      55 and 56 of Title 52 of the Pennsylvania Code (52 Pa. Code §§ 55
      (“Noncarrier Rates and Practices”) and 56 (“Standards and Billing
      Practices”)), which establish the standards and practices that public
      utilities must apply with respect to eligibility criteria, credit and
      deposit practices, account billing, termination of service and customer
      complaints.

            

    

     

    
      	
               
      

            	
              (ii)

            	
              The
      Pennsylvania Fair Credit Extension Uniformity Act (73 Pa. Code § 2270.1,
      et seq.),
      which establishes practices that constitute unfair or deceptive acts or
      practices with regard to the collection of
  debts.

            

    

     

    
      	
               
      

            	
              (iii)

            	
              Policy
      statements or letters from the Secretary of the Pennsylvania Public
      Utility Commission, which are issued from time to time to establish new
      policies or make changes to existing
policies.

            

    

     

    
      	
               
      

            	
              (iv)

            	
              Guidelines
      established by the PUC’s Pennsylvania Bureau of Consumer Services, which
      assists customers with their
complaints.

            

    

     

    Accordingly,
PPL Electric has some discretion regarding its credit and collection practices,
but these practices must comply with the applicable regulations and
guidelines.

     

    For
example, based on applicable regulations, PPL Electric is not entitled to deny
service to a new customer in its service territory.  However, PPL
Electric is permitted to require a security deposit equal to up to two months’
electricity usage at a new customer’s premises.  This security deposit
may be waived by PPL Electric based on the customer’s credit score or the
provision of some other non-cash credit support acceptable to PPL
Electric.

     

    In
addition, the applicable regulations establish the methods that PPL Electric may
use to collect bills from defaulting customers and the manner in which these
methods are to be conducted (e.g., phone calls to customers must be made during
business hours or before 7:00 p.m.).  The methods PPL Electric uses to
collect bills from defaulting customers include notices of nonpayment,
servicemen visits to customers’ premises and phone calls to
customers.  PPL Electric is required by the applicable regulations and
guidelines to make payment arrangements with defaulting
customers.  PPL Electric has some discretion in setting these payment
arrangements, so long as they are within established parameters based on a
customer’s income level.  PPL Electric also has the discretion to
refer a collection matter to an attorney if the defaulting customer’s income is
not at the poverty level.  Finally, PPL Electric has the discretion to
disconnect a customer’s service if it follows the mandated
procedures.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
IX

     

    

     

    Form of
Monthly Report

     

    On File
With Agent

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    

     

    Schedule
A

     

    

     

    Commitments
of Liquidity Banks

     

    

     

    
      	
              Liquidity
      Bank

            	
              Commitment

            
	 
      	 
      
	
              The
      Bank of Tokyo Mitsubishi UFJ, Ltd., New York Branch

            	
              $150,000,000

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
B

     

    

     

    Documents
to be Delivered to the Agent

     

    on or
prior to the Initial Advance

     

    1.           An
executed copy of the Intercreditor Agreement duly executed by each of the
parties thereto.

     

    2.           Copy
of the Resolutions of the Board of Directors of each PPL Electric Party
certified by its Secretary authorizing such Person’s execution, delivery and
performance of this Agreement and the other documents to be delivered by it
hereunder.

     

    3.           Articles
or Certificate of Incorporation of each PPL Electric Party certified by the
Secretary of State of its jurisdiction of incorporation on or within thirty (30)
days prior to the initial Advance.

     

    4.           Good
Standing Certificate for each PPL Electric Party issued by the Secretaries of
State of its state of incorporation and each jurisdiction where it has material
operations, each of which is listed below:

     

    a.           Borrower:                    State
of Delaware

     

    b.           Servicer:                      Commonwealth
of Pennsylvania

     

    5.           A
certificate of the Secretary of each PPL Electric Party certifying (i) the names
and signatures of the officers authorized on its behalf to execute this
Agreement and any other documents to be delivered by it hereunder and (ii) a
copy of such Person’s By-Laws.

     

    6.           Pre-filing
state and federal tax lien, judgment lien and UCC lien searches against each PPL
Electric Party from the following jurisdictions:

     

    a.           Borrower:                    State
of Delaware

     

    b.           Servicer:                      Commonwealth
of Pennsylvania

     

    7.           Time
stamped receipt copies of proper financing statements, duly filed under the UCC
on or before the date of the initial Advance in all jurisdictions as may be
necessary or, in the opinion of the Agent, desirable, under the UCC of all
appropriate jurisdictions or any comparable law in order to perfect the
ownership interests contemplated by this Agreement.

     

    8.           Time
stamped receipt copies of proper UCC termination statements, if any, necessary
to release all security interests and other rights of any Person in the
Receivables, Contracts or Related Security previously granted by Borrower which
are not Permitted Claims.

     

    9.           An
amendment to the Receivables Sale Agreement dated as of the Closing Date and in
form and substance acceptable to the Agent and duly executed by each of the
parties thereto.

     

    10.           A
favorable opinion of legal counsel to each of the PPL Electric Parties
reasonably acceptable to the Agent which addresses the following matters and
such other matters as the Agent may reasonably request:

     

    (a)           Borrower
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware.

     

    (b)           The
Servicer is a corporation duly organized, validly existing, and in good standing
under the laws of the Commonwealth of Pennsylvania.

     

    (c)           Each
of the PPL Electric Parties has all requisite authority to conduct its business
in each jurisdiction where failure to be so qualified would have a material
adverse effect on such entity’s business.

     

    (d)           The
execution and delivery by each of the PPL Electric Parties of the Transaction
Document to which it is a party and its performance of its obligations
thereunder have been duly authorized by all necessary corporate action and
proceedings on the part of such entity and will not:

     

    (i)           except
with respect to the PUC Order and filings with the PUC, require any action by or
in respect of, or filing with, any governmental body, agency or official (other
than the filing of UCC financing statements);

     

    (ii)           contravene,
or constitute a default under, any provision of applicable law or regulation or
of its articles or certificate of incorporation or bylaws or of any agreement,
judgment, injunction, order, decree or other instrument binding upon such
entity; or

     

    (iii)           result
in the creation or imposition of any Adverse Claim on assets of such entity or
PPL Transition Bond Company LLC (except as contemplated by the Transaction
Documents).

     

    (d)           Each
of the Transaction Documents to which each of the PPL Electric Parties is a
party has been duly executed and delivered by such entity and constitutes the
legally valid, and binding obligation of such entity enforceable in accordance
with its terms, except to the extent the enforcement thereof may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally and subject also to the availability of equitable remedies if
equitable remedies are sought.

     

    (e)           The
provisions of the Credit and Security Agreement are effective to create valid
security interests in favor of the Agent, for the benefit of the Secured
Parties, in all of Borrower’s right, title and interest in and to the
Receivables and Related Security described therein which constitute “accounts,”
“payment intangibles,” or “general intangibles” (each as defined in the UCC)
(collectively, the “Opinion
Collateral”), as security for the payment of the
Obligations.

     

    (f)           Each
of the UCC-1 Financing Statements naming Borrower as debtor, and Agent, as
secured party, to be filed in the Delaware filing office, is in appropriate form
for filing therein.  Upon filing of such UCC-1 Financing Statements in
such filing offices and payment of the required filing fees, the security
interest in favor of the Agent, for the benefit of the Secured Parties, in the
Opinion Collateral will be perfected.

     

     (g)           Neither
of the PPL Electric Parties is an “Investment Company” within the meaning
of  the Investment Company Act of 1940.

     

    11.           A
Compliance Certificate.

     

    12.           The
Fee Letter.

     

    13.           A
Monthly Report dated July 15, 2008.

     

    14.           A
pro forma balance sheet of Borrower as at [_____________], 2008.

     

    15.           Executed
copies of (i) all consents from and authorizations by any Persons and (ii) all
waivers and amendments to existing credit facilities, that are necessary in
connection with this Agreement.

     

    16.           [Reserved].

     

    17.           [Reserved].

     

    18.           If
applicable, for each Lender that is not incorporated under the laws of the
United States of America, or a state thereof, two duly completed copies of
United States Internal Revenue Service Form W-8BEN or W-8ECI, as applicable,
certifying in either case that such Lender is entitled to receive payments under
the Agreement without deduction or withholding of any United States federal
income taxes.

     

    19.           Executed
Final Order of the Commonwealth of Pennsylvania Public Utility Commission dated
as of March 18, 2004, authorizing PPL Electric Utilities Corporation and
Borrower to enter into the Credit and Security Agreement and each other
Transaction Document to which either of them is a party.

     

    20.           Executed
Final Order of the Commonwealth of Pennsylvania Public Utility Commission dated
as of January 23, 2003, relating to PPL Electric and all amendments or
supplements thereto.

     

    21.           Executed
Final Order of the Commonwealth of Pennsylvania Public Utility Commission dated
as of August 27, 1998, relating to PPL Electric and all amendments or
supplements thereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
C

    

    Addresses
for Notices

    

    If
to the Borrower:

    PPL
Receivables Corporation

    3993
Howard Hughes Parkway

    Suite
250

    Las
Vegas, Nevada 89169

    Attention:  Rebecca
L. Howell

    Telephone:
(702)-866-2200

    Fax:
(702)866-2244

    

    With a
copy to PPL Electric

    

    If
to PPL Electric:

    Two North
Ninth Street

    Allentown,
Pennsylvania 18101-1179

    Attention:  Treasurer

    Telephone:
(610)774-5987

    Fax:
(610)774-5235

    

    If
to Victory:

    Victory
Receivables Corporation

    c/o J.H.
Management Corporation

    One
International Place

    Boston,
MA 02110

    Attn: R.
Douglas Donaldson

    Tel:
(617) 951-7690

    Fax:
(617) 951-7050

    

    With a
copy to BTMU

    

    If
to BTMU:

    The Bank
of Tokyo-Mitsubishi UFJ, Ltd., New York Branch

    1251
Avenue of the Americas

    New York,
NY 10020

    Attention:  Securitization
Group

    Telephone:
(212) 782-6964

    Facsimile:
(212) 782-6448

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